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Related Party Transactions | 3 Months Ended
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Mar. 31, 2017
Related Party Transactions [Abstract] |
Related Party Transactions | Related Party Transactions Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor, and as a result, we pay advisory fees to Ashford LLC. We are required to pay Ashford LLC a quarterly base fee that is a percentage of our total market capitalization on a declining sliding scale plus the Key Money Asset Management Fee (defined in our advisory agreement as the aggregate gross asset value of all key money assets multiplied by 0.70%), subject to a minimum quarterly base fee, as payment for managing our day-to-day operations in accordance with our investment guidelines. Total market capitalization includes the aggregate principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not consolidated but excluding our joint venture partners’ proportionate share of consolidated debt). The range of base fees on the scale are between 0.70% and 0.50% per annum for total market capitalization that ranges from less than $6.0 billion to greater than $10.0 billion. At March 31, 2017, the quarterly base fee was 0.70% based on our current market capitalization. We are also required to pay Ashford LLC an incentive fee that is earned annually by Ashford LLC in each year that our annual total stockholder return exceeds the average annual total stockholder return for our peer group, subject to the FCCR Condition, as defined in the advisory agreement. We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, insurance claims advisory and asset management services, as specified in the advisory agreement. We also record equity-based compensation expense for equity grants of common stock and LTIP units awarded to our officers and employees of Ashford LLC in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period. The following table summarizes the advisory services fees incurred (in thousands):
| Three Months Ended March 31,
| 2017 |  | 2016
Advisory services fee |  |  |
Base advisory fee | $ | 2,003 |  |  | $ | 2,025 |
Reimbursable expenses (1) | 547 |  |  | 652 |
Equity-based compensation (2) | (1,685 | ) |  | (613 | )
| $ | 865 |  |  | $ | 2,064 |
________
(1) | Reimbursable expenses include overhead, internal audit, insurance claims advisory and asset management services.
(2) | Equity-based compensation is associated with equity grants of Ashford Prime’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.
At March 31, 2017 and December 31, 2016, we held a due to Ashford Trust OP, net, of $6,000 and a due from Ashford Trust OP, net, of $488,000, respectively, which are both associated with certain expenses. At March 31, 2017 and December 31, 2016, the balance in due to Ashford Inc., which is primarily associated with advisory services fee payable, was $3.5 million and $5.1 million, respectively. In addition, at December 31, 2016, we held a receivable from the AQUA U.S. Fund of $2.3 million, associated with the hold back from the AQUA U.S. Fund, of which the funds were received during the first quarter of 2017. On January 24, 2017, we entered into an amended and restated advisory agreement with Ashford Inc. (the “Amended and Restated Advisory Agreement”) that amends and restates our advisory agreement discussed herein. Although our board of directors, through the action of the independent directors only, may amend the advisory agreement without stockholder approval, the independent directors have elected to seek stockholder approval of the Amended and Restated Advisory Agreement. Accordingly, the Amended and Restated Advisory Agreement will not become effective unless and until it is approved by our stockholders. The material terms of the Amended and Restated Advisory Agreement include:
• | we will make a cash payment to Ashford LLC of $5.0 million at the time the Amended and Restated Advisory Agreement becomes effective;
• | the termination fee payable to Ashford LLC has been amended by eliminating the 1.1 x multiplier and tax gross up components of the fee;
• | Ashford Inc. will disclose publicly the revenues and expenses used to calculate “Net Earnings” on a quarterly basis which is used to calculate the termination fee; Ashford LLC will retain an accounting firm to provide a quarterly report to us on the reasonableness of Ashford LLC’s determination of expenses, which will be binding on the parties;
• | the right of Ashford LLC to appoint a “Designated CEO” has been eliminated;
• | the right of Ashford LLC to terminate the advisory agreement due to a change in a majority of the “Company Incumbent Board” (as defined in the current advisory agreement) has been eliminated;
• | we will be incentivized to grow our assets under a “growth covenant” in the Amended and Restated Advisory Agreement under which we will receive a deemed credit against a base amount of $45.0 million for: 3.75% of the total purchase price of each hotel acquired after the date of the Amended and Restated Advisory Agreement that was recommended by Ashford LLC, netted against 3.75% of the total sale price of each hotel sold after the date of the Amended and Restated Advisory Agreement. The difference between $45.0 million and such net credit, if any, is referred to as the “Uninvested Amount.” If the Amended and Restated Advisory Agreement is terminated, other than due to certain acts by Ashford LLC, we must pay Ashford LLC the Uninvested Amount, in addition to any termination fee payable under the Amended and Restated Advisory Agreement;
• | the Amended and Restated Advisory Agreement requires us to maintain a net worth of not less than $390 million plus 75% of the equity proceeds from the sale of securities by us after December 31, 2016 and a covenant prohibiting us from paying dividends except as required to maintain our REIT status if paying the dividend would reduce our net worth below the required minimum net worth;
• | the initial term of the Amended and Restated Advisory Agreement ends on the 10th anniversary of its effective date, subject to renewal by Ashford LLC for up to seven additional successive 10-year terms;
• | the base management fee payable to Ashford LLC will be fixed at 70 bps, and the fee will be payable on a monthly basis;
• | reimbursements of expenses to Ashford LLC will be made monthly in advance, based on an annual expense budget, with a quarterly true-up for actual expenses;
• | our right to terminate the advisory agreement due to a change of control of Ashford LLC has been eliminated;
• | our rights to terminate the advisory agreement at the end of each term upon payment of the termination fee based on the parties being unable to agree on new market-based fees or advisor’s performance have been eliminated; however, the Amended and Restated Advisory Agreement provides a mechanism for the parties to renegotiate the fees payable to Ashford LLC at the end of each term based on then prevailing market conditions, subject to floors and caps on the changes;
• | if a Change of Control (as defined in the Amended and Restated Advisory Agreement) is pending, we have agreed to deposit not less than 50%, and in certain cases 100%, of the applicable termination fee in escrow, with the payment of any remaining amounts owed to Ashford LLC secured by a letter of credit and/or first priority lien on certain assets;
• | our ability to terminate the Amended and Restated Advisory Agreement due to a material default by Ashford LLC is limited to instances where a court finally determines that the default had a material adverse effect on us and Ashford LLC fails to pay monetary damages in accordance with the Amended and Restated Advisory Agreement; and
• | if we repudiate the Amended and Restated Advisory Agreement through actions or omissions that constitute a repudiation as determined by a final non-appealable order from a court of competent jurisdiction, we will be liable to Ashford LLC for a liquidated damages amount.
Certain employees of Remington Lodging, who perform work on behalf of Ashford Prime, were granted approximately 21,000 and 1,000 shares of restricted stock under the Ashford Prime Stock Plan on April 1, 2016 and July 1, 2016, respectively. These share grants were accounted for under the applicable accounting guidance related to share-based payments granted to non-employees and are recorded as a component of “management fees” in our condensed consolidated statements of operations. For the three months ended March 31, 2017 and 2016, expense related to such grants was immaterial. The unamortized fair value of these grants was $141,000 as of March 31, 2017, which will be amortized over a period of 2.0 years. During first quarter of 2017, we reached a legal settlement with Sessa. See note 15.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph b -Article 3A + Details
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