Disclosure About Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Disclosure About Fair Value of Financial Instruments

Disclosure About Fair Value of Financial Instruments

The following summarizes the levels of inputs that we use to measure fair value.

Level 1.  Quoted prices in active markets for identical assets or liabilities.

Our Level 1 asset is our investment in marketable securities that we use to pay benefits under our non-qualified deferred compensation plan. Our Level 1 liability is our non-qualified deferred compensation obligation. The Company’s Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Our Level 2 assets include the fair value of our mortgages and notes receivable. Our Level 2 liabilities include the fair value of our mortgages and notes payable and interest rate swaps.

The fair value of mortgages and notes receivable and mortgages and notes payable is estimated by the income approach utilizing contractual cash flows and market-based interest rates to approximate the price that would be paid in an orderly transaction between market participants. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments of interest rate swaps are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, credit valuation adjustments are considered in the fair values to account for potential nonperformance risk, but were concluded to not be significant inputs to the calculation for the periods presented.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our Level 3 assets include any real estate assets recorded at fair value on a non-recurring basis as a result of our quarterly impairment analysis, which are valued using unobservable local and national industry market data such as comparable sales, appraisals, brokers’ opinions of value and/or the terms of definitive sales contracts. Significant increases or decreases in any valuation inputs in isolation would result in a significantly lower or higher fair value measurement.

The following table sets forth our assets and liabilities and the Company’s noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy:

			Level 1		Level 2		Level 3
	Total		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Observable Inputs		Significant Unobservable Inputs
Fair Value at June 30, 2020:
Assets:
Mortgages and notes receivable, at fair value (1)	$	1,440	$	—	$	1,440	$	—
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,111		2,111		—		—
Impaired real estate assets	2,053		—		—		2,053
Total Assets	$	5,604	$	2,111	$	1,440	$	2,053
Noncontrolling Interests in the Operating Partnership	$	106,103	$	106,103	$	—	$	—
Liabilities:
Mortgages and notes payable, net, at fair value (1)	$	2,421,024	$	—	$	2,421,024	$	—
Interest rate swaps (in accounts payable, accrued expenses and other liabilities)	1,237		—		1,237		—
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,111		2,111		—		—
Total Liabilities	$	2,424,372	$	2,111	$	2,422,261	$	—

Fair Value at December 31, 2019:
Assets:
Mortgages and notes receivable, at fair value (1)	$	1,501	$	—	$	1,501	$	—
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets)	2,345		2,345		—		—
Total Assets	$	3,846	$	2,345	$	1,501	$	—
Noncontrolling Interests in the Operating Partnership	$	133,216	$	133,216	$	—	$	—
Liabilities:
Mortgages and notes payable, net, at fair value (1)	$	2,615,776	$	—	$	2,615,776	$	—
Interest rate swaps (in accounts payable, accrued expenses and other liabilities)	154		—		154		—
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities)	2,345		2,345		—		—
Total Liabilities	$	2,618,275	$	2,345	$	2,615,930	$	—

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(1)    Amounts are not recorded at fair value on our Consolidated Balance Sheets at June 30, 2020 and December 31, 2019.

The Level 3 impaired real estate assets measured at a fair value of $2.1 million in the second quarter of 2020 include a non-core office building. The impairment resulted from a change in our assumptions about the use of the assets and was calculated using brokers’ opinions of value, letters of intent and comparable sales as observable inputs were not available.