Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
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 1100
 
 
Dallas, Texas
 
75254
(Address of principal executive offices)
 
(Zip code)

(972) 490-9600
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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
þ
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
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) if 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
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
 
98,636,320
(Class)
 
Outstanding at May 7, 2018


ASHFORD HOSPITALITY TRUST, INC
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2018
TABLE OF CONTENTS


 
 
 


Table of Contents

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)
 
March 31, 2018
 
December 31, 2017
Assets
 
Investments in hotel properties, net
$
4,034,591

 
$
4,035,915

Cash and cash equivalents
277,686

 
354,805

Restricted cash
137,145

 
116,787

Marketable securities
35,976

 
26,926

Accounts receivable, net of allowance of $746 and $770, respectively
54,578

 
44,257

Inventories
4,270

 
4,244

Investment in unconsolidated entities
3,034

 
2,955

Deferred costs, net
2,784

 
2,777

Prepaid expenses
29,267

 
19,269

Derivative assets, net
2,388

 
2,010

Other assets
16,685

 
14,152

Intangible assets, net
9,913

 
9,943

Due from related party, net
2,140

 
—

Due from third-party hotel managers
19,335

 
17,387

Assets held for sale
7,677

 
18,423

Total assets
$
4,637,469

 
$
4,669,850

Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Indebtedness, net
$
3,712,790

 
$
3,696,300

Accounts payable and accrued expenses
143,163

 
132,401

Dividends and distributions payable
26,824

 
25,045

Due to Ashford Inc., net
12,917

 
15,146

Due to related party, net
—

 
1,067

Due to third-party hotel managers
2,059

 
2,431

Intangible liabilities, net
15,750

 
15,839

Other liabilities
19,778

 
18,376

Liabilities related to assets held for sale
6,962

 
13,977

Total liabilities
3,940,243

 
3,920,582

Commitments and contingencies (note 14)


 


Redeemable noncontrolling interests in operating partnership
112,967

 
116,122

Equity:
 
 
 
Preferred stock, $0.01 par value, 50,000,000 shares authorized:
 
 
 
Series D Cumulative Preferred Stock, 2,389,393 shares issued and outstanding at March 31, 2018 and December 31, 2017
24

 
24

Series F Cumulative Preferred Stock, 4,800,000 shares issued and outstanding at March 31, 2018 and December 31, 2017
48

 
48

Series G Cumulative Preferred Stock, 6,200,000 shares issued and outstanding at March 31, 2018 and December 31, 2017
62

 
62

Series H Cumulative Preferred Stock, 3,800,000 shares issued and outstanding at March 31, 2018 and December 31, 2017
38

 
38

Series I Cumulative Preferred Stock, 5,400,000 shares issued and outstanding at March 31, 2018 and December 31, 2017
54

 
54

Common stock, $0.01 par value, 400,000,000 shares authorized, 98,654,148 and 97,409,113 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
987

 
974

Additional paid-in capital
1,789,501

 
1,784,997

Accumulated deficit
(1,207,063
)
 
(1,153,697
)
Total stockholders’ equity of the Company
583,651

 
632,500

Noncontrolling interests in consolidated entities
608

 
646

Total equity
584,259

 
633,146

Total liabilities and equity
$
4,637,469

 
$
4,669,850

See Notes to Consolidated Financial Statements.

2
Table of Contents

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
 
Three Months Ended March 31,
 
2018
 
2017
Revenue
 
Rooms
$
270,693

 
$
276,705

Food and beverage
55,044

 
62,850

Other hotel revenue
15,491

 
13,766

Total hotel revenue
341,228

 
353,321

Other
979

 
388

Total revenue
342,207

 
353,709

Expenses
 
 
 
Hotel operating expenses:
 
 
 
Rooms
59,086

 
59,873

Food and beverage
38,465

 
42,170

Other expenses
106,383

 
111,733

Management fees
12,737

 
12,826

Total hotel expenses
216,671

 
226,602

Property taxes, insurance, and other
18,359

 
18,333

Depreciation and amortization
63,047

 
64,698

Impairment charges
1,660

 
—

Transaction costs
2

 
3

Advisory services fee
17,077

 
10,641

Corporate general and administrative
2,129

 
5,170

Total expenses
318,945

 
325,447

Operating income (loss)
23,262

 
28,262

Equity in earnings (loss) of unconsolidated entities
(588
)
 
(763
)
Interest income
746

 
208

Gain (loss) on sale of hotel properties
(9
)
 
(83
)
Other income (expense)
76

 
(3,120
)
Interest expense and amortization of premiums and loan costs
(54,743
)
 
(55,305
)
Write-off of premiums, loan costs and exit fees
(2,050
)
 
(54
)
Unrealized gain (loss) on marketable securities
(558
)
 
(3,346
)
Unrealized gain (loss) on derivatives
329

 
1,418

Income (loss) before income taxes
(33,535
)
 
(32,783
)
Income tax (expense) benefit
886

 
846

Net income (loss)
(32,649
)
 
(31,937
)
(Income) loss from consolidated entities attributable to noncontrolling interest
38

 
31

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership
6,340

 
6,493

Net income (loss) attributable to the Company
(26,271
)
 
(25,413
)
Preferred dividends
(10,644
)
 
(10,956
)
Net income (loss) attributable to common stockholders
$
(36,915
)
 
$
(36,369
)
 
 
 
 
Income (loss) per share - basic and diluted:
 
 
 
Basic:
 
 
 
Net income (loss) attributable to common stockholders
$
(0.39
)
 
$
(0.39
)
Weighted average common shares outstanding – basic
95,367

 
94,840

Diluted:
 
 
 
Net income (loss) attributable to common stockholders
$
(0.39
)
 
$
(0.39
)
Weighted average common shares outstanding – diluted
95,367

 
94,840

 
 
 
 
Dividends declared per common share
$
0.12

 
$
0.12

See Notes to Consolidated Financial Statements.

3
Table of Contents

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2018
 
2017
Net income (loss)
$
(32,649
)
 
$
(31,937
)
Other comprehensive income (loss), net of tax:
 
 
 
Total other comprehensive income (loss)
—

 
—

Comprehensive income (loss)
(32,649
)
 
(31,937
)
Less: Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities
38

 
31

Less: Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership
6,340

 
6,493

Comprehensive income (loss) attributable to the Company
$
(26,271
)
 
$
(25,413
)
See Notes to Consolidated Financial Statements.

