Impairment of Real Estate, Impairment of Unconsolidated Entities, Write-Off of Abandoned Development Projects and Gain (Loss) on Early Extinguishment of Debt

6 Months Ended

Jul. 31, 2011

Impairment of Real Estate, Impairment of Unconsolidated Entities, Write-Off of Abandoned Development Projects and Gain (Loss) on Early Extinguishment of Debt [Abstract]

Impairment of Real Estate, Impairment of Unconsolidated Entities, Write-Off of Abandoned Development Projects and Gain (Loss) on Early Extinguishment of Debt

Impairment of Real Estate

The Company reviews its real estate portfolio, including land held for development or sale, for impairment whenever events or changes indicate that its carrying value may not be recoverable. In cases where the Company does not expect to recover its carrying costs, an impairment charge is recorded. The impairments recorded during the three and six months ended July 31, 2011 and 2010 represent write-downs to estimated fair value due to a change in events, such as a bona fide third-party purchase offer or changes in certain assumptions, including estimated holding periods and current market conditions and the impact of these assumptions to the properties’ estimated future cash flows, which represents Level 2 or Level 3 inputs.

The following table summarizes the Company’s impairment of real estate included in continuing operations.


		Three Months Ended July 31,				Six Months Ended July 31,
		2011		2010		2011		2010
		(in thousands)				(in thousands)
Investment in retail property	Portage, Michigan	$	-	$	-	$	3,435	$	-
Land Projects:
Mill Creek	York County, South Carolina		-		450		1,400		450
Gladden Farms	Marana, Arizona		-		650		-		650
Other			235		-		235		-

		$	235	$	1,100	$	5,070	$	1,100

In addition, included in discontinued operations is a $45,410,000 impairment of real estate for the three and six months ended July 31, 2010 related to Simi Valley Town Center, a regional mall located in Simi Valley, California, which was disposed of in December 2010 (see Note N - Discontinued Operations and Gain (Loss) on Disposition of Rental Properties).

Impairment of Unconsolidated Entities

The Company reviews its portfolio of unconsolidated entities for other-than-temporary impairments whenever events or changes indicate that its carrying value in the investments may be in excess of fair value. An equity method investment’s value is impaired if management’s estimate of its fair value is less than the carrying value and the difference is deemed to be other-than-temporary. In order to arrive at the estimates of fair value, the Company uses varying assumptions that may include comparable sale prices, market discount rates, market capitalization rates and estimated future discounted cash flows specific to the geographic region and property type, which are considered to be Level 3 inputs. For newly opened properties, assumptions also include the timing of initial lease up at the property. In the event the initial lease up assumptions differ from actual results, estimated future discounted cash flows may vary resulting in impairment charges in future periods.

The following table summarizes the Company’s impairment of unconsolidated entities:


		Three Months Ended July 31,				Six Months Ended July 31,
		2011		2010		2011		2010
		(in thousands)				(in thousands)
Mixed-Use Land Development:
Mercy Campus at Central Station	Chicago, Illinois	$	-	$	1,817	$	-	$	1,817
Old Stone Crossing at Caldwell Creek	Charlotte, North Carolina		-		-		-		743
Office Buildings:
818 Mission Street	San Francisco, California		-		-		-		4,018
Bulletin Building	San Francisco, California		-		-		-		3,543
Metreon (Specialty Retail Center)	San Francisco, California		-		-		-		4,595
Other			-		465		-		465

		$	-	$	2,282	$	-	$	15,181

Write-Off of Abandoned Development Projects

On a quarterly basis, the Company reviews each project under development to determine whether it is probable the project will be developed. If management determines that the project will not be developed, project costs are written off as an abandoned development project cost. The Company abandons certain projects under development for a number of reasons, including, but not limited to, changes in local market conditions, increases in construction or financing costs or due to third party challenges related to entitlements or public financing. The Company wrote off abandoned development projects of $5,088,000 and $5,245,000 for the three and six months ended July 31, 2011, respectively, and $37,000 for both the three and six months ended July 31, 2010, respectively, which were recorded in operating expenses.

In addition, included in equity in earnings (loss) of unconsolidated entities are write-offs of $2,557,000 for both the three and six months ended July 31, 2010, respectively, which represent the Company’s proportionate share of write-offs of abandoned development projects of equity method investments. The Company had no write-offs of abandoned development projects related to unconsolidated entities for both the three and six months ended July 31, 2011.

Gain (Loss) on Early Extinguishment of Debt

For the three and six months ended July 31, 2011, the Company recorded $5,471,000 and $5,767,000, respectively, as loss on early extinguishment of debt. The loss for 2011 includes losses on early extinguishment of debt of $10,800,000 related to the exchange of a portion of the 2016 Notes for Class A common stock and $296,000 related to a nonrecourse mortgage debt financing transaction on Johns Hopkins — 855 North Wolfe Street, an office building located in East Baltimore, Maryland. These losses were offset by a gain of $5,329,000 related to the early extinguishment of Urban Development Action Grant loans on Avenue at Tower City Center, a specialty retail center located in Cleveland, Ohio.

For the three and six months ended July 31, 2010, the Company recorded $1,896,000 and $8,193,000, respectively, as gain on early extinguishment of debt. The amounts for 2010 include a gain on the early extinguishment of a portion of the 2011 and 2017 Notes and a gain related to the exchange of a portion of the 2011, 2015 and 2017 Notes for a new issue of Series A preferred stock.