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Section 1: 10-Q (10-Q)

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, 2019
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 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
þ
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
 
102,142,228
(Class)
 
Outstanding at May 6, 2019




ASHFORD HOSPITALITY TRUST, INC
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2019
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, 2019
 
December 31, 2018
ASSETS
 
 
 
Investments in hotel properties, net
$
4,309,127

 
$
4,105,219

Cash and cash equivalents
242,561

 
319,210

Restricted cash
152,151

 
120,602

Marketable securities
11,550

 
21,816

Accounts receivable, net of allowance of $478 and $485, respectively
65,579

 
37,060

Inventories
4,514

 
4,224

Investment in unconsolidated entities
3,725

 
4,489

Deferred costs, net
3,369

 
3,449

Prepaid expenses
27,143

 
19,982

Derivative assets, net
2,196

 
2,396

Operating lease right-of-use assets
40,680

 

Other assets
15,411

 
15,923

Intangible assets, net
797

 
9,824

Due from related party, net
1,166

 

Due from third-party hotel managers
25,181

 
21,760

Total assets
$
4,905,150

 
$
4,685,954

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Indebtedness, net
$
4,157,767

 
$
3,927,266

Accounts payable and accrued expenses
162,060

 
136,757

Dividends and distributions payable
27,552

 
26,794

Due to Ashford Inc., net
7,795

 
23,034

Due to related party, net

 
1,477

Due to third-party hotel managers
2,480

 
2,529

Intangible liabilities, net
2,418

 
15,483

Derivative liabilities, net
36

 
50

Operating lease liabilities
43,795

 

Other liabilities
26,619

 
18,716

Total liabilities
4,430,522

 
4,152,106

Commitments and contingencies (note 15)


 


Redeemable noncontrolling interests in operating partnership
101,980

 
80,743

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, 2019 and December 31, 2018
24

 
24

Series F Cumulative Preferred Stock, 4,800,000 shares issued and outstanding at March 31, 2019 and December 31, 2018
48

 
48

Series G Cumulative Preferred Stock, 6,200,000 shares issued and outstanding at March 31, 2019 and December 31, 2018
62

 
62

Series H Cumulative Preferred Stock, 3,800,000 shares issued and outstanding at March 31, 2019 and December 31, 2018
38

 
38

Series I Cumulative Preferred Stock, 5,400,000 shares issued and outstanding at March 31, 2019 and December 31, 2018
54

 
54

Common stock, $0.01 par value, 400,000,000 shares authorized, 102,165,662 and 101,035,530 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
1,022

 
1,010

Additional paid-in capital
1,815,946

 
1,814,273

Accumulated deficit
(1,445,136
)
 
(1,363,020
)
Total stockholders’ equity of the Company
372,058

 
452,489

Noncontrolling interests in consolidated entities
590

 
616

Total equity
372,648

 
453,105

Total liabilities and equity
$
4,905,150

 
$
4,685,954

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,
 
2019
 
2018
REVENUE
 
 
 
Rooms
$
280,381

 
$
270,693

Food and beverage
61,061

 
55,044

Other hotel revenue
16,204

 
15,491

Total hotel revenue
357,646

 
341,228

Other
1,072

 
979

Total revenue
358,718

 
342,207

EXPENSES
 
 
 
Hotel operating expenses:
 
 
 
Rooms
60,647

 
59,086

Food and beverage
41,323

 
38,465

Other expenses
113,527

 
106,383

Management fees
12,989

 
12,737

Total hotel expenses
228,486

 
216,671

Property taxes, insurance, and other
20,397

 
18,359

Depreciation and amortization
67,178

 
63,047

Impairment charges

 
1,660

Transaction costs

 
2

Advisory services fee
16,304

 
17,077

Corporate general and administrative
2,601

 
2,129

Total expenses
334,966

 
318,945

Gain (loss) on sale of assets and hotel properties
233

 
(9
)
OPERATING INCOME (LOSS)
23,985

 
23,253

Equity in earnings (loss) of unconsolidated entities
(1,063
)
 
(588
)
Interest income
781

 
746

Other income (expense)
(316
)
 
76

Interest expense and amortization of premiums and loan costs
(66,166
)
 
(54,743
)
Write-off of premiums, loan costs and exit fees
(2,062
)
 
(2,050
)
Unrealized gain (loss) on marketable securities
808

 
(558
)
Unrealized gain (loss) on derivatives
(2,994
)
 
329

INCOME (LOSS) BEFORE INCOME TAXES
(47,027
)
 
(33,535
)
Income tax (expense) benefit
405

 
886

NET INCOME (LOSS)
(46,622
)
 
(32,649
)
(Income) loss from consolidated entities attributable to noncontrolling interest
26

 
38

Net (income) loss attributable to redeemable noncontrolling interests in operating partnership
8,579

 
6,340

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
(38,017
)
 
(26,271
)
Preferred dividends
(10,644
)
 
(10,644
)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
$
(48,661
)
 
$
(36,915
)
 
 
 
 
INCOME (LOSS) PER SHARE - BASIC AND DILUTED
 
 
 
Basic:
 
 
 
Net income (loss) attributable to common stockholders
$
(0.49
)
 
$
(0.39
)
Weighted average common shares outstanding – basic
99,407

 
95,367

Diluted:
 
 
 
Net income (loss) attributable to common stockholders
$
(0.49
)
 
$
(0.39
)
Weighted average common shares outstanding – diluted
99,407

 
95,367

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,
 
2019
 
2018
Net income (loss)
$
(46,622
)
 
$
(32,649
)
Other comprehensive income (loss), net of tax:
 
 
 
Total other comprehensive income (loss)

 

Comprehensive income (loss)
(46,622
)
 
(32,649
)
Less: Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities
26

 
38

Less: Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership
8,579

 
6,340

Comprehensive income (loss) attributable to the Company
$
(38,017
)
 
$
(26,271
)
See Notes to Consolidated Financial Statements.

4

Table of Contents

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited, in thousands except per share amounts)
 
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, 2018
2,389

 
$
24

 
4,800

 
$
48

 
6,200

 
$
62

 
3,800

 
$
38

 
5,400

 
$
54

 
101,036

 
$
1,010

 
$
1,814,273

 
$
(1,363,020
)
 
$
616

 
$
453,105

 
$
80,743

Impact of adoption of new accounting standard (1)

 

 

 

 

 

 

 

 

 

 

 

 

 
1,755

 

 
1,755

 

Purchases of common stock

 

 

 

 

 

 

 

 

 

 
(187
)
 
(1
)
 
(902
)
 

 

 
(903
)
 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 
2,788

 

 

 
2,788

 
1,802

Forfeitures of restricted shares

 

 

 

 

 

 

 

 

 

 
(6
)
 

 

 

 

 

 

Issuance of restricted shares/units

 

 

 

 

 

 

 

 

 

 
1,323

 
13

 
(13
)
 

 

 

 
23

Issuance of units for hotel acquisition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
7,854

Common stock offering costs

 

 

 

 

 

 

 

 

 

 

 

 
(200
)
 

 

 
(200
)
 

Dividends declared - common stock ($.12/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(12,450
)
 

 
(12,450
)
 

Dividends declared - preferred stock - Series D ($.53/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(1,262
)
 

 
(1,262
)
 

Dividends declared – preferred stock - Series F ($.46/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(2,212
)
 

 
(2,212
)
 

Dividends declared – preferred stock - Series G ($.46/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(2,858
)
 

 
(2,858
)
 

Dividends declared – preferred stock - Series H ($.47/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(1,781
)
 

 
(1,781
)
 

Dividends declared – preferred stock - Series I
($.47/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(2,531
)
 

 
(2,531
)
 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(2,623
)
Redemption value adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 
(22,760
)
 

 
(22,760
)
 
22,760

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 
(38,017
)
 
(26
)
 
(38,043
)
 
(8,579
)
Balance at March 31, 2019
2,389

 
$
24

 
4,800

 
$
48

 
6,200

 
$
62

 
3,800

 
$
38

 
5,400

 
$
54

 
102,166

 
$
1,022

 
$
1,815,946

 
$
(1,445,136
)
 
$
590

 
$
372,648

 
$
101,980

(1) see note 17.


