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Fair Value Measurements
 9 Months Ended
Sep. 30, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements on a Recurring Basis
The Company’s financial assets consist of interest rate caps, interest rate swaps and TRS with positive fair values included in other assets. The Company’s financial liabilities consist of interest rate swaps and TRS with negative fair values included in accounts payable, accrued expenses and other liabilities and borrowings subject to TRS included in mortgage debt and notes payable, nonrecourse (see Note E – Derivative Instruments and Hedging Activities).
The Company records the redeemable noncontrolling interest related to Brooklyn Arena, LLC at redemption value, which approximates fair value. In the event the book value of the redeemable noncontrolling interest, which represents initial cost, adjusted for contributions, distributions and the allocation of profits or losses, is in excess of estimated fair value, the Company records the redeemable noncontrolling interest at book value.
As of December 31, 2013, the fair value of the redeemable noncontrolling interest was incorrectly recorded and presented at less than the book value. Management evaluated the impact of the error and determined that the previously issued financial statements were not materially misstated. Additionally, management determined the impact of correcting the presentation of the redeemable noncontrolling interest is not material to the current period financial statements. Accordingly, at March 31, 2014, the Company corrected the carrying value of the redeemable noncontrolling interest by recording an adjustment of $28,390,000 to increase the redeemable noncontrolling interest. Such amount should have been reflected at December 31, 2013.
The following table presents information about financial assets and liabilities and redeemable noncontrolling interest measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value:
 
September 30, 2014
 
Level 1
Level 2
Level 3
Total
 
(in thousands)
Interest rate caps
$
—

$
258

$
—

$
258

Interest rate swaps (liabilities)
—

(1,113
)
(78,293
)
(79,406
)
TRS (assets)
—

—

5,849

5,849

TRS (liabilities)
—

—

(27,283
)
(27,283
)
Fair value adjustment to the borrowings subject to TRS
—

—

6,590

6,590

Redeemable noncontrolling interest (1) 
—

—

(186,834
)
(186,834
)
Total
$
—

$
(855
)
$
(279,971
)
$
(280,826
)
 
 
 
 
 
 
December 31, 2013
 
(in thousands)
Interest rate caps
$
—

$
155

$
—

$
155

Interest rate swaps (liabilities)
—

(498
)
(97,360
)
(97,858
)
TRS (assets)
—

—

903

903

TRS (liabilities)
—

—

(25,249
)
(25,249
)
Fair value adjustment to the borrowings subject to TRS
—

—

8,869

8,869

Redeemable noncontrolling interest
—

—

(171,743
)
(171,743
)
Total
$
—

$
(343
)
$
(284,580
)
$
(284,923
)

(1)
As of September 30, 2014, the redeemable noncontrolling interest is recorded at book value.
The following table presents a reconciliation of all financial assets and liabilities and redeemable noncontrolling interest measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
 
Redeemable
Noncontrolling
Interest
 
Interest Rate
Swaps
 
Net
TRS
Fair value
adjustment
to the borrowings
subject to TRS
Total TRS
Related
 
Total
 
(in thousands)
Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
Balance, January 1, 2014
$
(171,743
)
 
$
(97,360
)
 
$
(24,346
)
$
8,869

$
(15,477
)
 
$
(284,580
)
Loss attributable to redeemable noncontrolling interest
13,299

 
—

 
—

—

—

 
13,299

Total realized and unrealized gains (losses):
 
 
 
 
 
 
 
 
 
Included in earnings
—

 
—

 
2,912

(2,279
)
633

 
633

Included in other comprehensive income
—

 
19,067

 
—

—

—

 
19,067

Included in additional paid-in capital
(28,390
)
 
—

 
—

—

—

 
(28,390
)
Balance, September 30, 2014
$
(186,834
)
 
$
(78,293
)
 
$
(21,434
)
$
6,590

$
(14,844
)
 
$
(279,971
)
Nine Months Ended September 30, 2013
 
 
 
 
 
 
 
 
 
Balance, January 1, 2013
$
(240,790
)
 
$
(131,634
)
 
$
(6,108
)
$
9,890

$
3,782

 
$
(368,642
)
Loss attributable to redeemable noncontrolling interest
15,705

 
—

 
—

—

—

 
15,705

Total realized and unrealized gains (losses):
 
 
 
 
 
 
 
 
 
Included in earnings
—

 
—

 
(432
)
(3,100
)
(3,532
)
 
(3,532
)
Included in other comprehensive income
—

 
26,447

 
—

—

—

 
26,447

Included in additional paid-in capital
(9,939
)
 
—

 
—

—

—

 
(9,939
)
Balance, September 30, 2013
$
(235,024
)
 
$
(105,187
)
 
$
(6,540
)
$
6,790

$
250

 
$
(339,961
)

The following table presents quantitative information about the significant unobservable inputs used to estimate the fair value of financial instruments measured on a recurring basis as of September 30, 2014:
 
Quantitative Information about Level 3 Fair Value Measurements
 
Fair Value September 30, 2014
Valuation
Technique
Unobservable
Input
Input Values
 
(in thousands)
 
 
 
Credit valuation adjustment of interest rate swap
$
4,251

Potential future exposure
Credit spread
4.00%
TRS
$
(21,434
)
Third party bond pricing
Bond valuation
79.59 - 108.57
Fair value adjustment to the borrowings subject to TRS
$
6,590

Third party bond pricing
Bond valuation
79.59 - 108.57

Third party service providers involved in fair value measurements are evaluated for competency and qualifications. Fair value measurements, including unobservable inputs, are evaluated based on current transactions and experience in the real estate and capital markets.
The impact of changes in unobservable inputs used to determine the fair market value of the credit valuation adjustment, TRS and fair value adjustment to the borrowings subject to TRS are not deemed to be significant.
Fair Value of Other Financial Instruments
The carrying amount of notes and accounts receivable, excluding the Stapleton advances, and accounts payable, accrued expenses and other liabilities approximates fair value based upon the short-term nature of the instruments. The carrying amount of the Stapleton advances approximates fair value since the interest rates on these advances approximates current market rates. The Company estimates the fair value of its debt instruments by discounting future cash payments at interest rates that the Company believes approximate the current market. Estimated fair value is based upon market prices of public debt, available industry financing data, current treasury rates, recent financing transactions and loan to value ratios. The fair value of the Company’s debt instruments is classified as Level 3 in the fair value hierarchy.
The following table summarizes the fair value of nonrecourse mortgage debt and notes payable (exclusive of the fair value of derivatives), revolving credit facility, convertible senior debt and nonrecourse mortgage debt of development property held for sale:
 
September 30, 2014
 
December 31, 2013
 
Carrying Value
Fair Value
 
Carrying Value
Fair Value
 
(in thousands)
Fixed Rate Debt
$
2,892,316

$
3,241,230

 
$
3,281,337

$
3,488,406

Variable Rate Debt
1,824,080

1,820,368

 
1,998,169

1,954,136

Total
$
4,716,396

$
5,061,598

 
$
5,279,506

$
5,442,542


Impairment of real estate and unconsolidated entities is also subject to fair value measurements (see Note J – Impairment of Real Estate and Impairment of Unconsolidated Entities).