XML 115 R24.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

3 Months Ended

Mar. 31, 2020

ASC 820 defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of our financial and non-financial assets and liabilities. Accordingly, our fair value estimates, which are made at the end of each reporting period, may be different than the amounts that may ultimately be realized upon sale or disposition of these assets.


15.	Fair Value Measurements - continued

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities that are measured at fair value on our consolidated balance sheets consist of (i) marketable securities, (ii) real estate fund investments, (iii) the assets in our deferred compensation plan (for which there is a corresponding liability on our consolidated balance sheets), (iv) loans receivable (for which we have elected the fair value option under ASC 825-10), (v) interest rate swaps and (vi) mandatorily redeemable instruments (Series G-1 through G-4 convertible preferred units and Series D-13 cumulative redeemable preferred units). The tables below aggregate the fair values of these financial assets and liabilities by their levels in the fair value hierarchy.



(Amounts in thousands)	As of March 31, 2020
	Total		Level 1		Level 2		Level 3
Real estate fund investments	$	45,129	$	—	$	—	$	45,129
Deferred compensation plan assets ($12,116 included in restricted cash and $78,772 in other assets)	90,888		60,320		—		30,568
Loans receivable ($40,547 included in investments in partially owned entities and $11,443 in other assets)	51,990		—		—		51,990
Interest rate swaps (included in other assets)	94		—		94		—
Total assets	$	188,101	$	60,320	$	94	$	127,687

Mandatorily redeemable instruments (included in other liabilities)	$	49,938	$	49,938	$	—	$	—
Interest rate swaps (included in other liabilities)	81,601		—		81,601		—
Total liabilities	$	131,539	$	49,938	$	81,601	$	—

(Amounts in thousands)	As of December 31, 2019
	Total		Level 1		Level 2		Level 3
Marketable securities	$	33,313	$	33,313	$	—	$	—
Real estate fund investments	222,649		—		—		222,649
Deferred compensation plan assets ($11,819 included in restricted cash and $91,954 in other assets)	103,773		71,338		—		32,435
Interest rate swaps (included in other assets)	4,327		—		4,327		—
Total assets	$	364,062	$	104,651	$	4,327	$	255,084

Mandatorily redeemable instruments (included in other liabilities)	$	50,561	$	50,561	$	—	$	—
Interest rate swaps (included in other liabilities)	40,354		—		40,354		—
Total liabilities	$	90,915	$	50,561	$	40,354	$	—

Real Estate Fund Investments

As of March 31, 2020, we had four real estate fund investments with an aggregate fair value of $45,129,000, or $296,435,000 below cost. These investments are classified as Level 3.

Significant unobservable quantitative inputs used in determining the fair value of each investment include capitalization rates and discount rates. These rates are based on the location, type and nature of each property, current and anticipated market conditions, industry publications and from the experience of our Acquisitions and Capital Markets departments. Significant unobservable quantitative inputs in the table below were utilized in determining the fair value of these real estate fund investments.



	Range		Weighted Average (based on fair value of investments)
Unobservable Quantitative Input	March 31, 2020	December 31, 2019	March 31, 2020	December 31, 2019
Discount rates	10.0% to 15.0%	8.2% to 12.0%	13.8%	9.3%
Terminal capitalization rates	6.0% to 9.9%	4.6% to 8.2%	7.6%	5.3%


15.	Fair Value Measurements - continued

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis - continued

Real Estate Fund Investments - continued

The inputs on the previous page are subject to change based on changes in economic and market conditions and/or changes in use or timing of exit. Changes in discount rates and terminal capitalization rates result in increases or decreases in the fair values of these investments. The discount rates encompass, among other things, uncertainties in the valuation models with respect to terminal capitalization rates and the amount and timing of cash flows. Therefore, a change in the fair value of these investments resulting from a change in the terminal capitalization rate may be partially offset by a change in the discount rate. It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values.

The table below summarizes the changes in the fair value of real estate fund investments that are classified as Level 3.



(Amounts in thousands)	For the Three Months Ended March 31,
	2020			2019
Beginning balance	$	222,649		$	318,758
Purchases/additional fundings	6,000			4,000
Net unrealized (loss) gain on held investments	(183,520		)	100
Ending balance	$	45,129		$	322,858

Deferred Compensation Plan Assets

Deferred compensation plan assets that are classified as Level 3 consist of investments in limited partnerships and investment funds, which are managed by third parties. We receive quarterly financial reports from a third-party administrator, which are compiled from the quarterly reports provided to them from each limited partnership and investment fund. The quarterly reports provide net asset values on a fair value basis which are audited by independent public accounting firms on an annual basis. The period of time over which these underlying assets are expected to be liquidated is unknown. The third party administrator does not adjust these values in determining our share of the net assets and we do not adjust these values when reported in our consolidated financial statements.

