Note 17 - Fair Value Disclosure of Financial Instruments

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

17.  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 and mortgage and other finance receivables 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. The fair value for embedded derivative liability is based on using the “with-and-without” method. 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,
	2023				2022
	Carrying Amounts		Estimated Fair Value		Carrying Amounts		Estimated Fair Value
Assets:
Mortgage and other financing receivables (1)	$	130,745	$	122,323	$	87,359	$	87,359
Liabilities:
Notes payable, net (2)	$	7,262,851	$	6,671,450	$	6,780,969	$	5,837,401
Mortgages payable, net (3)	$	353,945	$	329,955	$	376,917	$	311,659

(1) The Company determined that the valuation of its mortgage and other financing receivables were classified within Level 3 of the fair value hierarchy.

(2) The Company determined that the valuation of its senior unsecured notes were classified within Level 2 of the fair value hierarchy. The estimated fair value amounts classified as Level 2 as of December 31, 2023 and 2022, were $6.7 billion and $5.8 billion, respectively. The carrying value includes deferred financing costs of $65.0 million and $66.4 million as of December 31, 2023 and 2022, respectively.

(3) The Company determined that its valuation of its mortgages payable were classified within Level 3 of the fair value hierarchy. The carrying value includes deferred financing costs of $1.2 million and $1.7 million as of December 31, 2023 and 2022, respectively.

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 and embedded derivative liabilities. 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 of 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 tables below present the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022, aggregated by the level of the fair value hierarchy within which those measurements fall (in thousands):

	Balance at December 31, 2023		Level 1		Level 2		Level 3
Assets:
Marketable equity securities	$	330,057	$	330,057	$	-	$	-
Liabilities:
Embedded derivative liability	$	30,914	$	-	$	-	$	30,914

	Balance at December 31, 2022		Level 1		Level 2		Level 3
Assets:
Marketable equity securities	$	597,732	$	597,732	$	-	$	-
Liabilities:
Embedded derivative liability	$	56,000	$	-	$	-	$	56,000

The significant unobservable input (Level 3 inputs) used in measuring the Company’s embedded derivative liability, which is categorized with Level 3 of the fair value hierarchy, is the discount rate of 6.40% and 8.00% as of December 31, 2023 and 2022, respectively.

The table below summarizes the change in the fair value of the embedded derivative liability for the year ended December 31, 2023 (in thousands): 

		Fair Value of Embedded Derivative Liability
Balance as of January 1, 2023	$	56,000
Settlements		(22,446)
Change in fair value (included in Other income, net)		(734)
Change in fair value (included in Paid-in capital)		(1,906)
Balance as of December 31, 2023	$	30,914

Assets measured at fair value on a non-recurring basis at December 31, 2023 are as follows (in thousands):

	Balance at December 31, 2023		Level 1		Level 2		Level 3
Real estate	$	11,724	$	-	$	-	$	11,724

During the year ended December 31, 2023, the Company recognized impairment charges related to adjustments to property carrying values of $14.0 million. The Company’s estimated fair values of these assets were primarily based upon estimated sales prices from signed contracts or letters of intent from third-party offers, which were less than the carrying value of the assets. The Company does not have access to the unobservable inputs used to determine the estimated fair values of third-party offers. Based on these inputs, the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy.