Drive Shack Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of carrying value and estimated fair value of assets and liabilities

The following table summarizes the carrying values and estimated fair values of the Company’s financial instruments at September 30, 2017:



	Carrying Value		Estimated Fair Value		Fair Value Method (A)
Assets
Real estate securities, available-for-sale	$	2,236	$	2,236	Pricing models
Real estate related and other loans, held-for-sale, net (B)	147		147		Pricing models
Cash and cash equivalents	182,371		182,371
Restricted cash, current and noncurrent	6,036		6,036
Non-hedge derivative assets (C)	167		167		Counterparty quotations

Liabilities
Credit facilities - Traditional Golf term loan	99,606		103,028		Pricing models
Junior subordinated notes payable	51,210		26,595		Pricing models


(A)	Internal pricing models are used for (i) real estate securities and loans that are not traded in an active market, and, therefore, have little or no price transparency, and for which significant unobservable inputs must be used in estimating fair value, or (ii) debt obligations which are private and untraded.


(B)	Real estate related and other loans held-for-sale, net are recorded in other current assets on the Consolidated Balance Sheets.


(C)	Represents an interest rate cap (Note 9).

Schedule of assets and liabilities measured at fair value on a recurring basis

The following table summarizes financial assets and liabilities measured at fair value on a recurring basis at September 30, 2017:



			Fair Value
	Carrying Value		Level 2		Level 3				Total
			Market Quotations (Observable)		Market Quotations (Unobservable)		Internal Pricing Models
Assets
Real estate securities, available-for-sale:
ABS - Non-Agency RMBS	$	2,236	$	—	$	—	$	2,236	$	2,236
Real estate securities, available-for-sale total	$	2,236	$	—	$	—	$	2,236	$	2,236

Derivative assets:
Interest rate cap, not treated as hedge	$	167	$	167	$	—	$	—	$	167
Derivative assets total	$	167	$	167	$	—	$	—	$	167

Schedule of quantitative information regarding significant unobservable inputs

The following table provides quantitative information regarding the significant unobservable inputs used by the Company for assets and liabilities measured at fair value on a recurring basis as of September 30, 2017:



					Weighted Average Significant Input
Asset Type	Amortized Cost Basis		Fair Value		Discount Rate		Prepayment Speed		Cumulative Default Rate		Loss Severity
ABS - Non-Agency RMBS	$	889	$	2,236	12.0	%	4.0	%	3.2	%	71.3	%
Total	$	889	$	2,236

Schedule of change in fair value of Level 3 investments

Real estate securities measured at fair value on a recurring basis using Level 3 inputs changed during the nine months ended September 30, 2017 as follows:



	ABS - Non-Agency RMBS
Balance at December 31, 2016	$	1,950
Total gains (losses) (A)
Included in other comprehensive income (loss)	179
Amortization included in interest income	144
Purchases, sales and repayments (A)
Proceeds	(37		)
Balance at September 30, 2017	$	2,236


(A)	None of the gains (losses) recorded in earnings during the period are attributable to the change in unrealized gains (losses) relating to Level 3 assets still held at the reporting dates. There were no purchases or sales during the nine months ended September 30, 2017. There were no transfers into or out of Level 3 during the nine months ended September 30, 2017.

Liabilities for which fair value is only disclosed

The following table summarizes the level of the fair value hierarchy, valuation techniques and inputs used for estimating each class of liabilities not measured at fair value in the statement of financial position but for which fair value is disclosed:



Type of Liabilities Not Measured At Fair Value for Which Fair Value Is Disclosed	Fair Value Hierarchy		Valuation Techniques and Significant Inputs
Credit facilities	Level 3	Valuation technique is based on discounted cash flows. Significant inputs include:
		l	Amount and timing of expected future cash flows
		l	Interest rates
		l	Market yields

Junior subordinated notes payable	Level 3	Valuation technique is based on discounted cash flows. Significant inputs include:
		l	Amount and timing of expected future cash flows
		l	Interest rates
		l	Market yields and the credit spread of the Company