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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________
Commission file number: 001-35972
BRAEMAR HOTELS & RESORTS INC.
(Exact name of registrant as specified in its charter)

Maryland |  | 46-2488594
(State or other jurisdiction of incorporation or organization) |  | (IRS employer identification number)
14185 Dallas Parkway |  |
Suite 1200 |  |
Dallas |  |
Texas |  | 75254
(Address of principal executive offices) |  | (Zip code)

(972) 490-9600
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ | Accelerated filer | ☑
Non-accelerated filer | ☐ | Smaller reporting company | ☑
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock |  | BHR |  | New York Stock Exchange
Preferred Stock, Series B |  | BHR-PB |  | New York Stock Exchange
Preferred Stock, Series D |  | BHR-PD |  | New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value per share |  | 64,503,016
(Class) |  | Outstanding at November 3, 2021

BRAEMAR HOTELS & RESORTS INC.
FORM 10-Q
FOR THE QUARTER ENDED September 30, 2021
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS (unaudited) |
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 | 2
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 | 3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020 | 4
Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2021 and 2020 | 5
Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2021 and 2020 | 7
Notes to Condensed Consolidated Financial Statements | 9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 36
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 58
ITEM 4. CONTROLS AND PROCEDURES | 59
PART II. OTHER INFORMATION |
ITEM 1. LEGAL PROCEEDINGS | 59
ITEM 1A. RISK FACTORS | 60
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 60
ITEM 3. DEFAULTS UPON SENIOR SECURITIES | 61
ITEM 4. MINE SAFETY DISCLOSURES | 61
ITEM 5. OTHER INFORMATION | 61
ITEM 6. EXHIBITS | 61
SIGNATURES | 63

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share amounts)

|  | September 30, 2021 |  | December 31, 2020
ASSETS |  |  |  |
Investments in hotel properties, gross |  | $ | 1,847,755 |  |  | $ | 1,784,849 |
Accumulated depreciation |  | (395,753) |  |  | (360,259) |
Investments in hotel properties, net |  | 1,452,002 |  |  | 1,424,590 |
Cash and cash equivalents |  | 195,517 |  |  | 78,606 |
Restricted cash |  | 44,753 |  |  | 34,544 |
Accounts receivable, net of allowance of $126 and $227, respectively |  | 17,317 |  |  | 13,557 |
Inventories |  | 2,718 |  |  | 2,551 |
Prepaid expenses |  | 4,297 |  |  | 4,405 |
Investment in unconsolidated entity |  | 1,627 |  |  | 1,708 |
Derivative assets |  | 74 |  |  | — |
Operating lease right-of-use assets |  | 80,593 |  |  | 81,260 |
Other assets |  | 14,439 |  |  | 14,898 |
Intangible assets, net |  | 4,356 |  |  | 4,640 |
Due from related parties, net |  | 1,910 |  |  | 991 |
Due from third-party hotel managers |  | 20,390 |  |  | 12,271 |
Total assets |  | $ | 1,839,993 |  |  | $ | 1,674,021 |
LIABILITIES AND EQUITY |  |  |  |
Liabilities: |  |  |  |
Indebtedness, net |  | $ | 1,172,787 |  |  | $ | 1,130,594 |
Accounts payable and accrued expenses |  | 89,265 |  |  | 61,758 |
Dividends and distributions payable |  | 2,112 |  |  | 2,736 |
Due to Ashford Inc. |  | 820 |  |  | 2,772 |
Due to third-party hotel managers |  | 1,665 |  |  | 1,393 |
Operating lease liabilities |  | 60,876 |  |  | 60,917 |
Other liabilities |  | 20,699 |  |  | 18,077 |
Derivative liabilities |  | 1,338 |  |  | — |
Total liabilities |  | 1,349,562 |  |  | 1,278,247 |
Commitments and contingencies (note 15) |  |  |  |
5.50% Series B cumulative convertible preferred stock, $0.01 par value, 3,078,017 and 5,031,473 shares issued and outstanding at September 30, 2021 and December 31, 2020 |  | 65,426 |  |  | 106,949 |
Series E redeemable preferred stock, $0.01 par value, 265,637 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020 |  | 6,110 |  |  | — |
Series M redeemable preferred stock, $0.01 par value, 14,644 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020 |  | 361 |  |  | — |
Redeemable noncontrolling interests in operating partnership |  | 39,948 |  |  | 27,655 |
Equity: |  |  |  |
Preferred stock, $0.01 value, 80,000,000 shares authorized: |  |  |  |
8.25% Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at September 30, 2021 and December 31, 2020 |  | 16 |  |  | 16 |
Common stock, $0.01 par value, 250,000,000 shares authorized, 63,974,117 and 38,274,770 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively |  | 639 |  |  | 382 |
Additional paid-in capital |  | 698,481 |  |  | 541,870 |
Accumulated deficit |  | (303,836) |  |  | (266,010) |
Total stockholders’ equity of the Company |  | 395,300 |  |  | 276,258 |
Noncontrolling interest in consolidated entities |  | (16,714) |  |  | (15,088) |
Total equity |  | 378,586 |  |  | 261,170 |
Total liabilities and equity |  | $ | 1,839,993 |  |  | $ | 1,674,021 |

See Notes to Condensed Consolidated Financial Statements.
2

Table of Contents
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
REVENUE |  |  |  |  |  |  |  |  |
Rooms | $ | 77,560 |  |  | $ | 28,118 |  |  | $ | 195,720 |  |  | $ | 105,119 |  |  |
Food and beverage | 24,494 |  |  | 8,537 |  |  | 60,976 |  |  | 39,417 |  |  |
Other | 14,123 |  |  | 8,099 |  |  | 40,439 |  |  | 30,633 |  |  |
Total hotel revenue | 116,177 |  |  | 44,754 |  |  | 297,135 |  |  | 175,169 |  |  |
EXPENSES |  |  |  |  |  |  |  |  |
Hotel operating expenses: |  |  |  |  |  |  |  |  |
Rooms | 17,072 |  |  | 7,975 |  |  | 41,569 |  |  | 29,300 |  |  |
Food and beverage | 20,252 |  |  | 7,994 |  |  | 50,526 |  |  | 35,544 |  |  |
Other expenses | 36,124 |  |  | 20,516 |  |  | 98,143 |  |  | 75,585 |  |  |
Management fees | 3,595 |  |  | 1,321 |  |  | 9,079 |  |  | 5,664 |  |  |
Total hotel operating expenses | 77,043 |  |  | 37,806 |  |  | 199,317 |  |  | 146,093 |  |  |
Property taxes, insurance and other | 12,622 |  |  | 6,929 |  |  | 27,076 |  |  | 21,833 |  |  |
Depreciation and amortization | 18,284 |  |  | 18,507 |  |  | 54,881 |  |  | 55,398 |  |  |
Advisory services fee | 4,809 |  |  | 4,575 |  |  | 16,343 |  |  | 14,545 |  |  |
(Gain) loss on legal settlements | — |  |  | — |  |  | (989) |  |  | — |  |  |
Transaction costs | 275 |  |  | — |  |  | 571 |  |  | — |  |  |
Corporate general and administrative | 2,094 |  |  | 1,405 |  |  | 6,077 |  |  | 4,850 |  |  |
Total expenses | 115,127 |  |  | 69,222 |  |  | 303,276 |  |  | 242,719 |  |  |
Gain (loss) on insurance settlement and disposition of assets | — |  |  | 10,149 |  |  | 696 |  |  | 10,149 |  |  |
OPERATING INCOME (LOSS) | 1,050 |  |  | (14,319) |  |  | (5,445) |  |  | (57,401) |  |  |
Equity in earnings (loss) of unconsolidated entity | (68) |  |  | (58) |  |  | (198) |  |  | (138) |  |  |
Interest income | 13 |  |  | 12 |  |  | 34 |  |  | 165 |  |  |
Other income (expense) | — |  |  | (3,604) |  |  | — |  |  | (3,806) |  |  |
Interest expense and amortization of discounts and loan costs | (8,364) |  |  | (8,859) |  |  | (22,346) |  |  | (38,167) |  |  |
Write-off of loan costs and exit fees | (432) |  |  | (1,335) |  |  | (1,960) |  |  | (3,572) |  |  |
Unrealized gain (loss) on derivatives | 142 |  |  | 3,561 |  |  | 64 |  |  | 3,748 |  |  |
INCOME (LOSS) BEFORE INCOME TAXES | (7,659) |  |  | (24,602) |  |  | (29,851) |  |  | (99,171) |  |  |
Income tax (expense) benefit | (560) |  |  | 1,545 |  |  | (766) |  |  | 4,622 |  |  |
NET INCOME (LOSS) | (8,219) |  |  | (23,057) |  |  | (30,617) |  |  | (94,549) |  |  |
(Income) loss attributable to noncontrolling interest in consolidated entities | 450 |  |  | 1,999 |  |  | 2,546 |  |  | 4,975 |  |  |
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership | 823 |  |  | 2,381 |  |  | 3,184 |  |  | 10,036 |  |  |
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY | (6,946) |  |  | (18,677) |  |  | (24,887) |  |  | (79,538) |  |  |
Preferred dividends | (1,977) |  |  | (2,554) |  |  | (6,258) |  |  | (7,664) |  |  |
Gain (loss) on extinguishment of preferred stock | (111) |  |  | — |  |  | (4,595) |  |  | — |  |  |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (9,034) |  |  | $ | (21,231) |  |  | $ | (35,740) |  |  | $ | (87,202) |  |  |
INCOME (LOSS) PER SHARE - BASIC: |  |  |  |  |  |  |  |  |
Net income (loss) attributable to common stockholders | $ | (0.15) |  |  | $ | (0.63) |  |  | $ | (0.73) |  |  | $ | (2.63) |  |  |
Weighted average common shares outstanding – basic | 59,207 |  |  | 33,923 |  |  | 48,954 |  |  | 33,103 |  |  |
INCOME (LOSS) PER SHARE - DILUTED: |  |  |  |  |  |  |  |  |
Net income (loss) attributable to common stockholders | $ | (0.15) |  |  | $ | (0.63) |  |  | $ | (0.73) |  |  | $ | (2.63) |  |  |
Weighted average common shares outstanding – diluted | 59,207 |  |  | 33,923 |  |  | 48,954 |  |  | 33,103 |  |  |

See Notes to Condensed Consolidated Financial Statements.
3

Table of Contents
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
NET INCOME (LOSS) | $ | (8,219) |  |  | $ | (23,057) |  |  | $ | (30,617) |  |  | $ | (94,549) |  |  |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |  |  |  |  |  |  |  |  |
Total other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | — |  |  |
TOTAL COMPREHENSIVE INCOME (LOSS) | (8,219) |  |  | (23,057) |  |  | (30,617) |  |  | (94,549) |  |  |
Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities | 450 |  |  | 1,999 |  |  | 2,546 |  |  | 4,975 |  |  |
Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership | 823 |  |  | 2,381 |  |  | 3,184 |  |  | 10,036 |  |  |
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY | $ | (6,946) |  |  | $ | (18,677) |  |  | $ | (24,887) |  |  | $ | (79,538) |  |  |

See Notes to Condensed Consolidated Financial Statements.
4

Table of Contents
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(unaudited, in thousands except per share amounts)

| 8.25% Series D Cumulative Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Noncontrolling Interest in Consolidated Entities |  |  |  |  |  | Total |  | 5.50% Series B Cumulative Convertible Preferred Stock |  | Series E Redeemable Preferred Stock |  | Series M Redeemable Preferred Stock |  | Redeemable Noncontrolling Interests in Operating Partnership
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |  |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |
Balance at June 30, 2021 | 1,600 |  |  | $ | 16 |  |  | 57,311 |  |  | $ | 573 |  |  | $ | 661,576 |  |  | $ | (295,641) |  |  | $ | (16,264) |  |  |  |  |  |  | $ | 350,260 |  |  | 3,108 |  |  | $ | 66,064 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | $ | 29,398 |
Equity-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 1,990 |  |  | — |  |  | — |  |  |  |  |  |  | 1,990 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,054 |
Issuance of common stock | — |  |  | — |  |  | 6,550 |  |  | 66 |  |  | 34,166 |  |  | — |  |  |  |  |  |  |  |  | 34,232 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuance of common units for hotel acquisition | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13,175 |
Issuance of preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | 266 |  |  | 4,204 |  |  | 15 |  |  | 250 |  |  | — |
Dividends declared – preferred stock - Series B ($0.34/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,058) |  |  | — |  |  |  |  |  |  | (1,058) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series D ($0.52/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (825) |  |  | — |  |  |  |  |  |  | (825) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series E ($0.50/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (90) |  |  | — |  |  |  |  |  |  | (90) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series M ($0.51/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4) |  |  | — |  |  |  |  |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,946) |  |  | (450) |  |  |  |  |  |  | (7,396) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (823) |
Extinguishment of preferred stock | — |  |  | — |  |  | 120 |  |  | — |  |  | 749 |  |  | (111) |  |  | — |  |  |  |  |  |  | 638 |  |  | (30) |  |  | (638) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Redemption value adjustment - preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,017) |  |  | — |  |  |  |  |  |  | (2,017) |  |  | — |  |  | — |  |  | — |  |  | 1,906 |  |  |  |  | 111 |  |  | — |
Redemption value adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,856 |  |  | — |  |  |  |  |  |  | 2,856 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,856) |
Balance at September 30, 2021 | 1,600 |  |  | $ | 16 |  |  | 63,974 |  |  | $ | 639 |  |  | $ | 698,481 |  |  | $ | (303,836) |  |  | $ | (16,714) |  |  |  |  |  |  | $ | 378,586 |  |  | 3,078 |  |  | $ | 65,426 |  |  | 266 |  |  | $ | 6,110 |  |  | 15 |  |  | $ | 361 |  |  | $ | 39,948 |

| 8.25% Series D Cumulative Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Noncontrolling Interest in Consolidated Entities |  |  |  |  | Total |  | 5.50% Series B Cumulative Convertible Preferred Stock |  | Series E Redeemable Preferred Stock |  | Series M Redeemable Preferred Stock |  | Redeemable Noncontrolling Interests in Operating Partnership
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |  | Shares |  | Amount |  | Shares |  | Amount |  | Shares |  | Amount |
Balance at December 31, 2020 | 1,600 |  |  | $ | 16 |  |  | 38,275 |  |  | $ | 382 |  |  | $ | 541,870 |  |  | $ | (266,010) |  |  | $ | (15,088) |  |  |  |  |  | $ | 261,170 |  |  | 5,031 |  |  | $ | 106,949 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |  |  | $ | 27,655 |
Purchase of common stock | — |  |  | — |  |  | (50) |  |  | — |  |  | (348) |  |  | — |  |  | — |  |  |  |  |  | (348) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Equity-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 5,015 |  |  | — |  |  | — |  |  |  |  |  | 5,015 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,250 |
Issuance of common stock | — |  |  | — |  |  | 17,714 |  |  | 178 |  |  | 99,631 |  |  | — |  |  | — |  |  |  |  |  | 99,809 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuance of preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  | — |  |  | — |  |  | — |  |  | 266 |  |  | 4,204 |  |  | 15 |  |  | 250 |  |  | — |
Issuance of restricted shares/units | — |  |  | — |  |  | 764 |  |  | 8 |  |  | (8) |  |  | — |  |  | — |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuance of common units for hotel acquisition | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13,175 |
Forfeiture of restricted common shares | — |  |  | — |  |  | (22) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series B ($1.03/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,689) |  |  | — |  |  |  |  |  | (3,689) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series D ($1.55/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,475) |  |  | — |  |  |  |  |  | (2,475) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series E ($0.50/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (90) |  |  | — |  |  |  |  |  | (90) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series M (0.51/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4) |  |  | — |  |  |  |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Contributions from noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 920 |  |  |  |  |  | 920 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Redemption/conversion of operating partnership units | — |  |  | — |  |  | 2 |  |  | — |  |  | 17 |  |  | — |  |  | — |  |  |  |  |  | 17 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (17) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (24,887) |  |  | (2,546) |  |  |  |  |  | (27,433) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,184) |
Extinguishment of preferred stock | — |  |  | — |  |  | 7,291 |  |  | 71 |  |  | 46,047 |  |  | (4,595) |  |  | — |  |  |  |  |  | 41,523 |  |  | (1,953) |  |  | (41,523) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Equity component of Convertible Senior Notes | — |  |  | — |  |  | — |  |  | — |  |  | 6,257 |  |  | — |  |  | — |  |  |  |  |  | 6,257 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Redemption value adjustment - preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,017) |  |  | — |  |  |  |  |  | (2,017) |  |  | — |  |  | — |  |  | — |  |  | 1,906 |  |  | — |  |  | 111 |  |  | — |
Redemption value adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (69) |  |  | — |  |  |  |  |  | (69) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 69 |
Balance at September 30, 2021 | 1,600 |  |  | $ | 16 |  |  | 63,974 |  |  | $ | 639 |  |  | $ | 698,481 |  |  | $ | (303,836) |  |  | $ | (16,714) |  |  |  |  |  | $ | 378,586 |  |  | 3,078 |  |  | $ | 65,426 |  |  | 266 |  |  | $ | 6,110 |  | $0 | 15 |  |  | $ | 361 |  |  | 39,948 |

5

Table of Contents

| 8.25% Series D Cumulative Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Noncontrolling Interest in Consolidated Entities |  |  |  |  |  | Total |  | 5.50% Series B Cumulative Convertible Preferred Stock |  | Redeemable Noncontrolling Interests in Operating Partnership
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |  |  | Shares |  | Amount |
Balance at June 30, 2020 | 1,600 |  |  | $ | 16 |  |  | 33,528 |  |  | $ | 335 |  |  | $ | 525,846 |  |  | $ | (216,574) |  |  | $ | (11,628) |  |  |  |  |  |  | $ | 297,995 |  |  | 5,031 |  |  | $ | 107,352 |  |  | $ | 31,589 |
Purchase of common stock | — |  |  | — |  |  | (1) |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  |  |  |  |  | (2) |  |  | — |  |  | — |  |  | — |
Equity-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 1,465 |  |  | — |  |  | — |  |  |  |  |  |  | 1,465 |  |  | — |  |  | — |  |  | 541 |
Issuance of common stock | — |  |  | — |  |  | 3,046 |  |  | 30 |  |  | 6,380 |  |  | — |  |  | — |  |  |  |  |  |  | 6,410 |  |  | — |  |  | — |  |  | — |
Issuance of restricted shares/units | — |  |  | — |  |  | 29 |  |  | — |  |  | (48) |  |  | — |  |  | — |  |  |  |  |  |  | (48) |  |  | — |  |  | — |  |  | (44) |
Forfeiture of restricted common shares | — |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series B ($0.34/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,729) |  |  | — |  |  |  |  |  |  | (1,729) |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock-Series D ($0.52/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (825) |  |  | — |  |  |  |  |  |  | (825) |  |  | — |  |  | — |  |  | — |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (18,677) |  |  | (1,999) |  |  |  |  |  |  | (20,676) |  |  | — |  |  | — |  |  | (2,381) |
Redemption value adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (8) |  |  | — |  |  |  |  |  |  | (8) |  |  | — |  |  | — |  |  | 8 |
Balance at September 30, 2020 | 1,600 |  |  | $ | 16 |  |  | 36,600 |  |  | $ | 365 |  |  | $ | 533,641 |  |  | $ | (237,813) |  |  | $ | (13,627) |  |  |  |  |  |  | $ | 282,582 |  |  | 5,031 |  |  | $ | 107,352 |  |  | $ | 29,713 |

| 8.25% Series D Cumulative Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Noncontrolling Interest in Consolidated Entities |  |  |  |  |  | Total |  | 5.50% Series B Cumulative Convertible Preferred Stock |  | Redeemable Noncontrolling Interests in Operating Partnership
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |  |  | Shares |  | Amount |
Balance at December 31, 2019 | 1,600 |  |  | $ | 16 |  |  | 32,885 |  |  | $ | 329 |  |  | $ | 519,551 |  |  | $ | (150,629) |  |  | $ | (6,013) |  |  |  |  |  |  | $ | 363,254 |  |  | 5,008 |  |  | $ | 106,920 |  |  | $ | 41,570 |
Purchase of common stock | — |  |  | — |  |  | (36) |  |  | — |  |  | (126) |  |  | — |  |  | — |  |  |  |  |  |  | (126) |  |  | — |  |  | — |  |  | — |
Equity-based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 4,388 |  |  | — |  |  | — |  |  |  |  |  |  | 4,388 |  |  | — |  |  | — |  |  | 1,651 |
Issuance of common stock | — |  |  | — |  |  | 3,046 |  |  | 30 |  |  | 6,380 |  |  | — |  |  | — |  |  |  |  |  |  | 6,410 |  |  | — |  |  | — |  |  | — |
Issuance of preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  | 23 |  |  | 432 |  |  | — |
Issuance of restricted shares/units | — |  |  | — |  |  | 375 |  |  | 3 |  |  | (3) |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |
Forfeiture of restricted common shares | — |  |  | — |  |  | (9) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock - Series B ($1.03/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (5,189) |  |  | — |  |  |  |  |  |  | (5,189) |  |  | — |  |  | — |  |  | — |
Dividends declared – preferred stock-Series D ($1.55/share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,475) |  |  | — |  |  |  |  |  |  | (2,475) |  |  | — |  |  | — |  |  | — |
Distributions to noncontrolling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,639) |  |  |  |  |  |  | (2,639) |  |  | — |  |  | — |  |  | — |
Redemption/conversion of operating partnership units | — |  |  | — |  |  | 339 |  |  | 3 |  |  | 3,451 |  |  | — |  |  | — |  |  |  |  |  |  | 3,454 |  |  | — |  |  | — |  |  | (3,454) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (79,538) |  |  | (4,975) |  |  |  |  |  |  | (84,513) |  |  | — |  |  | — |  |  | (10,036) |
Redemption value adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 18 |  |  | — |  |  |  |  |  |  | 18 |  |  | — |  |  | — |  |  | (18) |
Balance at September 30, 2020 | 1,600 |  |  | $ | 16 |  |  | 36,600 |  |  | $ | 365 |  |  | $ | 533,641 |  |  | $ | (237,813) |  |  | $ | (13,627) |  |  |  |  |  |  | $ | 282,582 |  |  | 5,031 |  |  | $ | 107,352 |  |  | $ | 29,713 |

