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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q 
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
           
Commission file number 1-14023

CORPORATE OFFICE PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 23-2947217
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6711 Columbia Gateway Drive, Suite 300, Columbia, MD
21046
(Address of principal executive offices)(Zip Code)
 
Registrant’s telephone number, including area code:  (443) 285-5400

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares of beneficial interest, $0.01 par valueOFCNew York Stock Exchange
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

As of October 22, 2021, 112,324,851 of Corporate Office Properties Trust’s Common Shares of Beneficial Interest, $0.01 par value, were issued and outstanding.



TABLE OF CONTENTS
 
FORM 10-Q
 
 PAGE
 
  
 
   
 
   
  

2


PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements

Corporate Office Properties Trust and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
September 30,
2021
December 31, 2020
Assets  
Properties, net:  
Operating properties, net$3,227,797 $3,115,280 
Projects in development or held for future development379,325 447,269 
Total properties, net3,607,122 3,562,549 
Property - operating right-of-use assets38,854 40,570 
Property - finance right-of-use assets40,077 40,425 
Assets held for sale, net2,821  
Cash and cash equivalents14,570 18,369 
Investment in unconsolidated real estate joint ventures
40,304 29,303 
Accounts receivable, net
33,110 41,637 
Deferred rent receivable 103,062 92,876 
Intangible assets on real estate acquisitions, net15,788 19,344 
Deferred leasing costs (net of accumulated amortization of $31,975 and $30,375, respectively)
62,269 58,613 
Investing receivables (net of allowance for credit losses of $1,415 and $2,851, respectively)
75,947 68,754 
Prepaid expenses and other assets, net117,214 104,583 
Total assets$4,151,138 $4,077,023 
Liabilities and equity  
Liabilities:  
Debt, net$2,159,732 $2,086,918 
Accounts payable and accrued expenses176,636 142,717 
Rents received in advance and security deposits32,092 33,425 
Dividends and distributions payable31,306 31,231 
Deferred revenue associated with operating leases8,704 10,832 
Property - operating lease liabilities29,630 30,746 
Interest rate derivatives5,562 9,522 
Other liabilities10,691 12,490 
Total liabilities2,454,353 2,357,881 
Commitments and contingencies (Note 18)
Redeemable noncontrolling interests26,006 25,430 
Equity:  
Corporate Office Properties Trust’s shareholders’ equity:  
Common Shares of beneficial interest ($0.01 par value; 150,000,000 shares authorized; shares issued and outstanding of 112,325,411 at September 30, 2021 and 112,181,759 at December 31, 2020)
1,123 1,122 
Additional paid-in capital2,480,412 2,478,906 
Cumulative distributions in excess of net income(839,676)(809,836)
Accumulated other comprehensive loss(5,347)(9,157)
Total Corporate Office Properties Trust’s shareholders’ equity1,636,512 1,661,035 
Noncontrolling interests in subsidiaries:  
Common units in Corporate Office Properties, L.P. (“COPLP”)21,568 20,465 
Other consolidated entities12,699 12,212 
Noncontrolling interests in subsidiaries34,267 32,677 
Total equity1,670,779 1,693,712 
Total liabilities, redeemable noncontrolling interests and equity$4,151,138 $4,077,023 

