Subsequent Events

On January 15, 2019, the Company acquired a 100% interest in the 170-room Ritz-Carlton, Lake Tahoe located in Truckee, California for $103.3 million, a 3.4-acre undeveloped land parcel for $8.4 million, and capital reserves of $8.3 million. The Company also completed the financing of a $54 million mortgage loan secured by the Ritz-Carlton, Lake Tahoe. The mortgage loan is interest-only, bears interest at a rate of LIBOR + 2.10%, and has a five-year term. We are currently evaluating the hotel property acquisition to determine whether the transaction is a business combination or asset acquisition.

In conjunction with the transaction, the Company entered into the Enhanced Return Funding Program Agreement and Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement (the “ERFP Agreement”) with Ashford Inc. The Amended and Restated Advisory Agreement was also amended to name Ashford Inc. and its subsidiaries as the Company’s sole and exclusive provider of asset management, project management and other services offered by Ashford Inc. or any of its subsidiaries. The independent members of our board of directors and the independent members of the board of directors of Ashford Inc., with the assistance of separate and independent legal counsel, engaged to negotiate the ERFP Agreement on behalf of Ashford Inc. and Braemar, respectively.

The ERFP Agreement generally provides that Ashford LLC will provide funding to facilitate the acquisition of properties by Braemar OP that are recommended by Ashford LLC, in an aggregate amount of up to $50 million (subject to increase to up to $100 million by mutual agreement). Each funding will equal 10% of the property acquisition price and will be made either at the time of the property acquisition or at any time generally within the two-year period following the date of such acquisition, in exchange for FF&E for use at the acquired property or any other property owned by Braemar OP.

The initial term of the ERFP Agreement is two years (the “Initial Term”), unless earlier terminated pursuant to the terms of the ERFP Agreement. At the end of the Initial Term, the ERFP Agreement shall automatically renew for successive one-year periods (each such period a “Renewal Term”) unless either Ashford Inc. or Braemar provides written notice to the other at least sixty days in advance of the expiration of the Initial Term or Renewal Term, as applicable, that such notifying party intends not to renew the ERFP Agreement. As a result of the Ritz-Carlton, Lake Tahoe acquisition, Braemar is entitled to receive $10.3 million from Ashford LLC in the form of future purchases of hotel FF&E at Braemar hotel properties that will be leased to us by Ashford LLC rent free.

Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement revised the formula for calculating the base fee. The total monthly base fee is in an amount equal to 1/12th of the sum of (i) 0.70% of the total market capitalization of our company for the prior month, plus (ii) the Net Asset Fee Adjustment (as defined), if any, on the last day of the prior month during which our advisory agreement was in effect; provided, however in no event shall the base fee for any month be less than the minimum base fee as provided by our advisory agreement. The base fee is payable on the 5th business day of each month.

The minimum base fee for Braemar for each month will be equal to the greater of:


(i)	90% of the base fee paid for the same month in the prior year; and


(ii)	1/12th of the G&A Ratio (as defined) multiplied by the total market capitalization of Braemar.

The Company and Premier agreed to amend and restate the master project management agreement, effective January 1, 2019, to, among other things, fix the following fees which were previously subject to periodic review and adjustment:

•architecture - 6.5% of total construction costs;

•construction management - 10.0% of total construction costs (for projects without a general contractor);


•	interior design - 6.0% of the amount selected (including the cost of any and all items selected by Premier or which are specified in the general contractor’s scope of work but excluding any associated charges for labor, freight and tax); and


•	FF&E purchasing - 8.0% of the purchased amount (which includes the selected items, freight and tax) unless the total purchased amount for a single hotel property in a single year is greater than $2.0 million, in which case the fee is reduced to 6.0% of the purchased amount in excess of $2 million.

On January 22, 2019, the Company refinanced its existing mortgage loan of approximately $187 million with a final maturity date in November 2021 with a new $195 million mortgage loan that is interest only, bears interest at a rate of LIBOR + 1.70% and has a five-year term. The mortgage loan is secured by the same two hotels: the Capital Hilton and Hilton La Jolla Torrey Pines. These two hotels are held in a joint venture in which we have a 75% equity interest.

On February 6, 2019, we invested an additional $156,000 in OpenKey, which investment was approved by the independent members of our board of directors.