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 September 30, 2022

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: 001-31775

ASHFORD HOSPITALITY TRUST, INC.

(Exact name of registrant as specified in its charter)

Maryland	86-1062192
(State or other jurisdiction of incorporation or organization)	(IRS employer identification number)
14185 Dallas Parkway
Suite 1200
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. þ 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). þ 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,” “smaller 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 þ 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	AHT	New York Stock Exchange
Preferred Stock, Series D	AHT-PD	New York Stock Exchange
Preferred Stock, Series F	AHT-PF	New York Stock Exchange
Preferred Stock, Series G	AHT-PG	New York Stock Exchange
Preferred Stock, Series H	AHT-PH	New York Stock Exchange
Preferred Stock, Series I	AHT-PI	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	34,498,993
(Class)	Outstanding at November 3, 2022

ASHFORD HOSPITALITY TRUST, INC.

FORM 10-Q

FOR THE QUARTER ENDED September 30, 2022

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	2
Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	3
Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021	4
Consolidated Statements of Equity (Deficit) for the three and nine months ended September 30, 2022 and 2021	5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	7
Notes to Consolidated Financial Statements	9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	53
ITEM 4. CONTROLS AND PROCEDURES	53
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	53
ITEM 1A. RISK FACTORS	54
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	55
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	55
ITEM 4. MINE SAFETY DISCLOSURES	55
ITEM 5. OTHER INFORMATION	55
ITEM 6. EXHIBITS	55
SIGNATURES	57

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

	September 30, 2022		December 31, 2021
ASSETS
Investments in hotel properties, net	$	3,114,528	$	3,230,710
Cash and cash equivalents	505,533		592,110
Restricted cash	132,055		99,534
Accounts receivable, net of allowance of $634 and $455, respectively	58,601		37,720
Inventories	3,788		3,291
Notes receivable, net	4,975		8,723
Investments in unconsolidated entities	10,802		11,253
Deferred costs, net	3,247		5,001
Prepaid expenses	19,797		13,384
Derivative assets	20,187		501
Operating lease right-of-use assets	44,082		44,575
Other assets	17,559		16,150
Intangible assets	797		797
Due from Ashford Inc., net	1,761		25
Due from related parties, net	6,597		7,473
Due from third-party hotel managers	27,361		26,896
Total assets	$	3,971,670	$	4,098,143
LIABILITIES AND EQUITY/DEFICIT
Liabilities:
Indebtedness, net	$	3,838,697	$	3,887,822
Accounts payable and accrued expenses	135,967		117,650
Accrued interest payable	10,577		15,432
Dividends and distributions payable	3,103		3,104
Due to related parties, net	—		728
Due to third-party hotel managers	727		1,204
Intangible liabilities, net	2,117		2,177
Operating lease liabilities	44,781		45,106
Other liabilities	4,452		4,832
Total liabilities	4,040,421		4,078,055
Commitments and contingencies (note 16)
Redeemable noncontrolling interests in operating partnership	21,988		22,742
Equity (deficit):
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
Series D Cumulative Preferred Stock, 1,174,427 shares issued and outstanding at September 30, 2022 and December 31, 2021	12		12
Series F Cumulative Preferred Stock, 1,251,044 shares issued and outstanding at September 30, 2022 and December 31, 2021	12		12
Series G Cumulative Preferred Stock, 1,531,996 shares issued and outstanding at September 30, 2022 and December 31, 2021	15		15
Series H Cumulative Preferred Stock, 1,308,415 shares issued and outstanding at September 30, 2022 and December 31, 2021	13		13
Series I Cumulative Preferred Stock, 1,252,923 shares issued and outstanding at September 30, 2022 and December 31, 2021	13		13
Common stock, $0.01 par value, 400,000,000 shares authorized, 34,498,993 and 34,490,381 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	345		345
Additional paid-in capital	2,382,863		2,379,906
Accumulated deficit	(2,474,012)		(2,382,970)
Total equity (deficit)	(90,739)		(2,654)
Total liabilities and equity/deficit	$	3,971,670	$	4,098,143

See Notes to Consolidated Financial Statements.

2

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
REVENUE
Rooms	$	260,616	$	202,119	$	731,474	$	459,264
Food and beverage	48,633		29,744		139,709		57,487
Other hotel revenue	18,183		14,944		50,042		38,358
Total hotel revenue	327,432		246,807		921,225		555,109
Other	724		627		2,164		1,567
Total revenue	328,156		247,434		923,389		556,676
EXPENSES
Hotel operating expenses:
Rooms	61,464		48,035		169,250		109,095
Food and beverage	36,199		22,750		100,981		42,860
Other expenses	106,907		92,581		310,407		224,422
Management fees	11,686		8,976		33,552		21,944
Total hotel expenses	216,256		172,342		614,190		398,321
Property taxes, insurance and other	17,541		17,222		51,289		51,821
Depreciation and amortization	49,428		53,069		152,444		166,291
Advisory services fee	12,513		7,395		38,176		39,110
Corporate, general and administrative	(884)		2,414		6,730		12,113
Total expenses	294,854		252,442		862,829		667,656
Gain (loss) on disposition of assets and hotel properties	(11)		103		273		395
OPERATING INCOME (LOSS)	33,291		(4,905)		60,833		(110,585)
Equity in earnings (loss) of unconsolidated entities	(147)		(145)		(451)		(423)
Interest income	1,576		124		2,153		137
Other income (expense)	241		208		426		682
Interest expense and amortization of discounts and loan costs	(61,023)		(43,003)		(152,975)		(112,003)
Write-off of premiums, loan costs and exit fees	(1,378)		(1,034)		(3,076)		(5,200)
Gain (loss) on extinguishment of debt	—		1,292		—		11,896
Unrealized gain (loss) on derivatives	9,774		6,029		19,059		3,712
INCOME (LOSS) BEFORE INCOME TAXES	(17,666)		(41,434)		(74,031)		(211,784)
Income tax (expense) benefit	(4,657)		(2,615)		(10,340)		(2,916)
NET INCOME (LOSS)	(22,323)		(44,049)		(84,371)		(214,700)
(Income) loss attributable to noncontrolling interest in consolidated entities	—		(10)		—		84
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	231		367		679		3,594
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	(22,092)		(43,692)		(83,692)		(211,022)
Preferred dividends	(3,104)		(2,039)		(9,311)		1,488
Gain (loss) on extinguishment of preferred stock	—		(1,789)		—		959
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(25,196)	$	(47,520)	$	(93,003)	$	(208,575)
INCOME (LOSS) PER SHARE - BASIC AND DILUTED
Basic:
Net income (loss) attributable to common stockholders	$	(0.73)	$	(1.70)	$	(2.71)	$	(11.89)
Weighted average common shares outstanding – basic	34,371		28,033		34,324		17,520
Diluted:
Net income (loss) attributable to common stockholders	$	(0.73)	$	(1.70)	$	(2.71)	$	(11.89)
Weighted average common shares outstanding – diluted	34,371		28,033		34,324		17,520

See Notes to Consolidated Financial Statements.

3

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	(22,323)	$	(44,049)	$	(84,371)	$	(214,700)
Other comprehensive income (loss), net of tax:
Total other comprehensive income (loss)	—		—		—		—
Comprehensive income (loss)	(22,323)		(44,049)		(84,371)		(214,700)
Less: Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities	—		(10)		—		84
Less: Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership	231		367		679		3,594
Comprehensive income (loss) attributable to the Company	$	(22,092)	$	(43,692)	$	(83,692)	$	(211,022)

See Notes to Consolidated Financial Statements.

4

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(unaudited, in thousands except per share amounts)

	Preferred Stock																		Additional Paid-in Capital		Accumulated Deficit		Total		Redeemable Noncontrolling Interests in Operating Partnership
	Series D			Series F			Series G			Series H			Series I			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at June 30, 2022	1,174	$	12	1,251	$	12	1,532	$	15	1,308	$	13	1,253	$	13	34,487	$	345	$	2,382,197	$	(2,448,350)	$	(65,743)	$	21,308
Purchases of common stock	—	—		—	—		—	—		—	—		—	—		(21)	—		(164)		—		(164)		—
Equity-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		830		—		830		445
Issuance of restricted shares/units	—	—		—	—		—	—		—	—		—	—		33	—		—		—		—		—
Dividends declared – preferred stock - Series D ($0.53/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(621)		(621)		—
Dividends declared – preferred stock - Series F ($0.46/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(577)		(577)		—
Dividends declared – preferred stock - Series G ($0.46/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(706)		(706)		—
Dividends declared – preferred stock - Series H ($0.47/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(613)		(613)		—
Dividends declared – preferred stock - Series I ($0.47/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(587)		(587)		—
Redemption value adjustment	—	—		—	—		—	—		—	—		—	—		—	—		—		(466)		(466)		466
Net income (loss)	—	—		—	—		—	—		—	—		—	—		—	—		—		(22,092)		(22,092)		(231)
Balance at September 30, 2022	1,174	$	12	1,251	$	12	1,532	$	15	1,308	$	13	1,253	$	13	34,499	$	345	$	2,382,863	$	(2,474,012)	$	(90,739)	$	21,988

	Preferred Stock																		Additional Paid-in Capital		Accumulated Deficit		Total		Redeemable Noncontrolling Interests in Operating Partnership
	Series D			Series F			Series G			Series H			Series I			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2021	1,174	$	12	1,251	$	12	1,532	$	15	1,308	$	13	1,253	$	13	34,490	$	345	$	2,379,906	$	(2,382,970)	$	(2,654)	$	22,742
Purchases of common stock	—	—		—	—		—	—		—	—		—	—		(42)	—		(316)		—		(316)		—
Equity-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		3,438		—		3,438		1,886
Forfeitures of restricted shares	—	—		—	—		—	—		—	—		—	—		(1)	—		—		—		—		—
Issuance of restricted shares/units	—	—		—	—		—	—		—	—		—	—		52	—		—		—		—		—
Common stock offering costs	—	—		—	—		—	—		—	—		—	—		—	—		(165)		—		(165)		—
Dividends declared – preferred stock - Series D ($1.59/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(1,861)		(1,861)		—
Dividends declared – preferred stock - Series F ($1.38/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(1,730)		(1,730)		—
Dividends declared – preferred stock - Series G ($1.38/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(2,118)		(2,118)		—
Dividends declared – preferred stock - Series H ($1.41/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(1,840)		(1,840)		—
Dividends declared – preferred stock - Series I ($1.41/share)	—	—		—	—		—	—		—	—		—	—		—	—		—		(1,762)		(1,762)		—
Redemption value adjustment	—	—		—	—		—	—		—	—		—	—		—	—		—		1,961		1,961		(1,961)
Net income (loss)	—	—		—	—		—	—		—	—		—	—		—	—		—		(83,692)		(83,692)		(679)
Balance at September 30, 2022	1,174	$	12	1,251	$	12	1,532	$	15	1,308	$	13	1,253	$	13	34,499	$	345	$	2,382,863	$	(2,474,012)	$	(90,739)	$	21,988

5

	Preferred Stock																		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interests In Consolidated Entities		Total		Redeemable Noncontrolling Interests in Operating Partnership
	Series D			Series F			Series G			Series H			Series I			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at June 30, 2021	1,316	$	13	1,471	$	15	1,910	$	19	1,458	$	14	1,392	$	14	22,321	$	223	$	2,181,467	$	(2,264,954)	$	72	$	(83,117)	$	28,906
Equity-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		1,948		—		—		1,948		542
Forfeitures of restricted shares	—	—		—	—		—	—		—	—		—	—		(1)	—		—		—		—		—		—
Issuance of common stock, net	—	—		—	—		—	—		—	—		—	—		9,297	93		176,879		—		—		176,972		—
Conversion of operating partnership units	—	—		—	—		—	—		—	—		—	—		—	—		2		—		—		2		(2)
Redemption value adjustment	—	—		—	—		—	—		—	—		—	—		—	—		—		5,946		—		5,946		(5,946)
Extinguishment of preferred stock	(45)	—		(92)	(1)		(189)	(2)		(105)	(1)		(120)	(1)		941	10		1,784		(1,789)		—		—		—
Net income (loss)	—	—		—	—		—	—		—	—		—	—		—	—		—		(43,692)		10		(43,682)		(367)
Balance at September 30, 2021	1,271	$	13	1,379	$	14	1,721	$	17	1,353	$	13	1,272	$	13	32,558	$	326	$	2,362,080	$	(2,304,489)	$	82	$	58,069	$	23,133

	Preferred Stock																		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interests In Consolidated Entities		Total		Redeemable Noncontrolling Interests in Operating Partnership
	Series D			Series F			Series G			Series H			Series I			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2020	1,791	$	18	2,891	$	29	4,423	$	44	2,669	$	27	3,391	$	34	6,436	$	64	$	1,809,455	$	(2,093,292)	$	166	$	(283,455)	$	22,951
Purchases of common stock	—	—		—	—		—	—		—	—		—	—		(1)	—		(46)		—		—		(46)		—
Equity-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		5,486		—		—		5,486		2,053
Forfeitures of restricted shares	—	—		—	—		—	—		—	—		—	—		(3)	—		—		—		—		—		—
Issuance of restricted shares/units	—	—		—	—		—	—		—	—		—	—		251	3		(3)		—		—		—		—
PSU dividend claw back upon cancellation	—	—		—	—		—	—		—	—		—	—		—	—		—		178		—		178		—
Issuance of common stock, net	—	—		—	—		—	—		—	—		—	—		19,009	190		548,091		—		—		548,281		—
Conversion of operating partnership units	—	—		—	—		—	—		—	—		—	—		1	—		43		—		—		43		(43)
Performance LTIP dividend claw back upon cancellation	—	—		—	—		—	—		—	—		—	—		—	—		—		—		—		—		454
Redemption value adjustment	—	—		—	—		—	—		—	—		—	—		—	—		—		(1,312)		—		(1,312)		1,312
Extinguishment of preferred stock	(520)	(5)		(1,512)	(15)		(2,702)	(27)		(1,316)	(14)		(2,119)	(21)		6,865	69		(946)		959		—		—		—
Net income (loss)	—	—		—	—		—	—		—	—		—	—		—	—		—		(211,022)		(84)		(211,106)		(3,594)
Balance at September 30, 2021	1,271	$	13	1,379	$	14	1,721	$	17	1,353	$	13	1,272	$	13	32,558	$	326	$	2,362,080	$	(2,304,489)	$	82	$	58,069	$	23,133

6

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Nine Months Ended September 30,
	2022		2021
Cash Flows from Operating Activities
Net income (loss)	$	(84,371)	$	(214,700)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	152,444		166,291
Amortization of intangibles	78		98
Recognition of deferred income	(374)		(374)
Bad debt expense	2,456		1,491
Deferred income tax expense (benefit)	141		(113)
Equity in (earnings) loss of unconsolidated entities	451		423
(Gain) loss on disposition of assets and hotel properties	(273)		(395)
(Gain) loss on extinguishment of debt	—		(11,896)
Unrealized (gain) loss on derivatives	(19,059)		(3,712)
Amortization of loan costs, discounts and capitalized default interest and write-off of premiums, loan costs and exit fees	7,760		(12,132)
Equity-based compensation	5,324		7,539
Non-cash interest income	(262)		(591)
Paid-in kind interest expense	—		23,574
Changes in operating assets and liabilities, exclusive of the effect of dispositions of hotel properties:
Accounts receivable and inventories	(24,893)		(20,199)
Prepaid expenses and other assets	(7,257)		(1,418)
Operating lease right-of-use assets	355		358
Operating lease liabilities	(325)		(361)
Accounts payable and accrued expenses and accrued interest payable	10,401		(21,496)
Due to/from related parties	148		(718)
Due to/from third-party hotel managers	(942)		(14,170)
Due to/from Ashford Inc., net	(2,286)		(11,024)
Other liabilities	(6)		(4)
Net cash provided by (used in) operating activities	39,510		(113,529)
Cash Flows from Investing Activities
Improvements and additions to hotel properties	(68,054)		(19,018)
Net proceeds from disposition of assets and hotel properties	34,707		7,543
Proceeds from property insurance	1,009		2,000
Investments in unconsolidated entities	—		(250)
Proceeds from note receivable	4,000		—
Net cash provided by (used in) investing activities	(28,338)		(9,725)
Cash Flows from Financing Activities
Borrowings on indebtedness, net of commitment fee	1,552		293,500
Repayments of indebtedness	(49,326)		(106,690)
Payments for loan costs and exit fees	(2,298)		(20,494)
Payments for dividends and distributions	(9,312)		—
Purchases of common stock	(316)		(46)
Payments for derivatives	(5,255)		(824)
Proceeds from common stock offerings	—		548,441
Common stock offering costs	(273)		—
Net cash provided by (used in) financing activities	(65,228)		713,887
Net increase (decrease) in cash, cash equivalents and restricted cash	(54,056)		590,633
Cash, cash equivalents and restricted cash at beginning of period	691,644		167,313
Cash, cash equivalents and restricted cash and at end of period	$	637,588	$	757,946

7

	Nine Months Ended September 30,
	2022		2021
Supplemental Cash Flow Information
Interest paid	$	153,155	$	153,873
Income taxes paid (refunded)	7,419		2,602
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Accrued but unpaid capital expenditures	$	14,996	$	4,700
Non-cash consideration from sale of hotel property	1,219		—
Accrued stock offering costs	—		160
Non-cash extinguishment of debt	—		9,604
Non-cash loan principal associated with default interest and late charges	—		32,626
Non-cash extinguishment of preferred stock	—		197,093
Issuance of common stock from preferred stock exchanges	—		196,134
Debt discount associated with embedded debt derivative	—		43,680
Credit facility commitment fee	—		4,500
Dividends and distributions declared but not paid	3,103		236
Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents at beginning of period	$	592,110	$	92,905
Restricted cash at beginning of period	99,534		74,408
Cash, cash equivalents and restricted cash at beginning of period	$	691,644	$	167,313
Cash and cash equivalents at end of period	$	505,533	$	672,961
Restricted cash at end of period	132,055		84,985
Cash, cash equivalents and restricted cash at end of period	$	637,588	$	757,946

See Notes to Consolidated Financial Statements.

8

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Ashford Hospitality Trust, Inc., together with its subsidiaries (“Ashford Trust”), is a real estate investment trust (“REIT”). While our portfolio currently consists of upscale hotels and upper upscale full-service hotels, our investment strategy is predominantly focused on investing in upper upscale full-service hotels in the United States that have revenue per available room (“RevPAR”) generally less than twice the U.S. national average, and in all methods including direct real estate, equity, and debt. We currently anticipate future investments will predominantly be in upper upscale hotels. We own our lodging investments and conduct our business through Ashford Hospitality Limited Partnership (“Ashford Trust OP”), our operating partnership. Ashford OP General Partner LLC, a wholly-owned subsidiary of Ashford Trust, serves as the sole general partner of our operating partnership. Terms such as the “Company,” “we,” “us,” or “our” refer to Ashford Hospitality Trust, Inc. and, as the context may require, all entities included in its consolidated financial statements.