5

Table of Contents

 
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

Preferred stock issuance costs

 

 

 

 

 

 

 

 

 

 

 

 
(30
)
 

 

 
(30
)
 

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared - common stock ($.12/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(11,961
)
 

 
(11,961
)
 

Dividends declared - preferred stock - Series D ($.53/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(1,262
)
 

 
(1,262
)
 

Dividends declared – preferred stock - Series F ($.46/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(2,212
)
 

 
(2,212
)
 

Dividends declared – preferred stock - Series G ($.46/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(2,858
)
 

 
(2,858
)
 

Dividends declared – preferred stock - Series H ($.47/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(1,781
)
 

 
(1,781
)
 

Dividends declared – preferred stock - Series I ($.47/share)

 

 

 

 

 

 

 

 

 

 

 

 

 
(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

6

Table of Contents

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2019
 
2018
Cash Flows from Operating Activities
 
 
 
Net income (loss)
$
(46,622
)
 
$
(32,649
)
Adjustments to reconcile net income (loss) to net cash flow from operating activities:
 
 
 
Depreciation and amortization
67,178

 
63,047

Impairment charges

 
1,660

Amortization of intangibles
(59
)
 
(59
)
Recognition of deferred income
(222
)
 
144

Bad debt expense
567

 
509

Deferred income tax expense (benefit)
(697
)
 
(1,147
)
Equity in (earnings) loss of unconsolidated entities
1,063

 
588

(Gain) loss on sale of assets and hotel properties
(233
)
 
9

Realized and unrealized (gain) loss on marketable securities
(804
)
 
448

Purchases of marketable securities
(1,325
)
 
(10,773
)
Sales of marketable securities
12,395

 
1,275

Net settlement of trading derivatives
(2,675
)
 
180

Realized and unrealized (gain) loss on derivatives
3,157

 
(329
)
Amortization of loan costs and premiums and write-off of premiums, loan costs and exit fees
9,255

 
4,434

Equity-based compensation
4,590

 
7,002

Changes in operating assets and liabilities, exclusive of the effect of acquisitions and dispositions of hotel properties:
 
 
 
Accounts receivable and inventories
(29,314
)
 
(11,389
)
Prepaid expenses and other assets
(5,162
)
 
(11,348
)
Operating lease right-of-use asset
(1,863
)
 

Operating lease liability
514

 

Accounts payable and accrued expenses
21,195

 
12,275

Due to/from related party
(2,327
)
 
(3,821
)
Due to/from third-party hotel managers
(3,470
)
 
(2,424
)
Due to/from Ashford Inc., net
861

 
(2,229
)
Other liabilities
777

 
1,258

Net cash provided by (used in) operating activities
26,779

 
16,661

Cash Flows from Investing Activities
 
 
 
Investment in unconsolidated entity
(299
)
 
(667
)
Proceeds from franchise agreement
4,000

 

Acquisition of hotel properties and assets, net of cash and restricted cash acquired
(212,791
)
 
(110
)
Improvements and additions to hotel properties
(37,982
)
 
(64,006
)
Net proceeds from sales of assets and hotel properties
5,000

 
10,535

Payments for initial franchise fees
(200
)
 
(75
)
Proceeds from property insurance
198

 
651

Net cash provided by (used in) investing activities
(242,074
)
 
(53,672
)
Cash Flows from Financing Activities
 
 
 
Borrowings on indebtedness
385,000

 
401,528

Repayments of indebtedness
(179,554
)
 
(394,704
)
Payments for loan costs and exit fees
(8,916
)
 
(1,997
)
Payments for dividends and distributions
(24,959
)
 
(23,173
)
Purchases of common stock
(903
)
 
(1,462
)
Payments for derivatives
(296
)
 
(229
)
Common stock offering costs
(200
)
 

Other
23

 
19

Net cash provided by (used in) financing activities
170,195

 
(20,018
)
Net increase (decrease) in cash, cash equivalents and restricted cash
(45,100
)
 
