Braemar Hotels & Resorts (BHR) risk factors, FY2024 10-K

Risks Related to Our Business and Properties

1. 01A financial crisis, economic slowdown, pandemic, or epidemic or other economically disruptive event may harm the operating performance of the hotel industry generally. If such events occur, we may be impacted by declines in occupancy, average daily room rates and/or other operating revenues
2. 02Economic conditions in the United States could have a material adverse impact on our earnings and financial condition
3. 03Our cash, cash equivalents and investments could be adversely affected if the financial institutions in which we hold our cash, cash equivalents and investments fail
4. 04We may not pay dividends on our common stock or preferred stock in the future
5. 05Our business is significantly influenced by the economies and other conditions in the specific markets in which we operate, particularly in the metropolitan areas where we have high concentrations of hotels
6. 06Our investments are concentrated in the hotel industry, and our business would be adversely affected by an economic downturn in that sector
7. 07We face risks related to changes in the global economic and political environment, including capital and credit markets
8. 08We invest in the luxury segments of the lodging market, which are highly competitive and generally subject to greater volatility than most other market segments and could negatively affect our profitability
9. 09Because we depend upon Ashford LLC and its affiliates to conduct our operations, any adverse changes in the financial condition of Ashford LLC or its affiliates or our relationship with them could hinder our operating performance
10. 10We depend on Ashford LLC’s key personnel with long-standing business relationships. The loss of Ashford LLC’s key personnel could threaten our ability to operate our business successfully
11. 11Our business strategy depends on acquiring additional hotel properties on attractive terms and the failure to do so or to otherwise manage our planned growth successfully may adversely affect our business and operating results
12. 12There is no guarantee that Ashford Trust will sell us any of the properties that are subject to the right of first offer agreement
13. 13We may be unable to successfully integrate and operate acquired properties, which may have a material adverse effect on our business and operating results
14. 14Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on a co-venturer’s financial condition and disputes between us and our co-venturers
15. 15Hotel franchise or management agreement requirements or the loss of such an agreement could adversely affect us
16. 16Our management agreements could adversely affect our ability to sell or finance our hotel properties
17. 17Eight of our hotels currently operate under Marriott or Hilton brands; therefore, we are subject to risks associated with concentrating our portfolio in just two brand families
18. 18If we cannot obtain additional capital, our growth will be limited
19. 19Some of our hotels are subject to ground leases; if we are found to be in breach of a ground lease or are unable to renew a ground lease, our business could be materially and adversely affected
20. 20In any eminent domain proceeding with respect to a hotel, we will not recognize any increase in the value of the land or improvements subject to our ground leases or at expiration and may only receive a portion of compensation paid
21. 21We are increasingly dependent on information technology, and cyber-attacks, security problems or other disruption and expanding social media vehicles present new risks
22. 22We may experience losses caused by severe weather conditions or natural disasters
23. 23Changes in laws, regulations or policies may adversely affect our business
24. 24We may from time to time be subject to litigation, which could have a material adverse effect on our financial condition, results of operations, cash flow and trading price of our common stock

Risks Related to our Debt Financing

1. 25We have a significant amount of debt, and our organizational documents have no limitation on the amount of additional indebtedness that we may incur in the future
2. 26acceptable to us, or at all. These conditions could adversely affect our financial position, results of operations, and cash flows or the market price of our stock
3. 27Higher interest rates have increased our debt payments and such debt payments may remain high
4. 28We may enter into other transactions that could further exacerbate the risks to our financial condition. The use of debt to finance future acquisitions could restrict operations, inhibit our ability to grow our business and revenues, and negatively affect our business and financial results
5. 29Covenants, “cash trap” provisions or other terms in our mortgage loans and our senior convertible notes, as well as any future credit facility, could limit our flexibility and adversely affect our financial condition or our qualification as a REIT
6. 30There is refinancing risk associated with our debt
7. 31Our hedging strategies may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on an investment in our Company

Risks Related to Conflicts of Interest

1. 32Ashford LLC was a subsidiary of Ashford Trust until its spin-off and may be able to direct attractive investment opportunities to Ashford Trust and away from us
2. 33Ashford LLC and its employees, some of whom are our executive officers, face competing demands relating to their time and this may adversely affect our operations
3. 34Conflicts of interest with Remington Hospitality and Premier, each of which is a subsidiary of Ashford Inc., could result in our management acting other than in our stockholders’ best interest
4. 35specifically relating to Remington Hospitality and Premier may lead to management decisions that are not in our stockholders’ best interest
5. 36Ashford Inc.’s ability to exercise significant influence over the determination of the competitive set for any hotels managed by Remington Hospitality could artificially enhance the perception of the performance of a hotel, making it more difficult to use managers other than Remington Hospitality for future properties
6. 37Remington Hospitality may be able to pursue lodging investment opportunities that compete with us
7. 38Our fiduciary duties as the general partner of our operating partnership could create conflicts of interest, which may impede business decisions that could benefit our stockholders
8. 39Our conflicts of interest policy may not adequately address all of the conflicts of interest that may arise with respect to our activities
9. 40The potential for conflicts of interest as a result of our management structure may provoke dissident stockholder activities that result in significant costs

