Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

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Fair Value Measurements
 12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value MeasurementsAccounting standards define fair value as the exit price, or the amount that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standards also establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy of these inputs is broken down into three levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs include (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in inactive markets and (3) inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is most significant to the fair value measurement.
Recurring Fair Value Measurements 

COPT has 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. The Company froze additional entry into the plan effective December 31, 2019. 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 COPT’s consolidated balance sheets using quoted market prices, as are other marketable securities that we hold. The balance of the plan, which was fully funded, totaled $3.0 million as of December 31, 2020 and $3.1 million as of December 31, 2019, and is included in the line entitled “prepaid expenses and other assets, net” on COPT’s 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 COPT’s 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 December 31, 2020 and 2019, 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 8, 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 10, 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 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 8 for investing receivables, Note 10 for debt and Note 11 for interest rate derivatives.
COPT and Subsidiaries

The tables below set forth financial assets and liabilities of COPT and subsidiaries that are accounted for at fair value on a recurring basis as of December 31, 2020 and 2019 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, 2020:
Assets:        
Marketable securities in deferred compensation plan (1)        
Mutual funds $ 3,008  $ —  $ —  $ 3,008 
Other 19  —  —  19 
Other marketable securities (1) 30  —  —  30 
Total assets $ 3,057  $ —  $ —  $ 3,057 
Liabilities:        
Deferred compensation plan liability (2) $ —  $ 3,027  $ —  $ 3,027 
Interest rate derivatives —  9,522  —  9,522 
Total liabilities $ —  $ 12,549  $ —  $ 12,549 
December 31, 2019:
Assets:        
Marketable securities in deferred compensation plan (1)        
Mutual funds $ 3,035  $ —  $ —  $ 3,035 
Other 25  —  —  25 
Interest rate derivatives (1) —  23  —  23 
Total assets $ 3,060  $ 23  $ —  $ 3,083 
Liabilities:        
Deferred compensation plan liability (2) $ —  $ 3,060  $ —  $ 3,060 
Interest rate derivatives —  25,682  —  25,682 
Total liabilities $ —  $ 28,742  $ —  $ 28,742 

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

The tables below set forth financial assets and liabilities of COPLP and subsidiaries that are accounted for at fair value on a recurring basis as of December 31, 2020 and 2019 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, 2020:
Assets:        
Other marketable securities (1) $ 30  $ —  $ —  $ 30 
Liabilities:        
Interest rate derivatives $ —  $ 9,522  $ —  $ 9,522 
December 31, 2019:
Assets:        
Interest rate derivatives (1) $ —  $ 23  $ —  $ 23 
Liabilities:        
Interest rate derivatives $ —  $ 25,682  $ —  $ 25,682 

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

2019 Nonrecurring Fair Value Measurements
In the third quarter of 2019, we determined that the carrying amount of land held in Frederick, Maryland would not be recovered from its eventual disposition. As a result, we recognized an impairment loss of $327,000 in order to adjust the land to its estimated fair value. This land was sold in the fourth quarter of 2019.