Fair Values of Financial Instruments

3 Months Ended

Mar. 31, 2022

Fair Values of Financial Instruments [Abstract]

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 allowances and are presented net of deferred loan fee revenue and credit losses reserves, where applicable.


	As of March 31, 2022
	Carrying value				Fair value measurements using fair value hierarchy
(In thousands)			Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Real estate loans	$	228,850	$	236,159	$	—	$	—	$	236,159
Notes receivable and line of credit receivable	8,875		8,875		—		—		8,875
	$	237,725	$	245,034	$	—	$	—	$	245,034
Financial Liabilities:
Mortgage notes payable	$	2,427,217	$	2,355,741	$	—	$	—	$	2,355,741
Revolving line of credit	—		—		—		—		—
	$	2,427,217	$	2,355,741	$	—	$	—	$	2,355,741


	As of December 31, 2021
	Carrying value				Fair value measurements using fair value hierarchy
(In thousands)			Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Real estate loans	$	213,458	$	219,923	$	—	$	—	$	219,923
Notes receivable and line of credit receivable	9,011		9,011		—		—		9,011
	$	222,469	$	228,934	$	—	$	—	$	228,934
Financial Liabilities:
Mortgage notes payable	$	2,382,652	$	2,414,774	$	—	$	—	$	2,414,774
Revolving line of credit	—		—		—		—		—
	$	2,382,652	$	2,414,774	$	—	$	—	$	2,414,774

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 to the Company at the maturity date of the loan, based on the outstanding loan balances at March 31, 2022 and December 31, 2021, 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.

- 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.

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