Investment in Unconsolidated Entity

Ashford Inc.

As of September 30, 2018 and December 31, 2017, we held approximately 195,000 shares of Ashford Inc. common stock. The closing price per share of Ashford Inc. common stock on the NYSE American LLC was $75.87 and $93.00 as of September 30, 2018 and December 31, 2017, respectively. This represented an approximate 8.2% and 9.3% ownership interest in Ashford Inc. for September 30, 2018 and December 31, 2017, 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 condensed consolidated balance sheets, and changes in market value are included in “unrealized gain (loss) on investment in Ashford Inc.” on our condensed consolidated statements of operations.

The following tables summarize the condensed consolidated balance sheets as of September 30, 2018 and December 31, 2017, and the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017, of Ashford Inc. (in thousands):

Ashford Inc.

Condensed Consolidated Balance Sheets

(unaudited)



	September 30, 2018		December 31, 2017
Total assets	$	389,818	$	114,810
Total liabilities	121,763		78,742
Series B cumulative convertible preferred stock	200,578		—
Redeemable noncontrolling interests	3,778		5,111
Total stockholders’ equity of Ashford Inc.	63,050		30,185
Noncontrolling interests in consolidated entities	649		772
Total equity	63,699		30,957
Total liabilities and equity	$	389,818	$	114,810
Our investment in Ashford Inc., at fair value	$	14,786	$	18,124

Ashford Inc.

Condensed Consolidated Statements of Operations

(unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Total revenue	$	41,565		$	19,255		$	144,544		$	51,907
Total operating expenses	(53,069		)	(21,595		)	(150,214		)	(54,965		)
Operating income (loss)	(11,504		)	(2,340		)	(5,670		)	(3,058		)
Realized and unrealized gain (loss) on investments, net	—			—			—			(91		)
Interest expense and loan amortization cost	(419		)	(20		)	(770		)	(35		)
Other income (expense)	25			77			(50		)	220
Income tax (expense) benefit	13,904			25			11,593			(9,248		)
Net income (loss)	2,006			(2,258		)	5,103			(12,212		)
(Income) loss from consolidated entities attributable to noncontrolling interests	413			102			704			267
Net (income) loss attributable to redeemable noncontrolling interests	968			300			817			995
Net income (loss) attributable to Ashford Inc.	$	3,387		$	(1,856	)	$	6,624		$	(10,950	)
Preferred dividends	(1,675		)	—			(1,675		)	—
Amortization of preferred stock discounts	(303		)	—			(303		)	—
Net income attributable to common shareholders	$	1,409		$	(1,856	)	$	4,646		$	(10,950	)
Our unrealized gain (loss) on investment in Ashford Inc.	$	2,158		$	1,875		$	(3,338	)	$	3,403

OpenKey

On March 28, 2018, the Company made a $2.0 million investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an 8.2% ownership interest, which investment was approved by our Related Party Transactions Committee and the independent members of our board of directors. OpenKey is a hospitality-focused mobile key platform that provides a universal smart phone app for keyless entry into hotel guest rooms. Our investment is recorded as a component of “investment in unconsolidated entity” in our condensed consolidated balance sheet and is accounted for under the equity method of accounting as we have been deemed to have significant influence over the entity under the applicable accounting guidance.

The following table summarizes our carrying value and ownership interest in OpenKey:



	September 30, 2018			December 31, 2017
Carrying value of the investment in OpenKey (in thousands)	$	1,854		$	—
Ownership interest in OpenKey	8.2		%	—

The following table summarizes our equity in earnings (loss) in OpenKey (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
Line Item	2018			2017		2018			2017
Equity in earnings (loss) of unconsolidated entity	$	(81	)	$	—	$	(146	)	$	—