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Redeemable Noncontrolling Interests in Operating Partnership

6 Months Ended

Jun. 30, 2025

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 our board of directors 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. As of June 30, 2025, there are 353,000 unvested Performance LTIP units.

As of June 30, 2025, there are approximately 429,000 issued and outstanding LTIP and Performance LTIP units. All LTIP and Performance LTIP units, other than approximately 353,000 Performance LTIP units issued in March 2023, 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:

			June 30, 2025						December 31, 2024
Redeemable noncontrolling interests in Braemar OP (in thousands)			$	17,994					$	29,964
Adjustments to redeemable noncontrolling interests (1) (in thousands)			$	536					$	1,324
Ownership percentage of operating partnership			8.51		%				8.05		%

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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):

			Three Months Ended June 30,												Six Months Ended June 30,
			2025						2024						2025						2024
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership			$	1,489					$	1,919					$	1,751					$	1,623
Distributions declared to holders of common units, LTIP units and Performance LTIP units			$	271					$	368					615						734

In June 2025, the Company exchanged approximately 1.5 million LTIP and Performance LTIP units for fully vested shares of the Company's common stock which resulted in no adjustments to equity-based compensation expense because the estimated fair value of the units immediately before the exchange was equal to the estimated fair value of the common stock immediately after the exchange. The exchange was accounted for in the same manner as a redemption by the holder of common units that was settled by the Company in shares of the Company's common stock, in which the greater of the historical cost or fair value of the underlying LTIP or Performance LTIP units as of the exchange date was reclassified from mezzanine equity to permanent equity. 

The following table presents the common units redeemed/exchanged for common stock (in thousands):

			Three Months Ended June 30,												Six Months Ended June 30,
			2025						2024						2025						2024
Units redeemed/exchanged			1,465						—						1,922						$	—
Fair value of common units redeemed (1)			$	3,516					$	—					$	4,897					—

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(1)    The redemption value is the greater of historical cost or fair value. The historical cost of the converted units for the three and six months ended June 30, 2025 was $7.0 million and $9.3 million, respectively.

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

			Three Months Ended June 30,												Six Months Ended June 30,
			2025						2024						2025						2024
Units redeemed			—						—						35						—
Fair value of common units redeemed			$	—					$	—					$	92					$	—

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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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