FAIR VALUE

3 Months Ended

Mar. 31, 2013

FAIR VALUE

FAIR VALUE

NOTE 4 FAIR VALUE

Fair Value of Operating Properties

We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the negotiated sales price, if applicable.  Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed.  Based upon these inputs, we determined that our valuations of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy.  For our properties for which the estimated fair value was based on negotiated sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy.

Fair Value of Financial Instruments

The fair values of our financial instruments approximate their carrying amount in our consolidated financial statements except for debt.  Management’s estimates of fair value are presented below for our debt as of March 31, 2013 and December 31, 2012.

	March 31, 2013				December 31, 2012
	Carrying Amount(1)		Estimated Fair Value		Carrying Amount(1)		Estimated Fair Value
Fixed-rate debt	$	15,254,834	$	16,226,925	$	14,954,601	$	16,190,518
Variable-rate debt	980,532		1,006,801		1,012,265		1,040,687
	$	16,235,366	$	17,233,726	$	15,966,866	$	17,231,205

(1) Includes market rate adjustments.

The fair value of our Junior Subordinated Notes approximates their carrying amount as of March 31, 2013 and December 31, 2012.  We estimated the fair value of mortgages, notes and other loans payable using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current London Interbank Offered Rate (“LIBOR”), U.S. treasury obligation interest rates and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and credit quality would be if credit markets were operating efficiently and assume that the debt is outstanding through maturity. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed.  Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist in specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.