Note 16 - Fair Value Disclosure of Financial Instruments

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

16.  Fair Value Disclosure of Financial Instruments:

All financial instruments of the Company are reflected in the accompanying Consolidated Balance Sheets at amounts which, in management’s estimation, based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values except those listed below, for which fair values are disclosed. The valuation method used to estimate fair value for fixed-rate and variable-rate debt is based on discounted cash flow analyses, with assumptions that include credit spreads, market yield curves, trading activity, loan amounts and debt maturities. The fair values for marketable securities are based on published values, securities dealers’ estimated market values or comparable market sales. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.

As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurements and Disclosures guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The following are financial instruments for which the Company’s estimate of fair value differs from the carrying amounts (in thousands):

	December 31,
	2020				2019
	Carrying Amounts		Estimated Fair Value		Carrying Amounts		Estimated Fair Value
Notes payable, net (1)	$	5,044,208	$	5,486,953	$	4,831,759	$	4,983,763
Mortgages and construction loan payable, net (2)	$	311,272	$	312,933	$	484,008	$	486,042

(1) The Company determined that the valuation of its Senior Unsecured Notes were classified within Level 2 of the fair value hierarchy and its Credit Facility was classified within Level 3 of the fair value hierarchy. The estimated fair value amounts classified as Level 2 as of December 31, 2020 and 2019, were $5.5 billion and $4.8 billion, respectively. The estimated fair value amounts classified as Level 3 as of December 31, 2019, was $199.9 million.

(2) The Company determined that its valuation of these mortgages and construction loan payable was classified within Level 3 of the fair value hierarchy. 

The Company has certain financial instruments that must be measured under the FASB’s Fair Value Measurements and Disclosures guidance, including available for sale securities. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

In instances where 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 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.

The Company from time to time has used interest rate swaps to manage its interest rate risk. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.  Based on these inputs, the Company has determined that interest rate swap valuations are classified within Level 2 of the fair value hierarchy.

The tables below present the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2020 and 2019, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

	Balance at December 31, 2020		Level 1		Level 2		Level 3
Assets:
Marketable equity securities	$	706,954	$	706,954	$	-	$	-

	Balance at December 31, 2019		Level 1		Level 2		Level 3
Assets:
Marketable equity securities	$	9,353	$	9,353	$	-	$	-

Assets measured at fair value on a non-recurring basis at December 31, 2020 and 2019 are as follows (in thousands):

	Balance at December 31, 2020		Level 1		Level 2		Level 3
Real estate	$	24,899	$	-	$	-	$	24,899
Other real estate investments	$	5,464	$	-	$	-	$	5,464

	Balance at December 31, 2019		Level 1		Level 2		Level 3
Real estate	$	39,510	$	-	$	-	$	39,510
Other real estate investments	$	32,974	$	-	$	-	$	32,974

During the year ended December 31, 2020, the Company recognized impairment charges related to adjustments to property carrying values of $6.6 million. The Company’s estimated fair values of these properties were primarily based upon estimated sales prices from signed contracts or letters of intent from third-party offers. Based on these inputs, the Company determined that its valuation of this investment was classified within Level 3 of the fair value hierarchy.

During the year ended December 31, 2019, the Company recognized impairment charges related to adjustments to property carrying values of $48.7 million. The Company’s estimated fair values of these properties were primarily based upon estimated sales prices from (i) signed contracts or letters of intent from third-party offers or (ii) discounted cash flow models. The Company does not have access to the unobservable inputs used to determine the estimated fair values of third-party offers. For the discounted cash flow model, the capitalization rate was 10.50% and the discount rate was 11.50% which were utilized in the model based upon unobservable rates that the Company believes to be within a reasonable range of current market rates for the investment. Based on these inputs, the Company determined that its valuation of this investment was classified within Level 3 of the fair value hierarchy.

The property carrying value impairment charges resulted from the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions.