XML 34 R22.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Fair Value Measurements | 9 Months Ended
--- | ---
Sep. 30, 2017
Fair Value Measurements |
Fair Value Measurements | Note 14 — Fair Value Measurements The Company measures the fair value of financial instruments based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. In accordance with the fair value hierarchy, Level 1 assets/liabilities are valued based on quoted prices for identical instruments in active markets, Level 2 assets/liabilities are valued based on quoted prices in active markets for similar instruments, on quoted prices in less active or inactive markets, or on other “observable” market inputs and Level 3 assets/liabilities are valued based significantly on “unobservable” market inputs. The carrying amounts of cash and cash equivalents, restricted cash, escrow, deposits and other assets and receivables (excluding interest rate swaps), dividends payable, and accrued expenses and other liabilities (excluding interest rate swaps), are not measured at fair value on a recurring basis, but are considered to be recorded at amounts that approximate fair value. At September 30, 2017, the $414,746,000 estimated fair value of the Company’s mortgages payable is greater than their $401,053,000 carrying value (before unamortized deferred financing costs) by approximately $13,693,000 assuming a blended market interest rate of 3.69% based on the 8.9 year weighted average remaining term to maturity of the mortgages. At December 31, 2016, the $413,916,000 estimated fair value of the Company’s mortgages payable is greater than their $399,192,000 carrying value (before unamortized deferred financing costs) by approximately $14,724,000 assuming a blended market interest rate of 3.74% based on the 9.3 year weighted average remaining term to maturity of the mortgages. At September 30, 2017 and December 31, 2016, the carrying amount of the Company’s line of credit (before unamortized deferred financing costs) of $6,400,000 and $10,000,000, respectively, approximates its fair value. The fair value of the Company’s mortgages payable and line of credit are estimated using unobservable inputs such as available market information and discounted cash flow analysis based on borrowing rates the Company believes it could obtain with similar terms and maturities. These fair value measurements fall within Level 3 of the fair value hierarchy. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Fair Value on a Recurring Basis The fair value of the Company’s derivative financial instruments, using Level 2 inputs, was determined to be the following (amounts in thousands) :
|  | As of |  | Carrying and Fair Value |
Financial assets: |  |  |  |  |
Interest rate swaps |  | September 30, 2017 |  | $ | 1,040 |
|  | December 31, 2016 |  | 1,257 |
Financial liabilities: |  |  |  |  |
Interest rate swaps |  | September 30, 2017 |  | $ | 2,310 |
|  | December 31, 2016 |  | 2,695 |
The Company does not own any financial instruments that are measured on a recurring basis and that are classified as Level 1 or 3. The Company’s objective in using interest rate swaps is to add stability to interest expense. The Company does not use derivatives for trading or speculative purposes. Fair values are approximated using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. Although the Company has determined 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 it use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparty. As of September 30, 2017, the Company has assessed and determined the impact of the credit valuation adjustments on the overall valuation of its derivative positions is not significant. As a result, the Company determined its derivative valuation is classified in Level 2 of the fair value hierarchy. As of September 30, 2017, the Company had entered into 29 interest rate derivatives, all of which were interest rate swaps, related to 29 outstanding mortgage loans with an aggregate $135,251,000 notional amount and mature between 2018 and 2028 (weighted average remaining term to maturity of 7.3 years). Such interest rate swaps, all of which were designated as cash flow hedges, converted LIBOR based variable rate mortgages to fixed annual rate mortgages (with interest rates ranging from 3.02% to 5.38% and a weighted average interest rate of 4.12% at September 30, 2017). The fair value of the Company’s derivatives in asset and liability positions are reflected as other assets or other liabilities on the consolidated balance sheets. During the nine months ended September 30, 2017, the Company discontinued hedge accounting on one of its interest rate swaps (see discussion following the table below). Three of the Company’s unconsolidated joint ventures, in which wholly-owned subsidiaries of the Company are 50% partners, had two interest rate derivatives outstanding at September 30, 2017 with an aggregate $10,556,000 notional amount. These interest rate swaps, which were designated as cash flow hedges, have interest rates of 3.49% and 5.81% and mature in 2022 and 2018, respectively. The following table presents the effect of the Company’s derivative financial instruments on the consolidated statements of income for the periods presented (amounts in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |
|  | 2017 |  | 2016 |  | 2017 |  | 2016 |
One Liberty Properties, Inc. and Consolidated subsidiaries |  |  |  |  |  |  |  |  |
Amount of (loss) gain recognized on derivatives in Other comprehensive loss |  | $ | (248 | ) | $ | 385 |  | $ | (1,234 | ) | $ | (7,197 | )
Amount of (loss) reclassification from Accumulated other comprehensive loss into Interest expense |  | $ | (352 | ) | (633 | ) | (1,406 | ) | (2,020 | )
Unconsolidated Joint Ventures (Company’s share) |  |  |  |  |  |  |  |  |
Amount of (loss) gain recognized on derivatives in Other comprehensive loss |  | $ | (2 | ) | $ | 21 |  | $ | (14 | ) | $ | (164 | )
Amount of (loss) reclassification from Accumulated other comprehensive loss into Equity in earnings of unconsolidated joint ventures |  | (13 | ) | (23 | ) | (48 | ) | (72 | )
On July 14, 2017, in connection with the sale of a property tenanted by Kohl’s and located in Kansas City, Missouri, the Company paid off the mortgage and terminated the related interest rate swap. In June 2017, the Company discontinued hedge accounting on this interest rate swap as the hedged forecasted transaction became probable not to occur. As a result, the Company accelerated the reclassification of $118,000 from accumulated other comprehensive loss to interest expense for the nine months ended September 30, 2017. No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Company’s cash flow hedges for the three months ended September 30, 2017 and the three and nine months ended September 30, 2016. During the twelve months ending September 30, 2018, the Company estimates an additional $988,000 will be reclassified from other accumulated other comprehensive loss as an increase to interest expense and $26,000 will be reclassified from accumulated other comprehensive loss as a decrease to equity in earnings of unconsolidated joint ventures. The derivative agreements in effect at September 30, 2017 provide that if the wholly-owned subsidiary of the Company which is a party to the agreement defaults or is capable of being declared in default on any of its indebtedness, then a default can be declared on such subsidiary’s derivative obligation. In addition, the Company is a party to the derivative agreements and if there is a default by the subsidiary on the loan subject to the derivative agreement to which the Company is a party and if there are swap breakage losses on account of the derivative being terminated early, then the Company could be held liable for such swap breakage losses, if any. During the nine months ended September 30, 2016, the Company terminated three interest rate swaps in connection with the early payoff of the related mortgages. As a result of these hedged forecasted transactions being terminated, the Company accelerated the reclassification of $178,000 in accumulated other comprehensive loss to earnings which are included in Prepayment costs on debt on the consolidated statement of income. As of September 30, 2017, the fair value of the derivatives in a liability position, including accrued interest of $71,000, but excluding any adjustments for nonperformance risk, was approximately $2,516,000. In the event the Company breaches any of the contractual provisions of the derivative contracts, it would be required to settle its obligations thereunder at their termination liability value of $2,516,000. This termination liability value, net of $135,000 adjustments for nonperformance risk, or $2,381,000, is included in Accrued expenses and other liabilities on the consolidated balance sheet at September 30, 2017.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration