Note 5. Fair Value Measurements

The carrying amounts of cash and cash equivalents, restricted cash, rents and other receivables, certain other assets, and accounts payable and accrued liabilities approximate fair value. The fair value of the Company’s investments and liabilities related to share-based compensation were determined to be a Level 1 within the valuation hierarchy, and were based on independent values provided by financial institutions.

The valuation of the liability for the Company’s interest rate swaps, which is measured on a recurring basis, was determined to be a Level 2 within the valuation hierarchy, and was based on independent values provided by financial institutions. Such valuations were determined using widely accepted valuation techniques, including discounted cash flow analyses, on the expected cash flows of each derivative. The analyses reflect the contractual terms of the swaps, including the period to maturity, and uses observable market-based inputs, including interest rate curves (“significant other observable inputs”). The fair value calculation also includes an amount for risk of non-performance using “significant unobservable inputs” such as estimates of current credit spreads to evaluate the likelihood of default. The Company has concluded that, as of September 30, 2013, the fair value associated with the “significant unobservable inputs” relating to the Company’s risk of non-performance was insignificant to the overall fair value of the interest rate swap agreements and, as a result, that the relevant inputs for purposes of calculating the fair value of the interest rate swap agreements, in their entirety, were based upon “significant other observable inputs”.

Nonfinancial assets and liabilities measured at fair value in the consolidated financial statements consist of real estate held for sale/conveyance, which are measured on a nonrecurring basis, have been determined to be (1) a Level 2 within the valuation hierarchy, where applicable, based on the respective contracts of sale, adjusted for closing costs and expenses, or (2) a Level 3 within the valuation hierarchy, where applicable, based on estimated sales prices, adjusted for closing costs and expenses, determined by discounted cash flow analyses, direct capitalization analyses or a sales comparison approach if no contracts had been concluded. The discounted cash flow and direct capitalization analyses include all estimated cash inflows and outflows over a specific holding period and, where applicable, any estimated debt premiums. These cash flows were comprised of unobservable inputs which included forecasted rental revenues and expenses based upon existing in-place leases, market conditions and expectations for growth. Capitalization rates and discount rates utilized in these analyses were based upon observable rates that the Company believed to be within a reasonable range of current market rates for the respective properties. The sales comparison approach was utilized for certain land values and include comparable sales that were completed in the selected market areas. The comparable sales utilized in these analyses were based upon observable per acre rates that the Company believed to be within a reasonable range of current market rates for the respective properties.

The Company engaged third party valuation experts to assist with the preparation of certain of its valuations. Other valuations were prepared using internally-developed valuation models. In addition, these valuations are reviewed and approved, during each reporting period, by a diverse group of management, as deemed necessary, including personnel from acquisitions, accounting, finance, operations, development and leasing departments, and the valuations are updated as appropriate.

The following tables show the hierarchy for those assets measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, respectively:



		Assets/Liabilities Measured at Fair Value on a
		Recurring Basis
		September 30, 2013
Description		Level 1		Level 2		Level 3		Total
Investments related to share-
based compensation liabilities (a)	$	412,000	$	-	$	-	$	412,000
Share-based compensation liabilities (b)	$	404,000	$	-	$	-	$	404,000
Interest rate swaps liability (b)	$	-	$	752,000	$	-	$	752,000

		December 31, 2012
Description		Level 1		Level 2		Level 3		Total
Investments related to share-
based compensation liabilities (a)	$	450,000	$	-	$	-	$	450,000
Share-based compensation liabilities (b)	$	445,000	$	-	$	-	$	445,000
Interest rate swaps liability (b)	$	-	$	1,577,000	$	-	$	1,577,000

(a) Included in other assets in the accompanying consolidated balance sheets.
(b) Included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

The fair value of the Company’s fixed rate mortgage loans was estimated using available market information and discounted cash flows analyses based on borrowing rates the Company believes it could obtain with similar terms and maturities. As of September 30, 2013 and December 31, 2012, the aggregate fair values of the Company’s fixed rate mortgage loans payable, which were determined to be a Level 3 within the valuation hierarchy, were approximately $503.8 million and $565.4 million, respectively; the carrying values of such loans were $483.6 million and $544.8 million, respectively.

The following tables show the hierarchy for those assets measured at fair value on a non-recurring basis as of September 30, 2013 and December 31, 2012, respectively:


		Assets Measured at Fair Value on a
		Non-Recurring Basis
		September 30, 2013
Asset Description		Level 1		Level 2		Level 3		Total
Real estate held for sale/conveyance	$	-	$	544,000	$	65,535,000	$	66,079,000

		December 31, 2012
Asset Description		Level 1		Level 2		Level 3		Total
Real estate held for sale/conveyance	$	-	$	15,574,000	$	62,219,000	$	77,793,000

The following table details the quantitative information regarding Level 3 assets measured at fair value on a non-recurring basis as of September 30, 2013:


Quantitative Information about Level 3 Fair Value Measurements
	Fair value at	Valuation	Unobservable	Range
	September 30, 2013	Technique	inputs	(weighted average)
Real estate held for sale/conveyance:
Operating retail real estate
(six properties)	$ 53,473,000	Discounted cash flow	Capitalization rates	7.8% to 11.0% (8.8%)
			Discount rates	9.2% to 12.8% (9.9%)
Land development property	10,477,000	Discounted cash flow	Capitalization rate	7.3%
			Discount rate	7.8%
Land (three parcels)	1,585,000	Sales comparison approach	Price per acre	$25,000 to $154,000 per acre
				($49,000 per acre)
	$ 65,535,000