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, 2014				December 31, 2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets and liabilities measured at fair value:
Marketable securities	$	44,273	$	44,273	$	29,601	$	29,601
Derivative assets, net	413		413		19		19
Liabilities associated with marketable securities and other	4,302		4,302		3,764		3,764

Financial assets not measured at fair value:
Cash and cash equivalents	$	280,574	$	280,574	$	128,780	$	128,780
Restricted cash	107,356		107,356		61,498		61,498
Accounts receivable	29,153		29,153		21,791		21,791
Note receivable	3,509		$2,983 to $3,297		3,384		$2,800 to $3,094
Due from affiliates	1,748		1,748		1,302		1,302
Due from Ashford Prime OP, net	3,815		3,815		13,042		13,042
Due from related parties	1,200		1,200		—		—
Due from third-party hotel managers	14,635		14,635		33,728		33,728

Financial liabilities not measured at fair value:
Indebtedness	$	1,959,608	$ 1,903,723 to $2,104,118		$	1,818,929	$ 1,786,651 to $1,974,714
Accounts payable and accrued expenses	93,536		93,536		70,683		70,683
Dividends payable	21,889		21,889		20,735		20,735
Due to related party, net	1,461		1,461		270		270
Due to third-party hotel managers	1,629		1,629		958		958

Cash, cash equivalents, and restricted cash. These financial assets bear interest at market rates and have 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, accounts payable, accrued expenses, dividends payable, due to/from Ashford Prime OP, due to/from related party, due to/from affiliates 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.

Note receivable. Fair value of notes receivable is determined using similar loans with similar collateral. We relied on our internal analysis of what we believe a willing buyer would pay for this note. We estimated the fair value of the note receivable to be approximately 15.0% to 6.0% lower than the carrying value of $3.5 million at September 30, 2014 and approximately 17.3% to 8.6% lower than the carrying value of $3.4 million at December 31, 2013. This is considered a Level 2 valuation technique.

Marketable securities. Marketable securities consist of U.S. treasury bills, public equity securities, and equity put and call options. The fair value of these investments is based on quoted market closing prices at the balance sheet dates. See Notes 2, 8 and 9 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 97.1% to 107.4% of the carrying value of $2.0 billion at September 30, 2014 and approximately 98.2% to 108.6% of the carrying value of $1.8 billion at December 31, 2013. This is considered a Level 2 valuation technique.

Derivative assets, net and liabilities associated with marketable securities and other. Fair value of interest rate derivatives is determined using the net present value of expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair values of credit default swap derivatives are obtained from a third party who publishes the CMBX index composition and price data. Liabilities associated with marketable securities and other consists of a margin account balance, short public equity securities and short equity put and call options. Fair value is determined based on quoted market closing prices at the balance sheet dates. See Notes 2, 8 and 9 for a complete description of the methodology and assumptions utilized in determining fair values.