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 September 30, 2014
	Using Quoted Prices in Active Markets for Identical Assets		Using Significant Other Observable Inputs			Using Significant Other Unobservable Inputs
	(Level 1)		(Level 2)			(Level 3)
Available-for-sale real estate equity securities	$	135,460	$	—		$	—
Real estate related bonds	—		3,698			—
Total assets	$	135,460	$	3,698		$	—
Derivative interest rate instruments	—		(1,089		)	—
Total liabilities	$	—	$	(1,089	)	$	—



	Fair Value Measurements at December 31, 2013
	Using Quoted Prices in Active Markets for Identical Assets		Using Significant Other Observable Inputs			Using Significant Other Unobservable Inputs
	(Level 1)		(Level 2)			(Level 3)
Available-for-sale real estate equity securities	$	234,760	$	—		$	—
Real estate related bonds	—		8,059			—
Total assets	$	234,760	$	8,059		$	—
Derivative interest rate instruments	—		(458		)	—
Total liabilities	$	—	$	(458	)	$	—

Level 1

At September 30, 2014 and December 31, 2013, the fair value of the available for sale real estate equity securities have been valued based upon quoted market prices for the same or similar issues when current quoted market prices were available. Unrealized gains or losses on investment are reflected in unrealized gain (loss) on investment securities in comprehensive income on the consolidated statements of operations and 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 derivative interest rate instruments, the Company uses inputs based on data that is observed in the forward yield curve which is widely observable in the marketplace. The Company also 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 September 30, 2014 and December 31, 2013, 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. As of September 30, 2014 and December 31, 2013, the Company had entered into interest rate swap agreements with a notional value of $51,283 and $60,044, respectively.

Level 3

At September 30, 2014 and December 31, 2013, the Company had no level three recurring fair value measurements.

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 three and nine months ended September 30, 2014 and 2013. The asset groups that were reflected at fair value through this evaluation are:



	For the three months ended				For the nine months ended
	September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2013
	Fair Value Measure-ments Using Significant Unobser-vable Inputs (Level 3)	Total Impairment Losses	Fair Value Measure-ments Using Significant Unobser-vable Inputs (Level 3)	Total Impairment Losses	Fair Value Measure-ments Using Significant Unobser-vable Inputs (Level 3)	Total Impairment Losses	Fair Value Measure-ments Using Significant Unobser-vable Inputs (Level 3)	Total Impairment Losses
Investment properties	$12,643	$2,337	$67,225	$39,942	$155,623	$80,281	$223,443	$225,009
Total	$12,643	$2,337	$67,225	$39,942	$155,623	$80,281	$223,443	$225,009

Investment Properties

During the three and nine months ended September 30, 2014 and 2013, the Company identified certain properties which may have a reduction in the expected holding period and reviewed the probability of these assets' dispositions. 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 observable inputs such as contractual revenues and unobservable inputs such as forecasted revenues and expenses. These unobservable inputs are based on market conditions and the Company’s expected growth rates. During the nine months ended September 30, 2014, capitalization rates ranging from 6.00% to 9.00% and discount rates ranging from 6.75% to 9.25% were utilized in the model. During the nine months ended September 30, 2013, capitalization rates ranging from 6.80% to 10.50% and discount rates ranging from 7.50% to 12.00% were utilized in the model. These rates are based upon observable rates that the Company believes to be within a reasonable range of current market rates. Additionally, during the nine months ended September 30, 2014, one property previously classified as held for sale was re-classified as held and used and was re-measured at the lesser of the carrying value or fair value as of May 8, 2014, resulting in an impairment charge to this asset of $67,647.

During the nine months ended September 30, 2013, the Company also identified one property, a large single tenant office property, in which it was exploring a potential disposition. After the Company began exploring a potential sale of the property, it became aware of circumstances in which the tenant would reduce the space they occupied. Although the lease does not expire until 2016, the Company analyzed various leasing and sale scenarios for the single tenant property. The Company’s estimated fair value relating to the investment properties’ impairment analysis was based on 10-year discounted cash flow models, which includes contractual inflows and outflows over a specific holding period. The cash flows consist of observable inputs such as contractual revenues and unobservable inputs such as forecasted revenues and expenses. These unobservable inputs are based on market conditions and the Company’s expected growth rates. The capitalization rates ranging from 6.25% to 7.75% and discount rates ranging from 7.00% to 8.50% were utilized in this model and are based upon observable rates that the Company believes to be within a reasonable range of current market rates. Based on the probabilities assigned to such scenarios, it was determined the property was impaired and therefore, written down to fair value. An impairment charge of $147,480 was recorded for this asset during nine months ended September 30, 2013.

For the three months ended September 30, 2014 and 2013, the Company recorded an impairment of investment properties of $2,337 and $39,942, respectively. The Company recorded an impairment of investment properties of $80,281 and $225,009 for the nine months ended September 30, 2014 and 2013, respectively. Certain properties have been disposed and were impaired prior to disposal. There were no related impairment charges for those properties included in discontinued operations for the three months ended September 30, 2014 and 2013. There were $0 and $4,476 related impairment charges for those properties included in discontinued operations for the nine months ended September 30, 2014 and 2013, respectively.

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 September 30, 2014 and December 31, 2013.



	September 30, 2014				December 31, 2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Mortgages payable	$	3,960,285	$	3,967,792	$	4,737,459	$	4,748,276
Line of credit	$	200,000	$	200,000	$	200,180	$	200,180
Margins payable	$	—	$	—	$	59,681	$	59,681

The Company estimates the fair value of its mortgages payable using a weighted average effective interest rate of 4.83% per annum. The fair value estimate of the line of credit and margins payable approximates the carrying value. 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.