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Financial Instruments and Fair Value Measurements
 9 Months Ended
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments and Fair Value Measurements OTE 10. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

 

Derivative Financial Instruments

 

In the normal course of business, our operations are exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates. We may enter into derivative financial instruments to offset these underlying market risks. There have been no significant changes in our policy and strategy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

The following table presents the fair value of our derivative financial instruments recognized within Other Assets and Other Liabilities in the Consolidated Balance Sheets (in thousands):

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Asset

 

 

Liability

 

 

Asset

 

 

Liability

 

Undesignated derivatives

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

 

 

 

 

 

 

 

 

 

 

 

     Forwards

 

 

 

 

 

 

 

 

 

 

 

 

          Brazilian real

 

$

-

 

 

$

569

 

 

$

35

 

 

$

494

 

          British pound sterling

 

 

19,973

 

 

 

638

 

 

 

29,187

 

 

 

648

 

          Canadian dollar

 

 

9,210

 

 

 

-

 

 

 

12,074

 

 

 

2

 

          Chinese renminbi

 

 

2,318

 

 

 

2

 

 

 

657

 

 

 

364

 

          Euro

 

 

34,156

 

 

 

1,877

 

 

 

51,317

 

 

 

2,801

 

          Japanese yen

 

 

57,758

 

 

 

-

 

 

 

34,022

 

 

 

2,344

 

          Mexican peso

 

 

-

 

 

 

444

 

 

 

-

 

 

 

-

 

          Swedish krona

 

 

6,659

 

 

 

1

 

 

 

6,292

 

 

 

-

 

     Options

 

 

 

 

 

 

 

 

 

 

 

 

          Mexican peso

 

 

1,629

 

 

 

1,738

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Designated derivatives

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

 

 

 

 

 

 

 

 

 

 

 

     Net investment hedges

 

 

 

 

 

 

 

 

 

 

 

 

          British pound sterling

 

 

10,254

 

 

 

-

 

 

 

23,534

 

 

 

-

 

          Canadian dollar

 

 

12,915

 

 

 

-

 

 

 

24,552

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

     Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

          Euro

 

 

3,790

 

 

 

-

 

 

 

44,982

 

 

 

-

 

          U.S. dollar

 

 

-

 

 

 

-

 

 

 

584

 

 

 

29

 

Total fair value of derivatives

 

$

158,662

 

 

$

5,269

 

 

$

227,236

 

 

$

6,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Undesignated Derivative Financial Instruments

 

Foreign Currency Contracts

 

The following table summarizes the activity of our undesignated foreign currency contracts for the nine months ended September 30 (in millions, except for weighted average forward rates and number of active contracts):

 

 

2023

 

 

2022

 

 

CAD

 

 

EUR

 

 

GBP

 

 

JPY

 

 

Other

 

 

Total

 

 

CAD

 

 

EUR

 

 

GBP

 

 

JPY

 

Other

 

 

Total

 

Notional amounts at January 1 ($)

 

283

 

 

 

601

 

 

 

349

 

 

 

331

 

 

 

81

 

 

 

1,645

 

 

 

175

 

 

 

749

 

 

 

383

 

 

 

250

 

 

105

 

 

 

1,662

 

New contracts ($)

 

6

 

 

 

110

 

 

 

124

 

 

 

116

 

 

 

34

 

 

 

390

 

 

 

124

 

 

 

603

 

 

 

251

 

 

 

175

 

 

81

 

 

 

1,234

 

Matured, expired or settled contracts ($)

 

(73

)

 

 

(218

)

 

 

(73

)

 

 

(66

)

 

 

68

 

 

 

(362

)

 

 

(49

)

 

 

(753

)

 

 

(274

)

 

 

(78

)

 

(105

)

 

 

(1,259

)

Notional amounts at September 30 ($)

 

216

 

 

 

493

 

 

 

400

 

 

 

381

 

 

 

183

 

 

 

1,673

 

 

 

250

 

 

 

599

 

 

 

360

 

 

 

347

 

 

81

 

 

 

1,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average forward rate at September 30

 

1.29

 

 

 

1.17

 

 

 

1.28

 

 

 

113.85

 

 

 

 

 

 

 

 

 

1.28

 

 

 

1.20

 

 

 

1.32

 

 

 

108.59

 

 

 

 

 

 

Active contracts at September 30

 

77

 

 

 

69

 

 

 

92

 

 

 

96

 

 

 

 

 

 

 

 

 

96

 

 

 

89

 

 

 

89

 

 

 

99

 

 

 

 

 

 

 

The following table summarizes the undesignated derivative financial instruments exercised and outstanding recognized in realized and unrealized gains, respectively, in Foreign Currency and Derivative Gains and Other Income, Net in the Consolidated Statements of Income (in millions, except for number of exercised contracts):

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Exercised contracts

 

 

42

 

 

 

55

 

 

 

163

 

 

 

124

 

Realized gains on the matured, expired or settled contracts

 

$

11

 

 

$

94

 

 

$

42

 

 

$

124

 

Unrealized gains on the change in fair value of outstanding contracts

 

$

29

 

 

$

48

 

 

$

9

 

 

$

151

 

 

Designated Derivative Financial Instruments

 

Changes in the fair value of derivatives that are designated as net investment hedges of our foreign operations and cash flow hedges are recorded in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) in the Consolidated Balance Sheets and reflected within the Other Comprehensive Income table below.

 

Foreign Currency Contracts

 

The following table summarizes the activity of our foreign currency contracts designated as net investment hedges for the nine months ended September 30 (in millions, except for weighted average forward rates and number of active contracts):

 

 

 

2023

 

 

2022

 

 

 

CAD

 

 

CNH

 

 

GBP

 

 

Total

 

 

BRL

 

 

CAD

 

 

GBP

 

 

Total

 

Notional amounts at January 1 ($)

 

 

534

 

 

 

-

 

 

 

440

 

 

 

974

 

 

 

-

 

 

 

535

 

 

 

432

 

 

 

967

 

New contracts ($)

 

 

350

 

 

 

100

 

 

 

218

 

 

 

668

 

 

 

44

 

 

 

599

 

 

 

317

 

 

 

960

 

Matured, expired or settled contracts ($)

 

 

(363

)

 

 

(100

)

 

 

(228

)

 

 

(691

)

 

 

(44

)

 

 

(535

)

 

 

(300

)

 

 

(879

)

Notional amounts at September 30 ($)

 

 

521

 

 

 

-

 

 

 

430

 

 

 

951

 

 

 

-

 

 

 

599

 

 

 

449

 

 

 

1,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average forward rate at
     September 30

 

 

1.32

 

 

 

-

 

 

 

1.25

 

 

 

 

 

 

-

 

 

 

1.29

 

 

 

1.31

 

 

 

 

Active contracts at September 30

 

 

6

 

 

 

-

 

 

 

4

 

 

 

 

 

 

-

 

 

 

7

 

 

 

4

 

 

 

 

 

Interest Rate Swaps

 

The following table summarizes the activity of our interest rate swaps designated as cash flow hedges for the nine months ended September 30 (in millions):

 

 

 

2023

 

 

2022

 

 

 

 

EUR

 

 

USD

 

 

Total

 

 

EUR

 

 

USD

 

 

Total

 

 

Notional amounts at January 1 ($)

 

 

447

 

 

 

150

 

 

 

597

 

 

 

165

 

 

 

-

 

 

 

165

 

 

New contracts ($)

 

 

691

 

 

 

1,750

 

 

 

2,441

 

 

 

1,004

 

 

 

250

 

 

 

1,254

 

 

Matured, expired or settled contracts ($)

 

 

(859

)

 

 

(1,900

)

 

 

(2,759

)

 

 

(722

)

 

 

(250

)

 

 

(972

)

 

Notional amounts at September 30 ($)

 

 

279

 

 

 

-

 

 

 

279

 

 

 

447

 

 

 

-

 

 

 

447

 

 

Designated Nonderivative Financial Instruments

The following table summarizes our debt and accrued interest, designated as a hedge of our net investment in international subsidiaries at the quarter ended (in millions):

 

 

 

September 30, 2023

 

 

December 31, 2022

 

British pound sterling

 

$

1,304

 

 

$

1,237

 

Canadian dollar

 

$

370

 

 

$

370

 

The following table summarizes the unrealized gains in Foreign Currency and Derivative Gains and Other Income, Net in the Consolidated Statements of Income on the remeasurement of the unhedged portion of our euro denominated debt and accrued interest (in millions):

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Unrealized gains on the unhedged portion

 

$

10

 

 

$

36

 

 

$

7

 

 

$

85

 

 

 

Other Comprehensive Income

 

The change in Other Comprehensive Income in the Consolidated Statements of Comprehensive Income during the periods presented was due to the translation into U.S. dollars from the consolidation of the financial statements of our consolidated subsidiaries whose functional currency is not the U.S. dollar. The change in fair value of the effective portion of our derivative financial instruments that have been designated as net investment hedges and cash flow hedges and the translation of the hedged portion of our debt, as discussed above, are also included in Other Comprehensive Income.

 

The following table presents these changes in Other Comprehensive Income (in thousands):

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Derivative net investment hedges (1)

 

$

29,679

 

 

$

74,341

 

 

$

6,846

 

 

$

134,798

 

Debt designated as nonderivative net investment hedges

 

 

50,149

 

 

 

105,726

 

 

 

(30,237

)

 

 

247,195

 

Cumulative translation adjustment

 

 

66,453

 

 

 

58,995

 

 

 

307,620

 

 

 

379,109

 

Total foreign currency translation gains, net

 

$

146,281

 

 

$

239,062

 

 

$

284,229

 

 

$

761,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges (1) (2)

 

$

632

 

 

$

16,818

 

 

$

(15,396

)

 

$

45,764

 

Our share of derivatives from unconsolidated co-investment ventures

 

 

3,070

 

 

 

8,084

 

 

 

(4,602

)

 

 

21,466

 

Total unrealized gains (losses) on derivative contracts, net

 

$

3,702

 

 

$

24,902

 

 

$

(19,998

)

 

$

67,230

 

Total change in other comprehensive income

 

$

149,983

 

 

$

263,964

 

 

$

264,231

 

 

$

828,332

 

 

(1)
The ending balance in AOCI/L in the Consolidated Balance Sheets for accumulated derivative gains on net investment hedges was $339.8 million and $333.0 million at September 30, 2023 and December 31, 2022 respectively. Additionally, the ending balance in AOCI/L for accumulated derivative gains on cash flow hedges was $17.3 million and $32.7 million at September 30, 2023 and December 31, 2022, respectively.

 

(2)
We estimate additional income of $2.7 million will be reclassified to Interest Expense in the Consolidated Statements of Income over the next 12 months from September 30, 2023, due to the amortization of previously settled derivatives designated as cash flow hedges.

 

Fair Value Measurements

 

There have been no significant changes in our policy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

Fair Value Measurements on a Recurring Basis

 

At September 30, 2023 and December 31, 2022, other than the derivatives discussed previously, we had no significant financial assets or financial liabilities that were measured at fair value on a recurring basis in the Consolidated Financial Statements. All of our derivatives held at September 30, 2023 and December 31, 2022, were classified as Level 2 of the fair value hierarchy.

 

Fair Value Measurements on Nonrecurring Basis

 

Acquired properties and assets we expect to sell or contribute are significant nonfinancial assets that met the criteria to be measured at fair value on a nonrecurring basis. At September 30, 2023 and December 31, 2022, we estimated the fair value of our properties using Level 2 or Level 3 inputs from the fair value hierarchy. See more information on our acquired properties in Note 3 and assets held for sale or contribution in Note 5.

 

Fair Value of Financial Instruments

 

At September 30, 2023 and December 31, 2022, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values.

 

The differences in the fair value of our debt from the carrying value in the table below were the result of differences in interest rates or borrowing spreads that were available to us at September 30, 2023 and December 31, 2022, as compared with those in effect when the debt was issued or assumed, including reduced borrowing spreads due to our credit ratings. See Note 6 for more information on our debt activity.

 

The following table reflects the carrying amounts and estimated fair values of our debt (in thousands):

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

Credit facilities

 

$

212,748

 

 

$

212,748

 

 

$

1,538,461

 

 

$

1,538,461

 

Senior notes

 

 

24,741,952

 

 

 

20,891,413

 

 

 

19,786,253

 

 

 

16,604,241

 

Term loans and unsecured other

 

 

2,253,857

 

 

 

2,239,280

 

 

 

2,106,592

 

 

 

2,092,264

 

Secured mortgage

 

 

369,640

 

 

 

340,147

 

 

 

444,655

 

 

 

420,964

 

Total

 

$

27,578,197

 

 

$

23,683,588

 

 

$

23,875,961

 

 

$

20,655,930