4
Table of Contents

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(unaudited, in thousands)
 
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 January 1, 2018
2,389

 
$
24

 
4,800

 
$
48

 
6,200

 
$
62

 
3,800

 
$
38

 
5,400

 
$
54

 
97,409

 
$
974

 
$
1,784,997

 
$
(1,153,697
)
 
$
646

 
$
633,146

 
$
116,122

Purchases of common stock
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(228
)
 
(2
)
 
(1,460
)
 
—

 
—

 
(1,462
)
 
—

Equity-based compensation
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
5,886

 
—

 
—

 
5,886

 
1,116

Forfeitures of restricted shares
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(14
)
 
—

 
—

 
—

 
—

 
—

 
—

Issuance of restricted shares/units
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,487

 
15

 
108

 
—

 
—

 
123

 
49

Cost for issuances of preferred shares
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(30
)
 
—

 
—

 
(30
)
 
—

Dividends declared - common shares
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(11,961
)
 
—

 
(11,961
)
 
—

Dividends declared - preferred shares- Series D
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,262
)
 
—

 
(1,262
)
 
—

Dividends declared – preferred shares- Series F
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2,212
)
 
—

 
(2,212
)
 
—

Dividends declared – preferred shares- Series G
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2,858
)
 
—

 
(2,858
)
 
—

Dividends declared – preferred shares- Series H
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,781
)
 
—

 
(1,781
)
 
—

Dividends declared – preferred shares- Series I
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2,531
)
 
—

 
(2,531
)
 
—

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2,470
)
Redemption value adjustment
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(4,490
)
 
—

 
(4,490
)
 
4,490

Net income (loss)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(26,271
)
 
(38
)
 
(26,309
)
 
(6,340
)
Balance at March 31, 2018
2,389

 
$
24

 
4,800

 
$
48

 
6,200

 
$
62

 
3,800

 
$
38

 
5,400

 
$
54

 
98,654

 
$
987

 
$
1,789,501

 
$
(1,207,063
)
 
$
608

 
$
584,259

 
$
112,967

See Notes to Consolidated Financial Statements.

5
Table of Contents

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2018
 
2017
Cash Flows from Operating Activities
 
Net income (loss)
$
(32,649
)
 
$
(31,937
)
Adjustments to reconcile net income (loss) to net cash flow from operating activities:
 
 
 
Depreciation and amortization
63,047

 
64,698

Impairment charges
1,660

 
—

Amortization of intangibles
(59
)
 
(60
)
Recognition of deferred income
144

 
(114
)
Bad debt expense
509

 
183

Deferred income tax expense (benefit)
(1,147
)
 
(1,134
)
Equity in (earnings) loss of unconsolidated entities
588

 
763

(Gain) loss on sale of hotel properties, net
9

 
83

Realized and unrealized (gain) loss on marketable securities
448

 
3,346

Purchases of marketable securities
(10,773
)
 
(543
)
Sales of marketable securities
1,275

 
—

Net settlement of trading derivatives
180

 
323

Realized and unrealized (gain) loss on derivatives
(329
)
 
1,885

Amortization of loan costs and premiums, write-off of premiums, loan costs and exit fees
4,434

 
4,866

Equity-based compensation
7,002

 
428

Changes in operating assets and liabilities, exclusive of effect of dispositions of hotel properties:
 
 
 
Accounts receivable and inventories
(11,389
)
 
(12,827
)
Prepaid expenses and other assets
(11,348
)
 
(7,273
)
Accounts payable and accrued expenses
12,275

 
25,767

Due to/from related party
(3,821
)
 
(2,551
)
Due to/from third-party hotel managers
(2,424
)
 
(5,282
)
Due to/from Braemar OP, net
—

 
(494
)
Due to/from Ashford Inc., net
(2,229
)
 
(1,247
)
Other liabilities
1,258

 
660

Net cash provided by (used in) operating activities
16,661

 
39,540

Cash Flows from Investing Activities
 
 
 
Investment in unconsolidated entity
(667
)
 
(650
)
Acquisition of hotel properties and assets, net of cash acquired
(110
)
 
—

Improvements and additions to hotel properties
(64,006
)
 
(56,765
)
Net proceeds from sales of assets/properties
10,535

 
17,325

Liquidation of AQUA U.S. Fund
—

 
48,363

Payments for initial franchise fees
(75
)
 
(75
)
Proceeds from property insurance
651

 
190

Net cash provided by (used in) investing activities
(53,672
)
 
8,388

Cash Flows from Financing Activities
 
 
 
Borrowings on indebtedness
401,528

 
—

Repayments of indebtedness
(394,704
)
 
(43,441
)
Payments for loan costs and exit fees
(1,997
)
 
(623
)
Payments for dividends and distributions
(23,173
)
 
(24,219
)
Purchases of common stock
(1,462
)
 
6

Payments for derivatives
(229
)
 
(280
)
Other
19

 
88

Net cash provided by (used in) financing activities
(20,018
)
 
(68,469
)
Net increase (decrease) in cash, cash equivalents and restricted cash
(57,029
)
 
(20,541
)
Cash, cash equivalents and restricted cash at beginning of period
472,072

 
492,473

Cash, cash equivalents and restricted cash and at end of period
$
415,043


$
471,932


6
Table of Contents

 
Three Months Ended March 31,
 
2018
 
2017
Supplemental Cash Flow Information
 
 
 
Interest paid
$
52,168

 
$
50,110

Income taxes paid (refunded)
(255
)
 
—

Supplemental Disclosure of Non-Cash Investing and Financing Activity
 
 
 
Accrued but unpaid capital expenditures
$
18,705

 
$
13,313

Dividends and distributions declared but not paid
26,824

 
25,786

Common stock repurchase accrued but not paid
—

 
1,281

Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash
 
 
 
Cash and cash equivalents at beginning of period
$
354,805

 
$
347,091

Cash and cash equivalents at beginning of period included in assets held for sale
78

 
976

Restricted cash at beginning of period
116,787

 
144,014

Restricted cash at beginning of period included in assets held for sale
402

 
392

Cash, cash equivalents and restricted cash at beginning of period
$
472,072

 
$
492,473

 
 
 
 
Cash and cash equivalents at end of period
$
277,686

 
$
306,670

Cash and cash equivalents at end of period included in assets held for sale
1

 
—

Restricted cash at end of period
137,145

 
165,262

Restricted cash at end of period included in assets held for sale
211

 
—

Cash, cash equivalents and restricted cash at end of period
$
415,043

 
$
471,932

See Notes to Consolidated Financial Statements.

