Fair Value of Assets and Liabilities

9 Months Ended

Sep. 30, 2020

Note 13. Fair Value of Assets and Liabilities

The table below presents certain of our assets and liabilities carried at fair value at September 30, 2020, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset or liability.


			Fair Value at Reporting Date Using
	Carrying Value at		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	September 30, 2020		(Level 1)		(Level 2)		(Level 3)
Recurring Fair Value Measurement Assets:
Investment in TA (1)	$	23,151	$	23,151	$	—	$	—
Non-recurring Fair Value Measurement Assets:
Assets of properties held for sale (2)	$	191,202	$	—	$	191,202	$	—

(1)Our 1,184,797 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 $24,418 as of September 30, 2020. We recorded unrealized gains of $5,606 and $4,909 during the three and nine months ended September 30, 2020, respectively, and recorded unrealized losses of $3,950 and $43,761 during the three and nine months ended September 30, 2019, respectively, to adjust the carrying value of our investment in TA shares to its fair value.

(2)As of September 30, 2020, we owned 40 hotels located in 18 states classified as held for sale with an aggregate net carrying value of $184,467 before adjusting for estimated costs of sale of $5,230 and six net lease properties with 121,451 square feet with a carrying value of $6,735 before adjusting for estimated costs of sale of $400. We recorded a $10,248 loss on asset impairment during the three months ended September 30, 2020 to reduce the carrying value of one hotel and two net lease properties to their estimated fair value less costs to sell. These properties are recorded at their estimated fair value less costs to sell based on the sales prices under purchase agreements with third-parties (Level 2 inputs as defined in the fair value hierarchy under GAAP).

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, 2020 and December 31, 2019, 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 floating interest rates, except as follows:


	September 30, 2020				December 31, 2019
	Carrying Value (1)		Fair Value		Carrying Value (1)		Fair Value
Senior Unsecured Notes, due 2021 at 4.25%	$	49,932	$	49,934	$	398,379	$	406,838
Senior Unsecured Notes, due 2022 at 5.00%	497,729		497,950		496,821		526,500
Senior Unsecured Notes, due 2023 at 4.50%	499,555		488,783		499,432		520,478
Senior Unsecured Notes, due 2024 at 4.65%	348,599		327,483		348,295		364,277
Senior Unsecured Notes, due 2024 at 4.35%	819,178		747,153		818,075		848,847
Senior Unsecured Notes, due 2025 at 4.50%	346,946		318,150		346,431		361,783
Senior Unsecured Notes, due 2025 at 7.50%	788,222		852,172		—		—
Senior Unsecured Notes, due 2026 at 5.25%	343,930		322,838		343,083		369,185
Senior Unsecured Notes, due 2026 at 4.75%	446,363		401,198		445,905		464,315
Senior Unsecured Notes, due 2027 at 4.95%	395,216		355,202		394,649		414,012
Senior Unsecured Notes, due 2028 at 3.95%	391,621		334,704		390,759		393,940
Senior Unsecured Notes, due 2029 at 4.95%	417,901		365,789		417,307		434,248
Senior Unsecured Notes, due 2030 at 4.375%	389,372		333,210		388,522		394,788
Total financial liabilities	$	5,734,564	$	5,394,566	$	5,287,658	$	5,499,211

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

At September 30, 2020 and December 31, 2019, 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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