See accompanying notes to consolidated financial statements.
3


Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2021202020212020
Revenues  
Lease revenue$145,749 $133,875 $434,031 $397,034 
Other property revenue841 568 2,146 2,063 
Construction contract and other service revenues28,046 20,323 64,592 46,240 
Total revenues174,636 154,766 500,769 445,337 
Operating expenses    
Property operating expenses57,190 51,552 168,780 151,755 
Depreciation and amortization associated with real estate operations36,611 35,332 111,487 101,540 
Construction contract and other service expenses27,089 19,220 61,964 44,052 
Impairment losses  1,530  1,530 
General, administrative and leasing expenses9,342 7,467 26,970 23,111 
Business development expenses and land carry costs1,093 1,094 3,559 3,474 
Total operating expenses131,325 116,195 372,760 325,462 
Interest expense(15,720)(17,152)(49,181)(50,789)
Interest and other income 1,818 1,746 5,911 5,233 
Credit loss recoveries326 1,465 1,040 161 
Gain on sales of real estate(32) 39,711 5 
Loss on early extinguishment of debt(1,159)(3,237)(59,553)(3,237)
Loss on interest rate derivatives (53,196) (53,196)
Income (loss) before equity in income of unconsolidated entities and income taxes28,544 (31,803)65,937 18,052 
Equity in income of unconsolidated entities297 477 779 1,372 
Income tax expense(47)(16)(103)(95)
Net income (loss)28,794 (31,342)66,613 19,329 
Net (income) loss attributable to noncontrolling interests:    
Common units in COPLP(357)386 (831)(185)
Preferred units in COPLP (77) (231)
Other consolidated entities(1,336)(812)(2,949)(3,207)
Net income (loss) attributable to COPT common shareholders$27,101 $(31,845)$62,833 $15,706 
Earnings per common share: (1)    
Net income (loss) attributable to COPT common shareholders - basic$0.24 $(0.29)$0.56 $0.14 
Net income (loss) attributable to COPT common shareholders - diluted$0.24 $(0.29)$0.56 $0.14 
(1) Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

See accompanying notes to consolidated financial statements.
4


Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2021202020212020
Net income (loss)$28,794 $(31,342)$66,613 $19,329 
Other comprehensive income:    
Unrealized (loss) income on interest rate derivatives(118)1,428 426 (39,592)
Reclassification adjustments on interest rate derivatives recognized in interest expense
1,226 1,342 3,604 2,408 
Reclassification adjustments on interest rate derivatives recognized in loss on interest rate derivatives
 51,865  51,865 
Total other comprehensive income 1,108 54,635 4,030 14,681 
Comprehensive income29,902 23,293 70,643 34,010 
Comprehensive income attributable to noncontrolling interests(1,733)(1,173)(4,000)(3,408)
Comprehensive income attributable to COPT$28,169 $22,120 $66,643 $30,602 
 
See accompanying notes to consolidated financial statements.


5


Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Equity
(Dollars in thousands)
(unaudited)
Common
Shares
Additional
Paid-in
Capital
Cumulative
Distributions in
Excess of Net
Income
Accumulated
Other
Comprehensive Loss
Noncontrolling
Interests
Total
For the Three Months Ended September 30, 2020
Balance at June 30, 2020 (112,183,192 common shares outstanding)
$1,122 $2,477,977 $(797,959)$(64,513)$40,297 $1,656,924 
Share-based compensation (7,504 shares redeemed, net of issuances)
 1,223 — — 561 1,784 
Redemption of vested equity awards
— (57)— — — (57)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP
— 552 — — (552) 
Comprehensive income
— — (31,845)53,965 533 22,653 
Dividends
— — (30,843)— — (30,843)
Distributions to owners of common and preferred units in COPLP
— — — — (444)(444)
Distributions to noncontrolling interests in other consolidated entities
— — — — (7)(7)
Adjustment to arrive at fair value of redeemable noncontrolling interests
— (374)— — — (374)
Balance at September 30, 2020 (112,175,688 common shares outstanding)
$1,122 $2,479,321 $(860,647)$(10,548)$40,388 $1,649,636 
For the Three Months Ended September 30, 2021
Balance at June 30, 2021 (112,336,070 common shares outstanding)
$1,123 $2,478,416 $(835,894)$(6,415)$34,082 $1,671,312 
Redemption of common units
— — — — (56)(56)
Share-based compensation (10,659 shares redeemed, net of issuances)
— 1,064 — — 1,098 2,162 
Redemption of vested equity awards
— (64)— — — (64)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP
— 1,051 — — (1,051) 
Comprehensive income— — 27,101 1,068 600 28,769 
Dividends
— — (30,883)— — (30,883)
Distributions to owners of common units in COPLP— — — — (398)(398)
Distributions to noncontrolling interests in other consolidated entities
— — — — (8)(8)
Adjustment to arrive at fair value of redeemable noncontrolling interests
— (55)— — — (55)
Balance at September 30, 2021 (112,325,411 common shares outstanding)
$1,123 $2,480,412 $(839,676)$(5,347)$34,267 $1,670,779 

See accompanying notes to consolidated financial statements.