Risks Related to Hotel Investments

1. 41We are subject to general risks associated with operating hotels
2. 42Declines in or disruptions to the travel industry could adversely affect our business and financial performance
3. 43We may have to make significant capital expenditures to maintain our hotel properties, and any development activities we undertake may be more costly than we anticipate
4. 44The hotel business is seasonal, which affects our results of operations from quarter to quarter
5. 45The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could have a material adverse effect on our business and operating results
6. 46Many of our real estate-related costs are fixed, and will not decrease even if revenue from our hotels decreases
7. 47The increasing use of Internet travel intermediaries by consumers may adversely affect our profitability
8. 48Our revenues and profitability may be adversely affected by increased use of business-related technology, which may reduce the need for business-related travel
9. 49Future terrorist attacks or changes in terror alert levels could materially and adversely affect our business
10. 50We are subject to risks associated with the employment of hotel personnel, particularly with respect to hotels that employ unionized labor

Risks Related to the Real Estate Industry

1. 51Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our hotel properties and harm our financial condition
2. 52Because real estate investments are relatively illiquid, our ability to sell promptly one or more hotel properties for reasonable prices in response to changing economic, financial, and investment conditions is limited
3. 53Increases in property taxes would increase our operating costs, reduce our income and adversely affect our ability to make distributions to our stockholders
4. 54The costs of compliance with or liabilities under environmental laws may harm our operating results
5. 55The discovery of material environmental liabilities at our properties could subject us to unanticipated significant costs. The presence of hazardous substances on a property may adversely affect our ability to sell the property on favorable terms or at all, and we may incur substantial remediation costs
6. 56Tax increases and changes in tax rules may adversely affect our financial results
7. 57Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem
8. 58Compliance with the ADA and fire, safety, and other regulations may require us to incur substantial costs
9. 59We may experience uninsured or underinsured losses
10. 60In the future, we may choose not to maintain terrorism insurance on any of our properties. As a result, one or more large uninsured or underinsured losses could have a material adverse effect on our business, operating results and financial condition

Risks Related to Investments in Securities

1. 61Our earnings are dependent, in part, upon the performance of our investment portfolio
2. 62Our prior investment performance is not indicative of future results
3. 63Our investment portfolio will likely contain investments concentrated in a single industry and will not be fully diversified

Risks Related to Our Organization and Structure

1. 64Our charter contains provisions that may delay or prevent a change of control transaction
2. 65Our board of directors may create and issue an additional class or series of common stock or preferred stock without stockholder approval
3. 66Certain provisions in the partnership agreement for our operating partnership may delay or prevent unsolicited acquisitions of us
4. 67Because provisions contained in Maryland law and our charter may have an anti-takeover effect, investors may be prevented from receiving a “control premium” for their shares
5. 68Certain provisions of Maryland law could inhibit changes in control
6. 69Our board of directors can take many actions without stockholder approval
7. 70Our rights and the rights of our stockholders to take action against our directors and officers are limited
8. 71Future issuances of securities, including our common stock and preferred stock, could reduce existing investors’ relative voting power and percentage of ownership and may dilute our share value

Risks Related to Our Status as a REIT

1. 72Failure to qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders
2. 73Even if we qualify and remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow
3. 74Failure to make required distributions would subject us to U.S. federal corporate income tax
4. 75Our TRS structure increases our overall tax liability
5. 76If our leases with our TRS lessees are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT
6. 77Our ownership of TRSs is limited and our transactions with our TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms
7. 78If our hotel managers, including Ashford Hospitality Services LLC and its subsidiaries (including Remington Hospitality) do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT
8. 79Complying with REIT requirements may cause us to forego otherwise attractive opportunities
9. 80Complying with REIT requirements may force us to liquidate otherwise attractive investments
10. 81Complying with REIT requirements may force us to borrow to make distributions to stockholders
11. 82We may distribute taxable dividends that are payable in cash and common stock at the election of each stockholder subject to certain limitations, including that the cash portion be at least 20% of the total distribution
12. 83The prohibited transactions tax may limit our ability to dispose of our properties
13. 84The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders
14. 85Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
15. 86We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our securities
16. 87If our operating partnership failed to qualify as a partnership for U.S. federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences
17. 88Qualifying as a REIT involves highly technical and complex provisions of the Code
18. 89Declines in the values of our investments may make it more difficult for us to maintain our qualification as a REIT or exemption from the Investment Company Act

Risks Related to our Common Stock

1. 90Broad market fluctuations could negatively impact the market price of our stock
2. 91The number of shares available for future sale could adversely affect the per share trading price of our common stock
3. 92The market price of our common stock could be adversely affected by our level of cash distributions
4. 93Our stock repurchase program could increase the volatility of the price of our common stock