See Notes to Condensed Consolidated Financial Statements.
6

Table of Contents
BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

| Nine Months Ended September 30,
| 2021 |  | 2020 |  |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |
Net income (loss) | $ | (30,617) |  |  | $ | (94,549) |  |  |
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities: |  |  |  |  |
Depreciation and amortization | 54,881 |  |  | 55,398 |  |  |
Equity-based compensation | 7,265 |  |  | 6,039 |  |  |
Bad debt expense | 208 |  |  | 574 |  |  |
Amortization of loan costs, discounts and capitalized default interest | (550) |  |  | 1,458 |  |  |
Write-off of loan costs and exit fees | 1,960 |  |  | 3,572 |  |  |
Amortization of intangibles | 394 |  |  | 621 |  |  |
Amortization of non-refundable membership initiation fees | (715) |  |  | (285) |  |  |
Interest expense accretion on refundable membership club deposits | 582 |  |  | 616 |  |  |
(Gain) loss on insurance settlement and disposition of assets | (696) |  |  | (10,149) |  |  |
Realized and unrealized (gain) loss on derivatives | (64) |  |  | (133) |  |  |
Net settlement of trading derivatives | — |  |  | 30 |  |  |
Equity in (earnings) loss of unconsolidated entity | 198 |  |  | 138 |  |  |
Deferred income tax expense (benefit) | (174) |  |  | (844) |  |  |
Changes in operating assets and liabilities, exclusive of the effect of hotel acquisition: |  |  |  |  |
Accounts receivable and inventories | (4,079) |  |  | 7,271 |  |  |
Prepaid expenses and other assets | 311 |  |  | (67) |  |  |
Accounts payable and accrued expenses | 31,131 |  |  | (7,912) |  |  |
Operating lease right-of-use assets | 416 |  |  | 387 |  |  |
Due to/from related parties, net | (919) |  |  | (442) |  |  |
Due to/from third-party hotel managers | (7,365) |  |  | 2,077 |  |  |
Due to/from Ashford Inc. | 409 |  |  | (802) |  |  |
Operating lease liabilities | (184) |  |  | (162) |  |  |
Other liabilities | 2,755 |  |  | 1,535 |  |  |
Net cash provided by (used in) operating activities | 55,147 |  |  | (35,629) |  |  |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |
Proceeds from property insurance | — |  |  | 2,528 |  |  |
Net proceeds from disposition of assets | 1,816 |  |  | — |  |  |
Acquisition of hotel property, net of cash and restricted cash acquired | (9,515) |  |  | — |  |  |
Investment in unconsolidated entity | (117) |  |  | (26) |  |  |
Improvements and additions to hotel properties | (15,849) |  |  | (21,451) |  |  |
Net cash provided by (used in) investing activities | (23,665) |  |  | (18,949) |  |  |
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |
Borrowings on indebtedness | 83,231 |  |  | 109,317 |  |  |
Repayments of indebtedness | (83,770) |  |  | (46,033) |  |  |
Payments of loan costs and exit fees | (1,895) |  |  | (6,478) |  |  |
Payments for derivatives | (200) |  |  | (92) |  |  |
Purchase of common stock | (376) |  |  | (260) |  |  |
Payments for dividends and distributions | (6,882) |  |  | (13,599) |  |  |
Proceeds from issuance of preferred stock | 4,586 |  |  | 474 |  |  |
Proceeds from issuance of common stock | 100,024 |  |  | 6,390 |  |  |
Contributions from noncontrolling interest in consolidated entities | 920 |  |  | — |  |  |
Distributions to noncontrolling interest in consolidated entities | — |  |  | (2,639) |  |  |
Net cash provided by (used in) financing activities | 95,638 |  |  | 47,080 |  |  |
Net change in cash, cash equivalents and restricted cash | 127,120 |  |  | (7,498) |  |  |
Cash, cash equivalents and restricted cash at beginning of period | 113,150 |  |  | 130,383 |  |  |
Cash, cash equivalents and restricted cash at end of period | $ | 240,270 |  |  | $ | 122,885 |  |  |
SUPPLEMENTAL CASH FLOW INFORMATION |  |  |  |  |
Interest paid | $ | 22,268 |  |  | $ | 20,969 |  |  |
Income taxes paid (refunded) | (20) |  |  | 898 |  |  |

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| Nine Months Ended September 30,
| 2021 |  | 2020 |  |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |  |  |  |  |
Dividends and distributions declared but not paid | $ | 2,112 |  |  | $ | 3,208 |  |  |
Common stock purchases accrued but not paid | — |  |  | 2 |  |  |
Issuance of units for hotel acquisition | 13,175 |  |  | — |  |  |
Issuance of warrants in hotel acquisition | 1,528 |  |  | — |  |  |
Assumption of debt in hotel acquisition | 49,815 |  |  | — |  |  |
Capital expenditures accrued but not paid | 2,094 |  |  | 7,380 |  |  |
Accrued but unpaid financing costs | — |  |  | 2,229 |  |  |
Non-cash loan principal associated with default interest and late charges | — |  |  | 9,859 |  |  |
Accrued common stock offering expense | 147 |  |  | 223 |  |  |
Unsettled common stock offering proceeds | — |  |  | 243 |  |  |
Accrued preferred stock offering expenses | 132 |  |  | — |  |  |
SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH |  |  |  |  |
Cash and cash equivalents at beginning of period | $ | 78,606 |  |  | $ | 71,995 |  |  |
Restricted cash at beginning of period | 34,544 |  |  | 58,388 |  |  |
Cash, cash equivalents and restricted cash at beginning of period | $ | 113,150 |  |  | $ | 130,383 |  |  |
Cash and cash equivalents at end of period | $ | 195,517 |  |  | $ | 88,227 |  |  |
Restricted cash at end of period | 44,753 |  |  | 34,658 |  |  |
Cash, cash equivalents and restricted cash at end of period | $ | 240,270 |  |  | $ | 122,885 |  |  |

See Notes to Condensed Consolidated Financial Statements.
8

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Description of Business
Braemar Hotels & Resorts Inc., together with its subsidiaries (“Braemar”), is a Maryland corporation that invests primarily in high revenue per available room (“RevPAR”) luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by Smith Travel Research. Braemar has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). Braemar conducts its business and owns substantially all of its assets through its operating partnership, Braemar Hospitality Limited Partnership (“Braemar OP”). In this report, the terms “Company,” “we,” “us” or “our” refers to Braemar Hotels & Resorts Inc. and, as the context may require, all entities included in its condensed consolidated financial statements.
We are advised by Ashford Hospitality Advisors LLC (“Ashford LLC” or the “Advisor”) through an advisory agreement. Ashford LLC is a subsidiary of Ashford Inc. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.
We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them for us under management contracts. Remington Hotels, a subsidiary of Ashford Inc., manages four of our 14 hotel properties. Third-party management companies manage the remaining hotel properties.
Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to design and construction services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and mobile key technology.
The accompanying condensed consolidated financial statements include the accounts of wholly-owned and majority-owned subsidiaries of Braemar OP that as of September 30, 2021, own 14 hotel properties in six states, the District of Columbia and the U.S. Virgin Islands (“USVI”). The portfolio includes 12 wholly-owned hotel properties and two hotel properties that are owned through a partnership in which Braemar OP has a controlling interest. These hotel properties represent 3,865 total rooms, or 3,630 net rooms, excluding those attributable to our partner. As a REIT, Braemar is required to comply with limitations imposed by the Code related to operating hotels. As of September 30, 2021, 13 of our 14 hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Braemar TRS”). One hotel property, located in the USVI, is owned by our USVI TRS. Braemar TRS then engages third-party or affiliated hotel management companies to operate the hotel properties under management contracts. Hotel operating results related to the hotel properties are included in the condensed consolidated statements of operations.
As of September 30, 2021, 11 of the 14 hotel properties were leased by Braemar’s wholly-owned TRS, and the two hotel properties majority-owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership. Each leased hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues. Lease revenue from Braemar TRS is eliminated in consolidation. The hotel properties are operated under management contracts with Marriott Hotel Services, Inc. (“Marriott”), Hilton Management LLC (“Hilton”), Accor Management US Inc. (“Accor”), Hyatt Corporation (“Hyatt”), Ritz-Carlton (Virgin Islands), Inc. and The Ritz-Carlton Hotel Company, L.L.C., each of which is an affiliate of Marriott (“Ritz-Carlton”) and Remington Hotels, which are eligible independent contractors under the Code.
Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has resulted in significant travel restrictions and extended shutdown of numerous businesses throughout the United States. In March 2020, the World Health Organization declared COVID-19 to be a global pandemic. Beginning in late February 2020, we experienced a significant decline in occupancy and RevPAR associated with COVID-19 as we experienced significant reservation cancellations as well as a significant reduction in new reservations. The prolonged presence of the virus has resulted in health and other government authorities imposing widespread restrictions on travel and other businesses.
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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
As of September 30, 2021, the Company maintained unrestricted cash of $195.5 million and restricted cash of $44.8 million. The vast majority of the restricted cash comprises lender and manager held reserves. As of September 30, 2021, there was also $20.4 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of its property managers which is also available to fund hotel operating costs. On December 10, 2020, the Company announced that it plans to continue its suspension of the common stock dividend into 2021 to protect liquidity and will evaluate future dividend declarations on a quarterly basis going forward.
We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully subside, whether our hotels will be forced to shut down operations or whether one or more possible recurrences of COVID-19 case surges could result in further reductions in business and personal travel or potentially cause state and local governments to reinstate travel restrictions. Facts and circumstances could change in the future that are outside of management’s control, such as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to COVID-19.
2. Significant Accounting Policies
Basis of Presentation and Principles of Consolidation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed consolidated financial statements include the accounts of Braemar Hotels & Resorts Inc., its majority-owned subsidiaries, and its majority-owned entities in which it has a controlling interest. All significant intercompany accounts and transactions between consolidated entities have been eliminated in these condensed consolidated financial statements. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K, as originally filed with the Securities and Exchange Commission (“SEC”) on March 5, 2021.
Braemar OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. All major decisions related to Braemar OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly-owned subsidiary, Braemar OP General Partner LLC, its general partner. As such, we consolidate Braemar OP.
The following items affect reporting comparability of our historical condensed consolidated financial statements:
•historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
•on August 5, 2021, we acquired the Mr. C Beverly Hills Hotel and five adjacent luxury residences. The operating results of the hotel property have been included in the results of operations from its acquisition date.
Use of Estimates—The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Standards—In January 2020, the Financial Accounting Standards Board’s (“FASB”) issued Accounting Standards Update (“ASU”) 2020-01, Investments – Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) (“ASU 2020-01”), which clarifies the interaction between the accounting for equity securities, equity method investments, and certain derivative instruments. The ASU, among other
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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years and should be applied prospectively. Early adoption is permitted. We adopted the standard effective January 1, 2021 and the adoption of this standard did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Standards—In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”) to provide guidance and relief for transitioning to alternative reference rates. ASU 2021-01 is effective immediately for all entities. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU: (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in Accounting Standards Codification (“ASC”) 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, this ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. We are currently evaluating the impact that ASU 2020-06 may have on our consolidated financial statements and related disclosures.
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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
3. Revenue
The following tables present our revenue disaggregated by geographical areas (dollars in thousands):

|  | Three Months Ended September 30, 2021
Primary Geographical Market |  | Number of Hotels |  | Rooms |  | Food and Beverage |  | Other Hotel |  |  |  | Total
California |  | 6 |  | $ | 28,838 |  |  | $ | 8,024 |  |  | $ | 3,626 |  |  |  |  | $ | 40,488 |
Colorado |  | 1 |  | 4,123 |  |  | 4,152 |  |  | 2,168 |  |  |  |  | 10,443 |
Florida |  | 2 |  | 13,738 |  |  | 5,384 |  |  | 4,581 |  |  |  |  | 23,703 |
Illinois |  | 1 |  | 5,233 |  |  | 1,196 |  |  | 389 |  |  |  |  | 6,818 |
Pennsylvania |  | 1 |  | 3,911 |  |  | 580 |  |  | 243 |  |  |  |  | 4,734 |
Washington |  | 1 |  | 6,906 |  |  | 792 |  |  | 550 |  |  |  |  | 8,248 |
Washington, D.C. |  | 1 |  | 2,476 |  |  | 512 |  |  | 337 |  |  |  |  | 3,325 |
USVI |  | 1 |  | 12,335 |  |  | 3,854 |  |  | 2,229 |  |  |  |  | 18,418 |
Total |  | 14 |  | $ | 77,560 |  |  | $ | 24,494 |  |  | $ | 14,123 |  |  |  |  | $ | 116,177 |

|  | Three Months Ended September 30, 2020
Primary Geographical Market |  | Number of Hotels |  | Rooms |  | Food and Beverage |  | Other Hotel |  |  |  | Total
California |  | 5 |  | $ | 11,504 |  |  | $ | 2,895 |  |  | $ | 1,536 |  |  |  |  | $ | 15,935 |
Colorado |  | 1 |  | 1,688 |  |  | 692 |  |  | 1,659 |  |  |  |  | 4,039 |
Florida |  | 2 |  | 7,103 |  |  | 3,175 |  |  | 3,262 |  |  |  |  | 13,540 |
Illinois |  | 1 |  | 1,706 |  |  | 240 |  |  | 127 |  |  |  |  | 2,073 |
Pennsylvania |  | 1 |  | 1,088 |  |  | 9 |  |  | 58 |  |  |  |  | 1,155 |
Washington |  | 1 |  | 1,056 |  |  | 3 |  |  | 118 |  |  |  |  | 1,177 |
Washington, D.C. |  | 1 |  | 331 |  |  | 4 |  |  | 292 |  |  |  |  | 627 |
USVI |  | 1 |  | 3,642 |  |  | 1,519 |  |  | 1,047 |  |  |  |  | 6,208 |
Total |  | 13 |  | $ | 28,118 |  |  | $ | 8,537 |  |  | $ | 8,099 |  |  |  |  | $ | 44,754 |

|  | Nine Months Ended September 30, 2021
Primary Geographical Market |  | Number of Hotels |  | Rooms |  | Food and Beverage |  | Other Hotel |  |  |  | Total
California |  | 6 |  | $ | 60,935 |  |  | $ | 17,942 |  |  | $ | 8,607 |  |  |  |  | $ | 87,484 |
Colorado |  | 1 |  | 12,058 |  |  | 8,344 |  |  | 6,058 |  |  |  |  | 26,460 |
Florida |  | 2 |  | 47,964 |  |  | 18,732 |  |  | 15,311 |  |  |  |  | 82,007 |
Illinois |  | 1 |  | 9,607 |  |  | 2,020 |  |  | 792 |  |  |  |  | 12,419 |
Pennsylvania |  | 1 |  | 7,568 |  |  | 706 |  |  | 490 |  |  |  |  | 8,764 |
Washington |  | 1 |  | 10,980 |  |  | 1,041 |  |  | 1,046 |  |  |  |  | 13,067 |
Washington, D.C. |  | 1 |  | 5,711 |  |  | 767 |  |  | 832 |  |  |  |  | 7,310 |
USVI |  | 1 |  | 40,897 |  |  | 11,424 |  |  | 7,303 |  |  |  |  | 59,624 |
Total |  | 14 |  | $ | 195,720 |  |  | $ | 60,976 |  |  | $ | 40,439 |  |  |  |  | $ | 297,135 |

|  | Nine Months Ended September 30, 2020
Primary Geographical Market |  | Number of Hotels |  | Rooms |  | Food and Beverage |  | Other Hotel |  |  |  | Total
California |  | 5 |  | $ | 37,401 |  |  | $ | 10,936 |  |  | $ | 6,474 |  |  |  |  | $ | 54,811 |
Colorado |  | 1 |  | 9,955 |  |  | 4,974 |  |  | 4,898 |  |  |  |  | 19,827 |
Florida |  | 2 |  | 24,401 |  |  | 12,535 |  |  | 10,292 |  |  |  |  | 47,228 |
Illinois |  | 1 |  | 4,638 |  |  | 1,129 |  |  | 490 |  |  |  |  | 6,257 |
Pennsylvania |  | 1 |  | 6,088 |  |  | 1,215 |  |  | 377 |  |  |  |  | 7,680 |
Washington |  | 1 |  | 4,821 |  |  | 794 |  |  | 540 |  |  |  |  | 6,155 |
Washington, D.C. |  | 1 |  | 6,857 |  |  | 3,482 |  |  | 1,174 |  |  |  |  | 11,513 |
USVI |  | 1 |  | 10,958 |  |  | 4,352 |  |  | 6,388 |  |  |  |  | 21,698 |
Total |  | 13 |  | $ | 105,119 |  |  | $ | 39,417 |  |  | $ | 30,633 |  |  |  |  | $ | 175,169 |

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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
For the three and nine months ended September 30, 2020, the Company recorded revenue from business interruption losses associated with lost profits from Hurricane Irma of $0 and $4.0 million, respectively. This revenue is included in “other” hotel revenue in our condensed consolidated statement of operations. There was no such revenue recorded for the three and nine months ended September 30, 2021 as the insurance claim was fully settled in 2020.
4. Investments in Hotel Properties, net
Investments in hotel properties, net consisted of the following (in thousands):

|  | September 30, 2021 |  | December 31, 2020
Land |  | $ | 480,530 |  |  | $ | 455,298 |
Buildings and improvements |  | 1,222,422 |  |  | 1,190,437 |
Furniture, fixtures and equipment |  | 122,921 |  |  | 127,692 |
Construction in progress |  | 9,136 |  |  | 11,422 |
Residences |  | 12,746 |  |  | — |
Total cost |  | 1,847,755 |  |  | 1,784,849 |
Accumulated depreciation |  | (395,753) |  |  | (360,259) |
Investments in hotel properties, net |  | $ | 1,452,002 |  |  | $ | 1,424,590 |

Impairment Charges and Insurance Recoveries
For the three and nine months ended September 30, 2021, we recognized a gain of $0 and $481,000, respectively. associated with proceeds received from an insurance claim.
For the three and nine months ended September 30, 2020, the Company received proceeds of $650,000 and $8.0 million, respectively, from our insurance carriers for property damage and business interruption from Hurricane Irma. There were no proceeds for the three and nine months ended September 30, 2021 as the claim was fully settled in September 2020.
During the three and nine months ended September 30, 2021 and 2020, no impairment charges were recorded.
In September 2020, the Company reached a final settlement with its insurance carriers related to Hurricane Irma. Upon settlement, the Company recorded a gain of $10.1 million as the proceeds received exceeded the carrying value of the hotel property at the time of the loss.
Mr. C Beverly Hills Hotel
On August 5, 2021, the Company acquired a 100% interest in the 138-room Mr. C Beverly Hills Hotel and five luxury residences adjacent to the hotel. The total consideration consisted of $10.0 million of cash, 2.5 million Braemar OP common units with a fair value of approximately $13.2 million and 500,000 warrants for the purchase of Braemar common stock with a $6.00 strike price and a fair value of approximately $1.5 million. Additionally the Company assumed a $50.0 million mortgage loan, with a fair value of approximately $49.8 million. Upon closing, the Company repaid $20.0 million of the assumed mortgage loan. See notes 6, 7 and 11 for further discussion regarding the mortgage loan, common units and warrants.
The acquisition of the Mr. C Beverly Hills Hotel included the hotel and the adjacent luxury residences (the “residences”). We have accounted for the transaction as a business combination under Accounting Standards Codification (“ASC”) 805- Business Combinations. We are in the process of evaluating the values assigned to investment in hotel property, property level working capital balances and the residences. This valuation is considered a Level 3 valuation technique. Thus, the balances reflected below are subject to change, and any such changes could result in adjustments to the allocation. Any change to the amounts recorded within the investments in hotel properties will also impact depreciation and amortization expense.
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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed in the acquisition (in thousands):

Land | $ | 25,232 |
Buildings and improvements | 35,689 |
Furniture, fixtures and equipment | 758 |
Residences | 12,746 |
Investments in hotel properties | 74,425 |
Inventories | 94 |
Mortgage loan | (49,815) |
| $ | 24,704 |
Net other assets (liabilities) | $ | (486) |

The results of operations of the hotel property have been included in our results of operations as of the acquisition date. The table below summarizes the total revenue and net income (loss) in our condensed consolidated statements of operations for the three and nine months ended September 30, 2021:

| Three Months Ended September 30, 2021 |  | Nine Months Ended September 30, 2021 |
Total revenue | $ | 2,272 |  |  | $ | 2,272 |  |
Net income (loss) | (1,203) |  |  | (1,203) |  |

Pro Forma Financial Results
The following table reflects the unaudited pro forma results of operations as if the acquisitions had occurred and the applicable indebtedness was incurred on January 1, 2020, and the removal of $275,000 and $571,000 of non-recurring transaction costs directly attributable to the acquisition for the three and nine months ended September 30, 2021 (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Total revenue | $ | 117,808 |  |  | $ | 46,409 |  |  | $ | 303,406 |  |  | $ | 181,121 |  |  |
Net income (loss) | $ | (7,114) |  |  | $ | (23,939) |  |  | $ | (30,418) |  |  | $ | (97,449) |  |  |
Net income (loss) attributable to common stockholders | $ | (7,898) |  |  | $ | (20,675) |  |  | $ | (34,082) |  |  | $ | (84,203) |  |  |
Pro Forma income per share; |  |  |  |  |  |  |  |  |
Basic | $ | (0.13) |  |  | $ | (0.61) |  |  | $ | (0.70) |  |  | $ | (2.54) |  |  |
Diluted | $ | (0.13) |  |  | $ | (0.61) |  |  | $ | (0.70) |  |  | $ | (2.54) |  |  |
Weighted average common shares outstanding (in thousands): |  |  |  |  |  |  |  |  |
Basic | 59,207 |  | 33,923 |  | 48,954 |  | 33,103 |  |
Diluted | 59,207 |  | 33,923 |  | 48,954 |  | 33,103 |  |

5. Investment in Unconsolidated Entity
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. In 2018, the Company made an initial investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an initial 8.2% ownership interest. On July 12, 2021, the Company made an additional investment in OpenKey of approximately $117,000. All investments were recommended by our Related Party Transactions Committee and unanimously approved by the independent members of our board of directors. As of September 30, 2021, the Company has made investments in OpenKey totaling $2.5 million.
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 significant influence over the entity under the applicable accounting guidance. We review our investment in OpenKey for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
the investment. Any impairment is recorded in equity in earnings (loss) of unconsolidated entity. No such impairment was recorded for the three and nine months ended September 30, 2021 and 2020.
The following table summarizes our carrying value and ownership interest in OpenKey:

| September 30, 2021 |  | December 31, 2020
Carrying value of the investment in OpenKey (in thousands) | $ | 1,627 |  |  | $ | 1,708 |
Ownership interest in OpenKey | 7.8 | % |  | 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 |  | 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Equity in earnings (loss) of unconsolidated entity |  | $ | (68) |  |  | $ | (58) |  |  | $ | (198) |  |  | $ | (138) |  |  |

6. Indebtedness, net
Indebtedness, net consisted of the following (dollars in thousands):

Indebtedness |  | Collateral |  | Current Maturity |  | Final Maturity (12) |  | Interest Rate |  | September 30, 2021 |  | December 31, 2020
Mortgage loan (3) |  | Park Hyatt Beaver Creek Resort & Spa |  | April 2022 |  | April 2022 |  | LIBOR (1) +3.00% |  | $ | 67,500 |  |  |  |  | $ | 67,500 |  |  |
Mortgage loan (4) |  | The Notary Hotel |  | June 2022 |  | June 2025 |  | LIBOR (1) + 2.16% |  | 435,000 |  |  |  |  | 435,000 |  |  |
|  | The Clancy |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Sofitel Chicago Magnificent Mile |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Marriott Seattle Waterfront |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage loan (5) |  | The Ritz-Carlton St. Thomas |  | August 2022 |  | August 2024 |  | LIBOR (1) + 3.95% |  | 42,500 |  |  |  |  | 42,500 |  |  |
Term loan (6) |  | Equity |  | October 2022 |  | October 2022 |  | Base Rate (2) + 1.25% to 2.65% or LIBOR (1) + 2.25% to 3.65% |  | — |  |  |  |  | 61,495 |  |  |
Mortgage loan (7) |  | The Ritz-Carlton Sarasota |  | April 2023 |  | April 2023 |  | LIBOR (1) + 2.65% |  | 99,750 |  |  |  |  | 100,000 |  |  |
Mortgage loan (7) (8) |  | Hotel Yountville |  | May 2023 |  | May 2023 |  | LIBOR (1) + 2.55% |  | 51,000 |  |  |  |  | 51,000 |  |  |
Mortgage loan (7) (8) |  | Bardessono Hotel and Spa |  | August 2023 |  | August 2023 |  | LIBOR (1) + 2.55% |  | 40,000 |  |  |  |  | 40,000 |  |  |
Mortgage loan (7) |  | The Ritz-Carlton Lake Tahoe |  | January 2024 |  | January 2024 |  | LIBOR (1) + 2.10% |  | 54,000 |  |  |  |  | 54,000 |  |  |
Mortgage loan (9) |  | Capital Hilton |  | February 2024 |  | February 2024 |  | LIBOR (1) + 1.70% |  | 195,203 |  |  |  |  | 197,229 |  |  |
|  | Hilton La Jolla Torrey Pines |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage loan (10) |  | Mr. C Beverly Hills Hotel |  | August 2024 |  | August 2024 |  | LIBOR (1) + 3.60% |  | 30,000 |  |  |  |  | — |  |  |
Mortgage loan (7) |  | Pier House Resort & Spa |  | September 2024 |  | September 2024 |  | LIBOR (1) + 1.85% |  | 80,000 |  |  |  |  | 80,000 |  |  |
Convertible Senior Notes (11) |  | Equity |  | June 2026 |  | June 2026 |  | 4.50% |  | 86,250 |  |  |  |  | — |  |  |
|  |  |  |  |  |  |  |  |  | 1,181,203 |  |  |  |  | 1,128,724 |  |  |
Capitalized default interest and late charges |  |  |  |  |  |  |  |  |  | 4,425 |  |  |  |  | 7,304 |  |  |
Deferred loan costs, net |  |  |  |  |  |  |  |  |  | (3,997) |  |  |  |  | (5,434) |  |  |
Discounts, net |  |  |  |  |  |  |  |  |  | (8,844) |  |  |  |  | — |  |  |
Indebtedness, net |  |  |  |  |  |  |  |  |  | $ | 1,172,787 |  |  |  |  | $ | 1,130,594 |  |  |