Our hotel properties are primarily branded under the widely recognized upscale and upper upscale brands of Hilton, Hyatt, Marriott and Intercontinental Hotel Group. As of September 30, 2022, we owned interests in the following assets:

•99 consolidated hotel properties, which represent 22,116 total rooms;

•79 hotel condominium units at WorldQuest Resort in Orlando, Florida (“WorldQuest”);

•15.1% ownership in OpenKey, Inc. (“OpenKey”) with a carrying value of approximately $2.3 million; and

•32.5% ownership in 815 Commerce Managing Member, LLC (“815 Commerce MM”), which is developing the Le Meridien Fort Worth, with a carrying value of approximately $8.5 million.

For U.S. federal income tax purposes, we have elected to be treated as a REIT, which imposes limitations related to operating hotels. As of September 30, 2022, our 99 hotel properties were leased or owned by our wholly-owned subsidiaries that are treated as taxable REIT subsidiaries for U.S. federal income tax purposes (collectively, these subsidiaries are referred to as “Ashford TRS”). Ashford TRS then engages third-party or affiliated hotel management companies to operate the hotels under management contracts. Hotel operating results related to these properties are included in the consolidated statements of operations.

We are advised by Ashford Hospitality Advisors LLC (“Ashford LLC”), a subsidiary of Ashford Inc., through an advisory agreement. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.

We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them for us under management contracts. Remington Lodging & Hospitality, LLC (“Remington Hotels”), a subsidiary of Ashford Inc., manages 67 of our 99 hotel properties and WorldQuest. Third-party management companies manage the remaining hotel properties.

Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to, design and construction services, debt placement and related services, audio visual services, real estate advisory services, insurance claims services, hypoallergenic premium rooms, broker-dealer and distribution services and mobile key technology.

2. Significant Accounting Policies

Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These consolidated financial statements include the accounts of Ashford Hospitality Trust, Inc., its majority-owned subsidiaries, and its majority-owned joint ventures in which it has a controlling interest. All inter-company accounts and transactions between consolidated entities have been eliminated in these consolidated financial statements. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto

9

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

included in our 2021 Annual Report to Stockholders on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022.

Ashford Trust OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. All major decisions related to Ashford Trust OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly-owned subsidiary, Ashford OP General Partner LLC, its general partner. As such, we consolidate Ashford Trust OP.

Historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The following dispositions affect reporting comparability of our consolidated financial statements:

Hotel Property	Location	Type	Date
Le Meridien Minneapolis	Minneapolis, MN	Disposition	January 20, 2021
SpringHill Suites Durham	Durham, NC	Disposition	April 29, 2021
SpringHill Suites Charlotte	Charlotte, NC	Disposition	April 29, 2021
Sheraton Ann Arbor	Ann Arbor, MI	Disposition	September 1, 2022

Use of Estimates—The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Adopted Accounting Standards—In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in Accounting Standards Codification (“ASC”) 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, this ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. We adopted the standard effective January 1, 2022, and the adoption of this standard did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards—In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform-related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.

Reclassification—Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.

10

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

3. Revenue

The following tables present our revenue disaggregated by geographical area (dollars in thousands):

	Three Months Ended September 30, 2022
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
Atlanta, GA Area	9	$	17,841	$	4,154	$	1,438	$	—	$	23,433
Boston, MA Area	2	15,562		1,363		1,453		—		18,378
Dallas / Ft. Worth, TX Area	7	12,867		3,047		889		—		16,803
Houston, TX Area	3	5,958		1,543		243		—		7,744
Los Angeles, CA Metro Area	6	19,515		3,132		1,252		—		23,899
Miami, FL Metro Area	2	4,816		1,617		155		—		6,588
Minneapolis - St. Paul, MN	2	4,361		1,335		163		—		5,859
Nashville, TN Area	1	13,705		5,997		1,047		—		20,749
New York / New Jersey Metro Area	6	16,316		4,594		876		—		21,786
Orlando, FL Area	2	4,981		407		430		—		5,818
Philadelphia, PA Area	3	6,120		632		196		—		6,948
San Diego, CA Area	2	6,127		154		334		—		6,615
San Francisco - Oakland, CA Metro Area	7	19,580		1,588		931		—		22,099
Tampa, FL Area	2	5,389		1,472		267		—		7,128
Washington D.C. - MD - VA Area	9	28,429		5,102		2,501		—		36,032
Other Areas	36	76,267		12,266		5,565		—		94,098
Orlando WorldQuest	—	1,068		39		260		—		1,367
Disposed properties	1	1,714		191		183		—		2,088
Corporate	—	—		—		—		724		724
Total	100	$	260,616	$	48,633	$	18,183	$	724	$	328,156

	Three Months Ended September 30, 2021
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
Atlanta, GA Area	9	$	14,233	$	2,672	$	1,229	$	—	$	18,134
Boston, MA Area	2	10,651		795		1,015		—		12,461
Dallas / Ft. Worth, TX Area	7	9,424		1,301		772		—		11,497
Houston, TX Area	3	5,463		897		117		—		6,477
Los Angeles, CA Metro Area	6	16,085		2,695		1,476		—		20,256
Miami, FL Metro Area	2	4,491		1,220		195		—		5,906
Minneapolis - St. Paul, MN	2	2,714		567		664		—		3,945
Nashville, TN Area	1	11,868		4,073		809		—		16,750
New York / New Jersey Metro Area	6	11,957		3,216		572		—		15,745
Orlando, FL Area	2	4,256		167		373		—		4,796
Philadelphia, PA Area	3	5,806		403		204		—		6,413
San Diego, CA Area	2	4,208		152		373		—		4,733
San Francisco - Oakland, CA Metro Area	7	13,035		870		673		—		14,578
Tampa, FL Area	2	4,231		521		229		—		4,981
Washington D.C. - MD - VA Area	9	16,296		2,172		1,295		—		19,763
Other Areas	36	64,641		7,771		4,639		—		77,051
Orlando WorldQuest	—	975		39		215		—		1,229
Disposed properties	1	1,785		213		94		—		2,092
Corporate	—	—		—		—		627		627
Total	100	$	202,119	$	29,744	$	14,944	$	627	$	247,434

11

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

	Nine Months Ended September 30, 2022
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
Atlanta, GA Area	9	$	49,046	$	11,639	$	3,787	$	—	$	64,472
Boston, MA Area	2	37,500		3,993		3,872		—		45,365
Dallas / Ft. Worth, TX Area	7	40,145		9,410		2,742		—		52,297
Houston, TX Area	3	17,741		5,232		635		—		23,608
Los Angeles, CA Metro Area	6	58,016		9,734		3,624		—		71,374
Miami, FL Metro Area	2	18,821		5,803		674		—		25,298
Minneapolis - St. Paul, MN	2	9,303		2,705		337		—		12,345
Nashville, TN Area	1	40,041		18,006		3,077		—		61,124
New York / New Jersey Metro Area	6	39,634		12,041		2,066		—		53,741
Orlando, FL Area	2	16,557		1,102		1,181		—		18,840
Philadelphia, PA Area	3	16,394		1,638		669		—		18,701
San Diego, CA Area	2	15,384		573		1,001		—		16,958
San Francisco - Oakland, CA Metro Area	7	46,923		3,992		2,302		—		53,217
Tampa, FL Area	2	19,600		4,500		891		—		24,991
Washington D.C. - MD - VA Area	9	80,263		14,533		5,972		—		100,768
Other Areas	36	218,243		33,848		15,971		—		268,062
Orlando WorldQuest	—	3,463		146		911		—		4,520
Disposed properties	1	4,400		814		330		—		5,544
Corporate	—	—		—		—		2,164		2,164
Total	100	$	731,474	$	139,709	$	50,042	$	2,164	$	923,389

	Nine Months Ended September 30, 2021
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
Atlanta, GA Area	9	$	32,795	$	5,685	$	3,124	$	—	$	41,604
Boston, MA Area	2	16,589		1,206		2,573		—		20,368
Dallas / Ft. Worth, TX Area	7	25,084		3,207		1,916		—		30,207
Houston, TX Area	3	13,906		1,931		348		—		16,185
Los Angeles, CA Metro Area	6	37,326		4,994		3,536		—		45,856
Miami, FL Metro Area	2	13,252		2,433		531		—		16,216
Minneapolis - St. Paul, MN	2	5,361		1,256		779		—		7,396
Nashville, TN Area	1	20,806		7,010		2,204		—		30,020
New York / New Jersey Metro Area	6	21,857		5,273		1,426		—		28,556
Orlando, FL Area	2	11,383		453		1,112		—		12,948
Philadelphia, PA Area	3	11,946		688		475		—		13,109
San Diego, CA Area	2	8,918		307		938		—		10,163
San Francisco - Oakland, CA Metro Area	7	29,586		1,395		1,910		—		32,891
Tampa, FL Area	2	14,806		1,522		623		—		16,951
Washington D.C. - MD - VA Area	9	35,477		3,413		3,299		—		42,189
Other Areas	36	153,599		16,322		12,747		—		182,668
Orlando WorldQuest	—	2,681		128		628		—		3,437
Disposed properties	4	3,892		264		189		—		4,345
Corporate	—	—		—		—		1,567		1,567
Total	103	$	459,264	$	57,487	$	38,358	$	1,567	$	556,676

12

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

4. Investments in Hotel Properties, net

Investments in hotel properties, net consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Land	$	622,759	$	626,917
Buildings and improvements	3,660,742		3,711,006
Furniture, fixtures and equipment	234,836		298,121
Construction in progress	23,368		16,370
Condominium properties	9,899		10,739
Total cost	4,551,604		4,663,153
Accumulated depreciation	(1,437,076)		(1,432,443)
Investments in hotel properties, net	$	3,114,528	$	3,230,710

5. Hotel Disposition and Impairment Charges

Hotel Dispositions

On September 1, 2022, the Company sold the Sheraton in Ann Arbor, MI (“Sheraton Ann Arbor”) for total consideration of approximately $35.7 million, which included cash of $34.5 million and an interest-free receivable with an estimated fair value of $1.2 million and a face value of $1.5 million. The payment of the $1.5 million is deferred until the last day of the twenty-fourth month following the closing date. The sale resulted in a loss of approximately $29,000 for the three and nine months ended September 30, 2022, which was included in “gain (loss) on sale of assets and hotel properties” in the consolidated statements of operations. The Company also repaid the $30.0 million mortgage loan secured by the hotel property. See note 7.

The results of operations for disposed hotel properties are included in net income (loss) through the date of disposition. See note 2 for a list of fiscal year 2021 and 2022 hotel property dispositions. The following table includes condensed financial information from hotel property dispositions that occurred in 2021 and 2022 for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Total hotel revenue	$	2,088	$	2,092	$	5,544	$	4,345
Total hotel operating expenses	(1,285)		(1,326)		(4,261)		(4,114)
Gain (loss) on disposition of assets and hotel properties	4		—		4		237
Property taxes, insurance and other	(134)		(148)		(433)		(565)
Depreciation and amortization	—		(590)		(1,203)		(2,030)
Operating income (loss)	673		28		(349)		(2,127)
Interest expense and amortization of discounts and loan costs	(207)		(359)		(955)		(1,691)
Gain (loss) on extinguishment of debt	—		—		—		10,604
Income (loss) before income taxes	466		(331)		(1,304)		6,786
(Income) loss before income taxes attributable to redeemable noncontrolling interests in operating partnership	(4)		3		8		(53)
Net income (loss) before income taxes attributable to the Company	$	462	$	(328)	$	(1,296)	$	6,733

Impairment Charges

For the three and nine months ended September 30, 2022 and 2021, no impairment charges were recorded.

6. Investments in Unconsolidated Entities

OpenKey, which is controlled and consolidated by Ashford Inc., is a hospitality-focused mobile key platform that provides a universal smart phone app and related hardware and software for keyless entry into hotel guest rooms. Our investment is recorded as a component of “investment in unconsolidated entities” in our consolidated balance sheets and is accounted for

13

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

under the equity method of accounting as we have been deemed to have significant influence over the entity under the applicable accounting guidance. As of September 30, 2022, the Company has made investments in OpenKey totaling approximately $5.5 million.

As of September 30, 2022, the Company held an investment in 815 Commerce MM of approximately $8.5 million, which is developing the Le Meridien Fort Worth. Our investment is recorded as a component of “investment in unconsolidated entities” in our consolidated balance sheets and is accounted for under the equity method of accounting as we have been deemed to have significant influence over the entity under the applicable accounting guidance.

The following table summarizes our carrying value and ownership interest in unconsolidated entities:

	September 30, 2022			December 31, 2021
Carrying value of the investment in OpenKey (in thousands)	$	2,320		$	2,771
Ownership interest in OpenKey	15.1		%	16.7		%
Carrying value of the investment in 815 Commerce MM (in thousands)	$	8,482		$	8,482
Ownership interest in 815 Commerce MM	32.5		%	32.5		%

The following table summarizes our equity in earnings (loss) of unconsolidated entities (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
OpenKey	$	(147)	$	(145)	$	(451)	$	(423)

We review our investments in unconsolidated entities for impairment each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of the investment. Any impairment is recorded in equity in earnings (loss) of unconsolidated entities. No impairment charges were recorded during the three and nine months ended September 30, 2022 and 2021.

14

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

7. Indebtedness, net

Indebtedness consisted of the following (in thousands):

				September 30, 2022		December 31, 2021
Indebtedness	Collateral	Maturity	Interest Rate (1)	Debt Balance		Debt Balance
Mortgage loan (2)	1 hotel	July 2022	LIBOR (1) + 3.95%	$	—	$	33,200
Mortgage loan (3)	17 hotels	November 2022	LIBOR(1) + 3.00%	415,000		419,000
Mortgage loan (4)	1 hotel	November 2022	LIBOR(1) + 2.70%	25,000		25,000
Mortgage loan (5)	1 hotel	December 2022	LIBOR(1) + 2.25%	16,100		16,100
Mortgage loan (6)	1 hotel	January 2023	LIBOR(1) + 3.40%	37,000		37,000
Mortgage loan (7)	8 hotels	February 2023	LIBOR(1) + 3.07%	395,000		395,000
Mortgage loan (8)	2 hotels	March 2023	LIBOR(1) + 2.75%	240,000		240,000
Mortgage loan (9)	19 hotels	April 2023	LIBOR(1) + 3.20%	907,030		910,694
Mortgage loan	1 hotel	June 2023	LIBOR(1) + 2.45%	73,450		73,450
Mortgage loan (10)	7 hotels	June 2023	LIBOR(1) + 3.65%	180,720		180,720
Mortgage loan (10)	7 hotels	June 2023	LIBOR(1) + 3.39%	174,400		174,400
Mortgage loan (10)	5 hotels	June 2023	LIBOR(1) + 3.73%	221,040		221,040
Mortgage loan (10)	5 hotels	June 2023	LIBOR(1) + 4.02%	262,640		262,640
Mortgage loan (10)	5 hotels	June 2023	LIBOR(1) + 2.73%	160,000		160,000
Mortgage loan (10)	5 hotels	June 2023	LIBOR(1) + 3.68%	215,120		215,120
Mortgage loan	1 hotel	January 2024	5.49%	6,383		6,492
Mortgage loan	1 hotel	January 2024	5.49%	9,316		9,474
Term loan (11)	Equity	January 2024	16.00%	195,959		200,000
Mortgage loan	1 hotel	May 2024	4.99%	5,881		6,150
Mortgage loan	1 hotel	June 2024	LIBOR(1) + 2.00%	8,881		8,881
Mortgage loan	2 hotels	August 2024	4.85%	11,231		11,427
Mortgage loan	3 hotels	August 2024	4.90%	22,466		22,853
Mortgage loan (12)	1 hotel	November 2024	LIBOR(1) + 4.65%	85,552		84,000
Mortgage loan	3 hotels	February 2025	4.45%	47,212		50,098
Mortgage loan	1 hotel	March 2025	4.66%	23,468		23,883
Mortgage loan (13)	1 hotel	August 2025	LIBOR(1) + 3.80%	98,000		98,000
				3,836,849		3,884,622
Premiums (discounts), net				(23,544)		(32,777)
Capitalized default interest and late charges				12,161		23,511
Deferred loan costs, net				(10,047)		(15,440)
Embedded debt derivative				23,278		27,906
Indebtedness, net				$	3,838,697	$	3,887,822

_____________________________

(1)    LIBOR rates were 3.143% and 0.101% at September 30, 2022 and December 31, 2021, respectively.

(2)    On September 1, 2022, we sold the property securing this mortgage loan. The assets and liabilities associated with this mortgage loan have been removed from the Company's consolidated balance sheet. See note 5.

(3)    This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The third one-year extension period began in November 2021. On March 2, 2022, we repaid $4.0 million of principal on this mortgage loan.

(4)    This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions. The second one-year extension option began in November 2021. This mortgage loan has a LIBOR floor of 1.25%.

(5)     This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions. This mortgage loan has a LIBOR floor of 0.25%.

(6)    This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions.

(7)    This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The third one-year extension period began in February 2022.

(8)    This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The second one-year extension period began in March 2022.

(9)    This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The third one-year extension period began in April 2022.

(10)    This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions. The third one-year extension period began in June 2022.

15

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(11)    This term loan has two one-year extension options, subject to satisfaction of certain conditions. On September 1, 2022, we repaid $4.0 million of principal on this term loan.

(12)    This mortgage loan has two one-year extension options, subject to the satisfaction of certain conditions. This mortgage loan has a LIBOR floor of 0.10%. Effective September 23, 2022, we drew $1.6 million of the $2.0 million of future additional funding available to replenish restricted cash balances in accordance with the terms of the mortgage loan.

(13)     This mortgage loan has one one-year extension option, subject to the satisfaction of certain conditions.

We recognized net premium (discount) amortization as presented in the table below (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Line Item	2022		2021		2022		2021
Interest expense, net of discount amortization	$	(3,108)	$	(1,913)	$	(8,719)	$	(4,606)

The amortization of the net premium (discount) is computed using a method that approximates the effective interest method, which is included in “interest expense and amortization of discounts and loan costs” in the consolidated statements of operations.

During the years ended December 31, 2021 and 2020 the Company entered into forbearance and other agreements which were evaluated to be 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 loan using the effective interest method. The amount of default interest and late charges capitalized into the loan balance was $0 and $32.6 million during the three and nine months ended September 30, 2021. No gain or loss was initially recognized as the carrying amount of the original loans was not greater than the undiscounted cash flows of the modified loans. The amount of the capitalized principal that was amortized during the three and nine months ended September 30, 2022 and 2021, was $3.8 million and $11.4 million and $4.3 million and $31.9 million, respectively. These amounts are included in “interest expense and amortization of discounts and loan costs” in the consolidated statement of operations.

We have extension options relating to certain property level loans that will permit us to extend the maturity date of our loans if certain conditions are satisfied at the respective extension dates, including the achievement of debt yield targets required in order to extend such loans. To the extent we decide to extend the maturity date of the debt outstanding under the loans, we may be required to prepay a significant amount of the loans in order to meet the required debt yield targets.

We are required to maintain certain financial ratios under various debt and related agreements. If we violate covenants in any debt or related 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. As of September 30, 2022, we were in compliance with all covenants related to mortgage loans for which we entered into forbearance and other agreements. We were also in compliance with all covenants under the senior secured term loan facility with Oaktree Capital Management L.P. (“Oaktree”) (the “Oaktree Credit Agreement”). 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 Ashford Trust or Ashford Trust OP, our operating partnership, and the liabilities of such subsidiaries do not constitute the obligations of Ashford Trust or Ashford Trust OP.

16

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

8. Notes Receivable, Net and Other

Notes receivable, net are summarized in the table below (dollars in thousands):

	Interest Rate		September 30, 2022		December 31, 2021
Construction Financing Note (1) (4)
Face amount	7.0	%	$	—	$	4,000
Certificate of Occupancy Note (2) (4)
Face amount	7.0	%	$	5,250	$	5,250
Discount (3)			(275)		(527)
			4,975		4,723
Notes receivable, net			$	4,975	$	8,723

____________________________________

(1)    The outstanding principal balance and all accrued and unpaid interest was due and payable on or before the earlier of (i) the buyer closing on third-party institutional financing for the construction of improvements on the property, (ii) three years after the development commencement date, or (iii) July 9, 2024. On March 4, 2022, the Construction Financing Note was paid in full in the amount of $4.0 million.

(2)    The outstanding principal balance and all accrued and unpaid interest is due and payable on or before July 9, 2025.

(3)    The discount represents the imputed interest during the interest-free period. Interest begins accruing on July 9, 2023.

(4)    The notes receivable are secured by the 1.65-acre land parcel adjacent to the Hilton St. Petersburg Bayfront.

No cash interest income was recorded for the three and nine months ended September 30, 2022. Cash interest income of $63,000 was recorded for the three and nine months ended September 30, 2021.

We recognized discount amortization income as presented in the table below (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Line Item	2022		2021		2022		2021
Other income (expense)	$	86	$	87	$	252	$	379

As of September 30, 2022 and December 31, 2021, the expected credit loss associated with the notes receivables was immaterial.

For the three and nine months ended September 30, 2021, we received reimbursement of $80,000 and $320,000, respectively, for parking fees and recognized income of $80,000 and $89,000, respectively, which is included in “other income (expense)” in the consolidated statements of operations while the parking parcel was in development.

On August 31, 2021, the parking parcel was completed and we obtained access to utilize the parking parcel.

For the three and nine months ended September 30, 2022 and 2021, respectively, we recognized imputed interest income as presented in the table below (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Line Item	2022		2021		2022		2021
Other income (expense)	$	—	$	54	$	—	$	211

17

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On September 1, 2022, the Company sold the Sheraton Ann Arbor. See note 5. Under the purchase and sale agreement, $1.5 million of the sales price is deferred, interest free, until the last day of the 24th month following the closing date (September 30, 2024). The components of the receivable are summarized below (dollars in thousands):

	Imputed Interest Rate		September 30, 2022
Deferred Receivable
Face amount	10.0	%	$	1,500
Discount (1)			(271)
			1,229
Total			$	1,229

(1)    The discount represents the imputed interest during the interest-free period.

We recognized discount amortization income as presented in the table below (in thousands):

	Three Months Ended September 30,		Nine Months Ended September 30,
Line Item	2022		2022
Other income (expense)	$	10	$	10

We review receivables for impairment each reporting period. Under the model, the Company estimates credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument and is required to record a credit loss expense (or reversal) in each reporting period. Our assessment of impairment is based on considerable management judgment and assumptions. No impairment charges were recorded for the three and nine months ended September 30, 2022.

9. Derivative Instruments and Hedging

Interest Rate Derivatives—We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage these risks, we primarily use interest rate derivatives to hedge our debt and our cash flows, which include interest rate caps. To mitigate the nonperformance risk, we routinely use a third party’s analysis of the creditworthiness of the counterparties, which supports our belief that the counterparties’ nonperformance risk is limited. All derivatives are recorded at fair value.

The following table presents a summary of our interest rate derivatives entered into over each applicable period:

	Nine Months Ended September 30,
	2022				2021
Interest rate caps:
Notional amount (in thousands)	$	2,873,651		(1)	$	3,304,301		(1)
Strike rate low end of range	3.00		%		2.50		%
Strike rate high end of range	4.00		%		4.00		%
Effective date range	January 2022 - June 2022				January 2021 - August 2021
Termination date range	January 2023 - July 2023				November 2021 - September 2023
Total cost (in thousands)	$	5,255			$	574

_______________

(1)These instruments were not designated as cash flow hedges.

18

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We held interest rate instruments as summarized in the table below:

	September 30, 2022				December 31, 2021
Interest rate caps:
Notional amount (in thousands)	$	3,525,751		(1)	$	3,597,301		(1)
Strike rate low end of range	2.00		%		2.00		%
Strike rate high end of range	4.00		%		4.00		%
Termination date range	November 2022 - November 2024				February 2022 - November 2024
Aggregate principal balance on corresponding mortgage loans (in thousands)	$	3,506,052			$	3,438,714

_______________

(1)These instruments were not designated as cash flow hedges.

Compound Embedded Debt Derivative—Based on certain provisions in the Oaktree Credit Agreement, the Company is required to pay an exit fee. Under the applicable accounting guidance, the exit fee is considered an embedded derivative liability that meets the criteria for bifurcation from the debt host. There were other features that were bifurcated, but did not have a material value. The embedded debt derivative was initially measured at fair value and the fair value of the embedded debt derivative is estimated at each reporting period. See note 10.

10. Fair Value Measurements

Fair Value Hierarchy—For disclosure purposes, financial instruments, whether measured at fair value on a recurring or nonrecurring basis or not measured at fair value, are classified in a hierarchy consisting of three levels based on the observability of valuation inputs in the market place as discussed below:

•Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

The fair value of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps. Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (LIBOR forward curves) and volatilities (Level 2 inputs). We also incorporate credit valuation adjustments (Level 3 inputs) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.

When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at September 30, 2022, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 3.143% to 4.595% for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values of derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.

The Company initially recorded an embedded debt derivative of $43.7 million, which was attributed to the compound embedded derivative liability associated with the Oaktree term loan.

The compound embedded derivative liability is considered a Level 3 measurement due to the utilization of significant unobservable inputs in the valuation, which were based on ‘with and without’ valuation models. Based on the terms and

19

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

provisions of the Oaktree Credit Agreement, with the assistance of a valuation specialist, the Company utilized a risk neutral model to estimate the fair value of the embedded derivative features requiring bifurcation as of the respective issuance dates and as of the September 30, 2022 reporting date. The risk neutral model is designed to utilize market data and the Company’s best estimate of the timing and likelihood of the settlement events that are related to the embedded derivative features in order to estimate the fair value of the respective notes with these embedded derivative features.

The fair value of the notes with the derivative features is compared to the fair value of a plain vanilla note (excluding the derivative features), which is calculated based on the present value of the future default adjusted expected cash flows. The difference between the two values represents the fair value of the bifurcated derivative features as of each respective valuation date.

The key inputs to the valuation models that were utilized to estimate the fair value of the embedded debt derivative are described as follows:

•the default probability-weighted exit fee and prepayment cash flows are based on the contractual terms of the Oaktree Credit Agreement and the expectation of an acceleration event, including default, of the Company;

•the remaining term was determined based on the remaining time period to maturity of the related note with embedded features subject to valuation (as of the respective valuation date);

•the Company’s equity volatility estimate was based on the historical equity volatility of the Company, based on the remaining term of the respective loans;

•the risk-free rate was the discount rate utilized in the valuation and was determined based on reference to market yields for U.S. treasury debt instruments with similar terms;

•the recovery rate assumed upon occurrence of a default event was estimated based upon recovery rate data published by credit rating agencies specific to the seniority of the notes; and

•the probabilities and timing of a default-related acceleration event were estimated using an annualized probability of default which was implied from the debt issuance proceeds as of the issuance date, and updated utilizing relevant market data including market observed option-adjusted spreads as of September 30, 2022.

The following table includes a summary of the compound embedded derivative liabilities measured at fair value using significant unobservable (Level 3) inputs (in thousands):

	Fair Value
Balance at January 1, 2021	$	—
Additions	43,681
Re-measurement of fair value	(1,279)
Balance at March 31, 2021	42,402
Re-measurement of fair value	2,676
Balance at June 30, 2021	45,078
Re-measurement of fair value	(6,125)
Balance at September 30, 2021	38,953
Re-measurement of fair value	(11,047)
Balance at December 31, 2021	27,906
Re-measurement of fair value	(932)
Balance at March 31, 2022	26,974
Re-measurement of fair value	(2,977)
Balance at June 30, 2022	23,997
Re-measurement of fair value	(719)
Balance at September 30, 2022	$	23,278

20

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):

	Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2022:
Assets
Derivative assets:
Interest rate derivatives - caps	$	—	$	20,187	$	—	$	20,187	(1)
Total	$	—	$	20,187	$	—	$	20,187
Liabilities
Embedded debt derivative	$	—	$	—	$	(23,278)	$	(23,278)	(2)
Net	$	—	$	20,187	$	(23,278)	$	(3,091)
December 31, 2021:
Assets
Derivative assets:
Interest rate derivatives - caps	$	—	$	501	$	—	$	501	(1)
Total	$	—	$	501	$	—	$	501
Liabilities
Embedded debt derivative	$	—	$	—	$	(27,906)	$	(27,906)	(2)
Net	$	—	$	501	$	(27,906)	$	(27,405)

____________________________________

(1)    Reported net as “derivative assets” in our consolidated balance sheets.

(2)    Reported in “indebtedness, net” in our consolidated balance sheets.

21

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Effect of Fair Value Measured Assets and Liabilities on Condensed Consolidated Statements of Operations

The following table summarizes the effect of fair value measured assets and liabilities on our consolidated statements of operations (in thousands):

	Gain (Loss) Recognized in Income
	Three Months Ended September 30,
	2022			2021
Assets
Derivative assets:
Interest rate derivatives - floors	$	—		$	(72)
Interest rate derivatives - caps	9,055		(1)	(24)
Total	9,055			(96)
Liabilities
Derivative liabilities:
Embedded debt derivative	719			6,125
Net	$	9,774		$	6,029
Total combined
Interest rate derivatives - floors	$	—		$	(72)
Interest rate derivatives - caps	9,055			(24)
Embedded debt derivative	719			6,125
Unrealized gain (loss) on derivatives	9,774		(2)	6,029		(2)
Net	$	9,774		$	6,029

____________________________________

(1)    Amount excludes income of $133,000 associated with payments received from counterparties on interest rate caps, which is included in other income (expense) in our consolidated statements of operations.

(2)    Reported as “unrealized gain (loss) on derivatives” in our consolidated statements of operations.

	Gain (Loss) Recognized in Income
	Nine Months Ended September 30,
	2022			2021
Assets
Derivative assets:
Interest rate derivatives - floors	$	—		$	(462)
Interest rate derivatives - caps	14,431		(1)	(554)
Total	14,431			(1,016)
Liabilities
Derivative liabilities:
Embedded debt derivative	4,628			4,728
Net	$	19,059		$	3,712
Total combined
Interest rate derivatives - floors	$	—		$	(462)
Interest rate derivatives - caps	14,431			(554)
Embedded debt derivative	4,628			4,728
Unrealized gain (loss) on derivatives	19,059		(2)	3,712		(2)
Net	$	19,059		$	3,712

____________________________________

(1)    Amount excludes income of $133,000 associated with payments received from counterparties on interest rate caps, which is included in other income (expense) in our consolidated statements of operations.

(2)    Reported as “unrealized gain (loss) on derivatives” in our consolidated statements of operations.

22

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

11. Summary of Fair Value of Financial Instruments

Determining estimated fair values of our financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. Market assumptions and/or estimation methodologies used may have a material effect on estimated fair value amounts. Accordingly, estimates presented are not necessarily indicative of amounts at which these instruments could be purchased, sold, or settled. Carrying amounts and estimated fair values of financial instruments, for periods indicated, were as follows (in thousands):

	September 30, 2022				December 31, 2021
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:
Derivative assets	$	20,187	$	20,187	$	501	$	501
Financial liabilities measured at fair value:
Embedded debt derivative	$	23,278	$	23,278	$	27,906	$	27,906
Financial assets not measured at fair value:
Cash and cash equivalents	$	505,533	$	505,533	$	592,110	$	592,110
Restricted cash	132,055		132,055		99,534		99,534
Accounts receivable, net	58,601		58,601		37,720		37,720
Notes receivable, net	4,975		4,726 to 5,224		8,723		8,287 to 9,159
Due from Ashford Inc., net	1,761		1,761		25		25
Due from related parties, net	6,597		6,597		7,473		7,473
Due from third-party hotel managers	27,361		27,361		26,896		26,896
Financial liabilities not measured at fair value:
Indebtedness	$	3,813,305	$3,481,207 to $3,847,648		$	3,851,845	$3,407,210 to $3,765,858
Accounts payable and accrued expenses	135,967		135,967		117,650		117,650
Accrued interest payable	10,577		10,577		15,432		15,432
Dividends and distributions payable	3,103		3,103		3,104		3,104
Due to related parties, net	—		—		728		728
Due to third-party hotel managers	727		727		1,204		1,204

Cash, cash equivalents and restricted cash. These financial assets bear interest at market rates and have original maturities of less than 90 days. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.

Accounts receivable, net, accounts payable and accrued expenses, accrued interest payable, dividends and distributions payable, due to/from related parties, net, due to/from Ashford Inc., net and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to their short-term nature. This is considered a Level 1 valuation technique.

Notes receivable, net. The carrying amount of notes receivable, net approximates its fair value. We estimate the fair value of the notes receivable, net to be approximately 95.0% and 105.0% of the carrying value of $5.0 million at September 30, 2022 and approximately 95.0% to 105.0% of the carrying value of $8.7 million as of December 31, 2021.

Derivative assets and embedded debt derivative. See notes 9 and 10 for a complete description of the methodology and assumptions utilized in determining fair values.

Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. Current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied and adjusted for credit spreads. Credit spreads take into consideration general market conditions, maturity, and collateral. We estimated the fair value of total indebtedness to be approximately 91.3% to 100.9% of the carrying value of $3.8 billion at September 30, 2022 and approximately 88.5% to 97.8% of the carrying value of $3.9 billion at December 31, 2021. These fair value estimates are considered a Level 2 valuation technique.

23

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

12. Income (Loss) Per Share

Basic income (loss) per common share is calculated using the two-class method by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per common share is calculated using the two-class method, or treasury stock method if more dilutive, and reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share.

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per-share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Income (loss) allocated to common stockholders - basic and diluted:
Income (loss) attributable to the Company	$	(22,092)	$	(43,692)	$	(83,692)	$	(211,022)
Less: Dividends on preferred stock	(3,104)		(2,039)		(9,311)		—
Add: Dividend reversal on preferred stock, net (1)	—		—		—		1,488
Add: Gain (loss) on extinguishment of preferred stock	—		(1,789)		—		959
Add: Claw back of dividends on cancelled performance stock units	—		—		—		178
Distributed and undistributed income (loss) allocated to common stockholders - basic and diluted	$	(25,196)	$	(47,520)	$	(93,003)	$	(208,397)
Weighted average common shares outstanding:
Weighted average shares outstanding - basic and diluted	34,371		28,033		34,324		17,520
Basic income (loss) per share:
Net income (loss) allocated to common stockholders per share	$	(0.73)	$	(1.70)	$	(2.71)	$	(11.89)
Diluted income (loss) per share:
Net income (loss) allocated to common stockholders per share	$	(0.73)	$	(1.70)	$	(2.71)	$	(11.89)

_______________

(1)The dividend reversal on preferred stock, net results from the reversal of unpaid dividends which were relinquished upon each 3(a)(9) preferred exchange. These reversals exceeded the amount of dividend expense recorded for the unpaid dividends for the remaining outstanding preferred stock.

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect adjustments for the following items (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022		2021
Income (loss) allocated to common stockholders is not adjusted for:
Income (loss) attributable to redeemable noncontrolling interests in operating partnership	$	(231)	$	(367)	(1)	$	(679)	$	(3,594)	(1)
Total	$	(231)	$	(367)		$	(679)	$	(3,594)
Weighted average diluted shares are not adjusted for:
Effect of unvested restricted stock	—		—			—		26
Effect of unvested performance stock units	—		—			—		12
Effect of assumed conversion of operating partnership units	317		216			278		220
Effect of assumed issuance of shares for term loan exit fee	1,745		1,745			1,745		1,648
Total	2,062		1,961			2,023		1,906

_______________

(1)Inclusive of preferred stock dividend of $16 and $41 for the three and nine months ended September 30, 2021 allocated to redeemable noncontrolling interests in operating partnership.

24

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

13. Redeemable Noncontrolling Interests in Operating Partnership

Redeemable noncontrolling interests in the operating partnership represents the limited partners’ proportionate share of equity in earnings/losses of the operating partnership, which is an allocation of net income/loss attributable to the common unit holders 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 the units issued under our Long-Term Incentive Plan (the “LTIP units”) that are vested. Each common unit may be redeemed 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 the 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 the operating partnership or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for the 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 Ashford Trust OP, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period.

In March 2022, the Company granted approximately 1.2 million Performance LTIP units, representing 250% of the target, with a grant date fair value of $10.02 per share and a vesting period of three years. During the second quarter, the Company’s stockholders approved an increase to the incentive stock plan, which is sufficient to cover the expected settlements. The 2022 awards, which were originally classified as liability awards, are now classified as equity awards, within temporary equity, which resulted in a remeasurement of the award at a new fair value of $5.64 per share.

With respect to the 2020 award agreements, the number of Performance LTIP units actually earned may range from 0% to 200% of target based on achievement of specified absolute and relative total stockholder returns based on the formulas determined by the Company’s compensation committee on the grant date. The performance criteria for the Performance LTIP units are based on market conditions under the relevant literatures. The corresponding compensation cost is recognized ratably over the service period for the award as the service is rendered, based on the grant date fair value of the award, regardless of the actual outcome of the market condition.

With respect to the 2021 and 2022 award agreements, the criteria for the Performance LTIP units are based on performance conditions and market conditions under the relevant literature. The corresponding compensation cost is recognized, based on the grant date fair value of the award, ratably over the service period for the award as the service is rendered, which may vary from period to period, as the number of performance grants earned may vary based on the estimated probable achievement of certain performance targets (performance conditions). The number of Performance LTIP Units to be earned based on the applicable performance conditions is determined upon the final vesting date. The initial calculation of the Performance LTIP units earned can range from 0% to 200% of target, which is further subjected to a specified absolute total stockholder return modifier (market condition) based on the formulas determined by the Company’s compensation committee on the grant date. This will result in an adjustment (75% to 125%) of the initial calculation of the number of performance awards earned based on the applicable performance targets resulting in a final award calculation ranging from 0% to 250% of the target amount.

As of September 30, 2022, there were approximately 1.3 million Performance LTIP units outstanding, representing 200% of the target number granted for the 2020 grants and 250% for the 2021 and 2022 grants.

In May 2022, approximately 81,000 LTIP units were issued to independent directors with a fair value of approximately $450,000, which vested immediately upon grant and have been expensed during the nine months ended September 30, 2022.

As of September 30, 2022, we have issued a total of approximately 1.6 million LTIP and Performance LTIP units, net of Performance LTIP cancellations. All LTIP and Performance LTIP units other than approximately 1.3 million units (1.2 million

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

of which are Performance LTIP units) have reached full economic parity with, and are convertible into, common units upon vesting.

