NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Summary of Significant Accounting
Policies
Organization
Presidential Realty Corporation (“Presidential”
or “the Company”) is a Delaware corporation organized in 1983 to succeed to the business of a company of the same
name which was organized in 1961 to succeed to the business of a closely held real estate business founded in 1911. Since 1982,
we have elected to be treated as a real estate investment trust (“REIT”) for Federal and State income tax purposes.
We own, directly or indirectly, interests in real estate and interests in entities which own real estate.
On November 8, 2011, we and PDL Partnership,
a New York general partnership (“PDL Partnership”), the general partners of which are Jeffrey F. Joseph (a director
and former officer), Steven Baruch (a former director and former officer) and Thomas Viertel (a former director and former officer),
entered into a series of transactions with the investors and Signature Community Investment Group LLC (together with its affiliates,
“Signature”)(“Strategic Transaction”). Signature is owned by Nickolas W. Jekogian, III, the promoter of
the stock transactions included in the Strategic Transaction. The Strategic Transaction among other things resulted in the termination
of our plan of liquidation.
Basis of Presentation and Going Concern
Considerations
For the three months ended March 31, 2013,
the Company had a loss from continuing operations. This combined with a history of operating losses and working capital deficiency
have been detrimental to our operations and could potentially affect our ability to meet our obligations and continue as a going
concern. See Note 7A3 of Notes to Consolidated Financial Statements. If the Company is required to pay any significant amounts
under its guaranty related to our Hato Rey property, such a payment would also adversely impact our liquidity. Our ability
to continue as a going concern is dependent upon management’s successful execution of our business plan to achieve profitability,
to increase working capital raising debt and or equity and a successful defense of the claims against the Company under its guaranty
related to the Hato Rey property. The accompanying consolidated financial statements do not include any adjustments that may result
from this uncertainty.
The consolidated financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and the requirements of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include
all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and
operating results.
The accompanying unaudited consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
for interim financial information. The results for such interim periods are not necessarily indicative of the results
to be expected for the year. In the opinion of management, all adjustments (consisting of only normal recurring accruals)
considered necessary for a fair presentation of the results for the respective periods have been reflected. These consolidated
financial statements and accompanying notes should be read in conjunction with the Company’s Form 10-K for the year ended
December 31, 2012.
PRESIDENTIAL
REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization
and Summary of Significant Accounting Policies (Continued)
Principles of Consolidation
The consolidated financial statements
include the accounts of Presidential Realty Corporation and its wholly owned subsidiaries. Additionally, the consolidated financial
statements include 100% of the account balances of PDL, Inc. and Associates Limited Co-Partnership (the “Hato Rey Partnership”).
PDL, Inc. (a wholly owned subsidiary of Presidential and the general partner of the Hato Rey Partnership) and Presidential own
an aggregate 60% general and limited partnership interest in the Hato Rey Partnership (see Note 5). All significant intercompany
balances and transactions have been eliminated.
Rental Revenue Recognition
The Company acts as lessor under operating
leases. Rental revenue is recorded on the straight-line basis from the later of the date of the commencement of the lease or the
date of acquisition of the property subject to existing leases, which averages minimum rents over the terms of the leases. Certain
leases require the tenants to reimburse a pro rata share of real estate taxes, utilities and maintenance costs. Recognition of
rental revenue is generally discontinued when the rental is delinquent for ninety days or more, or earlier if management determines
that collection is doubtful.
Allowance for Doubtful Accounts
The Company assesses the collectability
of amounts due from tenants and other receivables, using indicators such as past-due accounts, the nature and age of the receivable,
the payment history and the ability of the tenant or debtor to meet its payment obligations. Management’s estimate of allowances
for doubtful accounts is subject to revision as these factors change. Rental revenue is recorded on the accrual method and rental
revenue recognition is generally discontinued when the tenant in occupancy is delinquent for ninety days or more. Bad debt expense
is charged for vacated tenant accounts and subsequent receipts collected for those receivables will reduce bad debt expense. As
of March 31, 2013 and December 31, 2012, the allowance for doubtful accounts for continuing operations relating to tenant obligations
was $10,066 and $7,506, respectively.
Net Loss Per Share
Basic net loss per share data is computed
by dividing net loss by the weighted average number of shares of Class A and Class B common stock outstanding (excluding nonvested
shares) during each period. Diluted net loss per share is computed by dividing net loss by the weighted average shares outstanding,
including the dilutive effect, if any, of nonvested shares. For the three months ended March 31, 2013 and 2012, the weighted average
shares outstanding as used in the calculation of diluted loss per share do not include 740,000 of outstanding stock options, as
their inclusion would be antidilutive.
