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Fair Value Measurements
 12 Months Ended
Dec. 31, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements

NOTE 15. 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.

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 mortgage and other indebtedness was $1,806,486 and $1,833,992 at December 31, 2023 and 2022, respectively. The fair value 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.

Fair Value Measurements on a Recurring Basis

The following table sets forth information regarding the Successor Company's interest rate swap that was designated as a cash flow hedge of interest risk for the year ended December 31, 2023:

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

Asset

 

Fair Value at December 31, 2023

 

 

Quoted Prices in
Active Markets
 for Identical
Assets (Level 1)

 

 

Significant
Other
Observable
Inputs (Level 2)

 

 

Significant
Unobservable
Inputs (Level 3)

 

Interest rate swap

 

$

338

 

 

$

—

 

 

$

338

 

 

$

—

 

 

During the year ended December 31, 2023, the Successor Company has continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. The Successor Company designated the U.S. Treasury securities as available-for-sale (“AFS”). The below table sets forth information regarding the Successor Company’s AFS securities that were measured at fair value. Subsequent to December 31, 2023, the Successor Company redeemed U.S. Treasury securities. See Note 20 for additional information.

AFS Security (1)

 

Amortized
Cost

 

 

Allowance
for credit
losses (2)

 

 

Total unrealized gain

 

 

Fair value as of December 31, 2023 (3)

 

U.S. Treasury securities

 

$

261,869

 

 

$

—

 

 

$

273

 

 

$

262,142

 
(1)
The U.S. Treasury securities have maturities through July 2024.
(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 Successor Company did not record expected credit losses for its U.S Treasury securities for the year ended December 31, 2023.
(3)
The fair value was calculated using Level 1 inputs.

The following table sets forth information regarding the Successor Company’s AFS securities that were measured at fair value for the year ended December 31, 2022:

AFS Security

 

Amortized
Cost

 

 

Allowance
for credit
losses (1)

 

 

Total unrealized loss

 

 

Fair value as of December 31, 2022 (2)

 

U.S. Treasury securities

 

$

293,476

 

 

$

—

 

 

$

(1,054

)

 

$

292,422

 
(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 Successor Company did not record expected credit losses for its U.S Treasury securities for the year ended December 31, 2022.
(2)
The fair value was calculated using Level 1 inputs.

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 2 for additional information describing the Company's impairment review process.

See Note 19 for information regarding the fair value adjustments associated with Fresh Start Accounting.

Long-lived Assets Measured at Fair Value in 2023

During the year ended December 31, 2023, the Successor Company adjusted the negative equity in WestGate Mall and Alamance Crossing East to zero upon deconsolidation, which represents the estimated fair value of the Successor Company's investment in these properties. See Note 7 for more information.

Long-lived Assets Measured at Fair Value in 2022

During the year ended December 31, 2022, the Successor Company adjusted the negative equity in Greenbrier Mall to zero upon deconsolidation, which represented the estimated fair value of the Successor Company’s investment in that property. See Note 7 for more information.

During the year ended December 31, 2022, the Successor Company sold an outparcel at the Pavilion at Port Orange. Gross sales proceeds amounted to $1,660 and the transaction resulted in a loss on sale of $252.

Long-lived Assets Measured at Fair Value in 2021

During the period from January 1, 2021 through October 31, 2021, the Predecessor Company recognized impairments of real estate of $146,781 related to five malls, a redeveloped anchor parcel, an outlet center, an open-air center, an outparcel and vacant land. The properties were classified for segment reporting purposes as listed below. See Note 11 for segment information. The below 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 period from January 1, 2021 through October 31, 2021. No impairment charges were incurred during the Successor period from November 1, 2021 through December 31, 2021.

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

 

July

 

The Landing at Arbor Place - Outparcel (4)

 

Douglasville, GA

 

All Other

 

 

1,682

 

 

 

590

 

September

 

Laurel Park Place (5)

 

Livonia, MI

 

Malls

 

 

14,267

 

 

 

9,800

 

September

 

Parkdale Mall and Crossing (6)

 

Beaumont, TX

 

Malls/All Other

 

 

47,211

 

 

 

50,500

 

October

 

The Outlet Shoppes at Gettysburg (7)

 

Gettysburg, PA

 

Malls

 

 

21,470

 

 

 

16,660

 

October

 

Vacant land (8)

 

El Centro, CA

 

All Other

 

 

4,969

 

 

 

4,240

 

 

 

 

 

 

 

 

 

$

146,781

 

 

$

120,290

 

 

(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%.
(4)
In July 2021, the Predecessor Company sold an outparcel at The Landing at Arbor Place. Sales proceeds amounted to $590, which resulted in a loss on sale.
(5)
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 $9,800. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Laurel Park Place 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 11.5% and a discount rate of 13.0%.
(6)
In accordance with the Company’s quarterly impairment process, the Predecessor Company wrote down the book value of the mall, a redeveloped anchor parcel and an open-air center adjacent to the mall to their aggregate estimated fair value of $50,500. The mall had experienced a decline in cash flows due to store closures and rent reductions. These factors resulted in a reduction of the expected hold period for the mall and open-air center (excluding the redeveloped anchor parcel) based on Management’s assessment that there was an increased likelihood that the loan secured by the mall and open-air center may not be successfully restructured or refinanced. Management determined the fair value of Parkdale Mall, Parkdale Crossing and Parkdale Anchor using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of ten years, with a sale at the end of the holding period, a weighted-average capitalization rate of 12.3% and a weighted-average discount rate of 14.2%.
(7)
In accordance with the Company’s quarterly impairment process, the Predecessor Company wrote down the book value of the outlet center to its estimated fair value of $16,660. The outlet center had experienced a decline in cash flow due to store closures and rent reductions. Management determined the fair value of The Shoppes of Gettysburg 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 11.0% and a discount rate of 12.0%.
(8)
In accordance with the Company’s quarterly impairment process, the Predecessor Company wrote down the book value of land to its estimated fair value of $4,240. The Company evaluated comparable land parcel transactions and determined that $4,240 was the land’s estimated fair value.

During the period from November 1, 2021 through December 31, 2021, the Successor Company adjusted the negative equity in EastGate Mall to zero upon deconsolidation, which represented the estimated fair value of the Company’s investment in that property. During the period from January 1, 2021 through October 31, 2021, the Predecessor Company adjusted the negative equity in each of Asheville Mall and Park Plaza to zero upon deconsolidation, which represented the estimated fair values of the Company’s investments in these properties. See Note 7 for additional information.