The following table presents the common units redeemed and the fair value upon redemption (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Common units converted to stock	—		—		—		1
Fair value of common units converted	$	—	$	—	$	—	$	41

The following table presents the redeemable noncontrolling interest in Ashford Trust and the corresponding approximate ownership percentage:

	September 30, 2022			December 31, 2021
Redeemable noncontrolling interests (in thousands)	$	21,988		$	22,742
Cumulative adjustments to redeemable noncontrolling interests (1) (in thousands)	184,796			186,756
Ownership percentage of operating partnership	0.91		%	0.63		%

____________________________________

(1)    Reflects the excess of the redemption value over the accumulated historical costs.

We allocated net (income) loss to the redeemable noncontrolling interests and declared aggregate cash distributions to holders of common units and holders of LTIP units, as presented in the table below (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Allocated net (income) loss to the redeemable noncontrolling interests	$	231	$	367	$	679	$	3,594
Performance LTIP dividend claw back upon cancellation	—		—		—		(454)

14. Equity and Equity-Based Compensation

Common Stock Dividends—The board of directors did not declare a quarterly common stock dividend in 2022 or 2021.

Restricted Stock—We incur stock-based compensation expense in connection with restricted stock awarded to certain employees of Ashford LLC and its affiliates. We also issue common stock to certain of our independent directors, which vests immediately upon issuance.

In May 2022, approximately 16,000 shares of common stock were issued to independent directors with a fair value of approximately $90,000, which vested immediately upon grant and have been expensed during the nine months ended September 30, 2022.

Performance Stock Units—The compensation committee of the board of directors of the Company may authorize the issuance of performance stock units (“PSUs”), which have a cliff vesting period of three years, to certain executive officers and directors from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if, when and to the extent the applicable vesting criteria have been achieved following the end of the performance and service period.

With respect to the 2020 award agreements, the number of PSUs actually earned may range from 0% to 200% of target based on achievement of specified absolute and relative total stockholder returns based on the formulas determined by the Company’s Compensation Committee on the grant date. The performance criteria for the PSUs are based on market 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 grant date fair value of the award, regardless of the actual outcome of the market condition.

With respect to the 2021 and 2022 award agreements, the criteria for the PSUs are based on performance conditions and market conditions under the relevant literature. The corresponding compensation cost is recognized, based on the grant date fair value of the award, ratably over the service period for the award as the service is rendered, which may vary from period to period, as the number of PSUs earned may vary based on the estimated probable achievement of certain performance targets

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(performance conditions). The number of PSUs to be earned based on the applicable performance conditions is determined upon the final vesting date. The initial calculation of PSUs earned can range from 0% to 200% of target, which is further subjected to a specified absolute total stockholder return modifier (market condition) based on the formulas determined by the Company’s compensation committee on the grant date. This will result in an adjustment (75% to 125%) of the initial calculation for the number of PSUs earned based on the applicable performance targets resulting in a final award calculation ranging from 0% to 250% of the target amount.

In March 2022, 34,000 PSUs with a fair value of $344,000 and a vesting period of three years were granted. The 2022 awards may be settled in cash or shares of common stock of the Company solely at the option of the Company. During the second quarter, the Company’s stockholders approved an increase to the incentive stock plan, which is sufficient to cover the expected settlements. The 2022 awards, which were originally classified as liability awards, are now classified as equity awards, which resulted in a remeasurement of the award at a new fair value of $194,000.

Common Stock Resale Agreement—On September 9, 2021, the Company and M3A LP (“M3A”) entered into a purchase agreement (the “M3A Purchase Agreement”) pursuant to which the Company may issue or sell to M3A up to 6.0 million shares of the Company’s common stock from time to time during the term of the M3A Purchase Agreement. As of September 30, 2022, the Company had issued 900,000 shares. The Company did not issue any shares during the three and nine months ended September 30, 2022 and 2021.

At-the-Market-Equity Distribution Agreement—On April 11, 2022, the Company entered into an equity distribution agreement (the “Virtu Equity Distribution Agreement”) with Virtu Americas LLC (“Virtu”), to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $100 million. We will pay Virtu a commission of approximately 1% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of November 3, 2022, the Company has not issued any common stock pursuant to the Virtu Equity Distribution Agreement.

Preferred Dividends—The board of directors declared quarterly dividends per share as presented below:

	Three Months Ended September 30,
	2022		2021
8.45% Series D Cumulative Preferred Stock	$	0.5281	$	—
7.375% Series F Cumulative Preferred Stock	0.4609		—
7.375% Series G Cumulative Preferred Stock	0.4609		—
7.50% Series H Cumulative Preferred Stock	0.4688		—
7.50% Series I Cumulative Preferred Stock	0.4688		—

From December 8, 2020 through December 31, 2021, Ashford Trust entered into privately negotiated exchange agreements with certain holders of its 8.45% Series D Cumulative Preferred Stock, 7.375% Series F Cumulative Preferred Stock, 7.375% Series G Cumulative Preferred Stock, 7.50% Series H Cumulative Preferred Stock and 7.50% Series I Cumulative Preferred Stock in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).

The table below summarizes the activity (in thousands):

	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
	Preferred Shares Tendered	Common Shares Initially Issued	Common Shares Issued (1)	Preferred Shares Tendered	Common Shares Initially Issued	Common Shares Issued (1)
8.45% Series D Cumulative Preferred Stock	45	82	81	520	3,992	471
7.375% Series F Cumulative Preferred Stock	92	162	162	1,512	10,943	1,240
7.375% Series G Cumulative Preferred Stock	189	335	335	2,702	21,009	2,402
7.50% Series H Cumulative Preferred Stock	105	436	177	1,316	9,945	1,129
7.50% Series I Cumulative Preferred Stock	120	328	186	2,119	14,698	1,623
	551	1,343	941	8,169	60,587	6,865

____________________________________

(1)    Reflects the number of shares issued after the adjustment for the reverse stock split.

Stock Repurchases—On April 6, 2022 the board of directors approved a stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock and preferred stock

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

having an aggregate value of up to $200 million. The board of directors’ authorization replaced the previous repurchase authorization that the board of directors’ authorized in December 2017. No shares of our common stock or preferred stock were repurchased during the three and nine months ended September 30, 2022 and 2021, respectively.

15. Related Party Transactions

Ashford Inc.

Advisory Agreement

Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor. Our chairman, Mr. Monty J. Bennett, also serves as chairman of the board of directors and chief executive officer of Ashford Inc.

On January 14, 2021, we entered into the Second Amended and Restated Advisory Agreement with Ashford LLC (the “Second Amended and Restated Advisory Agreement”). The Second Amended and Restated Advisory Agreement amends and restates the terms of the Amended and Restated Advisory Agreement, dated June 10, 2015, as amended by the Enhanced Return Funding Program Agreement and Amendment No. 1 to the Amended and Restated Advisory Agreement, dated as of June 26, 2018 to, among other items: (i) revise the term and termination rights; (ii) fix the percentage used to calculate the base fee thereunder at 0.70% per annum; (iii) update the list of peer group members; (iv) suspend the requirement that we maintain a minimum Consolidated Tangible Net Worth (as defined in the Second Amended and Restated Advisory Agreement) until the first fiscal quarter beginning after June 30, 2023; and (v) revise the criteria that would constitute a Company Change of Control (as defined in the Second Amended and Restated Advisory Agreement) in order to provide us additional flexibility to dispose of underperforming assets. In connection with the transactions contemplated by the Oaktree Credit Agreement on January 15, 2021, we entered into a Subordination and Non-Disturbance Agreement with Ashford Inc. and Oaktree pursuant to which we agreed to subordinate to the prior repayment in full of all obligations under the Oaktree Credit Agreement: (1) prior to the later of: (i) the second anniversary of the Oaktree Credit Agreement; and (ii) the date accrued interest “in kind” is paid in full, advisory fees (other than reimbursable expenses) in excess of 80% of such fees paid during the fiscal year ended December 31, 2019; (2) any termination fee or liquidated damages amounts under the advisory agreement, or any amount owed under the enhanced return funding program in connection with the termination of the advisory agreement or sale or foreclosure of assets financed thereunder; and (3) any payments to Lismore in connection with the transactions contemplated by the Oaktree Credit Agreement.

On March 15, 2022, we entered into a Limited Waiver Under Advisory Agreement (the “Limited Waiver”) with Ashford Trust OP, Ashford TRS, Ashford Inc. and Ashford LLC (together with Ashford Inc., the “Advisor”). As previously disclosed, the Company, Ashford Trust OP, Ashford TRS and the Advisor are parties to the Second Amended and Restated Advisory Agreement, which (i) allocates responsibility for certain employee costs between us and our advisor and (ii) permits our board of directors to issue annual equity awards in the Company or Ashford Trust OP to employees and other representatives of our advisor based on achievement by the Company of certain financial or other objectives or otherwise as our board of directors sees fit. Pursuant to the Limited Waiver, the Company, Ashford Trust OP, Ashford TRS and the Advisor waived the operation of any provision in the advisory agreement that would otherwise limit our ability, in our discretion and at our cost and expense, to award during the first and second fiscal quarters of calendar year 2022 cash incentive compensation to employees and other representatives of our advisor; provided that such awarded cash incentive compensation does not exceed $8.5 million, in the aggregate, during the waiver period.

The following table summarizes the advisory services fees incurred (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Advisory services fee
Base advisory fee	$	8,854	$	9,476	$	26,202	$	27,217
Reimbursable expenses (1)	2,430		1,979		7,365		5,191
Equity-based compensation (2)	1,229		2,412		4,609		6,702
Incentive fee	—		(6,472)		—		—
Total advisory services fee	$	12,513	$	7,395	$	38,176	$	39,110

________

(1)Reimbursable expenses include overhead, internal audit, risk management advisory, asset management services and deferred cash awards.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

(2)    Equity-based compensation is associated with equity grants of Ashford Trust’s common stock, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.

Due from related parties, net as of September 30, 2022 and December 31, 2021, includes a $1.2 million security deposit paid to Remington Hotel Corporation, an entity indirectly owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr., for office space allocated to us under our advisory agreement. It will be held as security for the payment of our allocated share of office space rental. If unused it will be returned to us upon lease expiration or earlier termination.

Pursuant to the Company’s hotel management agreements with each hotel management company, the Company bears the economic burden for casualty insurance coverage. Under the advisory agreement, Ashford Inc. secures casualty insurance policies to cover Ashford Trust, Braemar Hotels & Resorts Inc. (“Braemar”), their hotel managers, as needed, and Ashford Inc. The total loss estimates included in such policies are based on the collective pool of risk exposures from each party. Ashford Inc.’s risk management department manages the casualty insurance program. Each year Ashford Inc.’s risk management department collects funds from Ashford Trust, Braemar and their respective hotel management companies, to fund the casualty insurance program as needed, on an allocated basis.

Lismore

On March 20, 2020, Lismore Capital II LLC (formerly known as Lismore Capital LLC) (“Lismore”), a subsidiary of Ashford Inc., entered into an agreement with the Company to seek modifications, forbearances or refinancings of the Company’s loans (as amended and restated on July 1, 2020, the “Lismore Agreement”). The Lismore Agreement expired on April 6, 2022.

Upon entering into the agreement with Lismore, the Company made a payment of $5.1 million. No amounts under this payment can be clawed back. As of September 30, 2022, the Company has paid $5.1 million related to periodic installments of which approximately $5.0 million has been expensed in accordance with the agreement. Additionally, the independent members of the board of directors of Ashford Inc. accelerated approximately $506,000 in claw back credit due to Ashford Trust which, absent a waiver, would occur after the expiration of the Lismore Agreement. Such claw back credit was due to Ashford Trust in connection with certain properties Ashford Trust no longer owns. This amount was offset against base advisory fees. Approximately $149,000 may be offset against fees under the agreement that are eligible for claw back under the agreement. The $149,000 was offset against the April 2022 base advisory fee payment. Further, the Company has incurred approximately $8.8 million in success fees under the agreement in connection with each signed forbearance or other agreement, of which no amounts are available for claw back. For the three and nine months ended September 30, 2022, the Company recognized expense of $125,000 and $768,000, respectively, which is included in “write-off of premiums, loan costs and exit fees.” For the three and nine months ended September 30, 2021, the Company recognized expense of $643,000 and $4.3 million, respectively, which is included in “write-off of premiums, loan costs and exit fees.”

In June 2022 the Company entered into modification agreements on six mortgage loans associated with the terms of each loan’s extension options. In connection with the modification agreements the Company paid total fees of $607,000 to Lismore. Additionally in June 2022, the Company amended its loan secured by the Sheraton Ann Arbor. In connection with this amendment, the Company paid a fee of $83,000 to Lismore.

Ashford Securities

On December 31, 2020, an Amended and Restated Contribution Agreement (the “Amended and Restated Contribution Agreement”) was entered into by Ashford Inc., Ashford Trust and Braemar with respect to expenses to be reimbursed to Ashford Securities LLC, a subsidiary of Ashford Inc. (“Ashford Securities”). Beginning on the effective date of the Amended and Restated Contribution Agreement, costs will be allocated based upon an allocation percentage of 50% to Ashford Inc., 50% to Braemar and 0% to Ashford Trust. Upon reaching the earlier of $400 million in aggregate preferred equity offerings raised, or June 10, 2023, there will be an amended and restated true up (the “Amended and Restated True-up Date”) among Ashford Inc., Ashford Trust and Braemar whereby the actual expense reimbursement paid by each company will be based on the actual amount of capital raised by Ashford Inc., Ashford Trust and Braemar, respectively, through Ashford Securities. After the Amended and Restated True-Up Date, the expense reimbursements will be allocated among Ashford Inc., Ashford Trust and Braemar quarterly based on the actual capital raised on their behalf, respectively, through Ashford Securities. On January 27, 2022, Ashford Trust, Braemar and Ashford Inc. entered into a Second Amended and Restated Contribution Agreement which provided for an additional $18 million in expenses to be reimbursed with all expenses allocated 45% to Ashford Trust, 45% to Braemar and 10% to Ashford Inc.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

As of September 30, 2022, Ashford Trust has funded approximately $5.6 million. As of September 30, 2022, $110,000 of the pre-funded amount was included in “other assets” and $5.0 million was included in “due from Ashford Inc., net” on our consolidated balance sheet. As of December 31, 2021, $632,000 of the pre-funded amount was included in “other assets” on our consolidated balance sheet. During the third quarter of 2022, the funding estimate was revised based on the latest capital raise estimates of the aggregate equity offerings raised by Ashford Securities, this resulted in a credit to expense of approximately $3.9 million.

The table below summarizes the amount Ashford Trust has expensed related to reimbursed operating expenses of Ashford Securities (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Line Item	2022		2021		2022		2021
Corporate, general and administrative	$	(3,522)	$	—	$	(2,331)	$	19

Enhanced Return Funding Program

The Enhanced Return Funding Program Agreement (the “ERFP Agreement”) generally provides that Ashford LLC will make investments to facilitate the acquisition of properties by Ashford Trust OP that are recommended by Ashford LLC, in an aggregate amount of up to $50 million (subject to increase to up to $100 million by mutual agreement). The investments will equal 10% of the property acquisition price and will be made, either at the time of the property acquisition or at any time generally in the following three years, in exchange for hotel FF&E for use at the acquired property or any other property owned by Ashford Trust OP.

The initial term of the ERFP Agreement is two years (the “Initial Term”), unless earlier terminated pursuant to the terms of the ERFP Agreement. At the end of the Initial Term, the ERFP Agreement shall automatically renew for successive one-year periods (each such period a “Renewal Term”) unless either Ashford Inc. or Ashford Trust provides written notice to the other at least 60 days in advance of the expiration of the Initial Term or Renewal Term, as applicable, that such notifying party intends not to renew the ERFP Agreement.

As a result of the Embassy Suites New York Manhattan Times Square acquisition in 2019, under the ERFP Agreement, we were entitled to receive $19.5 million from Ashford LLC in the form of future purchases of hotel FF&E. In the second quarter of 2019, the Company sold $8.1 million of hotel FF&E from certain Ashford Trust hotel properties to Ashford LLC. On March 13, 2020, an extension agreement was entered into whereby the required FF&E acquisition date by Ashford LLC of the remaining $11.4 million was extended to December 31, 2022.

On November 25, 2020, the independent members of the board of directors of Ashford Trust granted Ashford Inc., in its sole and absolute discretion, the right to set-off against the Embassy Suites New York ERFP balance, the fees pursuant to the advisory agreement and Lismore Agreement that have been or may be deferred by Ashford Inc. On April 20, 2021, the Company delivered written notice to Ashford LLC of its intention not to renew the ERFP Agreement. As a result, the ERFP Agreement terminated in accordance with its terms at the end of the current term on June 26, 2021.

Design and Construction Services

In connection with Ashford Inc.’s August 8, 2018 acquisition of Remington Lodging’s design and construction business, we entered into a design and construction services agreement with Ashford Inc.’s subsidiary, Premier Project Management LLC (“Premier”), pursuant to which Premier provides design and construction services to our hotels, including construction management, interior design, architectural services, and the purchasing, freight management, and supervision of installation of FF&E and related services. Pursuant to the design and construction services agreement, we pay Premier: (a) design and construction fees of up to 4% of project costs; and (b) market service fees at current market rates with respect to construction management, interior design, FF&E purchasing, FF&E expediting/freight management, FF&E warehousing and FF&E installation and supervision. On March 20, 2020, we amended the design and construction services agreement to provide that Premier’s fees shall be paid by the Company to Premier upon the completion of any work provided by third-party vendors to the Company.

Hotel Management Services

At September 30, 2022, Remington Hotels managed 67 of our 99 hotel properties and the WorldQuest condominium properties.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

We pay monthly hotel management fees equal to the greater of approximately $16,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues as well as annual incentive management fees, if certain operational criteria were met, and other general and administrative expense reimbursements primarily related to accounting services.

Pursuant to the terms of the Letter Agreement dated March 13, 2020 (the “Hotel Management Letter Agreement”), in order to allow Remington Hotels to better manage its corporate working capital and to ensure the continued efficient operation of our hotels, we agreed to pay the base fee and to reimburse all expenses on a weekly basis for the preceding week, rather than on a monthly basis. The Hotel Management Letter Agreement went into effect on March 13, 2020 and will continue until terminated by us.

We also have a mutual exclusivity agreement with Remington Hotels, pursuant to which: (i) we have agreed to engage Remington Hotels to provide management services with respect to any hotel we acquire or invest in, to the extent we have the right and/or control the right to direct the management of such hotel; and (ii) Remington Hotels has agreed to grant us a right of first refusal to purchase any opportunity to develop or construct a hotel that it identifies that meets our initial investment guidelines. We are not, however, obligated to engage Remington Hotels if our independent directors either: (i) unanimously vote to hire a different manager or developer; or (ii) by a majority vote elect not to engage such related party because either special circumstances exist such that it would be in the best interest of our Company not to engage such related party, or, based on the related party’s prior performance, it is believed that another manager could perform the management or other duties materially better.

