Fair Value Measurements

12 Months Ended

Dec. 31, 2023

The Company is required to disclose fair value information about all financial instruments, for which it is practicable to estimate fair value, whether or not recognized in the consolidated balance sheets. The Company measures and discloses the estimated fair value of financial assets and liabilities utilizing a fair value hierarchy that distinguishes between data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad levels, as follows: (i) quoted prices in active markets for identical assets or liabilities, (ii) “significant other observable inputs,” and (iii) “significant unobservable inputs.” “Significant other observable inputs” can include quoted prices for similar assets or liabilities in active markets, as well as inputs that are observable for the asset or liability, such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. “Significant unobservable inputs” are typically based on an entity’s own assumptions, since there is little, if any, related market activity. In instances in which 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 of 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. There were no transfers between the levels in the fair value hierarchy during the years ended December 31, 2023 and 2022.

Recurring Measurements

The following table sets forth the assets and liabilities that the Company measures at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2023 and 2022:


Assets/(Liabilities)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets and Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
December 31, 2023
Interest Rate Swap Asset	$	26,942	$	—	$	26,942	$	—
Mutual Funds Asset	$	7,148	$	7,148	$	—	$	—

December 31, 2022
Interest Rate Swap Asset	$	41,404	$	—	$	41,404	$	—
Mutual Funds Asset	$	6,191	$	6,191	$	—	$	—

Nonrecurring Measurement - Real Estate Impairment

For the year ended December 31, 2023, in connection with the preparation and review of the Company’s financial statements, the Company recorded a real estate impairment provision of approximately $409.5 million on seventeen properties, consisting of nine Office segment properties for $208.3 million and eight Other segment properties for $201.2 million, located in the Southwest, Northeast, Midwest, West, and Southeast regions of the United States. The impairment resulted from changes in the second quarter related to anticipated hold periods, expected selling prices, and potential vacancies that impacted the recoverability of these assets.

The following table is a summary of the quantitative fair value information for thirteen properties using the discounted cash flow approach, which the Company considered as Level 3 measurements within the fair value hierarchy:


	Range of Inputs or Input
Unobservable Inputs	Southwest	Northeast	West	Southeast
Market rent per square foot	$16.00 - $27.00	$15.00 - $30.00	$21.00	$14.00
Discount rate	8.50% - 15.00%	8.00% - 15.00%	9.00%	15.00%
Terminal capitalization rate	8.00% - 10.50%	6.50% - 9.00%	8.50%	9.00%

The following table is a summary of the quantitative fair value information for four properties using estimated selling prices based on quoted market values and comparable property sales, which the Company considered as Level 3 measurements within the fair value hierarchy:

Range of Inputs

Unobservable Inputs

Southwest

Northeast

West

Midwest

Estimated selling price (per square foot)

$235.00

$227.00

$30.00

$158.00

Anticipated hold period

One year

Nonrecurring Measurement - Goodwill Impairment

As a result of the qualitative and quantitative assessment as of October 1, 2023, the Company concluded that it was more likely than not that the fair value of the Other reporting unit was less than the carrying amount. The impairment resulted from a decline in fair value of the underlying properties within the Other reporting unit, particularly as we continue to execute on our strategic disposition plan under current market conditions. Thus, the Company recorded a $16.0 million impairment of goodwill allocated to its Other reporting unit.

The following table is a summary of the quantitative fair value information for fifteen properties in the Other reporting unit as of the valuation date using the discounted cash flow approach, which the Company considered as Level 3 measurements within the fair value hierarchy:


						Range of Inputs
Unobservable Inputs						Reporting Unit: Other
Market rent per square foot						$5.00 - $27.50
Discount rate						7.25% - 15.00%
Terminal capitalization rate						6.25% - 9.50%

The following table is a summary of the quantitative fair value information for three properties in the Other reporting unit as of the valuation date using estimated selling prices based on quoted market values and comparable property sales, which the Company considered as Level 3 measurements within the fair value hierarchy:


						Range of Inputs
Unobservable Inputs						Reporting Unit: Other
Estimated selling price (per square foot)						$38.92 - $74.07

The Company also estimated the fair value of the mortgage loans within the goodwill impairment analysis as described in the Financial Instruments Disclosed at Fair Value section below, which values approximated the fair values used in the goodwill impairment analysis. As part of the nonrecurring fair value measurement of mortgage loans within the goodwill impairment analysis, the Company determined that current borrowing rates available to the Company for debt instruments with similar terms and maturities ranged from 3.75% to 8.20%. The Company considered these inputs as Level 2 measurements within the fair value hierarchy. For the remaining assets and liabilities included within the goodwill impairment calculation, the Company determined that amounts within the consolidated financial statements approximated fair value.

Nonrecurring Measurement - Investment in Unconsolidated Entity Impairment

During the year ended December 31, 2023, the Company recorded an OTTI of approximately $129.3 million for its investment in the Office Joint Venture, which represents a complete write-off of the Company’s remaining investment balance. The impairment resulted from a decline in the fair value of the investment primarily due to increased future loan extension risk impacting the Company’s expectations on the recoverability of the investment. In determining the fair value of the investment in the Office Joint Venture, the Company considered Level 3 inputs based on leasing risks relating to the underlying properties.

Financial Instruments at Fair Value

Financial instruments as of December 31, 2023 and December 31, 2022 consisted of cash and cash equivalents, restricted cash, accounts receivable, accrued expenses and other liabilities, and mortgage payable and other borrowings, as defined in Note 5, Debt. With the exception of the seven mortgage loans in the table below, the amounts of the financial instruments presented in the consolidated financial statements substantially approximate their fair value as of December 31, 2023 and 2022.

The fair value of the seven mortgage loans in the table below is estimated by discounting each loan’s principal balance over the remaining term of the mortgage using current borrowing rates available to the Company for debt instruments with similar terms and maturities. The Company determined that the mortgage debt valuation in its entirety is classified in Level 2 of the fair value hierarchy, as the fair value is based on current pricing for debt with similar terms as the in-place debt.


	December 31,
	2023				2022
	Fair Value		Carrying Value (1)		Fair Value		Carrying Value (1)
BOA II Loan	$	220,730	$	250,000	$	226,361	$	250,000
AIG Loan II	115,340		119,953		111,872		122,328
AIG Loan	92,444		92,444		89,526		99,794
Samsonite Mortgage Loan	—		—		17,998		17,998
HealthSpring Mortgage Loan	—		—		19,107		19,107
Pepsi Bottling Ventures Mortgage Loan	17,439		17,439		17,014		17,836
Highway 94 Mortgage Loan	11,709		11,709		11,941		12,740
Total	$	457,662	$	491,545	$	493,819	$	539,803

(1)The carrying values do not include the debt premium/(discount) or deferred financing costs as of December 31, 2023 and 2022. See Note 5, Debt, for details.

- 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