(57,029
)
Cash, cash equivalents and restricted cash at beginning of period
439,812

 
472,072

Cash, cash equivalents and restricted cash and at end of period
$
394,712


$
415,043


7

Table of Contents

 
Three Months Ended March 31,
 
2019
 
2018
Supplemental Cash Flow Information
 
 
 
Interest paid
$
57,457

 
$
52,168

Income taxes paid (refunded)
46

 
(255
)
Supplemental Disclosure of Non-Cash Investing and Financing Activity
 
 
 
Accrued but unpaid capital expenditures
$
27,390

 
$
18,705

Non-cash dividends paid

 
123

Issuance of units for hotel acquisition
7,854

 

Assumption of debt in hotel acquisition
24,922

 

Dividends and distributions declared but not paid
27,552

 
26,824

Supplemental Disclosure of Cash, Cash Equivalents and Restricted Cash
 
 
 
Cash and cash equivalents at beginning of period
$
319,210

 
$
354,805

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

 
78

Restricted cash at beginning of period
120,602

 
116,787

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

 
402

Cash, cash equivalents and restricted cash at beginning of period
$
439,812

 
$
472,072

 
 
 
 
Cash and cash equivalents at end of period
$
242,561

 
$
277,686

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

 
1

Restricted cash at end of period
152,151

 
137,145

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

 
211

Cash, cash equivalents and restricted cash at end of period
$
394,712

 
$
415,043

See Notes to Consolidated Financial Statements.

8

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 opportunistically in the hospitality industry with a focus predominantly on full-service upscale and upper upscale hotels in the U.S. 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. 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. 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.
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 March 31, 2019, we owned interests in the following assets:
121 consolidated hotel properties, including 119 directly owned and two owned through a majority-owned investment in a consolidated entity, which represent 25,579 total rooms (or 25,552 net rooms excluding those attributable to our partner);
90 hotel condominium units at WorldQuest Resort in Orlando, Florida (“WorldQuest”);
a 24.2% ownership in Ashford Inc. common stock with a carrying value of $949,000 and a fair value of $33.2 million; and
a 16.6% ownership in OpenKey with a carrying value of $2.8 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, 2019, our 121 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.
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. As of March 31, 2019, Remington Lodging & Hospitality, LLC, together with its affiliates (“Remington Lodging”), which is beneficially wholly owned by Mr. Monty J. Bennett, our Chairman, and his father Mr. Archie Bennett, Jr., our Chairman Emeritus, managed 83 of our 121 hotel properties and WorldQuest Resort. 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 project management services, mortgage placement services, audio visual services, real estate advisory services, investment management 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 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 2018 Annual Report to Stockholders on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 1, 2019.

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

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 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, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
The following acquisitions and dispositions affect reporting comparability of our consolidated financial statements:
Hotel Property 
 
Location 
 
Type
 
Date
SpringHill Suites
 
Glen Allen, VA
 
Disposition
 
February 20, 2018
SpringHill Suites
 
Centreville, VA
 
Disposition
 
May 1, 2018
Residence Inn
 
Tampa, FL
 
Disposition
 
May 10, 2018
Hilton Alexandria Old Town
 
Alexandria, VA
 
Acquisition
 
June 29, 2018
La Posada de Santa Fe
 
Santa Fe, NM
 
Acquisition
 
October 31, 2018
Embassy Suites New York Midtown Manhattan
 
New York, NY
 
Acquisition
 
January 22, 2019
Hilton Santa Cruz/Scotts Valley
 
Santa Cruz, CA
 
Acquisition
 
February 26, 2019
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 6.
Investments in Unconsolidated Entities—Investments in entities in which we have ownership interests ranging from 16.6% to 24.2%, at March 31, 2019, 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, 2019 and 2018.
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, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Because we do not have the power