Braemar

As of December 31, 2021, the Company had a $728,000 payable to Braemar, included in “due to related parties, net” on our consolidated balance sheet. The payable related to a legal settlement between Ashford Trust and the City of San Francisco regarding a transfer tax matter associated with the transfer of The Clancy from Ashford Trust to Braemar upon Braemar’s 2013 spin-off from Ashford Trust. The transfer taxes were initially paid by Braemar at the time of the spin-off. In January 2022, the City of San Francisco remitted payment, which was then remitted to Braemar by the Company.

16. Commitments and Contingencies

Restricted Cash—Under certain management and debt agreements for our hotel properties existing at September 30, 2022, escrow payments are required for insurance, real estate taxes, and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4% to 6% of gross revenues for capital improvements. From time to time, the Company may work with its property managers and lenders in order to utilize lender and manager held reserves to fund operating shortfalls.

Franchise Fees—Under franchise agreements for our hotel properties existing at September 30, 2022, we pay franchisor royalty fees between 3% and 6% of gross rooms revenue and, in some cases, 1% to 3% of food and beverage revenues. Additionally, we pay fees for marketing, reservations, and other related activities aggregating between 1% and 4% of gross rooms revenue and, in some cases, food and beverage revenues. These franchise agreements expire on varying dates between 2023 and 2047. When a franchise term expires, the franchisor has no obligation to renew the franchise. In addition, if we breach the franchise agreement and the franchisor terminates a franchise prior to its expiration date, we may be liable for up to three times the average annual fees incurred for that property.

The table below summarizes the franchise fees incurred (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Line Item	2022		2021		2022		2021
Other hotel expenses	$	15,616	$	11,641	$	43,789	$	27,695

Management Fees—Under hotel management agreements for our hotel properties existing at September 30, 2022, we pay monthly hotel management fees equal to the greater of approximately $16,000 per hotel (increased annually based on consumer price index adjustments) or 3% of gross revenues, or in some cases 2% to 7% of gross revenues, as well as annual incentive management fees, if applicable. These hotel management agreements expire from 2023 through 2038, with renewal options. If we terminate a hotel management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term and liquidated damages or, in certain circumstances, we may substitute a new management agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Income Taxes—We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years 2017 through 2021 remain subject to potential examination by certain federal and state taxing authorities.

Potential Pension Liabilities—Upon our 2006 acquisition of a hotel property, certain employees of such hotel were unionized and covered by a multi-employer defined benefit pension plan. At that time, no unfunded pension liabilities existed. Subsequent to our acquisition, a majority of employees, who are employees of the hotel manager, Remington Lodging, petitioned the employer to withdraw recognition of the union. As a result of the decertification petition, Remington Lodging withdrew recognition of the union. At the time of the withdrawal, the National Retirement Fund, the union’s pension fund, indicated unfunded pension liabilities existed. The National Labor Relations Board filed a complaint against Remington Lodging seeking, among other things, a ruling that Remington Lodging’s withdrawal of recognition was unlawful. The pension fund entered into a settlement agreement with Remington Lodging on November 1, 2011, providing that Remington Lodging will continue to make monthly pension fund payments pursuant to the collective bargaining agreement. As of September 30, 2022, Remington Lodging continues to comply with the settlement agreement by making the appropriate monthly pension fund payments. If Remington Lodging does not comply with the settlement agreement, we have agreed to indemnify Remington Lodging for the payment of the unfunded pension liability, if any, as set forth in the settlement agreement equal to $1.7 million minus the monthly pension payments made by Remington Lodging since the settlement agreement. To illustrate, if Remington Lodging - as of the date a final determination occurs - has made monthly pension payments equaling $100,000, Remington Lodging’s remaining withdrawal liability would be the unfunded pension liability of $1.7 million minus $100,000 (or $1.6 million). This remaining unfunded pension liability would be paid to the pension fund in annual installments of $84,000 (but may be made monthly or quarterly, at Remington Lodging’s election), which shall continue for the remainder of 20 years, which is capped, unless Remington Lodging elects to pay the unfunded pension liability amount earlier.

Litigation—Palm Beach Florida Hotel and Office Building Limited Partnership, et al. v. Nantucket Enterprises, Inc. This litigation involves a landlord tenant dispute from 2008. This litigation was resolved in 2017 with the determination and reimbursement of attorney’s fees being the only remaining dispute. On July 26, 2018, we paid $544,000 as part of a settlement on certain legal fees. The negotiations relating to the potential payment of the remaining attorneys’ fees are still ongoing, pending the appeal of a contempt order against the Maraist Law Firm for failing to produce their fee records. As of September 30, 2022, we have accrued approximately $504,000 in legal fees, which represents the Company’s estimate of the amount of potential remaining legal fees that could be owed.

On December 4, 2015, Pedro Membrives filed a class action lawsuit against HHC TRS FP Portfolio LLC, Remington Lodging & Hospitality, LLC, Remington Holdings LLC, Mark A. Sharkey, Archie Bennett, Jr., Monty J. Bennett, Christopher Peckham, and any other related entities in the Supreme Court of New York, Nassau County, Commercial Division. On August 30, 2016, the complaint was amended to add Michele Spero as a Plaintiff and Remington Long Island Employers, LLC as a defendant. The lawsuit is captioned Pedro Membrives and Michele Spero, individually and on behalf of others similarly situated v. HHC TRS FP Portfolio LLC, Remington Lodging & Hospitality, LLC, Remington Holdings LLC, Remington Long Island Employers, LLC, et al., Index No. 607828/2015 (Sup. Ct. Nassau Cty.). The plaintiffs allege that the owner and management company of the Hyatt Regency Long Island hotel violated New York law by improperly retaining service charges rather than distributing them to employees. In 2017, the class was certified. On July 24, 2018, the trial court granted the plaintiffs’ motion for summary judgment on liability. The defendants appealed the summary judgment to the New York State Appellate Division, Second Department (the “Second Department”). The Second Department heard oral arguments in this matter on April 20, 2021, and on July 14, 2021, affirmed in part, and modified in part, the trial court’s summary judgment in favor of the plaintiffs. Due to the Second Department’s holding, all information produced during discovery, and the continuing cost and risk, to both sides, a settlement was reached, signed by the parties and approved by the Court in June 2022. The settlement requires the Company to establish a settlement fund that will be used to pay plaintiffs that opt in by November 10, 2022 and are entitled to receive payment, and to fund administrative expenses. The Company previously recorded an accrual of approximately $4.2 million. As of September 30, 2022, the Company has paid $100,000 and the accrual is approximately $4.1 million.

On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects nine hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: (1) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (2) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class, however, the total number of employees in the class has not been

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

definitively determined and is the subject of continuing discovery. The opt out period has been extended until such time that discovery has concluded. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time. As of September 30, 2022, no amounts have been accrued.

We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the Americans with Disability Act and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations, or cash flow. However, our assessment may change depending upon the development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty. If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.

17. Segment Reporting

We operate in one business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refers to owning hotel properties through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics. As of September 30, 2022 and December 31, 2021, all of our hotel properties were domestically located.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The following discussion should be read in conjunction with the unaudited financial statements and notes thereto appearing elsewhere herein. This report contains forward-looking statements within the meaning of the federal securities laws. Ashford Hospitality Trust, Inc. (the “Company,” “we,” “our” or “us”) cautions investors that any forward-looking statements presented herein, or which management may express orally or in writing from time to time, are based on management’s beliefs and assumptions at that time.

Throughout this Form 10-Q, we make forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature: 

•the impact of the ongoing COVID-19 pandemic, including the resurgence of cases relating to the spread of the Delta, Omicron or other potential variants, on our business, financial condition, liquidity and results of operations;

•the impact of numerous governmental travel restrictions and other orders related to COVID-19 on our business including one or more possible recurrences of COVID-19 case surges causing state and local governments to reinstate travel restrictions;

•our business and investment strategy;

•anticipated or expected purchases or sales of assets;

•our projected operating results;

•completion of any pending transactions;

•our ability to restructure existing property level indebtedness;

•our ability to secure additional financing to enable us to operate our business during the pendency of COVID-related business weakness, which has materially impacted our operating cash flows and cash balances;

•our understanding of our competition;

•projected capital expenditures; and

•the impact of technology on our operations and business.

Such forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our securities. Additionally, the following factors could cause actual results to vary from our forward-looking statements:

•factors discussed in our Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022, including those set forth under the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties,” as supplemented by our subsequent Quarterly Reports on Form 10-Q and other filings under the Exchange Act;

•adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and travel restrictions in regions where our hotels are located, and one or more possible recurrences of COVID-19 case surges causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or local governments;

•changes in interest rates;

•macroeconomic conditions, such as a prolonged period of weak economic growth and volatility in capital markets;

•extreme weather conditions may cause property damage or interrupt business;

•actions by the lenders of the Oaktree Credit Agreement to foreclose on our assets which are pledged as collateral;

•general volatility of the capital markets and the market price of our common and preferred stock;

•general and economic business conditions affecting the lodging and travel industry;

•changes in our business or investment strategy;

•availability, terms, and deployment of capital;

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•unanticipated increases in financing and other costs, including a rise in interest rates;

•changes in our industry and the market in which we operate, interest rates, or local economic conditions;

•the degree and nature of our competition;

•actual and potential conflicts of interest with Ashford Inc. and its subsidiaries (including Ashford LLC, Remington Hotels and Premier Project Management LLC (“Premier”)), Braemar and its subsidiaries, our executive officers and our non-independent directors;

•changes in personnel of Ashford LLC or the lack of availability of qualified personnel;

•changes in governmental regulations, accounting rules, tax rates and similar matters;

•legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”), and related rules, regulations and interpretations governing the taxation of real estate investment trusts (“REITs”);

•limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and

•future sales and issuances of our common stock or other securities might result in dilution and could cause the price of our common stock to decline.

When considering forward-looking statements, you should keep in mind the matters summarized under “Item 1A. Risk Factors” in Part I of our 2021 Form 10-K filed on February 28, 2022 and this Quarterly Report, and the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, could cause our actual results and performance to differ significantly from those contained in our forward-looking statements. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 outbreak and the numerous government travel restrictions imposed in response thereto. The extent to which COVID-19 impacts us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Quarterly Report. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Quarterly Report to conform these statements to actual results and performance, except as may be required by applicable law.

EXECUTIVE OVERVIEW

General

As of September 30, 2022, we owned 99 consolidated hotel properties which represents 22,116 total rooms. Currently, all of our hotel properties are located in the United States.

Based on our primary business objectives and forecasted operating conditions, our current key priorities and financial strategies include, among other things:

•maintain significant cash and cash equivalents liquidity;

•opportunistically exchange preferred stock into common stock;

•disposition of non-core hotel properties;

•pursuing capital market activities to enhance long-term stockholder value;

•implementing selective capital improvements designed to increase profitability;

•implementing effective asset management strategies to minimize operating costs and increase revenues;

•financing or refinancing hotels on competitive terms;

•utilizing hedges and derivatives to mitigate risks;

•pursue opportunistic value-add additions to our hotel portfolio: and

•making other investments or divestitures that our board of directors deems appropriate.

Our current investment strategy is to focus on owning predominantly full-service hotels in the upper upscale segment in domestic markets that have revenue per available room (“RevPAR”) generally less than twice the national average. We believe that as supply, demand, and capital market cycles change, we will be able to shift our investment strategy to take advantage of new lodging-related investment opportunities as they may develop. Our board of directors may change our investment strategy

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at any time without stockholder approval or notice. We will continue to seek ways to benefit from the cyclical nature of the hotel industry.

We are advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.

We do not operate any of our hotel properties directly; instead we employ hotel management companies to operate them for us under management contracts. As of September 30, 2022, Remington Hotels, a subsidiary of Ashford Inc., managed 67 of our 99 hotel properties and WorldQuest. Third-party management companies managed the remaining hotel properties.

Ashford Inc. also provides other products and services to us or our hotel properties through certain entities in which Ashford Inc. has an ownership interest. These products and services include, but are not limited to, design and construction services, debt placement and related services, audio visual services, real estate advisory services, insurance claims services, hypoallergenic premium rooms, broker-dealer and distribution services and mobile key technology.

Mr. Monty J. Bennett is chairman and chief executive officer of Ashford Inc. and, together with Mr. Archie Bennett, Jr., as of September 30, 2022, owned approximately 610,246 shares of Ashford Inc. common stock, which represented an approximate 19.6% ownership interest in Ashford Inc., and owned 18,758,600 shares of Ashford Inc. Series D Convertible Preferred Stock, which is exercisable (at an exercise price of $117.50 per share) into an additional approximate 3,991,191 shares of Ashford Inc. common stock, which if exercised as of September 30, 2022, would have increased the Bennetts’ ownership interest in Ashford Inc. to 64.8%, provided that prior to August 8, 2023, the voting power of the holders of the Ashford Inc. Series D Convertible Preferred Stock is limited to 40% of the combined voting power of all of the outstanding voting securities of Ashford Inc. entitled to vote on any given matter. The 18,758,600 Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 360,000 shares owned by trusts.

Recent Developments

On September 10, 2021, the Company filed a registration statement on Form S-11, which was declared effective by the SEC on September 29, 2021, to register for resale under the Securities Act, 6,040,888 shares of Common Stock that may be issued to M3A under the M3A Purchase Agreement. In connection with the Company’s recent eligibility to use a Form S-3, the Company filed a Form S-3, which was declared effective by the SEC on April 1, 2022, to replace the previous Form S-11 and to register for resale any future resales by M3A under the M3A Purchase Agreement.

On March 4, 2022, the Company filed an initial registration statement on Form S-3 with the SEC, as amended on April 29, 2022, related to the Company’s non-traded Series J Preferred Stock and Series K Preferred Stock. The registration statement was declared effective by the SEC on May 4, 2022, and contemplates the offering of up to (i) 20.0 million shares of Series J Preferred Stock or Series K Preferred Stock in a primary offering and (ii) 8.0 million shares of Series J Preferred Stock or Series K Preferred Stock pursuant to a dividend reinvestment plan. On May 5, 2022, we filed our prospectus for the offering with the SEC. Ashford Securities, a subsidiary of Ashford Inc., serves as the dealer manager for the offering. On April 28, 2022, we filed with the State Department of Assessments and Taxation of the State of Maryland (“SDAT”) articles supplementary to our Articles of Amendment and Restatement classifying and designating an aggregate of 28,000,000 shares of our unissued and undesignated shares of preferred stock and provided for their issuance either as shares of Series J Preferred Stock or Series K Preferred Stock. We also caused our operating partnership to execute Amendment No. 10 to the Seventh Amended and Restated Agreement of Limited Partnership to amend the terms of our operating partnership to conform to the terms of the articles supplementary for the Series J Preferred Stock and Series K Preferred Stock. As of November 3, 2022, no shares of Series J Preferred Stock or Series K Preferred Stock have been issued.

On September 14, 2022, we filed with the SDAT new articles supplementary to our Articles of Amendment and Restatement with respect to our Series J Preferred Stock and Series K Preferred Stock to remove (i) references to our option to list the preferred stock in the redemption provisions and (ii) and the provisions regarding certain change of control conversion rights (which were only triggered upon a listing of the preferred stock). All other terms of the Series J Preferred Stock and the Series K Preferred Stock (including, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption) remain unchanged by the filing of the new articles supplementary. We also caused our operating partnership to execute Amendment No. 11 to the Seventh Amended and Restated Agreement of Limited Partnership to conform to the terms of the Series J Preferred Stock and Series K Preferred Stock, respectively, as set forth in the new articles supplementary.

On April 6, 2022 the board of directors approved a repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock and preferred stock having an aggregate value of

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up to $200 million. The board of directors’ authorization replaced the previous repurchase authorization that the board of directors’ authorized in December 2017.

On April 11, 2022, the Company entered into the Virtu Equity Distribution Agreement with Virtu, to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $100 million. We will pay Virtu a commission of approximately 1% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of November 3, 2022, the Company has not issued any common stock pursuant to the Virtu Equity Distribution Agreement.

On April 15, 2022, Ashford Inc. and Ashford Hospitality Services, LLC, a subsidiary of Ashford Inc. (“Ashford Services”), agreed with Jeremy Welter, the Chief Operating Officer of Ashford Inc., that, effective on July 15, 2022, Mr. Welter would terminate employment with and service to Ashford Inc., Ashford Services and their affiliates. Mr. Welter was also the Chief Operating Officer of the Company and accordingly his service as Chief Operating Officer of the Company also ended on July 15, 2022.

On July 1, 2022, the Bank of America Pool 3 mortgage loan was brought current and is no longer in default.

In August 2022, given the recent increases in the federal funds rate and interest rates on short-term U.S. Treasury securities, the independent members of our board of directors approved the engagement of our Advisor to proactively manage and invest the Company’s excess cash in short-term U.S. Treasury securities (the “Cash Management Strategy”). As consideration for the Advisor’s services under this engagement, the Company will pay the Advisor an annual fee equal 20 basis points (0.20%) of the average daily balance of the Company’s excess cash invested by the Advisor (the “Cash Management Fee”). The Cash Management Fee will be calculated and payable monthly in arrears. Investment of the Company’s excess cash pursuant to the Cash Management Strategy commenced in October 2022.

On September 1, 2022, we completed the sale of the Sheraton Ann Arbor for total consideration of approximately $35.7 million, which included cash of $34.5 million and an interest-free receivable with an estimated fair value of $1.2 million and a face value of $1.5 million. The sale resulted in a loss of approximately $29,000 for the three and nine months ended September 30, 2022, which was included in “gain (loss) on sale of assets and hotel properties” in the consolidated statements of operations. The Company also repaid the $30.0 million mortgage loan that was secured by the hotel property.

RESULTS OF OPERATIONS

Key Indicators of Operating Performance

We use a variety of operating and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include:

•Occupancy—Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of hotels in a given period.

•ADR—ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We use ADR to assess the pricing levels that we are able to generate.

•RevPAR—RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.

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RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs.

Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.

We also use funds from operations (“FFO”), Adjusted FFO, earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) and Adjusted EBITDAre as measures of the operating performance of our business. See “Non-GAAP Financial Measures.”