6


Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Equity
(Dollars in thousands)
(unaudited)
 Common
Shares
Additional
Paid-in
Capital
Cumulative
Distributions in
Excess of Net
Income
Accumulated
Other
Comprehensive Loss
Noncontrolling
Interests
Total
For the Nine Months Ended September 30, 2020
Balance at December 31, 2019 (112,068,705 common shares outstanding)
$1,121 $2,481,558 $(778,275)$(25,444)$40,285 $1,719,245 
Cumulative effect of accounting change for adoption of credit loss guidance— — (5,541)— — (5,541)
Balance at December 31, 2019, as adjusted
1,121 2,481,558 (783,816)(25,444)40,285 1,713,704 
Conversion of common units to common shares (12,009 shares)
— 182 — — (182) 
Share-based compensation (94,974 shares issued, net of redemptions)
1 3,394 — — 1,335 4,730 
Redemption of vested equity awards
— (1,629)— — — (1,629)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP
— 527 — — (527) 
Comprehensive income— — 15,706 14,896 693 31,295 
Dividends
— — (92,537)— — (92,537)
Distributions to owners of common and preferred units in COPLP
— — — — (1,306)(1,306)
Contributions from noncontrolling interests in other consolidated entities
— — — — 112 112 
Distributions to noncontrolling interests in other consolidated entities
— — — — (22)(22)
Adjustment to arrive at fair value of redeemable noncontrolling interests
— (4,711)— — — (4,711)
Balance at September 30, 2020 (112,175,688 common shares outstanding)
$1,122 $2,479,321 $(860,647)$(10,548)$40,388 $1,649,636 
For the Nine Months Ended September 30, 2021
Balance at December 31, 2020 (112,181,759 common shares outstanding)
$1,122 $2,478,906 $(809,836)$(9,157)$32,677 $1,693,712 
Conversion of common units to common shares (8,054 shares)
— 121 — — (121) 
Redemption of common units
— — — — (297)(297)
Share-based compensation (135,598 shares issued, net of redemptions)
1 3,239 — — 3,082 6,322 
Redemption of vested equity awards
— (2,422)— — — (2,422)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP
— 1,245 — — (1,245) 
Comprehensive income— — 62,833 3,810 1,714 68,357 
Dividends
— — (92,673)— — (92,673)
Distributions to owners of common units in COPLP— — — — (1,196)(1,196)
Distributions to noncontrolling interests in other consolidated entities
— — — — (23)(23)
Adjustment to arrive at fair value of redeemable noncontrolling interests
— (677)— — — (677)
Other— — — — (324)(324)
Balance at September 30, 2021 (112,325,411 common shares outstanding)
$1,123 $2,480,412 $(839,676)$(5,347)$34,267 $1,670,779 

See accompanying notes to consolidated financial statements.
7


Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited) 
For the Nine Months Ended September 30,
 20212020
Cash flows from operating activities  
Revenues from real estate operations received$427,448 $394,094 
Construction contract and other service revenues received68,780 53,911 
Property operating expenses paid(168,009)(159,007)
Construction contract and other service expenses paid(50,275)(45,686)
General, administrative, leasing, business development and land carry costs paid(22,367)(24,408)
Interest expense paid(46,621)(49,693)
Lease incentives paid(8,694)(12,634)
Other(359)2,464 
Net cash provided by operating activities199,903 159,041 
Cash flows from investing activities  
Development and redevelopment of properties(176,554)(284,416)
Tenant improvements on operating properties(15,149)(23,377)
Other capital improvements on operating properties(19,256)(24,797)
Proceeds from sale of properties114,050  
Non-operating distributions from unconsolidated real estate joint venture872 2,287 
Leasing costs paid(14,929)(12,455)
Settlement of interest rate derivatives (53,130)
Other(1,026)(321)
Net cash used in investing activities(111,992)(396,209)
Cash flows from financing activities  
Proceeds from debt
Revolving Credit Facility456,000 409,000 
Unsecured senior notes987,210 395,264 
Other debt proceeds4,630 199,088 
Repayments of debt
Revolving Credit Facility(589,000)(529,000)
Unsecured senior notes(600,000)(122,948)
Scheduled principal amortization(2,911)(3,077)
Other debt repayments(188,960) 
Deferred financing costs paid(2,662)(2,161)
Payments in connection with early extinguishment of debt(55,720)(3,037)
Common share dividends paid(92,632)(92,512)
Distributions paid to redeemable noncontrolling interests(1,687)(13,515)
Redemption of vested equity awards(2,422)(1,629)
Other(3,645)(1,760)
Net cash (used in) provided by financing activities(91,799)233,713 
Net decrease in cash and cash equivalents and restricted cash(3,888)(3,455)
Cash and cash equivalents and restricted cash  
Beginning of period22,033 18,130 
End of period$18,145 $14,675 

See accompanying notes to consolidated financial statements.
 

