Financial Instruments and Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Financial Instruments and Fair Value Measurements

NOTE 15. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Derivative Financial Instruments

In the normal course of business, our operations are exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates. We may enter into derivative financial instruments to offset these underlying market risks. See Note 2 for our derivative financial instruments policy.

The following table presents the fair value of our derivative financial instruments recognized within Other Assets and Other Liabilities on the Consolidated Balance Sheets at December 31 (in thousands):

	2020				2019
	Asset		Liability		Asset		Liability
Undesignated derivatives
Foreign currency contracts
Forwards
Brazilian real	$	620	$	66	$	181	$	49
British pound sterling		174		7,589		731		3,823
Canadian dollar		80		5,827		523		1,855
Chinese renminbi		-		717		-		81
Euro		73		6,247		7,135		2,034
Japanese yen		720		1,604		3,889		97
Swedish krona		-		2,355		-		797
Designated derivatives
Foreign currency contracts
Net investment hedges
British pound sterling		-		2,081		807		13,189
Canadian dollar		-		9,847		-		1,926
Interest rate swaps
Cash flow hedges
Euro		-		9		-		-
U.S. dollar		-		140		-		-
Total fair value of derivatives	$	1,667	$	36,482	$	13,266	$	23,851

Undesignated Derivative Financial Instruments

Foreign Currency Contracts

The following table summarizes the activity of our undesignated foreign currency contracts for the years ended December 31 (in millions, except for weighted average forward rates and number of active contracts):

	2020																					2019																				2018
	CAD			EUR			GBP			JPY			SEK			Other			Total			CAD			EUR			GBP			JPY			SEK		Other			Total			CAD			EUR			GBP			JPY			Other			Total
Notional amounts at      January 1 ($)		120			581			178			182			31			15			1,107			55			314			118			177			-		5			669			56			233			132			153			-			574
New contracts ($)		88			1,314			364			154			37			48			2,005			201			619			1,111			85			31		524			2,571			28			252			55			102			423			860
Matured, expired or      settled contracts ($)		(45	)		(1,421	)		(335	)		(84	)		(30	)		(35	)		(1,950	)		(136	)		(352	)		(1,051	)		(80	)		-		(514	)		(2,133	)		(29	)		(171	)		(69	)		(78	)		(418	)		(765	)
Notional amounts at      December 31 ($)		163			474			207			252			38			28			1,162			120			581			178			182			31		15			1,107			55			314			118			177			5			669
Weighted average      forward rate      at December 31		1.32			1.23			1.32			102.66			8.64									1.32			1.13			1.32			103.39			9.42								1.28			1.21			1.32			105.17
Active contracts at      December 31		58			64			53			59			42									40			53			50			44			20								24			35			24			34

The following table summarizes the undesignated derivative financial instruments exercised and associated realized and unrealized gains (losses) in Foreign Currency and Derivative Gains (Losses), Net in the Consolidated Statements of Income for the years ended December 31 (in millions, except for number of exercised contracts):

	2020			2019			2018
Exercised contracts		173			115			89
Realized gains (losses) on the matured, expired or settled contracts	$	(6	)	$	28		$	(3	)
Unrealized gains (losses) on the change in fair value of outstanding contracts	$	(13	)	$	(10	)	$	29

Designated Derivative Financial Instruments

Foreign Currency Contracts

The following table summarizes the activity of our foreign currency contracts designated as net investment hedges for the years ended December 31 (in millions, except for weighted average forward rates and number of active contracts):

	2020									2019															2018
	CAD			GBP			Total			BRL			CAD			EUR			GBP			Total			BRL			CAD			EUR			GBP		Total
Notional amounts at January 1 ($)		97			387			484			460			100			-			127			687			-			99			-			-		99
New contracts ($)		377			459			836			489			97			420			649			1,655			1,568			100			1,053			127		2,848
Matured, expired or settled contracts ($)		(97	)		(711	)		(808	)		(949	)		(100	)		(420	)		(389	)		(1,858	)		(1,108	)		(99	)		(1,053	)		-		(2,260	)
Notional amounts at December 31 ($)		377			135			512			-			97			-			387			484			460			100			-			127		687
Weighted average forward rate      at December 31		1.31			1.35						-			1.32			-			1.29						3.91			1.28			-			1.28
Active contracts at December 31		6			1						-			2			-			5						1			2			-			2

Interest Rate Swaps

The following table summarizes the activity of our interest rate swaps designated as cash flow hedges for the years ended December 31 (in millions):

	2020								2019						2018
	EUR		USD			Total			EUR			Total			CAD			EUR		USD			Total
Notional amounts at January 1 ($)		-		-			-			500			500			271			-		-			271
New contracts ($) (1)(2)(3)(4)(5)		165		1,500			1,665			-			-			-			500		300			800
Matured, expired or settled contracts ($) (2)(4)(5)(6)		-		(1,250	)		(1,250	)		(500	)		(500	)		(271	)		-		(300	)		(571	)
Notional amounts at December 31 ($)		165		250			415			-			-			-			500		-			500

(1) During 2020, we entered into one interest rate swap contract with an aggregate notional amount of €150.0 million ($165.0 million) to effectively fix the interest rate on our euro senior notes bearing a floating rate of Euribor plus 0.3% issued in February 2020.  

(2) During 2020, we entered into four treasury lock contracts with an aggregate notional amount of $750.0 million to effectively fix the interest rate on the forecasted issuance of U.S. dollar senior notes, which were then issued in February 2020. Subsequent to issuance, we recorded a loss of $16.8 million associated with these derivatives that will be amortized out of AOCI/L to Interest Expense, in accordance with our policy.

