Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Recurring Fair Value Measurements

As of September 30, 2012, we have interest rate swap agreements with a notional amount of $250.0 million that are measured at fair value on a recurring basis. The fair value of our interest rate swaps at September 30, 2012 was a liability of $7.7 million and is included in accounts payable and accrued expenses in our condensed consolidated balance sheet as of such date. The net unrealized loss on our interest rate swaps was $2.6 million and $7.7 million for the three and nine months ended September 30, 2012, respectively, and is included in accumulated other comprehensive income. The fair value of the interest rate swaps is based on the estimated amount we would receive or pay to terminate the contract at the reporting date and is determined using interest rate pricing models and observable inputs. The interest rate swap is classified within Level 2 of the valuation hierarchy.

The following table presents our hierarchy for those liabilities measured and recorded at fair value on a recurring basis as of September 30, 2012:

	Fair Value Measurements
	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities:
Interest rate swaps	$	7,672	$	—	$	7,672	$	—

We held no assets or liabilities that were required to be measured on a recurring basis at fair value as of December 31, 2011.

Valuation Methods

Interest rate swap - The valuation of interest rate swaps is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit valuation adjustments associated with the derivatives also utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of September 30, 2012, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed and it was determined that these adjustments are not significant to the overall valuation of the derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety are classified in Level 2 of the fair value hierarchy. The unrealized loss included in other comprehensive income (“OCI”) of $2.6 million and $7.7 million for the three and nine months ended September 30, 2012, respectively, are attributable to the net change in unrealized gains or losses related to the interest rate swaps that remain outstanding at September 30, 2012, none of which were reported in the condensed consolidated statements of operations because they are documented and qualify as hedging instruments.

Long term incentive plan - We have a long-term incentive plan for four of our executives based on our total shareholder return versus returns for five of our peer companies. The fair value of this plan is determined using the average trial-specific value of the awards eligible for grant under the plan based upon a Monte Carlo simulation model. This model considers various assumptions, including time value, volatility factors, current market and contractual prices as well as projected future market prices for our common stock as well as common stock of our peer companies over the performance period.  Substantially all of these assumptions are observable in the marketplace throughout the full term of the plan, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Non-Recurring Fair Value Measurements

We perform annual, or more frequent in certain circumstances, impairment tests of our goodwill. Impairments, if any, result from values established by Level 3 valuations. We estimate the fair value of the reporting unit using discounted projected future cash flows, which approximate a current sales price. If the results of this analysis indicate that the carrying value of the reporting unit exceeds its fair value, impairment is recorded to reduce the carrying value to fair value. We did not recognize any goodwill impairment losses during the three and nine months ended September 30, 2012. During the three and nine months ended September 30, 2011, we recorded $1.5 millionand $1.7 million, respectively, in goodwill impairment losses.

On a non-recurring basis, we evaluate the carrying value of investment property and investments in and advances to unconsolidated joint ventures, when events or changes in circumstances indicate that the carrying value may not be recoverable. Impairments, if any, result from values established by Level 3 valuations. The carrying value is considered impaired when the total projected undiscounted cash flows from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset as determined by purchase price offers or by discounted cash flows using the income or market approach. These cash flows are comprised of unobservable inputs which include contractual rental revenue and forecasted rental revenue and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based upon observable rates that we believe to be within a reasonable range of current market rates for the respective properties. Based on these inputs, we determined that the valuation of these investment properties and investments is classified within Level 3 of the fair value hierarchy.

During the three and nine months ended September 30, 2012 and 2011, we did not record any impairments related to land parcels held for development and investments in and advances to unconsolidated joint ventures.

During the nine months ended September 30, 2012, we recognized impairment losses of $3.4 million related to two properties held for sale (one in the South Florida region and one in the Southeast region), which are included in discontinued operations in the accompanying condensed consolidated statements of operation. The estimated fair value related to the impairment assessment for the property in the South Florida region was based upon the expected sales prices as determined by an executed contract after adjusting for costs to sell and, therefore, is classified within Level 2 of the fair value hierarchy. The estimated fair value related to the impairment assessment for the property in the Southeast region was primarily based on a broker opinion and, therefore, is classified within Level 3 of the fair value hierarchy. During the three and nine months ended September 30, 2011, we recognized impairment losses of $35.5 million and $36.8 million, respectively, related to properties held for sale based on executed sales contracts.

During the three and nine months ended September 30, 2012, we recognized impairment losses of $2.4 million and $6.4 million, respectively, related to operating properties located in secondary markets for which our anticipated holding periods were reconsidered and for which leasing of significant vacant spaces has been difficult. The impairment and results of operations for these properties are included in the Southeast region. Our analysis included an assessment of each property based on the increased likelihood that holding periods may be shorter than previously estimated due to management's updated disposition plans. The expected cash flows considered the estimated holding period of the assets and the exit price in the event of a disposition. During the three and nine months ended September 30, 2011, we recognized $18.2 million of investment property impairments related to operating properties and land parcels held for development and $11.8 million of impairment losses on certain development projects for which management's development intentions changed.