UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number: 001-35972

BRAEMAR HOTELS & RESORTS INC.

(Exact name of registrant as specified in its charter)

Maryland	46-2488594
(State or other jurisdiction of incorporation or organization)	(IRS employer identification number)
14185 Dallas Parkway
Suite 1100
Dallas
Texas	75254
(Address of principal executive offices)	(Zip code)

(972) 490-9600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BHR	New York Stock Exchange
Preferred Stock, Series B	BHR-PB	New York Stock Exchange
Preferred Stock, Series D	BHR-PD	New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value per share	33,528,000
(Class)	Outstanding at August 4, 2020

BRAEMAR HOTELS & RESORTS INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2020

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019	3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019	4
Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2020 and 2019	5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	8
Notes to Condensed Consolidated Financial Statements	10
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	56
ITEM 4. CONTROLS AND PROCEDURES	57
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	57
ITEM 1A. RISK FACTORS	58
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	62
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	62
ITEM 4. MINE SAFETY DISCLOSURES	62
ITEM 5. OTHER INFORMATION	62
ITEM 6. EXHIBITS	63
SIGNATURES	64

PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS (unaudited)

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share amounts)

	June 30, 2020			December 31, 2019
ASSETS
Investments in hotel properties, gross	$	1,786,366		$	1,791,174
Accumulated depreciation	(338,186		)	(309,752		)
Investments in hotel properties, net	1,448,180			1,481,422
Cash and cash equivalents	102,568			71,995
Restricted cash	41,464			58,388
Accounts receivable, net of allowance of $187 and $153, respectively	7,747			19,053
Inventories	2,611			2,794
Prepaid expenses	5,338			4,992
Investment in unconsolidated entity	1,845			1,899
Derivative assets	756			582
Operating lease right-of-use assets	81,913			82,596
Other assets	14,971			13,018
Intangible assets, net	4,830			5,019
Due from related parties, net	887			551
Due from third-party hotel managers	8,867			16,638
Total assets	$	1,721,977		$	1,758,947
LIABILITIES AND EQUITY
Liabilities:
Indebtedness, net	$	1,123,313		$	1,058,486
Accounts payable and accrued expenses	69,821			94,919
Dividends and distributions payable	3,208			9,143
Due to Ashford Inc.	2,694			4,344
Due to third-party hotel managers	971			1,685
Operating lease liabilities	61,010			61,118
Other liabilities	19,410			17,508
Total liabilities	1,280,427			1,247,203
Commitments and contingencies (note 15)
5.50% Series B cumulative convertible preferred stock, $0.01 par value, 5,031,473 and 5,008,421 shares issued and outstanding at June 30, 2020 and December 31, 2019	107,352			106,920
Redeemable noncontrolling interests in operating partnership	32,060			41,570
Equity:
Preferred stock, $0.01 value, 80,000,000 shares authorized:
Series D cumulative preferred stock, 1,600,000 shares issued and outstanding at June 30, 2020 and December 31, 2019	16			16
Common stock, $0.01 par value, 250,000,000 shares authorized, 33,528,000 and 32,885,217 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	335			329
Additional paid-in capital	525,846			519,551
Accumulated deficit	(212,431		)	(150,629		)
Total stockholders’ equity of the Company	313,766			369,267
Noncontrolling interest in consolidated entities	(11,628		)	(6,013		)
Total equity	302,138			363,254
Total liabilities and equity	$	1,721,977		$	1,758,947

See Notes to Condensed Consolidated Financial Statements.

