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Fair Value Measurements

12 Months Ended

Dec. 31, 2023

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 as well as certain U.S. Treasury securities that are highly liquid and are actively traded in secondary markets; 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.

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) investments in U.S. Treasury bills (classified as available-for-sale), (ii) the assets in our deferred compensation plan (for which there is a corresponding liability on our consolidated balance sheets), (iii) loans receivable for which we have elected the fair value option under ASC Subtopic 825-10, Financial Instruments ("ASC 825-10"), (iv) interest rate swaps and caps and (v) 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 December 31, 2023
	Total		Level 1		Level 2		Level 3
Deferred compensation plan assets ($26,363 included in restricted cash and $78,883 in other assets)	$	105,246	$	58,956	$	—	$	46,290
Loans receivable (included in investments in partially owned entities)	32,984		—		—		32,984
Interest rate swaps and caps designated as a hedge (included in other assets)	138,772		—		138,772		—
Interest rate caps not designated as a hedge (included in other assets)	4,154		—		4,154		—
Total assets	$	281,156	$	58,956	$	142,926	$	79,274

Mandatorily redeemable instruments (included in other liabilities)	$	49,386	$	49,386	$	—	$	—
Interest rate swaps designated as a hedge (included in other liabilities)	7,239		—		7,239		—
Interest rate caps not designated as a hedge (included in other liabilities)	4,092		—		4,092		—
Total liabilities	$	60,717	$	49,386	$	11,331	$	—


(Amounts in thousands)	As of December 31, 2022
	Total		Level 1		Level 2		Level 3
Investments in U.S. Treasury bills(1)	$	471,962	$	471,962	$	—	$	—
Deferred compensation plan assets ($7,763 included in restricted cash and $88,559 in other assets)	96,322		57,406		—		38,916
Loans receivable ($50,091 included in investments in partially owned entities and $4,306 in other assets)	54,397		—		—		54,397
Interest rate swaps and caps designated as a hedge (included in other assets)	183,804		—		183,804		—
Interest rate caps not designated as a hedge (included in other assets)	5,994		—		5,994		—
Total assets	$	812,479	$	529,368	$	189,798	$	93,313

Mandatorily redeemable instruments (included in other liabilities)	$	49,383	$	49,383	$	—	$	—
Interest rate caps not designated as a hedge (included in other liabilities)	2,741		—		2,741		—
Total liabilities	$	52,124	$	49,383	$	2,741	$	—

____________________

(1)During the year ended December 31, 2023, we realized proceeds of $477,000 from maturing U.S. Treasury bills.

15. Fair Value Measurements - continued

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

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 that provide net asset values on a fair value basis from a third-party administrator, which are compiled from the quarterly reports provided to them from each limited partnership and investment fund. 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 Year Ended December 31,
	2023		2022
Beginning balance	$	38,916	$	45,016
Purchases	7,855		4,507
Sales	(5,080)		(9,941)
Realized and unrealized gains (losses)	982		(3,781)
Other, net	3,617		3,115
Ending balance	$	46,290	$	38,916

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. 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 loans receivable.


	As of
	December 31, 2023	December 31, 2022
Unobservable quantitative inputs (range and weighted average):
Discount rates	8.0%	7.5%
Terminal capitalization rates	5.5%	5.5%

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


(Amounts in thousands)	For the Year Ended December 31,
	2023			2022
Beginning balance	$	54,397		$	50,182
Credit losses	(26,155)		(1)	—
Interest accrual	5,153			4,748
Paydowns	(411)			(533)
Ending balance	$	32,984		$	54,397

____________________

(1)Includes a $21,114 impairment loss on advances made for our interest in a joint venture, resulting from a decline in the value of the underlying building. The loss was included in “income (loss) from partially owned entities” on our consolidated statements of income for the year ended December 31, 2023.

15. Fair Value Measurements - continued

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

Derivatives and Hedging

We use derivative instruments principally to reduce our exposure to interest rate increases. We do not enter into or hold derivative instruments for speculative trading purposes. We recognize the fair values of all derivatives in "other assets" or "other liabilities" on our consolidated balance sheets. Changes in the fair value of our cash flow hedges are 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 hedging instruments and hedged items, but will have no effect on cash flows. Cash payments and receipts related to our interest rate hedges are classified as operating activities and included within our disclosure of cash paid for interest on our consolidated statements of cash flows, consistent with the classification of the hedged interest payments.

The following table summarizes our consolidated hedging instruments, all of which hedge variable rate debt, as of December 31, 2023 and 2022, respectively.