7
Table of Contents
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”) focused on investing in full-service hotels in the upscale and upper upscale segments in domestic and international markets that have revenue per available room (“RevPAR”) generally less than twice the national average, and in all methods including direct real estate, equity, and debt. 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. In this report, terms such as the “Company,” “we,” “us,” or “our” refer to Ashford Hospitality Trust, Inc. and all entities included in its consolidated financial statements.
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.
As of March 31, 2018, we owned interests in the following assets:
•
119 consolidated hotel properties, including 117 (one which is held for sale) directly owned and two owned through a majority-owned investment in a consolidated entity, which represent 24,922 total rooms (or 24,895 net rooms excluding those attributable to our partner);
•
90 hotel condominium units at WorldQuest Resort in Orlando, Florida (“WorldQuest”);
•
a 28.4% ownership in Ashford Inc. common stock with a carrying value of $0 and a fair value of $57.3 million; and
•
a 16.3% ownership in OpenKey with a carrying value of $3.0 million.
For federal income tax purposes, we have elected to be treated as a REIT, which imposes limitations related to operating hotels. As of March 31, 2018, our 119 hotel properties were leased or owned by our wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries for 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.
As of March 31, 2018, Remington Lodging & Hospitality, LLC, together with its affiliates (“Remington Lodging”), which is beneficially wholly owned by Mr. Monty J. Bennett, our Chairman, and Mr. Archie Bennett, Jr., our Chairman Emeritus, managed 81 of our 119 hotel properties and WorldQuest Resort. Third-party management companies managed the remaining hotel properties.
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 significant 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 included in our 2017 Annual Report to Stockholders on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 14, 2018.
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, (ii) an implicit financial responsibility to ensure that a VIE operates as designed, and (iii) 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

8
Table of Contents
ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

our wholly-owned subsidiary, Ashford Trust 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 months ended March 31, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.
The following dispositions affect reporting comparability of our consolidated financial statements:
Hotel Property 
 
Location 
 
Type
 
Date
Renaissance
 
Portsmouth, VA
 
Disposition
 
February 1, 2017
Embassy Suites
 
Syracuse, NY
 
Disposition
 
March 6, 2017
Crowne Plaza Ravinia
 
Atlanta, GA
 
Disposition
 
June 29, 2017
SpringHill Suites
 
Glen Allen, VA
 
Disposition
 
February 20, 2018
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.
Restricted Cash—Restricted cash includes reserves for debt service, real estate taxes, and insurance, as well as excess cash flow deposits and reserves for furniture, fixtures, and equipment replacements of approximately 4% to 6% of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions.
Impairment of Investments in Hotel Properties—Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of the hotel is measured by comparison of the carrying amount of the hotel to the estimated future undiscounted cash flows, which take into account current market conditions and our intent with respect to holding or disposing of the hotel. If our analysis indicates that the carrying value of the hotel is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the property’s net book value exceeds its estimated fair value, or fair value, less cost to sell. In evaluating impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period, and expected useful life. Fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions and third-party appraisals, where considered necessary. Asset write-downs resulting from property damage are recorded up to the amount of the allocable property insurance deductible in the period that the property damage occurs. See note 5.
Hotel Dispositions—Discontinued operations are defined as the disposal of components of an entity that represents strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. We believe that individual dispositions of hotel properties do not represent a strategic shift that has (or will have) a major effect on our operations and financial results as most will not fit the definition.
Assets Held for Sale—We classify assets as held for sale when we have obtained a firm commitment from a buyer, and consummation of the sale is considered probable and expected within one year. The related operations of assets held for sale are reported as discontinued if the disposal is a component of an entity that represents a strategic shift that has (or will have) a major effect on our operations and cash flows. Depreciation and amortization will cease as of the date assets have met the criteria to be deemed held for sale. See note 5.
Investments in Unconsolidated Entities—Investments in entities in which we have ownership interests ranging from 16.3% to 28.4%, at March 31, 2018, are accounted for under the equity method of accounting by recording the initial investment and our percentage of interest in the entities’ net income/loss. We review the investments in our unconsolidated entities for impairment in 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 our investment. Any impairment is recorded in equity in earnings (loss) in unconsolidated entities. No such impairment was recorded for the three months ended March 31, 2018 and 2017.
Our investments in certain unconsolidated entities are considered to be variable interests in the underlying entities. Each VIE, as defined by authoritative accounting guidance, 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, (ii) an implicit financial responsibility to ensure that a VIE operates as designed, and (iii) the obligation to absorb losses of the VIE

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

or the right to receive benefits from the VIE. Because we do not have the power and financial responsibility to direct the unconsolidated entities’ activities and operations, we are not considered to be the primary beneficiary of these entities on an ongoing basis and therefore such entities should not be consolidated. In evaluating VIEs, our analysis involves considerable management judgment and assumptions.
Equity-Based Compensation—Stock/unit-based compensation for non-employees is accounted for at fair value based on the market price of the shares at period end in accordance with applicable authoritative accounting guidance that results in recording expense, included in “advisory services fee” and “management fees” equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Performance stock units (“PSUs”) and performance-based Long-Term Incentive Plan (“Performance LTIP”) units granted to certain executive officers are accounted for at fair value at period end based on a Monte Carlo simulation valuation model that results in recording expense, included in “advisory services fee,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Stock/unit grants to independent directors are recorded at fair value based on the market price of the shares at grant date, which amount is fully expensed as the grants of stock/units are fully vested on the date of grant.
Recently Adopted Accounting Standards—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model, which requires a company to recognize revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The update replaces most existing revenue recognition guidance in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which defers the effective date to fiscal periods beginning after December 15, 2017. The standard permits the use of either the full retrospective or cumulative effect (modified retrospective) transition method. This standard, referred to as “Topic 606,” does not materially affect the amount or timing of revenue recognition for revenues from room, food and beverage, and other hotel level sales. Additionally, we have historically disposed of hotel properties for cash sales with no contingencies and no future involvement in the hotel operations. Therefore, Topic 606 does not impact the recognition of hotel sales. We adopted this standard effective January 1, 2018, under the modified retrospective method, and the adoption of this standard did not have a material impact on our consolidated financial statements. See related disclosures in note 3.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of AFS debt securities in combination with other deferred tax assets. ASU 2016-01 provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. It also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Certain provisions of ASU 2016-01 are eligible for early adoption. We adopted this standard effective January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - a Consensus of the Emerging Issues Task Force (“ASU 2016-15”). The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Certain issues addressed in this guidance include - debt payments or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, distributions received from equity method investments and beneficial interests in securitization transactions. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We adopted this standard effective January 1, 2018 on a prospective basis. The adoption of this standard did not have a material impact on our consolidated statements of cash flows.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether a transaction should be accounted for as an acquisition (or disposal) of an asset or a business. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. We adopted this standard effective January 1, 2018. Under the new standard, certain future hotel acquisitions may be considered asset acquisitions rather than business

