Fair Value Measurements and Interest Rate Derivatives (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Measurements and Interest Rate Derivatives

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 September 30, 2022 (unaudited) and December 31, 2021 were as follows (in thousands):

	September 30, 2022				December 31, 2021
	Carrying Amount (1)		Fair Value (2)		Carrying Amount (1)		Fair Value (2)
Debt	$	816,647	$	798,323	$	611,437	$	590,359

(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.

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 September 30, 2022 (unaudited) and December 31, 2021 (in thousands):

									Estimated Fair Value of Assets (Liabilities) (1)
		Strike / Capped			Effective	Maturity	Notional		September 30,		December 31,
Hedged Debt	Type	Rate		Index	Date	Date	Amount		2022		2021
Hilton San Diego Bayfront	Cap	6.000	%	1-Month LIBOR	December 9, 2021	December 15, 2022	$	220,000	$	—	$	3
Term Loan 1	Swap	1.591	%	1-Month LIBOR	October 29, 2015	September 2, 2022	$	85,000		N/A		(744)
Term Loan 2	Swap	1.853	%	1-Month LIBOR	January 29, 2016	January 31, 2023	$	100,000		679		(1,484)
									$	679	$	(2,225)

(1) The fair values of the cap derivative are included in prepaid expenses and other current assets on the accompanying consolidated balance sheets as of both September 30, 2022 and December 31, 2021. The Term Loan 1 swap derivative expired in September 2022. The fair value of the Term Loan 2 swap derivative is included in prepaid expenses and other current assets on the accompanying consolidated balance sheet as of September 30, 2022. As of December 31, 2021, the fair values of both swap derivatives are included in other current liabilities and other liabilities, respectively, on the accompanying consolidated balance sheet.

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 decreases to interest expense for the three and nine months ended September 30, 2022 and 2021 as follows (unaudited and in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Noncash interest on derivatives, net	$	(39)	$	(616)	$	(2,904)	$	(2,194)