Fair Value of Assets and Liabilities

3 Months Ended

Mar. 31, 2016

Fair Value of Assets and Liabilities

Fair Value of Assets and Liabilities

Note 7.  Fair Value of Assets and Liabilities

The table below presents certain of our assets measured at fair value at March 31, 2016, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

							Significant
			Quoted Prices in Active		Significant Other		Unobservable
			Markets for Identical		Observable Inputs		Inputs
Description	Total		Assets (Level 1)		(Level 2)		(Level 3)
Recurring Fair Value Measurements
Assets:
Investments in available for sale securities(1)	$	75,660	$	75,660	$	—	$	—
Non-Recurring Fair Value Measurements
Assets:
Assets held for sale(2)	$	2,421	$	—	$	—	$	2,421

⁽¹⁾ Our investments in available for sale securities include our 4,235,000 common shares of Five Star and our 2,637,408 shares of RMR Inc. class A common stock. The fair values of these shares are based upon quoted prices at March 31, 2016 in active markets (Level 1 inputs). Our historical cost basis for our Five Star and RMR Inc. shares is $14,230 and $69,826, respectively, as of March 31, 2016. The unrealized losses of $4,532 for our Five Star shares and $3,864 for our RMR Inc. shares as of March 31, 2016 are included in cumulative other comprehensive income (loss) in our condensed consolidated balance sheets. We evaluated the decline in the fair value of the Five Star and RMR Inc. shares and determined that based on the severity and duration of the decline, and our ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value, we do not consider these investments to be other-than-temporarily impaired at March 31, 2016.

⁽²⁾ Assets held for sale consist of one MOB held for sale as of March 31, 2016. The MOB is recorded at its estimated fair value less costs to sell. We used an accepted offer from a third party to purchase this property to determine its fair value as of March 31, 2016.

In addition to the assets described in the table above, our financial instruments include cash and cash equivalents, restricted cash, other assets, an unsecured revolving credit facility, unsecured term loans, senior unsecured notes, secured mortgage debt and capital leases and other unsecured obligations and liabilities. At March 31, 2016 and December 31, 2015, the fair values of these financial instruments approximated their carrying values in our condensed consolidated financial statements, except as follows:

	As of March 31, 2016				As of December 31, 2015
Description	Carrying Amount (1)		Estimated Fair Value		Carrying Amount (1)		Estimated Fair Value
Senior unsecured notes	$	1,720,714	$	1,771,365	$	1,478,536	$	1,548,613
Secured mortgage debt and capital leases (2)		669,314		715,740		679,295		724,615
	$	2,390,028	$	2,487,105	$	2,157,831	$	2,273,228

⁽¹⁾ Includes unamortized debt issuance costs, premiums and discounts.

⁽²⁾ We assumed certain of these secured mortgage debts in connection with our acquisitions of certain properties. We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value adjustments, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition.

We estimate the fair values of our senior unsecured notes using an average of the bid and ask price of our outstanding six issuances of senior unsecured notes (Level 2 inputs as defined in the fair value hierarchy under GAAP) on or about March 31, 2016.  We estimate the fair values of our secured mortgage debts by using discounted cash flow analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined as defined in the fair value hierarchy under GAAP). Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.