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FAIR VALUE MEASUREMENT (Tables)

3 Months Ended

Mar. 31, 2019

Schedule of disclosures concerning financial instruments measured at fair value

Disclosures concerning financial instruments measured at fair value are as follows (in thousands):



	Fair Value Measurements at March 31, 2019 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	1,215	$	—	$	1,215
Purchase options related to real estate loans	—		—		6,120		6,120
Liabilities:
Interest rate swaps	—		8,354		—		8,354



	Fair Value Measurements at December 31, 2018 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	3,461	$	—	$	3,461
Purchase options related to real estate loans	—		—		6,120		6,120
Liabilities:
Interest rate swaps	—		5,042		—		5,042

Fair value valuation techniques

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:



Market approach:		Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Cost approach:		Amount required to replace the service capacity of an asset (replacement cost).
Income approach:		Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).

The estimated fair values of the purchase options were based on unobservable inputs for which there is little or no market information available and required us to develop our own assumptions as follows (dollar amounts in thousands):



	Real Estate Loan 1			Real Estate Loan 2			Real Estate Loan 3
Exercise price	$	15,143		$	17,377		$	5,503
First option exercise date ⁽¹⁾	12/31/2018			3/31/2019			5/31/2019
Last option exercise date	11/1/2020			12/5/2020			12/1/2020
Expected volatility	32.0		%	38.0		%	37.0		%
Risk free rate	1.7		%	1.8		%	1.9		%
Expected annualized equity dividend yield	6.8		%	9.9		%	6.5		%

(1)

The first option exercise date is the date used for valuing the purchase option. The actual option exercise dates are on or after the hotels are fully constructed and open for business. As of March 31, 2019, one of the three hotels were open for business.