Related Party Transactions

6 Months Ended

Jun. 30, 2019

12. Related Party Transactions

The Sponsor and its affiliates are in the business of making investments in companies and real estate assets and currently own, and may, from time to time acquire and hold, in each case, interests in businesses or assets that compete directly or indirectly with the Company. In addition, certain affiliates of the Sponsor have significant influence over Hilton, which indirectly owns the entities that serve as franchisors and receive franchise fees for 26 of the hotels owned by the Company. As of the end of May 2018, the Sponsor no longer has an equity investment in Hilton, however, an executive of the Sponsor is the Chairman of the Board of Directors of Hilton. In accordance with the Company’s certificate of incorporation, the Sponsor has no obligation to present any corporate opportunities to the Company or to conduct its other business and investment affairs in the best interests of the Company, common stockholder, or holders of Series A Preferred Shares. In connection with the Sponsor’s and its affiliates’ business activities, the Sponsor, BRE Holdings or any of their affiliates, including, without limitation, Hilton or its subsidiaries, may from time to time enter into arrangements with the Company or its subsidiaries. These arrangements may be subject to restrictions on affiliate transactions contained in agreements entered into in connection with the Loan.

The Company incurred $5.1 million and $5.2 million of franchise fees, marketing fees and other expenses during the three months ended June 30, 2019 and 2018, respectively. The Company incurred

$9.1 million and $9.0 million of franchise fees, marketing fees and other expenses during the six months ended June 30, 2019 and 2018, respectively, under agreements with Hilton or its subsidiaries. No amounts were payable to Hilton as of June 30, 2019 or December 31, 2018.

A management company provides services to the Company including financial, accounting, administrative and other services that may be requested from time to time pursuant to a corporate services agreement. Affiliates of the Sponsor hold a management interest in this management company. The Company paid $0.6 million and $0.7 million to this management company during the three months ended June 30, 2019 and 2018, respectively. The Company paid $1.2 million and $1.9 million to this management company during the six months ended June 30, 2019 and 2018, respectively. No amounts were outstanding to this management company as of June 30, 2019 or December 31, 2018. Prepayments of $0.6 million and $0.5 million related to the corporate services agreement are included in prepaid expenses and other assets on the condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018, respectively.