8


Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
For the Nine Months Ended September 30,
 20212020
Reconciliation of net income to net cash provided by operating activities:  
Net income $66,613 $19,329 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and other amortization113,676 102,864 
Impairment losses 1,530 
Amortization of deferred financing costs and net debt discounts3,969 3,104 
Increase in deferred rent receivable(13,515)(3,560)
Gain on sales of real estate(39,711)(5)
Share-based compensation5,960 4,753 
Loss on early extinguishment of debt59,553 3,237 
Loss on interest rate derivatives 53,196 
Other(3,708)(4,184)
Changes in operating assets and liabilities: 
Decrease (increase) in accounts receivable6,269 (744)
Increase in prepaid expenses and other assets, net(13,120)(13,164)
Increase (decrease) in accounts payable, accrued expenses and other liabilities15,250 (3,971)
Decrease in rents received in advance and security deposits(1,333)(3,344)
Net cash provided by operating activities$199,903 $159,041 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of period$18,369 $14,733 
Restricted cash at beginning of period3,664 3,397 
Cash and cash equivalents and restricted cash at beginning of period$22,033 $18,130 
Cash and cash equivalents at end of period$14,570 $11,458 
Restricted cash at end of period3,575 3,217 
Cash and cash equivalents and restricted cash at end of period$18,145 $14,675 
Supplemental schedule of non-cash investing and financing activities:  
Increase (decrease) in accrued capital improvements, leasing and other investing activity costs$17,590 $(195)
Recognition of operating right-of-use assets and related lease liabilities$328 $8,955 
Investment in unconsolidated real estate joint venture retained in property disposition$11,842 $ 
Increase (decrease) in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests$4,030 $(37,183)
Dividends/distributions payable
$31,306 $31,307 
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares
$121 $182 
Adjustments to noncontrolling interests resulting from changes in COPLP ownership
$(1,245)$(527)
Increase in redeemable noncontrolling interests and decrease in equity to carry redeemable noncontrolling interests at fair value
$677 $4,711 
 
See accompanying notes to consolidated financial statements.

9


Corporate Office Properties Trust and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
 
1.    Organization
 
Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company”, “we” or “us”) is a fully-integrated and self-managed real estate investment trust (“REIT”). We own, manage, lease, develop and selectively acquire office and data center properties. The majority of our portfolio is in locations that support the United States Government (“USG”) and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what we believe are growing, durable, priority missions (“Defense/IT Locations”). We also own a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office”). As of September 30, 2021, our properties included the following:

186 properties totaling 21.7 million square feet comprised of 16.9 million square feet in 160 office properties and 4.7 million square feet in 26 single-tenant data center shell properties (“data center shells”). We owned 19 of these data center shells through unconsolidated real estate joint ventures;
a wholesale data center with a capacity of 19.25 megawatts;
13 properties under development (10 office properties and three data center shells), including three partially-operational properties, that we estimate will total approximately 1.8 million square feet upon completion; and
approximately 720 acres of land controlled for future development that we believe could be developed into approximately 8.9 million square feet and 43 acres of other land.
 
We conduct almost all of our operations and own almost all of our assets through our operating partnership, Corporate Office Properties, L.P. (“COPLP”) and subsidiaries (collectively, the “Operating Partnership”), of which COPT is the sole general partner. COPLP owns real estate directly and through subsidiary partnerships and limited liability companies (“LLCs”).  In addition to owning real estate, COPLP also owns subsidiaries that provide real estate services such as property management, development and construction services primarily for our properties but also for third parties. Some of these services are performed by a taxable REIT subsidiary (“TRS”).

