Summary of Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2022

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, 2022				December 31, 2021
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:

Derivative assets	$	20,187	$	20,187	$	501	$	501

Financial liabilities measured at fair value:
Embedded debt derivative	$	23,278	$	23,278	$	27,906	$	27,906

Financial assets not measured at fair value:
Cash and cash equivalents	$	505,533	$	505,533	$	592,110	$	592,110
Restricted cash	132,055		132,055		99,534		99,534
Accounts receivable, net	58,601		58,601		37,720		37,720
Notes receivable, net	4,975		4,726 to 5,224		8,723		8,287 to 9,159
Due from Ashford Inc., net	1,761		1,761		25		25
Due from related parties, net	6,597		6,597		7,473		7,473
Due from third-party hotel managers	27,361		27,361		26,896		26,896

Financial liabilities not measured at fair value:
Indebtedness	$	3,813,305	$3,481,207 to $3,847,648		$	3,851,845	$3,407,210 to $3,765,858
Accounts payable and accrued expenses	135,967		135,967		117,650		117,650
Accrued interest payable	10,577		10,577		15,432		15,432
Dividends and distributions payable	3,103		3,103		3,104		3,104


Due to related parties, net	—		—		728		728
Due to third-party hotel managers	727		727		1,204		1,204

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 $5.0 million at September 30, 2022 and approximately 95.0% to 105.0% of the carrying value of $8.7 million as of December 31, 2021.

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 91.3% to 100.9% of the carrying value of $3.8 billion at September 30, 2022 and approximately 88.5% to 97.8% of the carrying value of $3.9 billion at December 31, 2021. These fair value estimates are considered a Level 2 valuation technique.