COPT Defense Properties Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of fair value assets and liabilities measured on recurring basis

The tables below set forth financial assets and liabilities of COPT and its subsidiaries that are accounted for at fair value on a recurring basis as of December 31, 2017 and 2016 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):



Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
December 31, 2017:
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	4,547	$	—	$	—	$	4,547
Other	69		—		—		69
Interest rate derivatives (2)	—		3,073		—		3,073
Total assets	$	4,616	$	3,073	$	—	$	7,689
Liabilities:
Deferred compensation plan liability (3)	$	—	$	4,616	$	—	$	4,616

December 31, 2016:
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	5,346	$	—	$	—	$	5,346
Other	91		—		—		91
Interest rate derivatives (2)	—		158		—		158
Total assets	$	5,437	$	158	$	—	$	5,595
Liabilities:
Deferred compensation plan liability (3)	$	—	$	5,437	$	—	$	5,437
Interest rate derivatives	—		1,572		—		1,572
Redeemable preferred shares of beneficial interest (4)	—		26,583		—		26,583
Total liabilities	$	—	$	33,592	$	—	$	33,592

(1) Included in the line entitled “restricted cash and marketable securities” on COPT’s consolidated balance sheet.

(2) Included in the line entitled “prepaid expenses and other assets, net” on COPT’s consolidated balance sheet.

(3) Included in the line entitled “other liabilities” on COPT’s consolidated balance sheet.

(4) See disclosure regarding our Series K Preferred Shares in Note 13.

COPLP and Subsidiaries

The tables below set forth financial assets and liabilities of COPLP and its subsidiaries that are accounted for at fair value on a recurring basis as of December 31, 2017 and 2016 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):



Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
December 31, 2017:
Assets:
Interest rate derivatives (1)	$	—	$	3,073	$	—	$	3,073

December 31, 2016:
Assets:
Interest rate derivatives (1)	$	—	$	158	$	—	$	158
Liabilities:
Interest rate derivatives	$	—	$	1,572	$	—	$	1,572
Redeemable preferred units of general partner (2)	—		26,583		—		26,583
Total liabilities	$	—	$	28,155	$	—	$	28,155

(1) Included in the line entitled “prepaid expenses and other assets, net” on COPLP’s consolidated balance sheet.

(2) See disclosure regarding our Series K Preferred Units in Note 14.

Schedule of fair value hierarchy of impaired properties and other assets associated with such properties

The table below sets forth the fair value hierarchy of the valuation technique we used to determine nonrecurring fair value measurements of properties as of December 31, 2017 (in thousands):



	Fair Values as of December 31, 2017
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Operating properties, net	$	—	$	—	$	3,850	$	3,850
Projects in development or held for future development	$	—	$	—	$	1,755	$	1,755

Schedule of quantitative information about significant unobservable inputs used for Level 3 fair value measurements

The table below sets forth quantitative information about significant unobservable inputs used for the Level 3 fair value measurements reported above as of December 31, 2017 (dollars in thousands):



Valuation Technique	Fair Values on Measurement Date		Unobservable Input	Range (Weighted Average)
Discounted cash flow	$	3,850	Discount rate	14% - 16% (14%)
			Terminal capitalization rate	12% (1)
Comparable sales analysis	$	1,755	Comparable sales prices	N/A

(1) Only one fair value applied for this unobservable input.