Our portfolio of marketable securities is comprised of equity securities that are classified as available-for-sale. Available-for-sale securities are presented on our consolidated balance sheets at fair value. Unrealized gains and losses resulting from the mark-to-market of these securities are included in “other comprehensive (loss) income.” Realized gains and losses are recognized in earnings only upon the sale of the securities and are recorded based on the weighted average cost of such securities.

During 2012, 2011 and 2010 we sold certain marketable securities for aggregate proceeds of $58,718,000, $69,559,000, and $281,486,000, respectively resulting in net gains of $3,582,000, $5,020,000, and $22,604,000, respectively, which are included as a component of “net gain on disposition of wholly owned and partially owned assets” on our consolidated statements of income.

We evaluate our portfolio of marketable securities for impairment each reporting period. For each of the securities in our portfolio with unrealized losses, we review the underlying cause of the decline in value and the estimated recovery period, as well as the severity and duration of the decline. In our evaluation, we consider our ability and intent to hold these investments for a reasonable period of time sufficient for us to recover our cost basis. We also evaluate the near-term prospects for each of these investments in relation to the severity and duration of the decline. In the year ended December 31, 2012, we recognized a $224,937,000 impairment loss on our investment in J.C. Penney (see below). No impairment losses were recognized in the years ended December 31, 2011 and 2010.

We own 23,400,000 J.C. Penney common shares, or 10.7% of its outstanding common shares. Below are the details of our investment.

We own 18,584,010 common shares at an average economic cost of $25.76 per share, or $478,691,000 in the aggregate. Of these shares, 15,500,000 were acquired through the exercise of a call option in November 2010. Upon the exercise of the call option, we recognized $112,537,000 of income, which increased the GAAP cost of these shares to $591,228,000. As of December 31, 2012, based on J.C. Penney's December 31, 2012 closing share price of $19.71 per share, these shares have an aggregate fair value of $366,291,000, or $224,937,000 below our GAAP basis. We have concluded that our investment in J.C. Penney is “other-than-temporarily” impaired and have recorded a $224,937,000 impairment loss in the fourth quarter. Our conclusion was based on the severity of the decline in the stock price and our inability to forecast a recovery in the near term.

We also own an economic interest in 4,815,990 J.C. Penney common shares through a forward contract at a weighted average strike price of $29.10 per share, or $140,138,000 in the aggregate. The forward contract was amended on October 8, 2012, such that, among other things, the contract may be settled, at our election, in cash or common shares, in whole or in part, at any time prior to October 9, 2014, or any anniversary thereof, or in the event we were to receive a credit downgrade. The forward contract strike price increases at an annual rate of LIBOR plus 95 basis points during the first two years of the contract and LIBOR plus 80 basis points thereafter. The contract is a derivative instrument that does not qualify for hedge accounting treatment. Gains and losses from the mark-to-market of the underlying common shares are recognized in “interest and other investment (loss) income, net” on our consolidated statements of income. In the year ended December 31, 2012, we recognized a loss of $75,815,000 from the mark-to-market of the underlying common shares. In the years ended December 31, 2011 and 2010, we recognized gains of $12,984,000 and $17,616,000, respectively, from the mark-to-market of the underlying common shares.

We review our investment in J.C. Penney on a continuing basis. Depending on various factors, including, without limitation, J.C. Penney's financial position and strategic direction, actions taken by its board, price levels of its common shares, other investment opportunities available to us, market conditions and general economic and industry conditions, we may take such actions with respect to J.C. Penney as we deem appropriate, including (i) purchasing additional common shares or other financial instruments related to J.C. Penney, (ii) selling some or all of our beneficial or economic holdings, or (iii) engaging in hedging or similar transactions.

	Below is a summary of our marketable securities portfolio as of December 31, 2012 and 2011.


		As of December 31, 2012							As of December 31, 2011
					GAAP		Unrealized					GAAP		Unrealized
		Maturity	Fair Value		Cost		Gain		Maturity	Fair Value		Cost		Gain
Equity securities:
	J.C. Penney	n/a	$	366,291	$	366,291	$	-	n/a	$	653,228	$	591,069	$	62,159
	Other	n/a		31,897		12,021		19,876	n/a		30,568		14,585		15,983
Debt securities		n/a		-		-		-	04/13 - 10/18		57,525		53,941		3,584
			$	398,188	$	378,312	$	19,876		$	741,321	$	659,595	$	81,726