Cash and Cash Equivalents
Cash and cash equivalents include cash
on hand, cash in banks and money market funds.
Management Estimates
The consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing the
consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and
the reported amounts of income and expense for the reporting period. Actual results could differ from those estimates.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Summary of Significant Accounting
Policies (Continued)
Discontinued Operations
The Company follows the guidance of the
presentation and property, plant, and equipment Topics of the ASC, with respect to long-lived assets classified as held for sale.
The ASC requires that the results of operations, including impairment, gains and losses related to the properties that have been
sold or properties that are intended to be sold, be presented as discontinued operations in the statements of operations for all
periods presented and the assets and liabilities of properties intended to be sold are to be separately classified on the balance
sheet. Properties designated as held for sale are carried at the lower of cost or fair value less costs to sell and are not depreciated.
Accounting for Uncertainty in Income
Taxes
The Company follows the guidance of the
recognition of current and deferred income tax accounts, including accrued interest and penalties, in accordance with ASC 740-10-25.
Under this guidance, if the Company’s tax positions in relation to certain transactions were examined and were not ultimately
upheld, the Company would be required to pay an income tax assessment and related interest. Alternatively, the Company could elect
to pay a deficiency dividend to its shareholders in order to continue to qualify as a REIT and the related interest assessment
to the taxing authorities.
2. Real Estate
Real estate included in continuing operations
is comprised of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
79,100
|
|
|
$
|
79,100
|
|
Buildings
|
|
|
985,287
|
|
|
|
982,408
|
|
Furniture and equipment
|
|
|
50,026
|
|
|
|
50,026
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,114,413
|
|
|
$
|
1,111,534
|
|
Rental revenue from the Maple Tree property
constituted virtually all of the rental revenue for the Company during the quarters ended March 31, 2013 and 2012.
3. Discontinued Operations
During the quarter ended March 31, 2012, the Company designated
PDL, Inc. & Associates, Limited Co-partnership, Presidential Matmor Corp. and PDL, Inc. as discontinued operations.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes
operations for the property discontinued:
|
|
Three Months
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Revenues:
|
|
|
|
|
|
|
Rental
|
|
$
|
895,652
|
|
|
$
|
951,918
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenes
|
|
|
-
|
|
|
|
3,633
|
|
Rental property expenses:
|
|
|
|
|
|
|
|
|
Operating
|
|
|
585,581
|
|
|
|
600,894
|
|
Interest on mortgage debt
|
|
|
562,042
|
|
|
|
576,703
|
|
Real estate taxes
|
|
|
78,638
|
|
|
|
78,742
|
|
|
|
|
|
|
|
|
|
|
Total rental property expense
|
|
|
1,226,261
|
|
|
|
1,259,972
|
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
689
|
|
|
|
-
|
|
Total loss from discontinued
operations
|
|
$
|
(329,920
|
)
|
|
$
|
(308,054
|
)
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Assets related to discontinued operations:
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
1,905,985
|
|
|
$
|
1,905,985
|
|
Buildings
|
|
|
13,829,390
|
|
|
|
13,829,390
|
|
Furniture and equipment
|
|
|
6,375
|
|
|
|
6,375
|
|
Less: accumulated depreciation
|
|
|
(2,087,424
|
)
|
|
|
(2,087,424
|
)
|
|
|
|
|
|
|
|
|
|
Net real estate
|
|
|
13,654,326
|
|
|
|
13,654,326
|
|
Other assets
|
|
|
629,096
|
|
|
|
548,480
|
|
Total assets related to discontinued operations
|
|
$
|
14,283,422
|
|
|
$
|
14,198,806
|
|
|
|
|
|
|
|
|
|
|
Liabilities related to discontinued operations:
|
|
|
|
|
|
|
|
|
Mortgage debt
|
|
$
|
14,009,797
|
|
|
$
|
14,009,797
|
|
Mortgage related interest and fees
|
|
|
3,559,461
|
|
|
|
3,287,507
|
|
Other liabilities
|
|
|
624,909
|
|
|
|
546,185
|
|
Total liabilities related to discontinued operations
|
|
$
|
18,194,167
|
|
|
$
|
17,843,489
|
|
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. Mortgage Debt
The mortgage debt on the Hato Rey Center
in Puerto Rico is being recorded in discontinued operations. At March 31, 2013 and December 31, 2012, the principal balance on
the mortgage was $14,009,797. The loan is nonrecourse to the Company with standard carve outs. The first mortgage loan on
the Hato Rey Center property matures on May 11, 2028, but provided that if it was not repaid on or before May 11, 2008, the interest
rate on the loan was increased by two percentage points to 9.38% per annum of which 2% per annum would be deferred until maturity.
