XML 24 R13.htm IDEA: XBRL DOCUMENT v3.25.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
 
The fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for identical instruments are available in active markets, such as money market funds and U.S. Treasury securities; Level 2, for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate caps; and Level 3, for securities that do not fall into Level 1 or Level 2 and for which little or no market data exists, therefore requiring us to develop our own assumptions.

Items Measured at Fair Value on a Recurring Basis

The methods and assumptions described below were used to estimate the fair value of each class of financial instrument. For significant Level 3 items, we have also provided the unobservable inputs.

Derivative Assets — Our derivative assets, which are included in Other assets, net in the consolidated financial statements, are comprised of interest rate caps (Note 7).
The valuation of our derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves, spot and forward rates, and implied volatilities. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative instruments for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. These derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

Our material financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands):
June 30, 2025December 31, 2024
LevelCarrying ValueFair ValueCarrying ValueFair Value
Non-recourse mortgages, net (a) (b)
3$117,170 $94,552 $111,259 $91,642 
NLOP Mezzanine Loan, net (a) (b) (c) (d)
3— — 57,957 61,753 
__________
(a)The carrying value of Non-recourse mortgages, net includes unamortized premium of $0.1 million and $0.4 million at June 30, 2025 and December 31, 2024, respectively. The carrying value of the NLOP Mezzanine Loan, net (Note 8) includes unamortized discount of $2.2 million at December 31, 2024.
(b)We determined the estimated fair value of our non-recourse mortgage loans and NLOP Mezzanine Loan using a discounted cash flow model that estimates the present value of the future loan payments by discounting such payments at current estimated market interest rates. The estimated market interest rates consider interest rate risk and the value of the underlying collateral, which includes quality of the collateral, the credit quality of the tenant/obligor, and the time until maturity.
(c)The carrying value of the NLOP Mezzanine Loan, net (Note 8) includes unamortized deferred financing costs of $1.0 million at December 31, 2024.
(d)In April 2025, we fully repaid the NLOP Mezzanine Loan (Note 8).

We estimated that our other financial assets and liabilities had fair values that approximated their carrying values at both June 30, 2025 and December 31, 2024.

Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges)

We periodically assess whether there are any indicators that the value of our real estate investments may be impaired or that their carrying value may not be recoverable. There have been no significant changes in our impairment policies from what was disclosed in the 2024 Annual Report.

The following table presents information about assets for which we recorded an impairment charge and that were measured at fair value on a non-recurring basis (in thousands):
Three Months Ended June 30,
20252024
Fair Value MeasurementsImpairment ChargesFair Value MeasurementsImpairment Charges
Impairment Charges
Real estate$97,768 $81,817 $74,754 $8,222 
$81,817 $8,222 
Six Months Ended June 30,
20252024
Fair Value MeasurementsImpairment ChargesFair Value MeasurementsImpairment Charges
Impairment Charges
Real estate$113,938 $82,737 $88,464 $12,287 
$82,737 $12,287 
Impairment charges, and their related triggering events and fair value measurements, recognized during the three and six months ended June 30, 2025 and 2024, were as follows:

Real Estate

The impairment charges described below are reflected within Impairment charges — real estate in our consolidated statements of operations.

2025 — During the three and six months ended June 30, 2025, we recognized an impairment charge of $81.6 million on a property in Houston, Texas, leased to KBR, Inc. After performing a strategic review of the asset at the direction of our Board of Trustees during the second quarter of 2025, we commenced sale efforts for the property. As a result, this met our likely disposition impairment trigger event in accordance with ASC 360, Property, Plant, and Equipment, at which time we determined that the carrying value of the asset was not fully recoverable. The impairment charge reflects the excess of the asset’s carrying amount over its current estimated fair value, which is $73.2 million and may change as we progress with our disposition process. The fair value was determined based on valuation techniques consistent with ASC 820, Fair Value Measurement, which factored in current market conditions, existing lease terms, and assumptions about the highest and best use of the asset, using the following unobservable inputs:

•Cash flow discount rate of 10%;
•Residual value discount rate of 10%; and
•Investor required return of 15%.

Although these circumstances met our likely disposition trigger, there can be no assurances that we will sell the asset for its estimated fair value. As a result, to the extent additional impairment triggers arise in the future, the asset will be tested for recoverability.

Additionally, during the three and six months ended June 30, 2025, we recognized impairment charges totaling $0.3 million and $1.2 million on one and two properties, respectively, in order to reduce their carrying values to their estimated fair values, which approximated their estimated selling prices. One of these properties was sold in May 2025 and one was sold in July 2025 (Note 13).

2024 — During the three and six months ended June 30, 2024, we recognized impairment charges totaling $8.2 million on two properties and $12.3 million on four properties, respectively, in order to reduce their carrying values to their estimated fair values, which approximated their estimated selling prices. Three of these properties were sold in 2024 and one was sold in March 2025.