Investment in Unconsolidated Entity

Ashford Inc.

As of September 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 $24.24 and $51.90 as of September 30, 2019 and December 31, 2018, respectively. This represented an approximate 7.5% and 8.1% ownership interest in the outstanding common stock of Ashford Inc. for September 30, 2019 and December 31, 2018, respectively. See notes 11, 12 and 19.

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, 2019 and December 31, 2018, and the condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018, of Ashford Inc. (in thousands):

Ashford Inc.

Condensed Consolidated Balance Sheets

(unaudited)



	September 30, 2019		December 31, 2018
Total assets	$	421,837	$	379,005
Total liabilities	148,779		108,726
Series B Convertible Preferred Stock	202,185		200,847
Redeemable noncontrolling interests	3,641		3,531
Total stockholders’ equity of Ashford Inc.	66,467		65,443
Noncontrolling interests in consolidated entities	765		458
Total equity	67,232		65,901
Total liabilities and equity	$	421,837	$	379,005
Our investment in Ashford Inc., at fair value	$	4,724	$	10,114

Ashford Inc.

Condensed Consolidated Statements of Operations

(unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Total revenue	$	56,889		$	41,565		$	183,675		$	144,544
Total operating expenses	(63,690		)	(53,069		)	(186,991		)	(150,214		)
Operating income (loss)	(6,801		)	(11,504		)	(3,316		)	(5,670		)
Equity in earnings (loss) of unconsolidated entities	464			—			(109		)	—
Interest expense and loan amortization cost	(531		)	(419		)	(1,412		)	(770		)
Other income (expense)	(20		)	25			(86		)	(50		)
Income tax (expense) benefit	297			13,904			(1,429		)	11,593
Net income (loss)	(6,591		)	2,006			(6,352		)	5,103
(Income) loss from consolidated entities attributable to noncontrolling interests	101			413			395			704
Net (income) loss attributable to redeemable noncontrolling interests	334			968			623			817
Net income (loss) attributable to Ashford Inc.	$	(6,156	)	$	3,387		$	(5,334	)	$	6,624
Preferred dividends	(2,909		)	(1,675		)	(8,492		)	(1,675		)
Amortization of preferred stock discount	(363		)	(303		)	(1,338		)	(303		)
Net income attributable to common stockholders	$	(9,428	)	$	1,409		$	(15,164	)	$	4,646
Our unrealized gain (loss) on investment in Ashford Inc.	$	(1,471	)	$	2,158		$	(5,390	)	$	(3,338	)

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. In 2019, we made additional investments of $332,000 which was recommended by our Related Party Transactions Committee and unanimously approved by the independent members of our board of directors. As of September 30, 2019, the Company has made investments in OpenKey totaling $2.3 million.

OpenKey is a hospitality-focused mobile key platform that provides a universal smart phone app and related hardware and software 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:



	September 30, 2019			December 31, 2018
Carrying value of the investment in OpenKey (in thousands)	$	1,949		$	1,766
Ownership interest in OpenKey	8.6		%	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	2019			2018			2019			2018
Equity in earnings (loss) of unconsolidated entity	$	(48	)	$	(81	)	$	(149	)	$	(146	)