The following table summarizes changes in key line items from our consolidated statements of operations (in thousands):

	Three Months Ended September 30,				Favorable/ (Unfavorable) Change		Nine Months Ended September 30,				Favorable/ (Unfavorable) Change
	2022		2021				2022		2021
Total revenue	$	328,156	$	247,434	$	80,722	$	923,389	$	556,676	$	366,713
Total hotel operating expenses	(216,256)		(172,342)		(43,914)		(614,190)		(398,321)		(215,869)
Property taxes, insurance and other	(17,541)		(17,222)		(319)		(51,289)		(51,821)		532
Depreciation and amortization	(49,428)		(53,069)		3,641		(152,444)		(166,291)		13,847
Advisory services fee	(12,513)		(7,395)		(5,118)		(38,176)		(39,110)		934
Corporate, general and administrative	884		(2,414)		3,298		(6,730)		(12,113)		5,383
Gain (loss) on disposition of assets and hotel properties	(11)		103		(114)		273		395		(122)
Operating income (loss)	33,291		(4,905)		38,196		60,833		(110,585)		171,418
Equity in earnings (loss) of unconsolidated entities	(147)		(145)		(2)		(451)		(423)		(28)
Interest income	1,576		124		1,452		2,153		137		2,016
Other income (expense)	241		208		33		426		682		(256)
Interest expense and amortization of discounts and loan costs	(61,023)		(43,003)		(18,020)		(152,975)		(112,003)		(40,972)
Write-off of premiums, loan costs and exit fees	(1,378)		(1,034)		(344)		(3,076)		(5,200)		2,124
Gain (loss) on extinguishment of debt	—		1,292		(1,292)		—		11,896		(11,896)
Unrealized gain (loss) on derivatives	9,774		6,029		3,745		19,059		3,712		15,347
Income tax (expense) benefit	(4,657)		(2,615)		(2,042)		(10,340)		(2,916)		(7,424)
Net income (loss)	(22,323)		(44,049)		21,726		(84,371)		(214,700)		130,329
(Income) loss attributable to noncontrolling interest in consolidated entities	—		(10)		10		—		84		(84)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	231		367		(136)		679		3,594		(2,915)
Net income (loss) attributable to the Company	$	(22,092)	$	(43,692)	$	21,600	$	(83,692)	$	(211,022)	$	127,330

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All hotel properties owned during the three and nine months ended September 30, 2022 and 2021 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed, operating results for certain hotel properties are not comparable for three and nine months ended September 30, 2022 and 2021. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following dispositions affect reporting comparability related to our consolidated financial statements:

Hotel Property	Location	Type	Date
Le Meridien Minneapolis (1)	Minneapolis, MN	Disposition	January 20, 2021
SpringHill Suites Durham (1)	Durham, NC	Disposition	April 29, 2021
SpringHill Suites Charlotte (1)	Charlotte, NC	Disposition	April 29, 2021
Sheraton Ann Arbor (1)	Ann Arbor, MI	Disposition	September 1, 2022

____________________________________

(1)    Collectively referred to as “Hotel Dispositions”

The following table illustrates the key performance indicators of all hotel properties and WorldQuest owned for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
RevPAR (revenue per available room)	$	126.24		$	97.59		$	119.19		$	74.37
Occupancy	70.98		%	62.80		%	67.60		%	54.06		%
ADR (average daily rate)	$	177.84		$	155.39		$	176.32		$	137.56

The following table illustrates the key performance indicators of the 99 comparable hotel properties and WorldQuest that were included for the full three and nine September 30, 2022 and 2021, respectively:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
RevPAR (revenue per available room)	$	126.16		$	97.59		$	119.40		$	74.77
Occupancy	71.00		%	62.84		%	67.70		%	54.23		%
ADR (average daily rate)	$	177.70		$	155.30		$	176.37		$	137.88

Comparison of the Three Months Ended September 30, 2022 and 2021

Net Income (Loss) Attributable to the Company. Net loss attributable to the Company decreased $21.6 million, from $43.7 million for the three months ended September 30, 2021 (the “2021 quarter”) to $22.1 million for the three months ended September 30, 2022 (the “2022 quarter”) as a result of the factors discussed below.

Revenue. Rooms revenue from our hotel properties and WorldQuest increased $58.5 million, or 28.9%, to $260.6 million in the 2022 quarter compared to the 2021 quarter. This increase is attributable to higher rooms revenue of $58.6 million at our comparable hotel properties and WorldQuest as our hotel properties recover from the effects of the COVID-19 pandemic partially offset by a decrease of $71,000 from our Hotel Dispositions. Our comparable hotel properties experienced an increase of 14.4% in room rates and an 816 basis point increase in occupancy.

Food and beverage revenue increased $18.9 million, or 63.5%, to $48.6 million. This increase is attributable to higher sales of food and beverage of $18.9 million at our comparable hotel properties and WorldQuest as our hotel properties recover from the effects of the COVID-19 pandemic.

Other hotel revenue, which consists mainly of Internet access, parking, and spa revenue, increased $3.2 million, or 21.7%, to $18.2 million. This increase is primarily attributable to an increase of $3.2 million at our comparable hotel properties as our hotel properties recover from the effects of the COVID-19 pandemic. Other non-hotel revenue increased $97,000, or 15.5%, to $724,000 in the 2022 quarter as compared to the 2021 quarter.

Hotel Operating Expenses. Hotel operating expenses increased $43.9 million, or 25.5%, to $216.3 million. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and management fees. Direct expenses increased $26.5 million in the 2022 quarter as compared to the 2021 quarter, as our hotel properties recover from the effects of the COVID-19 pandemic, which was comprised of an increase

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of $26.4 million from our comparable hotel properties and WorldQuest and an increase of $87,000 from our Hotel Dispositions. Direct expenses were 30.8% of total hotel revenue for the 2022 quarter and 30.1% for the 2021 quarter. Indirect expenses and management fees increased $17.4 million in the 2022 quarter as compared to the 2021 quarter, which was comprised of an increase of $17.5 million from our comparable hotel properties and WorldQuest as our hotel properties recover from the effects of the COVID-19 pandemic, partially offset by a decrease of $128,000 from our Hotel Dispositions.

Property Taxes, Insurance and Other. Property taxes, insurance and other expense increased $319,000, or 1.9%, to $17.5 million during the 2022 quarter compared to the 2021 quarter, which was due to an increase of $333,000 from our comparable hotel properties and WorldQuest partially offset by a decrease of $14,000 from our Hotel Dispositions.

Depreciation and Amortization. Depreciation and amortization decreased $3.6 million, or 6.9%, to $49.4 million during the 2022 quarter compared to the 2021 quarter, which was primarily due to a decrease of $3.1 million from our comparable hotel properties primarily related to fully depreciated assets and WorldQuest and a decrease of $590,000 from our Hotel Dispositions.

Advisory Services Fee. Advisory services fee increased $5.1 million, or 69.2%, to $12.5 million in the 2022 quarter compared to the 2021 quarter. The advisory services fee represents fees incurred in connection with the advisory agreement between Ashford Inc. and the Company. In the 2022 quarter, the advisory services fee was comprised of a base advisory fee of $8.9 million, equity-based compensation of $1.2 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and reimbursable expenses of $2.4 million. In the 2021 quarter, the advisory services fee was comprised of a base advisory fee of $9.5 million, equity-based compensation of $2.4 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc., reimbursable expenses of $2.0 million and an incentive fee reversal of $6.5 million.

Corporate, General and Administrative. Corporate, general and administrative expense changed $3.3 million, or 136.6%, from an expense of $2.4 million in the 2021 quarter to a credit of $884,000 in the 2022 quarter. The decrease was primarily attributable to a revision to the estimated contribution amount associated with the Second Amended and Restated Contribution Agreement with Ashford Securities that resulted in a $3.5 million expense reduction, lower legal and professional fees of $554,000 and lower public company costs of $85,000 which were partially offset by higher other miscellaneous expenses of $842,000.

Gain (Loss) on Disposition of Assets and Hotel Properties. Gain (loss) on disposition of assets and hotel properties changed $114,000 from a gain of $103,000 in the 2021 quarter to a loss of $11,000 in the 2022 quarter. The gain in the 2021 quarter of $103,000 was primarily related to the sale of two WorldQuest condominiums. The loss in the 2022 quarter was primarily related to the sale of the Sheraton Ann Arbor.

Equity in Earnings (Loss) of Unconsolidated Entities. Equity in loss of unconsolidated entities, which consists of our share of earnings/loss from OpenKey, was $147,000 in the 2022 quarter and $145,000 in the 2021 quarter.

Interest Income. Interest income was $1.6 million and $124,000 for the 2022 quarter and the 2021 quarter, respectively. The income in the 2022 quarter was primarily related to bank account interest resulting from the increase in interest rates.

Other Income (Expense). Other income increased $33,000 from $208,000 in the 2021 quarter to $241,000 in the 2022 quarter. In the 2022 quarter, we recorded $133,000 of income related to payments from counterparties on interest rate caps and miscellaneous income of $108,000. In the 2021 quarter, we recorded miscellaneous income of $208,000.

Interest expense and amortization of discounts and loan costs. Interest expense and amortization of discounts and loan costs increased $18.0 million, or 41.9%, to $61.0 million during the 2022 quarter compared to the 2021 quarter. The increase is primarily due to $17.5 million at our comparable hotel properties primarily due to higher LIBOR rates, a $790,000 increase attributable to the amortization of the embedded debt derivative of the Oaktree loan and an increase of $42,000 from our Hotel Dispositions. These increases were partially offset by lower credits to interest expense of $292,000 related to the amortization credit of default interest and late charges recorded on mortgage loans previously in default. The average LIBOR rates in the 2022 quarter and the 2021 quarter were 2.47% and 0.09%, respectively.

Write-off of Premiums, Loan Costs and Exit Fees. Write-off of premiums, loan costs and exit fees increased $344,000 to $1.4 million in the 2022 quarter compared to the 2021 quarter. In the 2022 quarter, we wrote off unamortized loan costs of $265,000 and a pro-rata write-off of the Oaktree loan discount in the amount of $514,000 upon making a $4.0 million pay down on the Oaktree loan. Additionally, we incurred third-party fees of $599,000. In the 2021 quarter, we recognized Lismore fees of $643,000 that reflects the amortization over the service period of the Lismore Agreement. Additionally, we wrote off unamortized loan costs in the amount of $332,000 and recognized a prepayment penalty of $63,000 related to the Hilton Boston Back Bay loan refinance.

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Gain (loss) on extinguishment of debt. Gain on extinguishment of debt was $1.3 million in the 2021 quarter, which primarily related to the write-off of capitalized default interest that was being amortized as a credit to interest expense related to the refinance of the Hilton Boston Back Bay loan.

Unrealized Gain (Loss) on Derivatives. Unrealized gain on derivatives increased $3.7 million from $6.0 million in the 2021 quarter to $9.8 million in the 2022 quarter. In the 2022 quarter, we recognized an unrealized gain of $719,000 from the revaluation of the embedded debt derivative and an unrealized gain of $9.1 million associated with interest rate caps. In the 2021 quarter, we recognized an unrealized gain of $6.1 million from the revaluation of the embedded debt derivative, partially offset by an unrealized loss of $72,000 on interest rate floors and an unrealized loss of $25,000 associated with interest rate caps.

Income Tax (Expense) Benefit. Income tax expense increased $2.0 million, from $2.6 million in the 2021 quarter to $4.7 million in the 2022 quarter. This change was primarily due to an increase in the profitability of our Ashford TRS entities due to the continued recovery from the COVID-19 pandemic in the 2022 quarter compared to the 2021 quarter.

(Income) Loss Attributable to Noncontrolling Interest in Consolidated Entities. Our noncontrolling interest partner in consolidated entities was allocated income of $10,000 in the 2021 quarter. On December 31, 2021, the Company acquired the remaining interest in the consolidated entities.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net losses of $231,000 in the 2022 quarter and $367,000 in the 2021 quarter. Redeemable noncontrolling interests represented ownership interests of 0.91% and 0.77% in the operating partnership at September 30, 2022 and 2021, respectively.

Comparison of the Nine Months Ended September 30, 2022 and 2021

Net Income (Loss) Attributable to the Company. Net loss attributable to the Company decreased $127.3 million from $211.0 million for the nine months ended September 30, 2021 (the “2021 period”) to $83.7 million for the nine months ended September 30, 2022 (the “2022 period”) as a result of the factors discussed below.

Revenue. Rooms revenue from our hotel properties and WorldQuest increased $272.2 million, or 59.3%, to $731.5 million in the 2022 period compared to the 2021 period. This increase is attributable to higher rooms revenue of $271.7 million at our comparable hotel properties and WorldQuest as our hotel properties recover from the effects of the COVID-19 pandemic and an increase of $509,000 from our Hotel Dispositions. Our comparable hotel properties experienced an increase of 27.9% in room rates and an increase of 1,347 basis points in occupancy.

Food and beverage revenue increased $82.2 million, or 143.0%, to $139.7 million in the 2022 period compared to the 2021 period. This increase is attributable to higher sales of food and beverage of $81.7 million at our comparable hotel properties and WorldQuest as a result of the COVID-19 pandemic and an increase of $550,000 from our Hotel Dispositions.

Other hotel revenue, which consists mainly of Internet access, parking, and spa revenue, increased $11.7 million, or 30.5%, to $50.0 million in the 2022 period compared to the 2021 period. This increase is attributable to higher other revenue of $11.5 million from our comparable hotel properties and WorldQuest as our hotel properties recover from the effects of the COVID-19 pandemic and an increase of $141,000 from our Hotel Dispositions. Other revenue increased $597,000, or 38.1%, to $2.2 million in the 2022 period compared to the 2021 period.

Hotel Operating Expenses. Hotel operating expenses increased $215.9 million, or 54.2%, to $614.2 million in the 2022 period compared to the 2021 period. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and management fees. Direct expenses increased $119.3 million in the 2022 period compared to the 2021 period, comprised of an increase of $118.8 million from our comparable hotel properties and WorldQuest as our hotel properties continue to recover from the effects of the COVID-19 pandemic and an increase of $475,000 from our Hotel Dispositions. Direct expenses were 30.3% of total hotel revenue for the 2022 period and 28.8% for the 2021 period. Indirect expenses and management fees increased $96.6 million in the 2022 period compared to the 2021 period, comprised of an increase of $96.9 million from our comparable hotel properties and WorldQuest as a result of the COVID-19 pandemic, partially offset by a decrease of $329,000 from our Hotel Dispositions.

Property Taxes, Insurance and Other. Property taxes, insurance and other expense decreased $532,000 or 1.0%, to $51.3 million in the 2022 period compared to the 2021 period, which was primarily due to a decrease of $132,000 from our Hotel Dispositions and $400,000 at our comparable hotel properties primarily due to real estate assessments or appeals that resulted in lower property taxes.

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Depreciation and Amortization. Depreciation and amortization decreased $13.8 million or 8.3%, to $152.4 million in the 2022 period compared to the 2021 period, which consisted of lower depreciation of $826,000 from our Hotel Dispositions and lower depreciation of $13.0 million at our comparable hotel properties and WorldQuest primarily due to fully depreciated assets.

Advisory Services Fee. Advisory services fee decreased $934,000, or 2.4%, to $38.2 million in the 2022 period compared to the 2021 period. The advisory services fee represents fees incurred in connection with the advisory agreement between Ashford Inc. and the Company. In the 2022 period, the advisory services fee was comprised of a base advisory fee of $26.2 million, equity-based compensation of $4.6 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and reimbursable expenses of $7.4 million. In the 2021 period, the advisory services fee was comprised of a base advisory fee of $27.2 million, equity-based compensation of $5.2 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. and reimbursable expenses of $6.7 million.

Corporate, General and Administrative. Corporate, general and administrative expense decreased $5.4 million, or 44.4%, to $6.7 million in the 2022 period compared to the 2021 period. The decrease was primarily attributable to lower legal and professional fees of $5.1 million and a revision to the estimated contribution amount associated with the Second Amended and Restated Contribution Agreement with Ashford Securities that resulted in in an expense reduction of $2.4 million. These decreases were partially offset by higher public company costs of $412,000 and higher miscellaneous expenses of $1.6 million.

Gain (Loss) on Disposition of Assets and Hotel Properties. Gain on disposition of assets and hotel properties decreased $122,000, from $395,000 in the 2021 period to $273,000 in the 2022 period. The gain in the 2021 period was primarily related to a franchise fee reimbursement of $327,000 related to the disposition of the Embassy Suites New York Manhattan Times Square and a gain related to the sale of two WorldQuest condominiums. The gain in the 2022 period was primarily related to a gain related to the sale of six WorldQuest condominiums.

Equity in Earnings (Loss) of Unconsolidated Entities. Equity in loss of unconsolidated entities was $451,000 in the 2022 period and $423,000 in the 2021 period, which consisted of our share of loss from OpenKey.

Interest Income. Interest income was $2.2 million and $137,000 in the 2022 period and the 2021 period, respectively. The income in the 2022 period was primarily related to bank account interest resulting from the increase in interest rates.

Other Income (Expense). Other income decreased $256,000 from $682,000 in the 2021 period to $426,000 in the 2022 period. In the 2022 period we recorded income of $133,000 related to payments from counterparties on interest rate caps and miscellaneous income of $293,000. In the 2021 period, we recorded miscellaneous income of $682,000.

Interest Expense and Amortization of Discounts and Loan Costs. Interest expense and amortization of discounts and loan costs increased $41.0 million, or 36.6%, to $153.0 million in the 2022 period compared to the 2021 period. The increase was primarily due to an $18.6 million increase at our comparable hotel properties primarily due to higher LIBOR rates, $5.3 million attributable to amortization of the embedded debt derivative and the Oaktree term loan as a result of it being outstanding for all of 2022 and lower credits to interest expense of $17.3 million related to the amortization credit of default interest and late charges recorded on mortgage loans previously in default. These increases were partially offset by a decrease of $214,000 from our Hotel Dispositions. The average LIBOR rates in the 2022 period and the 2021 period were 1.24% and 0.10%, respectively.

Write-off of Premiums, Loan Costs and Exit Fees. Write-off of premiums, loan costs and exit fees decreased $2.1 million to $3.1 million in the 2022 period compared to the 2021 period. In the 2022 period, we recognized Lismore fees of $643,000 that reflects the amortization over the service period of the Lismore Agreement (see note 15 to our consolidated financial statements) and Lismore fees of $690,000 related to loan modifications. We wrote off unamortized loan costs of $265,000 and a pro-rata write-off of the Oaktree loan discount in the amount of $514,000 upon making a $4.0 million pay down on the Oaktree loan. Additionally, we incurred third-party fees of $964,000. In the 2021 period, we recognized Lismore fees of $5.0 million that reflects the amortization over the service period of the Lismore Agreement, which were partially offset by a net credit of $177,000 related to third-party fees, totaling $4.8 million. Additionally, we wrote off unamortized loan costs in the amount of $332,000 and incurred a prepayment penalty of $63,000 related to the Hilton Boston Back Bay loan refinance.

Gain (loss) on extinguishment of debt. Gain on extinguishment of debt was $11.9 million in the 2021 period, which primarily related to the foreclosure of the SpringHill Suites Durham and SpringHill Suites Charlotte in the amount of $10.6 million and a gain of $1.4 million related to the write-off of capitalized default interest that was being amortized as a credit to interest expense related to the refinance of the Hilton Boston Back Bay loan.

Unrealized Gain (Loss) on Derivatives. Unrealized gain on derivatives increased $15.3 million from $3.7 million in the 2021 period to $19.1 million in the 2022 period. In the 2022 period, we recorded an unrealized gain of $4.6 million from the

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revaluation of the embedded debt derivative in the Oaktree Credit Agreement and an unrealized gain of $14.4 million from interest rate caps. In the 2021 period, we recorded unrealized gain of $4.7 million from the revaluation of the embedded debt derivative, partially offset by unrealized losses of $462,000 from interest rate floors and $554,000 from interest rate caps.

Income Tax (Expense) Benefit. Income tax expense increased $7.4 million, from $2.9 million in the 2021 period to $10.3 million in the 2022 period. This change was primarily due to an increase in the profitability of our Ashford TRS entities due to the continued recovery from the COVID-19 pandemic in the 2022 period compared to the 2021 period.