__________________
(1)LIBOR rates were 0.080% and 0.144% at September 30, 2021 and December 31, 2020, respectively.
(2)Base Rate, as defined in the secured term loan agreement, is the greater of (i) the prime rate set by Bank of America, or (ii) federal funds rate + 0.5%, or (iii) LIBOR + 1.0%.
(3)Effective January 9, 2021, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through June 2021. This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in April 2021.
(4)This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in June 2021.
(5)This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in August 2021. This mortgage loan has a LIBOR floor of 1.00%.
(6)Effective February 22, 2021, we amended this term loan. In conjunction with the amendment, the interest rate spread increased from a rate of Base Rate + 1.25% - 2.50% or LIBOR + 2.25% - 3.50% to a Base Rate + 1.25% - 2.65% or LIBOR + 2.25% - 3.65%, with a LIBOR floor of 0.50%. On May 18, 2021, we repaid this term loan in full.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
(7)Effective December 31, 2020, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through December 2021. This mortgage loan has a LIBOR floor of 0.25%.
(8)On September 23, 2021, we amended this mortgage loan. Terms of the agreement included extending the current and final maturity dates by one year.
(9)Effective March 5, 2021, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits waived through July 1, 2021.
(10)This mortgage loan has a LIBOR floor of 1.50%.
(11)On May 18, 2021, we executed a purchase agreement to sell convertible senior notes in a private offering. In conjunction with the private offering, we sold convertible senior notes with an aggregate principal amount of $86.25 million.
(12)The final maturity date assumes all available extensions options will be exercised.
During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront, Capital Hilton and Hilton La Jolla Torrey Pines. As of September 30, 2021, no loans are in default. See note 14 for discussion of the loan modification agreement with Lismore Capital LLC (“Lismore”). The Company determined that all of the forbearance and other agreements evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges. No gain or loss was recognized during 2020, as the carrying amount of the original loans was not greater than the undiscounted cash flows of the modified loans. Additionally, as a result of the troubled debt restructurings all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method. The amount of non-cash principal amortization associated with the default interest and late charges during the three and nine months ended September 30, 2021 was approximately $519,000 and $2.9 million, respectively. The amount of principal amortization during the three and nine months ended September 30, 2020 was $937,000 and $1.2 million, respectively.
On August 5, 2021, in connection with the acquisition of the Mr. C Beverly Hills Hotel and the adjacent residences in Los Angeles, California, the Company assumed a $50 million mortgage loan and repaid $20 million upon closing. This mortgage loan provides for an interest rate of LIBOR + 3.60%. The mortgage loan is interest only with the stated maturity in August 2024.
Convertible Senior Notes
In May 2021, the Company issued $86.25 million aggregate principal amount of 4.50% Convertible Senior Notes due June 2026 (the “Convertible Senior Notes”). The net proceeds from this offering of the Convertible Senior Notes were approximately $82.8 million after deducting the underwriting fees and other expenses paid by the Company. A portion of the proceeds were used to fully repay the secured term loan.
The Convertible Senior Notes are governed by an indenture (the “Base Indenture”) between the Company and U.S. Bank National Association, as trustee. The Convertible Senior Notes bear interest at a rate of 4.50% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The Convertible Senior Notes will mature on June 1, 2026. The Company recorded coupon interest expense of $970,000 and $1.4 million, respectively, for the three and nine months ended September 30, 2021.
The Company separated the Convertible Senior Notes into liability and equity components. The initial carrying amount of the liability component was calculated using a discount rate of 7.1%. The discount rate was based on the terms of debt instruments that were similar to the Convertible Senior Notes. The $6.3 million carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the net proceeds of the Convertible Senior Notes. The amount recorded in equity is not subject to remeasurement or amortization. The initial discount of $9.3 million is accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Senior Notes. The Company recorded discount amortization of $391,000 and $576,000, respectively, for the three and nine months ended September 30, 2021.
The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances. In addition, following the occurrence of certain corporate events, if the Company provides notice of redemption or if it exercises its option to convert the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be.
The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.
If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. As of September 30, 2021, we were in compliance with all covenants.
7. Derivative Instruments
Interest Rate Derivatives—We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage these risks, we primarily use interest rate derivatives to hedge our debt and our cash flows. The interest rate derivatives include interest rate caps and interest rate floors, which are subject to master netting settlement arrangements. All derivatives are recorded at fair value.
The following table summarizes the interest rate derivatives we entered into over the applicable periods:

| Nine Months Ended September 30,
Interest rate caps:(1) | 2021 |  | 2020 |  |
Notional amount (in thousands) | $ | 882,500 |  |  | $ | 602,500 |  |  |
Strike rate low end of range | 0.75 | % |  | 3.00 | % |  |
Strike rate high end of range | 4.00 | % |  | 4.00 | % |  |
Effective date range | January 2021- September 2021 |  | March 2020 - June 2020 |  |
Termination date range | February 2022- August 2024 |  | April 2021 - June 2021 |  |
Total cost of interest rate caps (in thousands) | $ | 200 |  |  | $ | 92 |  |  |

_______________
(1) No instruments were designated as cash flow hedges.
Interest rate derivatives consisted of the following:

Interest rate caps: (1) | September 30, 2021 |  | December 31, 2020
Notional amount (in thousands) | $ | 962,500 |  |  | $ | 779,000 |
Strike rate low end of range | 0.75 | % |  | 3.00 | %
Strike rate high end of range | 4.00 | % |  | 4.00 | %
Termination date range | October 2021 - August 2024 |  | February 2021 - October 2021
Aggregate principal balance on corresponding mortgage loans (in thousands) | $ | 857,250 |  |  | $ | 779,000 |

_______________
(1)No instruments were designated as cash flow hedges.
Warrants—On August 5, 2021, as part of the consideration paid to acquire the Mr. C Beverly Hills Hotel and five adjacent luxury residences, the Company issued 500,000 warrants for the purchase of Braemar common stock with a $6.00 strike price on or after the August 5, 2021 until August 5, 2024. The holder can choose to exercise the warrant by cash or by net issue exercise, in which event the Company shall issue to the holder a number of warrant shares which reflects the fair market value of the Company’s common stock. As of September 30, 2021, no warrants have been exercised.
The initial fair value of the warrant was calculated using a Black-Scholes option pricing model with the following assumptions: three-year contractual term; 97.93% volatility; 0% dividend rate; and a risk-free interest rate of 0.38%. The estimated fair value of the warrants was approximately $1.5 million on the date of issuance. The warrants are re-valued at each reporting period with the change in fair value recorded through earnings.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
In applying the guidance in ASC 815, it was determined that the warrants should be classified as a liability as a result of certain settlement provisions. The warrants are included in derivative liabilities on the condensed consolidated balance sheet and changes in value are reported as a component of unrealized gain (loss) on derivatives on the condensed consolidated statements of operations. This is a Level 2 valuation technique.
8. Fair Value Measurements
Fair Value Hierarchy—Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below:
•Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.
•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.
Fair value of interest rate caps is determined using the net present value of expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair value of credit default swaps is obtained from a third-party who publishes various information including the index composition and price data (Level 2 inputs). The fair value of credit default swaps does not contain credit-risk-related adjustments as the change in fair value is settled net through posting cash collateral or reclaiming cash collateral between us and our counterparty. Fair value of interest rate floors is calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. The fair value of warrants is determined by using the Black-Scholes option pricing model.
When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at September 30, 2021, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 0.080% to 1.188% for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):

| Quoted Market Prices (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  |  |  | Total |
September 30, 2021 |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | — |  |  | $ | 74 |  |  | $ | — |  |  |  |  | $ | 74 |  |
Total | $ | — |  |  | $ | 74 |  |  | $ | — |  |  |  |  | $ | 74 |  | (1)
Liabilities |  |  |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |
Warrants | — |  |  | (1,338) |  |  | $ | — |  |  |  |  | (1,338) |  | (2)
Net | $ | — |  |  | $ | (1,264) |  |  | $ | — |  |  |  |  | $ | (1,264) |  |

__________________
(1)Reported as “derivative assets” in our condensed consolidated balance sheet.
(2)Reported as “derivative liabilities” in our condensed consolidated balance sheet.

Effect of Fair Value Measured Assets and Liabilities on Condensed Consolidated Statements of Operations
The following table summarizes the effect of fair value measured assets and liabilities on our condensed consolidated statements of operations (in thousands):

| Gain (Loss) Recognized in Income |  |
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Assets |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | (48) |  |  | $ | (30) |  |  | $ | (126) |  |  | $ | (93) |  |  |
Credit default swaps | — |  |  | 51 |  | (1) | — |  |  | 226 |  | (1) |
Total derivative assets | $ | (48) |  |  | $ | 21 |  |  | $ | (126) |  |  | $ | 133 |  |  |
Total | $ | (48) |  |  | $ | 21 |  |  | $ | (126) |  |  | $ | 133 |  |  |
Liabilities |  |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |
Warrants | 190 |  |  | — |  |  | 190 |  |  | — |  |  |
Net | $ | 142 |  |  | $ | 21 |  |  | $ | 64 |  |  | $ | 133 |  |  |
Total combined |  |  |  |  |  |  |  |  |
Interest rate derivatives - floors | $ | — |  |  | $ | 3,540 |  |  | $ | — |  |  | $ | 3,615 |  |  |
Interest rate derivatives - caps | (48) |  |  | (30) |  |  | (126) |  |  | (93) |  |  |
Credit default swaps | — |  |  | 51 |  |  | — |  |  | 226 |  |  |
Warrants | 190 |  |  | — |  |  | 190 |  |  | — |  |  |
Unrealized gain (loss) on derivatives | 142 |  |  | 3,561 |  |  | 64 |  |  | 3,748 |  |  |
Realized gain (loss) on interest rate floors | — |  |  | (3,540) |  | (2) | — |  |  | (3,615) |  | (2) |
Net | $ | 142 |  |  | $ | 21 |  |  | $ | 64 |  |  | $ | 133 |  |  |

_______________
(1)Excludes costs associated with credit default swaps of $0 and $64 for the three months ended September 30, 2021 and 2020, respectively, as well as $0 and $191 for the nine months ended September 30, 2021 and 2020, respectively, which is included in “other income (expense)” in our condensed consolidated statements of operations.
(2)Included in “other income (expense)” in our condensed consolidated statements of operations.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
9. Summary of Fair Value of Financial Instruments
Determining the estimated fair values of certain financial instruments such as indebtedness requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled.
The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):

|  | September 30, 2021 |  | December 31, 2020
|  | Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
Financial assets and liabilities measured at fair value: |  |  |  |  |  |  |  |
Derivative assets |  | $ | 74 |  |  | $ | 74 |  |  | $ | — |  |  | $ | — |
Derivative liabilities |  | 1,338 |  |  | 1,338 |  |  | — |  |  | — |
Financial assets not measured at fair value: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 195,517 |  |  | $ | 195,517 |  |  | $ | 78,606 |  |  | $ | 78,606 |
Restricted cash |  | 44,753 |  |  | 44,753 |  |  | 34,544 |  |  | 34,544 |
Accounts receivable, net |  | 17,317 |  |  | 17,317 |  |  | 13,557 |  |  | 13,557 |
Due from related parties, net |  | 1,910 |  |  | 1,910 |  |  | 991 |  |  | 991 |
Due from third-party hotel managers |  | 20,390 |  |  | 20,390 |  |  | 12,271 |  |  | 12,271 |
Financial liabilities not measured at fair value: |  |  |  |  |  |  |  |
Indebtedness |  | $ | 1,172,359 |  |  | $968,075 to $1,069,978 |  | $ | 1,128,724 |  |  | $884,325 to $977,411
Accounts payable and accrued expenses |  | 89,265 |  |  | 89,265 |  |  | 61,758 |  |  | 61,758 |
Dividends and distributions payable |  | 2,112 |  |  | 2,112 |  |  | 2,736 |  |  | 2,736 |
Due to Ashford Inc. |  | 820 |  |  | 820 |  |  | 2,772 |  |  | 2,772 |
Due to third-party hotel managers |  | 1,665 |  |  | 1,665 |  |  | 1,393 |  |  | 1,393 |

Cash, cash equivalents and restricted cash. These financial assets have maturities of less than 90 days and most bear interest at market rates. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.
Accounts receivable, net, due from related parties, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc. and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.
Derivative assets and derivative liabilities. See notes 7 and 8 for a complete description of the methodology and assumptions utilized in determining fair values.
Indebtedness, net. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. We estimated the fair value of the total indebtedness to be approximately 82.6% to 91.3% of the carrying value of $1.2 billion at September 30, 2021, and approximately 78.3% to 86.6% of the carrying value of $1.1 billion at December 31, 2020. These fair value estimates are considered a Level 2 valuation technique.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
10. Income (Loss) Per Share
The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Net income (loss) attributable to common stockholders - basic and diluted: |  |  |  |  |  |  |  |  |
Net income (loss) attributable to the Company | $ | (6,946) |  |  | $ | (18,677) |  |  | $ | (24,887) |  |  | $ | (79,538) |  |  |
Less: Dividends on preferred stock | (1,977) |  |  | (2,554) |  |  | (6,258) |  |  | (7,664) |  |  |
Less: Loss on extinguishment of preferred stock - Series B | (111) |  |  | — |  |  | (4,595) |  |  | — |  |  |
Undistributed net income (loss) allocated to common stockholders | (9,034) |  |  | (21,231) |  |  | (35,740) |  |  | (87,202) |  |  |
Distributed and undistributed net income (loss) - basic and diluted | $ | (9,034) |  |  | $ | (21,231) |  |  | $ | (35,740) |  |  | $ | (87,202) |  |  |
Weighted average common shares outstanding: |  |  |  |  |  |  |  |  |
Weighted average common shares outstanding – basic and diluted | 59,207 |  |  | 33,923 |  |  | 48,954 |  |  | 33,103 |  |  |
Income (loss) per share - basic: |  |  |  |  |  |  |  |  |
Net income (loss) allocated to common stockholders per share | $ | (0.15) |  |  | $ | (0.63) |  |  | $ | (0.73) |  |  | $ | (2.63) |  |  |
Income (loss) per share - diluted: |  |  |  |  |  |  |  |  |
Net income (loss) allocated to common stockholders per share | $ | (0.15) |  |  | $ | (0.63) |  |  | $ | (0.73) |  |  | $ | (2.63) |  |  |

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Net income (loss) allocated to common stockholders is not adjusted for: |  |  |  |  |  |  |  |  |
Income (loss) attributable to redeemable noncontrolling interests in operating partnership | $ | (823) |  |  | $ | (2,381) |  |  | $ | (3,184) |  |  | $ | (10,036) |  |  |
Dividends on preferred stock - Series B | 1,058 |  |  | 1,729 |  |  | 3,689 |  |  | 5,189 |  |  |
Loss on extinguishment of preferred stock - Series B | 111 |  |  | — |  |  | 4,595 |  |  | — |  |  |
Interest expense on Convertible Senior Notes | 1,361 |  |  | — |  |  | 2,010 |  |  | — |  |  |
Dividends on preferred stock - Series E | 90 |  |  | — |  |  | 90 |  |  | — |  |  |
Dividends on preferred stock - Series M | 4 |  |  | — |  |  | 4 |  |  | — |  |  |
Total | $ | 1,801 |  |  | $ | (652) |  |  | $ | 7,204 |  |  | $ | (4,847) |  |  |
Weighted average diluted shares are not adjusted for: |  |  |  |  |  |  |  |  |
Effect of unvested restricted shares | 89 |  |  | — |  |  | 100 |  |  | 25 |  |  |
Effect of assumed conversion of operating partnership units | 5,564 |  |  | 3,863 |  |  | 4,543 |  |  | 3,940 |  |  |
Effect of assumed conversion of preferred stock - Series B | 4,115 |  |  | 6,728 |  |  | 4,781 |  |  | 6,728 |  |  |
Effect of assumed conversion of exchanged preferred stock - Series B | — |  |  | 269 |  |  | 485 |  |  | 288 |  |  |
Effect of contingently issuable shares | — |  |  | 10 |  |  | — |  |  | 3 |  |  |
Effect of assumed conversion of Convertible Senior Notes | 13,609 |  |  | — |  |  | 6,730 |  |  | — |  |  |
Effect of assumed conversion of preferred stock - Series E | 700 |  |  | — |  |  | 233 |  |  | — |  |  |
Effect of assumed conversion of preferred stock - Series M | 32 |  |  | — |  |  | 11 |  |  | — |  |  |
Total | 24,109 |  |  | 10,870 |  |  | 16,883 |  |  | 10,984 |  |  |

11. Redeemable Noncontrolling Interests in Operating Partnership
Redeemable noncontrolling interests in the operating partnership represents the limited partners’ proportionate share of equity and their allocable share of equity in earnings/losses of Braemar OP, which is an allocation of net income/loss attributable to the common unitholders based on the weighted average ownership percentage of these limited partners’ common units of limited partnership interest in the operating partnership (the “common units”) and units issued under our Long-Term Incentive Plan (the “LTIP” units) that are vested. Each common unit may be redeemed, by the holder, for either cash or, at our sole discretion, up to one share of our REIT common stock, which is either: (i) issued pursuant to an effective registration
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(unaudited)
statement; (ii) included in an effective registration statement providing for the resale of such common stock; or (iii) issued subject to a registration rights agreement.
LTIP units, which are issued to certain executives and employees of Ashford LLC as compensation, generally have vesting periods of three years. Additionally, certain independent members of the board of directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant. Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election, settled in our common stock. An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of our operating partnership at a time when our stock is trading at a level in excess of the price it was trading on the date of the LTIP issuance. More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of our operating partnership or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for our operating partnership.
The Company issued equity awards in the first quarter of 2021, a substantial majority of which were issued subject to stockholder approval of an increase in the number of shares available for issuance under the Company’s 2013 Equity Incentive Plan. Under the applicable accounting literature, these awards are not accounted for until stockholder approval is obtained. In March 2021, approximately 244,000 LTIP units with a fair value of approximately $1.7 million and a vesting period of three years were granted. Stockholder approval was obtained on May 11, 2021.
On May 11, 2021, approximately 202,000 LTIP units with a fair value of $1.4 million and a vesting period of three years were issued. Additionally, approximately 23,000 LTIP units were issued to independent directors, with a fair value of approximately $164,000, which vested immediately upon grant.
The compensation committee of the board of directors of the Company may authorize the issuance of Performance LTIP units to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of Performance LTIP units that will be settled in common units of Braemar OP, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date.
With respect to the 2019 and 2020 award agreements, the number of Performance LTIP units actually earned may range from 0% to 200% of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date. The performance criteria for the Performance LTIP units are based on market conditions under the relevant literature. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.
With respect to the 2021 award agreements, the compensation committee shifted to a new performance metric, pursuant to which, the performance awards will be eligible to vest, from 0% to 200% of target, based on achievement of certain performance targets over the three-year performance period commencing on January 1, 2021 and ending on December 31, 2023. The performance criteria for the 2021 performance grants are based on performance conditions under the relevant literature. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award. The grant date fair value of the award may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period. On May 11, 2021, approximately 840,000 Performance LTIP units with a fair value of approximately $5.7 million and a vesting period of three years were granted.
As of September 30, 2021, we have issued a total of approximately 2.4 million LTIP units (including Performance LTIP units), net of cancellations, all of which, other than approximately 572,000 LTIP units and 900,000 Performance LTIP units issued from March 2015 to May 2021, had reached full economic parity with, and are convertible into, common units.
On August 5, 2021, we issued 2.5 million common units in our operating partnership in conjunction with the acquisition of the Mr. C Beverly Hills Hotel. See note 4.
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(unaudited)
The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding approximate ownership percentage of our operating partnership:

| September 30, 2021 |  | December 31, 2020
Redeemable noncontrolling interests in Braemar OP | $ | 39,948 |  |  | $ | 27,655 |
Adjustments to redeemable noncontrolling interests (1) | $ | 236 |  |  | $ | 167 |
Ownership percentage of operating partnership | 8.35 | % |  | 9.43 | %

____________________________________
(1) Reflects the excess of the redemption value over the accumulated historical cost.
We allocated net income (loss) to the redeemable noncontrolling interests as illustrated in the table below (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership | $ | 823 |  |  | $ | 2,381 |  |  | $ | 3,184 |  |  | $ | 10,036 |  |  |

The following table presents the common units redeemed and the fair value at redemption (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Common units converted to common stock | — |  |  | — |  |  | 2 |  |  | 339 |  |  |
Fair value of common units converted | $ | — |  |  | $ | — |  |  | $ | 15 |  |  | $ | 390 |  | (1) |

