Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Measurements [Abstract]

Fair Value Measurements

9. Fair Value Measurements

ASC 820 defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). The standards generally require the use of one or more valuation techniques that include the market, income or cost approaches. The standards also establish market or observable inputs as the preferred source of values when using such valuation techniques, followed by assumptions based on hypothetical transactions in the absence of market inputs. 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 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. 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. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. 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. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and liabilities. Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the amounts that may ultimately be realized upon sale or disposition of these assets.

Non-Financial Assets Measured at Fair Value on a Recurring Basis

The Non-Financial asset that is measured at fair value on our consolidated balance sheet consists of a real estate partnership investment. The tables below aggregate the fair values of the non-financial assets by their levels in the fair value hierarchy.

	As of September 30, 2023
	Total		Level 1		Level 2		Level 3
Investment in Avalon Jubilee, LLC	$	-	$	-	$	-	$	-

	As of December 31, 2022
	Total		Level 1		Level 2		Level 3
Investment in Avalon Jubilee, LLC	$	-	$	-	$	-	$	-

Investment in Avalon Jubilee, LLC

Significant unobservable quantitative inputs used in determining the fair value of each investment include capitalization rates and discount rates. These rates are based on the location, type and nature of each property, current and anticipated market conditions, and industry publications. Significant unobservable quantitative inputs in the table below were utilized in determining the fair value of this real estate partnership investment.

	Range
	September 30, 2023		December 31, 2022
Unobservable Quantitative Input
Discount rates	16% to 20	%	16% to 20	%

The inputs above are subject to change based on changes in economic and market conditions and/or changes in use or timing of exit. Changes in discount rates and terminal capitalization rates result in increases or decreases in the fair values of the investment. The discount rates encompass, among other things, uncertainties in the valuation models with respect to terminal capitalization rates and the amount and timing of cash flows. Therefore, a change in the fair value of the investment resulting from a change in the terminal capitalization rate may be partially offset by a change in the discount rate. It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values. The table below summarizes the changes in the fair value of real estate investments that are classified as Level 3.

	September 30, 2023		December 31, 2022
Beginning Balance	$	-0-	$	-0-
Net unrealized gain(loss) on held investment		-0-		-0-
Purchase /additional funding		-0-		-0-
Ending balance	$	-0-	$	-0-

The carrying amounts of cash and cash equivalents, escrow, deposits and other assets and receivables and accrued expenses and other liabilities are not measured at fair value on a recurring basis but are considered to be recorded at amounts that approximate fair value.

At September 30, 2023, the $1,402,841 estimated fair value of the Company’s mortgage payable is less than the $1,451,934 carrying value (before unamortized deferred financing costs of $28,513), assuming a blended market interest rate of 6.5% based on the 1.11 year remaining term to maturity of the mortgage

At December 31, 2022, the $1,469,639 estimated fair value of the Company’s mortgage payable is less than the $1,486,191 carrying value (before unamortized deferred financing costs of $40,313), assuming a blended market interest rate of 6.5% based on the 2.8 year remaining term to maturity of the mortgage.

The fair value of the Company’s mortgages payable is estimated using unobservable inputs such as available market information and discounted cash flow analysis based on borrowing rates the Company believes it could obtain with similar terms and maturities. These fair value measurements fall within Level 3 of the fair value hierarchy.

Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.