Indebtedness, net

12 Months Ended

Dec. 31, 2023

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


Indebtedness	Collateral	Current Maturity	Final Maturity (16)	Interest Rate	December 31, 2023				December 31, 2022
					Debt Balance		Book Value of Collateral		Debt Balance		Book Value of Collateral
Mortgage loan (4)	Bardessono Hotel and Spa	August 2023	August 2023	SOFR (2) + 2.65%	$	—	—		$	40,000	51,514
Mortgage loan (4)	The Ritz-Carlton Sarasota	October 2023	April 2024	LIBOR (1) +2.65%	—		—		98,500		162,134
Mortgage loan (4)	Hotel Yountville	November 2023	May 2024	LIBOR (1) + 2.55%	—		—		51,000		84,180
Mortgage loan (5)	Capital Hilton	February 2024	February 2024	SOFR (2) + 1.70%	—		—		195,000		194,770
	Hilton La Jolla Torrey Pines
Mortgage loan (5) (6)	Hilton La Jolla Torrey Pines	February 2024	February 2024	SOFR (2) + 1.70%	66,600		66,947		—		—
Mortgage loan (7)	Park Hyatt Beaver Creek Resort & Spa	February 2024	February 2027	SOFR (2) + 2.86%	70,500		140,966		70,500		139,830
Mortgage loan (8)	The Ritz-Carlton Reserve Dorado Beach	March 2024	March 2026	LIBOR (1) + 6.00%	—		—		54,000		193,367
Mortgage loan (9)	The Notary Hotel	June 2024	June 2025	SOFR (2) + 2.66%	293,180		378,335		435,000		403,896
	The Clancy
	Sofitel Chicago Magnificent Mile
	Marriott Seattle Waterfront
Mortgage loan (10)	Cameo Beverly Hills	August 2024	August 2024	SOFR (2) + 3.66%	30,000		71,196		30,000		71,820
Mortgage loan (11) (12)	The Ritz-Carlton St. Thomas	August 2024	August 2024	SOFR (2) + 4.04%	42,500		114,224		42,500		119,492
Mortgage loan (13)	Pier House Resort & Spa	September 2024	September 2024	SOFR (2) + 1.95%	80,000		81,806		80,000		83,361
Mortgage loan (14)	The Ritz-Carlton Lake Tahoe	January 2025	January 2026	SOFR (2) + 3.60%	53,413		132,467		54,000		112,777
Convertible Senior Notes	Equity	June 2026	June 2026	4.50%	86,250		—		86,250		—
BAML Credit Facility (4)	Bardessono Hotel and Spa	July 2026	July 2027	Base Rate (3) +1.25% to 2.00% or SOFR (2) + 2.35% to 3.10%	200,000		303,405		—		—
	Hotel Yountville
	The Ritz-Carlton Sarasota
Mortgage loan (15)	Four Seasons Resort Scottsdale	December 2026	December 2028	SOFR (2) + 3.75%	140,000		261,737		100,000		267,460
Mortgage loan (5)	Capital Hilton	December 2026	December 2028	SOFR (2) + 3.75%	110,600		143,840		—		—
					1,173,043		$	1,694,923	1,336,750		$	1,884,601
Capitalized default interest and late charges, net					120				1,934
Deferred loan costs, net					(9,135)				(5,054)
Premiums/(discounts), net					(1,584)				500
Indebtedness, net					$	1,162,444			$	1,334,130

__________________

(1)LIBOR rate was 4.39% at December 31, 2022.

(2)SOFR rates were 5.35% and 4.36% at December 31, 2023 and December 31, 2022, respectively.

(3)Base Rate, as defined in the secured credit facility agreement, is the greater of (i) the prime rate set by Bank of America, (ii) federal funds rate + 0.50%, (iii) Term SOFR + 1.00%, or (iv) 1.00%.

(4)On July 31, 2023, we entered into a new $200.0 million secured credit facility comprised of a $150.0 million term loan and a $50.0 million secured revolving credit facility with a three-year initial term and one one-year extension option, subject to satisfaction of certain conditions. The new facility is interest only and bears interest at a rate of SOFR + 2.35% to 3.10%. Proceeds from the facility were used to repay the mortgage loans secured by Bardessono Hotel & Spa, Hotel Yountville, and The Ritz-Carlton Sarasota.