Since April 2011, cashflow at the
property was not sufficient to make the required monthly mortgage payments. (See Note 7A). At this time, Berkadia Commercial
Mortgage LLC (“Berkadia”) was put in place as the special servicer for the loan and all rental payments for the
property were sent to a lock box account controlled by Berkadia. During this period Berkadia has applied $474,341 to the
mortgage balance and $1,339,576 to interest accrued on the mortgage. The Company is accruing an additional 5% per annum
as default interest and a 5% late payment fee. At March 31, 2013 and December 31, 2012, interest and other fees payable were
$3,559,461 and $3,287,507, respectively, which were offset by escrow accounts maintained by Berkadia. Because of the
foreclosure action, the Hato Rey Center property was classified as a discontinued operation.
On June 8, 2012, we closed on a mortgage and line of credit
for a combined total of $1,000,000 with Country Bank for Savings on the Mapletree Industrial Center. The mortgage is for $500,000
at a 5% interest rate, for a term of 5 years. Thereafter the interest will adjust monthly equal to the bank’s Prime Rate,
plus 1% with an interest rate floor of 5%, for a term of 15 years. We received $459,620 of net proceeds. The balance at March
31, 2013 and December 31, 2012 was $481,866 and $488,748, respectively. The line of credit is for $500,000, with an interest rate
of 1% over the bank’s Prime Rate. At March 31, 2013, there was $100,000 outstanding on the line of credit. As of May 15,
2013, there was $200,000 outstanding on the line of credit. The line of credit is due on demand. Both the mortgage and the line
of credit are secured by the Mapletree Industrial Center in Palmer, Massachusetts.
5. Hato Rey Partnership
PDL, Inc. (a wholly owned subsidiary of
Presidential) is the general partner of the Hato Rey Partnership. Presidential and PDL, Inc. have an aggregate 60% general and
limited partner interest in the Hato Rey Partnership. The Company exercises effective control over the partnership through its
ability to manage the affairs of the partnership in the ordinary course of business. Accordingly, the Company consolidates the
Hato Rey Partnership in the accompanying consolidated financial statements. As of March 2012, the Company has reported the partnership
as a discontinued operation.
The Hato Rey Partnership owns
and operates the Hato Rey Center, an office building with 207,000 square feet of commercial space, located in Hato Rey,
Puerto Rico. The Company has previously advanced $2,670,000 to the partnership to be used for building improvements and for
operations. The loan, which was advanced to the partnership, as needed, bears interest at the rate of 13% per annum, with
interest and principal to be paid out of the positive cash flow from the property or upon a refinancing of the First Mortgage
on the property. At March 31, 2013 and December 31, 2012, the loan balance was $2,670,000 and accrued interest amounted
to $1,614,941. These amounts were eliminated in consolidation. Management does not believe the Company will collect any of
the principal or interest owed the Company. During the second quarter of 2012 the Company stopped accruing interest on
the loan.
6. Income Taxes
Presidential has elected to qualify as
a Real Estate Investment Trust under the Internal Revenue Code. A REIT which distributes at least 90% of its real estate investment
trust taxable income to its shareholders each year by the end of the following year and which meets certain other conditions will
not be taxed on that portion of its taxable income which is distributed to its shareholders.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ASC 740 prescribes a more likely than
not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken. If the Company’s tax position in relation to a transaction was not likely to be upheld, the Company would be required
to record the accrual for the tax and interest thereon. As of March 31, 2013, the tax years that remain open to examination by
the federal, state and local taxing authorities are the 2009 – 2011 tax years and the Company was not required to accrue
any liability for those tax years.
For the three months ended March 31, 2013,
the Company had a tax loss of approximately $352,000 ($0.10) per share, which is comprised of an ordinary loss.
