Note 10 - Fair Value Measurements

9 Months Ended

Sep. 30, 2016

10.

Fair Value Measurements

All financial instruments of the Company are reflected in the accompanying Condensed Consolidated Balance Sheets at amounts which, in management’s estimation, based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values except those listed below, for which fair values are disclosed. The valuation method used to estimate fair value for fixed-rate and variable-rate debt is based on discounted cash flow analyses, with assumptions that include credit spreads, market yield curves, trading activity, loan amounts and debt maturities. The fair values for marketable securities are based on published values, securities dealers’ estimated market values or comparable market sales. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.

As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurements and Disclosures guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The following are financial instruments for which the Company’s estimate of fair value differs from the carrying amounts (in thousands):

	September 30 , 201 6				December 31, 201 5
	Carrying Amounts		Estimated Fair Value		Carrying Amounts		Estimated Fair Value
Marketable securities (1)	$	8,141	$	8,141	$	7,565	$	7,564
Notes payable (2)	$	3,786,921	$	3,922,026	$	3,761,328	$	3,820,205
Mortgages payable (3)	$	1,213,120	$	1,229,655	$	1,614,982	$	1,629,760

(1)

As of September 30, 2016 and December 31, 2015, the Company determined that $6.5 million and $5.9 million, respectively, of the Marketable securities estimated fair value were classified within Level 1 of the fair value hierarchy and the remaining $1.6 million and $1.7 million, respectively, were classified within Level 3 of the fair value hierarchy.

(2)

The Company determined that its valuation of Notes payable was classified within Level 2 of the fair value hierarchy.

(3)

The Company determined that its valuation of Mortgages payable was classified within Level 3 of the fair value hierarchy.

The Company has certain financial instruments that must be measured under the FASB’s Fair Value Measurements and Disclosures guidance, including available for sale securities. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

The tables below present the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

	Balance at September 30, 2016		Level 1		Level 2		Level 3
Assets:
Marketable equity securities	$	6,542	$	6,542	$	-	$	-
Liabilities:
Interest rate swaps (1)	$	1,858	$	-	$	1,858	$	-

	Balance at December 31, 201 5		Level 1		Level 2		Level 3
Assets:
Marketable equity securities	$	5,909	$	5,909	$	-	$	-
Liabilities:
Interest rate swaps (1)	$	1,426	$	-	$	1,426	$	-

(1)

Included in Other liabilities on the Company’s Condensed Consolidated Balance Sheets

Assets measured at fair value on a non-recurring basis at September 30, 2016 and December 31, 2015, are as follows (in thousands):

	Balance at September 30, 2016		Level 1		Level 2		Level 3

Real estate	$	93,030	$	-	$	-	$	93,030

	Balance at December 31, 201 5		Level 1		Level 2		Level 3

Real estate	$	52,439	$	-	$	-	$	52,439

During the nine months ended September 30, 2016, the Company recognized impairment charges related to adjustments to property carrying values of $68.1 million. During the nine months ended September 30, 2015, the Company recognized impairment charges of $28.0 million of which $0.1 million, before noncontrolling interests and income taxes, is included in discontinued operations, and of which, (i) $21.9 million is related to adjustments to property carrying values, (ii) $5.3 million is related to certain investments in other real estate investments and (iii) $0.8 million is related to marketable debt securities investment.

The Company’s estimated fair values were primarily based upon estimated sales prices from third party offers that were based on signed contracts, appraisals or letters of intent for which the Company does not have access to the unobservable inputs used to determine these estimated fair values. For the appraisals, the capitalization rates primarily range from 6.50% to 7.75% and discount rates primarily range from 9.25% to 10.80% which were utilized in the models were based upon observable rates that the Company believes to be within a reasonable range of current market rates for each respective investment. Based on these inputs the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy. (See Footnote 2 for additional discussion regarding impairment charges).

- 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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