Fair Value of Assets and Liabilities

9 Months Ended

Sep. 30, 2013

Fair Value of Assets and Liabilities

Note 7. Fair Value of Assets and Liabilities

Our assets and liabilities at September 30, 2013 include cash and cash equivalents, restricted cash, rents receivable, mortgage notes payable, accounts payable, our revolving credit facility and our term loan, amounts due to related persons, other accrued expenses and security deposits. At September 30, 2013, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements, except as follows:

	Carrying Amount		Fair Value
Mortgage note payable, 5.73% interest rate, including unamortized premium of $463, due in 2015	$	48,607	$	50,095
Mortgage note payable, 6.21% interest rate, due in 2016	24,223		26,361
Mortgage note payable, 7.00% interest rate, including unamortized premium of $782, due in 2019	10,003		10,578
Mortgage note payable, 8.15% interest rate, including unamortized premium of $556, due in 2021	8,510		9,404
	$	91,343	$	96,438

We estimate the fair values of our mortgage notes payable by using discounted cash flow analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined in the fair value hierarchy under GAAP). Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.

The table below presents certain of our assets and liabilities measured on a non-recurring basis at fair value at September 30, 2013, categorized by the level of inputs used in the valuation of each asset and liability:

			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)

Non-Recurring Fair Value Measurements
Properties held for sale(1)	$	14,560	$	—	$	—	$	14,560
Additional purchase consideration(2)	1,231		—		—		1,231

(1) The estimated fair values at September 30, 2013 of the two properties for which a loss on asset impairment was recognized are based upon broker estimates of value less estimated sales costs (Level 3 inputs as defined in the fair value hierarchy under GAAP).

(2) In December 2012, we acquired a property located in Florence, KY. Pursuant to the terms of the purchase agreement for this property, the seller is entitled to up to $1,800 of additional purchase consideration based upon the property’s 2013 real estate tax assessment. In accounting for this acquisition in 2012, we had estimated the fair value (based on Level 3 inputs as defined in the fair value hierarchy under GAAP) of this additional consideration to be $273. During the three months ended September 30, 2013, we received the 2013 real estate tax assessment for this property and increased the estimated fair value (based on Level 3 inputs as defined in the fair value hierarchy under GAAP) of the additional consideration to $1,231 at September 30, 2013. The $958 increase in the fair value of the additional consideration is included in acquisition related costs in our condensed consolidated income statements for the three months ended September 30, 2013.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details