2

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
REVENUE
Rooms	$	6,533		$	75,121		$	77,001		$	151,852
Food and beverage	2,077			25,790			30,880			57,904
Other	4,285			17,605			22,534			37,268
Total hotel revenue	12,895			118,516			130,415			247,024
Other	—			—			—			5
Total revenue	12,895			118,516			130,415			247,029
EXPENSES
Hotel operating expenses:
Rooms	3,445			16,833			21,325			33,815
Food and beverage	3,649			19,394			27,550			41,604
Other expenses	12,979			36,335			55,069			75,230
Management fees	466			4,166			4,343			8,582
Total hotel operating expenses	20,539			76,728			108,287			159,231
Property taxes, insurance and other	7,244			5,206			14,904			12,666
Depreciation and amortization	18,553			18,474			36,891			35,160
Advisory services fee	4,901			4,397			9,970			10,421
Transaction costs	—			70			—			704
Corporate general and administrative	1,513			932			3,445			2,058
Total expenses	52,750			105,807			173,497			220,240
Gain (loss) on disposition of assets	—			9			—			9
OPERATING INCOME (LOSS)	(39,855		)	12,718			(43,082		)	26,798
Equity in earnings (loss) of unconsolidated entity	(40		)	(51		)	(80		)	(101		)
Interest income	24			287			153			649
Other income (expense)	(64		)	(139		)	(202		)	(256		)
Interest expense and amortization of loan costs	(12,797		)	(14,055		)	(24,694		)	(28,248		)
Write-off of loan costs and exit fees	(2,237		)	—			(2,237		)	(312		)
Unrealized gain (loss) on investment in Ashford Inc.	—			(4,626		)	—			(3,919		)
Unrealized gain (loss) on derivatives	(969		)	654			187			(218		)
INCOME (LOSS) BEFORE INCOME TAXES	(55,938		)	(5,212		)	(69,955		)	(5,607		)
Income tax (expense) benefit	4,447			(411		)	3,077			(1,338		)
NET INCOME (LOSS)	(51,491		)	(5,623		)	(66,878		)	(6,945		)
(Income) loss attributable to noncontrolling interest in consolidated entities	2,404			248			2,976			149
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	5,297			865			7,182			1,305
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	(43,790		)	(4,510		)	(56,720		)	(5,491		)
Preferred dividends	(2,555		)	(2,532		)	(5,110		)	(5,064		)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(46,345	)	$	(7,042	)	$	(61,830	)	$	(10,555	)
INCOME (LOSS) PER SHARE - BASIC:
Net income (loss) attributable to common stockholders	$	(1.41	)	$	(0.22	)	$	(1.89	)	$	(0.34	)
Weighted average common shares outstanding – basic	32,907			32,307			32,688			32,213
INCOME (LOSS) PER SHARE - DILUTED:
Net income (loss) attributable to common stockholders	$	(1.41	)	$	(0.22	)	$	(1.89	)	$	(0.34	)
Weighted average common shares outstanding – diluted	32,907			32,307			32,688			32,213

See Notes to Condensed Consolidated Financial Statements.

3

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
NET INCOME (LOSS)	$	(51,491	)	$	(5,623	)	$	(66,878	)	$	(6,945	)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Total other comprehensive income (loss)	—			—			—			—
TOTAL COMPREHENSIVE INCOME (LOSS)	(51,491		)	(5,623		)	(66,878		)	(6,945		)
Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities	2,404			248			2,976			149
Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership	5,297			865			7,182			1,305
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	(43,790	)	$	(4,510	)	$	(56,720	)	$	(5,491	)

See Notes to Condensed Consolidated Financial Statements.

4

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in thousands except per share amounts)

