Summary of Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2024

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, 2024				December 31, 2023
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets measured at fair value:

Derivative assets	$	4,074	$	4,074	$	13,696	$	13,696

Financial liabilities measured at fair value:
Embedded debt derivative	$	22,400	$	22,400	$	23,696	$	23,696

Financial assets not measured at fair value:
Cash and cash equivalents (1)	$	119,659	$	119,659	$	165,232	$	165,232
Restricted cash (1)	114,282		114,282		146,302		146,302
Accounts receivable, net (1)	49,874		49,874		45,692		45,692
Notes receivable, net	10,164		10,164		7,369		7,369

Due from related parties, net	2,078		2,078		—		—
Due from third-party hotel managers (1)	26,684		26,684		21,681		21,681

Financial liabilities not measured at fair value:
Indebtedness (1)	$	2,722,240	$2,681,085		$	3,038,139	$2,960,630
Indebtedness associated with hotels in receivership	322,800		265,256		355,120		289,028
Accounts payable and accrued expenses (1)	146,402		146,402		129,554		129,554
Accrued interest payable (1)	10,714		10,714		13,040		13,040
Accrued interest associated with hotels in receivership	42,847		42,847		14,024		14,024
Dividends and distributions payable	3,833		3,833		3,566		3,566
Due to Ashford Inc., net (1)	6,407		6,407		13,262		13,262

Due to related parties, net	—		—		5,874		5,874
Due to third-party hotel managers	1,149		1,149		1,193		1,193

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(1) Includes balances associated with assets held for sale and liabilities associated with assets held for sale as of December 31, 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, accrued interest associated with hotels in receivership, 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 approximate the carrying value of $10.2 million at September 30, 2024 and the carrying value of $7.4 million at December 31, 2023. 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 and indebtedness associated with hotels in receivership. 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 98.5% of the carrying value of $2.7 billion at September 30, 2024 and approximately 97.4% of the carrying value of $3.0 billion at December 31, 2023. We estimated the fair value of indebtedness associated with hotels in receivership to be approximately 82.2% of the carrying value

of $322.8 million at September 30, 2024 and approximately 81.4% of the carrying value of $355.1 million at December 31, 2023. These fair value estimates are considered a Level 2 valuation technique.