Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Recurring Measurements

The following financial instruments are remeasured at fair value on a recurring basis:



	Fair Value Measurements as of
	September 30, 2019							December 31, 2018
Cash Flow Hedges:	Level 1		Level 2			Level 3		Level 1		Level 2		Level 3
Derivative interest rate assets (a)	$	—	$	161		$	—	$	—	$	1,637	$	—
Derivative interest rate liabilities (b)	—		(1,629		)	—		—		—		—


(a)	Recognized as a part of deferred costs and other assets, net, on the condensed consolidated balance sheets.


(b)	Recognized as a part of other liabilities on the condensed consolidated balance sheets.

Level 1

At September 30, 2019 and December 31, 2018, the Company had no Level 1 recurring fair value measurements.

Level 2

To calculate the fair value of the derivative interest rate instruments, the Company primarily uses quoted prices for similar contracts and inputs based on data that are observed in the forward yield curve that is widely observable in the marketplace. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements that utilize Level 3 inputs, such as estimates of current credit spreads.

As of September 30, 2019 and December 31, 2018, the Company determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company's derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.

Level 3

At September 30, 2019 and December 31, 2018, the Company had no Level 3 recurring fair value measurements.

Nonrecurring Measurements

During the three and nine months ended September 30, 2019, the Company identified one retail property that had a reduction in its expected holding period and recorded a provision for asset impairment of $2,359 on the condensed consolidated statement of operations and comprehensive income as a result of the fair value being lower than the property's carrying value. The Company's fair value was based on an executed sales contract.

During the three months ended September 30, 2018, the Company identified two retail properties that had reductions in the expected holding periods and recorded an aggregate provision for asset impairment of $2,713 on the condensed consolidated statement of operations and comprehensive income as a result of the fair values being lower than the properties' carrying value. The Company's fair values were based on executed sales contracts.

During the nine months ended September 30, 2018, the Company identified three retail properties that had reductions in the expected holding periods and recorded an aggregate provision for asset impairment of $3,510 on the condensed consolidated statement of operations and comprehensive income as a result of the fair values being lower than the properties' carrying value. The Company's fair values were based on executed sales contracts.

The following table summarizes activity for the Company's assets measured at fair value on a nonrecurring basis and the related impairment charges for the three and nine months ended September 30, 2019 and 2018:



	For the three months ended September 30,								For the nine months ended September 30,
	2019				2018				2019				2018
	Level 3		Impairment Losses		Level 3		Impairment Losses		Level 3		Impairment Losses		Level 3		Impairment Losses
Investment properties	$	42,250	$	2,359	$	33,075	$	2,713	$	42,250	$	2,359	$	64,075	$	3,510

Financial Instruments Not Measured at Fair Value

The table below represents the estimated fair value of financial instruments presented at carrying values in the Company's condensed consolidated financial statements as of September 30, 2019 and December 31, 2018:



	September 30, 2019				December 31, 2018
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Mortgages payable	$	176,502	$	180,671	$	213,925	$	212,572
Term loans	$	400,000	$	400,004	$	352,000	$	352,006

The Company estimated the fair value of its mortgages payable using a weighted-average effective market interest rate of 3.39% and 4.38% as of September 30, 2019 and December 31, 2018, respectively. The fair value estimate of the term loans approximate the carrying value due to limited market volatility in pricing. The assumptions reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to that of the Company's. As a result, the Company used a weighted-average interest rate of 2.57% and 3.63% as of September 30, 2019 and December 31, 2018, respectively, to estimate the fair value of its term loans. The Company has determined that its debt instrument valuations are classified in Level 2 of the fair value hierarchy.

- 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