Fair Value Measurements

9 Months Ended

Sep. 30, 2022

The Company is required to disclose fair value information about all financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practicable to estimate fair value. The Company measures and discloses the estimated fair value of financial assets and liabilities utilizing a fair value hierarchy that distinguishes between data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad levels, as follows: (i) quoted prices in active markets for identical assets or liabilities, (ii) “significant other observable inputs,” and (iii) “significant unobservable inputs.” “Significant other observable inputs” can include quoted prices for similar assets or liabilities in active markets, as well as inputs that are observable for the asset or liability, such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. “Significant unobservable inputs” are typically based on an entity’s own assumptions, since there is little, if any, related market activity. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers between the levels in the fair value hierarchy during the nine months ended September 30, 2022 and the year ended December 31, 2021.

The following table sets forth the assets and liabilities that the Company measures at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021:


Assets/(Liabilities)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets and Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
September 30, 2022

Interest Rate Swap Asset	$	42,724	$	—	$	42,724	$	—
Corporate Owned Life Insurance Asset	$	6,035	$	—	$	6,035	$	—
Mutual Funds Asset	$	5,082	$	5,082	$	—	$	—

December 31, 2021
Interest Rate Swap Asset	$	3,456	$	—	$	3,456	$	—
Interest Rate Swap Liability	$	(25,108)	$	—	$	(25,108)	$	—
Corporate Owned Life Insurance Asset	$	6,875	$	—	$	6,875	$	—
Mutual Funds Asset	$	5,543	$	5,543	$	—	$	—

Real Estate

As of September 30, 2022, in connection with the preparation and review of the Company's financial statements, the Company determined that four of the Company’s properties were impaired based upon discounted cash flow analyses where the

most significant inputs were the market rental rates, terminal capitalization rate, discount rate and expected hold period; one additional property was impaired based on a shortened expected hold period and selling price. The Company considered these inputs as Level 3 measurements within the fair value hierarchy. The following table is a summary of the quantitative information related to the non-recurring fair value measurement for the impairment of the Company's real estate properties for the nine months ended September 30, 2022:

Range of Inputs or Inputs

Unobservable Inputs:

Midwest Properties

Southwest Property

Market rent per square foot

$8.50 to $12.75

$18.00

Terminal capitalization rate

9.50% to 11.25%

7.23%

Discount rate

10.25% to 14.00%

8.60%


						Range of Inputs or Inputs
Unobservable Inputs:						Southern Property


Expected selling price per square foot						$295.96
Estimated hold period						Less than one year

Financial Instruments Disclosed at Fair Value

Financial instruments as of September 30, 2022 and December 31, 2021 consisted of cash and cash equivalents, restricted cash, accounts receivable, accrued expenses and other liabilities, and mortgage payable and other borrowings, as defined in Note 5, Debt. With the exception of the mortgage loans in the table below, the amounts of the financial instruments presented in the consolidated financial statements substantially approximate their fair value as of September 30, 2022 and December 31, 2021.

The fair value of the nine mortgage loans in the table below is estimated by discounting each loan’s principal balance over the remaining term of the mortgage using current borrowing rates available to the Company for debt instruments with similar terms and maturities. The Company determined that the mortgage debt valuation in its entirety is classified in Level 2 of the fair value hierarchy, as the fair value is based on current pricing for debt with similar terms as the in-place debt.


	September 30, 2022				December 31, 2021
	Fair Value		Carrying Value (1)		Fair Value		Carrying Value (1)
BOA Loan	$	—	$	—	$	349,082	$	375,000
BOA/KeyBank Loan	227,696		250,000		260,378		250,000
AIG Loan II	111,990		122,906		120,141		124,606
AIG Loan	90,551		100,326		99,697		101,884
Midland Mortgage Loan	—		—		95,720		95,792
Samsonite Loan	18,283		18,283		19,366		19,114
HealthSpring Mortgage Loan	19,250		19,250		19,639		19,669
Pepsi Bottling Ventures Loan	17,060		17,933		18,262		18,218
Highway 94 Loan	12,134		12,991		13,360		13,732
Total	$	496,964	$	541,689	$	995,645	$	1,018,015

(1)The carrying values do not include the debt premium/(discount) or deferred financing costs as of September 30, 2022 and December 31, 2021. See Note 5, Debt, for details.

- 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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