FAIR VALUE MEASUREMENTS |
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| FAIR VALUE MEASUREMENTS | NOTE 10 – FAIR VALUE MEASUREMENTS The Company measures the fair value of financial instruments based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. In accordance with the fair value hierarchy, Level 1 assets/liabilities are valued based on quoted prices for identical instruments in active markets, Level 2 assets/liabilities are valued based on quoted prices in active markets for similar instruments, on quoted prices in less active or inactive markets, or on other “observable” market inputs and Level 3 assets/liabilities are valued based significantly on “unobservable” market inputs. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts of cash and cash equivalents, escrow, deposits and other assets and receivables (excluding interest rate swaps), dividends payable, and accrued expenses and other liabilities, are not measured at fair value on a recurring basis but are considered to be recorded at amounts that approximate fair value. The fair value and carrying amounts of the Company’s mortgages payable are as follows (dollars in thousands):
Fair Value on a Recurring Basis As of June 30, 2026, the Company had one interest rate derivative, which was an interest rate swap, related to an outstanding mortgage loan with an aggregate $810,000 notional amount. This interest rate swap, which (i) was designated as a cash flow hedge, converted a SOFR based variable rate mortgage to a fixed annual rate mortgage, (ii) had an interest rate of 3.24% and (iii) matured and was paid off on July 1, 2026. The Company’s objective in using this interest rate swap was to add stability to interest expense. The Company does not use derivatives for trading or speculative purposes. Fair values are approximated using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This fair value analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company has determined its derivative valuation was classified in Level 2 of the fair value hierarchy and does not currently own any financial instruments that are measured on a recurring basis and that are classified as Level 1 or 3. The carrying and fair value of the Company’s derivative financial instruments was $0 and $16,000 as of June 30, 2026 and December 31, 2025, respectively. The fair value of the Company’s derivatives were reflected in Escrow, deposits and other assets and receivables on the consolidated balance sheets. As of June 30, 2026 and December 31, 2025, there were no derivatives in a liability position. NOTE 10 – FAIR VALUE MEASUREMENTS (CONTINUED) The following table presents the effect of the Company’s derivative financial instruments on the consolidated statements of income for the periods presented (amounts in thousands):
Fair Value on a Non-Recurring Basis Non-financial assets measured at fair value on a non-recurring basis in the consolidated financial statements consist of a property located in Chicago, Illinois for which the Company had recorded an impairment loss of $142,000 during the three and six months ended June 30, 2026 (as discussed in Note 5). The Company determined fair value based on an executed sales contract for the property which was determined to be a Level 3 input in the fair value hierarchy. |
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