Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

(10) Fair Value Measurements

In accordance with ASC 820, Fair Value Measurement and Disclosures, the Company defines fair value based on the price that would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:

• Level 1 - Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

• Level 2 - Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that would be realized upon disposition.

Recurring Measurements

For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of the fair value for each major category of assets and liabilities is presented below:

		Fair Value Measurements at June 30, 2012
Description		Using Quoted Prices in Active Markets for Identical Assets (Level 1)			Using Significant Other Observable Inputs (Level 2)				Using Significant Other Unobservable Inputs (Level 3)
Available-for-sale real estate equity securities	$		301,945	$		0		$		0
Real estate related bonds			0			21,516				0
Total assets	$		301,945	$		21,516		$		0
Derivative interest rate instruments	$		0	$		(1,735	)	$		0
Total liabilities	$		0	$		(1,735	)	$		0

		Fair Value Measurements at December 31, 2011
Description		Using Quoted Prices in Active Markets for Identical Assets (Level 1)			Using Significant Other Observable Inputs (Level 2)				Using Significant Other Unobservable Inputs (Level 3)
Available-for-sale real estate equity securities	$		274,274	$		0		$		0
Real estate related bonds			0			15,091				0
Total assets	$		274,274	$		15,091		$		0
Derivative interest rate instruments	$		0	$		(2,284	)	$		0
Total liabilities	$		0	$		(2,284	)	$		0

Level 1

At June 30, 2012 and December 31, 2011, the fair value of the available for sale real estate equity securities have been estimated based upon quoted market prices for the same or similar issues when current quoted market prices are available. Unrealized gains or losses on investment are reflected in unrealized gain (loss) on investment securities in other comprehensive income on the consolidated statements of operations and other comprehensive income.

Level 2

To calculate the fair value of the real estate related bonds and the derivative interest rate instruments, the Company primarily uses quoted prices for similar securities and contracts. For the real estate related bonds, the Company reviews price histories for similar market transactions. For the derivatives, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements which utilizes Level 3 inputs, such as estimates of current credit spreads. However, as of June 30, 2012 and December 31, 2011, the Company has assessed that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The Company estimates the fair value of its debt instruments using a weighted average effective interest rate of 5.19% per annum. The assumptions reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to the Company’s.

Non-Recurring Measurements

The following table summarizes activity for the Company’s assets measured at fair value on a non-recurring basis. The Company recognized certain impairment charges to reflect the investments at their fair values for the six months ended June 30, 2012 and 2011. The asset groups that were reflected at fair value through this evaluation are:

	For the three months ended June 30, 2012				For the three months ended June 30, 2011
	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)		Total Impairment Losses		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)		Total Impairment Losses
Investment properties		80,871		17,458		157,059		30,208
Total		80,871		17,458		157,059		30,208

		For the six months ended June 30, 2012						For the six months  ended June 30, 2011
		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)			Total Impairment Losses			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)			Total Impairment Losses
Investment properties	$		223,508	$		27,887	$		224,309	$		58,175
Investment in unconsolidated entity	$		16,914	$		4,200	$		0	$		0
Total	$		240,422	$		32,087	$		224,309	$		58,175

The Company’s estimated fair value relating to the investment properties’ impairment analysis was based on a comparison of letters of intent or purchase contracts, broker opinions of value and ten-year discounted cash flow models, which includes contractual inflows and outflows over a specific holding period. The cash flows consist of unobservable inputs such as contractual revenues and forecasted revenues and expenses. These unobservable inputs are based on market conditions and the Company’s expected growth rates. Capitalization rates ranging from 7.25% to 9.00% and discount rates ranging from 7.50% to 10.00% were utilized in the model and are based upon observable rates that the Company believes to be within a reasonable range of current market rates. During the six months ended June 30, 2012, the Company identified certain properties which may have a reduction in the expected holding period and the Company reviewed the probability of these assets’ dispositions. For the six months ended June 30, 2012 and 2011, the impairment of the investment properties was $27,887 and $17,314, respectively. Certain properties have been disposed and were impaired prior to disposition and the related impairment charge of $0 and $40,861 is included in discontinued operations for the six months ended June 30, 2012 and 2011, respectively.

The Company’s estimated fair value relating to the investment in unconsolidated entity’s impairment analysis was in part based on the expected future cash distributions and on the fair value of the underlying assets of the investment using a discounted cash flow model, including discount rates and capitalization rates on the expected future cash flows of the properties. The cash flows consist of unobservable inputs such as contractual revenues and forecasted revenues and expenses. These unobservable inputs are based on market conditions and expected growth rates. Capitalization rates ranging from 8.00% to 11.25% and discount rates ranging from 10.00% to 11.00% were utilized in the model and are based upon observable rates that the Company believes to be within a reasonable range of current market rates. These factors resulted in the valuation of the Company’s investment in the entity at $16,914 and an impairment charge of $4,200 for the six months ended June 30, 2012. There were no impairments to investment in unconsolidated entities recorded for the six months ended June 30, 2011.

Financial Instruments not Measured at Fair Value

The table below represents the fair value of financial instruments presented at carrying values in our consolidated financial statements as of June 30, 2012 and December 31, 2011.

		June 30, 2012						December 31, 2011
		Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Mortgage and notes payable	$		6,078,271	$		5,937,002	$		5,812,595	$		5,524,022
Margins payable	$		149,979	$		149,979	$		120,858	$		120,858

The Company estimates the fair value of its debt instruments using a weighted average effective interest rate of 5.57% per annum. The assumptions reflect the terms currently available on similar borrowing terms to borrowers with credit profiles similar to the Company’s. The Company has determined that its debt instrument valuations are classified in Level 2 of the fair value hierarchy.