Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Recurring Measurements

For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of the fair value for each major category of assets and liabilities is presented below:



	Fair Value Measurements at June 30, 2018
Assets	Level 1		Level 2		Level 3
Marketable equity securities	$	1,064	$	—	$	—
Real estate related bonds	—		307		—
Derivative interest rate swaps	—		2,437		—
Total assets	$	1,064	$	2,744	$	—



	Fair Value Measurements at December 31, 2017
Assets	Level 1		Level 2		Level 3
Available-for-sale marketable securities	$	4,431	$	—	$	—
Real estate related bonds	—		327		—
Derivative interest rate swaps	—		1,670		—
Total assets	$	4,431	$	1,997	$	—

Level 1

At June 30, 2018 and December 31, 2017, the fair value of the marketable equity securities has been determined based upon quoted market prices.

Level 2

To calculate the fair value of the real estate related bonds and the derivative interest rate instruments, the Company primarily uses quoted prices for similar securities and contracts. For the real estate related bonds, the Company reviews price histories for similar market transactions. For the derivative interest rate instruments, the Company uses inputs based on data that is observed in the forward yield curve that is widely observable in the marketplace. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements which utilizes Level 3 inputs, such as estimates of current credit spreads. However, as of June 30, 2018 and December 31, 2017, the Company determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. As of June 30, 2018 and December 31, 2017, the Company had outstanding interest rate swap agreements with an aggregate notional value of $150,000.

Level 3

At June 30, 2018 and December 31, 2017, the Company had no Level 3 recurring fair value measurements.

Nonrecurring Measurements

During the six months ended June 30, 2018, the Company identified one retail property that had a reduction in the expected holding period. The Company's estimated fair value was based on an executed purchase contract. The Company recorded a provision for asset impairment of $797 on that retail property. There was no provision for asset impairment recorded for the three months ended June 30, 2018.

During the six months ended June 30, 2017, the Company identified certain retail properties that had reductions in the expected holding periods and reviewed the probability of these retail properties' disposition. The Company's estimated fair values were based on broker opinions of value and letters of intent. The Company recorded a provision for asset impairment of $16,440 on three retail properties during the six months ended June 30, 2017. There was no provision for asset impairment recorded for the three months ended June 30, 2017.

The following table summarizes activity for the Company’s assets measured at fair value on a nonrecurring basis and the related impairment charges for the three and six months ended June 30, 2018 and 2017:



	For the three months ended June 30,								For the six months ended June 30,
	2018				2017				2018				2017
	Level 3		Impairment Losses		Level 3		Impairment Losses		Level 3		Impairment Losses		Level 3		Impairment Losses
Investment properties	$	—	$	—	$	—	$	—	$	31,000	$	797	$	36,676	$	16,440

Financial Instruments Not Measured at Fair Value

The table below represents the fair value of financial instruments presented at carrying values in the Company's condensed consolidated financial statements as of June 30, 2018 and December 31, 2017.



	June 30, 2018				December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Mortgages payable	$	292,835	$	291,144	$	370,804	$	372,962
Line of credit and term loan	$	300,000	$	299,789	$	300,000	$	299,770

The Company estimated the fair value of its mortgages payable using a weighted average effective market interest rate of 4.45% and 4.20% as of June 30, 2018 and December 31, 2017, respectively.

The fair value estimate of the line of credit and term loan approximates the carrying value due to limited market volatility in pricing. The assumptions reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to the Company's. As a result, the Company used a weighted average interest rate of 4.09% and 3.48% as of June 30, 2018 and December 31, 2017, respectively, to estimate the fair value of its line of credit and term loan.

The Company has determined that its debt instrument valuations are classified in Level 2 of the fair value hierarchy.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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