____________________________________
(1) The redemption value is the greater of historical cost or fair value. The historical cost of the converted units was $3.5 million.
12. Equity and Stock-Based Compensation
Common Stock Dividends—The board of directors did not declare a quarterly common stock dividend for the three and nine months ended September 30, 2021 and 2020.
Restricted Stock Units—We incur stock-based compensation expense in connection with restricted stock units awarded to certain employees of Ashford LLC and its affiliates. We also issue common stock to certain of our independent directors, which vests immediately upon issuance.
The Company issued equity awards in the first quarter of 2021, a substantial majority of which were issued subject to stockholder approval of an increase in the number of shares available for issuance under the Company’s 2013 Equity Incentive Plan. Under the applicable accounting literature, these awards are not accounted for until stockholder approval is obtained. In March 2021, approximately 504,000 restricted stock units with a fair value of approximately $3.5 million and a vesting period of three years were granted. Stockholder approval was obtained on May 11, 2021.
On May 11, 2021, approximately 215,000 restricted stock units with a fair value of approximately $1.5 million and a vesting period of three years were granted. Additionally, approximately 46,000 shares of common stock were issued to independent directors, with a fair value of approximately $322,000, which vested immediately upon grant.
Performance Stock Units—The compensation committee of the board of directors of the Company may authorize the issuance of grants of performance stock units (“PSUs”) to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period, which is generally three years from the grant date.
With respect to the 2019 and 2020 award agreements, the number of PSUs actually earned may range from 0% to 200% of target based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s compensation committee on the grant date. The performance criteria for the PSUs are based on market conditions under the relevant literature. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.
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(unaudited)
The Company issued equity awards in the first quarter of 2021, a substantial majority of which were issued subject to stockholder approval of an increase in the number of shares available for issuance under the Company’s Amended and Restated 2011 Stock Incentive Plan. Under the applicable accounting literature, these awards are not accounted for until shareholder approval is obtained. Stockholder approval was obtained on May 11, 2021.
With respect to the 2021 award agreements, the compensation committee shifted to a new performance metric, pursuant to which, the performance awards will be eligible to vest, from 0% to 200% of target, based on achievement of certain performance targets over the three-year performance period commencing on January 1, 2021 and ending on December 31, 2023. The performance criteria for the 2021 performance grants are based on performance conditions under the relevant literature, and the 2021 performance grants were issued to non-employees. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, which may vary from period to period, as the number of performance grants earned may vary since the estimated probable achievement of certain performance targets may vary from period to period.
On May 11, 2021, approximately 446,000 PSUs with a fair value of approximately $6.0 million and vesting period of three years were issued.
8.25% Series D Cumulative Preferred Stock—The dividend for all issued and outstanding shares of the Company’s Series D Cumulative Preferred Stock (the “Series D Preferred Stock”) is set at $2.0625 per annum per share.
The following table summarizes dividends declared (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |  |
Series D Cumulative Preferred Stock | $ | 825 |  |  | 825 |  |  | $ | 2,475 |  |  | $ | 2,475 |  |  |  |

At-the-Market Common Stock Equity Distribution Program—On December 11, 2017, the Company established an “at-the-market” equity distribution program pursuant to which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $50 million.
As of September 30, 2021, the Company has sold approximately 7.4 million shares of common stock and received net proceeds of approximately $30.5 million under this program.
The issuance activity is summarized below (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2021 |  | 2020 |  | 2021 |  | 2020 |
Common shares issued | — |  |  | 3,046 |  |  | 2,711 |  |  | 3,046 |  |
Gross proceeds received | $ | — |  |  | $ | 7,715 |  |  | $ | 16,119 |  |  | $ | 7,715 |  |
Commissions and other expenses | — |  |  | 97 |  |  | 202 |  |  | 97 |  |
Net proceeds | $ | — |  |  | $ | 7,618 |  |  | $ | 15,917 |  |  | $ | 7,618 |  |

Standby Equity Distribution Agreement—On February 4, 2021, the Company entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd. (“YA”), pursuant to which the Company will be able to sell up to 7,780,786 shares of its common stock (the “Commitment Amount”) at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating on the earliest of (i) the first day of the month next following the 36-month anniversary of the SEDA or (ii) the date on which YA shall have made payment of Advances (as defined in the SEDA) pursuant to the SEDA for shares of the Company’s common stock equal to the Commitment Amount (the “Commitment Period”). Other than with respect to the Initial Advance (as defined below) the shares sold to YA pursuant to the SEDA would be purchased at 95% of the Market Price (as defined below) and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock. “Market Price” shall mean the lowest daily VWAP (as defined below) of the Company’s common stock during the five consecutive trading days commencing on the trading day following the date the Company submits an advance notice to YA. “VWAP” means, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on the principal market as reported by Bloomberg L.P. during regular trading hours.
At any time during the Commitment Period the Company may require YA to purchase shares of the Company’s common stock by delivering a written notice to YA setting forth the Advance Shares (as defined in the SEDA) that the Company desires
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(unaudited)
to issue and sell to YA (the “Advance Notice”). The Company may deliver an Advance Notice for an initial Advance for up to 1,200,000 Advance Shares (the “Initial Advance”). The preliminary purchase price per share for such shares shall be 100% of the average daily VWAP for the five consecutive trading days immediately prior to the date of the Advance Notice (the “Preliminary Purchase Price”).
Pursuant to the SEDA, we currently intend to use the net proceeds from any sale of the shares for working capital purposes, including the repayment of outstanding debt. There are no other restrictions on future financing transactions. The SEDA does not contain any right of first refusal, participation rights, penalties or liquidated damages. We are not required to pay any additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $10,000 structuring fee.
The issuance activity under the SEDA is summarized below (in thousands):

| Three Months Ended September 30, 2021 |  |  |  | Nine Months Ended September 30, 2021 |  |  |
Common shares sold to YA | — |  |  |  | 1,700 |  |  |
Proceeds received | $ | — |  |  |  |  | $ | 10,000 |  |  |  |

Common Stock Resale Agreement—On April 21, 2021, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”), entered into a purchase agreement, pursuant to which the Company may issue or sell to Lincoln Park up to 8,893,565 shares of the Company’s common stock from time to time during the term of the purchase agreement. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln Park with certain registration rights related to the shares issued under the Purchase Agreement.
Upon entering into the purchase agreement, the Company issued 15,000 shares of the Company’s common stock as consideration for Lincoln Park’s execution and delivery of the purchase agreement. The issuance activity under the Lincoln Park agreement is summarized below (in thousands):

| Three Months Ended September 30, 2021 |  |  |  | Nine Months Ended September 30, 2021 |  |  |
Common shares sold to Lincoln Park | — |  |  |  | 766 |  |  |
Additional commitment shares | — |  |  |  | 15 |  |  |
Total common shares issued to Lincoln Park | — |  |  |  | 781 |  |  |
Proceeds received | $ | — |  |  |  |  | $ | 4,217 |  |  |  |

At-the-Market Equity Distribution Agreement—On May 25, 2021, the Company entered into an equity distribution agreement with Virtu Americas LLC (“Virtu”), to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $50 million (the “Virtu May 2021 EDA”). We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.
The issuance activity under the Virtu May 2021 EDA is summarized below (in thousands):

| Three Months Ended September 30, 2021 |  |  |  | Nine Months Ended September 30, 2021 |  |  |
Common shares issued | 2,367 |  |  |  |  | 8,339 |  |  |  |
Gross proceeds received | $ | 13,421 |  |  |  |  | $ | 50,000 |  |  |  |
Commissions and other expenses | 134 |  |  |  |  | 500 |  |  |  |
Net proceeds | $ | 13,287 |  |  |  |  | $ | 49,500 |  |  |  |

On July 12, 2021, the Company entered into a second equity distribution agreement with Virtu to sell from time to time shares of our common stock having an aggregate offering price of up to $100 million (the “Virtu July 2021 EDA”). We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale.
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(unaudited)
The issuance activity under the Virtu July 2021 EDA is summarized below (in thousands):

| Three Months Ended September 30, 2021 |  |  |  | Nine Months Ended September 30, 2021 |  |  |
Common shares issued | 4,183 |  |  |  |  | 4,183 |  |  |  |
Gross proceeds received | $ | 21,363 |  |  |  |  | $ | 21,363 |  |  |  |
Commissions and other expenses | 214 |  |  |  |  | 214 |  |  |  |
Net proceeds | $ | 21,149 |  |  |  |  | $ | 21,149 |  |  |  |

Stock Repurchases—On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share having an aggregate value of up to $50 million. The board of directors’ authorization replaced any previous repurchase authorizations. No shares were repurchased during the nine months ended September 30, 2021 and 2020. As of September 30, 2021, $50 million remains authorized by the board of directors pursuant to the December 5, 2017 approval.
13. Preferred Stock
5.50% Series B Cumulative Convertible Preferred Stock
Each share of our 5.50% Series B Cumulative Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) is convertible at any time, at the option of the holder, into a number of whole shares of common stock at a conversion price of $18.70 (which represents a conversion rate of 1.3372 shares of our common stock, subject to certain adjustments). The Series B Convertible Preferred Stock is also subject to conversion upon certain events constituting a change of control. Holders of the Series B Convertible Preferred Stock have no voting rights, subject to certain exceptions. The Series B Convertible Preferred Stock dividend for all issued and outstanding shares is set at $1.375 per annum per share.
The Company may, at its option, cause the Series B Convertible Preferred Stock to be converted in whole or in part, on a pro-rata basis, into fully paid and nonassessable shares of the Company’s common stock at the conversion price, provided that the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110% of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion.
Additionally, the Series B Convertible Preferred Stock contains cash redemption features that consist of: 1) an optional redemption in which on or after June 11, 2020, the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $25.00 per share, plus any accumulated, accrued and unpaid dividends; 2) a special optional redemption, in which on or prior to the occurrence of a Change of Control (as defined), the Company may redeem shares of the Series B Convertible Preferred Stock, in whole or in part, for cash at a redemption price of $25.00 per share; and 3) a REIT Termination Event and Listing Event Redemption, in which at any time (i) a REIT Termination Event (defined below) occurs or (ii) the Company’s common stock fails to be listed on the NYSE, NYSE American, or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor thereto (each a “National Exchange”), the holder of Series B Convertible Preferred Stock shall have the right to require the Company to redeem any or all shares of Series B Convertible Preferred Stock at 103% of the liquidation preference ($25.00 per share, plus any accumulated, accrued, and unpaid dividends) in cash.
A REIT Termination Event, shall mean the earliest of:
(i) filing of income tax return where the Company does not compute its income as a REIT;
(ii) stockholders’ approval on ceasing to be qualified as a REIT;
(iii) board of directors’ approval on ceasing to be qualified as a REIT;
(iv) board’s determination based on the advice of counsel to cease to be qualified as a REIT; or
(v) determination within the meaning of Section 1313(a) of the Code to cease to be qualified as a REIT.
On December 4, 2019, we entered into equity distribution agreements with certain sales agents to sell from time to time shares of our Series B Convertible Preferred Stock having an aggregate offering price of up to $40.0 million. Sales of shares of our Series B Convertible Preferred Stock may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the NYSE, the existing trading market for our Series B Convertible Preferred Stock, or sales made to or through a market maker other than on an exchange or through an electronic communications network. We will pay each of the sales
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(unaudited)
agents a commission, which in each case shall not be more than 2.0% of the gross sales price of the shares of our Series B Convertible Preferred Stock sold through such sales agents. As of September 30, 2021, we have sold approximately 65,000 shares of our Series B Convertible Preferred Stock and received proceeds of approximately $1.2 million under this program.
The issuance activity is summarized below (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Series B Convertible Preferred Stock shares issued | — |  |  | — |  |  | — |  |  | 23 |  |  |
Gross proceeds received | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 439 |  |  |
Commissions and other expenses | — |  |  | — |  |  | — |  |  | 7 |  |  |
Net proceeds | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 432 |  |  |

Series B Convertible Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside our control. As such, the Series B Convertible Preferred Stock is classified outside of permanent equity.
The following table summarizes dividends declared (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |  |
Series B Convertible Preferred Stock | $ | 1,058 |  |  | $ | 1,729 |  |  | $ | 3,689 |  |  | $ | 5,189 |  |  |  |

During 2021, Braemar entered into privately negotiated exchange agreements with certain holders of the Series B Convertible Preferred Stock, in reliance on Section 3(a)(9) of the Securities Act. The table below summarizes the activity (in thousands):

| Three Months Ended September 30, 2021 |  | Nine Months Ended September 30, 2021 |
| Preferred Shares Tendered |  | Common Shares Issued |  | Preferred Shares Tendered |  | Common Shares Issued |
Series B Convertible Preferred Stock | 30 |  | 120 |  | 1,953 |  | 7,291 |

Series E Redeemable Preferred Stock
On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell from time-to-time shares of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”). Pursuant to such equity distribution agreements, the Company is offering a maximum of 20,000,000 shares of Series E Preferred Stock in a primary offering price of $25.00 per share. The Company is also offering a maximum of 8,000,000 shares of the Series E Preferred Stock pursuant to a dividend reinvestment plan (the “DRIP”) at $25.00 per share (the “Stated Value”).
The Series E Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred stock, the Series D Preferred Stock and the Series M Preferred Stock (as defined below)) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.
Holders of the Series E Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class. If and whenever dividends on any shares of the Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive the number of directors then constituting the Board shall be increased by two and the holders of such shares of Series E Preferred Stock shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.
Each share is redeemable at any time, at the option of the holder, at a redemption price of $25.00 per share, plus any accumulated, accrued, and unpaid dividends, less a redemption fee. Starting on the second anniversary, each share is redeemable at any time, at the option of the Company, at a redemption price of $25.00 per share, plus any accumulated, accrued, and unpaid dividends (with no redemption fee). The Series E Preferred Stock is also subject to conversion upon certain
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(unaudited)
events constituting a change of control. Upon such change of control events, holders have the option to convert their shares of Series E Preferred Stock into a maximum of 5.69476 shares of our common stock.
The redemption fee shall be an amount equal to:
•8.0% of the stated value of $25.00 per share (the “Stated Value”) beginning on the Original Issue Date (as defined in the Articles Supplementary) of the shares of the Series E Preferred Stock to be redeemed;
•5.0% of the Stated Value beginning on the second anniversary from the Original Issue Date of the shares of the Series E Preferred Stock to be redeemed; and
•0% of the Stated Value beginning on the third anniversary from the Original Issue Date of the shares of the Series E Preferred Stock to be redeemed.
The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption.
The Series E Preferred Stock cash dividends are as follows:
•8.0% per annum of the Stated Value beginning on the date of the first settlement of the Series E Preferred Stock (the “Date of Initial Closing”);
•7.75% per annum of the Stated Value beginning on the first anniversary from the Date of Initial Closing; and
•7.5% per annum of the Stated Value beginning on the second anniversary from the Date of Initial Closing.
Dividends will be authorized and declared on a monthly basis and payable in arrears on the 15th of each month to holders of record at the close of business on the last business day of each month immediately preceding the applicable thereafter dividend payment date. Dividends will be computed on the basis of twelve 30-day months and a 360-day year.
The Company has a DRIP that allows for participating holders to have their Series E Preferred Stock dividend distributions automatically reinvested in additional shares of the Series E Preferred Stock at a price of $25.00 per share.
The issuance activity of the Series E Preferred Stock is summarized below (in thousands):

| Three Months Ended September 30, |  |  | Nine Months Ended September 30, |  |  |  |
| 2021 |  |  | 2021 |  |  |  |
Series E Preferred Stock shares issued | 266 |  |  |  | 266 |  |  |  |  |
Net proceeds | $ | 5,976 |  |  |  | $ | 5,976 |  |  |  |  |

The Series E Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside of the Company’s control. As such, the Series E Preferred Stock is classified outside of permanent equity.
At the date of issuance, the carrying amount of the Series E Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable the carrying value will be increased to the redemption amount each reporting period.
The redemption value adjustment of Series E Preferred Stock is summarized below (in thousands):

| September 30, 2021 |  | December 31, 2020
Series E Preferred Stock | $ | 6,110 |  |  | $ | — |
Adjustments to Series E Preferred Stock (1) | $ | 1,906 |  |  | $ | — |

________
(1) Reflects the excess of the redemption value over the accumulated carrying value.
The following table summarizes dividends declared (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2021 |  |  | 2021 |  |  |  |
Series E Preferred Stock | 90 |  |  | 90 |  |  |  |

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Series M Redeemable Preferred Stock
On April 2, 2021, the Company entered into equity distribution agreements with certain sales agents to sell from time-to-time shares of the Series M Redeemable Preferred Stock (the “Series M Preferred Stock”). Pursuant to such equity distribution agreements, the Company is offering a maximum of 20,000,000 shares of the Series M Preferred Stock (par value $0.01) in a primary offering price of $25.00 per share (or “Stated Value”). The Company is also offering a maximum of 8,000,000 shares of Series M Preferred Stock pursuant to the DRIP at $25.00 per share.
The Series M Preferred Stock ranks senior to all classes or series of the Company’s common stock and future junior securities, on a parity with each series of the Company’s outstanding preferred stock (the Series B Convertible Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock) and with any future parity securities and junior to future senior securities and to all of the Company’s existing and future indebtedness, with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up of the Company’s affairs.
Holders of the Series M Preferred Stock shall have the right to vote for the election of directors of the Company and on all other matters requiring stockholder action by the holders of the common stock, each share being entitled to vote to the same extent as one share of the Company’s common stock, and all such shares voting together as a single class. If and whenever dividends on any shares of Series E Preferred Stock shall be in arrears for 18 or more monthly periods, whether or not such quarterly periods are consecutive the number of directors then constituting the Board shall be increased by two and the holders of such shares of Series M Preferred Stock shall be entitled to vote for the election of the additional directors of the Company who shall each be elected for one-year terms.
The redemption fee shall be an amount equal to:
•1.5% of the Stated Value of $25.00 per share beginning on the Series M Original Issue Date (as defined below) of the shares of Series M Preferred Stock to be redeemed; and
•0% of the Stated Value beginning on the first anniversary from the Original Issue Date of the shares of Series M Preferred Stock to be redeemed.
The Company has the right, in its sole discretion, to redeem the shares in cash, or in an equal of shares of common stock or any combination thereof, calculated based on the closing price per share for the single trading day prior to the date of redemption.
Holders of Series M Preferred Stock are entitled to receive cumulative cash dividends at the initial rate of 8.2% per annum of the Stated Value of $25.00 per share (equivalent to an annual dividend rate of $2.05 per share). Beginning one year from the date of original issuance of each share of Series M Preferred Stock (the “Series M Original Issue Date of Series M”) and on each one-year anniversary thereafter for such share of Series M Preferred Stock, the dividend rate shall increase by 0.10% per annum; provided, however, that the dividend rate for any share of Series M Preferred Stock shall not exceed 8.7% per annum of the Stated Value.
Dividends will be authorized and declared on a monthly basis and payable in arrears on the 15th of each month to holders of record at the close of business on the last business day of each month immediately preceding the applicable dividend payment date. Dividends will be computed on the basis of twelve 30-day months and a 360-day year.
The Company has a DRIP that allows for participating holders to have their Series M Preferred Stock dividend distributions automatically reinvested in additional shares of the Series M Preferred Stock at a price of $25.00 per share.
The issuance activity of Series M Preferred Stock is summarized below (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2021 |  |  | 2021 |  |  |  |
Series M Preferred Stock shares issued | 15 |  |  |  | 15 |  |  |  |  |
Net proceeds | $ | 355 |  |  |  | $ | 355 |  |  |  |  |

The Series M Preferred Stock does not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside the Company’s control. As such, the Series M Preferred Stock is classified outside of permanent equity.
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(unaudited)
At the date of issuance, the carrying amount of the Series M Preferred Stock was less than the redemption value. As a result of the Company’s determination that redemption is probable the carrying value will be increased to the redemption amount each reporting period.
The redemption value adjustment of Series M Preferred stock is summarized below (in thousands):

| September 30, 2021 |  | December 31, 2020
Series M Preferred Stock | $ | 361 |  |  | $ | — |
Adjustments to Series M Preferred Stock (1) | $ | 111 |  |  | $ | — |

________
(1) Reflects the excess of the redemption value over the accumulated carrying value.
The following table summarizes dividends declared (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2021 |  |  | 2021 |  |  |  |
Series M Preferred Stock | $ | 4 |  |  |  | $ | 4 |  |  |  |  |

14. Related Party Transactions
Ashford Inc.
Advisory Agreement
Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor. Our chairman, Mr. Monty Bennett, also serves as chairman of the board of directors and chief executive officer of Ashford Inc. Under our advisory agreement, we pay advisory fees to Ashford LLC. We pay a monthly base fee equal to 1/12 th 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 in our advisory agreement), 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 5 th business day of each month.
The minimum base fee for Braemar for each month will be equal to the greater of:
▪90% of the base fee paid for the same month in the prior year; and
▪1/12 th of the G&A Ratio (as defined) multiplied by the total market capitalization of Braemar.
We are also required to pay Ashford LLC an incentive fee that is measured annually (or for a stub period if the advisory agreement is terminated at other than year-end). Each year that our annual total stockholder return exceeds the average annual total stockholder return for our peer group we pay Ashford LLC an incentive fee over the following three years, subject to the Fixed Charge Coverage Ratio (“FCCR”) Condition, as defined in the advisory agreement, which relates to the ratio of adjusted EBITDA to fixed charges. We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, risk management advisory and asset management services, as specified in the advisory agreement. We also recorded equity-based compensation expense for equity grants of common stock and LTIP units awarded to officers and employees of Ashford LLC in connection with providing advisory services.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes the advisory services fees incurred (in thousands):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Advisory services fee |  |  |  |  |  |  |  |  |
Base advisory fee | $ | 2,758 |  |  | $ | 2,386 |  |  | $ | 7,981 |  |  | $ | 7,579 |  |  |
Reimbursable expenses (1) | 694 |  |  | 404 |  |  | 1,696 |  |  | 1,360 |  |  |
Equity-based compensation (2) | 2,994 |  |  | 1,785 |  |  | 6,666 |  |  | 5,606 |  |  |
Incentive fee | (1,637) |  |  | — |  |  | — |  |  | — |  |  |
Total | $ | 4,809 |  |  | $ | 4,575 |  |  | $ | 16,343 |  |  | $ | 14,545 |  |  |

________
(1)Reimbursable expenses include overhead, internal audit, risk management advisory and asset management services.
(2) Equity-based compensation is associated with equity grants of Braemar’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.
Pursuant to the Company's hotel management agreements with each hotel management company, the Company bears the economic burden for casualty insurance coverage. Under the advisory agreement, Ashford Inc. secures casualty insurance policies to cover Braemar, Ashford Hospitality Trust, Inc. (“Ashford Trust”), their hotel managers, as needed, and Ashford Inc. The total loss estimates included in such policies are based on the collective pool of risk exposures from each party. Ashford Inc.'s risk management department manages the casualty insurance program. At the beginning of each year, Ashford Inc.'s risk management department collects funds from Braemar, Ashford Trust and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.
Lismore
On March 20, 2020, the Company entered into an agreement with Lismore, a subsidiary of Ashford Inc., to engage Lismore to seek modifications, forbearances or refinancings of the Company’s loans (the “Lismore Agreement”). The Lismore Agreement was terminated effective March 20, 2021.
Upon entering into the agreement with Lismore, the Company made an initial payment of approximately $1.4 million. The Company paid approximately $1.4 million related to periodic installments of which $683,000 was expensed in accordance with the agreement. The remaining $681,000 was set off against the cash payment of the base advisory fee per the agreement upon contract termination in March 2021. Further, the Company paid approximately $1.4 million in success fees in connection with signed forbearance or other agreements. In total, the Company paid approximately $4.1 million under the Lismore Agreement.
For the three and nine months ended September 30, 2021, the Company recognized expense of $0 and $341,000, respectively. For the three and nine months ended September 30, 2020, the Company recognized expense of $1.2 million and $2.7 million, respectively. These expenses are included in “write-off of loan costs and exit fees” in the condensed consolidated statements of operations.
The Company engaged Lismore to negotiate, on the Company’s behalf, one or more modifications to the terms of the mortgage loan assumed in connection with the acquisition of the Mr. C Beverly Hills Hotel. Upon closing of the hotel, the Company paid Lismore a debt placement fee of $150,000.
Ashford Securities
On September 25, 2019, Ashford Inc. announced the formation of Ashford Securities LLC (“Ashford Securities”) to raise retail capital in order to grow its existing and future platforms. In conjunction with the formation of Ashford Securities, Braemar has entered into a contribution agreement (the “Initial Contribution Agreement”) with Ashford Inc. pursuant to which Braemar has agreed to contribute, with Ashford Trust, up to $15.0 million to fund the operations of Ashford Securities. Costs for all operating expenses of Ashford Securities that were contributed by Ashford Trust and Braemar will be expensed as incurred. These costs were allocated initially to Ashford Trust and Braemar based on an allocation percentage of 75% to Ashford Trust and 25% Braemar. Upon reaching the earlier of $400 million in aggregate non-listed preferred equity offerings raised or June 10, 2023, there will be a true up (the “Initial True-up Date”) between Ashford Trust and Braemar, whereby the actual capital contributions contributed by each company will be based on the actual amount of capital raised by Ashford Trust and Braemar, respectively. After the Initial True-Up Date, the capital contributions will be allocated between Ashford Trust and Braemar quarterly based on the actual capital raised through Ashford Securities.
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(unaudited)
On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by Ashford Inc., Ashford Trust and Braemar with respect to expenses to be reimbursed by Ashford Securities. The Initial True-Up Date did not occur, and beginning on the effective date of the Amended and Restated Contribution Agreement, costs will be allocated based upon an allocation percentage of 50% to Ashford Inc., 50% to Braemar and 0% to Ashford Trust. Upon reaching the earlier of $400 million in aggregate non-listed preferred equity offerings raised, or June 10, 2023, there will be an Amended and Restated true up (the “Amended and Restated True-up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual expense reimbursement paid by each company will be based on the actual amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively. After the Amended and Restated True-Up Date, the expense reimbursements will be allocated among Ashford Inc., Ashford Trust and Braemar quarterly based on the actual capital raised through Ashford Securities. Additionally, Braemar’s aggregate Capital Contributions under the Initial Contribution Agreement and the Amended and Restated Contribution Agreement shall not exceed $3.75 million unless otherwise agreed to in writing by Braemar.
As of September 30, 2021, Braemar has funded approximately $2.8 million. Additionally, as of September 30, 2021, $144,000 of the pre-funded amount was included in “other assets” on our condensed consolidated balance sheets.
The table below summarizes the amount Braemar has expensed related to reimbursed operating expenses of Ashford Securities (in thousands):

