Fair Value of Financial Assets and Liabilities

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities

10.   Fair Value of Financial Assets and Liabilities

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure for assets and liabilities measured at fair value, requires allocation to a three-level valuation hierarchy. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

We believe that the carrying values reflected in our consolidated balance sheets reasonably approximate the fair values for cash and cash equivalents, accounts receivable, escrow deposits, loans receivable, and all liabilities, due to their short-term nature, except for our notes receivable issued in connection with property sales or acquired in connection with an acquisition, mortgages payable and our senior notes and bonds payable, which are disclosed below (dollars in millions).

	Carrying value per		Estimated fair
At September 30, 2012	balance sheet		value
Notes receivable issued in connection with property sales	$	19.0	$	20.2
Notes receivable acquired in connection with an acquisition	$	8.8	$	8.8
Mortgages payable assumed in connection with acquisitions	$	133.4	$	134.4
Notes payable	$	1,750.0	$	2,029.7

	Carrying value per		Estimated fair
At December 31, 2011	balance sheet		value
Notes receivable issued in connection with property sales	$	19.0	$	19.6
Note receivable acquired in connection with an acquisition	$	8.8	$	8.8
Mortgages payable assumed in connection with acquisitions	$	67.8	$	68.2
Notes payable	$	1,750.0	$	1,901.9

The estimated fair values of our notes receivable issued in connection with property sales or acquired in connection with an acquisition, and our mortgages payable have been calculated by discounting the future cash flows using an interest rate based upon the current 5-year or 7-year Treasury yield curve, plus an applicable credit-adjusted spread. The notes receivable were issued in connection with the sale of properties by Crest. Payments to us on these notes receivable are current and no allowance for doubtful accounts has been recorded for them. Because this methodology includes unobservable inputs that reflect our own internal assumptions and calculations, the measurement of estimated fair values related to our notes receivable and mortgages payable is categorized as level 3 on the three-level valuation hierarchy.

The estimated fair value of our senior notes and bonds payable is based upon indicative market prices and recent trading activity of our senior notes and bonds payable. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to our notes and bonds payable is categorized as level 2 on the three-level valuation hierarchy.