Company: BHR-PD
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001574085-25-000024
Chunk: 204

Company: Braemar Hotels & Resorts Inc.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 8
Chunk 204
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 to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Presentation of Commercial Mortgage-Backed Security 

As described in Note 7 to the Company’s consolidated financial statements, on August 7, 2024, the Company refinanced two existing mortgage loans and a credit facility into a new $407 million mortgage loan. The Company also purchased an investment in a tranche of Commercial Mortgage-Backed Securities (“CMBS”), which is secured by the five hotel properties which secure the $407 million mortgage loan. The CMBS has a par value of $42.2 million and a rate of SOFR + 5.20%. 

We identified the presentation of the mortgage loan, investment in the CMBS, as well as the corresponding interest expense and interest income, as a critical audit matter. Auditing the presentation of the CMBS and related mortgage loan was especially challenging due to the inherent complexities of the agreements