death or qualifying disability. The Company is not obligated to repurchase shares under the Share Repurchase Program. The Company may amend, suspend or terminate the Share Repurchase Program at its discretion at any time, subject to certain notice
requirements. For the nine months ended September 30, 2015, the Company repurchased 206,432 shares of common stock for 2.0 million at an average price of 9.75 per share. For the year ended December 31, 2014, the Company repurchased 14,355
shares of common stock for a 0.1 million at an average price of 9.92 per share pursuant to the Share Repurchase Program. The Company funds repurchase requests received during a quarter with proceeds set aside for that purpose which are not
expected to exceed proceeds received from its DRP. As of September 30, 2015, there were no unfulfilled repurchase requests.
10. Non-controlling Interests
Operating Partnership Non-controlling interests include the aggregate limited partnership interests in the Operating Partnership held by limited
partners, other than the Company. Income loss attributable to the non-controlling interests is based on the limited partners’ ownership percentage of the Operating Partnership. Income loss allocated to the Operating Partnership non-controlling
interests for the three and nine months ended September 30, 2015 and 2014 was an immaterial amount.
Other Other non-controlling interests represent third-party equity interests in ventures that are consolidated with the Company’s
financial statements. Net income loss attributable to the other non-controlling interests was a 0.1 million loss and an immaterial amount for the three months ended September 30, 2015 and 2014, respectively and a 0.3 million loss and an
immaterial amount for the nine months ended September 30, 2015 and 2014, respectively.
11. Fair Value
Fair Value Measurement The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and
categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities Level 1 and the lowest priority to unobservable inputs Level 3. If the inputs used to
measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1. Quoted prices for identical assets or liabilities in an active market. Level 2. Financial assets and liabilities whose values are based on the following:
a Quoted prices for similar assets or liabilities in active markets.
b Quoted prices for identical or similar assets or liabilities in non-active markets.
c Pricing models whose inputs are observable for substantially the full term of the asset or liability.
d Pricing models whose inputs are derived principally from or corroborated by observable market data
for substantially the full term of the asset or liability. Level 3. Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair
value measurement. Fair Value of Financial Instruments
U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the
financial instruments. The use of different market assumptions andor estimation methodologies may have a material effect on estimated fair value.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Unaudited
30
The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of September 30, 2015 and December 31, 2014 dollars in thousands:
September 30, 2015 December 31, 2014
Principal Amount
Carrying Value
Fair Value
Principal Amount
Carrying Value
Fair Value
Financial assets:
1
Real estate debt investments, net 203,019
202,549 223,792
145,887 146,267
153,001
Financial liabilities:
1
Mortgage notes payable 579,750
579,750 555,902
76,000 76,000
75,293
_____________________________
1 The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.
Disclosure about fair value of financial instruments is based on pertinent information available to management as of the reporting date. Although management is not aware of any factors that would significantly affect fair value, such amounts have
not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.
Real Estate Debt Investments For debt investments, fair value was approximated by comparing the current yield to the estimated yield for newly originated
loans with similar credit risk or the market yield at which a third party might expect to purchase such investment. Fair value was determined assuming fully-extended maturities regardless of structural or economic tests required to achieve such extended
maturities. These fair value measurements of debt are generally based on unobservable inputs and, as such, are classified as Level 3 of the fair value hierarchy.
Mortgage Notes Payable For mortgage notes payable, the Company primarily uses rates currently available with similar terms and remaining maturities
to estimate fair value. These measurements are determined using comparable U.S. Treasury rates as of the end of the reporting period. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value
hierarchy.
12. Segment Reporting
