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Related Party Transactions | 9 Months Ended
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Sep. 30, 2018
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 monthly base fee that is 1/12th of 0.70% of our total market capitalization 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 1/12th of 0.70%), subject to a minimum monthly 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). We are also required to pay Ashford LLC an incentive fee that is measured annually. Each year that our annual total stockholder return exceeds the average annual total stockholder return for our peer group, we will pay Ashford LLC an incentive fee over the following three years, subject to the Fixed Charge Coverage Ratio (“FCCR”) Condition, as defined in the advisory agreement, which relates to the ratio of adjusted EBITDA to fixed charges. We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, risk management 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 September 30, |  | Nine Months Ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Advisory services fee |  |  |  |  |  |  |
Base advisory fee | $ | 2,508 |  |  | $ | 2,300 |  |  | $ | 6,928 |  |  | $ | 6,579 |
Reimbursable expenses (1) | 529 |  |  | 462 |  |  | 1,448 |  |  | 1,541 |
Equity-based compensation (2) | 1,316 |  |  | (948 | ) |  | 5,240 |  |  | (2,298 | )
Incentive fee | 1,380 |  |  | — |  |  | 2,241 |  |  | — |
Total | $ | 5,733 |  |  | $ | 1,814 |  |  | $ | 15,857 |  |  | $ | 5,822 |
________
(1) | Reimbursable expenses include overhead, internal audit, risk management advisory and asset management services.
(2) | Equity-based compensation is associated with equity grants of Braemar’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.
In connection with the acquisition of the Bardessono Hotel in 2015 and Ashford Inc.’s engagement to provide hotel advisory services to us, Ashford Inc. agreed to provide $2.0 million of key money consideration in the form of furniture, fixtures and equipment to be used by Braemar. This arrangement is accounted for as a lease, in accordance with the applicable accounting guidance. As such, a portion of the base advisory fee is allocated to lease expense equal to the estimated fair value of the lease payments that would have been made. Lease expense of $84,000 and $252,000 was recognized for the three and nine months ended September 30, 2018, respectively, and was included in “other” hotel expense in the consolidated statements of operations. For the three and nine months ended September 30, 2017, this expense was $84,000 and $252,000. Certain employees of Remington Lodging, who perform work on behalf of Braemar, were granted approximately 22,000 and 21,000 shares of restricted stock under the Braemar Stock Plan in 2017 and 2018, 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 and nine months ended September 30, 2018, expense related to such grants was $53,000 and $164,000, respectively. For both the three and nine months ended September 30, 2017, expense related to such grants was $27,000 and $61,000, respectively. The unamortized compensation expense of these grants was $363,000 as of September 30, 2018, which will be amortized over a period of 2.5 years. On August 8, 2018, Ashford Inc. completed the acquisition of Premier Project Management LLC (“Premier”), the project management business formerly conducted by certain affiliates of Remington Lodging, including construction management, interior design, architectural oversight, and the purchasing, freight management, and supervision of installation of furniture, fixtures, and equipment, and related services. As a result of Ashford Inc.’s acquisition, the project management services that were previously provided by Remington Lodging will now be provided by a subsidiary of Ashford Inc. under the respective project management agreement with each customer, including Ashford Trust and Braemar. In accordance with our advisory agreement, our advisor, or entities in which our advisor has an interest, have a right to provide products or services to us or our hotel properties, provided such transactions are evaluated and approved by our independent directors. The following tables summarize the entities in which our advisor has an interest with which we or our hotel properties contracted for products and services, the amounts recorded by us for those services and the applicable classification on our condensed consolidated financial statements (in thousands):
|  |  | Three Months Ended September 30, 2018
Company |  | Product or Service | Total, net | Investments in Hotel Properties, net (1) |  | Indebtedness, net (2) |  | Other Hotel Expenses |  | Corporate General and Administrative
OpenKey |  | Mobile key app | $ | 5 |  | $ | — |  |  | $ | — |  |  | $ | 5 |  |  | $ | — |
Pure Rooms |  | Hypoallergenic premium rooms | 128 |  | 117 |  |  | — |  |  | 11 |  |  | — |
RED Leisure |  | Watersports activities and travel/transportation services | 180 |  | — |  |  | — |  |  | 180 |  |  | — |
Premier |  | Project management services | 1,125 |  | 1,125 |  |  | — |  |  | — |  |  | — |
Ashford LLC |  | Insurance claims services | 31 |  | — |  |  | — |  |  | — |  |  | 31 |
________
(1) | Recorded in furniture, fixtures and equipment and depreciated over the estimated useful life.
(2) | Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.
|  |  | Nine Months Ended September 30, 2018
Company |  | Product or Service | Total, net | Investments in Hotel Properties, net (1) |  | Indebtedness, net (2) |  | Other Hotel Expenses |  | Corporate General and Administrative
OpenKey |  | Mobile key app | $ | 17 |  | $ | — |  |  | $ | — |  |  | $ | 17 |  |  | $ | — |
Pure Rooms |  | Hypoallergenic premium rooms | 147 |  | 117 |  |  | — |  |  | 30 |  |  | — |
RED Leisure |  | Watersports activities and travel/transportation services | 540 |  | — |  |  | — |  |  | 540 |  |  | — |
Premier |  | Project management services | 1,125 |  | 1,125 |  |  | — |  |  | — |  |  | — |
Lismore Capital |  | Mortgage placement services | 999 |  | — |  |  | (999 | ) |  | — |  |  | — |
Ashford LLC |  | Insurance claims services | 100 |  | — |  |  | — |  |  | — |  |  | 100 |
________
(1) | Recorded in furniture, fixtures and equipment and depreciated over the estimated useful life.
(2) | Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.
The following table summarizes the due to Ashford Inc. (in thousands):
|  |  |  | September 30, 2018 |  | December 31, 2017
Company |  | Product or Service |  | Due to Ashford Inc.
Ashford LLC |  | Advisory services |  | $ | 2,525 |  |  | $ | 1,654 |
Ashford LLC |  | Insurance claims services |  | 30 |  |  | — |
OpenKey |  | Mobile key app |  | 2 |  |  | 4 |
Pure Rooms |  | Hypoallergenic premium rooms |  | — |  |  | 45 |
Premier |  | Project management services |  | 625 |  |  | — |
|  |  |  | $ | 3,182 |  |  | $ | 1,703 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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