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Summary of Fair Value of Financial Instruments
9 Months Ended
Sep. 30, 2019
Investments, All Other Investments [Abstract]  
Summary of Fair Value of Financial Instruments
Summary of Fair Value of Financial Instruments
Determining the estimated fair values of certain financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled.
The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):
 
 
September 30, 2019
 
December 31, 2018
 
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial assets and liabilities measured at fair value:
 
 
 
 
 
 
 
 
Investment in Ashford Inc.
 
$
4,724

 
$
4,724

 
$
10,114

 
$
10,114

Derivative assets
 
773

 
773

 
772

 
772

Financial assets not measured at fair value:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
82,583

 
$
82,583

 
$
182,578

 
$
182,578

Restricted cash
 
57,367

 
57,367

 
75,910

 
75,910

Accounts receivable, net
 
19,657

 
19,657

 
12,739

 
12,739

Due from related party, net
 
817

 
817

 

 

Due from third-party hotel managers
 
18,019

 
18,019

 
4,927

 
4,927

Financial liabilities not measured at fair value:
 
 
 
 
 
 
 
 
Indebtedness
 
$
1,065,000

 
$994,975 to $1,099,709

 
$
992,586

 
$936,904 to $1,035,526

Accounts payable and accrued expenses
 
97,945

 
97,945

 
64,116

 
64,116

Dividends and distributions payable
 
9,502

 
9,502

 
8,514

 
8,514

Due to Ashford Inc.
 
4,749

 
4,749

 
4,001

 
4,001

Due to related party, net
 

 

 
224

 
224

Due to third-party hotel managers
 
2,172

 
2,172

 
1,633

 
1,633


Cash, cash equivalents and restricted cash. These financial assets have maturities of less than 90 days and most bear interest at market rates. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.
Accounts receivable, net, due to/from related party, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc. and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.
Investment in Ashford Inc. Fair value of the investment in Ashford Inc. is based on the quoted closing price on the balance sheet date. This is considered a Level 1 valuation technique.
Derivative assets. Fair value of interest rate caps 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 value of credit default swaps 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. See notes 10 and 11 for a complete description of the methodology and assumptions utilized in determining fair values.
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. The 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 the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. We estimated the fair value of the total indebtedness to be approximately 93.4% to 103.3% of the carrying value of $1.1 billion at September 30, 2019, and approximately 94.4% to 104.3% of the carrying value of $992.6 million at December 31, 2018. This is considered a Level 2 valuation technique.