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

combinations, which would affect capitalization of acquisitions costs (such costs are expensed for business combinations and capitalized for asset acquisitions).
In February 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (ASU “2017-05”), which clarifies the scope of ASC Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets and adds guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. An entity may elect to apply ASU 2017-05 under a retrospective or modified retrospective method. We adopted this standard effective January 1, 2018, under the modified retrospective method. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.
Recently Issued Accounting Standards—In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The accounting for leases under which we are the lessor remains largely unchanged. While we are currently assessing the impact that ASU 2016-02 will have on our consolidated financial statements, we expect the primary impact to our consolidated financial statements upon adoption will be the recognition, on a discounted basis, of our future minimum rentals due under noncancelable leases on our consolidated balance sheets resulting in the recording of ROU assets and lease obligations.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The ASU sets forth an “expected credit loss” impairment model to replace the current “incurred loss” method of recognizing credit losses. The standard requires measurement and recognition of expected credit losses for most financial assets held. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for periods beginning after December 15, 2018. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and related disclosures.
3. Revenue
On January 1, 2018, we adopted Topic 606 using the modified retrospective method. As the adoption of this standard did not have a material impact on our consolidated financial statements, no adjustments to opening retained earnings were made as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605-Revenue Recognition.
Rooms revenue represents revenue from the occupancy of our hotel rooms and is driven by the occupancy and average daily rate charged. Rooms revenue includes revenue for guest no-shows, day use, and early/late departure fees. The contracts for room stays with customers are generally short in duration and revenues are recognized as services are provided over the course of the hotel stay.
Food & Beverage (“F&B”) revenue consists of revenue from the restaurants and lounges at our hotel properties, In-room dining and mini-bars revenue, and banquet/catering revenue from group and social functions. Other F&B revenue may include revenue from audio-visual equipment/services, rental of function rooms, and other F&B related revenue. Revenue is recognized as the services or products are provided. Our hotel properties may employ third parties to provide certain services at the property, for example, audio visual services. We evaluate each of these contracts to determine if the hotel is the principal or the agent in the transaction, and record the revenue as appropriate (i.e. gross vs. net).
Other revenue consists of ancillary revenue at the property, including attrition and cancellation fees, resort and destination fees, spas, parking, entertainment and other guest services, as well as rental revenue; primarily consisting of leased retail outlets at our hotel properties. Attrition and cancellation fees are recognized for non-cancellable deposits when the customer provides notification of cancellation within established management policy time frames.
Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. Interest income is recognized when earned. We discontinue recording interest and amortizing discounts/premiums when the contractual payment of interest and/or principal is not received when contractually due.

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following tables presents our revenue disaggregated by geographical areas (in thousands):
 
 
Three Months Ended March 31, 2018
Primary Geographical Markets
 
Number of Hotels
 
Rooms
 
Food and Beverage
 
Other Hotel
 
Other
 
Total
Atlanta, GA Area
 
9

 
$
17,259

 
$
4,439

 
$
1,343

 
$
—

 
$
23,041

Boston, MA Area
 
3

 
9,166

 
1,402

 
776

 
—

 
11,344

Dallas / Ft. Worth Area
 
7

 
16,482

 
4,963

 
779

 
—

 
22,224

Houston, TX Area
 
3

 
6,972

 
2,642

 
215

 
—

 
9,829

Los Angeles, CA Metro Area
 
6

 
20,581

 
4,456

 
999

 
—

 
26,036

Miami, FL Metro Area
 
3

 
9,994

 
2,555

 
294

 
—

 
12,843

Minneapolis - St. Paul, MN-WI Area
 
4

 
8,844

 
2,261

 
1,120

 
—

 
12,225

Nashville, TN Area
 
1

 
10,978

 
2,320

 
472

 
—

 
13,770

New York / New Jersey Metro Area
 
6

 
16,323

 
4,923

 
744

 
—

 
21,990

Orlando, FL Area
 
3

 
8,341

 
371

 
196

 
—

 
8,908

Philadelphia, PA Area
 
3

 
4,907

 
1,030

 
189

 
—

 
6,126

San Diego, CA Area
 
2

 
4,173

 
240

 
221

 
—

 
4,634

San Francisco - Oakland, CA Metro Area
 
6

 
18,486

 
1,918

 
466

 
—

 
20,870

Tampa, FL Area
 
3

 
9,064

 
1,915

 
859

 
—

 
11,838

Washington DC - MD - VA Area
 
9

 
24,314

 
5,146

 
1,238

 
—

 
30,698

Other Areas
 
51

 
83,091

 
14,430

 
5,236

 
—

 
102,757

Orlando WorldQuest
 
—

 
1,391

 
33

 
338

 
—

 
1,762

Sold properties
 
1

 
327

 
—

 
6

 
—

 
333

Corporate
 
—

 
—

 
—

 
—

 
979

 
979

Total
 
120

 
$
270,693

 
$
55,044

 
$
15,491

 
$
979

 
$
342,207

 
 
Three Months Ended March 31, 2017
Primary Geographical Markets
 
Number of Hotels
 
Rooms
 
Food and Beverage
 
Other Hotel
 
Other
 
Total
Atlanta, GA Area
 
9

 
$
17,160

 
$
4,985

 
$
1,077

 
$
—

 
$
23,222

Boston, MA Area
 
3

 
8,867

 
1,780

 
698

 
—

 
11,345

Dallas / Ft. Worth Area
 
7

 
15,688

 
5,053

 
817

 
—

 
21,558

Houston, TX Area
 
3

 
7,126

 
2,304

 
161

 
—

 
9,591

Los Angeles, CA Metro Area
 
6

 
20,382

 
4,774

 
1,154

 
—

 
26,310

Miami, FL Metro Area
 
3

 
9,369

 
2,572

 
256

 
—

 
12,197

Minneapolis - St. Paul, MN-WI Area
 
4

 
7,878

 
2,197

 
933

 
—

 
11,008

Nashville, TN Area
 
1

 
11,797

 
5,548

 
287

 
—

 
17,632

New York / New Jersey Metro Area
 
6

 
15,656

 
5,579

 
491

 
—

 
21,726

Orlando, FL Area
 
3

 
8,372

 
585

 
185

 
—

 
9,142

Philadelphia, PA Area
 
3

 
4,683

 
850

 
189

 
—

 
5,722

San Diego, CA Area
 
2

 
4,158

 
381

 
165

 
—

 
4,704

San Francisco - Oakland, CA Metro Area
 
6

 
18,290

 
1,750

 
487

 
—

 
20,527

Tampa, FL Area
 
3

 
9,316

 
2,346

 
244

 
—

 
11,906

Washington DC - MD - VA Area
 
9

 
27,503

 
5,622

 
1,295

 
—

 
34,420

Other Areas
 
51

 
83,310

 
14,405

 
4,832

 
—

 
102,547

Orlando WorldQuest
 
—

 
1,317

 
38

 
367

 
—

 
1,722

Sold properties
 
4

 
5,833

 
2,081

 
128

 
—

 
8,042

Corporate
 
—

 
—

 
—

 
—

 
388

 
388

Total
 
123

 
$
276,705

 
$
62,850

 
$
13,766

 
$
388

 
$
353,709

 
 
