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Fair Value Disclosures | 12 Months Ended
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Dec. 31, 2018
Fair Value Disclosures [Abstract] |
Fair Value Disclosures | Fair Value Disclosures The Company has certain financial instruments that are required to be measured under the FASB’s Fair Value Measurement guidance. The Company currently does not have any non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis. As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurement guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. 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’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. Derivative Financial Instruments The Company uses interest rate swaps, foreign currency forwards and cross currency swaps to manage its interest rate and 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, foreign exchange rates, and implied volatilities. The fair value of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. In conjunction with the FASB's fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives also use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. As of December 31, 2018, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives and therefore, has classified its derivatives as Level 2 within the fair value reporting hierarchy. The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017, aggregated by the level in the fair value hierarchy within which those measurements are classified and by derivative type.
Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2018 and 2017 (Dollars in thousands)
Description | Quoted Prices in Active Markets for Identical Assets (Level I) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Balance at end of period
2018: |  |  |  |  |  |  |
Cross Currency Swaps* | $ | — |  |  | $ | 6,278 |  |  | $ | — |  |  | $ | 6,278 |
Interest Rate Swap Agreements* | $ | — |  |  | $ | 4,344 |  |  | $ | — |  |  | $ | 4,344 |
2017: |  |  |  |  |  |  |
Cross Currency Swaps* | $ | — |  |  | $ | 1,041 |  |  | $ | — |  |  | $ | 1,041 |
Cross Currency Swaps** | $ | — |  |  | $ | (134 | ) |  | $ | — |  |  | $ | (134 | )
Currency Forward Agreements* | $ | — |  |  | $ | 22,235 |  |  | $ | — |  |  | $ | 22,235 |
Interest Rate Swap Agreements* | $ | — |  |  | $ | 2,496 |  |  | $ | — |  |  | $ | 2,496 |
*Included in "Other assets" in the accompanying consolidated balance sheet. **Included in "Accounts payable and accrued liabilities" in the accompanying consolidated balance sheet. Non-recurring fair value measurements The table below presents the Company's assets measured at fair value on a non-recurring basis during the year ended December 31, 2018 aggregated by the level in the fair value hierarchy within which those measurements fall. Assets Measured at Fair Value on a Non-Recurring Basis During the Year Ended December 31, 2018 and 2017 (Dollars in thousands)
Description | Quoted Prices in Active Markets for Identical Assets (Level I) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Balance at end of period
2018: |  |  |  |  |  |  |
Land held for development | $ | — |  |  | $ | — |  |  | $ | 9,805 |  |  | $ | 9,805 |
2017: |  |  |  |  |  |  |
Investment in direct financing leases, net | $ | — |  |  | $ | — |  |  | $ | 35,807 |  |  | $ | 35,807 |
As discussed further in Note 4, during the year ended December 31, 2018, the Company recorded impairment charges totaling $16.5 million related to land held for development and property under development. Management estimated the fair value of these investments taking into account various factors including the independent appraisals, the shortened hold period and current market conditions. The Company determined, based on the inputs, that its valuation of land held for development and property under development was classified within Level 3 of the fair value hierarchy as many of the assumptions are not observable. As discussed further in Note 7, during the year ended December 31, 2017, the Company recorded impairment charges totaling $10.2 million related to its investment in direct financing leases, net. Management estimated the fair value of this investments taking into account various factors including the independent appraisals, input from an outside broker and current market conditions. The Company determined, based on the inputs, that its valuation of the investment was classified within Level 3 of the fair value hierarchy as many of the assumptions are not observable. During 2017, the Company entered into revised lease terms on these properties and as a result, these properties were classified as operating leases and moved to rental properties. Fair Value of Financial Instruments The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instruments at December 31, 2018 and 2017: Mortgage notes receivable and related accrued interest receivable: The fair value of the Company’s mortgage notes and related accrued interest receivable is estimated by discounting the future cash flows of each instrument using current market rates. At December 31, 2018, the Company had a carrying value of $517.5 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 8.67%. The fixed rate mortgage notes bear interest at rates of 7.00% to 11.43%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.50% to 10.00%, management estimates the fair value of the fixed rate mortgage notes receivable to be $544.6 million with an estimated weighted average market rate of 8.68% at December 31, 2018. At December 31, 2017, the Company had a carrying value of $970.7 million in fixed rate mortgage notes receivable outstanding, including related accrued interest, with a weighted average interest rate of approximately 8.42%. The fixed rate mortgage notes bear interest at rates of 7.00% to 11.31%. Discounting the future cash flows for fixed rate mortgage notes receivable using rates of 7.00% to 11.50%, management estimates the fair value of the fixed rate mortgage notes receivable to be $992.6 million with an estimated weighted average market rate of 8.79% at December 31, 2017. Investment in direct financing leases, net: At December 31, 2018, the Company had investments in direct financing leases with a carrying value of $20.6 million, and with a weighted average effective interest rate of 12.04%. At December 31, 2018, the investment in direct financing leases bears interest at effective rates of 11.93% to 12.38%. The carrying value of the $20.6 million investment in direct financing leases approximated the fair value at December 31, 2018. At December 31, 2017, the Company had investments in direct financing leases with a carrying value of $57.9 million, and a weighted average effective interest rate of 11.98%. At December 31, 2017, the investment in direct financing leases bears interest at effective interest rates of 11.90% to 12.38%. The carrying value of the investment in direct financing leases approximated the fair value at December 31, 2017. Derivative instruments: Derivative instruments are carried at their fair value. Debt instruments: The fair value of the Company's debt as of December 31, 2018 and 2017 is estimated by discounting the future cash flows of each instrument using current market rates. At December 31, 2018, the Company had a carrying value of $455.0 million in variable rate debt outstanding with an average weighted interest rate of approximately 2.84%. The carrying value of the variable rate debt outstanding approximates the fair value at December 31, 2018. At December 31, 2017, the Company had a carrying value of $635.0 million in variable rate debt outstanding with an average weighted interest rate of approximately 2.58%. The carrying value of the variable rate debt outstanding approximates the fair value at December 31, 2017. As described in Note 11, at December 31, 2018 and 2017, $350.0 million of variable rate debt outstanding under the Company's unsecured term loan facility had been effectively converted to a fixed rate through February 7, 2022 by interest rate swap agreements. At December 31, 2018, the Company had a carrying value of $2.57 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 4.86%. Discounting the future cash flows for fixed rate debt using December 31, 2018 market rates of 3.48% to 4.99%, management estimates the fair value of the fixed rate debt to be approximately $2.57 billion with an estimated weighted average market rate of 4.69% at December 31, 2018. At December 31, 2017, the Company had a carrying value of $2.43 billion in fixed rate long-term debt outstanding with an average weighted interest rate of approximately 5.15%. Discounting the future cash flows for fixed rate debt using December 31, 2017 market rates of 2.49% to 4.56%, management estimates the fair value of the fixed rate debt to be approximately $2.53 billion with an estimated weighted average market rate of 4.04% at December 31, 2017.

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- 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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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