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

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.
Leases—We determine if an arrangement is a lease at the commencement date. Operating leases, as lessee, are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on our consolidated balance sheets. We currently do not have any finance leases.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms used to calculate our right-of-use asset may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
We have lease agreements with lease and non-lease components, which under the elected practical expedients under ASC 842, we are not accounting for separately. For certain equipment leases, such as office equipment, we account for the lease and non-lease components as a single lease component.
Equity-Based Compensation—Prior to the adoption of Accounting Standards Update (“ASU”) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”) in the third quarter of 2018, stock/unit-based compensation for non-employees was accounted for at fair value based on the market price of the shares at period end that resulted 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 Long-Term Incentive Plan (“Performance LTIP”) units granted to certain executive officers were accounted for at fair value at period end based on a Monte Carlo simulation valuation model that resulted 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 certain 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.
After the adoption of ASU 2018-07 in the third quarter of 2018, stock/unit-based compensation for non-employees is measured at the grant date and expensed ratably over the vesting period based on the original measurement as of the grant date. This results in the recording of expense, included in “advisory services fee,” “management fees” and “corporate general and administrative” expense, equal to the ratable amount of the grant date fair value based on the requisite service period satisfied during the period. PSUs and Performance LTIP units granted to certain executive officers vest based on market conditions and are measured at the grant date fair value based on a Monte Carlo simulation valuation model. The subsequent expense is then ratably recognized over the service period as the service is rendered regardless of when, if ever, the market conditions are satisfied. This results in recording expense, included in “advisory services fee,” equal to the ratable amount of the grant date fair value based on the requisite service period satisfied during the period. Stock/unit grants to certain independent directors are measured at the grant date 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 February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a 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. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases ("ASU 2018-10") and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease, lease term and purchase option. The amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842), Narrow-Scope Improvements for Lessors (“ASU 2018-20”). The amendments create a lessor practical expedient applicable to sales and other similar taxes incurred in connection with a lease, and simplify lessor accounting for lessor costs paid by the lessee.
We adopted the standard effective January 1, 2019 on a modified retrospective basis and implemented internal controls to enable the preparation of financial information on adoption. We elected the practical expedients which provide us the option to

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

apply the new guidance at its effective date on January 1, 2019 without having to adjust the comparative prior period financial statements. The package of practical expedients also allowed us to carry forward the historical lease classification. Additionally, we elected the practical expedients allowing us not to separate lease and non-lease components and not record leases with an initial term of twelve months or less (“short-term leases”) on the balance sheet across all existing asset classes.
The adoption of this standard has resulted in the recognition of ROU assets and lease liabilities primarily related to our ground lease arrangements for which we are the lessee. As of January 1, 2019, we recorded operating lease liabilities of $43.3 million as well as a corresponding ROU asset of $38.8 million, which includes, among other things, reclassified intangible assets of $9.0 million, intangible liabilities of $13.0 million and deferred rent of $485,000. The standard did not have a material impact on our consolidated statements of operations and statements of cash flows. See related disclosures in note 5.
Recently Issued Accounting Standards—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. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2018-19”). ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies certain disclosure requirements related to fair value measurements including requiring disclosures on changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements and a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that ASU 2018-13 will have on the consolidated financial statements.
3. Revenue
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 from non-cancellable deposits when the customer provides notification of cancellation within established management policy time frames.
Taxes specifically collected from customers and submitted to taxing authorities are not recorded in revenue. Interest income is recognized when earned.

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

The following tables present our revenue disaggregated by geographical areas (in thousands):
 
 
Three Months Ended March 31, 2019
Primary Geographical Market
 
Number of Hotels
 
Rooms
 
Food and Beverage
 
Other Hotel
 
Other
 
Total
Atlanta, GA Area
 
9

 
$
20,276

 
$
5,043

 
$
1,195

 
$

 
$
26,514

Boston, MA Area
 
3

 
9,470

 
1,601

 
812

 

 
11,883

Dallas / Ft. Worth Area
 
7

 
15,904

 
4,776

 
885

 

 
21,565

Houston, TX Area
 
3

 
6,641

 
2,561

 
199

 

 
9,401

Los Angeles, CA Metro Area
 
6

 
20,544

 
4,593

 
1,166

 

 
26,303

Miami, FL Metro Area
 
3

 
8,910

 
2,788

 
225

 

 
11,923

Minneapolis / St. Paul, MN / WI Area
 
4

 
6,369

 
1,622

 
793

 

 
8,784

Nashville, TN Area
 
1

 
12,082

 
5,198

 
697

 

 
17,977

New York / New Jersey Metro Area
 
7

 
18,877

 
4,706

 
766

 

 
24,349

Orlando, FL Area
 
3

 
8,986

 
536

 
460

 

 
9,982

Philadelphia, PA Area
 
3

 
4,667

 
793

 
156

 

 
5,616

San Diego, CA Area
 
2

 
4,329

 
402

 
219

 

 
4,950

San Francisco / Oakland, CA Metro Area
 
6

 
21,625

 
2,338

 
567

 

 
24,530

Tampa, FL Area
 
2

 
8,134

 
2,713

 
269

 

 
11,116

Washington D.C. / MD / VA Area
 
9

 
25,755

 
5,450

 
1,811

 

 
33,016

Other Areas
 
53

 
86,626

 
15,926

 
5,591

 

 
108,143

Orlando WorldQuest
 

 
1,186

 
15

 
393

 

 
1,594

Corporate
 

 

 

 

 
1,072

 
1,072

Total
 
121

 
$
280,381

 
$
61,061

 
$
16,204

 
$
1,072

 
$
358,718

 
 
Three Months Ended March 31, 2018
Primary Geographical Market
 
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
 
2

 
7,481

 
1,915

 
786

 

 
10,182

Washington D.C. - MD - VA Area
 
8

 
23,650

 
5,145

 
1,225

 

 
30,020

Other Areas
 
51

 
83,092

 
14,430

 
5,236

 

 
102,758

Orlando WorldQuest
 

 
1,391

 
33

 
338

 

 
1,762

Sold properties
 
3

 
2,573

 
1

 
92

 

 
2,666

Corporate
 

 

 

 

 
979

 
979

Total
 
120

 
$
270,693

 
$
55,044

 
$
15,491

 
$
979

 
$
342,207

 
 

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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, 2019
 
December 31, 2018
Land
$
791,075

 
$
670,362

Buildings and improvements
4,193,548

 
4,062,810

Furniture, fixtures, and equipment
499,059

 
504,806

Construction in progress
34,753

 
37,394

Condominium properties
12,091

 
12,091

Total cost
5,530,526

 
5,287,463

Accumulated depreciation
(1,221,399
)
 
(1,182,244
)
Investments in hotel properties, net
$
4,309,127

 
$
4,105,219

Acquisitions
Embassy Suites New York Midtown Manhattan
On January 22, 2019, we acquired a 100% interest in the 310-room Embassy Suites New York Midtown Manhattan for $195.0 million. In connection with this transaction, we entered into a $145.0 million non-recourse mortgage loan at closing (see note 8). 
We accounted for this transaction as an asset acquisition because substantially all of the fair value of the gross assets acquired were concentrated in a group of similar identifiable assets. We allocated the cost of the acquisition including transaction costs to the individual assets acquired on a relative fair value basis, which is considered a Level 3 valuation technique, as noted in the following table (in thousands):
Land
$
111,760

Buildings and improvements
79,906

Furniture, fixtures and equipment
8,626

 
$
200,292

Key money
(3,800
)
 
$
196,492

Net other assets (liabilities)
$
1,559

The results of operations of the hotel property have been included in our results of operations as of the acquisition date. The table below summarizes the total revenue and net income (loss) of the hotel property in our consolidated statements of operations for the three months ended March 31, 2019 (in thousands):
 
Three Months Ended March 31, 2019
Total revenue
$
3,394

Net income (loss)
(2,371
)
Hilton Santa Cruz/Scotts Valley
On February 26, 2019, we acquired a 100% interest in the 178-room Hilton Santa Cruz/Scotts Valley for $47.5 million. Consideration included cash, approximately 1.5 million common units in our operating partnership and the assumption of non-recourse mortgage loan with a face value of approximately $25.3 million and a fair value of $24.9 million (see note 8). The number of common units was determined using a price of $7.00 per common unit. On February 26, 2019, the price per unit was $5.35 resulting in a fair value of $7.9 million.

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

We accounted for this transaction as an asset acquisition because substantially all of the fair value of the gross assets acquired were concentrated in a group of similar identifiable assets. We allocated the cost of the acquisition including transaction costs to the individual assets acquired on a relative fair value basis, which is considered a Level 3 valuation technique, as noted in the following table (in thousands):
Land
$
9,439

Buildings and improvements
34,203

Furniture, fixtures and equipment (1)
3,852

 
$
47,494

Debt discount
407

 
$
47,901

Net other assets (liabilities)
$
320

_____________________________
(1) Furniture, fixtures and equipment was sold to Ashford Inc. as a part of the $5.0 million ERFP for the Hilton Santa Cruz/Scotts Valley.
The results of operations of the hotel property have been included in our results of operations as of the acquisition date. The table below summarizes the total revenue and net income (loss) of the hotel property in our consolidated statements of operations for the three months ended March 31, 2019 (in thousands):
 
Three Months Ended March 31, 2019
Total revenue
$
820

Net income (loss)
(237
)
5. Leases
On January 1, 2019, we adopted ASC 842 on a modified retrospective basis. We elected the practical expedients which allowed us to apply the new guidance at its effective date on January 1, 2019 without adjusting the comparative prior period financial statements. The package of practical expedients also allowed us to carry forward the historical lease classification. Additionally, we elected the practical expedients allowing us not to separate lease and non-lease components and not record leases with an initial term of twelve months or less (“short-term leases”) on the balance sheet across all existing asset classes.
The adoption of this standard has resulted in the recognition of ROU assets and lease liabilities primarily related to our ground lease arrangements for which we are the lessee. As of January 1, 2019, we recorded operating lease liabilities of $43.3 million as well as a corresponding ROU asset of $38.8 million which includes the reclassified intangible assets of $9.0 million, intangible liabilities of $13.0 million and deferred rent of $485,000. The standard did not have a material impact on our condensed consolidated statements of operations and statements of cash flows.
The majority of our leases are operating ground leases. We also have operating equipment leases, such as copier and vehicle leases, at our hotel properties. Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to 99 years. The exercise of lease renewal options is at our sole discretion. Some leases have variable payments, however, if variable payments are contingent, they are not included in the ROU assets and liabilities. We have no finance leases as of March 31, 2019.
As of March 31, 2019, our leased assets and liabilities consisted of the following (in thousands):
 
March 31, 2019
Assets
 
Operating lease right-of-use assets
$
40,680

Liabilities
 
Operating lease liabilities
$
43,795


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

We incurred the following lease costs related to our operating leases (in thousands):
 
 
Classification
 
Three Months Ended March 31, 2019
Operating lease cost (1)
 
Hotel operating expenses - other
 
$
831

_______________________________________
(1) Includes approximately $192,000 of variable lease cost associated with the ground leases and ($39,000) of net amortization costs related to the intangible assets and liabilities that was reclassified upon adoption of ASC 842. Short-term lease costs in aggregate are immaterial.
Other information related to leases is as follows:
 
 
Three Months Ended March 31,
 
 
2019
Supplemental Cash Flows Information
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash flows from operating leases (in thousands)
 
$
728

Weighted Average Remaining Lease Term
 
 
Operating leases (1)
 
71 years

Weighted Average Discount Rate
 
 
Operating leases (1)
 
5.16
%
_______________________________________
(1) Calculated using the lease term, excluding extension options, and our calculated discount rates of the ground leases and owner managed leases.
Future minimum lease payments due under non-cancellable leases as of March 31, 2019 were as follows (in thousands):
 
 
Operating Leases
2019
 
$
2,914

2020
 
2,791

2021
 
2,600

2022
 
2,483

2023
 
2,419

Thereafter
 
167,006

Total future minimum lease payments
 
180,213

Less: interest
 
(136,418
)
Present value of lease liabilities
 
$
43,795

Future minimum lease payments due under non-cancellable leases under ASC 840 as of December 31, 2018 were as follows (in thousands):
2019
$
2,643

2020
2,506

2021
2,379

2022
2,297

2023
2,249