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Line Item |  | 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Corporate, general and administrative |  | $ | 642 |  |  | $ | 228 |  |  | $ | 1,505 |  |  | $ | 558 |  |  |

Enhanced Return Funding Program
Concurrent with Amendment No. 1 to the Fifth Amended and Restated Advisory Agreement with Ashford Inc. (“Amendment No. 1”), on January 15, 2019, the Company also entered into the Enhanced Return Funding Program Agreement (the “ERFP Agreement”) with Ashford Inc. The “key money investments” concept previously contemplated by our advisory agreement was replaced with the ERFP Agreement. The Fifth 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, design and construction 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 was two years (the “Initial Term”). At the end of the Initial Term, the ERFP Agreement automatically renewed for one year and 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.
During the second quarter of 2021, the Company sold approximately $1.6 million of hotel FF&E from Braemar hotel properties to Ashford LLC, which was subsequently leased back to the Company rent-free. In accordance with ASC 842, the Company evaluated the transactions and concluded that the transactions qualified as sales. As a result, the Company recorded an aggregate gain of $0 and $197,000 for the three and nine months ended September 30, 2021, respectively. The gains are recorded in “gain (loss) on insurance settlement, disposition of assets and sale of hotel properties” in our condensed consolidated statements of operations.
In the second quarter of 2021, upon expiration of an ERFP lease, the Company purchased the underlying FF&E from Ashford Inc. at fair value for $144,000, which was paid during the third quarter of 2021.
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(unaudited)
Design and Construction Services
In connection with Ashford Inc.’s August 8, 2018 acquisition of Remington Lodging’s design and construction business, we entered into a design and construction services agreement with Ashford Inc.’s subsidiary, Premier Project Management LLC (“Premier”), pursuant to which Premier provides design and construction services to our hotels, including construction management, interior design, architectural services, and the purchasing, freight management, and supervision of installation of FF&E and related services. Pursuant to the design and construction services agreement, we pay Premier: (a) design and construction fees of up to 4% of project costs; and (b) for the following services: (i) architectural (6.5% of total construction costs); (ii) construction management for projects without a general contractor (10% of total construction costs); (iii) interior design (6% of the purchase price of the FF&E designed or selected by Premier); and (iv) FF&E purchasing (8% of the purchase price of FF&E purchased by Premier; provided that if the purchase price exceeds $2.0 million for a single hotel in a calendar year, then the purchasing fee is reduced to 6% of the FF&E purchase price in excess of $2.0 million for such hotel in such calendar year). On March 20, 2020, we amended the design and construction services agreement to provide that Premier’s fees shall be paid by the Company to Premier upon the completion of any work provided by third-party vendors to the Company.
Hotel Management Services
On November 6, 2019, Ashford Inc. completed the acquisition of Remington Lodging’s hotel management business. Following the acquisition, hotel management services are provided by Remington Hotels, a subsidiary of Ashford Inc., under the respective hotel management agreement with each customer, including Ashford Trust and Braemar.
At September 30, 2021, Remington Hotels managed four of our 14 hotel properties.
We pay monthly hotel management fees equal to the greater of approximately $14,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues as well as annual incentive management fees, if certain operational criteria were met and other general and administrative expense reimbursements primarily related to accounting services.
Pursuant to the terms of the Letter Agreement dated March 13, 2020 (the “Hotel Management Letter Agreement”), in order to allow Remington Hotels to better manage its corporate working capital and to ensure the continued efficient operation of our hotels, we agreed to pay the base fee and to reimburse all expenses on a weekly basis for the preceding week, rather than on a monthly basis. The Hotel Management Letter Agreement went into effect on March 13, 2020 and will continue until terminated by us.
We also have a mutual exclusivity agreement with Remington Hotels, pursuant to which: (i) we have agreed to engage Remington Hotels to provide management services with respect to any hotel we acquire or invest in, to the extent we have the right and/or control the right to direct the management of such hotel; and (ii) Remington Hotels has agreed to grant us a right of first refusal to purchase any opportunity to develop or construct a hotel that it identifies that meets our initial investment guidelines. We are not, however, obligated to engage Remington Hotels if our independent directors either: (i) unanimously vote to hire a different manager or developer; or (ii) by a majority vote elect not to engage such related party because either special circumstances exist such that it would be in the best interest of our Company not to engage such related party, or, based on related party’s prior performance, it is believed that another manager could perform the management or other duties materially better.
Ashford Trust
As of September 30, 2021, the Company has an $800,000 receivable from Ashford Trust, included in “due from related parties, net.” The receivable relates to a legal settlement between Ashford Trust and the City of San Francisco regarding a transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off from Ashford Trust. The transfer taxes were initially paid by Braemar at the time of the spin-off. The $800,000 gain is included in “(gain) loss on legal settlements” on the condensed consolidated statements of operations.
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(unaudited)
15. Commitments and Contingencies
Restricted Cash—Under certain management and debt agreements for our hotel properties existing at September 30, 2021, escrow payments are required for insurance, real estate taxes and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4% to 5% of gross revenues for capital improvements.
Licensing Fees—In conjunction with the Mr. C Beverly Hills Hotel acquisition on August 5, 2021, we entered into an Intellectual Property Sublease Agreement, which allows us to continue to use certain proprietary marks associated with the Mr. C brand name. In return, we pay licensing fees of: (i) 1% of total operating revenue; (ii) 2% of gross food and beverage revenues; and (iii) 25% of food and beverage profits. The agreement expires on August 4, 2022.
The table below summarizes the licensing fees incurred (in thousands):

Line Item |  | Three Months Ended September 30, 2021 |  |  |  | Nine Months Ended September 30, 2021
Other hotel expenses |  | $ | 53 |  |  |  |  | $ | 53 |

Management Fees—Under hotel management agreements for our hotel properties existing at September 30, 2021, we pay a monthly hotel management fee equal to the greater of approximately $15,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues, or in some cases 2.5% to 5.0% of gross revenues, as well as annual incentive management fees, if applicable. These management agreements expire from December 2023 through December 2065, with renewal options. If we terminate a management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term, liquidated damages or, in certain circumstances, we may substitute a new management agreement.
Income Taxes—We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years 2017 through 2020 remain subject to potential examination by certain federal and state taxing authorities.
Litigation—On October 24, 2019, the Company provided notice to Accor of the material breach of Accor’s responsibilities under the Accor management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago, Illinois. On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York County, seeking a declaratory judgment that no breach has occurred. Accor’s complaint was dismissed on or about February 27, 2020. On January 6, 2020, Ashford TRS Chicago II filed a complaint against Accor in the Supreme Court of the State of New York, New York County, alleging breach of the Accor management agreement and seeking declaration of its right to terminate the Accor management agreement. On July 20, 2020, Accor filed an Amended Answer and Counterclaims against Ashford TRS Chicago II. Accor asserts two causes of action: First, Accor asserts a counterclaim for declaratory judgment that Accor correctly calculated the amount payable to Ashford TRS Chicago II under the management agreement to “cure” Accor’s performance test failure (the “Cure Amount”). Second, Accor asserts a counterclaim for breach of contract on the basis that Ashford TRS Chicago II breached the management agreement by wrongfully maintaining that the Cure Amount for the 2018 and 2019 Performance Test failure is $1,031,549 instead of $535,120. As of September 30, 2021, no amounts have been accrued.
One of the Company’s hotel management companies is currently involved in litigation regarding its employment policies and practices at multiple California hotels, including one of the Company’s hotels. The Company believes it is probable that the litigation will result in a loss due to a potential pre-trial settlement, in which case the Company estimates its potential loss will be approximately $500,000; however, it is entitled to indemnification for a portion of such loss. As of September 30, 2021, approximately $500,000 has been accrued.
In June 2020, each of the Company, Ashford Trust, Ashford Inc., and Lismore, a subsidiary of Ashford Inc. (collectively with the Company, Ashford Trust, Ashford Inc. and Lismore, the “Ashford Companies”), received an administrative subpoena from the SEC. The Company’s administrative subpoena requires the production of documents and other information since January 1, 2018 relating to, among other things, (1) related party transactions among the Ashford Companies (including the Lismore Agreement between the Company and Lismore pursuant to which the Company engaged Lismore to negotiate the refinancing, modification or forbearance of certain mortgage debt) or between any of the Ashford Companies and any officer, director or owner of the Ashford Companies or any entity controlled by any such person, and (2) the Company’s accounting policies, procedures, and internal controls related to such related party transactions. In addition, in October 2020, Mr. Monty J. Bennett, chairman of our board of directors, received an administrative subpoena from the SEC requiring testimony and the
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
production of documents and other information substantially similar to the requests in the subpoenas received by the Ashford Companies. The Company and Mr. Monty J. Bennett are responding to the administrative subpoenas.
On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: (1) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (2) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class; however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe any potential loss to the Company is reasonably estimable at this time. As of September 30, 2021, no amounts have been accrued.
We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the ADA and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations, or cash flow. However, our assessment may change depending upon the development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty. If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.
16. Segment Reporting
We operate in one business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refers to owning hotel properties through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics and exhibit similar long-term financial performance. As of September 30, 2021 and December 31, 2020, all of our hotel properties were in the U.S. and its territories.
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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used in this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the references to “we,” “us,” “our,” the “Company” or “Braemar” refer to Braemar Hotels & Resorts Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Braemar Hospitality Limited Partnership, a Delaware limited partnership, which we refer to as “our operating partnership” or “Braemar OP.” “Our TRSs” refers to our taxable REIT subsidiaries, including Braemar TRS Corporation, a Delaware corporation, which we refer to as “Braemar TRS,” and its subsidiaries, together with the two taxable REIT subsidiaries that lease our two hotels held in a consolidated joint venture and are wholly-owned by the joint venture and the U.S. Virgin Islands’ (“USVI”) taxable REIT subsidiary that owns The Ritz-Carlton St. Thomas hotel. “Ashford Trust” refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership and Ashford Trust’s operating partnership, which we refer to as “Ashford Trust OP.” “Ashford Inc.” refers to Ashford Inc., a Nevada corporation and, as the context may require, its consolidated subsidiaries. “Ashford LLC” or our “advisor” refers to Ashford Hospitality Advisors LLC, a Delaware limited liability company and a subsidiary of Ashford Inc. “Premier” refers to Premier Project Management LLC, a Maryland limited liability company and a subsidiary of Ashford LLC. “Remington Lodging” refers to Remington Lodging & Hospitality, LLC, a Delaware limited liability company and a hotel management company that was owned by Mr. Monty J. Bennett, chairman of our board of directors, and his father, Mr. Archie Bennett, Jr., chairman emeritus of Ashford Trust before its acquisition by Ashford Inc. on November 6, 2019. “Remington Hotels” refers to the same entity after the acquisition was completed resulting in Remington Lodging & Hospitality, LLC becoming a subsidiary of Ashford Inc.
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains registered trademarks that are the exclusive property of their respective owners, which are companies other than us, including Marriott International®, Hilton Worldwide®, Sofitel®, Hyatt® and Accor®.
FORWARD-LOOKING STATEMENTS
Throughout this Form 10-Q, we make forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature:
•the impact of COVID-19 and numerous governmental travel restrictions and other orders on our business, including one or more possible recurrences of COVID-19 case surges causing state and local governments to reinstate travel restrictions;
•our business and investment strategy;
•our projected operating results and dividend rates;
•our ability to obtain future financing arrangements or restructure existing indebtedness;
•our understanding of our competition;
•market trends;
•projected capital expenditures;
•anticipated acquisitions or dispositions; and
•the impact of technology on our operations and business.
Such forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our securities. Additionally, the following factors could cause actual results to vary from our forward-looking statements:
•the factors discussed in our Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2021 (the “2020 10-K”), including those set forth under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties;” and other filings under the Exchange Act;
•adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and travel restrictions in regions where our hotels are located, and one or more possible recurrences of COVID-19 case surges
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causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or local governments;
•our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our liquidity requirements;
•actions by our lenders to accelerate loan balances and foreclose on the hotel properties that are security for our loans if we are unable to make debt service payments or satisfy our other obligations under the forbearance agreements;
•general volatility of the capital markets and the market price of our common and preferred stock;
•general business and economic conditions affecting the lodging and travel industry;
•changes in our business or investment strategy;
•availability, terms and deployment of capital;
•unanticipated increases in financing and other costs, including a rise in interest rates;
•changes in our industry and the markets in which we operate, interest rates, or local economic conditions;
•the degree and nature of our competition;
•actual and potential conflicts of interest with Ashford Trust, Ashford Inc. and its subsidiaries (including Ashford LLC, Remington Hotels and Premier) and our executive officers and our non-independent director;
•changes in personnel of Ashford LLC or the lack of availability of qualified personnel;
•changes in governmental regulations, accounting rules, tax rates and similar matters;
•our ability to implement effective internal controls to address the material weakness identified in this report;
•the timing or outcome of the SEC investigation;
•legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”) and related rules, regulations and interpretations governing the taxation of REITs;
•limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and
•future sales and issuances of our common stock or other securities might result in dilution and could cause the price of our common stock to decline.
When considering forward-looking statements, you should keep in mind the matters summarized under “Item 1A. Risk Factors” in Part I of our 2020 10-K and this Form 10-Q, and the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, could cause our actual results and performance to differ significantly from those contained in our forward-looking statements. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 outbreak and the numerous government travel restrictions imposed in response thereto. The extent to which COVID-19 impacts us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Form 10-Q. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Form 10-Q to conform these statements to actual results and performance, except as may be required by applicable law.
Overview
We are a Maryland corporation formed in April 2013 that invests primarily in high revenue per available room (“RevPAR”), luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by Smith Travel Research. Two times the U.S. national average was $91 for the year ended December 31, 2020. We have elected to be taxed as a REIT under the Code. We conduct our business and own substantially all of our assets through our operating partnership, Braemar OP.
We operate in the direct hotel investment segment of the hotel lodging industry. As of September 30, 2021, we owned interests in 14 hotel properties in six states, the District of Columbia and St. Thomas, U.S. Virgin Islands with 3,865 total rooms, or 3,630 net rooms, excluding those attributable to our joint venture partner. The hotel properties in our current portfolio are predominantly located in U.S. urban markets and resort locations with favorable growth characteristics resulting from multiple demand generators. We own 12 of our hotel properties directly, and the remaining two hotel properties through an investment in a majority-owned consolidated entity.
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We are advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.
We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them for us under management contracts. As of September 30, 2021, Remington Hotels, a subsidiary of Ashford Inc., managed four of our 14 hotel properties. Third-party management companies managed the remaining hotel properties.
Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to design and construction services, debt placement and related services, broker-dealer and distribution services, audio visual services, real estate advisory services, insurance claims services, hypoallergenic premium rooms, watersport activities, travel/transportation services and mobile key technology.
Mr. Monty J. Bennett is chairman and chief executive officer of Ashford Inc. and, together with Mr. Archie Bennett, Jr., as of September 30, 2021, owned approximately 609,413 shares of Ashford Inc. common stock, which represented an approximate 20.2% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc. Series D Convertible Preferred Stock, which was exercisable (at an exercise price of $117.50 per share) into an additional approximate 3,991,191 shares of Ashford Inc. common stock, which if exercised as of September 30, 2021 would have increased the Bennetts’ ownership interest in Ashford Inc. to 65.6%; provided that prior to August 8, 2023, the voting power of the holders of the Ashford Inc. Series D Convertible Preferred Stock is limited to 40% of the combined voting power of all of the outstanding voting securities of the Ashford Inc. entitled to vote on any given matter. The 18,758,600 shares of Ashford Inc. Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 360,000 shares owned by trusts.
As of September 30, 2021, Mr. Monty J. Bennett, chairman of our board of directors and his father, Mr. Archie Bennett, Jr., together owned approximately 4,234,775 shares of our common stock (including common units, long-term incentive plan (“LTIP”) units and performance LTIP units), which represented an approximate 5.9% ownership in the Company.
COVID-19, Management’s Plans and Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has resulted in significant travel restrictions and extended shutdown of numerous businesses throughout the United States. In March 2020, the World Health Organization declared COVID-19 to be a global pandemic. Beginning in late February 2020, we experienced a significant decline in occupancy and RevPAR associated with COVID-19 as we experienced significant reservation cancellations as well as a significant reduction in new reservations. The prolonged presence of the virus has resulted in health and other government authorities imposing widespread restrictions on travel and other businesses.
As of September 30, 2021, the Company maintained unrestricted cash of $195.5 million and restricted cash of $44.8 million. For the nine months ended September 30, 2021, cash flows provided by operating activities was approximately $55.1 million. The vast majority of the restricted cash comprises lender and manager held reserves. At the end of the quarter, there was also $20.4 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of its property managers which is also available to fund hotel operating costs. On December 10, 2020, the Company announced that it plans to continue its suspension of the common stock dividend into 2021 to protect liquidity and will evaluate future dividend declarations on a quarterly basis going forward.
We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully subside, whether our hotels will be forced to shut down operations or whether one or more possible recurrences of COVID-19 case surges could result in further reductions in business and personal travel or potentially cause state and local governments to reinstate travel restrictions. Facts and circumstances could change in the future that are outside of management’s control, such as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to COVID-19.
Recent Developments
On July 12, 2021, the Company entered into a second equity distribution agreement with Virtu to sell from time to time shares of our common stock having an aggregate offering price of up to $100 million (the “Virtu July 2021 EDA”). We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of November 3, 2021, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received proceeds of approximately $24.0 million.
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On July 12, 2021, the Company made an additional investment in OpenKey of approximately $117,000.
On August 5, 2021, the Company acquired a 100% interest in the 138-room Mr. C Beverly Hills Hotel and five luxury residences adjacent to the hotel. The total consideration consisted of $10.0 million of cash, 2.5 million Braemar OP common units with a fair value of approximately $13.2 million and 500,000 warrants for the purchase of Braemar common stock with a $6.00 strike price and a fair value of approximately $1.5 million. Additionally, the Company assumed a $50.0 million mortgage loan, with a fair value of approximately $49.8 million. Upon closing, the Company repaid $20.0 million of the assumed mortgage loan.
On September 23, 2021, the Company finalized an extension of its mortgage loans for the Bardessono Hotel and Spa with a final maturity in August 2022 and the Hotel Yountville with a final maturity in May 2022. Each of the loans was extended for one year beyond its original maturity on the same terms as the original loan.
Key Indicators of Operating Performance
We use a variety of operating and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include:
•Occupancy. Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of hotels in a given period.
•ADR. ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We use ADR to assess the pricing levels that we are able to generate.
•RevPAR. RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.
RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs.
Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.
We also use funds from operations (“FFO”), Adjusted FFO, earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) and Adjusted EBITDAre as measures of the operating performance of our business. See “Non-GAAP Financial Measures.”
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RESULTS OF OPERATIONS
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
The following table summarizes changes in key line items from our condensed consolidated statements of operations for the three months ended September 30, 2021 and 2020 (in thousands except percentages):

| Three Months Ended September 30, |  | Favorable (Unfavorable)
| 2021 |  | 2020 |  | $ Change |  | % Change
Revenue |  |  |  |  |  |  |
Rooms | $ | 77,560 |  |  | $ | 28,118 |  |  | $ | 49,442 |  |  | 175.8 | %
Food and beverage | 24,494 |  |  | 8,537 |  |  | 15,957 |  |  | 186.9 |
Other | 14,123 |  |  | 8,099 |  |  | 6,024 |  |  | 74.4 |
Total revenue | 116,177 |  |  | 44,754 |  |  | 71,423 |  |  | 159.6 |
Expenses |  |  |  |  |  |  |
Hotel operating expenses: |  |  |  |  |  |  |
Rooms | 17,072 |  |  | 7,975 |  |  | (9,097) |  |  | (114.1) |
Food and beverage | 20,252 |  |  | 7,994 |  |  | (12,258) |  |  | (153.3) |
Other expenses | 36,124 |  |  | 20,516 |  |  | (15,608) |  |  | (76.1) |
Management fees | 3,595 |  |  | 1,321 |  |  | (2,274) |  |  | (172.1) |
Total hotel operating expenses | 77,043 |  |  | 37,806 |  |  | (39,237) |  |  | (103.8) |
Property taxes, insurance and other | 12,622 |  |  | 6,929 |  |  | (5,693) |  |  | (82.2) |
Depreciation and amortization | 18,284 |  |  | 18,507 |  |  | 223 |  |  | 1.2 |
Advisory services fee | 4,809 |  |  | 4,575 |  |  | (234) |  |  | (5.1) |
Transaction costs | 275 |  |  | — |  |  | (275) |  |  |
Corporate general and administrative | 2,094 |  |  | 1,405 |  |  | (689) |  |  | (49.0) |
Total expenses | 115,127 |  |  | 69,222 |  |  | (45,905) |  |  | (66.3) |
Gain (loss) on insurance settlement and disposition of assets | — |  |  | 10,149 |  |  | (10,149) |  |  |
Operating income (loss) | 1,050 |  |  | (14,319) |  |  | 15,369 |  |  | 107.3 |
Equity in earnings (loss) of unconsolidated entity | (68) |  |  | (58) |  |  | (10) |  |  | (17.2) |
Interest income | 13 |  |  | 12 |  |  | 1 |  |  | 8.3 |
Other income (expense) | — |  |  | (3,604) |  |  | 3,604 |  |  | 100.0 |
Interest expense and amortization of loan costs | (8,364) |  |  | (8,859) |  |  | 495 |  |  | 5.6 |
Write-off of loan costs and exit fees | (432) |  |  | (1,335) |  |  | 903 |  |  | 67.6 |
Unrealized gain (loss) on derivatives | 142 |  |  | 3,561 |  |  | (3,419) |  |  | (96.0) |
Income (loss) before income taxes | (7,659) |  |  | (24,602) |  |  | 16,943 |  |  | 68.9 |
Income tax (expense) benefit | (560) |  |  | 1,545 |  |  | (2,105) |  |  | (136.2) |
Net income (loss) | (8,219) |  |  | (23,057) |  |  | 14,838 |  |  | 64.4 |
(Income) loss attributable to noncontrolling interest in consolidated entities | 450 |  |  | 1,999 |  |  | (1,549) |  |  | (77.5) |
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership | 823 |  |  | 2,381 |  |  | (1,558) |  |  | (65.4) |
Net income (loss) attributable to the Company | $ | (6,946) |  |  | $ | (18,677) |  |  | $ | 11,731 |  |  | 62.8 | %