(5)On December 22, 2023, we entered into a new $110.6 million loan secured by Capital Hilton. The new mortgage loan is interest only and bears interest at a rate of SOFR + 3.75%, has a three-year initial term and two one-year extension options, subject to satisfaction of certain conditions, and has a SOFR floor of 2.00%. The Hilton La Jolla Torrey Pines remains encumbered by the original mortgage loan, which was partially paid down to a remaining balance of $66.6 million.

(6)On February 5, 2024, we amended this mortgage loan. Terms of the amendment included extending the maturity date by six months from February 2024 to August 2024, and converting the interest rate from a variable rate of SOFR + 1.70% to a fixed rate of 9.00%.

(7)This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised February 2024.

(8)On January 18, 2023, we repaid this mortgage loan.

(9)This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the fourth was exercised in June 2023. In accordance with exercising the fourth one-year extension option, we repaid $142.0 million of principal and the variable interest rate increased from LIBOR + 2.16% to LIBOR + 2.61%. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate increased from LIBOR + 2.61% to SOFR + 2.66%.

(10)This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate increased from LIBOR + 3.60% to SOFR + 3.66%. This mortgage loan has a SOFR floor of 1.50%.

(11)This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in August 2023. This loan transitioned from LIBOR to SOFR in July 2023 and the variable interest rate increased from LIBOR + 3.95% to SOFR + 4.04%. This mortgage loan has a SOFR floor of 1.00%.

(12)On January 29, 2024, we amended this mortgage loan. Terms of the amendment included extending the current maturity date one year to August 2025, and the variable rate increased from SOFR + 4.04% to SOFR 4.35%. This amended mortgage loan has one one-year extension option, subject to satisfaction of certain conditions. This mortgage loan has a SOFR floor of 4.00%.

(13)On January 3, 2024, we amended this mortgage loan. Terms of the amendment included extending the current maturity date one year to September 2025, and the variable rate increased from SOFR + 1.95% to SOFR + 3.60%. This amended mortgage loan has one one-year extension option, subject to satisfaction of certain conditions.

(14)On October 31, 2023, we amended this mortgage loan. Terms of the amendment included extending the current maturity date one year to January 2025, and the variable interest rate increased from SOFR + 2.20% to SOFR + 3.60%. This amended mortgage loan has one one-year extension option, subject to satisfaction of certain conditions.

(15)On September 29, 2023, we amended this mortgage loan. Terms of the amendment included increasing the outstanding principal from $100.0 million to $140.0 million, and extending the current maturity date by one year to December 2026. This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions. This mortgage loan has a SOFR floor of 1.00%.

(16) The final maturity date assumes all available extension 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 certain of our hotels. 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.

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 amortized principal was approximately $1.7 million, $2.0 million and $3.4 million, respectively, for the years ended December 31, 2023, 2022 and 2021.

On January 18, 2023, the Company repaid its $54.0 million mortgage loan secured by The Ritz-Carlton Reserve Dorado Beach, which resulted in a gain on extinguishment of debt of $2.3 million for the year ended December 31, 2023. The gain was primarily attributable to the premium that was recorded upon the assumption of the mortgage loan when the hotel was acquired.

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.

The Convertible Senior Notes are governed by an 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. For the years ended December 31, 2023, 2022 and 2021, the Company recorded coupon interest expense of $3.9 million, $3.9 million and $2.4 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded discount amortization of $589,000, $553,000 and $974,000, respectively, related to the initial purchase discount, with the remaining discount balance to be amortized through June 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.

Credit Facility

On July 31, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with Braemar OP (the “Borrower”), the lenders party thereto (the “Lenders”) and Bank of America, N.A., as administrative agent and L/C Issuer (as defined in the Credit Agreement). Bank of America, N.A. acted as administrative agent and lead arranger on the transaction. Syndicate bank participants include TBK Bank and MidFirst Bank.

The Credit Agreement, as amended by the First Amendment to Credit Agreement, dated as of February 21, 2024, evidences a $200 million secured credit facility (the “Facility”) comprised of a secured term loan facility of $150 million (the “Term Loan Facility”) and a secured revolving credit facility of $50 million (the “Revolving Credit Facility”). Upon satisfaction of certain conditions, including the addition of new Borrowing Base Properties (as defined in the Credit Agreement), the Facility may be increased to an amount of not more than $400 million in the aggregate. The maximum availability under the Facility is determined on a quarterly basis and limited to the lesser of (i) $200 million (subject to increase of up to $400 million in the aggregate); (ii) 55% of the appraised value of all Borrowing Base Properties; and (iii) the DSC Amount (as defined below). The initial Borrowing Base Properties include the Company’s Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville hotel properties (the “Initial Borrowing Base Properties”). The “DSC Amount” means the maximum principal amount that can be supported from the Adjusted NOI (as defined in the Credit Agreement) from the Borrowing Base Properties assuming: (i) a 30-year amortization and an interest rate which is the greater of (a) the ten (10) year U.S. Treasury Rate plus 2.50% and (b) 7.50%; and (ii) a minimum debt service coverage of 1.55 to 1.00.

The proceeds of the Term Loan Facility were used to repay the mortgage debt associated with The Ritz-Carlton Sarasota, Bardessono Hotel and Spa and Hotel Yountville, which serve as the Initial Borrowing Base Properties for the financing. In addition, at closing, the Company drew down approximately $46 million under the Revolving Credit Facility.

The Facility is a three-year, interest-only facility with all outstanding principal due at maturity, with a one-year extension option, subject to the satisfaction of certain conditions, including the payment of an Extension Fee (as defined in the Credit Agreement) equal to 20 basis points (0.20%) of the outstanding Facility amount.

The Credit Agreement is guaranteed by the Company, the Borrower and certain other eligible subsidiaries of the Company and secured by: (i) perfected lien mortgages or deeds of trust and security interests in the Borrowing Base Properties (as defined in the Credit Agreement); (ii) assignments of leases and rents with respect to the Borrowing Base Properties; (iii) assignments of all management agreements, franchise agreements, licenses and other material agreements relating to the Borrowing Base Properties; (iv) perfected first priority liens on all reserve accounts and all operating accounts related to each Borrowing Base Property; and (v) perfected first priority liens on and security interests in each subsidiary guarantor owning a Borrowing Base Property.

Borrowings under the Credit Agreement will bear interest at Daily SOFR or Term SOFR plus 10 basis points (with a 0% floor) plus the applicable margin. Depending on the Company’s Net Debt to EBITDA ratio, the applicable margin for SOFR ranges from 2.25% to 3.00%. Default interest would accrue at the applicable rate plus 2.0%.

The Facility contains customary terms, covenants, negative covenants, events of default, limitations and other conditions for credit facilities of this type. Subject to certain exceptions, the Company and the Borrower are subject to restrictions on incurring additional indebtedness and liens, investments, mergers and fundamental changes, sales or other dispositions of property, dividends and stock redemptions, changes in the nature of the Borrower’s business, transactions with affiliates and burdensome agreements.

Financial covenants are generally based on the financial condition and results of operations of the Company and its consolidated subsidiaries and include, among others, the following:

(i) a Consolidated Leverage Ratio (i.e., Consolidated Net Debt to the Consolidated Total Asset Value) of not more than 55%; and

(ii) a Consolidated Fixed Charge Coverage Ratio (FCCR) (i.e., the ratio of Consolidated Adjusted EBITDA to Consolidated Fixed Charges) of not less than (i) prior to December 31, 2024, 1.1 to 1.0 and (ii) thereafter, 1.25 to 1.0.

The Credit Agreement includes customary events of default, and the occurrence of an event of default will permit the Lenders to terminate commitments to lend under the Credit Agreement and accelerate payments of all amounts outstanding thereunder.

Effective June 30, 2023, LIBOR is no longer published. Accordingly, all variable interest rate mortgage loans held by the Company that used the LIBOR index transitioned to SOFR beginning on July 1, 2023. Not all lenders executed loan amendment documents and instead deferred to original loan documents that dictate changes in index rates.

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 December 31, 2023, we were in compliance with all covenants.

Maturities and scheduled amortization of indebtedness as of December 31, 2023, assuming no extension of existing extension options for each of the following five years and thereafter are as follows (in thousands):


2024	$	582,780
2025	53,413
2026	536,850
2027	—
2028	—
Thereafter	—
Total	$	1,173,043