(Income) Loss from Consolidated Entities Attributable to Noncontrolling Interests. Our noncontrolling interest partner in consolidated entities was allocated a loss of $84,000 in the 2021 period. On December 31, 2021, the Company acquired the remaining interest in the consolidated entities.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net losses of $679,000 and $3.6 million in the 2022 period and the 2021 period, respectively. Redeemable noncontrolling interests represented ownership interests of 0.91% and 0.77% in the operating partnership at September 30, 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

As of September 30, 2022, the Company held cash and cash equivalents of $505.5 million and restricted cash of $132.1 million, the vast majority of which is comprised of lender and manager-held reserves. As of September 30, 2022, $27.4 million was also due to the Company from third-party hotel managers, most of which is held by one of the Company’s managers and is available to fund hotel operating costs.

In 2020, the Company ceased paying dividends on both its common stock and preferred stock. During the fourth quarter of 2021, the Company reinstated and caught up on all of its accrued preferred dividends and currently plans to pay dividends on its preferred stock going forward. The Company does not anticipate paying any dividends on its outstanding common stock for the foreseeable future.

Based on our current level of operations, our cash flow from operations and our existing cash balances should be adequate to meet upcoming anticipated requirements for interest and principal payments on debt (excluding any potential final maturity payments), working capital, and capital expenditures for the next 12 months and dividends required to maintain our status as a REIT for U.S. federal income tax purposes. With respect to upcoming maturities, no assurances can be given that we will be able to refinance our upcoming maturities. Additionally, no assurances can be given that we will obtain additional financings or, if we do, what the amount and terms will be. Our failure to obtain future financing under favorable terms could adversely impact our ability to execute our business strategy or may result in lender foreclosure.

Our cash position from operations is affected primarily by macro industry movements in occupancy and rate as well as our ability to control costs. Further, interest rates can greatly affect the cost of our debt service as well as the value of any financial hedges we may put in place. We monitor industry fundamentals and interest rates very closely. Capital expenditures above our reserves will affect cash flow as well.

Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotels decline below a threshold. When these provisions are triggered, substantially all of the profit generated by our hotels is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. During a cash trap, certain disbursements from these hotel operating cash receipts would require consent of our lenders. These cash trap provisions have been triggered on nearly all of our mortgage loans containing cash trap provisions. As of September 30, 2022, 85% of our hotels were in cash traps and approximately $18.6 million of our restricted cash was subject to these cash traps. Our loans may remain subject to cash trap provisions for a substantial period of time which could limit our flexibility and adversely affect our financial condition or our qualification as a REIT.

We have extension options relating to certain property level loans that will permit us to extend the maturity date of our loans if certain conditions are satisfied at the respective extension dates, including the achievement of debt yield targets required in order to extend such loans. To the extent we decide to extend the maturity date of the debt outstanding under the loans, we may be required to prepay a significant amount of the loans in order to meet the required debt yield targets. There can be no assurances that we will be able to meet the conditions for extensions pursuant to the respective terms of such loans.

We are required to maintain certain financial ratios under various debt and related agreements. If we violate covenants in any debt or related agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when

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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 Ashford Trust or Ashford Trust OP, our operating partnership, and the liabilities of such subsidiaries do not constitute the obligations of Ashford Trust or Ashford Trust OP. As of November 3, 2022, the Company is not expecting to be required to repay all or a portion of our indebtedness before maturity.

Mortgage and mezzanine loans are nonrecourse to the borrowers, except for customary exceptions or carve-outs that trigger recourse liability to the borrowers in certain limited instances. Recourse obligations typically include only the payment of costs and liabilities suffered by lenders as a result of the occurrence of certain bad acts on the part of the borrower. However, in certain cases, carve-outs could trigger recourse obligations on the part of the borrower with respect to repayment of all or a portion of the outstanding principal amount of the loans. We have entered into customary guaranty agreements pursuant to which we guaranty payment of any recourse liabilities of the borrowers that result from non-recourse carve-outs (which include, but are not limited to, fraud, misrepresentation, willful conduct resulting in waste, misappropriations of rents following an event of default, voluntary bankruptcy filings, unpermitted transfers of collateral, and certain environmental liabilities). In the opinion of management, none of these guaranty agreements, either individually or in the aggregate, are likely to have a material adverse effect on our business, results of operations, or financial condition.

We have entered into certain customary guaranty agreements pursuant to which we guaranty payment of any recourse liabilities of our subsidiaries or joint ventures that may result from non-recourse carve-outs, which include, but are not limited to, fraud, misrepresentation, willful misconduct resulting in waste, misappropriations of rents following an event of default, voluntary bankruptcy filings, unpermitted transfers of collateral, delinquency of trade payables and certain environmental liabilities. Certain of these guarantees represent a guaranty of material amounts, and if we are required to make payments under those guarantees, our liquidity could be adversely affected.

We are committed to an investment strategy where we will pursue hotel-related investments as suitable situations arise. Funds for future hotel-related investments are expected to be derived, in whole or in part, from cash on hand, future borrowings under a credit facility or other loans, or proceeds from additional issuances of common stock, preferred stock (including net proceeds from the sale of any shares of Series J Preferred Stock or Series K Preferred Stock), or other securities, asset sales, and joint ventures. However, we have no formal commitment or understanding to invest in additional assets, and there can be no assurance that we will successfully make additional investments. We may, when conditions are suitable, consider additional capital raising opportunities.

Our existing hotel properties are mostly located in developed areas with competing hotel properties. Future occupancy, ADR, and RevPAR of any individual hotel could be materially and adversely affected by an increase in the number or quality of competitive hotel properties, home sharing companies or apartment operators offering short-term rentals in its market area. Competition could also affect the quality and quantity of future investment opportunities.

Debt Transactions

On June 7, 2022, we amended our $33.2 million mortgage loan, secured by the Sheraton Ann Arbor hotel, which extended the maturity to December 2022 and included a $3.2 million principal repayment. The amended mortgage loan was interest only and bears interest at a rate of LIBOR + 4.40%, and had a LIBOR floor of 0.25%.

On July 1, 2022, the Bank of America Pool 3 mortgage loan was brought current and is no longer in default.

On September 1, 2022, we completed the sale of the Sheraton Ann Arbor and repaid the $30.0 million mortgage loan with the proceeds from the sale.

Equity Transactions

On March 1, 2022, the Company filed a new universal shelf registration statement on Form S-3 with the SEC. The shelf registration statement provides for the registration of unspecified amounts of equity and debt securities with a maximum aggregate offering price of up to $300 million. The SEC declared the Form S-3 effective on April 1, 2022.

On March 4, 2022, the Company filed an initial registration statement on Form S-3 with the SEC, as amended on April 29, 2022, related to the Company’s non-traded Series J Preferred Stock and Series K Preferred Stock. The registration statement was declared effective by the SEC on May 4, 2022, and contemplates the offering of up to (i) 20.0 million shares of Series J Preferred Stock or Series K Preferred Stock in a primary offering and (ii) 8.0 million shares of Series J Preferred Stock or Series K Preferred Stock pursuant to a dividend reinvestment plan. On May 5, 2022, we filed our prospectus for the offering with the SEC. Ashford Securities, a subsidiary of Ashford Inc., serves as the dealer manager for the offering. On April 28, 2022, we filed with the State Department of Assessments and Taxation of the State of Maryland articles supplementary to our

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Articles of Amendment and Restatement classifying and designating an aggregate of 28,000,000 shares of our unissued and undesignated shares of preferred stock and provided for their issuance either as shares of Series J Preferred Stock or Series K Preferred Stock. We also caused our operating partnership to execute Amendment No. 10 to the Seventh Amended and Restated Agreement of Limited Partnership to amend the terms of our operating partnership to conform to the terms of the articles supplementary for the Series J Preferred Stock and Series K Preferred Stock.

As of November 3, 2022, no shares of Series J Preferred Stock or Series K Preferred Stock have been issued. We intend to use the net proceeds from the sale of any shares of Series J Preferred Stock or Series K Preferred Stock for general corporate purposes, including, without limitation, payment of dividends on our outstanding capital stock, repayment of debt or other maturing obligations, financing future hotel-related investments, redemption of outstanding shares of our preferred stock, capital expenditures and working capital.

On September 9, 2021, the Company and M3A LP (“M3A”) entered into a purchase agreement (the “M3A Purchase Agreement”), which provides that subject to the terms and conditions set forth therein, the Company may sell to M3A up to approximately 6.0 million shares of common stock, from time to time during the term of the M3A Purchase Agreement. On September 10, 2021, the Company filed a registration statement on Form S-11, which was declared effective by the SEC on September 29, 2021, to register for resale under the Securities Act, 6,040,888 shares of Common Stock that may be issued to M3A under the M3A Purchase Agreement. In connection with the Company’s recent eligibility to use a Form S-3, the Company filed a registration statement on Form S-3, which was declared effective by the SEC on April 1, 2022, to replace the previous Form S-11 and to register for resale any future resales by M3A under the M3A Purchase Agreement. As of November 3, 2022, the Company has issued approximately 900,000 shares of common stock for gross proceeds of approximately $12.9 million under the M3A Purchase Agreement.

On April 6, 2022 the board of directors approved a stock repurchase program (the “Repurchase Program”) pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock and preferred stock having an aggregate value of up to $200 million. The board of directors’ authorization replaced the 2017 Repurchase Program that the board of directors’ authorized in December 2017. No shares have been repurchased under the Repurchase Program.

On April 11, 2022, the Company entered into the Virtu Equity Distribution Agreement with Virtu, to sell from time to time shares of the Company’s common stock having an aggregate offering price of up to $100 million. We will pay Virtu a commission of approximately 1% of the gross sales price of the shares of our common stock sold. The Company may also sell some or all of the shares of our common stock to Virtu as principal for its own account at a price agreed upon at the time of sale. As of November 3, 2022, the Company has not issued any common stock pursuant to the Virtu Equity Distribution Agreement.

On September 14, 2022, we filed with the SDAT new articles supplementary to our Articles of Amendment and Restatement with respect to our Series J Preferred Stock and Series K Preferred Stock to remove (i) references to our option to list the preferred stock in the redemption provisions and (ii) and the provisions regarding certain change of control conversion rights (which were only triggered upon a listing of the preferred stock). All other terms of the Series J Preferred Stock and the Series K Preferred Stock (including, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption) remain unchanged by the filing of the new articles supplementary. We also caused our operating partnership to execute Amendment No. 11 to the Seventh Amended and Restated Agreement of Limited Partnership to conform to the terms of the Series J Preferred Stock and Series K Preferred Stock, respectively, as set forth in the new articles supplementary.

Sources and Uses of Cash

Our principal sources of funds to meet our cash requirements include cash on hand, cash flow from operations, capital market activities, property refinancing proceeds and asset sales. Additionally, our principal uses of funds are expected to include possible operating shortfalls, owner-funded capital expenditures, dividends, new investments, and debt interest and principal payments. Items that impacted our cash flow and liquidity during the periods indicated are summarized as follows:

Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by (used in) operating activities, pursuant to our consolidated statements of cash flows, which includes changes in balance sheet items, were $39.5 million and $(113.5) million for the nine months ended September 30, 2022 and 2021, respectively. Cash flows provided by (used in) operations were impacted by the COVID-19 pandemic, changes in hotel operations, our hotel dispositions in 2021 and 2022 as well as the timing of collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties and settling with hotel managers.

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Net Cash Flows Provided by (Used in) Investing Activities. For the nine months ended September 30, 2022, net cash flows used in investing activities were $28.3 million. Cash outflows consisted of $68.1 million for capital improvements made to various hotel properties partially offset by cash inflows of $34.7 million from proceeds received from the sale of the Sheraton Ann Arbor and six WorldQuest condominium units, $1.0 million of proceeds from property insurance and $4.0 million from the payment of a note receivable.

For the nine months ended September 30, 2021, net cash flows used in investing activities were $9.7 million. Cash outflows primarily consisted of $19.0 million for capital improvements made to various hotel properties. Cash outflows were partially offset by cash inflows of $7.5 million from proceeds received from the sale of the Le Meridien Minneapolis and $2.0 million of proceeds from property insurance.

Net Cash Flows Provided by (Used in) Financing Activities. For the nine months ended September 30, 2022, net cash flows used in financing activities were $65.2 million. Cash outflows primarily consisted of $49.3 million for repayments of indebtedness, $2.3 million for payments of loan costs and exit fees, $9.3 million of payments for preferred dividends and $5.3 million of payments for derivatives, partially offset by $1.6 million of borrowings on indebtedness.

For the nine months ended September 30, 2021, net cash flows provided by financing activities were $713.9 million. Cash inflows primarily consisted of $293.5 million from borrowings on indebtedness, net of commitment fee and $548.4 million of net proceeds from issuances of common stock, partially offset by cash outflows of $106.7 million for repayments of indebtedness, $20.5 million for payments of loan costs and exit fees and $824,000 of payments for derivatives.

Dividend Policy. Distributions are authorized by our board of directors and declared by us based upon a variety of factors deemed relevant by our directors. The board of directors will continue to review our distribution policy on at least a quarterly basis. Our ability to pay distributions to our preferred or common stockholders will depend, in part, upon our receipt of distributions from our operating partnership. This, in turn, may depend upon receipt of lease payments with respect to our properties from indirect subsidiaries of our operating partnership, the management of our properties by our hotel managers and general business conditions (including the impact of the COVID-19 pandemic). Distributions to our stockholders are generally taxable to our stockholders as ordinary income. However, since a portion of our investments are equity ownership interests in hotels, which result in depreciation and non-cash charges against our income, a portion of our distributions may constitute a non-taxable return of capital, to the extent of a stockholder’s tax basis in the stock. To the extent that it is consistent with maintaining our REIT status, we may maintain accumulated earnings of Ashford TRS in that entity.

On December 7, 2021, our board of directors reviewed and approved our 2022 dividend policy. We do not anticipate paying any dividends on our outstanding common stock for any quarter during 2022 and expect to pay dividends on our outstanding preferred stock during 2022. Declaration of dividends in 2022 on our preferred stock may require a determination by our board of directors, at the time of any determination, that the Company would continue to have positive equity on a fair value basis, among other considerations. Our board of directors will continue to review our dividend policy and make future announcements with respect thereto. We may incur indebtedness to meet distribution requirements imposed on REITs under the Code to the extent that working capital and cash flow from our investments are insufficient to fund required distributions. We may pay dividends in excess of our cash flow.

SEASONALITY

Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months, while certain other properties maintain higher occupancy rates during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. Quarterly revenue also may be adversely affected by renovations and repositionings, our managers’ effectiveness in generating business and by events beyond our control, such as extreme weather conditions, natural disasters, terrorist attacks or alerts, civil unrest, government shutdowns, airline strikes or reduced airline capacity, economic factors and other considerations affecting travel. To the extent that cash flows from operations are insufficient during any quarter to enable us to make quarterly distributions to maintain our REIT status due to temporary or seasonal fluctuations in lease revenue, we expect to utilize cash on hand, borrowings and common stock to fund required distributions. However, we cannot make any assurances that we will make distributions in the future.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the

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most difficult judgments are described in our 2021 Form 10-K. There have been no material changes in these critical accounting policies.

NON-GAAP FINANCIAL MEASURES

The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, Funds From Operations (“FFO”) and Adjusted FFO are presented to help our investors evaluate our operating performance.

EBITDA is defined as net income (loss) before interest expense and amortization of discounts and loan costs, net, income taxes, depreciation and amortization, as adjusted to reflect only the Company’s portion of EBITDA of unconsolidated entities. In addition, we exclude impairment charges on real estate, and gain/loss on disposition of assets and hotel properties and gain/loss of unconsolidated entities to calculate EBITDAre, as defined by NAREIT.

We then further adjust EBITDAre to exclude certain additional items such as gain/loss on insurance settlements, write-off of premiums, loan costs and exit fees, other income/expense, net, transaction and conversion costs, legal, advisory and settlement costs, dead deal costs, advisory services incentive fee and stock/unit-based compensation and non-cash items such as amortization of unfavorable contract liabilities, gain/loss on extinguishment of debt, unrealized gains/losses on marketable securities and derivative instruments, as well as our portion of adjustments to EBITDAre of unconsolidated entities.

We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they are useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions. EBITDA, EBITDAre and Adjusted EBITDAre as calculated by us may not be comparable to EBITDA, EBITDAre and Adjusted EBITDAre reported by other companies that do not define EBITDA, EBITDAre and Adjusted EBITDAre exactly as we define the terms. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income (loss) or net income (loss) determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as an indicator of liquidity.

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The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	(22,323)	$	(44,049)	$	(84,371)	$	(214,700)
Interest expense and amortization of discounts and loan costs	61,023		43,003		152,975		112,003
Depreciation and amortization	49,428		53,069		152,444		166,291
Income tax expense (benefit)	4,657		2,615		10,340		2,916
Equity in (earnings) loss of unconsolidated entities	147		145		451		423
Company’s portion of EBITDA of unconsolidated entities	(148)		(144)		(452)		(419)
EBITDA	92,784		54,639		231,387		66,514
(Gain) loss on disposition of assets and hotel properties	11		(103)		(273)		(395)
EBITDAre	92,795		54,536		231,114		66,119
Amortization of unfavorable contract liabilities	43		52		138		158
Write-off of premiums, loan costs and exit fees	1,378		1,034		3,076		5,200
(Gain) loss on extinguishment of debt	—		(1,292)		—		(11,896)
Other (income) expense, net	(241)		(209)		(426)		(683)
Transaction and conversion costs	(3,401)		332		(1,828)		2,254
Legal, advisory and settlement costs	(96)		2,435		(59)		6,932
Unrealized (gain) loss on derivatives	(9,774)		(6,029)		(19,059)		(3,712)
Dead deal costs	76		—		356		689
Uninsured remediation costs	—		(33)		—		341
Stock/unit-based compensation	1,275		2,490		5,324		7,539
Advisory services incentive fee	—		(6,472)		—		—
Company’s portion of adjustments to EBITDAre of unconsolidated entities	1		2		12		14
Adjusted EBITDAre	$	82,056	$	46,846	$	218,648	$	72,955

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We calculate FFO and Adjusted FFO in the following table. FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to common stockholders, computed in accordance with GAAP, excluding gains or losses on disposition of assets and hotel properties, plus depreciation and amortization of real estate assets, impairment charges on real estate assets, and after adjustments for unconsolidated entities and noncontrolling interests in the operating partnership. Adjustments for unconsolidated entities are calculated to reflect FFO on the same basis. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. Our calculation of Adjusted FFO excludes gain/loss on extinguishment of debt, write-off of premiums, loan costs and exit fees, other income/expense, net transaction and conversion costs, legal, advisory and settlement costs, dead deal costs, and stock/unit-based compensation and non-cash items such as amortization of loan costs, amortization of the term loan discount, unrealized gains/losses on marketable securities and derivative instruments, as well as our portion of adjustments to FFO related to unconsolidated entities. We exclude items from Adjusted FFO that are either non-cash or are not part of our core operations in order to provide a period-over-period comparison of our operating results. We present FFO and Adjusted FFO because we consider FFO and Adjusted FFO important supplemental measures of our operational performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and Adjusted FFO when reporting their results. FFO and Adjusted FFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and Adjusted FFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and Adjusted FFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. We consider FFO and Adjusted FFO to be appropriate measures of our ongoing normalized operating performance as a REIT. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than we do. FFO and Adjusted FFO do not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income or loss as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity, nor is it indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO and Adjusted FFO should be considered along with our net income or loss and cash flows reported in the consolidated financial statements.

