Fair Value Measurements and Interest Rate Derivatives (Tables)

3 Months Ended

Mar. 31, 2020

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, 2020 and December 31, 2019 (in thousands):

			Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
March 31, 2020 (unaudited):
Hilton Times Square (1)	$	61,261	$	—	$	—	$	61,261
Renaissance Westchester (1)		29,500		—		29,500		—
Total assets measured at fair value at March 31, 2020	$	90,761	$	—	$	29,500	$	61,261
December 31, 2019:
Renaissance Harborplace (1)	$	96,725	$	—	$	—	$	96,725
Total assets measured at fair value at December 31, 2019	$	96,725	$	—	$	—	$	96,725

(1) The fair market value of the Hilton Times Square is comprised of $63.5 million included in investment in hotel properties, net, $12.5 million included in operating lease right-of-use assets, net and $(14.7) million included in operating lease obligations on the Company’s consolidated balance sheets at March 31, 2020. The fair market values of the Renaissance Westchester and the Renaissance Harborplace are included in investment in hotel properties, net on the Company’s consolidated balance sheets at March 31, 2020 and December 31, 2019, respectively.

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, 2020 and December 31, 2019 (in thousands):

			Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
March 31, 2020 (unaudited):
Interest rate swap derivatives	$	7,161	$	—	$	7,161	$	—
Total liabilities measured at fair value at March 31, 2020	$	7,161	$	—	$	7,161	$	—
December 31, 2019:
Interest rate swap derivatives	$	1,081	$	—	$	1,081	$	—
Total liabilities measured at fair value at December 31, 2019	$	1,081	$	—	$	1,081	$	—

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, 2020 (unaudited) and December 31, 2019 (in thousands):

									Estimated Fair Value of Liabilities (1)
		Strike / Capped			Effective	Maturity	Notional		March 31,		December 31,
Hedged Debt	Type	Rate		Index	Date	Date	Amount		2020		2019
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		(2,706)		(132)
$100.0 million term loan	Swap	1.853	%	1-Month LIBOR	January 29, 2016	January 31, 2023	$	100,000		(4,455)		(949)
									$	(7,161)	$	(1,081)

(1) The fair values of both swap agreements are included in other liabilities on the accompanying consolidated balance sheets as of both March 31, 2020 and December 31, 2019.

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 to interest expense for the three months ended March 31, 2020 and 2019 as follows (unaudited and in thousands):

	Three Months Ended March 31,
	2020		2019
Noncash interest on derivatives	$	6,080	$	2,064

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, 2020 (unaudited) and December 31, 2019 were as follows (in thousands):

	March 31, 2020				December 31, 2019
	Carrying Amount (1)		Fair Value (2)		Carrying Amount (1)		Fair Value
Debt	$	1,272,965	$	1,247,507	$	974,863	$	976,012

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

(2) Due to prevailing market conditions and the uncertain economic environment caused by the COVID-19 pandemic, actual interest rates could vary materially from those estimated, which would result in variances in the Company’s calculations of the fair market value of its debt.