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Redeemable Noncontrolling Interests in Operating Partnership

12 Months Ended

Dec. 31, 2024

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interests in Operating Partnership

Redeemable Noncontrolling Interests in Operating Partnership

Redeemable noncontrolling interests in the operating partnership represent 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 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 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. 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. The performance criteria 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 applicable measurement 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. During the year ended 2024, Performance LTIPs granted in 2022, vested at 174% of target based on the performance conditions met over the performance period.

As of December 31, 2024, there were approximately 353,000 unvested Performance LTIP units, representing 200% of the target, outstanding.

As of December 31, 2024, we have issued a total of approximately 1.8 million LTIP and Performance LTIP units, net of Performance LTIP cancellations. All LTIP and Performance LTIP units, other than approximately 623,000 LTIP units and 353,000 Performance LTIP units issued from March 2015 to December 2024, had reached full economic parity with, and are convertible into, common units.

The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding approximate ownership percentage of our operating partnership:

			December 31, 2024						December 31, 2023
Redeemable noncontrolling interests in Braemar OP (in thousands)			$	29,964					$	32,395
Adjustments to redeemable noncontrolling interests (1) (in thousands)			$	1,324					$	66
Ownership percentage of operating partnership			8.05		%				6.63		%

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(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):

									Year Ended December 31,
															2024						2023						2022
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership															$	4,472					$	5,230					$	476
Distributions declared to holders of common units, LTIP units and Performance LTIP units															1,397						1,444						665
Performance LTIP dividend claw back upon cancellation															—						—						(4)

The following table presents compensation expense for Performance LTIP units and LTIP units (in thousands):

																		Year Ended December 31,
Type						Line Item																		2024						2023						2022
Performance LTIP units						Advisory services fee																		$	1,842					$	4,445					$	4,301
LTIP units						Advisory services fee																		209						1,039						1,229
LTIP units						Corporate, general and administrative																		3						14						28
LTIP units - independent directors						Corporate, general and administrative																		154						182						252
Total																								$	2,208					$	5,680					$	5,810

The unamortized cost of the unvested Performance LTIP units of approximately $77,000 at December 31, 2024 will be expensed over a period of 1.0 year with a weighted average period of 1.0 year.

A summary of the activity of the units in our operating partnership is as follows (in thousands):

			Year Ended December 31,
			2024						2023						2022
Units outstanding at beginning of year			7,224						8,283						7,158
LTIP units issued			151						44						44
Performance LTIP units issued			—						353						1,194
Units redeemed for shares of common stock			—						(1,456)						—
Performance LTIP units cancelled			(155)						—						(113)
Units outstanding at end of year			7,220						7,224						8,283
Units convertible/redeemable at end of year			6,244						4,292						5,841

The following table presents the common units redeemed for cash (in thousands):

									Year Ended December 31,
															2024						2023						2022
Units redeemed															—						1,456						—
Cash value of common units redeemed															$	—					$	7,162		(1)			$	—

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(1)    Includes Mr. Monty J. Bennett’s 1.4 million common units redeemed for cash of approximately $7.0 million during February 2023.

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- Definition

The entire disclosure for noncontrolling interest in consolidated subsidiaries, which could include the name of the subsidiary, the ownership percentage held by the parent, the ownership percentage held by the noncontrolling owners, the amount of the noncontrolling interest, the location of this amount on the balance sheet (when not reported separately), an explanation of the increase or decrease in the amount of the noncontrolling interest, the noncontrolling interest share of the net Income or Loss of the subsidiary, the location of this amount on the income statement (when not reported separately), the nature of the noncontrolling interest such as background information and terms, the amount of the noncontrolling interest represented by preferred stock, a description of the preferred stock, and the dividend requirements of the preferred stock.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 810
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/810/tableOfContent

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- References

No definition available.

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