Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Measurements

Schedule of carrying value and fair value of the entity's financial instruments

The carrying value and fair value of our financial instruments as of December 31, 2016 and 2015 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):

	At December 31, 2016					At December 31, 2015
	Carrying		Fair			Carrying		Fair
	Value		Value			Value		Value
Mortgage loans receivable	$	229,801	$	294,319	(1)	$	217,529	$	257,335	(1)
Bank borrowings		107,100		107,100	(2)		120,500		120,500	(2)
Senior unsecured notes, net of debt issue costs		502,291		498,915	(3)		451,372		451,420	(3)
Accrued incentives and earn-outs		12,229		12,229	(4)		12,722		12,722	(4)

⁽¹⁾ Our investment in mortgage loans receivable is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash inflows of the mortgage loans receivable at December 31, 2016 and 2015 was 8.2% and 8.9%, respectively.

⁽²⁾ Our bank borrowings bear interest at a variable interest rate. The estimated fair value of our bank borrowings approximated their carrying values at December 31, 2016 and 2015 based upon prevailing market interest rates for similar debt arrangements.

⁽³⁾ Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is measured based upon management’s estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities. At December 31, 2016, the discount rate used to value our future cash outflow of our senior unsecured notes was 4.47% for those maturing before year 2026 and 4.60% for those maturing at or beyond year 2026. At December 31, 2015, the discount rate used to value our future cash outflow of our senior unsecured notes was 4.35% for those maturing before year 2026 and 4.55% for those maturing beyond year 2026.

⁽⁴⁾ Our contingent obligations under the accrued incentives and earn‑out liabilities are classified as Level 3. We estimated the fair value of the contingent earn‑out payments using a discounted cash flow analysis. The discount rate that we use consists of a risk‑free U.S. Treasury rate plus a company specific credit spread which we believe is acceptable by willing market participants. At December 31, 2016 and December 31, 2015, the discount rate used to value our future cash outflow of the earn-out liability was 5.9% and 6.1%, respectively.