The table below summarizes the changes in the fair value of deferred compensation plan assets that are classified as Level 3.



(Amounts in thousands)	For the Three Months Ended March 31,
	2020			2019
Beginning balance	$	32,435		$	37,808
Sales	(2,475		)	(2,114		)
Purchases	1,293			908
Realized and unrealized (losses) gains	(1,229		)	523
Other, net	544			437
Ending balance	$	30,568		$	37,562

Loans Receivable

Loans receivable consist of loan investments in real estate related assets for which we have elected the fair value option under ASC 825-10 as of January 1, 2020. These investments are classified as Level 3.



	March 31, 2020
	Range	Weighted Average (based on fair value of investments)
Unobservable Quantitative Input
Discount rates	6.0% to 14.0%	7.0%
Terminal capitalization rates	5.0% to 6.0%	5.1%


15.	Fair Value Measurements - continued

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis - continued

Loans Receivable - continued

The table below summarizes the changes in fair value of loans receivable that are classified as Level 3.



(Amounts in thousands)	For the Three Months Ended March 31, 2020
Beginning balance	$	59,251
Credit losses	(7,261		)
Ending balance	$	51,990

Fair Value Measurements on a Nonrecurring Basis

There were no assets measured at fair value on a nonrecurring basis on our consolidated balance sheets as of March 31, 2020 and December 31, 2019.

Financial Assets and Liabilities not Measured at Fair Value

Financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash equivalents (primarily money market funds, which invest in obligations of the United States government), and our secured and unsecured debt. Estimates of the fair value of these instruments are determined by the standard practice of modeling the contractual cash flows required under the instrument and discounting them back to their present value at the appropriate current risk adjusted interest rate, which is provided by a third-party specialist. For floating rate debt, we use forward rates derived from observable market yield curves to project the expected cash flows we would be required to make under the instrument. The fair value of cash equivalents and borrowings under our unsecured revolving credit facilities and unsecured term loan are classified as Level 1. The fair value of our secured debt and unsecured debt are classified as Level 2. The table below summarizes the carrying amounts and fair value of these financial instruments.



(Amounts in thousands)		As of March 31, 2020					As of December 31, 2019
		Carrying Amount			Fair Value		Carrying Amount			Fair Value
Cash equivalents		$	1,422,502		$	1,423,000	$	1,276,815		$	1,277,000
Debt:
	Mortgages payable	$	5,670,928		$	5,689,000	$	5,670,016		$	5,714,000
	Senior unsecured notes	450,000			434,000		450,000			468,000
	Unsecured term loan	800,000			800,000		750,000			750,000
	Unsecured revolving credit facilities	1,075,000			1,075,000		575,000			575,000
	Total	$	7,995,928	⁽¹⁾	$	7,998,000	$	7,445,016	⁽¹⁾	$	7,507,000

____________________


(1)	Excludes $35,171 and $38,407 of deferred financing costs, net and other as of March 31, 2020 and December 31, 2019, respectively.

Derivatives and Hedging

We utilize various financial instruments to mitigate the impact of interest rate fluctuations on our cash flows and earnings, including hedging strategies, depending on our analysis of the interest rate environment and the costs and risks of such strategies. We recognize the fair values of all derivatives in "other assets" or "other liabilities" on our consolidated balance sheets. Derivatives that are not hedges are adjusted to fair value through earnings. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedge asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. Reported net income and equity may increase or decrease prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows.


15.	Fair Value Measurements - continued

Derivatives and Hedging - continued

The following table summarizes our consolidated derivative instruments, all of which hedge variable rate debt.



(Amounts in thousands)	As of March 31, 2020
						Variable Rate
Hedged Item (Interest rate swaps)	Fair Value		Notional Amount			Spread over LIBOR	Interest Rate	Swapped Rate	Expiration Date
Included in other assets:
Other	$	94	$	175,000

Included in other liabilities:
Unsecured term loan	$	68,439	$	750,000	⁽¹⁾	L+100	1.94%	3.87%	10/23
33-00 Northern Boulevard mortgage loan	9,141		100,000			L+180	2.81%	4.14%	1/25
888 Seventh Avenue mortgage loan	3,077		375,000			L+170	2.62%	3.25%	12/20
770 Broadway mortgage loan	944		700,000			L+175	2.76%	2.56%	9/20
	$	81,601	$	1,925,000

____________________

(1)

Remaining $50,000 balance of our unsecured term loan bears interest at a floating rate of LIBOR plus 1.00%.

- 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