Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.5.0.2
Fair Value Measurements
 9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements

Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
Tier
 
Description
Level 1
 
Observable inputs such as quoted prices in active markets
Level 2
 
Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3
 
Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

The following table sets forth our assets and liabilities that are measured at fair value within the fair value hierarchy (in thousands):
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
Quoted Prices in Active Markets for Identical Assets or Liabilities
 
Significant Observable Inputs
 
Significant Unobservable Inputs
 
 
Total
 
 
 
Fair value as of September 30, 2016
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps (other liabilities)
 
$
(2,217
)
 
$
—

 
$
(2,217
)
 
$
—

Total liabilities
 
$
(2,217
)
 
$
—

 
$
(2,217
)
 
$
—


 
 
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
Quoted Prices in Active Markets for Identical Assets or Liabilities
 
Significant Observable Inputs
 
Significant Unobservable Inputs
 
 
Total
 
 
 
Fair value as of December 31, 2015:
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps (other liabilities)
 
$
(616
)
 
$
—

 
$
(616
)
 
$
—

Total liabilities
 
$
(616
)
 
$
—

 
$
(616
)
 
$
—



Fair values of interest rate swaps are approximated using Level 2 inputs based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well recognized financial principles including counterparty risks, credit spreads and interest rate projections, as well as reasonable estimates about relevant future market conditions.











The estimated fair value within the fair value hierarchy and recorded value of our debt consisting of senior unsecured notes, unsecured term loans, secured mortgages and unsecured lines of credit were as follows (in thousands):

 
 
September 30, 2016
 
December 31, 2015
Level 1 Quoted Prices in Active Markets for Identical Assets or Liabilities
 
$
521,000

 
$
447,800

Level 2 Significant Observable Inputs
 
1,178,198

 
901,958

Level 3 Significant Unobservable Inputs
 
129,340

 
266,075

Total fair value of debt
 
$
1,828,538

 
$
1,615,833

 
 
 
 
 
Recorded value of debt
 
$
1,724,646

 
$
1,551,924



With the exception of the unsecured term loan and unsecured lines of credit, that have variable rates and considered at market value, fair values of the senior notes and mortgage loans are determined using discounted cash flow analysis with an interest rate or credit spread similar to that of current market borrowing arrangements. Because the Company's senior unsecured notes are publicly traded with limited trading volume, these instruments are classified as Level 2 in the hierarchy. In contrast, mortgage loans are classified as Level 3 given the unobservable inputs utilized in the valuation. Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on the disposition of the financial instruments.

The carrying values of cash and cash equivalents, receivables, accounts payable, accrued expenses and other assets and liabilities are reasonable estimates of their fair values because of the short maturities of these instruments.