7. Commitments, Contingencies and
Related parties
|
A.
|
Commitments and Contingencies
|
|
1)
|
Except as described in item 3 below, Presidential is not a
party to any material legal proceedings. The Company may from
time to time be a party to routine litigation incidental to the
ordinary course of its business.
|
|
2)
|
In the opinion of management,
all of the Company’s properties are adequately covered by
insurance in accordance with normal insurance practices.
|
|
3)
|
On April 4, 2012, a mortgage foreclosure
action was filed in the Court of First Instance, San Juan Superior
Part, in the Commonwealth of Puerto Rico to foreclose on the Company’s
Hato Rey property. The action is entitled U.S. Bank National Association,
as trustee, as successor-in-interest to Bank of America, National
Association, as trustee for the Registered Holders of GS Mortgage
Securities Corporation II, Commercial Mortgage Pass-Through Certificates,
Series 1998-C1, acting by and through Berkadia Commercial Mortgage
LLC in its capacity as special servicer pursuant to the pooling
and servicing agreement dated October 11, 1998, against PDL, Inc.
& Associates, Limited Co-partnership; PDL, Inc., Presidential
Realty Corporation; Lester Cohen and F.D. Rich Company of Puerto
Rico, Inc. The complaint seeks a judgment against the Hato Rey
Partnership in the amount of not less than $19,512,591, consisting
of i) $14,484,138 in principal, ii) $1,119,406 in accrued interest,
iii) $685,985 in default interest, iv) $48,371 in late charges,
v) $1,424,691 in deferred interest and vi) $1,750,000 in liquidated
damages, as well as additional interest and default charges which
continue to accrue under the mortgage loan on the Hato Rey property
and foreclosure of the mortgage notes in order to sell the Hato
Rey property and apply the proceeds of sale against the indebtedness.
The Company’s wholly owned subsidiary, PDL, Inc., is the
general partner of the partnership and the Company’s wholly
owned subsidiary, Presidential Matmor Corporation, is a limited
partner of the partnership.
|
The
complaint also seeks judgments against PDL, Inc., the Company, Lester Cohen and F.D. Rich Company of Puerto Rico, Inc., with liability
among them to be allocated 1%, 45%, 9% and 45%, respectively, under the terms of certain guarantees issued by them in connection
with the mortgage loans, for alleged physical waste to the Property and, the costs of certain repairs to the property of not less
than $1,100,000 and the reasonable legal costs and expenses in connection with the enforcement of the loan documents. In 1998,
at the time the mortgage loan was made, F.D. Rich Company of Puerto Rico, Inc. was a limited partner of the partnership. In April
2006, Presidential Matmor Corp. acquired the limited partnership interest in the partnership owned by F.D. Rich Company of Puerto
Rico, Inc. In connection with the acquisition of that interest, the parties executed a release and indemnification agreement which
provides, among other things, that the Company and Presidential Matmor Corp. agree to indemnify F.D. Rich of Puerto Rico, Inc.
against any liability under the guaranty.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The guarantees provide that the guarantors will pay
the lender any loss, damage, cost, expense, liability, claim or other obligation incurred by the lender arising out of fraud,
intentional material misrepresentation, willful misconduct, physical waste committed on the subject property, failure to pay any
valid taxes and assessments to the extent rents from the property are sufficient to pay such taxes, mechanics liens, materialmen’s
liens or other liens which could create liens superior to the mortgage lien, reasonable legal costs and expenses incurred by lender
in connection with litigation or other legal proceedings to enforce the loan, the breach of any material representation, covenant
and warranty under the related environmental and hazardous substance indemnification agreement, misapplication or conversion of
any insurance proceeds, awards or other amounts received in connection with condemnation of all or a portion of the property or
any rents following an event of default and any security deposits not delivered to the lender. The lender has not asserted any
claims against the Company other than those asserted under the guarantees as referenced above. The Company believes that the likelihood
that the Company will be held liable for the claims asserted under the guarantees is remote.
The plaintiff has made a motion
for the entry of judgment against the Partnership and PDL Inc. and the right to sell the property in foreclosure. The motion is
currently pending. The plaintiff lender has also obtained a default judgment against F. D. Rich Company of Puerto Rico, Inc. That
company was dissolved in 2009.
Property Management Agreement
On November 8, 2011, the Company and Signature entered
into a Property Management Agreement pursuant to which the Company has retained Signature as the exclusive managing and leasing
agent for the Company’s Mapletree Industrial Center property in Palmer, Massachusetts (the “Mapletree Property”).