 
 
 
 
 
 
 
 
 
 
 

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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):
 
March 31, 2018
 
December 31, 2017
Land
$
653,293

 
$
653,293

Buildings and improvements
3,919,109

 
3,895,112

Furniture, fixtures, and equipment
492,845

 
468,420

Construction in progress
37,892

 
35,273

Condominium properties
12,233

 
12,196

Total cost
5,115,372

 
5,064,294

Accumulated depreciation
(1,080,781
)
 
(1,028,379
)
Investments in hotel properties, net
$
4,034,591

 
$
4,035,915

5. Hotel Dispositions, Impairment Charges, Insurance Recoveries and Assets Held For Sale
Hotel Dispositions
On February 1, 2017, the Company sold the Renaissance hotel in Portsmouth, Virginia (“Renaissance Portsmouth”) for approximately $9.2 million in cash. The sale resulted in a loss of $43,000 for the year ended December 31, 2017 and is included in “gain (loss) on sale of hotel properties” in the consolidated statements of operations. The Company also repaid approximately $20.2 million of debt associated with the hotel property. See note 7.
On March 6, 2017, the Company sold the Embassy Suites in Syracuse, New York (“Embassy Suites Syracuse”) for approximately $8.8 million in cash. The sale resulted in a loss of $40,000 for the year ended December 31, 2017 and is included in “gain (loss) on sale of hotel properties” in the consolidated statements of operations. The Company also repaid approximately $20.6 million of debt associated with the hotel property. See note 7.
On June 29, 2017, the Company sold the Crowne Plaza Ravinia in Atlanta, Georgia for approximately $88.7 million in cash. The sale resulted in a gain of $14.1 million for the year ended December 31, 2017 and is included in “gain (loss) on sale of hotel properties” in the consolidated statements of operations. The Company also repaid approximately $78.7 million of debt associated with the hotel property. See note 7.
On February 20, 2018, we completed the sale of the SpringHill Suites Glen Allen for approximately $10.9 million in cash. The sale resulted in a loss of approximately $9,000 for the three months ended March 31, 2018 and is included in “gain (loss) on sale of hotel properties” in the consolidated statements of operations. The Company also repaid approximately $7.6 million of debt associated with the hotel property. See note 7.

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

We included the results of operations for these hotel properties through the date of disposition in net income (loss). The following table includes condensed financial information from these hotel properties in the consolidated statements of operations for the three months ended March 31, 2018 and 2017 (in thousands):
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Total hotel revenue
$
333

 
$
8,042

Total hotel operating expenses
(320
)
 
(6,426
)
Operating income (loss)
13

 
1,616

Property taxes, insurance and other
(44
)
 
(422
)
Depreciation and amortization
—

 
(1,529
)
Gain (loss) on sale of hotel properties
(9
)
 
(83
)
Interest expense and amortization of loan costs
(127
)
 
(1,577
)
Write-off of loan costs and exit fees
(61
)
 
(54
)
Income (loss) before income taxes
(228
)
 
(2,049
)
(Income) loss before income taxes attributable to redeemable noncontrolling interests in operating partnership
33

 
316

Net income (loss) attributable to the Company
$
(195
)
 
$
(1,733
)
Impairment Charges and Insurance Recoveries
In August and September 2017, twenty-four of our hotel properties in Texas and Florida were impacted by the effects of Hurricanes Harvey and Irma. The Company holds insurance policies that provide coverage for property damage and business interruption after meeting certain deductibles at all of its hotel properties. During 2017, the Company recognized impairment charges, net of anticipated insurance recoveries of $2.0 million. Additionally, the Company recognized remediation and other costs, net of anticipated insurance recoveries of $2.8 million, included primarily in other hotel operating expenses. As of December 31, 2017, the Company has recorded an insurance receivable of $267,000, net of deductibles of $4.8 million, included in “accounts receivable, net” on our consolidated balance sheet, related to the anticipated insurance recoveries. During the year ended December 31, 2017, the Company received proceeds of $612,000 for business interruption losses associated with lost profits, which has been recorded as “other” hotel revenue in our consolidated statement of operations, in excess of the deductible of $360,000.
For the three months ended March 31, 2018, the Company recorded revenue from business interruption losses associated with lost profits from the hurricanes of $401,000, which is included in “other” hotel revenue in our consolidated statement of operations and recorded an additional increase to the insurance receivable of $64,000 associated with property damage from the hurricanes. We received additional proceeds of $500,000 associated with property damage from the hurricanes during the three months ended March 31, 2018. The Company will not record an insurance recovery receivable for business interruption losses associated with lost profits until the amount for such recoveries is known and the amount is realizable.
Additionally, for the three months ended March 31, 2018, we recorded a $2.0 million impairment charge at the SpringHill Suites in Centreville, Virginia (“SpringHill Suites Centreville”). We also recorded impairment credits of $302,000 based on changes in estimates of property damages incurred from Hurricanes Harvey and Irma. For the year ended December 31, 2017, we recorded impairment charges of $8.2 million related to the SpringHill Suites Centreville and the SpringHill Suites in Glen Allen, Virginia (“SpringHill Suites Glen Allen”) in the amounts of $4.7 million and $3.5 million, respectively. The impairment charges were based on methodologies discussed in note 2, which are considered Level 3 valuation techniques. SpringHill Suites Glen Allen was sold on February 20, 2018. SpringHill Suites Centreville is currently held for sale and the sale was completed on May 1, 2018. See discussion below.
Assets Held For Sale
At December 31, 2017, the SpringHill Suites Centreville and the SpringHill Suites Glen Allen were classified as held for sale in the consolidated balance sheet based on methodologies discussed in note 2.
On February 20, 2018, we completed the sale of the SpringHill Suites Glen Allen for approximately $10.9 million. The sale resulted in a loss of $9,000 for the three months ended March 31, 2018, and is included in “gain (loss) on sale of hotel properties” in the consolidated statements of operations.

