Fair Value Measurements and Interest Rate Derivatives (Tables)

6 Months Ended

Jun. 30, 2023

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 June 30, 2023 (unaudited) and December 31, 2022 were as follows (in thousands):


	June 30, 2023				December 31, 2022
	Carrying Amount (1)		Fair Value (2)		Carrying Amount (1)		Fair Value (2)
Debt	$	820,100	$	801,197	$	816,136	$	809,141

(1)

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

(2)

Due to prevailing market conditions and the current uncertain economic environment, 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 June 30, 2023 (unaudited) and December 31, 2022 (in thousands):

Estimated Fair Value of Assets (1)

Strike / Capped

Effective

Maturity

Notional

June 30,

December 31,

Hedged Debt

Type

Rate

Index

Date

Amount

2023

2022

Hilton San Diego Bayfront

Cap

6.000

1-Month LIBOR

December 9, 2022

December 9, 2023

N/A

Term Loan 1

Swap

3.675

CME Term SOFR

March 17, 2023

March 17, 2026

75,000

1,438

N/A

Term Loan 1

Swap

3.931

CME Term SOFR

September 14, 2023

September 14, 2026

100,000

709

N/A

Term Loan 2

Swap

1.853

1-Month LIBOR

January 29, 2016

January 31, 2023

N/A

208

2,147

268

(1)

In May 2023, the cap derivative was terminated in conjunction with the Company’s repayment of the loan secured by the Hilton San Diego Bayfront (see Note 6). The fair value of the cap derivative is included in prepaid expenses and other current assets on the accompanying consolidated balance sheet as of December 31, 2022. The Term Loan 1 swap derivatives are included in other assets on the accompanying consolidated balance sheet as of June 30, 2023. 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 December 31, 2022.

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 six months ended June 30, 2023 and 2022 as follows (unaudited and in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Noncash interest on derivatives, net	$	(3,711)	$	(1,023)	$	(1,879)	$	(2,865)