Summit Hotel Properties, Inc.INN

Summit Hotel Properties, Inc. Fair Value Disclosure

10-KFiled Feb 25, 20263 min read
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
 
The following table presents information about our financial instruments measured at fair value on a recurring basis as of December 31, 2025 and 2024. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, we classify assets and liabilities based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
 
Disclosures concerning financial instruments measured at fair value are as follows (in thousands):
Fair Value Measurement at December 31, 2025 using
Level 1Level 2Level 3Total
Assets:
Interest rate swaps$— $3,001 $— $3,001 
Onera Purchase Option— — 931 931 
Liabilities:
Interest rate swaps— 536 — 536 
Fair Value Measurement at December 31, 2024 using
Level 1Level 2Level 3Total
Assets:
Interest rate swaps$— $11,573 $— $11,573 
Onera Purchase Option— — 931 931 
 
The Onera Purchase Option does not have a readily determinable fair value. The fair value was estimated using the Black-Scholes model and was based on unobservable inputs for which there is little or no market information available. As such, we were required to develop assumptions to determine the fair value of the Onera Purchase Option as follows (dollar amounts in thousands):
Exercise price$8,206 
First option exercise date (1)
10/1/2024
Expected volatility52.20 %
Risk free rate4.15 %
Expected annualized equity dividend yield— %
(1)The first option exercise date is the date used for estimating the fair value of the purchase option. The Onera Purchase Option is exercisable when the lodging development is fully constructed and open for business and expires one year from the date that it is initially exercisable.

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended December 31, 2025 or 2024.

Nonrecurring Fair Value Measurements

During the year ended December 31, 2025, the Company recorded a loss on write-down of a lodging property classified as Assets held for sale of $1.8 million to reduce the carrying amount of the Hilton Garden Inn, Longview, TX to its expected net selling price less estimated cost to sell (Level 2 of the fair value hierarchy).

During the year ended December 31, 2024, the Company recorded a loss on impairment related to a lodging property totaling $6.7 million to reduce the carrying amount of the property to its estimated fair value (Level 2 of the fair value hierarchy).

During the year ended December 31, 2023, the Company recorded a loss on write-down of lodging properties classified as Assets held for sale of $16.7 million to reduce the carrying amounts of the Hyatt Place - Dallas (Plano), TX and two additional lodging properties to their expected net selling prices less estimated costs to sell (Level 2 of the fair value hierarchy).

Historical Timeline

Fiscal YearFiled
2025Feb 25, 2026Showing above
2024Feb 24, 2025
2023Feb 29, 2024
2022Feb 27, 2023
2021Feb 23, 2022
2020Feb 26, 2021
2019Feb 25, 2020
2018Feb 26, 2019
2017Feb 21, 2018
2016Feb 23, 2017
2015Feb 24, 2016

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

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