Annual report pursuant to Section 13 and 15(d)

DISCLOSURE OF FAIR VALUE OF ASSETS AND LIABILITIES

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DISCLOSURE OF FAIR VALUE OF ASSETS AND LIABILITIES
 12 Months Ended
Dec. 31, 2023
Fair Value Disclosures [Abstract]  
DISCLOSURE OF FAIR VALUE OF ASSETS AND LIABILITIES DISCLOSURE OF FAIR VALUE OF ASSETS AND LIABILITIES
The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the assets and liabilities at December 31, 2023 and 2022. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Items Measured at Fair Value on a Recurring Basis
Cash equivalents, receivables, notes receivables, accounts payable, and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of December 31, 2023 and 2022.
The fair value of the Company’s long-term debt, consisting of mortgages, loans payable and other obligations aggregated approximately $1.8 billion and $1.8 billion as compared to the book value of approximately $1.9 billion and $1.9 billion as of December 31, 2023 and 2022, respectively. The fair value of the Company’s long-term debt was valued using level 3 inputs (as provided by ASC 820, Fair Value Measurements and Disclosures). The fair value was estimated using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and maturities. The fair value of the mortgage debt was determined by discounting the future contractual interest and principal payments by a market rate.
Although the Company has determined that the majority of the inputs used to value its derivative financial instruments fall within level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivative financial instruments utilize level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. As a result, the Company has determined that its derivative financial instruments valuations in their entirety are classified in level 2 of the fair value hierarchy.
Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges)
The fair value measurements used in the evaluation of the Company’s rental properties for impairment analysis are considered to be Level 3 valuations within the fair value hierarchy, as there are significant unobservable assumptions. Assumptions that were utilized in the fair value calculations include, but are not limited to, discount rates, market capitalization rates, expected lease rental rates, third-party broker information and information from potential buyers, as applicable.
Valuations of real estate identified as held for sale are based on estimated sale prices, net of estimated selling costs, of such property. In the absence of an executed sales agreement with a set sales price, management’s estimate of the net sales price may be based on a number of unobservable assumptions, including, but not limited to, the Company’s estimates of future cash flows, market capitalization rates and discount rates, if applicable. For developable land, an estimated per-unit market value assumption is also considered based on development rights or plans for the land.
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:
Years Ended December 31,
2023 2022 2021
(dollars in thousands) Fair Value Measurements Impairment Charges Fair Value Measurements Impairment Charges Fair Value Measurements Impairment Charges
Investment in Real Estate $ 169,839  $ 45,471  $ 314,512  $ 116,718  $ 421,053  $ 34,241 
Goodwill —  —  —  —  —  2,945 
The impairment charges described below are reflected within Property impairments, Land and other impairments, net or Unrealized gains (losses) on disposition of rental property for real estate in our Consolidated Statements of Operations. For properties classified as discontinued operations as of December 31, 2023, the impairment charges described below are reflected within the Discontinued operations section in our Consolidated Statements of Operations for all periods presented.
Impairment charges, and their related triggering events and fair value measurements, recognized during the years ended December 31, 2023, 2022 and 2021 were as follows:
2023 — During the year ended December 31, 2023, the Company recognized impairment charges for the following properties in order to reduce their carrying values to their estimated fair values, as follows:
•$32.5 million on one office property due to the shortening of its expected hold period; the fair value measurement was determined by estimating discounted cash flows using two significant unobservable inputs, which were the cash flow discount rate (11%) and terminal capitalization rate (9%);
•$3.6 million on one office property based on its estimated selling price; the property was sold in September 2023;
•$9.3 million on three land parcels based on their estimated selling prices.
2022 — During the year ended December 31, 2022, the Company recognized impairment charges for the following properties in order to reduce their carrying values to their estimated fair values, as follows:
•$94.8 million on four office properties due to the shortening of their expected hold periods; the fair value measurement was determined by estimating discounted cash flows using two significant unobservable inputs, which were the cash flow discount rate (range of 7.5% to 13%) and terminal capitalization rate (range of 5.5% to 8.75%); the properties were sold during 2023;
•$12.5 million on two hotels and one office property based on their estimated selling price; the properties were sold during 2023;
•$9.4 million on four land parcels based on their estimated selling prices. One parcel of the land was sold in November 2022.
2021 — During the year ended December 31, 2021, the Company recognized impairment charges for the following properties in order to reduce their carrying values to their estimated fair values, as follows:
•$6.0 million on one office property due to the shortening of its expected hold period; the fair value measurement was determined by estimating discounted cash flows using two significant unobservable inputs, which were the cash flow discount rate (8.0%) and terminal capitalization rate (5.75%); the property was sold in January 2022;
•$7.4 million on two hotels due to the adverse effect of the COVID-19 pandemic has had on the hotel operations; the fair value measurement was determined by estimating discounted cash flows using two significant unobservable inputs, which were the cash flow discount rate (8.67%) and terminal capitalization rate (6.5%); the two hotels were sold in February 2023;
•$20.8 million on several land parcels based on their estimated selling price;
•$2.9 million on goodwill which was fully impaired based on management's impairment test.