Fair Value of Assets and Liabilities

9 Months Ended

Sep. 30, 2018

Note 13. Fair Value of Assets and Liabilities

The table below presents certain of our assets carried at fair value at September 30, 2018, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.



			Fair Value at September 30, 2018 Using
			Quoted Prices in
			Active Markets for		Significant Other		Significant
	Carrying Value at		Identical Assets		Observable Inputs		Unobservable Inputs
Description	September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Recurring Fair Value Measurement Assets:
Investment in TA ⁽¹⁾	$	19,494	$	19,494	$	—	$	—
Investment in RMR Inc.⁽²⁾	$	232,351	$	232,351	$	—	$	—

(1)

Our 3,420,000 common shares of TA, which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is $17,407 as of September 30, 2018. During the three and nine months ended September 30, 2018, we recorded unrealized gains of $7,524 and $5,472, respectively, to adjust the carrying value of our investment in TA shares to their fair value as of September 30, 2018.

(2)

Our 2,503,777 shares of class A common stock of RMR Inc., which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is $66,374 as of September 30, 2018. During the three and nine months ended September 30, 2018, we recorded unrealized gains of $35,929 and $83,876, respectively, to adjust the carrying value of our investment in RMR Inc. shares to their fair value as of September 30, 2018.

In addition to the investment securities included in the table above, our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, revolving credit facility, term loan, senior notes and security deposits. At September 30, 2018 and December 31, 2017, the fair values of these additional financial instruments approximated their carrying values in our condensed consolidated balance sheets due to their short term nature or variable interest rates, except as follows:



	September 30, 2018				December 31, 2017
	Carrying		Fair		Carrying		Fair
	Value ⁽¹⁾		Value		Value ⁽¹⁾		Value
Senior Unsecured Notes, due 2021 at 4.25%	$	396,578	$	402,810	$	395,497	$	413,676
Senior Unsecured Notes, due 2022 at 5.00%	495,307		512,548		494,398		533,908
Senior Unsecured Notes, due 2023 at 4.50%	499,227		502,033		499,104		523,275
Senior Unsecured Notes, due 2024 at 4.65%	347,788		348,565		347,484		368,804
Senior Unsecured Notes, due 2025 at 4.50%	345,571		341,129		345,055		363,589
Senior Unsecured Notes, due 2026 at 5.25%	341,673		353,250		340,826		377,431
Senior Unsecured Notes, due 2027 at 4.95%	393,704		392,696		393,137		422,914
Senior Unsecured Notes, due 2028 at 3.95%	389,322		362,642		388,461		390,930
Senior Unsecured Notes, due 2030 at 4.375%	387,105		367,644		—		—
Total financial liabilities	$	3,596,275	$	3,583,317	$	3,203,962	$	3,394,527


(1)	Carrying value includes unamortized discounts and premiums and issuance costs.

At September 30, 2018 and December 31, 2017, we estimated the fair values of our senior notes using an average of the bid and ask price of our then outstanding issuances of senior notes (Level 2 inputs).

- 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.

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