What forms do The Standardx's investments in debt and equity securities take?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
HTM Debt Securities—We hold investments in third-party entities associated with certain of our hotels. The investments are redeemable on various dates through 2062 and recorded as HTM debt securities within other assets on our condensed consolidated balance sheets:
| March 31, 2025 | December 31, 2024 | |
|---|---|---|
| HTM debt securities (1) | $ 296 | $ 276 |
| Less: allowance for credit losses | (9) | (9) |
| Total HTM debt securities, net of allowances | $ 287 | $ 267 |
(1) Includes a $194 million preferred equity investment in a third-party entity that owns a managed hotel. The investment was net of $34 million and $35 million of unamortized discounts at March 31, 2025 and December 31, 2024, respectively. Accretion of the discount is recognized as interest income in other income (loss), net on our condensed consolidated statements of income (see Note 18) and is based on an imputed interest rate of approximately 8.9%.
The following table summarizes the activity in our HTM debt securities allowance for credit losses:
| 2025 | 2024 | |
|---|---|---|
| Allowance at January 1 | $ 9 | $ 13 |
| Provisions, net (1) | — | — |
| Allowance at March 31 | $ 9 | $ 13 |
(1) Provisions for credit losses were partially or fully offset by interest income recognized in the same periods (see Note 18).
We estimated the fair value of these HTM debt securities to be approximately $287 million and $270 million at March 31, 2025 and December 31, 2024, respectively. The fair values of our preferred equity investments, which are classified as Level Three in the fair value hierarchy, are estimated using probability-based discounted future cash flow models based on current market inputs for similar types of arrangements. The primary sensitivity in these models is the selection of appropriate discount rates and probability weighting. Fluctuations in these assumptions could result in different estimates of fair value. The remaining HTM debt securities are classified as Level Two in the fair value hierarchy due to the use and weighting of multiple market inputs being considered in the final price of the security.
Convertible Debt Security—We hold a convertible debt investment associated with one of our franchised properties. Our investment is classified as AFS and remeasured at fair value on a recurring basis. The fair value of our investment, which is classified as Level Three in the fair value hierarchy, was estimated using a discounted future cash flow model. The model includes assumptions and judgments regarding projected future cash flows and discount rate, and fluctuations in our assumptions could result in different estimates of fair value.
The convertible debt security has a contractual maturity date in 2029 and is recorded within other assets on our condensed consolidated balance sheets.
Source: Item 1 — Financial Statements. (FDD pages 156–187)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the company holds various investments in debt and equity securities. These investments include HTM (held-to-maturity) debt securities, which were valued at approximately $287 million as of March 31, 2025, and $270 million as of December 31, 2024. The company also has preferred equity investments. Additionally, The Standardx holds a convertible debt investment associated with one of its franchised properties, classified as AFS (available-for-sale) and remeasured at fair value, with a contractual maturity date in 2029.
Furthermore, The Standardx has investments in equity securities without a readily determinable fair value, amounting to $11 million as of March 31, 2025, and $12 million as of December 31, 2024. These represent investments in entities where The Standardx does not have significant influence over operations. The company also holds marketable securities to fund operating programs, including AFS debt securities with maturity dates ranging from 2025 through 2069, time deposits classified as HTM debt securities maturing in 2025, and equity securities with readily determinable fair value.
These investment activities reflect The Standardx's broader financial strategies and involvement in various hospitality-related ventures. For a prospective franchisee, this indicates that The Standardx actively manages its assets through diverse investment vehicles, which can impact the company's overall financial health and stability. Understanding the nature and performance of these investments can provide franchisees with insights into the financial risks and opportunities associated with The Standardx.