Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Fair Value Measurements on a Recurring Basis

The Company’s financial assets consist of interest rate caps, interest rate swaps and TROR with positive fair values included in other assets. The Company’s financial liabilities consist of interest rate swaps and TROR with negative fair values included in accounts payable, accrued expenses and other liabilities and borrowings subject to TROR included in mortgage debt and notes payable, nonrecourse.

The Company records the redeemable noncontrolling interest related to Brooklyn Arena, LLC at redemption value, which approximates fair value if greater than historical cost. In the event the historical cost 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 historical cost. Redeemable noncontrolling interest is recorded at historical cost for all periods presented.

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:



	March 31, 2015
	Level 1		Level 2			Level 3			Total
	(in thousands)
Interest rate caps (assets)	$	—	$	27		$	—		$	27
Interest rate swaps (liabilities)	—		(2,316		)	(70,015		)	(72,331		)
TROR (assets)	—		—			12,167			12,167
TROR (liabilities)	—		—			(26,877		)	(26,877		)
Fair value adjustment to the borrowings subject to TROR	—		—			4,196			4,196
Redeemable noncontrolling interest ⁽¹⁾	—		—			(178,050		)	(178,050		)
Total	$	—	$	(2,289	)	$	(258,579	)	$	(260,868	)

	December 31, 2014
	(in thousands)
Interest rate caps (assets)	$	—	$	126		$	—		$	126
Interest rate swaps (liabilities)	—		(1,745		)	(73,536		)	(75,281		)
TROR (assets)	—		—			8,236			8,236
TROR (liabilities)	—		—			(27,081		)	(27,081		)
Fair value adjustment to the borrowings subject to TROR	—		—			5,604			5,604
Redeemable noncontrolling interest ⁽¹⁾	—		—			(183,038		)	(183,038		)
Total	$	—	$	(1,619	)	$	(269,815	)	$	(271,434	)


(1)	Redeemable noncontrolling interest is recorded at historical cost for period presented.

The following table presents a reconciliation of 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 TROR			Fair value adjustment to the borrowings subject to TROR			Total TROR Related			Total
	(in thousands)
Three Months Ended March 31, 2015
Balance, January 1, 2015 ⁽¹⁾	$	(183,038	)	$	(73,536	)	$	(18,845	)	$	5,604		$	(13,241	)	$	(269,815	)
Loss attributable to redeemable noncontrolling interest	4,988			—			—			—			—			4,988
Total realized and unrealized gains (losses):
Included in earnings	—			—			4,135			(1,408		)	2,727			2,727
Included in other comprehensive income	—			3,521			—			—			—			3,521
Balance, March 31, 2015 ⁽¹⁾	$	(178,050	)	$	(70,015	)	$	(14,710	)	$	4,196		$	(10,514	)	$	(258,579	)
Three Months Ended March 31, 2014
Balance, January 1, 2014	$	(171,743	)	$	(97,360	)	$	(24,346	)	$	8,869		$	(15,477	)	$	(284,580	)
Loss attributable to redeemable noncontrolling interest	3,093			—			—			—			—			3,093
Total realized and unrealized gains (losses):
Included in earnings	—			—			4,348			(5,354		)	(1,006		)	(1,006		)
Included in other comprehensive income	—			5,515			—			—			—			5,515
Included in additional paid-in capital	(28,390		)	—			—			—			—			(28,390		)
Balance, March 31, 2014 ⁽¹⁾	$	(197,040	)	$	(91,845	)	$	(19,998	)	$	3,515		$	(16,483	)	$	(305,368	)


(1)	Redeemable noncontrolling interest is recorded at historical cost for period presented.

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 March 31, 2015:



	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value March 31, 2015			Valuation Technique	Unobservable Input	Input Values
	(in thousands)
Credit valuation adjustment of interest rate swap	$	3,354		Potential future exposure	Credit spread	4.00%
TROR	$	(14,710	)	Third party bond pricing	Bond valuation	79.59 - 114.21
Fair value adjustment to the borrowings subject to TROR	$	4,196		Third party bond pricing	Bond valuation	79.59 - 114.21

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, TROR and fair value adjustment to the borrowings subject to TROR 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 or the prevailing interest rate if long-term. 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 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, conversion features on convertible senior debt 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 and convertible senior debt:



	March 31, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Fixed Rate Debt	$	2,664,795	$	3,105,674	$	2,993,591	$	3,421,373
Variable Rate Debt	2,008,789		1,994,026		1,944,610		1,924,823
Total	$	4,673,584	$	5,099,700	$	4,938,201	$	5,346,196

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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