Investment in Unconsolidated Entity

Ashford Inc.

As of 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 $51.90 as of December 31, 2018. This represented an approximate 8.1% ownership interest in the outstanding common stock of Ashford Inc.

We 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. was included in “investment in Ashford Inc., at fair value” on our consolidated balance sheet as of December 31, 2018. Changes in market value are included in “unrealized gain (loss) on investment in Ashford Inc.” on our consolidated statements of operations.

On October 2, 2019, we entered into a stock purchase agreement with Ashford LLC under which Ashford LLC purchased all of the common stock of Ashford Inc. held by one of our TRS subsidiaries, totaling 19,897 shares, for $30 per share, resulting in total proceeds of approximately $597,000 to the Company. For the year ended December 31, 2019 a loss of $436,000 was recognized as a result of changes in fair value.

On October 21, 2019, our board of directors declared the distribution of its remaining 174,983 shares of common stock of Ashford Inc. Both common stockholders of Braemar and unitholders of Braemar OP received their pro-rata share of Ashford Inc. common stock. The distribution to Company Record Holders was completed through a pro-rata taxable dividend of Ashford Inc. common stock on the “Distribution Date to Company Record Holders as of the close of business of the NYSE on the Record Date. On the Distribution Date, each Company Record Holder received approximately 0.0047 shares of Ashford Inc. common stock for every unit and/or share of the Company’s common stock held by such Company Record Holder on the Record Date. No fractional shares of Ashford Inc. common stock were issued. Fractional shares of Ashford Inc. common stock to which Company Record Holders would otherwise be entitled were aggregated and, after the distribution, sold in the open market by the distribution agent. The aggregate net proceeds of the sales were distributed in a pro-rata manner as cash payments to the Company Record Holders who would otherwise have received fractional shares of Ashford Inc. common stock. The fair value of the Ashford Inc. common stock at the time of the distribution was $4.0 million. For the year ended December 31, 2019 a loss of $5.1 million was recognized as a result of changes in fair value. Subsequent to the distribution, we do not have any ownership interest in Ashford Inc. See notes 10 and 11.

The following tables summarize the condensed consolidated balance sheet as of December 31, 2018, and the condensed consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017, of Ashford Inc. (in thousands):

Ashford Inc.

Condensed Consolidated Balance Sheet



	December 31, 2018
Total assets	$	379,005
Total liabilities	$	108,726
Series B Convertible Preferred Stock	200,847
Redeemable noncontrolling interests	3,531
Total stockholders’ equity of Ashford Inc.	65,443
Noncontrolling interests in consolidated entities	458
Total equity	65,901
Total liabilities and equity	$	379,005
Our investment in Ashford Inc., at fair value	$	10,114

Ashford Inc.

Condensed Consolidated Statements of Operations



	Year Ended December 31,
	2019			2018			2017
Total revenue	$	291,250		$	195,520		$	81,573
Total operating expenses	(302,480		)	(196,359		)	(92,095		)
Operating income (loss)	(11,230		)	(839		)	(10,522		)
Equity in earnings (loss) of unconsolidated entities	(286		)	—			—
Realized and unrealized gain (loss) on investments, net	—			—			(91		)
Interest expense and amortization of loan cost	(2,367		)	(1,200		)	(122		)
Other income (expense)	49			(505		)	264
Income tax (expense) benefit	(1,540		)	10,364			(9,723		)
Net income (loss)	(15,374		)	7,820			(20,194		)
(Income) loss from consolidated entities attributable to noncontrolling interests	536			924			358
Net (income) loss attributable to redeemable noncontrolling interests	983			1,438			1,484
Net income (loss) attributable to Ashford Inc.	$	(13,855	)	$	10,182		$	(18,352	)
Preferred dividends	(14,435		)	(4,466		)	—
Amortization of preferred stock discount	(1,928		)	(730		)	—
Net income attributable to common stockholders	$	(30,218	)	$	4,986		$	(18,352	)
Our realized gain (loss) on investment in Ashford Inc.	$	(13,424	)	$	—		$	—
Our unrealized gain (loss) on investment in Ashford Inc.	$	7,872		$	(8,010	)	$	9,717

OpenKey

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. On March 28, 2018, the Company made an initial $2.0 million investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an initial 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 December 31, 2019, the Company has made investments in OpenKey totaling $2.3 million. Our investment is recorded as “investment in unconsolidated entity” in our 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:



	December 31, 2019			December 31, 2018
Carrying value of the investment in OpenKey (in thousands)	$	1,899		$	1,766
Ownership interest in OpenKey	8.6		%	8.2		%

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



	Year Ended December 31,
Line Item	2019			2018
Equity in earnings (loss) of unconsolidated entity	$	(199	)	$	(234	)