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All hotel properties owned for the three months ended September 30, 2021 and 2020 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended September 30, 2021 and 2020. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following acquisitions and dispositions affect reporting comparability related to our condensed consolidated financial statements:

Hotel Properties |  | Location |  | Acquisition/Disposition |  | Acquisition/Disposition Date
Mr. C Beverly Hills Hotel |  | Los Angeles, CA |  | Acquisition |  | August 5, 2021

The following table illustrates the key performance indicators of all hotel properties owned for the periods indicated:

| Three Months Ended September 30,
| 2021 |  | 2020
Occupancy | 61.64 | % |  | 26.88 | %
ADR (average daily rate) | $ | 357.99 |  |  | $ | 304.68 |
RevPAR (revenue per available room) | $ | 220.66 |  |  | $ | 81.89 |
Rooms revenue (in thousands) | $ | 77,560 |  |  | $ | 28,118 |
Total hotel revenue (in thousands) | $ | 116,177 |  |  | $ | 44,754 |

The following table illustrates the key performance indicators of the 13 hotel properties that were included for the full three months ended September 30, 2021 and 2020:

| Three Months Ended September 30,
| 2021 |  | 2020
Occupancy | 61.81 | % |  | 26.88 | %
ADR (average daily rate) | $ | 358.25 |  |  | $ | 304.68 |
RevPAR (revenue per available room) | $ | 221.43 |  |  | $ | 81.89 |
Rooms revenue (in thousands) | $ | 76,027 |  |  | $ | 28,118 |
Total hotel revenue (in thousands) | $ | 113,905 |  |  | $ | 44,754 |

Net Income (Loss) Attributable to the Company. Net loss attributable to the Company decreased $11.7 million, from $18.7 million for the three months ended September 30, 2020 (the “2020 quarter”) to $6.9 million for the three months ended September 30, 2021 (the “2021 quarter”), as a result of the factors discussed below.
Rooms Revenue. Rooms revenue increased $49.4 million, or 175.8%, to $77.6 million during the 2021 quarter compared to the 2020 quarter. During the 2021 quarter, we experienced a 3,476 basis point increase in occupancy and a 17.5% increase in room rates. The increase in rooms revenue is primarily due to the hotel properties recovering from the COVID-19 pandemic as well as an increase of $1.5 million associated with the acquisition of the Mr. C Beverly Hills Hotel on August 5, 2021.
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Fluctuations in rooms revenue between the 2021 quarter and the 2020 quarter is a result of the changes in occupancy and ADR between the 2021 quarter and the 2020 quarter as reflected in the table below (dollars in thousands):

Hotel Property |  | Favorable (Unfavorable) |
| Rooms Revenue |  | Occupancy (change in bps) |  | ADR (change in %) |
Comparable |  |  |  |  |  |  |
Capital Hilton (1) |  | $ | 2,145 |  |  | 2,698 |  |  | 21.7 | % |
Marriott Seattle Waterfront |  | 5,850 |  |  | 6,315 |  |  | 34.0 | % |
The Notary Hotel |  | 2,823 |  |  | 3,169 |  |  | 10.9 | % |
The Clancy (2) |  | 5,185 |  |  | 7,469 |  |  | n/a |
Sofitel Chicago Magnificent Mile |  | 3,527 |  |  | 3,243 |  |  | 45.9 | % |
Pier House Resort & Spa |  | 3,367 |  |  | 1,978 |  |  | 78.8 | % |
The Ritz-Carlton St. Thomas |  | 8,693 |  |  | 3,763 |  |  | 73.6 | % |
Park Hyatt Beaver Creek Resort & Spa |  | 2,436 |  |  | 3,893 |  |  | 15.2 | % |
Hotel Yountville |  | 2,942 |  |  | 3,455 |  |  | 42.0 | % |
The Ritz-Carlton Sarasota |  | 3,267 |  |  | 1,189 |  |  | 39.2 | % |
Hilton La Jolla Torrey Pines |  | 3,644 |  |  | 2,465 |  |  | 62.4 | % |
Bardessono Hotel and Spa |  | 3,722 |  |  | 2,834 |  |  | 53.2 | % |
The Ritz-Carlton Lake Tahoe |  | 307 |  |  | (908) |  |  | 26.2 | % |
Total |  | $ | 47,908 |  |  | 3,493 |  |  | 17.5 | % |
Non-comparable |  |  |  |  |  |  |
Mr. C Beverly Hills Hotel |  | $ | 1,534 |  |  | n/a |  | n/a |

_______________
(1) The hotel was closed from April 2020 through mid-August 2020.
(2) The hotel was being renovated through September 30, 2020.
Food and Beverage Revenue. Food and beverage revenue increased $16.0 million, or 186.9%, to $24.5 million during the 2021 quarter compared to the 2020 quarter. This increase is attributable to an aggregate increase at all comparable hotel properties of $15.4 million as they are recovering from the COVID-19 pandemic, as well as an increase of $553,000 resulting from the acquisition of the Mr. C Beverly Hills Hotel on August 5, 2021.
Other Hotel Revenue. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals and business interruption revenue, increased $6.0 million, or 74.4%, to $14.1 million during the 2021 quarter compared to the 2020 quarter. The increase is attributable to an aggregate increase in other hotel revenue of $5.8 million at 13 comparable hotel properties and an increase of $186,000 at the Mr. C Beverly Hills Hotel.
Rooms Expense. Rooms expense increased $9.1 million, or 114.1%, to $17.1 million in the 2021 quarter compared to the 2020 quarter. This increase is primarily attributable to an aggregate increase of $8.8 million at 12 comparable hotel properties as they are recovering from the COVID-19 pandemic and an increase of $410,000 at the Mr. C Beverly Hills Hotel, partially offset by a decrease of $113,000 at the Capital Hilton.
Food and Beverage Expense. Food and beverage expense increased $12.3 million, or 153.3%, to $20.3 million during the 2021 quarter compared to the 2020 quarter. This increase is attributable to an aggregate increase of $11.8 million at all comparable hotel properties and an increase of $455,000 at the Mr. C Beverly Hills Hotel.
Other Operating Expenses. Other operating expenses increased $15.6 million, or 76.1%, to $36.1 million in the 2021 quarter compared to the 2020 quarter. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees.
We experienced an increase of $2.2 million in direct expenses and $13.4 million in indirect expenses and incentive management fees in the 2021 quarter as compared to the 2020 quarter as the hotel properties are recovering from the COVID-19 pandemic. Direct expenses were 4.4% of total hotel revenue in the 2021 quarter and 6.4% in the 2020 quarter. The increase in direct expenses is primarily attributable to higher occupancy levels at all of our comparable hotel properties as they are recovering from the COVID-19 pandemic and an increase of approximately $13,000 at the Mr. C Beverly Hills Hotel.
The increase in indirect expenses comprises increases in: (i) general and administrative costs of $4.6 million comprising an increase of $4.3 million at our 13 comparable hotel properties and $294,000 at the Mr. C Beverly Hills Hotel; (ii) marketing
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costs of $3.8 million comprising an increase of $3.6 million at our 13 comparable hotel properties and $181,000 at the Mr. C Beverly Hills Hotel; (iii) repairs and maintenance of $1.8 million, comprising an increase of $1.7 million at our 13 comparable hotel properties and $79,000 at the Mr. C Beverly Hills Hotel; (iv) lease expense of $825,000 comprising an increase of $820,000 at our 13 comparable hotel properties and $5,000 at the Mr. C Beverly Hills Hotel; (v) energy costs of $1.2 million comprising an increase of $1.0 million at our 13 comparable hotel properties and $153,000 at the Mr. C Beverly Hills Hotel; and (vi) incentive management fees of $1.2 million comprising an increase of $1.2 million at our 13 comparable hotel properties and $22,000 at the Mr. C Beverly Hills Hotel.
Management Fees. Base management fees increased $2.3 million, or 172.1%, to $3.6 million in the 2021 quarter compared to the 2020 quarter at all of our comparable hotel properties as a result of the recovery from the COVID-19 pandemic and an increase of $67,000 at the Mr. C Beverly Hills Hotel.
Property Taxes, Insurance and Other. Property taxes, insurance and other increased $5.7 million, or 82.2%, to $12.6 million in the 2021 quarter compared to the 2020 quarter. The increase comprised an aggregate increase of approximately $5.9 million at six hotel properties. Approximately $5.3 million of the increase is primarily attributable to higher current year assessments at two hotel properties. The increase also includes an increase of $209,000 at the Mr. C Beverly Hills Hotel, partially offset by an aggregate decrease of approximately $314,000 at seven hotel properties.
Depreciation and Amortization. Depreciation and amortization decreased $223,000, or 1.2%, to $18.3 million in the 2021 quarter compared to the 2020 quarter. The decrease is comprised of an aggregate decrease of approximately $959,000 at eight comparable hotel properties, partially offset by an aggregate increase of $363,000 at The Clancy, Hotel Yountville, The Ritz-Carlton St. Thomas, The Ritz-Carlton Sarasota and The Ritz-Carlton Lake Tahoe as well as an increase of $373,000 at the Mr. C Beverly Hills Hotel.
Advisory Services Fee. Advisory services fee increased $234,000, or 5.1%, to $4.8 million in the 2021 quarter compared to the 2020 quarter due to increases in the base advisory fee of $372,000, reimbursable expenses of $290,000 and equity-based compensation of $1.2 million, partially offset by a decrease in incentive fee of $1.6 million.
In the 2021 quarter, we recorded an advisory services fee of $4.8 million, which included a base advisory fee of $2.8 million, reimbursable expenses of $694,000, $3.0 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and a credit to incentive fee of $1.6 million.
In the 2020 quarter, we recorded an advisory services fee of $4.6 million, which included a base advisory fee of $2.4 million, reimbursable expenses of $404,000 and $1.8 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.
Transaction Costs. In the 2021 quarter, we recognized transactions costs of $275,000 associated with the acquisition of the Mr. C Beverly Hills Hotel. There were no transaction costs in the 2020 quarter.
Corporate General and Administrative. Corporate general and administrative expense was $2.1 million in the 2021 quarter and $1.4 million in the 2020 quarter. The increase in corporate general and administrative expense is due to higher professional fees of $226,000, higher public company costs of $225,000 and an increase of $414,000 related to our share of the reimbursed operating expenses of Ashford Securities, partially offset by lower miscellaneous expenses of $176,000.
Gain (Loss) on Insurance Settlement and Disposition of Assets. In the 2020 quarter, we recognized a gain of $10.1 million as a result of finalizing the insurance settlement from Hurricane Irma.
Equity in Earnings (Loss) of Unconsolidated Entity. In the 2021 quarter and 2020 quarter, we recorded equity in loss of unconsolidated entity of $68,000 and $58,000, respectively, related to our investment in OpenKey.
Interest Income. Interest income increased $1,000, or 8.3%, to $13,000 for the 2021 quarter.
Other Income (Expense). Other expense was $3.6 million in 2020 quarter compared to $0 in the 2021 quarter. In the 2020 quarter, we recorded a realized loss of $3.5 million on interest rate floors and expense of $64,000 related to CMBX premiums and interest paid on collateral.
Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs decreased $495,000, or 5.6%, to $8.4 million in the 2021 quarter compared to the 2020 quarter. The decrease is primarily due to lower interest expense from a lower average LIBOR rate, a credit to interest expense related to the amortization of default interest and late charges recorded on loans that were previously in default and the repayment of our secured term loan. These decreases were partially offset by higher interest expense associated with our Convertible Senior Notes and the mortgage loan associated with the Mr. C
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Beverly Hills Hotel acquisition. The average LIBOR rates in the 2021 quarter and the 2020 quarter were 0.09% and 0.16%, respectively.
Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees was $432,000 in the 2021 quarter, primarily associated with the $419,000 write-off of loan costs upon the $20 million pay-down of the mortgage loan assumed with the Mr. C Beverly Hills Hotel acquisition.
Write-off of loan costs and exit fees was $1.3 million in the 2020 quarter, resulting from amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments. Third-party fees incurred in conjunction with these amendments, totaling $1.3 million, were expensed in accordance with applicable accounting guidance.
Unrealized Gain (Loss) on Derivatives. Unrealized gain on derivatives of $142,000 in the 2021 quarter consisted of an unrealized gain of approximately $190,000 on warrants, partially offset by an unrealized loss of approximately $48,000 on interest rate caps.
Unrealized gain on derivatives of $3.6 million in the 2020 quarter consisted of a $3.5 million unrealized gain on interest rate floors associated with the recognition of realized losses from the expiration of interest rate floors and a $51,000 unrealized gain on CMBX credit default swaps, partially offset by a $30,000 unrealized loss on interest rate caps.
Income Tax (Expense) Benefit. Income tax (expense) benefit changed $2.1 million, from an income tax benefit of $1.5 million in the 2020 quarter to income tax expense of $560,000 in the 2021 quarter. This change was primarily due to an increase in the profitability of our TRS entities in the 2021 quarter compared to the 2020 quarter.
(Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities. Our noncontrolling interest partner in consolidated entities was allocated a loss of $450,000 and $2.0 million in the 2021 quarter and the 2020 quarter, respectively. At both September 30, 2021 and 2020, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.
Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated a net loss of $823,000 and $2.4 million in the 2021 quarter and the 2020 quarter, respectively. Redeemable noncontrolling interests in Braemar OP represented ownership interests of 8.35% and 10.08% as of September 30, 2021 and 2020, respectively.
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Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
The following table summarizes changes in key line items from our condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020 (in thousands except percentages):

| Nine Months Ended September 30, |  | Favorable (Unfavorable)
| 2021 |  | 2020 |  | $ Change |  | % Change
Revenue |  |  |  |  |  |  |
Rooms | $ | 195,720 |  |  | $ | 105,119 |  |  | $ | 90,601 |  |  | 86.2 | %
Food and beverage | 60,976 |  |  | 39,417 |  |  | 21,559 |  |  | 54.7 |
Other | 40,439 |  |  | 30,633 |  |  | 9,806 |  |  | 32.0 |
Total hotel revenue | 297,135 |  |  | 175,169 |  |  | 121,966 |  |  | 69.6 |
Expenses |  |  |  |  |  |  |
Hotel operating expenses: |  |  |  |  |  |  |
Rooms | 41,569 |  |  | 29,300 |  |  | (12,269) |  |  | (41.9) |
Food and beverage | 50,526 |  |  | 35,544 |  |  | (14,982) |  |  | (42.2) |
Other expenses | 98,143 |  |  | 75,585 |  |  | (22,558) |  |  | (29.8) |
Management fees | 9,079 |  |  | 5,664 |  |  | (3,415) |  |  | (60.3) |
Total hotel operating expenses | 199,317 |  |  | 146,093 |  |  | (53,224) |  |  | (36.4) |
Property taxes, insurance and other | 27,076 |  |  | 21,833 |  |  | 5,243 |  |  | (24.0) |
Depreciation and amortization | 54,881 |  |  | 55,398 |  |  | (517) |  |  | (0.9) |
Gain on legal settlement | (989) |  |  | — |  |  | 989 |  |  |
Advisory services fee | 16,343 |  |  | 14,545 |  |  | (1,798) |  |  | (12.4) |
Transaction costs | 571 |  |  | — |  |  | (571) |  |  |
Corporate general and administrative | 6,077 |  |  | 4,850 |  |  | (1,227) |  |  | (25.3) |
Total expenses | 303,276 |  |  | 242,719 |  |  | (60,557) |  |  | (24.9) |
Gain (loss) on insurance settlement and disposition of assets | 696 |  |  | 10,149 |  |  | (9,453) |  |  | (93.1) |
Operating income (loss) | (5,445) |  |  | (57,401) |  |  | 51,956 |  |  | 90.5 |
Equity in earnings (loss) of unconsolidated entity | (198) |  |  | (138) |  |  | (60) |  |  | (43.5) |
Interest income | 34 |  |  | 165 |  |  | (131) |  |  | (79.4) |
Other income (expense) | — |  |  | (3,806) |  |  | 3,806 |  |  | 100.0 |
Interest expense and amortization of loan costs | (22,346) |  |  | (38,167) |  |  | 15,821 |  |  | 41.5 |
Write-off of loan costs and exit fees | (1,960) |  |  | (3,572) |  |  | 1,612 |  |  | 45.1 |
Unrealized gain (loss) on derivatives | 64 |  |  | 3,748 |  |  | (3,684) |  |  | (98.3) |
Income (loss) before income taxes | (29,851) |  |  | (99,171) |  |  | 69,320 |  |  | 69.9 |
Income tax (expense) benefit | (766) |  |  | 4,622 |  |  | (5,388) |  |  | (116.6) |
Net income (loss) | (30,617) |  |  | (94,549) |  |  | 63,932 |  |  | 67.6 |
(Income) loss attributable to noncontrolling interest in consolidated entities | 2,546 |  |  | 4,975 |  |  | 2,429 |  |  | 48.8 |
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership | 3,184 |  |  | 10,036 |  |  | 6,852 |  |  | 68.3 |
Net income (loss) attributable to the Company | $ | (24,887) |  |  | $ | (79,538) |  |  | $ | 54,651 |  |  | 68.7 | %

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All hotel properties owned for the nine months ended September 30, 2021 and 2020 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the nine months ended September 30, 2021 and 2020. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following acquisitions and dispositions affect reporting comparability related to our condensed consolidated financial statements:

Hotel Properties |  | Location |  | Acquisition/Disposition |  | Acquisition/Disposition Date
Mr. C Beverly Hills Hotel |  | Los Angeles, CA |  | Acquisition |  | August 5, 2021

The following table illustrates the key performance indicators of all hotel properties for the periods indicated:

| Nine Months Ended September 30,
| 2021 |  | 2020
Occupancy | 49.46 | % |  | 31.11 | %
ADR (average daily rate) | $ | 385.28 |  |  | $ | 330.77 |
RevPAR (revenue per available room) | $ | 190.58 |  |  | $ | 102.90 |
Rooms revenue (in thousands) | $ | 195,720 |  |  | $ | 105,119 |
Total hotel revenue (in thousands) | $ | 297,135 |  |  | $ | 175,169 |

The following table illustrates the key performance indicators of the 13 hotel properties that were included for the full nine months ended September 30, 2021 and 2020:

| Nine Months Ended September 30,
| 2021 |  | 2020
Occupancy | 49.42 | % |  | 31.11 | %
ADR (average daily rate) | $ | 385.63 |  |  | $ | 330.77 |
RevPAR (revenue per available room) | $ | 190.60 |  |  | $ | 102.90 |
Rooms revenue (in thousands) | $ | 194,187 |  |  | $ | 105,119 |
Total hotel revenue (in thousands) | $ | 294,863 |  |  | $ | 175,169 |

Net Income (Loss) Attributable to the Company. Net loss attributable to the Company decreased $54.7 million, from $79.5 million for the nine months ended September 30, 2020 (the “2020 period”), to $24.9 million for the nine months ended September 30, 2021 (the “2021 period”), as a result of the factors discussed below.
Rooms Revenue. Rooms revenue increased $90.6 million, or 86.2%, to $195.7 million during the 2021 period compared to the 2020 period. During the 2021 period, we experienced a 1,835 basis point increase in occupancy and a 16.5% increase in room rates compared to the 2020 period. The increase in rooms revenue is due to the hotel properties recovering from the COVID-19 pandemic as well as an increase of $1.5 million associated with the acquisition of the Mr. C Beverly Hills Hotel on August 5, 2021.
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Fluctuations in rooms revenue between the 2021 period and the 2020 period is a result of the changes in occupancy and ADR between the 2021 period and the 2020 period as reflected in the table below (dollars in thousands):

Hotel Property |  | Favorable (Unfavorable) |
| Rooms Revenue |  | Occupancy (change in bps) |  | ADR (change in %) |
Comparable |  |  |  |  |  |  |
Capital Hilton (1) |  | $ | (1,146) |  |  | 449 |  |  | (30.8) | % |
Marriott Seattle Waterfront |  | 6,159 |  |  | 2,517 |  |  | 9.1 | % |
The Notary Hotel |  | 1,480 |  |  | 666 |  |  | (0.5) | % |
The Clancy (2) |  | 1,615 |  |  | 2,832 |  |  | (47.3) | % |
Sofitel Chicago Magnificent Mile |  | 4,970 |  |  | 1,305 |  |  | 43.4 | % |
Pier House Resort & Spa |  | 9,294 |  |  | 3,320 |  |  | 25.2 | % |
The Ritz-Carlton St. Thomas |  | 29,939 |  |  | 4,786 |  |  | 50.8 | % |
Park Hyatt Beaver Creek Resort & Spa |  | 2,103 |  |  | 2,326 |  |  | (28.4) | % |
Hotel Yountville |  | 5,606 |  |  | 2,722 |  |  | 40.0 | % |
The Ritz-Carlton Sarasota |  | 14,270 |  |  | 2,465 |  |  | 30.0 | % |
Hilton La Jolla Torrey Pines |  | 3,928 |  |  | 1,505 |  |  | 8.7 | % |
Bardessono Hotel and Spa |  | 7,693 |  |  | 2,741 |  |  | 45.2 | % |
The Ritz-Carlton Lake Tahoe |  | 3,156 |  |  | 1,249 |  |  | (3.8) | % |
Total |  | $ | 89,067 |  |  | 1,831 |  |  | 16.5 | % |
Non-comparable |  |  |  |  |  |  |
Mr. C Beverly Hills Hotel |  | $ | 1,534 |  |  | n/a |  | n/a |

