Annual report pursuant to Section 13 and 15(d)

Fair Value Disclosures

v2.4.0.6
Fair Value Disclosures
12 Months Ended
Dec. 31, 2011
Fair Value Disclosures [Abstract]  
Fair Value Disclosures
FAIR VALUE DISCLOSURES
Assets and Liabilities Measured at Fair Value
For assets and liabilities measured at fair value on a recurring basis, quantitative disclosures about the fair value measurements are required to be disclosed separately for each major category of assets and liabilities. The only assets or liabilities we had at December 31, 2011 and 2010 that are recorded at fair value on a recurring basis are the assets held in the SERP and the interest rate hedge contracts. We base the valuations related to these items on assumptions derived from significant other observable inputs and accordingly these valuations fall into Level 2 in the fair value hierarchy. The fair values of these assets and liabilities at December 31, 2011 and 2010 are as follows (in millions):
 
December 31, 2011
 
December 31, 2010
 
Fair Value
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Fair Value
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SERP
$
1.7

 
$

 
$
1.7

 
$

 
$
1.7

 
$

 
$
1.7

 
$

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives
$

 
$

 
$

 
$

 
$
1.5

 
$

 
$
1.5

 
$


Financial Assets and Liabilities Not Measured at Fair Value
The following disclosures of estimated fair value were determined by management using available market information and established valuation methodologies, including discounted cash flow. Many of these estimates involve significant judgment. The estimated fair value disclosed may not necessarily be indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have an effect on the estimated fair value amounts. In addition, fair value estimates are made at a point in time and thus, estimates of fair value subsequent to December 31, 2011 may differ significantly from the amounts presented.

Below is a summary of significant methodologies used in estimating fair values and a schedule of fair values at December 31, 2011.
Cash and Cash Equivalents
Cash and cash equivalents includes cash and commercial paper with original maturities of less than 90 days, which are valued at the carrying value, which approximates fair value due to the short maturity of these instruments.
Notes Receivable
The fair value of the notes is estimated based on quotes for debt with similar terms and characteristics or a discounted cash flow methodology using market discount rates if reliable quotes are not available.
Derivatives
The company reports its interest rate swap at fair value in accordance with GAAP, and thus the carrying value is the fair value.
Mortgage Notes Payable
Mortgage notes payable consist of instruments in which certain of our real estate assets are used for collateral. The fair value of the mortgage notes payable is estimated by discounting the contractual cash flows at a rate equal to the relevant treasury rates (with respect to the timing of each cash flow) plus credit spreads estimated through independent comparisons to real estate assets or loans with similar characteristics.
Lines of Credit Payable
Lines of credit payable consist of bank facilities which we use for various purposes including working capital, acquisition funding or capital improvements. The lines of credit advances are priced at a specified rate plus a spread. The carrying value of the lines of credit payable is estimated to be market value given the adjustable rate of these borrowings and in consideration of any changes in spreads.
Notes Payable
The fair value of the notes payable is estimated by discounting the contractual cash flows at a rate equal to the relevant treasury rates (with respect to the timing of each cash flow) plus credit spreads derived using the relevant securities’ market prices.
 
 
2011
 
2010
(in thousands)
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
Cash and cash equivalents, including restricted cash
$
32,189

 
$
32,189

 
$
99,253

 
$
99,253

2445 M Street note receivable
$
6,975

 
$
7,721

 
$
7,090

 
$
8,048

Mortgage notes payable
$
427,710

 
$
463,238

 
$
361,860

 
$
380,360

Lines of credit payable
$
99,000

 
$
99,000

 
$
100,000

 
$
100,000

Notes payable
$
657,470

 
$
713,797

 
$
753,587

 
$
785,637