Fair Value Measurements and Interest Rate Derivatives (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2020 and December 31, 2019 (in thousands):

			Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
June 30, 2020 (unaudited):
Interest rate cap derivatives	$	6	$	—	$	6	$	—
Renaissance Harborplace (1)		76,683		—		76,683		—
Total assets measured at fair value at June 30, 2020	$	76,689	$	—	$	76,689	$	—
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 values of the Renaissance Harborplace are included in assets held for sale, net and investment in hotel properties, net on the Company’s consolidated balance sheets at June 30, 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 June 30, 2020 and December 31, 2019 (in thousands):

			Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
June 30, 2020 (unaudited):
Interest rate swap derivatives	$	7,272	$	—	$	7,272	$	—
Total liabilities measured at fair value at June 30, 2020	$	7,272	$	—	$	7,272	$	—
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 June 30, 2020 (unaudited) and December 31, 2019 (in thousands):

									Estimated Fair Value of Assets (Liabilities) (1)
		Strike / Capped			Effective	Maturity	Notional		June 30,		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	$	—	$	—
Hilton San Diego Bayfront	Cap (2)	6.000	%	1-Month LIBOR	December 9, 2020	December 15, 2021	$	220,000		6		—
$85.0 million term loan	Swap	1.591	%	1-Month LIBOR	October 29, 2015	September 2, 2022	$	85,000		(2,742)		(132)
$100.0 million term loan	Swap	1.853	%	1-Month LIBOR	January 29, 2016	January 31, 2023	$	100,000		(4,530)		(949)
									$	(7,266)	$	(1,081)

(1) The fair values of both cap agreements and both swap agreements are included in other assets, net and other liabilities, respectively, on the accompanying consolidated balance sheets as of both June 30, 2020 and December 31, 2019.

(2) In April 2020, the Company purchased a new interest rate cap agreement for $0.1 million related to the existing loan secured by the Hilton San Diego Bayfront. The new cap agreement, whose terms are substantially the same as the terms under the prior cap agreement, effectively extends the cap agreement’s maturity date to December 15, 2021.

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 and six months ended June 30, 2020 and 2019 as follows (unaudited and in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Noncash interest on derivatives	$	216	$	3,578	$	6,296	$	5,642

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 June 30, 2020 (unaudited) and December 31, 2019 were as follows (in thousands):

	June 30, 2020				December 31, 2019
	Carrying Amount (1)		Fair Value (2)		Carrying Amount (1)		Fair Value
Debt	$	1,021,247	$	976,249	$	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.