Quarterly report pursuant to Section 13 or 15(d)

Fair Value Disclosures

v2.3.0.15
Fair Value Disclosures
9 Months Ended
Sep. 30, 2011
Fair Value Disclosures [Abstract]  
Fair Value Disclosures

NOTE 9: FAIR VALUE DISCLOSURES

Financial 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, as follows:

Level 1: Quoted Prices in Active Markets for Identical Assets

Level 2: Significant Other Observable Inputs

Level 3: Significant Unobservable Inputs

The only assets or liabilities we had at September 30, 2011 and December 31, 2010 that are recorded at fair value on a recurring basis are the assets held in the Supplemental Executive Retirement Program ("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 September 30, 2011 and December 31, 2010 are as follows (in millions):

 

     September 30, 2011      December 31, 2010  
     Fair Value      Level 1      Level 2      Level 3      Fair Value      Level 1      Level 2      Level 3  

Assets:

                       

SERP

   $ 1.8       $ —         $ 1.8       $ —         $ 1.7       $ —         $ 1.7       $ —     

Liabilities:

                       

Derivatives

   $ 0.2       $ —         $ 0.2       $ —         $ 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 September 30, 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 September 30, 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.

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.

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.

 

     September 30, 2011      December 31, 2010  
(in thousands)    Carrying
Value
     Fair Value      Carrying
Value
     Fair Value  

Cash and cash equivalents

   $ 40,751       $ 40,751       $ 78,767       $ 78,767   

Restricted cash

   $ 23,267       $ 23,267       $ 20,486       $ 20,486   

2445 M Street note receivable

   $ 6,844       $ 7,807       $ 7,090       $ 8,048   

Mortgage notes payable

   $ 428,909       $ 463,801       $ 361,860       $ 380,360   

Lines of credit payable

   $ 193,000       $ 193,000       $ 100,000       $ 100,000   

Notes payable

   $ 657,378       $ 726,957       $ 753,587       $ 785,637