Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2016

Fair Value of Assets and Liabilities

Note 12. Fair Value of Assets and Liabilities

The table below presents certain of our assets carried at fair value at June 30, 2016, 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 June 30, 2016 Using
			Quoted Prices in
			Active Markets for		Significant Other		Significant
	Carrying Value at		Identical Assets		Observable Inputs		Unobservable Inputs
Description	June 30, 2016		(Level 1)		(Level 2)		(Level 3)
Investment in TA(1)	$	27,907	$	27,907	$	-	$	-
Investment in RMR Inc.(2)	$	77,542	$	77,542	$	-	$	-

(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 securities is $17,407 as of June 30, 2016. The unrealized gain of $10,500 for these shares as of June 30, 2016 is included in cumulative other comprehensive income (loss) in our condensed consolidated balance sheets.

(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 June 30, 2016. The unrealized gain of $11,168 for these shares as of June 30, 2016 is included in cumulative other comprehensive income (loss) 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, term loan, senior notes and security deposits. At June 30, 2016 and December 31, 2015, 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:


	June 30, 2016				December 31, 2015
	Carrying		Fair		Carrying		Fair
	Value (1)		Value		Value (1)		Value
Senior Unsecured Notes, due 2016 at 6.30%	$	-	$	-	$	274,869	$	275,813
Senior Unsecured Notes, due 2017 at 5.625%		299,757		307,914		299,576		311,181
Senior Unsecured Notes, due 2018 at 6.70%		349,104		365,932		348,821		370,438
Senior Unsecured Notes, due 2021 at 4.25%		393,337		415,890		-		-
Senior Unsecured Notes, due 2022 at 5.00%		492,581		539,840		491,974		515,760
Senior Unsecured Notes, due 2023 at 4.50%		297,988		307,034		297,845		295,709
Senior Unsecured Notes, due 2024 at 4.65%		346,876		357,968		346,674		346,010
Senior Unsecured Notes, due 2025 at 4.50%		344,024		352,889		343,680		338,426
Senior Unsecured Notes, due 2026 at 5.25%		339,133		369,436		-		-
Convertible Unsecured Senior Notes, due 2027 at 3.8%		8,478		8,651		8,478		8,697
Total financial liabilities	$	2,871,278	$	3,025,554	$	2,411,917	$	2,462,034

(1)

Carrying value includes unamortized discounts and certain issuance costs.

At June 30, 2016, 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). We estimated the fair value of our convertible senior notes using discounted cash flow analyses and currently prevailing market interest rates (Level 3 inputs) because no market quotes or other observable inputs for these notes were available at June 30, 2016 and December 31, 2015.

- 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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