XML 105 R17.htm IDEA: XBRL DOCUMENT
v3.19.3

Financial Instruments and Fair Value Measurements | 9 Months Ended
--- | ---
Sep. 30, 2019
Fair Value Disclosures [Abstract] |
Financial Instruments and Fair Value Measurements | Financial Instruments and Fair Value Measurements Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure for assets and liabilities measured at fair value requires allocation to a three-level valuation hierarchy. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. We believe that the carrying values reflected in our consolidated balance sheets reasonably approximate the fair values for cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, line of credit payable, term loans and all other liabilities, due to their short-term nature or interest rates and terms that are consistent with market, except for our mortgages payable assumed in connection with acquisitions and our senior notes and bonds payable, which are disclosed as follows (dollars in millions):
September 30, 2019 | Carrying value |  |  | Estimated fair value |
Mortgages payable assumed in connection with acquisitions (1) | $ | 278.9 |  |  | $ | 289.5 |
Notes and bonds payable (2) | 6,287.1 |  |  | 6,839.7 |
December 31, 2018 | Carrying value |  |  | Estimated fair value |
Mortgages payable assumed in connection with acquisitions (1) | $ | 298.4 |  |  | $ | 305.7 |
Notes and bonds payable (2) | 5,400.0 |  |  | 5,430.0 |
(1) | Excludes non-cash net premiums recorded on the mortgages payable. The unamortized balance of these net premiums was $3.3 million at September 30, 2019, and $4.4 million at December 31, 2018. Also excludes deferred financing costs of $143,000 at September 30, 2019 and $183,000 at December 31, 2018.
(2) | Excludes non-cash original issuance premiums and discounts recorded on notes payable. The unamortized balance of the net original issuance premiums was $6.6 million at September 30, 2019, and $10.5 million at December 31, 2018. Also excludes deferred financing costs of $37.3 million at September 30, 2019 and $33.7 million at December 31, 2018.
The estimated fair values of our mortgages payable assumed in connection with acquisitions and private senior notes payable have been calculated by discounting the future cash flows using an interest rate based upon the relevant forward interest rate curve, plus an applicable credit-adjusted spread. Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our mortgages payable is categorized as level three on the three-level valuation hierarchy. The estimated fair values of our publicly-traded senior notes and bonds payable are based upon indicative market prices and recent trading activity of our senior notes and bonds payable. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level two on the three-level valuation hierarchy. We record interest rate swaps on the consolidated balance sheet at fair value. Prior to our adoption of hedge accounting in October 2018, the change in fair value of interest rate swaps was recognized through interest expense. Following adoption, changes to fair value are recorded to accumulated other comprehensive income, or AOCI. In May 2019, we entered into four cross-currency swaps to exchange £130 million for $166 million maturing in May 2034, in order to hedge the foreign currency risk associated with our Sterling-denominated intercompany loan receivable from our consolidated foreign subsidiaries. These cross-currency swaps were designated as cash flow hedges on their trade date. Gains and losses, representing hedge components excluded from the assessment of effectiveness, are recognized in earnings over the life of the hedges on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election. The earnings recognition of excluded components is presented in foreign currency and derivative gains, net on our consolidated statements of income and comprehensive income, which is the same caption item as the hedged transactions. The following table summarizes the terms and fair values of our derivative financial instruments at September 30, 2019 and December 31, 2018 (dollars in millions):
Derivative Type | Hedge Designation | Notional Amount | Strike | Effective Date | Maturity Date | Fair Value - asset (liability)
|  | September 30, | December 31, |  |  |  | September 30, | December 31,
|  | 2019 | 2018 |  |  |  | 2019 | 2018
Interest rate swap | Cash flow | $ | 7.1 |  | $ | 7.2 |  | 6.03% | 09/25/2012 | 09/03/2021 | $ | (0.3 | ) | $ | (0.2 | )
Interest rate swap | Cash flow | 250.0 |  | 250.0 |  | 1.72% | 06/30/2015 | 06/30/2020 | — |  | 3.0 |
Interest rate swap | Cash flow | 250.0 |  | 250.0 |  | 3.04% | 10/24/2018 | 03/24/2024 | (17.4 | ) | (6.8 | )
Cross-currency swap (1) | Cash flow | 41.6 |  | — |  | (2) | 05/20/2019 | 05/22/2034 | 2.9 |  | — |
Cross-currency swap (1) | Cash flow | 41.6 |  | — |  | (3) | 05/20/2019 | 05/22/2034 | 2.9 |  | — |
Cross-currency swap (1) | Cash flow | 41.6 |  | — |  | (4) | 05/20/2019 | 05/22/2034 | 2.4 |  | — |
Cross-currency swap (1) | Cash flow | 41.6 |  | — |  | (5) | 05/20/2019 | 05/22/2034 | 2.2 |  | — |
|  | $ | 673.5 |  | $ | 507.2 |  |  |  |  | $ | (7.3 | ) | $ | (4.0 | )
(1) | Represents British Pound Sterling, or GBP, United States Dollar, or USD, cross-currency swap.
(2) | GBP fixed rates initially at 4.82% and escalating to 10.96%, and USD fixed rate at 9.800%.
(3) | GBP fixed rates initially at 4.82% and escalating to 10.96%, and USD fixed rate at 9.803%.
(4) | GBP fixed rates initially at 4.82% and escalating to 10.96%, and USD fixed rate at 9.745%.
(5) | GBP fixed rates initially at 4.82% and escalating to 10.96%, and USD fixed rate at 9.755%.
We measure our derivatives at fair value and include the balances within other assets and accounts payable and accrued expenses on our consolidated balance sheets. We have agreements with each of our derivative counterparties containing provisions under which we could be declared in default on our derivative obligations if repayment of our indebtedness is accelerated by the lender due to our default. We utilize interest rate swap agreements to manage interest rate risk and cross-currency swaps to manage foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, spot and forward rates, as well as option volatility. To comply with the provisions of ASC 820, Fair Value Measurement, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although we have determined that the majority of the inputs used to value our derivatives fall within level two on the three-level valuation hierarchy, the credit valuation adjustments associated with our derivatives utilize level three inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by ourselves and our counterparties. However, at September 30, 2019 and December 31, 2018, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety are classified as level two on the three-level valuation hierarchy. Unrealized gains and losses in AOCI are reclassified to interest expense in the case of interest rate swaps and to foreign currency gains and losses, net in the case of cross-currency swaps, when the related hedged items are recognized. During the three and nine months ended September 30, 2019, we reclassified $890,000 and $2.0 million, respectively, from AOCI as an increase to interest expense for our interest rate swaps and $5.7 million and $7.1 million for the three and nine months ended September 30, 2019 for cross-currency swaps into foreign exchange gains. During the first nine months of 2018, there were no outstanding derivatives designated as hedges and accounted for through AOCI. As a result, there were no amounts to reclassify from AOCI during the first nine months of 2018. We expect to reclassify $5.7 million from AOCI as an increase to interest expense relating to interest rate swaps and $1.9 million from AOCI to foreign currency gain relating to cross-currency swaps within the next twelve months.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration