Assets and Liabilities Measured at Fair Value

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy) has been established.

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets and liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability that are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Recurring Fair Value Measurements

Currently, we use interest rate swaps and caps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, implied volatilities, and foreign currency exchange rates.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2016, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The following fair value hierarchy table presents information about our assets measured at fair value on a recurring basis as of December 31, 2015:



December 31, 2015	Level 1		Level 2		Level 3		Total
Assets
Derivative financial instruments	$	—	$	2	$	—	$	2

Courtyard Kauai Coconut Beach Hotel was our only remaining asset with an interest rate cap as of June 30, 2016 and it had a nominal value.

Derivative financial instruments classified as assets are included in prepaid expenses and other assets on the balance sheet.

Nonrecurring Fair Value Measurements

During the year ended December 31, 2015, we recorded a $1.4 million non-cash impairment charge as a result of a measurable decrease in the fair value of 22 Exchange, one of our student housing investments. In estimating the fair value of 22 Exchange, we used management’s internal discounted cash flow analysis prepared with consideration of the current local market. The discounted cash flow estimate is considered Level 3 under the fair value hierarchy described above.

The following fair value hierarchy table presents information about our assets measured at fair value on a nonrecurring basis during the year ended December 31, 2015:



For the year ended December 31, 2015	Level 1		Level 2		Level 3		Total Fair Value		Loss
Assets
Buildings and improvements, net⁽¹⁾	$	—	$	—	$	25,000	$	25,000	$	(1,417	)

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(1)	Due to the local market in Akron, Ohio during the fourth quarter of 2015, we recorded a non-cash impairment charge of $1.4 million on our investment in 22 Exchange, one of our student housing investments.

Quantitative Information about Level 3 Fair Value Measurements



Description	Fair Value for the year ended December 31, 2015 (in 000s)		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Buildings and improvements, net⁽¹⁾	$	25,000	Discounted cash flow	Discount rate Terminal capitalization rate	7.5% - 8.0% 6.5% - 7.5%

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(1)	Due to the local market in Akron, Ohio during the fourth quarter of 2015, we recorded a non-cash impairment charge of $1.4 million on our investment in 22 Exchange, a student housing property.

There were no impairment charges recorded during the three and six months ended June 30, 2016 and 2015.