Fair Values of Financial Instruments

9 Months Ended

Sep. 30, 2020

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

Fair Values of Financial Instruments

Fair value is defined as the price at which an asset or liability is exchanged between market participants in an orderly transaction at the reporting date. The Company’s cash equivalents, notes receivable, accounts receivable and payables and accrued expenses all approximate fair value due to their short term nature.

The following tables provide estimated fair values of the Company’s financial instruments. The carrying values of the Company's real estate loans include accrued interest receivable from additional interest or exit fee provisions and are presented net of deferred loan fee revenue and credit losses reserves, where applicable.

	As of September 30, 2020
(In thousands)	Carrying value				Fair value measurements using fair value hierarchy
			Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Real estate loans	$	334,385	$	348,608	$	—	$	—	$	348,608
Notes receivable and line of credit receivable	11,905		11,905		—		—		11,905
	$	346,290	$	360,513	$	—	$	—	$	360,513
Financial Liabilities:
Mortgage notes payable	$	2,814,169	$	2,866,502	$	—	$	—	$	2,866,502
Revolving credit facility	33,000		33,000		—		—		33,000
	$	2,847,169	$	2,899,502	$	—	$	—	$	2,899,502

	As of December 31, 2019
(In thousands)	Carrying value				Fair value measurements using fair value hierarchy
			Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Real estate loans	$	375,460	$	382,373	$	—	$	—	$	382,373
Notes receivable and line of credit receivable	41,917		41,917		—		—		41,917
	$	417,377	$	424,290	$	—	$	—	$	424,290
Financial Liabilities:
Mortgage notes payable	$	2,609,829	$	2,659,242	$	—	$	—	$	2,659,242
Revolving line of credit	—		—		—		—		—
Term note payable	70,000		70,000		—		—		70,000
	$	2,679,829	$	2,729,242	$	—	$	—	$	2,729,242

The fair value of the real estate loans within the level 3 hierarchy are comprised of estimates of the fair value of the notes, which were developed utilizing a discounted cash flow model over the remaining terms of the notes until their maturity dates and utilizing discount rates believed to approximate the market risk factor for notes of similar type and duration. The fair values also contain a separately-calculated estimate of any applicable additional interest payment due the Company at the maturity date of the loan, based on the outstanding loan balances at September 30, 2020, discounted to the reporting date utilizing a discount rate believed to be appropriate for multifamily development projects. The fair values of the fixed rate mortgages on the Company’s properties were developed using market quotes of the fixed rate yield index and spread for 4, 5, 6, 7, 10, 15, 25 and 35 year notes as of the reporting date. The present values of the cash flows were calculated using the original interest rate in place on the fixed rate mortgages and again at the current market rate. The difference between the two results was applied as a fair market adjustment to the carrying value of the mortgages.