_______________
(1) The hotel was closed from April 2020 through mid-August in 2020.
(2) The hotel was being renovated through September 30, 2020.
Food and Beverage Revenue. Food and beverage revenue increased $21.6 million, or 54.7%, to $61.0 million during the 2021 period compared to the 2020 period. This increase is primarily driven by the recovery from the COVID-19 pandemic. We experienced an aggregate increase in food and beverage revenue of $24.3 million at ten comparable hotel properties as well as an increase of $553,000 at the Mr. C Beverly Hills Hotel. These increases were partially offset by an aggregate decrease of $3.3 million at Capital Hilton, Hilton La Jolla Torrey Pines and The Notary Hotel.
Other Hotel Revenue. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $9.8 million, or 32.0%, to $40.4 million during the 2021 period compared to the 2020 period.
The increase is attributable to higher other hotel revenue of $14.0 million at 11 comparable hotel properties and an increase of $186,000 at the Mr. C Beverly Hills Hotel, partially offset by an aggregate decrease of $381,000 at The Clancy and Capital Hilton as well as lower business interruption revenue of $4.0 million.
During the 2020 period, we recognized business interruption revenue of $4.0 million at The Ritz-Carlton St. Thomas as a result of Hurricane Irma. There was no such revenue recorded in the 2021 period.
Rooms Expense. Rooms expense increased $12.3 million, or 41.9%, to $41.6 million in the 2021 period compared to the 2020 period. The increase is attributable to an aggregate increase in rooms expense of $12.7 million at 12 comparable hotel properties and an increase of $410,000 at the Mr. C Beverly Hills Hotel, partially offset by a decrease of $791,000 at the Capital Hilton.
Food and Beverage Expense. Food and beverage expense increased $15.0 million, or 42.2%, to $50.5 million during the 2021 period compared to the 2020 period.
The increase is attributable to an aggregate increase of $18.0 million at nine comparable hotel properties and an increase of $455,000 at the Mr. C Beverly Hills Hotel, partially offset by an aggregate decrease of $3.5 million at the Capital Hilton, The Notary Hotel, Hilton La Jolla Torrey Pines and Marriott Seattle Waterfront.
Other Operating Expenses. Other operating expenses increased $22.6 million, or 29.8%, to $98.1 million in the 2021 period compared to the 2020 period. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. We experienced an
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increase of $5.4 million in direct expenses and $17.2 million in indirect expenses and incentive management fees in the 2021 period compared to the 2020 period.
Direct expenses were 5.1% of total hotel revenue in the 2021 period and 5.6% in the 2020 period. The increase in direct expenses is associated with higher revenues as all of our comparable hotel properties are recovering from the COVID-19 pandemic and an increase of 13,000 at the Mr. C Beverly Hills Hotel.
The increase in indirect expenses is attributable to increases in (i) general and administrative costs of $2.0 million comprising an increase of $1.7 million at our 13 comparable hotel properties and $294,000 at the Mr. C Beverly Hills Hotel; (ii) marketing costs of $3.7 million comprising an increase of $3.5 million at our 13 comparable hotel properties and $181,000 at the Mr. C Beverly Hills Hotel; (iii) repairs and maintenance of $3.3 million comprising an increase of $3.2 million at our 13 comparable hotel properties and $79,000 at the Mr. C Beverly Hills Hotel; (iv) lease expense of $667,000 comprising an increase of $662,000 at our 13 comparable hotel properties and $5,000 at the Mr. C Beverly Hills Hotel; (v) energy costs of $2.5 million comprised of an increase of $2.4 million at our 13 comparable hotel properties and $153,000 at the Mr. C Beverly Hills Hotel; and (vi) incentive management fees of $5.0 million comprising an increase of $5.0 million at our 13 comparable hotel properties and $22,000 at the Mr. C Beverly Hills Hotel.
Management Fees. Base management fees increased $3.4 million, or 60.3%, to $9.1 million in the 2021 period compared to the 2020 period. Management fees increased $3.6 million at eleven comparable hotel properties and $67,000 at the Mr. C Beverly Hills Hotel, partially offset be an aggregate decrease of approximately $200,000 at the Capital Hilton and The Clancy.
Property Taxes, Insurance and Other. Property taxes, insurance and other increased $5.2 million, or 24.0%, to $27.1 million in the 2021 period compared to the 2020 period. The increase is comprised of an aggregate increase of approximately $5.7 million at nine hotel properties. Approximately $4.9 million of the increase is primarily attributable to higher current year assessments at two hotel properties. The increase also includes $209,000 at the Mr. C Beverly Hills Hotel. These increases were partially offset by an aggregate decrease of approximately $489,000 at four hotel properties.
Depreciation and Amortization. Depreciation and amortization decreased $517,000, or 0.9%, to $54.9 million for the 2021 period compared to the 2020 period. The decrease is comprised of an aggregate decrease of $2.7 million at eight comparable hotel properties, partially offset by an increase of $373,000 at the Mr. C Beverly Hills Hotel and an aggregate increase of $1.8 million at The Clancy, Hotel Yountville, The Ritz-Carlton St. Thomas, The Ritz-Carlton Sarasota and The Ritz-Carlton Lake Tahoe.
Advisory Services Fee. Advisory services fee increased $1.8 million, or 12.4%, to $16.3 million in the 2021 period compared to the 2020 period due to increases in the base advisory fee of $402,000, reimbursable expenses of $336,000, as well as an increase in equity-based compensation of $1.1 million.
In the 2021 period, we recorded an advisory services fee of $16.3 million, which included a base advisory fee of $8.0 million, reimbursable expenses of $1.7 million, $6.7 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.
In the 2020 period, we recorded an advisory services fee of $14.5 million, which included a base advisory fee of $7.6 million, reimbursable expenses of $1.4 million and $5.6 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.
Gain on Legal Settlement. In the 2021 period, we recognized a gain of $800,000 related to the settlement of a transfer tax matter with the City of San Francisco and $189,000 related to a billing dispute. In the 2020 period, there was no such gain recognized.
Transaction costs. In the 2021 period, we recognized $571,000 of transaction costs associated with the acquisition of the Mr. C Beverly Hills Hotel. There were no transaction costs in the 2020 period.
Corporate General and Administrative. Corporate general and administrative expense was $6.1 million in the 2021 period and $4.9 million in the 2020 period. The increase in corporate general and administrative expenses is primarily due to higher miscellaneous expenses of $45,000, an increase of $946,000 related to our share of the reimbursed operating expenses of Ashford Securities and higher public company costs of $457,000, partially offset by lower professional fees of $222,000.
Gain (loss) on Insurance Settlement and Disposition of Assets. In the 2020 period, we recognized a gain of $10.1 million as a result of finalizing the insurance settlement from Hurricane Irma. In the 2021 period, we recognized a gain of $481,000 associated with proceeds received from an insurance claim, a gain of $18,000 upon disposition of certain fixed assets as well as a gain of $197,000 associated with the sale of certain ERFP assets to Ashford Inc.
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Equity in Earnings (Loss) of Unconsolidated Entity. In the 2021 period and the 2020 period, we recorded equity in loss of unconsolidated entity of $198,000 and $138,000, respectively, related to our investment in OpenKey.
Interest Income. Interest income decreased $131,000, or 79.4%, to $34,000 for the 2021 period compared to the 2020 period.
Other Income (Expense). Other expense decreased $3.8 million, or 100.0% to $0 in the 2021 period compared to the 2020 period. In the 2020 period, we recorded a realized loss of $3.6 million on interest rate floors and expense of $191,000 related to CMBX premiums and interest paid on collateral.
Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs decreased $15.8 million, or 41.5%, to $22.3 million for the 2021 period compared to the 2020 period. The dec rease i s primarily due to lower interest expense from a lower average LIBOR rate, a credit to interest expense related to the amortization of default interest and late charges recorded on loans that were previously in default and the repayment of our secured term loan. These decreases were partially offset by higher interest expense from our Convertible Senior Notes and the mortgage loan associated with the Mr. C Beverly Hills Hotel acquisition. The average LIBOR rates for the 2021 period and the 2020 period were 0.10% and 0.64%, respectively.
Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees was $2.0 million in the 2021 period, primary associated with a $1.2 million write-off of unamortized loan costs upon the payoff of our secured term loan payoff and $351,000 from several amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments. Third-party fees incurred in conjunction with these amendments, totaling $351,000, were expensed in accordance with applicable accounting guidance. In addition, there was approximately a $419,000 write-off of loan costs upon the $20 million pay-down of the mortgage loan assumed with the acquisition of the Mr. C Beverly Hills Hotel.
Write-off of loan costs and exit fees was $3.6 million for the 2020 period, resulting from several amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments. Third-party fees incurred in conjunction with these amendments, totaling $3.6 million, were expensed in accordance with applicable accounting guidance.
Unrealized Gain (Loss) on Derivatives. Unrealized gain on derivatives of $64,000 for the 2021 period consisted of an unrealized gain of approximately $190,000 on warrants, partially offset by an unrealized loss of approximately $126,000 on interest rate caps.
Unrealized gain on derivatives of $3.7 million for the 2020 period consisted of a $3.6 million unrealized gain on interest rate floors associated with the recognition of realized losses from the expiration of interest rate floors and a $226,000 unrealized gain on CMBX credit default swaps and partially offset by an unrealized loss of $93,000 on interest rate caps.
Income Tax (Expense) Benefit. Income tax expense changed $5.4 million, from an income tax benefit of $4.6 million in the 2020 period to income tax expense of $766,000 in the 2021 period. This change was primarily due to an increase in the profitability of our TRS entities in the 2021 period compared to the 2020 period.
(Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities. Our noncontrolling interest partner in consolidated entities was allocated a loss of $2.5 million and $5.0 million for the 2021 period and the 2020 period, respectively. At both September 30, 2021 and 2020, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.
Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated a net loss of $3.2 million and $10.0 million for the 2021 period and the 2020 period, respectively. Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 8.35% and 10.08% as of September 30, 2021 and 2020, respectively.
LIQUIDITY AND CAPITAL RESOURCES
COVID-19, Management’s Plans and Liquidity
In December 2019, COVID-19 was identified in Wuhan, China, subsequently spread to other regions of the world, and has resulted in significant travel restrictions and extended shutdown of numerous businesses throughout the United States. In March 2020, the World Health Organization declared COVID-19 to be a global pandemic. Beginning in late February 2020, we experienced a significant decline in occupancy and RevPAR associated with COVID-19 as we experienced significant
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reservation cancellations as well as a significant reduction in new reservations. The prolonged presence of the virus has resulted in health and other government authorities imposing widespread restrictions on travel and other businesses.
As of September 30, 2021, the Company maintained unrestricted cash of $195.5 million and restricted cash of $44.8 million. For the nine months ended September 30, 2021, cash flows provided by operating activities was approximately $55.1 million. The vast majority of the restricted cash comprises lender and manager held reserves. At the end of the quarter, there was also $20.4 million due to the Company from third-party hotel managers, which is primarily the Company’s cash held by one of its property managers which is also available to fund hotel operating costs. On December 10, 2020, the Company announced that it plans to continue its suspension of the common stock dividend into 2021 to protect liquidity and will evaluate future dividend declarations on a quarterly basis going forward.
We cannot predict when hotel operating levels will return to normalized levels after the effects of the pandemic fully subside, whether our hotels will be forced to shut down operations or whether one or more possible recurrences of COVID-19 case surges could result in further reductions in business and personal travel or potentially cause state and local governments to reinstate travel restrictions. Facts and circumstances could change in the future that are outside of management’s control, such as additional government mandates, health official orders, travel restrictions and extended business shutdowns due to COVID-19.
Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including:
•advisory fees payable to Ashford LLC;
•recurring maintenance necessary to maintain our hotel properties in accordance with brand standards;
•interest expense and scheduled principal payments on outstanding indebtedness, including our secured term loan (see “Contractual Obligations and Commitments”);
•distributions, if any, in the form of dividends on our common stock, necessary to qualify for taxation as a REIT;
•dividends on our preferred stock; and
•capital expenditures to improve our hotel properties.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations, capital market activities and existing cash balances.
Pursuant to the advisory agreement between us and our advisor, we must pay our advisor on a monthly basis a base advisory fee, subject to a minimum base advisory fee. The minimum base advisory fee is equal to the greater of: (i) 90% of the base fee paid for the same month in the prior fiscal year; and (ii) 1/12 th of the “G&A Ratio” for the most recently completed fiscal quarter multiplied by our total market capitalization on the last balance sheet date included in the most recent quarterly report on Form 10-Q or annual report on Form 10-K that we file with the SEC. Thus, even if our total market capitalization and performance decline, we will still be required to make payments to our advisor equal to the minimum base advisory fee, which could adversely impact our liquidity and financial condition.
Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotel properties and redevelopments, renovations, expansions and other capital expenditures that need to be made periodically with respect to our hotel properties and scheduled debt payments. We expect to meet our long-term liquidity requirements through various sources of capital, including future common and preferred equity issuances, existing working capital, net cash provided by operations, hotel mortgage indebtedness and other secured and unsecured borrowings. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, including the current and ongoing effects of COVID-19 on our business and the hotel industry, the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity and market perceptions about us. The success of our business strategy will depend, in part, on our ability to access these various capital sources. While management cannot provide any assurances, management believes that our cash flow from operations and our existing cash balances will be adequate to meet upcoming anticipated requirements for interest and principal payments on debt (excluding any potential final maturity principal payments), working capital, and capital expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S. federal income tax purposes.
Our hotel properties will require periodic capital expenditures and renovation to remain competitive. In addition, acquisitions, redevelopments or expansions of hotel properties may require significant capital outlays. We may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90%
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of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures, acquisitions or hotel redevelopment through retained earnings is very limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects could be materially and adversely affected.
Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties decline. When these provisions are triggered, substantially all of the profit generated by the hotel properties securing such loan is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. This could affect our liquidity and our ability to make distributions to our stockholders until such time that a cash trap is no longer in effect for such loan. These cash trap provisions have been triggered on some of our mortgage loans.
Equity Transactions
On December 5, 2017, our board of directors approved the stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share and preferred stock having an aggregate value of up to $50 million. The board of directors’ authorization replaced any previous repurchase authorizations. No shares were repurchased during the nine months ended September 30, 2021, pursuant to this authorization.
On December 11, 2017, we entered into equity distribution agreements with certain sales agents to sell from time to time shares of our common stock having an aggregate offering price of up to $50.0 million. Sales of shares of our common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 of the Securities Act, including sales made directly on the NYSE, the existing trading market for our common stock, or sales made to or through a market maker other than on an exchange or through an electronic communications network. We will pay each of the sales agents a commission, which in each case shall not be more than 2.0% of the gross sales price of the shares of our common stock sold through such sales agent. On July 7, 2020, we entered into a side letter (the “Side Letter”) with the sales agents pursuant to which we agreed to pay all reasonable documented out-of-pocket expenses, including the reasonable fees and disbursements of counsel incurred by the sales agents, in connection with the ongoing services contemplated by the equity distribution agreements (subject to a $75,000 cap on certain expenses incurred in June 2020). Pursuant to the Side Letter, the sales agents have agreed to reimburse us for up to $50,000 of such expenses, if the sales agents offer and sell an amount of our common stock with an aggregate offering price of $15,000,000, and have agreed to reimburse us for up to an additional $50,000 of such expenses, provided the sales agents offer and sell an amount of our common stock with an aggregate offering price of $30,000,000. As of November 3, 2021, the Company has sold approximately 7.4 million shares of common stock and received gross proceeds of approximately $30.8 million under this program.
On November 13, 2019, we filed an initial registration statement with the SEC, as amended on January 24, 2020, for shares of our non-traded Series E Redeemable Preferred Stock (the “Series E Preferred Stock”) and our non-traded Series M Redeemable Preferred Stock (the “Series M Preferred Stock”). The registration statement became effective on February 21, 2020, and contemplates the issuance and sale of up to 20,000,000 shares of Series E Preferred Stock or Series M Preferred Stock in a primary offering and up to 8,000,000 shares of Series E Preferred Stock or Series M Preferred Stock pursuant to a dividend reinvestment plan. On February 25, 2020, we filed our prospectus with the SEC. Ashford Securities, a subsidiary of Ashford Inc. serves as the dealer manager and wholesaler of the Series E Preferred Stock and Series M Preferred Stock. On April 2, 2021, the Company filed with the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”) articles supplementary to the Company’s Articles of Amendment and Restatement that provided for: (i) reclassifying the existing 28,000,000 shares of Series E Preferred Stock and 28,000,000 shares of Series M Preferred Stock as unissued shares of preferred stock; (ii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series E Preferred Stock (the “Series E Articles Supplementary”); and (iii) reclassifying and designating 28,000,000 shares of the Company’s authorized capital stock as shares of the Series M Preferred Stock (the “Series M Articles Supplementary”). The Series E Articles Supplementary and Series M Articles Supplementary were filed to revise the preferred stock terms related to the dividend rate, our optional redemption right and certain other voting rights. The Company also caused its operating partnership to execute Amendment No. 5 to the Third Amended and Restated Agreement of Limited Partnership to amend the terms of its operating partnership agreement to conform to the terms of the Series E Articles Supplementary and Series M Articles Supplementary. As of November 3, 2021, the Company has issued approximately 459,000 shares of Series E Preferred Stock and received net proceeds of approximately $10.3 million and issued approximately 17,000 shares of Series M Preferred Stock and received net proceeds of approximately $408,000.
On December 4, 2019, we entered into equity distribution agreements with certain sales agents to sell from time to time shares of our 5.50% Series B Cumulative Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) having an
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aggregate offering price of up to $40.0 million. Sales of shares of the Series B Convertible Preferred Stock may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 of the Securities Act, including sales made directly on the NYSE, the existing trading market for the Series B Convertible Preferred Stock, or sales made to or through a market maker other than on an exchange or through an electronic communications network. We will pay each of the sales agents a commission, which in each case shall not be more than 2.0% of the gross sales price of the shares of the Series B Convertible Preferred Stock sold through such sales agents. Since the inception of the program, we issued approximately 63,000 shares of the Series B Convertible Preferred Stock through our “at-the-market” equity offering program resulting in gross proceeds of approximately $1.0 million before discounts and commissions to the selling agents of approximately $19,000.
On February 4, 2021, the Company entered into the SEDA, pursuant to which the Company will be able to sell the Commitment Amount at the Company’s request any time during the commitment period commencing on February 4, 2021, and terminating at the end of the Commitment Period. Other than with respect to the Initial Advance the shares sold to YA pursuant to the SEDA would be purchased at 95% of the Market Price and would be subject to certain limitations, including that YA could not purchase any shares that would result in it owning more than 4.99% of the Company’s common stock.
At any time during the Commitment Period the Company may require YA to purchase shares of the Company’s common stock by delivering an Advance Notice. The Company may deliver an Initial Advance for up to 1,200,000 Advance Shares. The Preliminary Purchase Price per share for such shares shall be 100% of the average daily VWAP for the 5 consecutive trading days immediately prior to the date of the Advance Notice.
Pursuant to the SEDA, we currently intend to use the net proceeds from any sale of the shares for working capital purposes, including the repayment of outstanding debt. There are no other restrictions on future financing transactions. The SEDA does not contain any right of first refusal, participation rights, penalties or liquidated damages. We are not required to pay any additional amounts to reimburse or otherwise compensate YA in connection with the transaction except for a $10,000 structuring fee. As of November 3, 2021, the Company has sold approximately 1.7 million shares of common stock and received proceeds of approximately $10.0 million under the SEDA.
From March 16, 2021 through November 3, 2021, Braemar entered into privately negotiated exchange agreements with certain holders of the Series B Convertible Preferred Stock in reliance on Section 3(a)(9) of the Securities Act. The Company agreed to exchange a total of approximately 2.0 million shares of its common stock for approximately 7.3 million shares of its Series B Convertible Preferred Stock.
On April 21, 2021, Braemar and Lincoln Park, entered into a purchase agreement, pursuant to which the Company may sell to Lincoln Park up to 8,893,565 shares of its common stock, par value $0.01 per share of the Company, from time to time during the term of the purchase agreement. The issuance of the common stock pursuant to the purchase agreement has been registered pursuant to the Company’s Registration Statement, and the related base prospectus included in the Registration Statement, as supplemented by a prospectus supplement filed with the SEC on April 21, 2021. Braemar and Lincoln Park also entered into a registration rights agreement, pursuant to which the Company agreed to maintain the effectiveness of the Registration Statement. As of November 3, 2021, the Company has issued approximately 766,000 shares of common stock for gross proceeds of approximately $4.2 million under the Purchase Agreement.
On May 25, 2021, the Company entered into an equity distribution agreement with Virtu Americas LLC (“Virtu”), to sell from time to time shares of our common stock having an aggregate offering price of up to $50 million (the “Virtu May 2021 EDA”). We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of November 3, 2021, the Company has sold approximately 8.3 million shares of common stock under the Virtu May 2021 EDA and received gross proceeds of approximately $50.0 million.
On July 12, 2021, the Company entered into a second equity distribution agreement with Virtu to sell from time to time shares of our common stock having an aggregate offering price of up to $100 million (the “Virtu July 2021 EDA”). We will pay Virtu a commission of approximately 1.0% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of November 3, 2021, the Company has sold approximately 4.7 million shares of common stock under the Virtu July 2021 EDA and received gross proceeds of approximately $24.0 million.
Debt Transactions
In May 2021, the Company issued $86.25 million aggregate principal amount of 4.50% Convertible Senior Notes due June 2026 (the “Convertible Senior Notes”). The net proceeds from this offering of the Convertible Senior Notes were approximately $82.8 million after deducting the underwriting fees and other expenses paid by the Company.
The Convertible Senior Notes are governed by an indenture (the “Base Indenture”) between the Company and U.S. Bank National Association, as trustee. The Convertible Senior Notes bear interest at a rate of 4.50% per annum, payable semi-
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annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The Convertible Senior Notes will mature on June 1, 2026.
The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances. In addition, following the occurrence of certain corporate events, if the Company provides notice of redemption or if it exercises its option to convert the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be.
The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.
On September 23, 2021, the Company finalized an extension of its mortgage loans for the Bardessono Hotel and Spa with a final maturity in August 2022 and the Hotel Yountville with a final maturity in May 2022. Each of the loans was extended for one year beyond its original maturity on the same terms as the original loan.
Sources and Uses of Cash
We had approximately $195.5 million and $78.6 million of cash and cash equivalents at September 30, 2021 and December 31, 2020, respectively.
We anticipate that our principal sources of funds to meet our cash requirements will include cash on hand, positive cash flow from operations and capital market activities.
Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by (used in) operating activities were $55.1 million and $(35.6) million for the nine months ended September 30, 2021 and 2020, respectively. Cash flows from operations were impacted by the COVID-19 pandemic and changes in hotel operations of our 13 comparable hotel properties as well the acquisition of the Mr. C Beverly Hills Hotel on August 5, 2021. Cash flows from operations are also impacted by the timing of working capital cash flows such as collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties, settling with hotel managers and timing differences between the receipt of proceeds from business interruption insurance claims and the recognition of the related revenue.
Net Cash Flows Provided by (Used in) Investing Activities. For the nine months ended September 30, 2021, net cash flows used in investing activities were $23.7 million. These cash outflows were primarily attributable to $15.8 million of capital improvements made to various hotel properties, approximately $9.5 million associated with the acquisition of the Mr. C Beverly Hills Hotel, partially offset by proceeds of $1.8 million from the sale of certain ERFP assets to Ashford Inc.
For the nine months ended September 30, 2020, net cash flows used in investing activities were $18.9 million. These cash outflows were primarily attributable to $21.5 million of capital improvements made to various hotel properties offset by $2.5 million of insurance proceeds received related to the hurricanes.
Net Cash Flows Provided by (Used in) Financing Activities. For the nine months ended September 30, 2021, net cash flows provided by financing activities were $95.6 million. Cash inflows primarily consisted of net proceeds of $83.2 million from the issuance of our Convertible Senior Notes, $100.0 million from the issuance of common stock, $4.6 million from the issuance of preferred stock and contributions of $920,000 from a noncontrolling interest in consolidated entities. The cash inflows were partially offset by repayments of indebtedness of $83.8 million, $6.9 million of dividend and distribution payments and $1.9 million of payments for loan costs and fees.
For the nine months ended September 30, 2020, net cash flows provided by financing activities were $47.1 million. Cash inflows primarily consisted of borrowings on indebtedness of $109.3 million, net proceeds of $6.4 million from the “at-the-market” common stock offering and $474,000 from the issuance of preferred stock, partially offset by repayments on indebtedness of $46.0 million, $13.6 million of dividend and distribution payments, $6.5 million of payments for loan costs and fees associated with loan forbearance, and distributions of $2.6 million to a noncontrolling interest in consolidated entities.
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Dividend Policy. In December 2019, the board of directors approved our dividend policy for 2020, which stated our then-expectation to pay a quarterly dividend of $0.16 per share during 2020. As previously disclosed, the approval of our dividend policy did not commit our board of directors to declare future dividends with respect to any quantity or the amount thereof. On March 16, 2020, the Company and its board of directors announced a suspension of its previously disclosed 2020 common stock dividend policy. The Company did not pay a dividend on its common stock during any quarter of 2020. On December 10, 2020, the Company announced that it plans to continue its suspension of the common stock dividend into 2021 to protect liquidity and will evaluate future dividend declarations on a quarterly basis going forward. The board of directors will continue to review our dividend policy and make announcements with respect thereto.
Seasonality
Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as the COVID-19 pandemic and government-issued travel restrictions in response, extreme weather conditions, natural disasters, terrorist attacks or alerts, civil unrest, government shutdowns, airline strikes or reduced airline capacity, economic factors and other considerations affecting travel. To the extent that cash flows from operations and cash on hand are insufficient during any quarter due to temporary or seasonal fluctuations in lease revenue, we expect to utilize borrowings to fund distributions required to maintain our REIT status. However, we cannot make any assurances that we will make distributions in the future.
Contractual Obligations and Commitments
There have been no material changes, outside of the ordinary course of business, as of September 30, 2021 to contractual obligations specified in the table of contractual obligations included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Form 10-K.
Off-Balance Sheet Arrangements
In the normal course of business, we may form or invest in partnerships or joint ventures. We evaluate each partnership and joint venture to determine whether the entity is a variable interest entity. If the entity is determined to be a VIE we assess whether we are the primary beneficiary and need to consolidate the entity. For further discussion see note 2 to our consolidated financial statements. We have no other off-balance sheet arrangements.
Critical Accounting Policies
The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Form 10-K. There have been no material changes in these critical accounting policies.
Non-GAAP Financial Measures
The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, Funds From Operations (“FFO”) and Adjusted FFO are presented to help our investors evaluate our operating performance.
EBITDA is defined as net income (loss) before interest expense and amortization of loan costs, depreciation and amortization, income taxes, equity in (earnings) loss of unconsolidated entity and after the Company’s portion of EBITDA of OpenKey. In addition, we excluded impairment on real estate, (gain) loss on insurance settlement and disposition of assets and Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDA for real estate, or EBITDAre, as defined by NAREIT.
We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable) contract assets (liabilities), transaction and conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, other/income expense, Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/ loss on derivatives and stock/unit-based compensation.
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We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they reflect more accurately the ongoing performance of our hotel assets and other investments and provide more useful information to investors as they are indicators of our ability to meet our future debt payment requirements, working capital requirements and they provide an overall evaluation of our financial condition. EBITDA, EBITDAre and Adjusted EBITDAre as calculated by us may not be comparable to EBITDA, EBITDAre and Adjusted EBITDAre reported by other companies that do not define EBITDA, EBITDAre and Adjusted EBITDAre exactly as we define the terms. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as an indicator of liquidity.
The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Net income (loss) | $ | (8,219) |  |  | $ | (23,057) |  |  | $ | (30,617) |  |  | $ | (94,549) |  |  |
Interest expense and amortization of loan costs | 8,364 |  |  | 8,859 |  |  | 22,346 |  |  | 38,167 |  |  |
Depreciation and amortization | 18,284 |  |  | 18,507 |  |  | 54,881 |  |  | 55,398 |  |  |
Income tax expense (benefit) | 560 |  |  | (1,545) |  |  | 766 |  |  | (4,622) |  |  |
Equity in (earnings) loss of unconsolidated entity | 68 |  |  | 58 |  |  | 198 |  |  | 138 |  |  |
Company’s portion of EBITDA of OpenKey | (68) |  |  | (56) |  |  | (196) |  |  | (135) |  |  |
EBITDA | 18,989 |  |  | 2,766 |  |  | 47,378 |  |  | (5,603) |  |  |
(Gain) loss on insurance settlement and disposition of assets | — |  |  | (10,149) |  |  | (696) |  |  | (10,149) |  |  |
EBITDAre | 18,989 |  |  | (7,383) |  |  | 46,682 |  |  | (15,752) |  |  |
Amortization of favorable (unfavorable) contract assets (liabilities) | 118 |  |  | 207 |  |  | 394 |  |  | 621 |  |  |
Transaction and conversion costs | 980 |  |  | 517 |  |  | 2,148 |  |  | 1,128 |  |  |
Other (income) expense | — |  |  | 3,604 |  |  | — |  |  | 3,806 |  |  |
Write-off of loan costs and exit fees | 432 |  |  | 1,335 |  |  | 1,960 |  |  | 3,572 |  |  |
Unrealized (gain) loss on derivatives | (142) |  |  | (3,561) |  |  | (64) |  |  | (3,748) |  |  |
Non-cash stock/unit-based compensation | 3,044 |  |  | 2,006 |  |  | 7,265 |  |  | 6,039 |  |  |
Legal, advisory and settlement costs | 107 |  |  | 142 |  |  | (320) |  |  | 1,168 |  |  |
Advisory services incentive fee | (1,637) |  |  | — |  |  | — |  |  | — |  |  |
Company’s portion of adjustments to EBITDAre of OpenKey | 1 |  |  | 1 |  |  | 7 |  |  | 6 |  |  |
Adjusted EBITDAre | $ | 21,892 |  |  | $ | (3,132) |  |  | $ | 58,072 |  |  | $ | (3,160) |  |  |

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FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to common stockholders, computed in accordance with GAAP, excluding gains or losses on insurance settlement and disposition of assets, plus impairment charges on real estate, depreciation and amortization of real estate assets, and after redeemable noncontrolling interests in the operating partnership and adjustments for unconsolidated entities. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. Our calculation of Adjusted FFO excludes dividends on Series B Convertible Preferred Stock, gain/loss on extinguishment of preferred stock, transaction and conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement costs, advisory services incentive fee, other income/expense and non-cash items such as interest expense on Convertible Senior Notes, interest expense accretion on refundable membership club deposits, amortization of loan costs, unrealized gain/loss on derivatives, stock/unit-based compensation and the Company’s portion of adjustments to FFO of OpenKey. FFO and Adjusted FFO exclude amounts attributable to the portion of a partnership owned by the third-party. We consider FFO and Adjusted FFO to be appropriate measures of our ongoing normalized operating performance as a REIT. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO and Adjusted FFO do not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income or loss as an indication of our financial performance or GAAP cash flows from operating activities as a measure of our liquidity. FFO and Adjusted FFO are also not indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO and Adjusted FFO should be considered along with our net income or loss and cash flows reported in our condensed consolidated financial statements.
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The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Net income (loss) | $ | (8,219) |  |  | $ | (23,057) |  |  | $ | (30,617) |  |  | $ | (94,549) |  |  |
(Income) loss attributable to noncontrolling interest in consolidated entities | 450 |  |  | 1,999 |  |  | 2,546 |  |  | 4,975 |  |  |
Net (Income) loss attributable to redeemable noncontrolling interests in operating partnership | 823 |  |  | 2,381 |  |  | 3,184 |  |  | 10,036 |  |  |
Preferred dividends | (1,977) |  |  | (2,554) |  |  | (6,258) |  |  | (7,664) |  |  |
Gain (loss) on extinguishment of preferred stock | (111) |  |  | — |  |  | (4,595) |  |  | — |  |  |
Net income (loss) attributable to common stockholders | (9,034) |  |  | (21,231) |  |  | (35,740) |  |  | (87,202) |  |  |
Depreciation and amortization on real estate (1) | 17,619 |  |  | 17,791 |  |  | 52,843 |  |  | 53,142 |  |  |
Net income (loss) attributable to redeemable noncontrolling interests in operating partnership | (823) |  |  | (2,381) |  |  | (3,184) |  |  | (10,036) |  |  |
Equity in (earnings) loss of unconsolidated entity | 68 |  |  | 58 |  |  | 198 |  |  | 138 |  |  |
(Gain) loss on insurance settlement and disposition of assets | — |  |  | (10,149) |  |  | (696) |  |  | (10,149) |  |  |
Company’s portion of FFO of OpenKey | (68) |  |  | (57) |  |  | (197) |  |  | (137) |  |  |
FFO available to common stockholders and OP unitholders | 7,762 |  |  | (15,969) |  |  | 13,224 |  |  | (54,244) |  |  |
Series B Convertible Preferred Stock dividends | 1,058 |  |  | 1,729 |  |  | 3,689 |  |  | 5,189 |  |  |
(Gain) loss on extinguishment of preferred stock | 111 |  |  | — |  |  | 4,595 |  |  | — |  |  |
Transaction and conversion costs | 980 |  |  | 517 |  |  | 2,148 |  |  | 1,128 |  |  |
Other (income) expense | — |  |  | 3,604 |  |  | — |  |  | 3,806 |  |  |
Interest expense on Convertible Senior Notes | 1,361 |  |  | — |  |  | 2,010 |  |  | — |  |  |
Interest expense accretion on refundable membership club benefits | 190 |  |  | 201 |  |  | 582 |  |  | 616 |  |  |
Write-off of loan costs and exit fees | 432 |  |  | 1,335 |  |  | 1,960 |  |  | 3,572 |  |  |
Amortization of loan costs (1) | 407 |  |  | 670 |  |  | 1,684 |  |  | 2,651 |  |  |
Unrealized (gain) loss on derivatives | (142) |  |  | (3,561) |  |  | (64) |  |  | (3,748) |  |  |
Non-cash stock/unit-based compensation | 3,044 |  |  | 2,006 |  |  | 7,265 |  |  | 6,039 |  |  |
Legal, advisory and settlement costs | 107 |  |  | 142 |  |  | (320) |  |  | 1,168 |  |  |
Advisory services incentive fee | (1,637) |  |  | — |  |  | — |  |  | — |  |  |
Company’s portion of adjustments to FFO of OpenKey | 1 |  |  | 1 |  |  | 7 |  |  | 6 |  |  |
Adjusted FFO available to common stockholders, OP unitholders, Series B Cumulative Convertible preferred stockholders and convertible note holders on an “as converted” basis | $ | 13,674 |  |  | $ | (9,325) |  |  | $ | 36,780 |  |  | $ | (33,817) |  |  |

____________________
(1)Net of adjustment for noncontrolling interest in consolidated entities. The following table presents the amounts of the adjustments for noncontrolling interests for each line item:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Depreciation and amortization on real estate | $ | (665) |  |  | $ | (716) |  |  | $ | (2,038) |  |  | $ | (2,256) |  |  |
Amortization of loan costs | (22) |  |  | (19) |  |  | (65) |  |  | (56) |  |  |

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Hotel Properties
The following table presents certain information related to our hotel properties:

Hotel Property |  | Location |  |  |  | Total Rooms |  | % Owned |  | Owned Rooms |  |  |  |  |  |
Fee Simple Properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Capital Hilton |  | Washington, D.C. |  |  |  | 550 |  |  | 75 | % |  | 413 |  |  |  |  |  |  |
Marriott Seattle Waterfront |  | Seattle, WA |  |  |  | 361 |  |  | 100 | % |  | 361 |  |  |  |  |  |  |
The Notary Hotel |  | Philadelphia, PA |  |  |  | 499 |  |  | 100 | % |  | 499 |  |  |  |  |  |  |
The Clancy |  | San Francisco, CA |  |  |  | 410 |  |  | 100 | % |  | 410 |  |  |  |  |  |  |
Sofitel Chicago Magnificent Mile |  | Chicago, IL |  |  |  | 415 |  |  | 100 | % |  | 415 |  |  |  |  |  |  |
Pier House Resort & Spa |  | Key West, FL |  |  |  | 142 |  |  | 100 | % |  | 142 |  |  |  |  |  |  |
The Ritz-Carlton St. Thomas |  | St. Thomas, USVI |  |  |  | 180 |  |  | 100 | % |  | 180 |  |  |  |  |  |  |
Park Hyatt Beaver Creek Resort & Spa |  | Beaver Creek, CO |  |  |  | 190 |  |  | 100 | % |  | 190 |  |  |  |  |  |  |
Hotel Yountville |  | Yountville, CA |  |  |  | 80 |  |  | 100 | % |  | 80 |  |  |  |  |  |  |
The Ritz-Carlton Sarasota |  | Sarasota, FL |  |  |  | 266 |  |  | 100 | % |  | 266 |  |  |  |  |  |  |
The Ritz-Carlton Lake Tahoe (1) |  | Truckee, CA |  |  |  | 170 |  |  | 100 | % |  | 170 |  |  |  |  |  |  |
Mr. C Beverly Hills Hotel (2) |  | Los Angeles, CA |  |  |  | 143 |  |  | 100 | % |  | 143 |  |  |  |  |  |  |
Ground Lease Properties (3) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hilton La Jolla Torrey Pines (4) |  | La Jolla, CA |  |  |  | 394 |  |  | 75 | % |  | 296 |  |  |  |  |  |  |
Bardessono Hotel and Spa (5) |  | Yountville, CA |  |  |  | 65 |  |  | 100 | % |  | 65 |  |  |  |  |  |  |
Total |  |  |  |  |  | 3,865 |  |  |  |  | 3,630 |  |  |  |  |  |  |

________
(1) The above information does not include the operations of ten condominium units not owned by The Ritz-Carlton Lake Tahoe.
(2) Includes 138 hotel rooms and five residences adjacent to the hotel.
(3) Some of our hotel properties are on land subject to ground leases, two of which cover the entire property.
(4) The ground lease expires in 2067. The ground lease contains one extension option of either 10 or 20 years dependent upon capital investment spend during the lease term.
(5) The initial ground lease expires in 2065. The ground lease contains two 25-year extension options, at our election.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments that bear interest at variable rates that fluctuate with market interest rates. To the extent that we acquire assets or conduct operations in an international jurisdiction, we will also have currency exchange risk. We may enter into certain hedging arrangements in order to manage interest rate and currency fluctuations. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.
At September 30, 2021, our total indebtedness of approximately $1.2 billion included approximately $1.1 billion of variable-rate debt. The impact on the results of operations of a 25-basis point change in the interest rate on the outstanding balance of variable-rate debt at September 30, 2021, would be approximately $2.7 million per year. Interest rate changes have no impact on the remaining $116.3 million of fixed-rate debt.
The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and assume no changes in our capital structure. The information presented above includes those exposures that existed at September 30, 2021, but it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies at the time, and the related interest rates.
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ITEM 4.CONTROLS AND PROCEDURES
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021 (“Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms; and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
On October 24, 2019, the Company provided notice to Accor of the material breach of its responsibilities under the Accor management agreement for the Sofitel Chicago Magnificent Mile at 20 East Chestnut Street in Chicago, Illinois. On November 7, 2019, Accor filed a complaint against Ashford TRS Chicago II in the Supreme Court of the State of New York, New York County, seeking a declaratory judgment that no breach has occurred. Accor’s complaint was dismissed on or about February 27, 2020. On January 6, 2020, Ashford TRS Chicago II filed a complaint against Accor in the Supreme Court of the State of New York, New York County, alleging breach of the Accor management agreement and seeking declaration of its right to terminate the Accor management agreement. On July 20, 2020, Accor filed an Amended Answer and Counterclaims against Ashford TRS Chicago II, Accor asserts two causes of action: First, Accor asserts a counterclaim for declaratory judgment that Accor correctly calculated the amount payable to Ashford TRS Chicago II under the management agreement to “cure” Accor’s performance test failure (the “Cure Amount”). Second, Accor asserts a counterclaim for breach of contract on the basis that Ashford TRS Chicago II breached the management agreement by wrongfully maintaining that the Cure Amount for the 2018 and 2019 Performance Test failure is $1,031,549 instead of $535,120. As of September 30, 2021, no amounts have been accrued.
One of the Company’s hotel management companies is currently involved in litigation regarding its employment policies and practices at multiple California hotels, including one of the Company’s hotels. The Company believes it is probable that the litigation will result in a loss due to a potential pre-trial settlement, in which case the Company estimates its potential loss will be approximately $500,000; however, it is entitled to indemnification for a portion of such loss. As of September 30, 2021, approximately $500,000 has been accrued.
In June 2020, each of the Company, Ashford Trust, Ashford Inc., and Lismore, a subsidiary of Ashford Inc. (collectively with the Company, Ashford Trust, Ashford Inc. and Lismore, the “Ashford Companies”), received an administrative subpoena from the SEC. The Company’s administrative subpoena requires the production of documents and other information since January 1, 2018 relating to, among other things, (1) related party transactions among the Ashford Companies (including the Lismore Agreement between the Company and Lismore pursuant to which the Company engaged Lismore to negotiate the refinancing, modification or forbearance of certain mortgage debt) or between any of the Ashford Companies and any officer, director or owner of the Ashford Companies or any entity controlled by any such person, and (2) the Company’s accounting policies, procedures, and internal controls related to such related party transactions. In addition, in October 2020, Mr. Monty J. Bennett, chairman of our board of directors, received an administrative subpoena from the SEC requiring testimony and the production of documents and other information substantially similar to the requests in the subpoenas received by the Ashford Companies. The Company and Mr. Monty J. Bennett are responding to the administrative subpoenas.
On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects two hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: (1) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (2) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class; however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal
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issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe any potential loss to the Company is reasonably estimable at this time. As of September 30, 2021, no amounts have been accrued.
As of September 30, 2021, the Company has an $800,000 receivable from Ashford Trust, included in Due from related parties, net. The receivable relates to a legal settlement between Ashford Trust and the City of San Francisco regarding a transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off from Ashford Trust. The transfer taxes were initially paid by Braemar at the time of the spin-off. The $800,000 gain is included in “(gain) loss on legal settlements” on the condensed consolidated statements of operations.
We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the ADA and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations, or cash flow. However, our assessment may change depending upon the development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty. If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.
ITEM 1A.RISK FACTORS
The discussion of our business and operations should be read together with the risk factors contained in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. The risk factors set forth below update, and should be read together with, the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer
On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share having an aggregate value of up to $50 million. The board of director’s authorization replaced any previous repurchase authorizations. No shares were repurchased during the three and nine months ended September 30, 2021, pursuant to this authorization.
The following table provides the information with respect to purchases and forfeitures of our common stock during each of the months in the third quarter of 2021:

Period |  | Total Number of Shares Purchased |  | Average Price Paid Per Share |  | Total Number of Shares Purchased as Part of a Publicly Announced Plan |  | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
Common stock: |  |  |  |  |  |  |  |
July 1 to July 31 |  | 1,354 |  | (1) | $ | — |  |  | — |  |  | $ | 50,000,000 |
August 1 to August 31 |  | 751 |  | (1) | $ | — |  |  | — |  |  | $ | 50,000,000 |
September 1 to September 30 |  | 4,903 |  | (1) | $ | — |  |  | — |  |  | $ | 50,000,000 |
Total |  | 7,008 |  |  | $ | — |  |  | — |  |  |

__________________
(1)There is no cost associated with the forfeiture of 1,354, 751 and 4,903 restricted shares of our common stock in July, August and September, respectively.
During the period between July 1, 2021 and September 30, 2021, the Company exchanged a total of 120,000 shares of its common stock for an aggregate of 30,000 shares of preferred stock with certain holders of its 5.50% Series B Cumulative
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Convertible Preferred Stock. The issuance of the shares of the common stock was made by the Company pursuant to the exemption from the registration requirements of Section 3(a)(9) of the Securities Act on the basis that these offers constituted an exchange with existing holders of the Company’s securities. No commission or other remuneration was paid to any party for soliciting such exchange and the transactions did not involve a public offering. In consideration for the common stock issuances, the Company received shares of Series B Convertible Preferred Stock from the stockholders, which shares of preferred stock were cancelled and of no further effect.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.MINE SAFETY DISCLOSURES
None.
ITEM 5.OTHER INFORMATION
Amendments to Articles of Incorporation
As previously disclosed, on April 2, 2021, we filed with the SDAT the Series E Articles Supplementary and the Series M Articles Supplementary establishing the rights and preferences of the Series E Preferred Stock and the Series M Preferred Stock, respectively (together, the Series E Articles Supplementary and the Series M Articles Supplementary, the “Articles Supplementary”).
On November 4, 2021, we filed with the SDAT certificates of correction to the Articles Supplementary (together, the “Certificates of Correction”). The Certificates of Correction fix incorrect cross references contained in Section (7)(b)(v) of Article THIRD of the Articles Supplementary. The Certificates of Correction became effective upon filing. All terms of the Series E Preferred Stock and the Series M Preferred Stock (including, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption) remain unchanged by the filing of the Certificates of Correction.
Copies of the Certificates of Correction are attached as Exhibit 3.10 and 3.11 to this Form 10-Q and are incorporated herein by reference.
ITEM 6.EXHIBITS

Exhibit |  | Description
1.1 |  | Purchase Agreement, dated as of May 13, 2021, by and among the Company, the Operating Partnership, the Advisor and UBS Securities LLC, as the Initial Purchaser (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K filed on May 18, 2021).
1.2 |  | Equity Distribution Agreement, dated as of May 25, 2021, by and between Braemar Hotels & Resorts Inc. and Virtu Americas LLC (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K filed on May 26, 2021).
1.3 |  | Equity Distribution Agreement, dated as of July 12, 2021, by and among Braemar Hotels & Resorts Inc., Braemar Hospitality Limited Partnership, Ashford Hospitality Advisors LLC and Virtu Americas LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 12, 2021).
3.1 |  | Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 29, 2016).
3.2 |  | Articles Supplementary of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on May 18, 2015).
3.3 |  | Articles of Amendment of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on April 29, 2016).
3.4 |  | Amendment Number One to the Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 8, 2017).
3.5 |  | Amendment Number Two to Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 23, 2018).
3.6 |  | Articles of Amendment of Braemar Hotels & Resorts Inc., accepted for record and certified by the SDAT on January 23, 2020 (incorporated by reference to Exhibit 3.13 to Amendment No. 1 to the Registration Statement on Form S-3 (File No. 333-234663) filed with the SEC on January 24, 2020).
3.7 |  | Articles Supplementary Establishing the Series E Redeemable Preferred Stock of Braemar Hotels & Resorts Inc., accepted for record and certified by the SDAT on April 2, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 2, 2021).

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Exhibit |  | Description
3.8 |  | Articles Supplementary Establishing the Series M Redeemable Preferred Stock of Braemar Hotels & Resorts Inc., accepted for record and certified by the SDAT on April 2, 2021 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on April 2, 2021).
3.9 |  | Fourth Amended and Restated Bylaws of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 20, 2018).
3.10* |  | Certificate of Correction of Series E Articles Supplementary of Braemar Hotels & Resorts Inc., accepted for record and certified by the SDAT on November 4, 2021.
3.11* |  | Certificate of Correction of Series M Articles Supplementary of Braemar Hotels & Resorts Inc., accepted for record and certified by the SDAT on November 4, 2021.
10.1 |  | Amendment No. 2 to the Fifth Amended and Restated Advisory Agreement, dated as of August 16, 2021, by and among Braemar Hotels & Resorts Inc., Braemar Hospitality Limited Partnership, Braemar TRS Corporation, Ashford Inc. and Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 17, 2021).
31.1* |  | Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended.
31.2* |  | Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended.
32.1** |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2** |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1 |  | Consulting and Cooperation Agreement, by and among Ashford Inc., Ashford Hospitality Advisors LLC, and Robert G. Haiman, dated as of June 30, 2021 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed on June 30, 2021).

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 are formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements Comprehensive Income; (iv) Consolidated Statements of Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to the Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
101.INS |  | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document | Submitted electronically with this report.
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Submitted electronically with this report.
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document | Submitted electronically with this report.
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document. | Submitted electronically with this report.
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | Submitted electronically with this report.
104 |  | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |

___________________________________
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BRAEMAR HOTELS & RESORTS INC.

Date: | November 5, 2021 | By: | /s/ RICHARD J. STOCKTON |
|  |  | Richard J. Stockton |
|  |  | President and Chief Executive Officer |
Date: | November 5, 2021 | By: | /s/ DERIC S. EUBANKS |
|  |  | Deric S. Eubanks |
|  |  | Chief Financial Officer |

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