Summary of Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2023

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, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:

Derivative assets	$	25,493	$	25,493	$	47,182	$	47,182

Financial liabilities measured at fair value:
Embedded debt derivative	$	23,096	$	23,096	$	23,687	$	23,687

Financial assets not measured at fair value:
Cash and cash equivalents (1)	$	184,737	$	184,737	$	417,064	$	417,064
Restricted cash (1)	172,182		172,182		141,962		141,962
Accounts receivable, net (1)	73,940		73,940		49,809		49,809
Notes receivable, net	5,934		5,637 to 6,230		5,062		4,809 to 5,315
Due from Ashford Inc., net	—		—		486		486
Due from related parties, net (1)	4,404		4,404		6,570		6,570
Due from third-party hotel managers	24,145		24,145		22,462		22,462

Financial liabilities not measured at fair value:
Indebtedness (1)	$	3,624,259	$3,329,331 to $3,679,785		$	3,815,023	$3,500,635 to $3,869,122
Accounts payable and accrued expenses (1)	153,719		153,719		115,970		115,970
Accrued interest payable (1)	25,281		25,281		15,287		15,287
Dividends and distributions payable	3,568		3,568		3,118		3,118
Due to Ashford Inc., net (1)	9,019		9,019		—		—


Due to third-party hotel managers	1,134		1,134		1,319		1,319

____________________________________

(1) Includes balances associated with assets held for sale and liabilities associated with assets held for sale as of September 30, 2023.

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 $5.9 million at September 30, 2023 and approximately 95.0% to 105.0% of the carrying value of $5.1 million at December 31, 2022. This is considered a Level 2 valuation technique.

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 91.9% to 101.5% of the carrying value of $3.6 billion at September 30, 2023 and approximately 91.8% to 101.4% of the carrying value of $3.8 billion at December 31, 2022. These fair value estimates are considered a Level 2 valuation technique.