Investment in Unconsolidated Entity

Ashford Inc.

On July 31, 2015, we entered into a block trade with an unaffiliated third party pursuant to a sale arrangement between the Company, Ashford Inc. and Ashford Trust. The block trade included the purchase from a third party of approximately 175,000 shares of Ashford Inc. common stock at $95.00 per share, which approximated the 120-day volume weighted average share price, for a total cost of approximately $16.6 million. The sale arrangement and block trade were evaluated and approved by the independent members of our board of directors. The block trade purchase price and other terms of the sale arrangement were the result of negotiations with the third party, and the board of directors received a fairness opinion from an independent financial advisor that the price paid for the Ashford Inc. shares by the Company was fair to the Company. We did not receive any concessions or economic benefits from Ashford Inc. pertaining to our current contractual arrangements with Ashford Inc. in connection with this block trade. The block trade settled on August 4, 2015, and the loss resulting from the block trade is recorded within “unrealized loss on investment in Ashford Inc.” in our consolidated statement of operations for the year ended December 31, 2015.

Separately, on September 14, 2015, we received 19,897 shares of Ashford Inc. common stock from Ashford Inc. as part of our acquisition of the Bardessono Hotel. As of December 31, 2017 and 2016, we held approximately 195,000 shares of Ashford Inc. common stock, which represented an approximate 9.3% and 9.7% ownership interest, respectively, and a fair value of $18.1 million and $8.4 million, respectively. See notes 11 and 12.

We have elected to use the fair value option, under the applicable accounting guidance, to account for our investment in Ashford Inc. as the fair value is readily available since Ashford Inc. common stock is traded on a national exchange. The fair value of our investment in Ashford Inc. is included in “investment in Ashford Inc., at fair value” on our consolidated balance sheets, and changes in market value are included in “unrealized loss on investment in Ashford Inc.” on our consolidated statements of operations.

The following tables summarize the condensed balance sheets as of December 31, 2017 and 2016, and the condensed statements of operations for the years ended December 31, 2017, 2016 and 2015, of Ashford Inc. (in thousands):

Ashford Inc.

Condensed Consolidated Balance Sheets



	December 31, 2017		December 31, 2016
Total assets	$	114,810	$	129,797
Total liabilities	78,742		38,168
Redeemable noncontrolling interests	5,111		1,480
Total stockholders’ equity of Ashford Inc.	30,185		37,377
Noncontrolling interests in consolidated entities	772		52,772
Total equity	30,957		90,149
Total liabilities and equity	$	114,810	$	129,797
Our investment in Ashford Inc., at fair value	$	18,124	$	8,407

Ashford Inc.

Condensed Consolidated Statements of Operations



	Year Ended December 31,
	2017			2016			2015
Total revenue	$	81,573		$	67,607		$	58,981
Total operating expenses	(92,095		)	(70,064		)	(60,332		)
Operating loss	(10,522		)	(2,457		)	(1,351		)
Realized and unrealized gain (loss) on investment in unconsolidated entity	—			(1,460		)	(2,141		)
Realized and unrealized gain (loss) on investments	(91		)	(7,787		)	(7,600		)
Other	142			81			1,114
Income tax (expense) benefit	(9,723		)	(780		)	(2,066		)
Net income (loss)	(20,194		)	(12,403		)	(12,044		)
(Income) loss from consolidated entities attributable to noncontrolling interests	358			8,860			10,852
Net (income) loss attributable to redeemable noncontrolling interests	1,484			1,147			2
Net gain (loss) attributable to Ashford Inc.	$	(18,352	)	$	(2,396	)	$	(1,190	)
Our unrealized gain (loss) on investment in Ashford Inc.	$	9,717		$	(1,970	)	$	(7,609	)