Fair Value

Fair value is the exchange price that would be the amount received for an asset or paid to transfer a liability in an orderly transaction between market participants. In arriving at a fair value measurement, we use a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. The three levels of inputs used to establish fair value are the following:


•	Level 1 — Quoted prices in active markets for identical assets or liabilities;


•	Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and


•	Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Non-financial assets measured at fair value on a non-recurring basis principally include real estate assets, proved oil and gas properties, goodwill and intangible assets, which are measured for impairment.

Proved oil and gas properties are evaluated for impairment when facts and circumstances indicate that their carrying amounts may not be recoverable. If projected undiscounted future net cash flows are less than the carrying value of the property, an impairment loss is recognized for the excess of the carrying amount over estimated fair value. Future net cash flows are based on future sales prices of oil and gas, future development and production costs, future reserves to be recovered and timing of production. We used Level 3 inputs and the income valuation method to estimate the fair value of proved oil and gas properties where the carrying amount exceeded the estimated undiscounted cash flows. We used a discount rate of 10 percent as of year-end 2014 which is commensurate with our risk and current market conditions associated with realizing the expected cash flows projected. As a result, we recorded proved property non-cash impairment charges of $15,535,000 in 2014.

In 2014, certain real estate assets were remeasured and reported at fair value due to events or circumstances that indicated the carrying value may not be recoverable. We determined estimated fair value based on the present value of future probability weighted cash flows expected from the sale of the long-lived asset or based on a third party appraisal of current value. As a result, we recognized non-cash asset impairment charges of $399,000 in 2014 associated with two owned entitled projects. We had $1,790,000 non-cash impairment charges in 2013 associated with a master-planned community and golf club near Dallas.



	Year-End 2014								Year-End 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In thousands)
Non-Financial Assets and Liabilities:
Real estate	$	—	$	970	$	—	$	970	$	—	$	3,700	$	—	$	3,700
Proved oil and gas properties	$	—	$	—	$	3,655	$	3,655	$	—	$	—	$	—	$	—

We elected not to use the fair value option for cash and cash equivalents, accounts receivable, other current assets, variable debt, accounts payable and other current liabilities. The carrying amounts of these financial instruments approximate their fair values due to their short-term nature or variable interest rates. We determine the fair value of fixed rate financial instruments using quoted prices for similar instruments in active markets.

Information about our fixed rate financial instruments not measured at fair value follows:



	Year-End 2014						Year-End 2013
	Carrying Amount			Fair Value			Carrying Amount			Fair Value			Valuation Technique
	(In thousands)
Loan secured by real estate	$	3,574		$	4,859		$	7,610		$	18,025		Level 2
Fixed rate debt^(a)	$	(370,348	)	$	(359,131	)	$	(126,640	)	$	(118,634	)	Level 2

_____________________


^(a)	Year-end 2014 includes our $250,000,000 of 8.50% senior secured notes due 2022, issued May 12, 2014.