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Financial Instruments and Fair Value Measurements | 3 Months Ended
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Mar. 31, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Financial Instruments and Fair Value Measurements | NOTE 10. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Derivative Financial Instruments In the normal course of business, our operations are exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates. We may enter into derivative financial instruments to offset these underlying market risks. There have been no significant changes in our policy or strategy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020. The following table presents the fair value of our derivative financial instruments recognized within Other Assets and Other Liabilities on the Consolidated Balance Sheets (in thousands):
|  | March 31, 2021 |  |  | December 31, 2020 |
|  | Asset |  |  | Liability |  |  | Asset |  |  | Liability |
Undesignated derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forwards |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Brazilian real |  | $ | 826 |  |  | $ | - |  |  | $ | 620 |  |  | $ | 66 |
British pound sterling |  |  | 71 |  |  |  | 8,735 |  |  |  | 174 |  |  |  | 7,589 |
Canadian dollar |  |  | - |  |  |  | 8,016 |  |  |  | 80 |  |  |  | 5,827 |
Chinese renminbi |  |  | 34 |  |  |  | 499 |  |  |  | - |  |  |  | 717 |
Euro |  |  | 16,096 |  |  |  | 287 |  |  |  | 73 |  |  |  | 6,247 |
Japanese yen |  |  | 16,096 |  |  |  | - |  |  |  | 720 |  |  |  | 1,604 |
Swedish krona |  |  | 1,214 |  |  |  | 868 |  |  |  | - |  |  |  | 2,355 |
Designated derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
British pound sterling |  |  | 3,251 |  |  |  | 3,125 |  |  |  | - |  |  |  | 2,081 |
Canadian dollar |  |  | - |  |  |  | 14,799 |  |  |  | - |  |  |  | 9,847 |
Interest rate swaps |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euro |  |  | - |  |  |  | 14 |  |  |  | - |  |  |  | 9 |
U.S. dollar |  |  | - |  |  |  | 28 |  |  |  | - |  |  |  | 140 |
Total fair value of derivatives |  | $ | 37,588 |  |  | $ | 36,371 |  |  | $ | 1,667 |  |  | $ | 36,482 |
Undesignated Derivative Financial Instruments Foreign Currency Contracts The following table summarizes the activity of our undesignated foreign currency contracts for the three months ended March 31 (in millions, except for weighted average forward rates and number of active contracts):
| 2021 |  |  | 2020 |
| CAD |  |  | EUR |  |  | GBP |  |  | JPY |  |  | SEK |  |  | Other |  |  | Total |  |  | CAD |  |  | EUR |  |  | GBP |  |  | JPY |  |  | SEK |  |  | Other |  |  | Total |
Notional amounts at January 1 ($) |  | 163 |  |  |  | 474 |  |  |  | 207 |  |  |  | 252 |  |  |  | 38 |  |  |  | 28 |  |  |  | 1,162 |  |  |  | 120 |  |  |  | 581 |  |  |  | 178 |  |  |  | 182 |  |  |  | 31 |  |  |  | 15 |  |  |  | 1,107 |
New contracts ($) |  | 3 |  |  |  | 83 |  |  |  | 11 |  |  |  | 25 |  |  |  | 5 |  |  |  | - |  |  |  | 127 |  |  |  | - |  |  |  | 809 |  |  |  | 294 |  |  |  | 60 |  |  |  | 9 |  |  |  | 19 |  |  |  | 1,191 |
Matured, expired or settled contracts ($) |  | (11 | ) |  |  | (36 | ) |  |  | (16 | ) |  |  | (20 | ) |  |  | (4 | ) |  |  | (4 | ) |  |  | (91 | ) |  |  | (11 | ) |  |  | (1,003 | ) |  |  | (267 | ) |  |  | (15 | ) |  |  | (3 | ) |  |  | (23 | ) |  |  | (1,322 | )
Notional amounts at March 31 ($) |  | 155 |  |  |  | 521 |  |  |  | 202 |  |  |  | 257 |  |  |  | 39 |  |  |  | 24 |  |  |  | 1,198 |  |  |  | 109 |  |  |  | 387 |  |  |  | 205 |  |  |  | 227 |  |  |  | 37 |  |  |  | 11 |  |  |  | 976 |
Weighted average forward rate at March 31 |  | 1.32 |  |  |  | 1.23 |  |  |  | 1.33 |  |  |  | 102.66 |  |  |  | 8.59 |  |  |  |  |  |  |  |  |  |  |  | 1.32 |  |  |  | 1.16 |  |  |  | 1.77 |  |  |  | 103.08 |  |  |  | 9.41 |  |  |  |  |  |  |  |  |
Active contracts at March 31 |  | 58 |  |  |  | 74 |  |  |  | 53 |  |  |  | 68 |  |  |  | 51 |  |  |  |  |  |  |  |  |  |  |  | 35 |  |  |  | 61 |  |  |  | 64 |  |  |  | 53 |  |  |  | 32 |  |  |  |  |  |  |  |  |
The following table summarizes the undesignated derivative financial instruments exercised and associated realized and unrealized gains (losses) in Foreign Currency and Derivative Gains, Net in the Consolidated Statements of Income (in millions, except for number of exercised contracts):
|  | Three Months Ended |
|  | March 31, |
|  | 2021 |  |  | 2020 |
Exercised contracts |  |  | 25 |  |  |  | 33 |
Realized gains (losses) on the matured, expired or settled contracts |  | $ | (1 | ) |  | $ | 4 |
Unrealized gains on the change in fair value of outstanding contracts |  | $ | 38 |  |  | $ | 47 |
Designated Derivative Financial Instruments Foreign Currency Contracts The following table summarizes the activity of our foreign currency contracts designated as net investment hedges for the three months ended March 31 (in millions, except for weighted average forward rates and number of active contracts):
|  | 2021 |  |  | 2020 |
|  | CAD |  |  | GBP |  |  | Total |  |  | CAD |  |  | GBP |  |  | Total |
Notional amounts at January 1 ($) |  |  | 377 |  |  |  | 135 |  |  |  | 512 |  |  |  | 97 |  |  |  | 387 |  |  |  | 484 |
New contracts ($) |  |  | 250 |  |  |  | 300 |  |  |  | 550 |  |  |  | - |  |  |  | 324 |  |  |  | 324 |
Matured, expired or settled contracts ($) |  |  | (63 | ) |  |  | - |  |  |  | (63 | ) |  |  | - |  |  |  | (576 | ) |  |  | (576 | )
Notional amounts at March 31 ($) |  |  | 564 |  |  |  | 435 |  |  |  | 999 |  |  |  | 97 |  |  |  | 135 |  |  |  | 232 |
Weighted average forward rate at March 31 |  |  | 1.29 |  |  |  | 1.38 |  |  |  |  |  |  |  | 1.32 |  |  |  | 1.35 |  |  |  |  |
Active contracts at March 31 |  |  | 7 |  |  |  | 4 |  |  |  |  |  |  |  | 2 |  |  |  | 1 |  |  |  |  |
Interest Rate Swaps The following table summarizes the activity of our interest rate swaps designated as cash flow hedges for the three months ended March 31 (in millions):
|  | 2021 |  |  | 2020 |  |
|  | EUR (1) |  |  | USD (1) |  |  | Total |  |  | EUR |  |  | USD |  |  | Total |  |
Notional amounts at January 1 ($) |  |  | 165 |  |  |  | 250 |  |  |  | 415 |  |  |  | - |  |  |  | - |  |  |  | - |  |
New contracts ($) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 165 |  |  |  | 750 |  |  |  | 915 |  |
Matured, expired or settled contracts ($) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (750 | ) |  |  | (750 | ) |
Notional amounts at March 31 ($) |  |  | 165 |  |  |  | 250 |  |  |  | 415 |  |  |  | 165 |  |  |  | - |  |  |  | 165 |  |
(1) | During the year ended December 31, 2020, we entered into interest rate swap contracts to effectively fix the interest rate on our euro senior notes issued in February 2020 and the U.S. dollar outstanding balance on our 2017 Term Loan. In April 2021, the 2017 Term Loan was terminated and the interest rate swap contracts associated with the outstanding balance were settled.
