XML 33 R18.htm IDEA: XBRL DOCUMENT

FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2022

The following table presents information about our financial instruments measured at fair value on a recurring basis as of December 31, 2022 and 2021. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, we classify assets and liabilities based on the lowest level of input that is significant to the fair value measurement. 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.

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


	Fair Value Measurement at December 31, 2022 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	16,841	$	—	$	16,841




	Fair Value Measurement at December 31, 2021 using
	Level 1		Level 2		Level 3		Total
Assets:

Purchase options related to real estate loans (1)	$	—	$	—	$	2,800	$	2,800
Liabilities:
Interest rate swaps	$	—	$	15,723	$	—	$	15,723

(1) The original fair value of the Initial Purchase Option was estimated using the Black-Scholes model. The Initial Purchase Option related to the acquisition of the AC/Element Hotel and did not have a readily determinable fair value at December 31, 2021. As such, the Initial Purchase Option was recorded at an amount at inception that was estimated using the Black-Scholes model.

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended December 31, 2022 or 2021.

During the year ended December 31, 2021, we recorded a Loss on impairment and write-off of assets of $4.4 million as follows (dollar amounts in thousands):


	Real Estate Loan 1			Real Estate Loan 2			Real Estate Loan 3
Purchase option carrying amount at December 31, 2020	$	1,600		$	2,761		$	2,800
Loss on impairment and write-off of assets	(1,600)		(1)	(2,761)		(1)	—
Purchase option carrying amount at December 31, 2021	$	—		$	—		$	2,800

(1) Real Estate Loan 1 and 2 were repaid in full during the year ended December 31, 2021 and the Company elected not to exercise its purchase options related to these loans. As such, we recorded a Loss on impairment and write-off of assets of $4.4 million related to the forfeited purchase options during the year ended December 31, 2021.

Due to the adverse effects of the Pandemic, we evaluated our Purchase Options for impairment during the year ended December 31, 2020. The fair value of each Purchase Option was estimated using the Black-Scholes model. 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			$	37,800


Term	2.59			(1)	2.68			(1)	1.42			(2)
Expected volatility	65.0		%		55.0		%		55.0		%
Risk-free rate	0.3		%		0.3		%		0.2		%
Expected annualized equity dividend yield	6.5		%		7.5		%		—		%

(1) The option term is the period from April 1, 2020 through the fully extended maturity dates of the respective mezzanine loans.

(2) The option term is the period from April 1, 2020 through the date in which the development project is completed and the option becomes exercisable.

During the year ended December 31, 2020, we recorded an impairment of $1.8 million related to Real Estate Loan 3 to reduce its carrying amount to its estimated fair value as of December 31, 2020.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details