Quarterly report [Sections 13 or 15(d)]

Fair Value Measures

v3.26.3
Fair Value Measures
 9 Months Ended
Sep. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measures
Note 5 – Fair Value Measures
Items Measured at Fair Value on a Recurring Basis
The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of the dates indicated below, aggregated by the level in the fair value hierarchy within which those instruments fall (in thousands):
Level 1 Level 2 Level 3
Balance as of September 30, 2026
Derivative assets $ —  $ 129  $ —  $ 129 
Level 1 Level 2 Level 3
Balance as of December 31, 2025
Derivative liabilities $ —  $ 5  $ —  $ 5 
Derivative Assets and Liabilities – The Company’s derivative financial instruments were comprised of an interest rate cap agreement as of September 30, 2026 and an interest rate collar agreement as of December 31, 2025. These derivative agreements were entered into in order to hedge interest rate volatility with respect to the Company’s borrowings under the Original Revolving Facility and subsequently the New Revolving Facility with an aggregate notional amount of $50.0 million and $75.0 million as of September 30, 2026 and December 31, 2025, respectively (as described in Note 6 – Debt, Net). The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential non-performance risk and the performance risk of the counterparties.
Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, 2026 and December 31, 2025, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Items Measured at Fair Value on a Non-Recurring Basis
Certain financial and non-financial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.
Real Estate and Other Investments – The Company performs quarterly impairment review procedures for real estate investments, right-of-use assets and its investment in the Unconsolidated Joint Venture, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying value of such assets may not be recoverable. See Note 3 – Real Estate Investments and Related Intangibles - Investment in Unconsolidated Joint Venture for discussion of an other-than-temporary impairment recognized on the Company’s investment in the Unconsolidated Joint Venture as of December 31, 2025.
The following table summarizes the Company’s provisions for real estate asset impairment during the periods indicated below (dollars in thousands). The impairment charges reflect changes in the Company’s future cash flow assumptions for agreed-upon or estimated sales proceeds with respect to real estate assets that were expected to be sold as well as changes to assumptions with regard to management’s intent to sell or lease the real estate assets.
Nine Months Ended September 30,
2026 2025
Number of properties 1  11 
Carrying value of impaired properties $ 11,293  $ 179,243 
Provisions for impairment (6,296) (84,910)
Estimated fair value $ 4,997  $ 94,333 
The Company estimates fair values using Level 2 and Level 3 inputs and uses a combined income and market approach, specifically using discounted cash flow analysis and/or recent comparable sales transactions. The evaluation of real estate assets for potential impairment requires the Company’s management to exercise significant judgment and make certain key assumptions, including the following: (1) capitalization rates; (2) discount rates; (3) number of years the property will be held; (4) property operating expenses; and (5) re-leasing assumptions including the number of months to re-lease, market rental revenue and required tenant improvements. There are inherent uncertainties in making these estimates such as market conditions and performance and sustainability of the Company’s tenants.
For the Company’s impairment tests over the real estate assets during the nine months ended September 30, 2026, the fair value measurement for one property was determined by using a discount rate of 10.5% and a capitalization rate of 10.0%. During the nine months ended September 30, 2026, the Company recognized impairment charges of $6.3 million for held and used properties.
For the Company’s impairment tests over the real estate assets during the nine months ended September 30, 2025, the fair value measurements for six properties were determined based on sales prices under definitive agreements, three properties were determined by using a weighted average discount rate of 8.9% and a weighted average capitalization rate of 8.6%, and two properties were determined based on estimated sales prices based on market data. During the nine months ended September 30, 2025, the Company recognized impairment charges of $67.4 million for held and used properties, impairment charges of $6.0 million were recognized for held for sale properties and impairment charges of $11.5 million were recognized for disposed properties.
The following table presents certain of the Company’s assets which were subject to impairment as of the date indicated below and therefore, have been measured at fair value on a non-recurring basis, aggregated by the level in the fair value hierarchy within which those assets fall (in thousands):
Level 1
Level 2 (1)
Level 3
Balance as of December 31, 2025
Assets of properties held for sale $ —  $ 12,803  $ —  $ 12,803 
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(1)The fair value of the Level 2 category was derived using negotiated sales prices with third parties.
Fair Value of Financial Instruments
The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, accounts receivable, derivative assets and accounts payable approximates their carrying value in the accompanying consolidated balance sheets due to their short-term nature. The following table presents carrying values and fair values of the Company’s long-term financial instruments as of the dates indicated below (dollars in thousands):
Level
Carrying Value at September 30, 2026
Fair Value at September 30, 2026
Carrying Value at December 31, 2025
Fair Value at December 31, 2025
Assets:
Notes receivable 3 $ —  $ —  $ 678  $ 678 
Liabilities (1):
Mortgages payable 2 $ 334,494  $ 310,473  $ 373,000  $ 365,853 
New Revolving Facility (2)
2 102,000  101,977  —  — 
Total $ 436,494  $ 412,450  $ 373,000  $ 365,853 
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(1)Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs.
(2)The carrying value and fair value for the Original Revolving Facility have been excluded from the table as of December 31, 2025, as its maturity date was less than one year from the reporting date.
Notes Receivable – The carrying value of the Company’s long-term promissory notes receivable, net of loan loss reserves, was determined to be at fair value based on management’s estimates of credit spreads and observable market interest rates, representing Level 3 on the fair value hierarchy.
Debt – The fair value is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of credit spreads and observable market interest rates, representing Level 2 on the fair value hierarchy.