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Since the sale of the hotel properties does not represent a strategic shift that has (or will have) a major effect on our operations or financial results, their results of operation were not reported as discontinued operations in the consolidated financial statements. Depreciation and amortization were ceased as of the date the assets were deemed held for sale. At March 31, 2018, the SpringHill Suites Centreville was classified as held for sale.
The major classes of assets and liabilities related to the assets held for sale included in the consolidated balance sheets at March 31, 2018 and December 31, 2017 were as follows:
 
March 31, 2018
December 31, 2017
Assets
 
 
Investments in hotel properties, net
$
7,225

$
17,732

Cash and cash equivalents
1

78

Restricted cash
211

402

Accounts receivable
89

127

Inventories
—

1

Prepaid expenses
6

21

Other assets
10

31

Due from third-party hotel managers
135

31

Assets held for sale
$
7,677

$
18,423

 
 
 
Liabilities
 
 
Indebtedness, net
$
5,992

$
13,221

Accounts payable and accrued expenses
970

662

Due to related party, net
—

94

Liabilities related to assets held for sale
$
6,962

$
13,977

6. Investment in Unconsolidated Entities
Ashford Inc.
We hold approximately 598,000 shares of Ashford Inc. common stock, which represented an approximate 28.4% ownership interest in Ashford Inc. as of March 31, 2018, with a carrying value of $0 and a fair value of $57.3 million.
The following tables summarize the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017 and the condensed consolidated statements of operations of Ashford Inc. and our equity in earnings (loss) for the three months ended March 31, 2018 and 2017 (in thousands):
Ashford Inc.
Condensed Consolidated Balance Sheets
(unaudited)
 
March 31, 2018
 
December 31, 2017
Total assets
$
119,597

 
$
114,810

Total liabilities
$
82,830

 
$
78,742

Redeemable noncontrolling interests
4,662

 
5,111

Total stockholders’ equity of Ashford Inc.
30,545

 
30,185

Noncontrolling interests in consolidated entities
1,560

 
772

Total equity
32,105

 
30,957

Total liabilities and equity
$
119,597

 
$
114,810

Our ownership interest in Ashford Inc.
$
—

 
$
437


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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Ashford Inc.
Condensed Consolidated Statements of Operations
(unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Total revenue
$
48,168

 
$
13,013

Total operating expenses
(53,204
)
 
(15,149
)
Operating income (loss)
(5,036
)
 
(2,136
)
Realized and unrealized gain (loss) on investments, net
—

 
(75
)
Interest expense and loan amortization costs
(166
)
 
—

Other income (expense)
73

 
118

Income tax (expense) benefit
(706
)
 
(630
)
Net income (loss)
(5,835
)
 
(2,723
)
(Income) loss from consolidated entities attributable to noncontrolling interests
173

 
(25
)
Net (income) loss attributable to redeemable noncontrolling interests
(61
)
 
363

Net income (loss) attributable to Ashford Inc.
$
(5,723
)
 
$
(2,385
)
Our equity in earnings (loss) of Ashford Inc.
$
(437
)
 
$
(708
)
OpenKey
In 2016, the Company made investments totaling $2.3 million in OpenKey, which is controlled and consolidated by Ashford Inc., for a 13.3% ownership interest. OpenKey is a hospitality focused mobile key platform that provides a universal smart phone app for keyless entry into hotel guest rooms. In 2018 and 2017 we made additional investments of $667,000 and $983,000, respectively. As of March 31, 2018, the Company has made investments totaling $4.0 million. Our investment is recorded as a component of “investment in unconsolidated entities” in our consolidated balance sheet 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. As of March 31, 2018 and December 31, 2017, our ownership interest of approximately 16.3% and 16.2% had a carrying value of $3.0 million and $2.5 million, respectively. For the three months ended March 31, 2018 and 2017, our equity in earnings (loss) in the unconsolidated entity was a loss of $151,000 and $107,000, respectively.

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

7. Indebtedness
Indebtedness consisted of the following (in thousands):
Indebtedness
 
Collateral
 
Maturity
 
Interest Rate
 
March 31, 2018
 
December 31, 2017
Mortgage loan (2)
 
8 hotels
 
January 2018
 
LIBOR (1) + 4.95%
 
$
—

 
$
376,800

Mortgage loan (3)
 
1 hotel
 
April 2018
 
LIBOR (1) + 4.95%
 
33,300

 
33,300

Mortgage loan (4)
 
22 hotels
 
April 2018
 
LIBOR (1) + 4.39%
 
971,654

 
971,654

Mortgage loan (5)
 
1 hotel
 
May 2018
 
LIBOR (1) + 5.10%
 
25,100

 
25,100

Mortgage loan (6)
 
1 hotel
 
June 2018
 
LIBOR (1) + 5.10%
 
43,750

 
43,750

Mortgage loan (7)
 
1 hotel
 
July 2018
 
LIBOR (1) + 4.15%
 
35,200

 
35,200

Mortgage loan (7)
 
1 hotel
 
July 2018
 
LIBOR (1) + 5.10%
 
40,500

 
40,500

Mortgage loan (7)
 
8 hotels
 
July 2018
 
LIBOR (1) + 4.09%
 
144,000

 
144,000

Mortgage loan (8)
 
1 hotel
 
August 2018
 
LIBOR (1) + 4.95%
 
12,000

 
12,000

Mortgage loan (9) (10)
 
4 hotels
 
August 2018
 
LIBOR (1) + 4.35%
 
52,530

 
52,530

Mortgage loan (9)
 
6 hotels
 
August 2018
 
LIBOR (1) + 4.35%
 
280,421

 
280,421

Mortgage loan (11) (12) (13)
 
17 hotels
 
October 2018
 
LIBOR (1) + 4.55%
 
442,359

 
450,000

Mortgage loan (14)
 
5 hotels
 
February 2018
 
LIBOR (1) + 4.75%
 
200,000

 
200,000

Mortgage loan
 
1 hotel
 
July 2019
 
4.00%
 
5,310

 
5,336

Mortgage loan (15)
 
17 hotels
 
November 2019
 
LIBOR (1) + 3.00%
 
427,000

 
427,000

Mortgage loan (2)
 
8 hotels
 
February 2020
 
LIBOR (1) + 2.92%
 
395,000

 
—

Mortgage loan (16)
 
1 hotel
 
May 2020
 
LIBOR (1) + 2.90%
 
16,100

 
16,100

Mortgage loan
 
1 hotel
 
November 2020
 
6.26%
 
94,754

 
95,207

Mortgage loan (17)
 
