Investment in Unconsolidated Entity

Ashford Inc.

As of June 30, 2019 and December 31, 2018, 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 $31.79 and $51.90 as of June 30, 2019 and December 31, 2018, respectively. This represented an approximate 7.9% and 8.1% ownership interest in the outstanding common stock of Ashford Inc. for June 30, 2019 and December 31, 2018, 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 June 30, 2019 and December 31, 2018, and the condensed consolidated statements of operations for the three and six months ended June 30, 2019 and 2018, of Ashford Inc. (in thousands):

Ashford Inc.

Condensed Consolidated Balance Sheets

(unaudited)



	June 30, 2019		December 31, 2018
Total assets	$	418,178	$	379,005
Total liabilities	142,743		108,726
Series B cumulative convertible preferred stock	201,822		200,847
Redeemable noncontrolling interests	3,615		3,531
Total stockholders’ equity of Ashford Inc.	69,588		65,443
Noncontrolling interests in consolidated entities	410		458
Total equity	69,998		65,901
Total liabilities and equity	$	418,178	$	379,005
Our investment in Ashford Inc., at fair value	$	6,195	$	10,114

Ashford Inc.

Condensed Consolidated Statements of Operations

(unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Total revenue	$	63,466		$	54,811		$	126,786		$	102,979
Total operating expenses	(62,523		)	(43,941		)	(123,301		)	(97,145		)
Operating income (loss)	943			10,870			3,485			5,834
Equity in earnings (loss) of unconsolidated entities	(298		)	—			(573		)	—
Interest expense and loan amortization cost	(515		)	(185		)	(881		)	(351		)
Other income (expense)	(33		)	(148		)	(66		)	(75		)
Income tax (expense) benefit	(426		)	(1,605		)	(1,726		)	(2,311		)
Net income (loss)	(329		)	8,932			239			3,097
(Income) loss from consolidated entities attributable to noncontrolling interests	131			118			294			291
Net (income) loss attributable to redeemable noncontrolling interests	310			(90		)	289			(151		)
Net income (loss) attributable to Ashford Inc.	$	112		$	8,960		$	822		$	3,237
Preferred dividends	(2,791		)	—			(5,583		)	—
Amortization of preferred stock discount	(484		)	—			(975		)	—
Net income attributable to common stockholders	$	(3,163	)	$	8,960		$	(5,736	)	$	3,237
Our unrealized gain (loss) on investment in Ashford Inc.	$	(4,626	)	$	(6,024	)	$	(3,919	)	$	(5,496	)

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 recommended by our Related Party Transactions Committee and unanimously approved by the independent members of our board of directors. On February 6, 2019, the Company made an additional investment of $156,000, which was recommended by our Related Party Transactions Committee and unanimously approved by 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 “investment in unconsolidated entity” in our condensed consolidated balance sheets 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:



	June 30, 2019			December 31, 2018
Carrying value of the investment in OpenKey (in thousands)	$	1,821		$	1,766
Ownership interest in OpenKey	8.4		%	8.2		%

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



	Three Months Ended June 30,						Six Months Ended June 30,
Line Item	2019			2018			2019			2018
Equity in earnings (loss) of unconsolidated entity	$	(51	)	$	(62	)	$	(101	)	$	(65	)