Signature shall manage the Mapletree Property in accordance with specific management guidelines and leasing guidelines and shall
meet specific reporting requirements and vendor insurance requirements. Signature will receive compensation of 5% of monthly rental
income actually received from tenants at the Mapletree Property. The Company will reimburse Signature for all reasonable expenses
incurred by Signature in performance of its duties under the Property Management Agreement that are either in accordance with
the annual budget or which have been approved in writing by the Company. Such expense shall include, but not be limited to, Signature’s
costs of the salaries, benefits and appropriate and prudent training for Signature’s employees who are engaged solely in
management or operation of the Mapletree Property, but excluding certain expenses that will be borne by Signature, as specified
in the Property Management Agreement. The Property Management Agreement renewed for a one year term on November 8, 2012 and will
be automatically renewable for one year terms until it is terminated by either party upon written notice. For the three months
ended March 31, 2013 and 2012 the Company incurred management fees of $10,828 and $9,178, respectively.
Ass
et Management Agreement
On November 8, 2011, the
Company and Signature entered into an Asset Management Agreement pursuant to which the Company engaged Signature to oversee
the Company’s Mapletree Industrial Center property in Palmer, Massachusetts and an office building
at Hato Rey, Puerto Rico
(the “Properties”). Signature’s duties include leasing, marketing and
advertising, financing, construction and dispositions of the Properties. Signature will receive a construction fee for any
major renovations or capital projects, subject to the approval of the Company’s Board of Directors, an asset management
fee of 1.5% of the monthly gross rental revenues collected for the Properties, a finance fee of 1%
on any debt placement, and a disposition fee of 1% on the sale of any assets, as specified in the Asset Management Agreement.
The Asset Management Agreement renewed for a one year term on November 8, 2012 and will be automatically renewable for one
year terms until it is terminated by either party upon written notice. For the three and three months ended March 31, 2013
and 2012 the Company incurred an asset management fee of $12,777 and $0, respectively.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Sublease
The Company subleases its executive office
space under a month to month lease with Signature for a monthly rental payment of $433 or $5,200 per year. Either party may
terminate the sublease upon 30 days prior written notice. For each of the three month periods ended March 31, 2013 and 2012
the Company incurred approximately $1,300 in rent expense.
8. Stock Options
In connection with the November 8, 2011 Strategic Transactions
the Company issued 740,000 options at an exercise price of $1.25. A total of 148,000 shares vest six months after the grant date.
At March 31, 2013, the aggregate intrinsic value was $0. The remaining options vest upon the achievement of performance milestones.
Options vesting on the achievement of performance milestones will not be recognized as compensation until such milestones are
deemed probable of achievement. For the quarters ended March 31, 2013 and 2012 compensation expense was $0 and $74,000, respectively.
The Company has approximately $592,000 of unrecognized compensation expense related to unvested share-based compensation awards,
which will vest upon the achievement of performance milestones.
.
9. Estimated Fair Value of Financial Instruments
Estimated fair values of the Company’s
financial instruments as of March 31, 2013 and December 31, 2012 were determined using available market information and various
valuation estimation methodologies. Considerable judgment was required to interpret the effects on fair value of such items as
future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other
factors. The estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a errant
market exchange. Also, the use of different market assumptions and/or estimation methodologies may have a material effect on the
estimated fair values.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
March 31, 2013
|
|
|
December 31, 2012
|
|
|
|
(Amounts in thousands)
|
|
|
(Amounts in thousands)
|
|
|
|
Net Carrying
|
|
|
Estimated
|
|
|
Net Carrying
|
|
|
Estimated
|
|
|
|
Value (1)
|
|
|
Fair Value
|
|
|
Value (1)
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
776
|
|
|
$
|
776
|
|
|
$
|
853
|
|
|
$
|
853
|
|
Notes Receivable
|
|
|
13
|
|
|
|
13
|
|
|
|
15
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage debt
|
|
|
482
|
|
|
|
482
|
|
|
|
489
|
|
|
|
489
|
|
Line of credit
|
|
|
100
|
|
|
|
100
|
|
|
|
-
|
|
|
|
-
|
|
(1) Net carrying value is net of valuation reserves and
discounts where applicable.
The fair value estimates presented above
were based on pertinent information available to management as of March 31, 2013 and December 31, 2012.
Fair value methods and assumptions were
as follows:
Cash and Cash Equivalents – The
estimated fair value approximated carrying value, due to the short maturity of these investments.
Notes Receivable – The fair value
of notes receivable was estimated by discounting projected cash flows using current rates for similar notes receivable.
Mortgage Debt and line of credit –
The fair value of mortgage debt was estimated by discounting projected cash flows using current rates for similar debt.