	8.25% Series D Cumulative Preferred Stock			Common Stock				Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interest in Consolidated Entities			Total			5.50% Series B Cumulative Convertible Preferred Stock			Redeemable Noncontrolling Interests in Operating Partnership
	Shares	Amount		Shares		Amount														Shares	Amount
Balance at March 31, 2020	1,600	$	16	33,511		$	335	$	524,341		$	(166,108	)	$	(9,224	)	$	349,360		5,031	$	107,352	$	36,786
Purchase of common stock	—	—		(15	)	—		(42		)	—			—			(42		)	—	—		—
Equity-based compensation	—	—		—		—		1,499			—			—			1,499			—	—		549
Issuance of restricted shares/units	—	—		35		—		48			—			—			48			—	—		44
Forfeiture of restricted common shares	—	—		(3	)	—		—			—			—			—			—	—		—
Dividends declared – preferred stock - Series B ($0.34/share)	—	—		—		—		—			(1,730		)	—			(1,730		)	—	—		—
Dividends declared – preferred stock - Series D ($0.52/share)	—	—		—		—		—			(825		)	—			(825		)	—	—		—
Net income (loss)	—	—		—		—		—			(43,790		)	(2,404		)	(46,194		)	—	—		(5,297		)
Redemption value adjustment	—	—		—		—		—			22			—			22			—	—		(22		)
Balance at June 30, 2020	1,600	$	16	33,528		$	335	$	525,846		$	(212,431	)	$	(11,628	)	$	302,138		5,031	$	107,352	$	32,060

	8.25% Series D Cumulative Preferred Stock			Common Stock				Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interest in Consolidated Entities			Total			5.50% Series B Cumulative Convertible Preferred Stock			Redeemable Noncontrolling Interests in Operating Partnership
	Shares	Amount		Shares		Amount														Shares	Amount
Balance at December 31, 2019	1,600	$	16	32,885		$	329	$	519,551		$	(150,629	)	$	(6,013	)	$	363,254		5,008	$	106,920	$	41,570
Purchase of common stock	—	—		(35	)	—		(124		)	—			—			(124		)	—	—		—
Equity-based compensation	—	—		—		—		2,923			—			—			2,923			—	—		1,110
Issuance of preferred stock	—	—		—		—		—			—			—			—			23	432		—
Issuance of restricted shares/units	—	—		346		3		45			—			—			48			—	—		44
Forfeiture of restricted common shares	—	—		(7	)	—		—			—			—			—			—	—		—
Dividends declared – preferred stock - Series B ($0.69/share)	—	—		—		—		—			(3,460		)	—			(3,460		)	—	—		—
Dividends declared – preferred stock - Series D ($1.03/share)	—	—		—		—		—			(1,650		)	—			(1,650		)	—	—		—
Distributions to noncontrolling interests	—	—		—		—		—			—			(2,639		)	(2,639		)	—	—		—
Redemption/conversion of operating partnership units	—	—		339		3		3,451			—			—			3,454			—	—		(3,454		)
Net income (loss)	—	—		—		—		—			(56,720		)	(2,976		)	(59,696		)	—	—		(7,182		)
Redemption value adjustment	—	—		—		—		—			28			—			28			—	—		(28		)
Balance at June 30, 2020	1,600	$	16	33,528		$	335	$	525,846		$	(212,431	)	$	(11,628	)	$	302,138		5,031	$	107,352	$	32,060

5

	8.25% Series D Cumulative Preferred Stock			Common Stock				Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interest in Consolidated Entities			Total			5.50% Series B Cumulative Convertible  Preferred Stock			Redeemable Noncontrolling Interests in Operating Partnership
	Shares	Amount		Shares		Amount														Shares	Amount
Balance at March 31, 2019	1,600	$	16	32,841		$	328	$	514,739		$	(132,575	)	$	(5,292	)	$	377,216		4,966	$	106,123	$	51,010
Purchase of common stock	—	—		(13	)	—		(182		)	—			—			(182		)	—	—		—
Equity-based compensation	—	—		—		—		1,377			—			—			1,377			—	—		644
Forfeiture of restricted common shares	—	—		(3	)	—		—			—			—			—			—	—		—
Dividends declared – common stock ($0.16/share)	—	—		—		—		—			(5,336		)	—			(5,336		)	—	—		—
Dividends declared – preferred stock - Series B ($0.34/share)	—	—		—		—		—			(1,707		)	—			(1,707		)	—	—		—
Dividends declared – preferred stock-Series D ($0.52/share)	—	—		—		—		—			(825		)	—			(825		)	—	—		—
Distributions to noncontrolling interests	—	—		—		—		—			—			—			—			—