2 hotels
 
June 2022
 
LIBOR (1) + 3.00%
 
171,228

 
164,700

Mortgage loan
 
1 hotel
 
November 2022
 
LIBOR (1) + 2.00%
 
97,000

 
97,000

Mortgage loan
 
1 hotel
 
May 2023
 
5.46%
 
53,548

 
53,789

Mortgage loan
 
1 hotel
 
January 2024
 
5.49%
 
6,970

 
7,000

Mortgage loan
 
1 hotel
 
January 2024
 
5.49%
 
10,172

 
10,216

Mortgage loan
 
1 hotel
 
May 2024
 
4.99%
 
6,501

 
6,530

Mortgage loan
 
2 hotels
 
August 2024
 
4.85%
 
12,193

 
12,242

Mortgage loan
 
3 hotels
 
August 2024
 
4.90%
 
24,372

 
24,471

Mortgage loan
 
3 hotels
 
August 2024
 
5.20%
 
65,971

 
66,224

Mortgage loan
 
2 hotels
 
February 2025
 
4.45%
 
20,117

 
20,214

Mortgage loan
 
3 hotels
 
February 2025
 
4.45%
 
52,035

 
52,284

 
 
 
 
 
 
 
 
3,739,085

 
3,723,568

Premiums, net
 
 
 
 
 
 
 
1,501

 
1,570

Deferred loan costs, net
 
 
 
 
 
 
 
(21,804
)
 
(15,617
)
 
 
 
 
 
 
 
 
$
3,718,782

 
$
3,709,521

 
 

 
 
 

 


 


Indebtedness related to assets held for sale (10)
 
1 hotel
 
August 2018
 
LIBOR (1) + 4.35%
 
5,992

 
5,992

Indebtedness related to assets held for sale (12)
 
1 hotel
 
October 2018
 
LIBOR (1) + 4.55%
 
—

 
7,229

Indebtedness, net
 
 
 
 
 
 
 
$
3,712,790

 
$
3,696,300

____________________________________
(1) 
LIBOR rates were 1.883% and 1.564% at March 31, 2018 and December 31, 2017, respectively.
(2) 
On January 17, 2018, we refinanced this mortgage loan totaling $376.8 million set to mature in January 2018 with a new $395.0 million mortgage loan with a two-year initial term one-year extension options, subject to the satisfaction of certain conditions. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 2.92%.
(3) 
This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions. The second one-year extension period began in April 2018.
(4) 
On April 9, 2018, we refinanced this mortgage loan totaling $971.7 million set to mature in April 2018 with a new $985.0 million mortgage loan with a two-year initial term and five one-year extension options, subject to satisfaction of certain conditions. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 3.20%

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

(5) 
This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in May 2017.
(6) 
This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in June 2017.
(7) 
This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions. The first one-year extension period began in July 2017.
(8) 
This mortgage loan has two one -year extension options, subject to satisfaction of certain conditions.
(9) 
This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions. The second one-year extension period began in August 2017.
(10) 
A portion of this mortgage loan at March 31, 2018 and at December 31, 2017 relates to the SpringHill Suites Centerville. See note 5.
(11) 
This mortgage loan has four one-year extension options, subject to satisfaction of certain conditions.
(12) 
A portion of this mortgage loan at December 31, 2017 relates to SpringHill Suites Glen Allen. See note 5.
(13) 
This mortgage loan had a $7.6 million pay down of principal related to the SpringHill Suites Glen Allen that was sold on February 20, 2018. See note 5.
(14) 
This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions and a LIBOR floor of 2.0%. The third one-year extension period began in February 2018.
(15) 
This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions.
(16) 
This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions.
(17) 
This $181.0 million mortgage loan had an initial advance of $164.7 million in May 2017. In February 2018, an additional advance of $6.5 million was taken for a capital expenditures project at one of the hotels securing the mortgage loan.
On February 1, 2017, we repaid $20.2 million of principal on our mortgage loan partially secured by the Renaissance Portsmouth. This hotel property was sold on February 1, 2017.
On March 6, 2017, we repaid $20.6 million of principal on our mortgage loan partially secured by the Embassy Suites Syracuse. This hotel property was sold on March 6, 2017.
On May 10, 2017, we refinanced a $105.0 million mortgage loan, secured by the Renaissance Nashville in Nashville, Tennessee and the Westin in Princeton, New Jersey. The new mortgage loan totals $181.0 million, of which our initial advance was $164.7 million with future advances totaling $16.3 million as reimbursement for capital expenditures. The mortgage loan is interest only and provides for a floating interest rate of LIBOR + 3.00%. Beginning on July 1, 2020, quarterly principal payments of $750,000 are due. The stated maturity is June 2022, with no extension options.
On May 24, 2017, we refinanced a $15.7 million mortgage loan, secured by the Hotel Indigo (“Indigo Atlanta”) in Atlanta, Georgia. The new mortgage loan totals $16.1 million. The mortgage loan is interest only and provides for a floating interest rate of LIBOR + 2.90% for the first two years with a 30-year amortization schedule based on a 6% interest rate starting in the third year. The stated maturity is May 2020, with two one-year extension options.
On June 29, 2017, we repaid $78.7 million of principal on our mortgage loan partially secured by the Crowne Plaza Ravinia. This hotel property was sold on June 29, 2017.
On October 30, 2017, we refinanced our $94.7 million mortgage loan, with an outstanding balance of $94.5 million, secured by the Hilton Boston Back Bay. The new mortgage loan totals $97.0 million. The mortgage loan is non-recourse interest only and provides for a floating interest rate of LIBOR + 2.00%. The stated maturity is November 2022, with no extension options.
On October 31, 2017, we refinanced a $412.5 million mortgage loan, secured by seventeen hotels. The new mortgage loan totals $427.0 million. The mortgage loan is interest only and provides for a floating interest rate of LIBOR + 3.00%. The stated maturity is November 2019, with five one-year extension options. The new mortgage loan is secured by the following seventeen hotels: the Courtyard Alpharetta, Courtyard Bloomington, Courtyard Crystal City, Courtyard Foothill Ranch, Embassy Suites Austin, Embassy Suites Dallas, Embassy Suites Houston, Embassy Suites Las Vegas, Embassy Suites Palm Beach, Hampton Inn Evansville, Hilton Garden Inn Jacksonville, Hilton Nassau Bay, Hilton St. Petersburg, Residence Inn Evansville, Residence Inn Falls Church, Residence Inn San Diego and Sheraton Indianapolis.
On January 17, 2018, we refinanced our $376.8 million mortgage loan. The new mortgage loan totaled $395.0 million. The new mortgage loan has a two-year initial term and five one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is interest only and provides for a floating interest rate of LIBOR + 2.92%. The new mortgage loan is secured by eight hotels: Embassy Suites Portland, Embassy Suites Crystal City, Embassy Suites Orlando, Embassy Suites Santa Clara, Crowne Plaza Key West, Hilton Costa Mesa, Sheraton Minneapolis, and Historic Inns of Annapolis.
On February 20, 2018, we repaid $7.6 million of principal on our mortgage loan partially secured by the SpringHill Suites Glen Allen. This hotel property was sold on February 20, 2018.

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

On April 9, 2018, we refinanced our $971.7 million mortgage loan secured by 22 hotel properties. The new mortgage loan totaled $985.0 million, is interest only and provides for a floating interest rate of LIBOR + 3.20%. The stated maturity is April 2020 with five one-year extension options, subject to the satisfaction of certain conditions. The new mortgage loan is secured by the same 22 hotel properties that include: the Courtyard Boston Downtown, Courtyard Denver, Courtyard Gaithersburg, Courtyard Savannah, Hampton Inn Parsippany, Hilton Parsippany, Hilton Tampa, Hilton Garden Inn Austin, Hilton Garden Inn BWI, Hilton Garden Inn Virginia Beach, Hyatt Windwatch Long Island, Hyatt Savannah, Marriott DFW Airport, Marriott Omaha, Marriott San Antonio, Marriott Sugarland, Renaissance Palm Springs, Ritz-Carlton Atlanta, Residence Inn Tampa, Churchill, Melrose and Silversmith.
During the three months ended March 31, 2018 and 2017, we recognized premium amortization of $69,000 and $534,000, respectively. The amortization of the premium is computed using a method that approximates the effective interest method, which is included in interest expense and amortization of premiums and loan costs in the consolidated statements of operations.
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. 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 March 31, 2018, we were in compliance in all material respects with all covenants or other requirements set forth in our debt and related agreements as amended.
8. 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 March 31,
 
2018
 
2017
Income (loss) allocated to common stockholders:
 
 
 
Income (loss) attributable to the Company
$
(26,271
)
 
$
(25,413
)
Less: Dividends on preferred stock
(10,644
)
 
(10,956
)
Less: Dividends on common stock
(11,613
)
 
(11,438
)
Less: Dividends on unvested performance stock units
(123
)
 
(98
)
Less: Dividends on unvested restricted shares
(225
)
 
(205
)
Undistributed income (loss)
(48,876
)
 
(48,110
)
Add back: Dividends on common stock
11,613

 
11,438

Distributed and undistributed income (loss) - basic and diluted
$
(37,263
)
 
$
(36,672
)
 
 
 
 
Weighted average shares outstanding:
 
 
 
Weighted average common shares outstanding - basic and diluted
95,367

 
94,840

 
 
 
 
Basic income (loss) per share:
 
 
 
Net income (loss) allocated to common stockholders per share
$
(0.39
)
 
$
(0.39
)
 
 
 
 
Diluted income (loss) per share:
 
 
 
Net income (loss) allocated to common stockholders per share
$
(0.39
)
 
$
(0.39
)

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Due to the anti-dilutive effect, the computation of diluted income (loss) per share does not reflect adjustments for the following items (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Income (loss) allocated to common stockholders is not adjusted for:
 
 
 
Income (loss) allocated to unvested restricted shares
$
225

 
$
205

Income (loss) allocated to unvested performance stock units
123

 
98

Income (loss) attributable to noncontrolling interest in operating partnership units
(6,340
)
 
(6,493
)
Total
$
(5,992
)
 
$
(6,190
)
 
 
 
 
Weighted average diluted shares are not adjusted for:
 
 
 
Effect of unvested restricted shares
181

 
117

Effect of unvested performance stock units
551

 
40

Effect of assumed conversion of operating partnership units
17,541

 
17,265

Effect of incentive fee shares
283

 
300

Total
18,556

 
17,722

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. The interest rate derivatives currently include interest rate caps and interest rate floors. These derivatives are subject to master netting settlement arrangements. 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.
During the three months ended March 31, 2018, we entered into interest rate caps with notional amounts totaling $1.0 billion and strike rates ranging from 2.50% to 4.00%. These interest rate caps had effective dates from January 2018 to March 2018, maturity dates from January 2019 to February 2020 and a total cost of $229,000.
During the three months ended March 31, 2017, we entered into interest rate caps with notional amounts totaling $1.3 billion and strike rates ranging from 2.50% to 4.44%. These interest rate caps had effective dates from February 2017 to April 2017, termination dates from January 2018 to April 2018 and a total cost of $280,000. These instruments were not designated as cash flow hedges.
As of March 31, 2018, we held interest rate caps with notional amounts totaling $3.6 billion and strike rates ranging from 1.50% to 5.84%. These instruments had maturity dates ranging from April 2018 to February 2020. These instruments cap the interest rates on our mortgage loans with principal balances of $3.3 billion and maturity dates from April 2018 to June 2022. As of March 31, 2018, we held interest rate floors with notional amounts totaling $16.8 billion and strike rates ranging from (0.25)% to 1.5%. These instruments have termination dates ranging from March 2019 to July 2020. Cash collateral is posted by us as well as our counterparties. We offset the fair value of the derivative and the obligation/right to return/reclaim cash collateral.
Credit Default Swap Derivatives—We use credit default swaps, tied to the CMBX index, to hedge financial and capital market risk. A credit default swap is a derivative contract that functions like an insurance policy against the credit risk of an entity or obligation. The seller of protection assumes the credit risk of the reference obligation from the buyer (us) of protection in exchange for annual premium payments. If a default or a loss, as defined in the credit default swap agreements, occurs on the underlying bonds, then the buyer of protection is protected against those losses. The only liability for us, the buyer, is the annual premium and any change in value of the underlying CMBX index (if the trade is terminated prior to maturity). For all CMBX trades completed to date, we were the buyer of protection. Credit default swaps are subject to master-netting settlement arrangements and credit support annexes. As of March 31, 2018, we held credit default swaps with notional amounts totaling $212.5 million. These credit default swaps had effective dates from February 2015 to August 2017 and expected maturity dates from October 2023 to October 2026. Assuming the underlying bonds pay off at par over their remaining average life, our total exposure for these trades was approximately $7.5 million as of March 31, 2018. Cash collateral is posted by us as well as our counterparties. We

20
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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

offset the fair value of the derivative and the obligation/right to return/reclaim cash collateral. The change in market value of credit default swaps is settled net through posting cash collateral or reclaiming cash collateral between us and our counterparties when the change in market value is over $250,000.
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.