Summary of Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2021

Investments, All Other Investments [Abstract]

Summary of Fair Value of Financial Instruments

Determining estimated fair values of our financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. Market assumptions and/or estimation methodologies used may have a material effect on estimated fair value amounts. Accordingly, estimates presented are not necessarily indicative of amounts at which these instruments could be purchased, sold, or settled. Carrying amounts and estimated fair values of financial instruments, for periods indicated, were as follows (in thousands):


	September 30, 2021				December 31, 2020
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets and liabilities measured at fair value:

Derivative assets	$	71	$	71	$	263	$	263

Embedded debt derivative	38,952		38,952		—		—

Financial assets not measured at fair value:
Cash and cash equivalents	$	672,961	$	672,961	$	92,905	$	92,905
Restricted cash	84,985		84,985		74,408		74,408
Accounts receivable, net	38,284		38,284		21,760		21,760
Notes receivable, net	8,642		$8,210 to $9,074		8,263		$7,850 to $8,676
Due from Ashford Inc., net	1,264		1,264		—		—
Due from related parties, net	7,319		7,319		5,801		5,801
Due from third-party hotel managers	24,077		24,077		9,383		9,383

Financial liabilities not measured at fair value:
Indebtedness	$	3,867,739	$3,413,404 to $3,772,713		$	3,711,297	$3,167,369 to $3,500,777
Accounts payable and accrued expenses	118,267		118,267		99,954		99,954
Accrued interest payable	16,964		16,964		98,685		98,685
Dividends and distributions payable	236		236		868		868
Due to Ashford Inc., net	—		—		13,383		13,383

Due to related parties, net	800		800		—		—
Due to third-party hotel managers	958		958		184		184

Cash, cash equivalents and restricted cash. These financial assets bear interest at market rates and have original maturities of less than 90 days. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.

Accounts receivable, net, accounts payable and accrued expenses, accrued interest payable, dividends and distributions payable, due to/from related parties, net, due to/from Ashford Inc., net and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to their short-term nature. This is considered a Level 1 valuation technique.

Notes receivable, net. The carrying amount of notes receivable, net approximates its fair value. We estimate the fair value of the notes receivable, net to be approximately 95.0% and 105.0% of the carrying value of $8.6 million at September 30, 2021 and approximately 95.0% to 105.0% of the carrying value of $8.3 million as of December 31, 2020.

Derivative assets and embedded debt derivative. See notes 9 and 10 for a complete description of the methodology and assumptions utilized in determining fair values.

Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. Current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied and adjusted for credit spreads. Credit spreads take into consideration general market conditions, maturity, and collateral. We estimated the fair value of total indebtedness to be approximately 88.3% to 97.5% of the carrying value of $3.9 billion at September 30, 2021 and approximately 85.3% to 94.3% of the carrying value of $3.7 billion at December 31, 2020. These fair value estimates are considered a Level 2 valuation technique.