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The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	(22,323)	$	(44,049)	$	(84,371)	$	(214,700)
(Income) loss attributable to noncontrolling interest in consolidated entities	—		(10)		—		84
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	231		367		679		3,594
Preferred dividends	(3,104)		(2,039)		(9,311)		1,488
Gain (loss) on extinguishment of preferred stock	—		(1,789)		—		959
Net income (loss) attributable to common stockholders	(25,196)		(47,520)		(93,003)		(208,575)
Depreciation and amortization of real estate	49,428		53,033		152,444		166,182
(Gain) loss on disposition of assets and hotel properties	11		(103)		(273)		(395)
Net income (loss) attributable to redeemable noncontrolling interests in operating partnership	(231)		(367)		(679)		(3,594)
Equity in (earnings) loss of unconsolidated entities	147		145		451		423
Company’s portion of FFO of unconsolidated entities	(148)		(145)		(452)		(421)
FFO available to common stockholders and OP unitholders	24,011		5,043		58,488		(46,380)
(Gain) loss on extinguishment of preferred stock	—		1,789		—		(959)
Write-off of premiums, loan costs and exit fees	1,378		1,034		3,076		5,200
(Gain) loss on extinguishment of debt	—		(1,292)		—		(11,896)
Other (income) expense, net	(108)		(209)		(293)		(683)
Transaction and conversion costs	(3,401)		332		(1,828)		2,628
Legal, advisory and settlement costs	(96)		2,435		(59)		6,932
Unrealized (gain) loss on derivatives	(9,774)		(6,029)		(19,059)		(3,712)
Dead deal costs	76		—		356		689
Uninsured remediation costs	—		(33)		—		341
Stock/unit-based compensation	1,275		2,490		5,324		7,539
Amortization of term loan exit fee	3,092		1,896		8,669		4,556
Amortization of loan costs	2,512		2,203		7,314		9,960
Advisory services incentive fee	—		(6,472)		—		—
Company’s portion of adjustments to FFO of unconsolidated entities	1		2		12		14
Adjusted FFO available to common stockholders and OP unitholders	$	18,966	$	3,189	$	62,000	$	(25,771)

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HOTEL PORTFOLIO

The following table presents certain information related to our hotel properties as of September 30, 2022:

Hotel Property	Location	Service Type	Total Rooms	% Owned		Owned Rooms
Fee Simple Properties
Embassy Suites	Austin, TX	Full service	150	100	%	150
Embassy Suites	Dallas, TX	Full service	150	100		150
Embassy Suites	Herndon, VA	Full service	150	100		150
Embassy Suites	Las Vegas, NV	Full service	220	100		220
Embassy Suites	Flagstaff, AZ	Full service	119	100		119
Embassy Suites	Houston, TX	Full service	150	100		150
Embassy Suites	West Palm Beach, FL	Full service	160	100		160
Embassy Suites	Philadelphia, PA	Full service	263	100		263
Embassy Suites	Walnut Creek, CA	Full service	249	100		249
Embassy Suites	Arlington, VA	Full service	269	100		269
Embassy Suites	Portland, OR	Full service	276	100		276
Embassy Suites	Santa Clara, CA	Full service	258	100		258
Embassy Suites	Orlando, FL	Full service	174	100		174
Hilton Garden Inn	Jacksonville, FL	Select service	119	100		119
Hilton Garden Inn	Austin, TX	Select service	254	100		254
Hilton Garden Inn	Baltimore, MD	Select service	158	100		158
Hilton Garden Inn	Virginia Beach, VA	Select service	176	100		176
Hilton	Houston, TX	Full service	242	100		242
Hilton	St. Petersburg, FL	Full service	333	100		333
Hilton	Santa Fe, NM	Full service	158	100		158
Hilton	Bloomington, MN	Full service	300	100		300
Hilton	Costa Mesa, CA	Full service	486	100		486
Hilton	Boston, MA	Full service	390	100		390
Hilton	Parsippany, NJ	Full service	353	100		353
Hilton	Tampa, FL	Full service	238	100		238
Hilton	Alexandria, VA	Full service	252	100		252
Hilton	Santa Cruz, CA	Full service	178	100		178
Hilton	Ft. Worth, TX	Full service	294	100		294
Hampton Inn	Lawrenceville, GA	Select service	85	100		85
Hampton Inn	Evansville, IN	Select service	140	100		140
Hampton Inn	Parsippany, NJ	Select service	152	100		152
Hampton Inn	Buford, GA	Select service	92	100		92
Marriott	Beverly Hills, CA	Full service	260	100		260
Marriott	Durham, NC	Full service	225	100		225
Marriott	Arlington, VA	Full service	701	100		701
Marriott	Bridgewater, NJ	Full service	349	100		349
Marriott	Dallas, TX	Full service	265	100		265
Marriott	Fremont, CA	Full service	357	100		357
Marriott	Memphis, TN	Full service	232	100		232
Marriott	Irving, TX	Full service	499	100		499
Marriott	Omaha, NE	Full service	300	100		300
Marriott	Sugarland, TX	Full service	300	100		300
SpringHill Suites by Marriott	Baltimore, MD	Select service	133	100		133
SpringHill Suites by Marriott	Kennesaw, GA	Select service	90	100		90
SpringHill Suites by Marriott	Buford, GA	Select service	97	100		97
SpringHill Suites by Marriott	Manhattan Beach, CA	Select service	164	100		164
SpringHill Suites by Marriott	Plymouth Meeting, PA	Select service	199	100		199
Fairfield Inn by Marriott	Kennesaw, GA	Select service	86	100		86
Courtyard by Marriott	Bloomington, IN	Select service	117	100		117
Courtyard by Marriott - Tremont	Boston, MA	Select service	315	100		315
Courtyard by Marriott	Columbus, IN	Select service	90	100		90
Courtyard by Marriott	Denver, CO	Select service	202	100		202
Courtyard by Marriott	Gaithersburg, MD	Select service	210	100		210

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Hotel Property	Location	Service Type	Total Rooms	% Owned	Owned Rooms
Courtyard by Marriott	Crystal City, VA	Select service	272	100	272
Courtyard by Marriott	Overland Park, KS	Select service	168	100	168
Courtyard by Marriott	Foothill Ranch, CA	Select service	156	100	156
Courtyard by Marriott	Alpharetta, GA	Select service	154	100	154
Courtyard by Marriott	Oakland, CA	Select service	156	100	156
Courtyard by Marriott	Scottsdale, AZ	Select service	180	100	180
Courtyard by Marriott	Plano, TX	Select service	153	100	153
Courtyard by Marriott	Newark, CA	Select service	181	100	181
Courtyard by Marriott	Manchester, CT	Select service	90	100	90
Courtyard by Marriott	Basking Ridge, NJ	Select service	235	100	235
Marriott Residence Inn	Evansville, IN	Select service	78	100	78
Marriott Residence Inn	Orlando, FL	Select service	350	100	350
Marriott Residence Inn	Falls Church, VA	Select service	159	100	159
Marriott Residence Inn	San Diego, CA	Select service	150	100	150
Marriott Residence Inn	Salt Lake City, UT	Select service	144	100	144
Marriott Residence Inn	Las Vegas, NV	Select service	256	100	256
Marriott Residence Inn	Phoenix, AZ	Select service	200	100	200
Marriott Residence Inn	Plano, TX	Select service	126	100	126
Marriott Residence Inn	Newark, CA	Select service	168	100	168
Marriott Residence Inn	Manchester, CT	Select service	96	100	96
Marriott Residence Inn	Jacksonville, FL	Select service	120	100	120
TownePlace Suites by Marriott	Manhattan Beach, CA	Select service	143	100	143
One Ocean	Atlantic Beach, FL	Full service	193	100	193
Sheraton Hotel	Langhorne, PA	Full service	186	100	186
Sheraton Hotel	Minneapolis, MN	Full service	220	100	220
Sheraton Hotel	Indianapolis, IN	Full service	378	100	378
Sheraton Hotel	Anchorage, AK	Full service	370	100	370
Sheraton Hotel	San Diego, CA	Full service	260	100	260
Hyatt Regency	Coral Gables, FL	Full service	254	100	254
Hyatt Regency	Hauppauge, NY	Full service	358	100	358
Hyatt Regency	Savannah, GA	Full service	351	100	351
Renaissance	Nashville, TN	Full service	673	100	673
Annapolis Historic Inn	Annapolis, MD	Full service	124	100	124
Lakeway Resort & Spa	Austin, TX	Full service	168	100	168
Silversmith	Chicago, IL	Full service	144	100	144
The Churchill	Washington, D.C.	Full service	173	100	173
The Melrose	Washington, D.C.	Full service	240	100	240
Le Pavillon	New Orleans, LA	Full service	226	100	226
The Ashton	Ft. Worth, TX	Full service	39	100	39
Westin	Princeton, NJ	Full service	296	100	296
W	Atlanta, GA	Full service	237	100	237
Hotel Indigo	Atlanta, GA	Full service	141	100	141
Ritz-Carlton	Atlanta, GA	Full service	444	100	444
La Posada de Santa Fe	Santa Fe, NM	Full service	157	100	157
Ground Lease Properties
Crowne Plaza (1) (2)	Key West, FL	Full service	160	100	160
Renaissance (3)	Palm Springs, CA	Full service	410	100	410
Total			22,116		22,116

________

(1) The ground lease expires in 2084.

(2) The Company entered into a new franchise agreement with Marriott to convert the Crowne Plaza La Concha Key West Hotel in Key West, Florida to an Autograph Collection property. The agreement with Marriott calls for the Hotel to be converted to an Autograph property by July 1, 2023.

(3) The ground lease expires in 2059 with one 25-year extension option.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.

At September 30, 2022, our total indebtedness of $3.8 billion included $3.5 billion of variable-rate debt. The impact on our results of operations of a 25-basis point change in interest rate on the outstanding balance of variable-rate debt at September 30, 2022, would be approximately $8.8 million per year. However, we currently have various interest rate caps in place that limit this exposure. Interest rate changes have no impact on the remaining $321.9 million of fixed-rate debt.

The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and assume no changes in our capital structure. As the information presented above includes only those exposures that existed at September 30, 2022, it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies in place at the time, and the related interest rates.

ITEM 4.CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2022 (“Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms; and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Litigation—Palm Beach Florida Hotel and Office Building Limited Partnership, et al. v. Nantucket Enterprises, Inc. This litigation involves a landlord tenant dispute from 2008. The litigation was resolved in 2017 with the determination and reimbursement of attorneys’ fees being the only remaining dispute. On July 26, 2018, we paid $544,000 as part of a settlement on certain legal fees. The negotiations relating to the potential payment of the remaining attorney’s fees are still ongoing, pending the appeal of a contempt order against the Maraist Law Firm for failing to produce their fee records. As of September 30, 2022, we have accrued approximately $504,000 in legal fees, which represents the Company’s estimate of the amount of potential remaining legal fees that could be owed.

On December 4, 2015, Pedro Membrives filed a class action lawsuit against HHC TRS FP Portfolio LLC, Remington Lodging & Hospitality, LLC, Remington Holdings LLC, Mark A. Sharkey, Archie Bennett, Jr., Monty J. Bennett, Christopher Peckham, and any other related entities in the Supreme Court of New York, Nassau County, Commercial Division. On August 30, 2016, the complaint was amended to add Michele Spero as a Plaintiff and Remington Long Island Employers, LLC as a defendant. The lawsuit is captioned Pedro Membrives and Michele Spero, individually and on behalf of others similarly situated v. HHC TRS FP Portfolio LLC, Remington Lodging & Hospitality, LLC, Remington Holdings LLC, Remington Long Island Employers, LLC, et al., Index No. 607828/2015 (Sup. Ct. Nassau Cty.). The plaintiffs allege that the owner and management company of the Hyatt Regency Long Island hotel violated New York law by improperly retaining service charges rather than distributing them to employees. In 2017, the class was certified. On July 24, 2018, the trial court granted the plaintiffs’ motion for summary judgment on liability. The defendants appealed the summary judgment to the New York State Appellate Division, Second Department (the “Second Department”). The Second Department heard oral arguments in this matter on April 20, 2021, and on July 14, 2021, affirmed in part, and modified in part, the trial court’s summary judgment in favor of the plaintiffs. Due to the Second Department’s holding, all information produced during discovery, and the continuing cost and risk, to both sides, a settlement was reached, signed by the parties and approved by the Court in June 2022. The settlement requires the Company to establish a settlement fund that will be used to pay plaintiffs that opt in by November 10, 2022 and are entitled to receive payment, and to fund administrative expenses. The Company previously recorded an accrual of

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approximately $4.2 million. As of September 30, 2022, the Company has paid $100,000 and the accrual is approximately $4.1 million.

On December 20, 2016, a class action lawsuit was filed against one of the Company’s hotel management companies in the Superior Court of the State of California in and for the County of Contra Costa alleging violations of certain California employment laws, which class action affects nine hotels owned by subsidiaries of the Company. The court has entered an order granting class certification with respect to: (1) a statewide class of non-exempt employees of our manager who were allegedly deprived of rest breaks as a result of our manager’s previous written policy requiring its employees to stay on premises during rest breaks; and (2) a derivative class of non-exempt former employees of our manager who were not paid for allegedly missed breaks upon separation from employment. Notices to potential class members were sent out on February 2, 2021. Potential class members had until April 4, 2021 to opt out of the class, however, the total number of employees in the class has not been definitively determined and is the subject of continuing discovery. The opt out period has been extended until such time that discovery has concluded. While we believe it is reasonably possible that we may incur a loss associated with this litigation, because there remains uncertainty under California law with respect to a significant legal issue, discovery relating to class members continues, and the trial judge retains discretion to award lower penalties than set forth in the applicable California employment laws, we do not believe that any potential loss to the Company is reasonably estimable at this time. As of September 30, 2022, no amounts have been accrued.

We are also engaged in other legal proceedings that have arisen but have not been fully adjudicated. To the extent the claims giving rise to these legal proceedings are not covered by insurance, they relate to the following general types of claims: employment matters, tax matters and matters relating to compliance with applicable law (for example, the Americans with Disability Act and similar state laws). The likelihood of loss from these legal proceedings is based on the definitions within contingency accounting literature. We recognize a loss when we believe the loss is both probable and reasonably estimable. Based on the information available to us relating to these legal proceedings and/or our experience in similar legal proceedings, we do not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position, results of operations, or cash flow. However, our assessment may change depending upon the development of these legal proceedings, and the final results of these legal proceedings cannot be predicted with certainty. If we do not prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position, results of operations, or cash flows could be materially adversely affected in future periods.

ITEM 1A.RISK FACTORS

The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. The risk factors set forth below update, and should be read together with, the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2021.

Economic conditions in the United States could have a material adverse impact on our earnings and financial condition.

The economic outlook in the United States is uncertain and facing recessionary concerns resulting from slowing gross domestic product growth, continuing effects of the COVID-19 pandemic, rising inflation, increasing interest rates, supply chain disruptions and the conflict between Russia and Ukraine. Because economic conditions in the United States may affect demand within the hospitality industry and our subsidiaries’ businesses, current and future economic conditions in the United States, including slower growth, stock market volatility and recession fears, could have a material adverse impact on our earnings and financial condition. Economic conditions may be affected by numerous factors, including but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, changes in currency exchange rates, uncertainty about government fiscal and tax policy, geopolitical events, the regulatory environment and the availability of credit and interest rates.

Inflation and price volatility could negatively impact our businesses and results of operations.

General inflation in the United States has risen to levels not experienced in recent decades, including rising energy prices, prices for consumer goods, interest rates, wages, and currency volatility, causing interest rates and borrowing costs to rise. These increases and any fiscal, monetary or other policy interventions by the U.S. government or Federal Reserve in reaction to such events could negatively impact our businesses by increasing our operating costs and our borrowing costs and may negatively impact our ability to access the debt markets on favorable terms.

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

The following table provides the information with respect to purchases and forfeitures of shares of our common stock during each of the months in the third quarter of 2022:

Period	Total Number of Shares Purchased		Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plan (1)	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
Common stock:
July 1 to July 31	20,874	(2)	$	7.81	(3)	—	$	200,000,000
August 1 to August 31	452	(2)	—			—	200,000,000
September 1 to September 30	31		9.79		(3)	—	200,000,000
Total	21,357		$	7.81		—

____________________

(1)On April 6, 2022 the board of directors approved a stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock and preferred stock having an aggregate value of up to $200 million. The board of directors’ authorization replaced the previous repurchase authorization that the board of directors’ authorized in December 2017.

(2)There is no cost associated with the forfeiture of 2 and 452 restricted shares of our common stock in July and August, respectively.

(3)Includes 20,872 and 31 shares in July and September that were withheld to cover tax-withholding requirements related to the vesting of restricted shares of our common stock issued to employees of our advisor pursuant to the Company’s stockholder-approved stock incentive plan.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

None.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

Exhibit	Description
3.1	Articles of Amendment and Restatement, as amended by Amendment Number One to Articles of Amendment and Restatement (incorporated by reference to Exhibit 4.6 to Registration Statement on Form S-3 filed May 15, 2015)
3.2	Amendment Number Two to Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on May 22, 2017) (File No. 00131775)
3.3	Articles of Amendment to the Company’s charter (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on July 1, 2020) (File No. 001-31775)
3.4	Articles of Amendment to the Articles of Amendment and Restatement of the Company (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on July 16, 2021) (File No. 001-31775)
3.5	Articles Supplementary, dated April 28, 2022 (incorporated by reference to Exhibit 4.10 to the Registrant’s Registration Statement on Form S-3, filed on April 29, 2022) (File No. 333-263323)
3.6	Articles Supplementary establishing the Series J Preferred Stock, dated September 14, 2022 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed on September 14, 2022) (File No. 333-263323)
3.7	Articles Supplementary establishing the Series K Preferred Stock, dated September 14, 2022 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, filed on September 14, 2022) (File No. 333-263323)
3.8	Second Amended and Restated Bylaws, as amended by Amendment No. 1 on October 26, 2014, by Amendment No. 2 on October 19, 2015, by Amendment No. 3 on August 2, 2016 and by Amendment No. 4 on March 17, 2022, adopted on March 17, 2022. (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K, filed on March 18, 2022) (File No. 001-31775)
10.1	Amendment No. 11 to the Seventh Amended and Restated Agreement of Limited Partnership of Ashford Hospitality Limited Partnership, dated as of September 14, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K, filed on September 14, 2022) (File No. 001-31775)
31.1*	Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

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Exhibit	Description
31.2*	Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 are formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements Comprehensive Income (Loss); (iv) Consolidated Statements of Equity (Deficit); (v) Consolidated Statements of Cash Flows; and (vi) Notes to the Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Submitted electronically with this report.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Submitted electronically with this report.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically with this report.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	Submitted electronically with this report.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	Submitted electronically with this report.
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

___________________________________

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    ASHFORD HOSPITALITY TRUST, INC.

Date:	November 7, 2022	By:	/s/ J. ROBISON HAYS, III
			J. Robison Hays, III
			President and Chief Executive Officer
Date:	November 7, 2022	By:	/s/ DERIC S. EUBANKS
			Deric S. Eubanks
			Chief Financial Officer

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