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Summary of Fair Value of Financial Instruments
6 Months Ended
Jun. 30, 2016
Investments, All Other Investments [Abstract]  
Summary of Fair Value of Financial Instruments
Summary of Fair Value of Financial Instruments
Determining estimated fair values of our financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. Market assumptions and/or estimation methodologies used may have a material effect on estimated fair value amounts. Accordingly, estimates presented are not necessarily indicative of amounts at which these instruments could be purchased, sold, or settled. Carrying amounts and estimated fair values of financial instruments, for periods indicated, were as follows (in thousands):
 
June 30, 2016
 
December 31, 2015
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial assets and liabilities measured at fair value:
 
 
 
 
 
 
 
Derivative assets, net
$
15,800

 
$
15,800

 
$
3,435

 
$
3,435

 
 
 
 
 
 
 
 
Financial assets not measured at fair value:
 
 
 
 
 
 
 
Cash and cash equivalents
$
261,821

 
$
261,821

 
$
215,078

 
$
215,078

Restricted cash
161,935

 
161,935

 
153,680

 
153,680

Accounts receivable, net
55,147

 
55,147

 
40,438

 
40,438

Note receivable, net
3,850

 
3,509 to 3,879

 
3,746

 
3,344 to 3,696

Due from Ashford Prime OP, net
15

 
15

 
528

 
528

Due from related party, net
2,202

 
2,202

 

 

Due from third-party hotel managers
18,040

 
18,040

 
22,869

 
22,869

 
 
 
 
 
 
 
 
Financial liabilities not measured at fair value:
 
 
 
 
 
 
 
Indebtedness
$
3,805,184

 
$3,626,701 to $4,008,462

 
$
3,874,617

 
$3,683,196 to $4,070,904

Accounts payable and accrued expenses
138,786

 
138,786

 
123,444

 
123,444

Dividends payable
23,097

 
23,097

 
22,678

 
22,678

Due to Ashford Inc., net
7,336

 
7,336

 
9,856

 
9,856

Due to related party, net

 

 
1,339

 
1,339

Due to third-party hotel managers
2,989

 
2,989

 
2,504

 
2,504


Cash, cash equivalents, and restricted cash. These financial assets bear interest at market rates and have maturities of less than 90 days. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.
Accounts receivable, net, accounts payable and accrued expenses, dividends payable, due to/from Ashford Prime OP, due to/from related party, due to/from Ashford Inc. and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to their short-term nature. This is considered a Level 1 valuation technique.
Note receivable, net. Fair value of notes receivable is determined using similar loans with similar collateral. We relied on our internal analysis of what we believe a willing buyer would pay for this note. We estimated the fair value of the note receivable to be approximately 8.9% to 0.8% lower than the carrying value of $3.9 million at June 30, 2016 and approximately 10.7% to 1.3% lower than the carrying value of $3.7 million at December 31, 2015. This is considered a Level 2 valuation technique.
Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. Current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied and adjusted for credit spreads. Credit spreads take into consideration general market conditions, maturity, and collateral. We estimated the fair value of total indebtedness to be approximately 95.3% to 105.3% of the carrying value of $3.8 billion at June 30, 2016 and approximately 95.1% to 105.1% of the carrying value of $3.9 billion at December 31, 2015. This is considered a Level 2 valuation technique.
Derivative assets, net. Fair value of interest rate derivatives is determined using the net present value of expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair values of credit default swap derivatives are obtained from a third party who publishes the CMBX index composition and price data. Fair values of interest rate floors are calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. Fair values of options on futures contracts are valued at their last reported settlement price as of the measurement date. See notes 2, 9 and 10 for a complete description of the methodology and assumptions utilized in determining fair values.