Designated Nonderivative Financial Instruments The following table summarizes our debt and accrued interest, designated as a hedge of our net investment in international subsidiaries as of the quarter ended (in millions):
|  | March 31, 2021 |  |  | December 31, 2020 |
British pound sterling |  | $ | 956 |  |  | $ | 842 |
The following table summarizes the unrealized gains in Foreign Currency and Derivative Gains, Net on the remeasurement of the unhedged portion of our debt and accrued interest for the three months ended March 31 (in millions):
|  | Three Months Ended |
|  | March 31, |
|  | 2021 |  |  | 2020 |
Unrealized gains on the unhedged portion |  | $ | 46 |  |  | $ | 82 |
Other Comprehensive Income (Loss) The change in Other Comprehensive Income (Loss) in the Consolidated Statements of Comprehensive Income during the periods presented was due to the translation into U.S. dollars from the consolidation of the financial statements of our consolidated subsidiaries whose functional currency is not the U.S. dollar. The change in fair value of the effective portion of our derivative financial instruments that have been designated as net investment hedges and cash flow hedges and the translation of the hedged portion of our debt, as discussed above, are also included in Other Comprehensive Income (Loss). The following table presents these changes in Other Comprehensive Income (Loss) (in thousands):
|  | Three Months Ended March 31, |
|  | 2021 |  |  | 2020 |
Derivative net investment hedges |  | $ | (5,266 | ) |  | $ | 25,359 |
Debt designated as nonderivative net investment hedges |  |  | (6,402 | ) |  |  | 32,750 |
Cumulative translation adjustment |  |  | 183,427 |  |  |  | (191,642 | )
Total foreign currency translation gains (losses), net |  | $ | 171,759 |  |  | $ | (133,533 | )
Cash flow hedges (1) (2) |  | $ | 1,371 |  |  | $ | (15,525 | )
Our share of derivatives from unconsolidated co-investment ventures |  |  | 3,450 |  |  |  | (7,923 | )
Total unrealized gains (losses) on derivative contracts, net |  | $ | 4,821 |  |  | $ | (23,448 | )
Total change in other comprehensive income (loss) |  | $ | 176,580 |  |  | $ | (156,981 | )
| (1) | We estimate an additional expense of $4.4 million will be reclassified to Interest Expense over the next 12 months from March 31, 2021, due to the amortization of previously settled derivatives designated as cash flow hedges.
| (2) | Included in the three months ended March 31, 2020 was $16.8 million in losses associated with the termination of four U.S. dollar treasury lock contracts with an aggregate notional amount of $750.0 million that fixed the interest rate on the forecasted issuance of U.S. dollar senior notes issued in February 2020.
Fair Value Measurements There have been no significant changes in our policy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020. Fair Value Measurements on a Recurring Basis At March 31, 2021 and December 31, 2020, other than the derivatives discussed previously, we had no significant financial assets or financial liabilities that were measured at fair value on a recurring basis in the Consolidated Financial Statements. All of our derivatives held at March 31, 2021 and December 31, 2020, were classified as Level 2 of the fair value hierarchy. Fair Value Measurements on Nonrecurring Basis Acquired properties and assets we expect to sell or contribute are significant nonfinancial assets that met the criteria to be measured at fair value on a nonrecurring basis. At March 31, 2021 and December 31, 2020, we estimated the fair value of our properties using Level 2 or Level 3 inputs from the fair value hierarchy. See more information on our acquired properties in Notes 2 and 3 and assets held for sale or contribution in Note 5. Fair Value of Financial Instruments At March 31, 2021 and December 31, 2020, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values. The differences in the fair value of our debt from the carrying value in the table below were the result of differences in interest rates or borrowing spreads that were available to us at March 31, 2021 and December 31, 2020, as compared with those in effect when the debt was issued or assumed, including reduced borrowing spreads due to our improved credit ratings. The fair value of the senior notes decreased during the three months ended March 31, 2021 due to the increase in bond yields in the market as compared to the weighted average interest rates on our senior notes. The senior notes and many of the issuances of secured mortgage debt contain prepayment penalties or yield maintenance provisions that could make the cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so. We evaluate this on an on-going basis and have taken the opportunity to refinance some of our debt at lower rates and longer maturities as discussed in Note 6. The following table reflects the carrying amounts and estimated fair values of our debt (in thousands):
|  | March 31, 2021 |  |  | December 31, 2020 |
|  | Carrying Value |  |  | Fair Value |  |  | Carrying Value |  |  | Fair Value |
Credit Facilities |  | $ | 53,250 |  |  | $ | 53,250 |  |  | $ | 171,794 |  |  | $ | 171,794 |
Senior notes |  |  | 14,433,868 |  |  |  | 14,598,729 |  |  |  | 14,275,870 |  |  |  | 15,452,381 |
Term loans and unsecured other |  |  | 1,670,556 |  |  |  | 1,687,135 |  |  |  | 1,764,311 |  |  |  | 1,785,706 |
Secured mortgage |  |  | 345,784 |  |  |  | 374,402 |  |  |  | 637,101 |  |  |  | 673,549 |
Total |  | $ | 16,503,458 |  |  | $ | 16,713,516 |  |  | $ | 16,849,076 |  |  | $ | 18,083,430 |

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