Equity interests in COPLP are in the form of common and preferred units. As of September 30, 2021, COPT owned 98.3% of the outstanding COPLP common units (“common units”) and there were no preferred units outstanding. Common units not owned by COPT carry certain redemption rights. The number of common units owned by COPT is equivalent to the number of outstanding common shares of beneficial interest (“common shares”) of COPT, and the entitlement of common units to quarterly distributions and payments in liquidation is substantially the same as that of COPT common shareholders.

COPT’s common shares are publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “OFC”.
  
2.    Summary of Significant Accounting Policies
 
Basis of Presentation
 
The consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries and other entities in which COPT has a majority voting interest and control.  We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities.  We eliminate all intercompany balances and transactions in consolidation.

We use the equity method of accounting when we own an interest in an entity and can exert significant influence over but cannot control the entity’s operations. We discontinue equity method accounting if our investment in an entity (and net advances) is reduced to zero unless we have guaranteed obligations of the entity or are otherwise committed to provide further financial support for the entity.
 
When we own an equity investment in an entity and cannot exert significant influence over its operations, we measure the investment at fair value, with changes recognized through net income. For an investment without a readily determinable fair value, we measure the investment at cost, less any impairments, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.

These interim financial statements should be read together with the consolidated financial statements and notes thereto as
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of and for the year ended December 31, 2020 included in the Company’s and Operating Partnership’s 2020 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly state our financial position and results of operations.  All adjustments are of a normal recurring nature.  The consolidated financial statements have been prepared using the accounting policies described in the Company’s and Operating Partnership’s 2020 Annual Report on Form 10-K as updated for our adoption of recent accounting pronouncements discussed below.

Reclassifications

We reclassified certain amounts from the prior period to conform to the current period presentation of our consolidated financial statements with no effect on previously reported net income or equity.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued guidance containing practical expedients for reference rate reform related activities pertaining to debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur. In 2020, we elected to apply an expedient to treat any changes in loans resulting from reference rate reform as debt modifications (as opposed to extinguishments) and hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of the hedge accounting expedients preserves the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of this guidance and may apply other elections as applicable as additional changes in the market occur.

3.     Fair Value Measurements

Recurring Fair Value Measurements

We have a non-qualified elective deferred compensation plan for Trustees and certain members of our management team that, prior to December 31, 2019, permitted participants to defer up to 100% of their compensation on a pre-tax basis and receive a tax-deferred return on such deferrals. Effective December 31, 2019, no new investments of deferred compensation were eligible for the plan.  The assets held in the plan (comprised primarily of mutual funds and equity securities) and the corresponding liability to the participants are measured at fair value on a recurring basis on our consolidated balance sheets using quoted market prices, as are other marketable securities that we hold. The balance of the plan, which was fully funded and totaled $2.6 million as of September 30, 2021, is included in the line entitled “prepaid expenses and other assets, net” on our consolidated balance sheets along with an insignificant amount of other marketable securities. The offsetting liability associated with the plan is adjusted to fair value at the end of each accounting period based on the fair value of the plan assets and reported in “other liabilities” on our consolidated balance sheets. The assets of the plan are classified in Level 1 of the fair value hierarchy, while the offsetting liability is classified in Level 2 of the fair value hierarchy.

The fair values of our interest rate derivatives are determined using widely accepted valuation techniques, including 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, and uses observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While we determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our interest rate derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of September 30, 2021, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivatives and determined that these adjustments are not significant. As a result, we determined that our interest rate derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets (excluding investing receivables) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturities of these instruments.  The fair values of our investing receivables, as disclosed in Note 7, were based on the discounted estimated future cash flows of the loans (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans with similar maturities and credit quality, and the estimated cash payments include scheduled principal and interest payments.  For our disclosure of debt fair values in Note 9, we estimated the fair value of our unsecured senior notes based on quoted market rates for publicly-traded debt (categorized within Level 2 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled
11


principal and interest payments.  Fair value estimates are made as of a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. 

For additional fair value information, refer to Note 7 for investing receivables, Note 9 for debt and Note 10 for interest rate derivatives. 

The table below sets forth our financial assets and liabilities accounted for at fair value on a recurring basis as of September 30, 2021 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):
DescriptionQuoted Prices in
Active Markets for
Identical Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable 
Inputs
(Level 3)