Investments in Hotel Properties, net

12 Months Ended

Dec. 31, 2021

Property, Plant and Equipment [Abstract]

Investments in hotel properties, net consisted of the following (in thousands):


	December 31, 2021		December 31, 2020
Land	$	480,530	$	455,298
Buildings and improvements	1,215,810		1,190,437
Furniture, fixtures and equipment	123,954		127,692
Construction in progress	12,038		11,422
Residences	12,746		—
Total cost	1,845,078		1,784,849
Accumulated depreciation	(399,481)		(360,259)
Investments in hotel properties, net	$	1,445,597	$	1,424,590

The cost of land and depreciable property, net of accumulated depreciation, for U.S. federal income tax purposes was approximately $1.4 billion and $1.3 billion as of December 31, 2021 and 2020, respectively.

For the years ended December 31, 2021, 2020 and 2019, depreciation expense was $73.0 million, $72.8 million and $69.5 million, respectively.

Impairment Charges and Insurance Recoveries

For the years ended December 31, 2020 and 2019, the Company received proceeds of $14.5 million and $36.6 million, respectively, from our insurance carriers for property damage and business interruption from Hurricane Irma. 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. Additionally, for the year ended December 31, 2019, the Company recorded a gain of $26.2 million upon settlement of a portion of the insurance claim. For the year ended December 31, 2021, we recognized a gain of $481,000 associated with proceeds received from an insurance claim.

During the years ended December 31, 2021, 2020 and 2019, no impairment charges were recorded.

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 prepared the purchase price allocation of the assets acquired and liabilities assumed. The final purchase price allocation was completed with the assistance of a third party appraisal firm during the year ended December 31, 2021.

This valuation is considered a Level 3 valuation technique, as noted in the following table (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 from the acquisition date. The table below summarizes the total revenue and net income (loss) in our consolidated statements of operations for the year ended December 31, 2021:


	Year Ended December 31, 2021
Total revenue	$	6,592
Net income (loss)	(1,630)

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 $563,000 of non-recurring transaction costs directly attributable to the acquisition for the year ended December 31, 2021 (in thousands):


	Year Ended December 31,
		2021		2020
Total revenue		$	433,813	$	235,379
Net income (loss)		$	(32,720)	$	(128,461)
Net income (loss) attributable to common stockholders		$	(38,334)	$	(111,613)
Pro forma income (loss) per share;
Basic		$	(0.72)	$	(3.28)
Diluted		$	(0.72)	$	(3.28)
Weighted average common shares outstanding (in thousands):
Basic		52,684		33,998
Diluted		52,684		33,998