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Fair Value Disclosure
 6 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Disclosure Fair Value Disclosure
GAAP establishes a hierarchy of valuation techniques based on the observability of the inputs utilized in measuring financial instruments at fair value. Market-based or observable inputs are the preferred source of values, followed by valuation models using management's assumptions in the absence of market-based or observable inputs. The three levels of the hierarchy as noted in ASC 820, "Fair Value Measurements and Disclosures" are described below:
Level I — Quoted prices in active markets for identical assets or liabilities.
Level II — Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.
Level III — Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used.
While we anticipate that our valuation methods will be appropriate and consistent with valuation methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We will use inputs that are current as of the measurement date, which may include periods of market dislocation, during which price transparency may be reduced.
The estimated fair values of our derivative instruments are determined using a discounted cash flow analysis on the expected cash flows of each instrument. Our derivative instruments are classified as Level II in the fair value hierarchy.
The fair values of foreign exchange forwards are determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying countries.
The fair value of our interest rate cap is determined by using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the interest rate cap. The variable interest rates used in the calculation of projected receipts on the interest rate cap are based on a third party expert's expectation of future interest rates derived from observable market interest rate curves and volatilities.
The following table summarizes the levels in the fair value hierarchy into which our assets and liabilities with recurring fair value measurements were categorized as of June 30, 2021 and December 31, 2020 ($ in thousands): 
 Fair Value as of June 30, 2021Fair Value as of December 31, 2020
 Level ILevel IILevel IIITotalLevel ILevel IILevel IIITotal
Recurring fair value measurements:
Foreign currency forward, net$— $(22,894)$— $(22,894)$— $(31,375)$— $(31,375)
Interest rate cap asset— 380 — 380 — 134 — 134 
Total financial instruments$— $(22,514)$— $(22,514)$— $(31,241)$— $(31,241)
Non-recurring Fair Value Measurements
We are required to record real estate owned, a nonfinancial asset, at fair value on a non-recurring basis in accordance with GAAP. If the real estate is classified as held for sale, the fair value of our real estate owned and the related debt is determined by using the market approach, less costs to sell. The market approach utilizes the fair value of similar assets and liabilities in the
marketplace as well as an internal analysis as to selling price of specific assets and liabilities, which we deem to be significant unobservable inputs. As such the fair value of real estate owned, held for sale and the related debt falls within Level III of the fair value hierarchy.
During the first quarter of 2021, there was an increase in our expected costs to sell our real estate owned, held for sale and we performed a non-recurring fair value measurement. During the second quarter of 2021, the property was sold and no additional gain or loss was recorded.
On May 24, 2021, we acquired legal title to a full-service luxury hotel through a deed-in-lieu of foreclosure, which is classified as real estate owned on our condensed consolidated balance sheet. We assumed the hotel’s assets and liabilities, including a $110.0 million mortgage loan. We performed a non-recurring fair value measurement on the assets and liabilities assumed as of the date we acquired legal title to the real estate. On June 29, 2021, we repaid the $110.0 million mortgage loan against the property.
Refer to "Note 5 - Real Estate Owned and Related Debt" for further discussion.
The following table summarizes the levels in the fair value hierarchy into which our assets and liabilities with non-recurring fair value measurements were categorized as of June 30, 2021 and December 31, 2020 ($ in thousands): 
 Fair Value as of June 30, 2021Fair Value as of December 31, 2020
 Level ILevel IILevel IIITotalLevel ILevel IILevel IIITotal
Non-Recurring fair value measurements:
Real estate owned$— $— $154,300 $154,300 $— $— $— $— 
Real estate owned, held for sale— — — — — — 42,905 42,905 
Debt related to real estate owned, held for sale— — — — — — (33,000)(33,000)
Net real estate owned and related debt$— $— $154,300 $154,300 $— $— $9,905 $9,905