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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2022
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Note 5 – Fair Value Measurements The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
Level 1 – | Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date.
Level 2 – | Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability.
Level 3 – | Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment.
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. The estimated fair value of the 10% senior secured notes due 2029 (the “Secured Notes”) and mortgage and other indebtedness was $1,854,171 and $2,059,094 at March 31, 2022 and December 31, 2021, respectively. The fair value of mortgage and other indebtedness was calculated using Level 2 inputs by discounting future cash flows for mortgage and other indebtedness using estimated market rates at which similar loans would be made currently. The Company elected the fair value option in conjunction with the issuance of the Secured Notes because it believes that the fair value option provides the most accurate depiction of the current value of the Secured Notes. The following table sets forth information regarding the Secured Notes for the three months ended March 31, 2022:
Debt Instrument |  | Carrying amount as of March 31,2022 |  |  | Change in fair value (1) |  |  | Fair value as of March 31, 2022 (2) |
Secured Notes |  | $ | 395,000 |  |  | $ | 593 |  |  | $ | 395,593 |
(1) | For the three months ended March 31, 2022, the change in fair value is included within “Interest Expense” in the Company’s condensed consolidated income statement.
(2) | The fair value was calculated using Level 1 inputs.
The following table sets forth information regarding the Secured Notes for the year ended December 31, 2021:
Debt Instrument |  | Carrying amount as of December 31, 2021 |  |  | Change in fair value (1) |  |  | Fair value as of December 31, 2021 (2) |
Secured Notes |  | $ | 395,000 |  |  | $ | 395 |  |  | $ | 395,395 |
(1) | For the two months ended December 31, 2021, the change in fair value is included within “Interest Expense” in the Company’s condensed consolidated income statement.
(2) | The fair value was calculated using Level 1 inputs.
During the three months ended March 31, 2022, the Company has continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. The Company designated the U.S. Treasury securities as available-for-sale (“AFS”). The following table sets forth information regarding the Company’s AFS securities that were measured at fair value for the three months ended March 31, 2022:
AFS Security |  | Amortized Cost (1) |  |  | Allowance for credit losses (2) |  |  | Total unrealized gain |  |  | Fair value as of March 31, 2022 |
U.S. Treasury securities |  | $ | 149,936 |  |  | $ | — |  |  | $ | 39 |  |  | $ | 149,975 |
(1) | The U.S. Treasury securities have maturities through May 2022. Subsequent to March 31, 2022, the Company used funds from its matured U.S. Treasury securities to purchase additional U.S. Treasury securities. See Note 14 for more information.
(2) | U.S Treasury securities have a long history with no credit losses. Additionally, the Company notes that U.S Treasury securities are explicitly fully guaranteed by a sovereign entity that can print its own currency and that the sovereign entity’s currency is routinely held by central banks and other major financial institutions, is used in international commerce, and commonly viewed as a reserve currency, all of which qualitatively indicate that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. Therefore, the Company did not record expected credit losses for its U.S Treasury securities for the three months ended March 31, 2022.
The following table sets forth information regarding the Company’s AFS securities that were measured at fair value for the year ended December 31, 2021:
AFS Security |  | Amortized Cost |  |  | Allowance for credit losses (1) |  |  | Total unrealized gain |  |  | Fair value as of December 31, 2021 |
U.S. Treasury securities |  | $ | 149,999 |  |  | $ | — |  |  | $ | (3 | ) |  | $ | 149,996 |
(1) | U.S Treasury securities have a long history with no credit losses. Additionally, the Company notes that U.S Treasury securities are explicitly fully guaranteed by a sovereign entity that can print its own currency and that the sovereign entity’s currency is routinely held by central banks and other major financial institutions, is used in international commerce, and commonly viewed as a reserve currency, all of which qualitatively indicate that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. Therefore, the Company did not record expected credit losses for its U.S Treasury securities for the year ended December 31, 2021.
Fair Value Measurements on a Nonrecurring Basis The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company’s evaluation of the recoverability of long-lived assets involves the comparison of undiscounted future cash flows expected to be generated by each property over the Company’s expected remaining holding period to the respective carrying amount. The determination of whether the carrying value is recoverable also requires management to make estimates related to probability weighted scenarios impacting undiscounted cash flow models. The Company considers both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income, occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. The quantitative and qualitative factors impact the selection of the terminal capitalization rate which is used in both an undiscounted and discounted cash flow model and the discount rate used in a discounted cash flow model. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Company classifies such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. See below for a description of the estimates and assumptions the Company used in its impairment analysis. See Note 3 in the annual report on Form 10-K for the year ended December 31, 2021 for information regarding the fair value adjustments associated with fresh start accounting. Long-lived Assets Measured at Fair Value in 2022 During the three months ended March 31, 2022, the Successor Company adjusted the negative equity in Greenbrier Mall to zero upon deconsolidation, which represents the estimated fair value of the Successor Company’s investment in that property. See Note 7 for additional information. Long-lived Assets Measured at Fair Value in 2021 The following table sets forth information regarding the Predecessor Company's assets that were measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2021:
|  |  |  |  |  | Fair Value Measurements at Reporting Date Using |  |  |  |  |
|  | Total |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total Loss on Impairment |
2021: Predecessor |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-lived assets |  | $ | 38,500 |  |  | $ | — |  |  | $ | — |  |  | $ | 38,500 |  |  | $ | 57,182 |
During the three months ended March 31, 2021, the Predecessor Company recognized impairments of real estate of $57,182 related to three malls.
Impairment Date |  | Property |  | Location |  | Segment Classification |  | Loss on Impairment |  |  | Fair Value |  |
March |  | Eastland Mall (1) |  | Bloomington, IL |  | Malls |  | $ | 13,243 |  |  | $ | 10,700 |  |
March |  | Old Hickory Mall (2) |  | Jackson, TN |  | Malls |  |  | 20,149 |  |  |  | 12,400 |  |
March |  | Stroud Mall (3) |  | Stroudsburg, PA |  | Malls |  |  | 23,790 |  |  |  | 15,400 |  |
|  |  |  |  |  |  |  | $ | 57,182 |  |  | $ | 38,500 |  |
(1) | In accordance with the Company's quarterly impairment process, the Predecessor Company wrote down the book value of the mall to its estimated fair value of $10,700. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Eastland Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 14.0% and a discount rate of 15.0%.
(2) | In accordance with the Company's quarterly impairment process, the Predecessor Company wrote down the book value of the mall to its estimated fair value of $12,400. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Old Hickory Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 13.0% and a discount rate of 14.0%.
(3) | In accordance with the Company's quarterly impairment process, the Predecessor Company wrote down the book value of the mall to its estimated fair value of $15,400. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Stroud Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 11.75% and a discount rate of 12.5%.
During the three months ended March 31, 2021, the Predecessor Company adjusted the combined negative equity in Asheville Mall and Park Plaza to zero upon deconsolidation, which represents the estimated fair values of the Predecessor Company’s investments in these properties.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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