Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2012

Fair Value of Assets and Liabilities

Fair Value of Assets and Liabilities

Note 13.  Fair Value of Assets and Liabilities

The table below presents certain of our assets carried at fair value at June 30, 2012, 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 Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
Property held for sale (1)	$	18,440	$	—	$	18,440	$	—
Investment securities (2)	$	12,888	$	12,888	$	—	$	—

(1)

Our property held for sale consisted of one Marriott hotel we had agreed to sell at June 30, 2012. We estimated the fair value less costs to sell this hotel using the selling price agreed to with a third party (Level 2 inputs). In July 2012, we completed the sale of this hotel. Because the expected selling price was higher than our net book value for this hotel, the hotel was carried at its net book value. We removed 20 Marriott branded hotels with a carrying value of $104,585 from held for sale status in March 2012. As described in Note 12, we have agreed to retain and renovate 18 of these hotels and expect to retain and rebrand the remaining two hotels to the Sonesta brand and management. We recorded an $889 loss on asset impairment in the first quarter of 2012 in connection with our decision to remove these hotels from held for sale status.

(2)

Our investment securities, consisting of our 2,540,000 shares of TA, which are included in our other assets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these securities is $9,267. The unrealized gain for these securities as of June 30, 2012, is included in cumulative other comprehensive income in our Condensed Consolidated Balance Sheets.

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, unsecured term loan, senior notes and security deposits. At June 30, 2012 and December 31, 2011, the fair values of these additional financial instruments were not materially different from their carrying values, except as follows:

	June 30, 2012					December 31, 2011
	Carrying			Fair		Carrying			Fair
	Amount			Value		Amount			Value
Senior Notes, due 2012 at 6.85%(1)	$	—		$	—	$	100,829		$	105,407
Senior Notes, due 2013 at 6.75%	287,000			299,175		287,000			301,871
Senior Notes, due 2014 at 7.875%	300,000			331,964		300,000			333,887
Senior Notes, due 2015 at 5.125%	280,000			292,464		280,000			290,052
Senior Notes, due 2016 at 6.3%	275,000			295,881		275,000			291,572
Senior Notes, due 2017 at 5.625%	300,000			320,655		300,000			313,106
Senior Notes, due 2018 at 6.7%	350,000			397,576		350,000			386,942
Convertible Senior Notes, due 2027 at 3.8%(2)	8,478			8,792		79,054			80,087
Unamortized discounts	(4,166		)	—		(5,169		)	—
Total financial liabilities	$	1,796,312		$	1,946,507	$	1,966,714		$	2,102,924

(1) We redeemed these notes at par plus accrued interest on April 11, 2012.

(2) On March 20, 2012, we repurchased $70,576 of our 3.8% convertible senior notes due 2027 which were tendered by the holders of those notes for repurchase.

We estimate the fair value of our indebtedness using discounted cash flow analysis and currently prevailing market interest rates (Level 3 inputs).