Fair Value Measurements

9 Months Ended

Sep. 30, 2017

10.

Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures defines fair value and establishes a framework for measuring fair value. ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value.

Financial Assets and Liabilities Measured at Fair Value

Financial assets measured at fair value on our consolidated balance sheets as of September 30, 2017 and December 31, 2016, consist of marketable securities, which are presented in the table below based on their level in the fair value hierarchy, and an interest rate cap, which fair value was insignificant as of September 30, 2017 and December 31, 2016. There were no financial liabilities measured at fair value as of September 30, 2017 and December 31, 2016.


		As of September 30, 2017
(Amounts in thousands)		Total		Level 1		Level 2			Level 3
Marketable securities	$		29,424	$	29,424		$	-		$	-


		As of December 31, 2016
(Amounts in thousands)		Total		Level 1		Level 2			Level 3
Marketable securities	$		37,918	$	37,918		$	-		$	-

Financial Assets and Liabilities not Measured at Fair Value

Financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include the Rego Park II loan participation, mortgages payable, and cash equivalents. The fair values of the Rego Park II loan participation and mortgages payable are calculated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit ratings, which are provided by a third-party specialist, and are classified as Level 2. Cash equivalents are carried at cost, which approximates fair value due to their short-term maturities and is classified as Level 1. The table below summarizes the carrying amounts and fair value of these financial instruments as of September 30, 2017 and December 31, 2016.


	As of September 30, 2017						As of December 31, 2016
(Amounts in thousands)	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Assets:
Rego Park II loan participation		$	199,275		$	199,275		$	-		$	-
Cash equivalents			246,541			246,541			256,370			256,370

		$	445,816		$	445,816		$	256,370		$	256,370


Liabilities:
Mortgages payable (excluding deferred debt issuance costs)		$	1,253,393		$	1,241,000		$	1,056,147		$	1,045,000

- 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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