Investments in Hotel Properties, net

9 Months Ended

Sep. 30, 2021

Property, Plant and Equipment [Abstract]

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.

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