Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs.  

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures regularly and, depending on various factors, it is possible that an asset or liability may be classified differently from period to period. However, the Company expects that changes in classifications between levels will be rare.

In addition to the disclosures for assets and liabilities required to be measured at fair value at the balance sheet date, companies are required to disclose the estimated fair values of all financial instruments, even if they are not presented at their fair value on the consolidated balance sheet. The fair values of financial instruments are estimates based upon market conditions and perceived risks at December 31, 2022 and 2021. These estimates require management's judgment and may not be indicative of the future fair values of the assets and liabilities.

Financial assets and liabilities for which the carrying values approximate their fair values include cash and cash equivalents, restricted cash, accounts receivable included within prepaid expenses and other assets, dividends payable and accrued liabilities and other payables. Generally, these assets and liabilities are short term in duration and their carrying value approximates fair value on the consolidated balance sheets.

The estimated fair values of the Company's fixed‑rate loans receivable have been derived based on primarily unobservable market inputs such as interest rates and discounted cash flow analyses using estimates of the amount and timing of future cash flows, market rates and credit spreads. These measurements are classified as Level 3 within the fair value hierarchy. The Company believes the carrying value of its fixed-rate loans receivable approximates fair value as of December 31, 2022 and 2021.

The estimated fair values of the Company's borrowings under the Revolving Credit Facility, the 2024 Term Loan, the 2027 Term Loan and the 2028 Term Loan have been derived based on primarily unobservable market inputs such as interest rates and discounted cash flow analyses using estimates of the amount and timing of future cash flows, market rates and credit spreads. These measurements are classified as Level 3 within the fair value hierarchy. The Company believes the carrying value of its borrowings under the Revolving Credit Facility, the 2024 Term Loan, the 2027 Term Loan and the 2028 Term Loan as of December 31, 2022 and 2021 approximate fair value.

The Company measures the fair value of its senior unsecured notes and derivative financial instruments on a recurring basis. The fair values of these financial assets were determined using the following input levels as of the dates presented: 

	Net Carrying				Fair Value Measurements Using Fair Value Hierarchy
(in thousands)	Value		Fair Value		Level 1		Level 2		Level 3
December 31, 2022
Financial assets:
Senior unsecured notes (1)	$	395,286	$	292,120	$	292,120	$	—	$	—
Interest rate swaps	45,603		45,603		—		45,603		—
December 31, 2021
Financial assets:
Senior unsecured notes (1)	$	394,723	$	400,640	$	400,640	$	—	$	—
Interest rate swaps	(11,838)		(11,838)		—		(11,838)		—

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(1)Carrying value is net of $4.0 million and $4.5 million of net deferred financing costs and $0.7 million and $0.8 million of net discount as of December 31, 2022 and 2021, respectively.

The Company measures its real estate investments at fair value on a nonrecurring basis. The fair values of these real estate investments were determined using the following input levels as of the dates presented: 

	Net Carrying				Fair Value Measurements Using Fair Value Hierarchy
(in thousands)	Value		Fair Value		Level 1		Level 2		Level 3
December 31, 2022
Non-financial assets:
Long-lived assets	$	12,144	$	12,144	$	—	$	—	$	12,144
December 31, 2021
Non-financial assets:
Long-lived assets	$	—	$	—	$	—	$	—	$	—

Long-Lived Assets

The Company reviews its investments in real estate when events or circumstances change indicating that the carrying amount of an asset may not be recoverable. In the evaluation of an investment in real estate for impairment, many factors are considered, including estimated current and expected operating cash flows from the asset during the projected holding period, costs necessary to extend the life or improve the asset, expected capitalization rates, projected stabilized net operating income, selling costs, and the ability to hold and dispose of the asset in the ordinary course of business.

Quantitative information about Level 3 fair value measurements as of December 31, 2022 is as follows:

(dollar amounts in thousands)	Fair Value		Valuation Techniques	Significant Unobservable Inputs
Non-financial assets:
Long-lived assets:
Equipment rental and sales	$	7,337	Sales comparison approach	Comparable sales price	$	7,337
Quick service restaurant	465		Discounted cash flow approach	Terminal Value: 8.0% Discount Rate: 8.5%	465
Pet care services	2,699		Discounted cash flow approach	Terminal Value: 5.0% Discount Rate: 6.0%	2,699
Pet care services	1,643		Discounted cash flow approach	Terminal Value: 8.0% Discount Rate: 8.5%	1,643

The fair values of impaired real estate were determined by using the following information, depending on availability, in order of preference: i) signed purchase and sale agreements or letters of intent; ii) recently quoted bid or ask prices; iii) estimates of future cash flows, which consider, among other things, contractual and forecasted rental revenues, leasing assumptions, terminal capitalization rates, discount rates and expenses based upon market conditions; or iv) expectations for the use of the real estate. Based on these inputs, the Company determined that its valuation of the impaired real estate falls within Level 3 of the fair value hierarchy.