(3) During 2020, we entered into two interest rate swap contracts with an aggregate notional amount of $250.0 million to effectively fix the interest rate on the outstanding balance of our 2017 Term Loan bearing a floating rate of 1-month USD LIBOR plus 0.9%.

(4) During 2020, we entered into two treasury lock contracts with an aggregate notional amount of $500.0 million to effectively fix the interest rate on the forecasted issuance of U.S. dollar senior notes, which were then issued in August 2020. The loss associated with the settlement of the derivatives upon issuance of the senior notes was not significant.

(5) During 2018, we entered into two interest rate swap contracts with an aggregated notional amount of €400.0 million ($499.7 million) to effectively fix the interest rate on our senior notes bearing a floating rate of Euribor plus 0.3% issued in January 2018. In 2019, the interest rate swap contracts matured and in January 2020 we redeemed the senior notes.

(6) During 2018, we repaid CAD 201.4 million ($158.9 million) on our 2015 Canadian Term Loan. At that time, we settled the interest rate swaps related to the 2015 Canadian Term Loan as we determined it was no longer probable that we would continue to have the future cash flows as originally hedged. As a result, the $12.5 million gain in AOCI/L at the time of settlement was reclassified to Interest Expense during 2018.

Designated Nonderivative Financial Instruments

The following table summarizes our debt and accrued interest, designated as a hedge of our net investment in international subsidiaries at December 31 (in millions):

		2020		2019		2018
British pound sterling	$	842	$	329	$	269
Euro	$	-	$	850	$	2,645

The following table summarizes the unrealized gains (losses) in Foreign Currency and Derivative Gains (Losses), Net on the remeasurement of the unhedged portion of our debt and accrued interest for the years ended December 31 (in millions):

	2020			2019			2018
Unrealized gains (losses) on the unhedged portion	$	(139	)	$	(64	)	$	96

Other Comprehensive Income (Loss)

The change in Other Comprehensive Income (Loss) in the Consolidated Statements of Comprehensive Income during the periods presented was due to the translation into U.S. dollars from the consolidation of the financial statements of our consolidated subsidiaries whose functional currency is not the U.S. dollar. The change in fair value of the effective portion of our derivative financial instruments that have been designated as net investment hedges and cash flow hedges and the translation of the hedged portion of our debt, as discussed above, are also included in Other Comprehensive Income (Loss).

The following table presents these changes in Other Comprehensive Income (Loss) for the years ended December 31 (in thousands):

	2020			2019			2018
Derivative net investment hedges	$	(4,301	)	$	(22,600	)	$	26,457
Debt designated as nonderivative net investment hedges		(62,263	)		141,675			151,083
Cumulative translation adjustment		(128,109	)		(20,593	)		(368,130	)
Total foreign currency translation gains (losses), net	$	(194,673	)	$	98,482		$	(190,590	)
Cash flow hedges (1)(2)	$	(11,269	)	$	4,665		$	(5,815	)
Our share of derivatives from unconsolidated co-investment ventures		(2,848	)		(6,000	)		4,492
Total unrealized losses on derivative contracts, net	$	(14,117	)	$	(1,335	)	$	(1,323	)
Total change in other comprehensive income (loss)	$	(208,790	)	$	97,147		$	(191,913	)

(1) We estimate an additional expense of $4.8 million will be reclassified to Interest Expense over the next 12 months from December 31, 2020, due to the amortization of previously settled derivatives designated as cash flow hedges.

(2) Included in the year ended December 31, 2020 was $16.8 million in losses associated with the termination of the four treasury lock contracts.

Fair Value Measurements

We have estimated the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that we would realize on disposition. See Note 2 for more information on our fair value measurements policy.

Fair Value Measurements on a Recurring Basis

At December 31, 2020 and 2019, other than the derivatives discussed previously, we had no significant financial assets or financial liabilities that were measured at fair value on a recurring basis in the Consolidated Financial Statements. All of our derivatives held at December 31, 2020 and 2019 were classified as Level 2 of the fair value hierarchy.

Fair Value Measurements on Nonrecurring Basis

Acquired properties and assets we expect to sell or contribute are significant nonfinancial assets that met the criteria to be measured at fair value on a nonrecurring basis, as detailed in our accounting policy in Note 2. At December 31, 2020 and 2019, we estimated the fair value of our properties using Level 2 or Level 3 inputs from the fair value hierarchy. See more information on our acquired properties in Notes 3 and 4 and assets held for sale or contribution in Note 6.

Fair Value of Financial Instruments

At December 31, 2020 and 2019, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values.

The differences in the fair value of our debt from the carrying value in the table below were the result of differences in interest rates or borrowing spreads that were available to us at December 31, 2020 and 2019, as compared with those in effect when the debt was issued or assumed, including reduced borrowing spreads due to our credit ratings. The fair value of the senior notes increased in 2020 due to the decrease in bond yields in the market as compared to the higher weighted average interest rates on our senior notes. The senior notes and many of the issuances of secured mortgage debt contain prepayment penalties or yield maintenance provisions that could make the cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so. We evaluate this on an on-going basis and have taken the opportunity to refinance some of our debt at lower rates and longer maturities as discussed in Note 8.

The following table reflects the carrying amounts and estimated fair values of our debt at December 31 (in thousands):

	2020				2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Credit Facilities	$	171,794	$	171,794	$	184,255	$	184,255
Senior notes		14,275,870		15,452,381		9,660,570		10,228,715
Term loans and unsecured other		1,764,311		1,785,706		1,441,882		1,463,841
Secured mortgage		637,101		673,549		619,170		651,047
Total	$	16,849,076	$	18,083,430	$	11,905,877	$	12,527,858