3.Fair Value

Griffin applies the provisions of FASB ASC 820, “Fair Value Measurement” (“ASC 820”), which establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value, as follows:

Level 1 applies to assets or liabilities for which there are quoted market prices in active markets for identical assets or liabilities. Griffin’s available-for-sale securities are considered Level 1 within the fair value hierarchy.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 2 assets include Griffin’s note receivable from Monrovia (see Note 8). Level 2 liabilities include Griffin’s interest rate swap derivatives (see Note 5). These inputs are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, Griffin has categorized these derivative instruments as Level 2 within the fair value hierarchy.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

During the 2015 six month period, Griffin did not transfer any assets or liabilities in or out of Levels 1 or 2. The following are Griffin’s financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:

	May 31, 2015
	Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)

Marketable equity securities	$	2,373	$	—	$	—


Interest rate swap liabilities	$	—	$	2,465	$	—

	November 30, 2014
	Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)

Marketable equity securities	$	1,924	$	—	$	—


Interest rate swap asset	$	—	$	8	$	—


Interest rate swap liabilities	$	—	$	2,330	$	—

The carrying and estimated fair values of Griffin’s financial instruments are as follows:

	Fair Value	May 31, 2015				November 30, 2014
	Hierarchy	Carrying		Estimated		Carrying		Estimated
	Level	Value		Fair Value		Value		Fair Value
Financial assets:
Cash and cash equivalents	1	$	18,777	$	18,777	$	17,059	$	17,059
Available-for-sale securities	1	2,373		2,373		1,924		1,924
Note receivable	2	1,500		1,500		1,451		1,451
Interest rate swap	2	—		—		8		8

Financial liabilities:
Mortgage loans	2	79,965		80,909		70,168		71,014
Interest rate swaps	2	2,465		2,465		2,330		2,330

The amounts included in the financial statements for cash and cash equivalents, note receivable, leasing receivables and accounts payable and accrued liabilities approximate their fair values because of the short-term maturity of these instruments. The fair values of the available-for-sale securities are based on quoted market prices. The fair values of the mortgage loans are estimated based on current rates offered to Griffin for similar debt of the same remaining maturities and, additionally, Griffin considers its credit worthiness in determining the fair value of its mortgage loans. The fair values of the interest rate swaps (used for purposes other than trading) are determined based on discounted cash flow models that incorporate the cash flows of the derivatives as well as the current OIS rate and swap curve along with other market data, taking into account current interest rates and the credit worthiness of the counterparty for assets and the credit worthiness of Griffin for liabilities.