Fair Value Measurements and Interest Rate Derivatives (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Measurements and Interest Rate Derivatives

Schedule of assets measured at fair value on a recurring and nonrecurring basis

The following table presents the Company’s assets measured at fair value on a recurring and nonrecurring basis at March 31, 2019 and December 31, 2018 (in thousands):


			Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3

March 31, 2019 (unaudited):
Interest rate cap derivatives	$	—	$	—	$	—	$	—
Interest rate swap derivatives		2,725		—		2,725		—
Life insurance policy (1)		398		—		398		—
Total assets measured at fair value at March 31, 2019	$	3,123	$	—	$	3,123	$	—
December 31, 2018:
Interest rate cap derivatives	$	—	$	—	$	—	$	—
Interest rate swap derivatives		4,789		—		4,789		—
Life insurance policy (1)		386		—		386		—
Total assets measured at fair value at December 31, 2018	$	5,175	$	—	$	5,175	$	—

(1)

Includes the split life insurance policy for a former Company associate. These amounts are included in other assets, net on the accompanying consolidated balance sheets, and will be used to reimburse the Company for payments made to the former associate from the related retirement benefit agreement, which is included in accrued payroll and employee benefits on the accompanying consolidated balance sheets.

Schedule of liabilities measured at fair value on a recurring and nonrecurring basis

The following table presents the Company’s liabilities measured at fair value on a recurring and nonrecurring basis at March 31, 2019 and December 31, 2018 (in thousands):


			Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3

March 31, 2019 (unaudited):
Retirement benefit agreement (1)	$	398	$	—	$	398	$	—
Total liabilities measured at fair value at March 31, 2019	$	398	$	—	$	398	$	—

December 31, 2018:
Retirement benefit agreement (1)	$	386	$	—	$	386	$	—
Total liabilities measured at fair value at December 31, 2018	$	386	$	—	$	386	$	—

(1)

Includes the retirement benefit agreement for a former Company associate. The agreement calls for the balance of the retirement benefit to be paid out to the former associate in ten annual installments, beginning in 2011. As such, the Company has paid the former associate a total of $1.6 million through March 31, 2019, which was reimbursed to the Company using funds from the related split life insurance policy noted above. These amounts are included in accrued payroll and employee benefits on the accompanying consolidated balance sheets.

Schedule of interest rate derivatives

The Company’s interest rate derivatives, which are not designated as effective cash flow hedges, consisted of the following at March 31, 2019 (unaudited) and December 31, 2018 (in thousands):


									Estimated Fair Value of Assets (1)
		Strike / Capped			Effective	Maturity	Notional		March 31,		December 31,
Hedged Debt	Type	Rate		Index	Date	Date	Amount		2019		2018
Hilton San Diego Bayfront	Cap	4.250	%	1-Month LIBOR	May 1, 2017	May 1, 2019	$	107,515	$	—	$	—
Hilton San Diego Bayfront	Cap	6.000	%	1-Month LIBOR	November 10, 2017	December 9, 2020	$	220,000		—		—
$85.0 million term loan	Swap	1.591	%	1-Month LIBOR	October 29, 2015	September 2, 2022	$	85,000		1,616		2,521
$100.0 million term loan	Swap	1.853	%	1-Month LIBOR	January 29, 2016	January 31, 2023	$	100,000		1,109		2,268
									$	2,725	$	4,789

(1)

The fair values of the cap and swap agreements are included in other assets, net on the accompanying consolidated balance sheets as of both March 31, 2019 and December 31, 2018.

Schedule of changes in fair value of interest rate derivatives

Noncash changes in the fair values of the Company’s interest rate derivatives resulted in increases (decreases) to interest expense for the three months ended March 31, 2019 and 2018 as follows (unaudited and in thousands):

Schedule of principal values and estimated fair values of debt

The Company’s principal balances and fair market values of its consolidated debt as of March 31, 2019 (unaudited) and December 31, 2018 were as follows (in thousands):


	March 31, 2019				December 31, 2018
	Carrying Amount (1)		Fair Value		Carrying Amount (1)		Fair Value
Debt	$	980,996	$	972,535	$	982,828	$	971,082

(1)

The principal balance of debt is presented before any unamortized deferred financing costs.

Three Months Ended March 31,

Noncash interest on derivatives