Fair value measurements

9 Months Ended

Sep. 30, 2012

Fair value measurements

Fair value measurements

7.      Fair value measurements

Recurring fair value measurements

We are required to disclose fair value information about all financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value.  We measure and disclose the estimated fair value of financial assets and liabilities utilizing a fair value hierarchy that distinguishes between data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions.  This hierarchy consists of three broad levels as follows: (1) quoted prices in active markets for identical assets or liabilities, (2) “significant other observable inputs,” and (3) “significant unobservable inputs.”  “Significant other observable inputs” can include quoted prices for similar assets or liabilities in active markets, as well as inputs that are observable for the asset or liability, such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.  “Significant unobservable inputs” are typically based on an entity’s own assumptions, since there is little, if any, related market activity. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of input that is significant to the fair value measurement in its entirety.  Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.  There were no transfers between the levels in the fair value hierarchy during the three or nine months ended September 30, 2012.

The following tables set forth the assets and liabilities that we measure at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2012, and December 31, 2011 (in thousands):

			September 30, 2012
Description	Total		Quoted Prices in Active Markets for Identical Assets		“Significant Other Observable Inputs”		“Significant Unobservable Inputs”
Assets:
Marketable securities	$	6,563	$	6,563	$	–	$	–
Liabilities:
Interest rate swap agreements	$	25,336	$	–	$	25,336	$	–

			December 31, 2011
Description	Total		Quoted Prices in Active Markets for Identical Assets		“Significant Other Observable Inputs”		“Significant Unobservable Inputs”
Assets:
Marketable securities	$	6,235	$	6,235	$	–	$	–
Liabilities:
Interest rate swap agreements	$	32,980	$	–	$	32,980	$	–

The carrying amounts of cash and cash equivalents, restricted cash, tenant receivables, other assets, accounts payable, accrued expenses, and tenant security deposits approximate fair value.  Our marketable securities and our interest rate swap agreements, respectively, have been recorded at fair value.  The fair values of our secured notes payable, unsecured senior notes payable, unsecured senior line of credit, unsecured senior bank term loans, and unsecured senior convertible notes were estimated using widely accepted valuation techniques, including discounted cash flow analyses of “significant other observable inputs” such as available market information on discount and borrowing rates with similar terms and maturities.  Because the valuations of our financial instruments are based on these types of estimates, the actual fair value of our financial instruments may differ materially if our estimates do not prove to be accurate.  Additionally, the use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

As of September 30, 2012, and December 31, 2011, the book and fair values of our marketable securities, interest rate swap agreements, secured notes payable, unsecured senior notes payable, unsecured senior line of credit, and unsecured senior bank term loans were as follows (in thousands):

	September 30, 2012						December 31, 2011
	Book Value			Fair Value			Book Value			Fair Value
Marketable securities	$	6,563		$	6,563		$	6,235		$	6,235
Interest rate swap agreements	$	(25,336	)	$	(25,336	)	$	(32,980	)	$	(32,980	)
Secured notes payable	$	(719,350	)	$	(814,637	)	$	(724,305	)	$	(810,128	)
Unsecured senior notes payable	$	(549,794	)	$	(585,016	)	$	(84,959	)	$	(85,221	)
Unsecured senior line of credit	$	(413,000	)	$	(426,757	)	$	(370,000	)	$	(378,783	)
Unsecured senior bank term loans	$	(1,350,000	)	$	(1,362,120	)	$	(1,600,000	)	$	(1,603,917	)

Fair value measurements for other than on a recurring basis

In September 2012, four properties aggregating 504,130 rentable square feet met the classification requirements for held for sale.  During the three months ended September 30, 2012, we recorded impairment charges aggregating approximately $9.8 million to reduce the aggregate carrying value of the properties to the estimated sales price less costs to sell. We used the preliminary sales price estimates based on offers from prospective buyers as a significant observable input (level 2) within the valuation hierarchy to determine the estimated fair value of these assets.