(Amounts in thousands)	As of December 31, 2023									As of December 31, 2022
	Notional Amount			All-In Swapped Rate	Swap/Cap Expiration Date	Fair Value Asset		Fair Value Liability		Fair Value Asset
Interest rate swaps:
555 California Street mortgage loan:
In-place swap	$	840,000	(1)	2.29%	05/24	$	15,494	$	—	$	49,888
Forward swap (effective 05/24)	840,000		(1)	6.03%	05/26	—		6,091		—
770 Broadway mortgage loan	700,000			4.98%	07/27	20,306		—		29,226
PENN 11 mortgage loan:
In-place swap	500,000			2.22%	03/24	4,702		—		26,587
Forward swap (effective 03/24)	250,000		(2)	6.34%	10/25	—		1,148		—
Unsecured revolving credit facility	575,000			3.87%	08/27	17,064		—		24,457
Unsecured term loan(3)	700,000			4.52%	(3)	11,089		—		21,024
100 West 33rd Street mortgage loan	480,000			5.06%	06/27	3,550		—		6,886
888 Seventh Avenue mortgage loan	200,000		(4)	4.76%	09/27	4,340		—		6,544
4 Union Square South mortgage loan	98,200		(5)	3.74%	01/25	2,327		—		4,050
Interest rate caps:
1290 Avenue of the Americas mortgage loan	950,000			(6)	11/25	53,784		—		7,590
One Park Avenue mortgage loan	525,000			(7)	03/25	5,297		—		5,472
Various mortgage loans						819		—		2,080
						$	138,772	$	7,239	$	183,804

________________________________________

(1)Represents our 70.0% share of the $1.2 billion mortgage loan. In March 2023, we entered into the forward swap arrangement detailed above.

(2)In January 2024, we entered into a forward swap arrangement for the remaining $250,000 balance of the $500,000 PENN 11 mortgage loan which is effective upon the March 2024 expiration of the current in-place swap. Together with the forward swap above, the loan will bear interest at an all-in swapped rate of 6.28% effective March 2024 through October 2025.

(3)Represents the aggregate fair value of various interest rate swap arrangements to hedge interest payments on our unsecured term loan, which matures in December 2027. The impact of these interest rate swap arrangements is detailed below:


	Swapped Balance		All-In Swapped Rate	Unswapped Balance (bears interest at S+129)

Through 07/25	$	700,000	4.52%	$	100,000
07/25 through 10/26	550,000		4.35%	250,000
10/26 through 08/27	50,000		4.03%	750,000

2022 includes the fair value of a $100,000 notional swap which expired in October 2023.

(4)The remaining $59,800 mortgage loan balance bears interest at a floating rate of SOFR plus 1.80% (7.14% as of December 31, 2023).

(5)The remaining $21,800 mortgage loan balance bears interest at a floating rate of SOFR plus 1.50% (6.84% as of December 31, 2023).

(6)Current SOFR strike rate of 1.00%. In connection with the arrangement, we made a $63,100 up-front payment, of which $18,930 was attributable to noncontrolling interests. See Note 9 - Debt for further information.

(7)Current SOFR cap strike rate of 3.89%. In March 2023, we entered into a forward cap arrangement which is effective upon the March 2024 expiration of the current in-place cap and expires in March 2025. The forward cap has a SOFR strike rate of 3.89%.

15. Fair Value Measurements - continued

Fair Value Measurements on a Nonrecurring Basis

During the years ended December 31, 2023 and 2022, we recognized impairment losses on certain real estate investments. The following table sets forth the details of our impairment losses.


(Amounts in thousands)	As of and For The Years Ended
	December 31, 2023					December 31, 2022
	Aggregate Fair Value		Impairment Losses			Aggregate Fair Value		Impairment Losses
Consolidated real estate assets	$	55,097	$	45,007	(1)	$	80,008	$	19,098
Investments in partially owned entities	21,473		29,344		(2)	2,272,320		583,212		(3)
	$	76,570	$	74,351		$	2,352,328	$	602,310

________________________________________

(1)Includes $22,176 attributable to noncontrolling interests.

(2)Excludes a $21,114 impairment loss on advances made for our interest in a joint venture.

(3)Includes $6,822 attributable to noncontrolling interests.

The fair value of these assets was measured using discounted cash flow analyses and level 3 inputs. Significant unobservable quantitative inputs in the table below were utilized in determining the fair value of these real estate assets.


	As of
	December 31, 2023		December 31, 2022
Unobservable Quantitative Input	Range	Weighted Average	Range	Weighted Average
Discount rates	7.50% - 8.00%	7.99%	7.50% - 8.00%	7.52%
Terminal capitalization rates	5.50%	5.50%	4.75% - 5.50%	4.78%

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 December 31, 2023					As of December 31, 2022
	Carrying Amount			Fair Value		Carrying Amount			Fair Value
Cash equivalents	$	825,720		$	826,000	$	402,903		$	403,000
Debt:
Mortgages payable	$	5,729,615		$	5,569,000	$	5,877,615		$	5,697,000
Senior unsecured notes	1,200,000			1,069,000		1,200,000			1,021,000
Unsecured term loan	800,000			800,000		800,000			800,000
Unsecured revolving credit facilities	575,000			575,000		575,000			575,000
Total	$	8,304,615	(1)	$	8,013,000	$	8,452,615	(1)	$	8,093,000

________________________________________

(1)Excludes $53,163 and $63,572 of deferred financing costs, net and other as of December 31, 2023 and 2022, respectively.

- 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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