COPT Defense Properties Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Schedule of fair value assets and liabilities measured on recurring basis

The table below sets forth financial assets and liabilities of COPT and its subsidiaries that are accounted for at fair value on a recurring basis as of June 30, 2013 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
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	6,649	$	—	$	—	$	6,649
Common stocks	216		—		—		216
Other	211		—		—		211
Common stock (1)	1,825		—		—		1,825
Interest rate derivatives (2)	—		6,963		—		6,963
Warrants to purchase common stock (2)	—		299		—		299
Assets	$	8,901	$	7,262	$	—	$	16,163
Liabilities:
Deferred compensation plan liability (3)	$	7,076	$	—	$	—	$	7,076
Interest rate derivatives	—		3,556		—		3,556
Liabilities	$	7,076	$	3,556	$	—	$	10,632
Redeemable noncontrolling interest	$	—	$	—	$	15,571	$	15,571

(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” on COPT’s consolidated balance sheet.

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

The table below sets forth financial assets and liabilities of COPLP and its subsidiaries that are accounted for at fair value on a recurring basis as of June 30, 2013 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
Assets:
Common stock (1)	$	1,825	$	—	$	—	$	1,825
Interest rate derivatives (2)	—		6,963		—		6,963
Warrants to purchase common stock (2)	—		299		—		299
Assets	$	1,825	$	7,262	$	—	$	9,087
Liabilities:
Interest rate derivatives	$	—	$	3,556	$	—	$	3,556
Redeemable noncontrolling interest	$	—	$	—	$	15,571	$	15,571

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

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

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 used by us in determining the fair value of the properties (dollars in thousands):

Quoted Prices in

Significant

Impairment Losses Recognized

Active Markets for

Significant Other

Unobservable

Three Months

Six Months

Identical Assets

Observable Inputs

Inputs

Ended

Description

(Level 1)

(Level 2)

(Level 3)

Total

June 30, 2013

Assets (1):

Properties, net

—

113,144

7,195

9,052

(1) Reflects balance sheet classifications of assets at time of fair value measurement, excluding the effect of held for sale classifications.

The table below sets forth the fair value hierarchy of the valuation techniques used by us in determining such fair values (dollars in thousands):

Quoted Prices in

Significant

Impairment Losses Recognized (1)

Active Markets for

Significant Other

Unobservable

Three Months

Six Months

Identical Assets

Observable Inputs

Inputs

Ended

Description

(Level 1)

(Level 2)

(Level 3)

Total

June 30, 2012

Assets (2):

Properties, net

—

202,250

2,214

7,693

(1) Represents impairment losses, excluding exit costs incurred of $105,000 for the three months ended June 30, 2012 and $1.2 million for the six months ended June 30, 2012.

(2) Reflects balance sheet classifications of assets at time of fair value measurement, excluding the effect of held for sale classifications.

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 (dollars in thousands):



Description	Fair Value on Measurement Date		Valuation Technique	Unobservable Input	Range (Weighted Average)
Property on which impairment loss was recognized	$	113,144	Bids for property indicative of value	Indicative bids (1)	(1)

(1) This fair value measurement was developed by a third party source, subject to our corroboration for reasonableness.

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



Description	Fair Value on Measurement Date		Valuation Technique	Unobservable Input	Range (Weighted Average)
Properties on which impairment losses were recognized	$	202,250	Bid for properties indicative of value	Indicative bid (1)	(1)
			Contract of sale	Contract price (1)	(1)
			Discounted cash flow	Discount rate	11.0% (2)
				Terminal capitalization rate	9.0% (2)
				Market rent growth rate	3.0% (2)
				Expense growth rate	3.0% (2)
			Yield Analysis	Yield	12% (2)
				Market rent rate	$8.50 (2)
				Leasing costs	$20.00 per square foot (2)

(1) These fair value measurements were developed by third party sources, subject to our corroboration for reasonableness.

(2) Only one value applied for this unobservable input.

- Definition

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

+ References + Details