Annual report pursuant to Section 13 and 15(d)

Fair Value Disclosures

v2.4.1.9
Fair Value Disclosures
12 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]  
Fair Value Disclosures
NOTE 9: 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, 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 December 31, 2014 and 2013 that are recorded at fair value on a recurring basis are the assets held in the SERP, which primarily consists of investments in mutual funds. 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 at December 31, 2014 and 2013 were as follows (in thousands):
 
December 31, 2014
 
December 31, 2013
 
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
$
2,778

 
$

 
$
2,778

 
$

 
$
3,290

 
$

 
$
3,290

 
$


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, 2014 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, 2014.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents and restricted cash include 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 (Level 1 inputs).
Notes Receivable
We acquired a note receivable ("2445 M Street note") in 2008 with the purchase of 2445 M Street. We estimate the fair value of the 2445 M Street note based on a discounted cash flow methodology using market discount rates (Level 3 inputs).
Debt
Mortgage notes payable consist of instruments in which certain of our real estate assets are used for collateral. We estimate the fair value of the mortgage notes payable 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 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. We estimate the market value based on a comparison of the spreads of the advances to market given the adjustable base rate. We estimate the fair value of the notes payable 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. We classify these fair value measurements as Level 3 as we use significant unobservable inputs and management judgment due to the absence of quoted market prices.
As of December 31, 2014 and 2013, the carrying values and estimated fair values of our financial instruments were as follows (in thousands):
 
December 31,
 
2014
 
2013
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
Cash and cash equivalents
$
15,827

 
$
15,827

 
$
130,343

 
$
130,343

Restricted cash
10,299

 
10,299

 
9,189

 
9,189

2445 M Street note receivable
4,404

 
5,113

 
6,070

 
6,803

Mortgage notes payable
418,525

 
433,762

 
294,671

 
313,476

Lines of credit payable
50,000

 
50,000

 

 

Notes payable
747,208

 
782,042

 
846,703

 
856,171