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 income (loss).” 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.

On March 4, 2013, we sold 10,000,000 J.C. Penney common shares at a price of $16.03 per share, or $160,300,000 in the aggregate, which resulted in a net loss of $36,800,000, which is included in “net gain on disposition of wholly owned and partially owned assets” on our consolidated statements of income.

As of March 31, 2013, we own an economic interest in 13,400,000 J.C. Penney common shares, or 6.1% of its outstanding common shares. Below are the details of our investment.

We own 8,584,010 common shares at a GAAP cost of $19.71, per share, or $169,191,000 in the aggregate. As of March 31, 2013, based on J.C. Penney's closing share price of $15.11 per share, these shares have an aggregate fair value of $129,704,000, or $39,487,000 below our GAAP cost. We have concluded that this decline in value is “other-than temporary” and have recorded a $39,487,000 impairment loss in the first quarter. Our conclusion was based on the severity of 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 common shares through a forward contract at a weighted average strike price of $29.18 per share, or $140,525,000 in the aggregate. The forward contract may be settled, at our election, in cash or common shares, in whole or in part, at any time prior to October 8, 2022. The counterparty may accelerate settlement, in whole or in part, on October 8, 2014, or any anniversary thereof, or in the event we were to receive a credit downgrade. The forward contract strike price per share 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 three months ended March 31, 2013, we recognized a loss of $22,540,000, from the mark-to-market of the underlying common shares, and as of March 31, 2013, have funded $76,002,000 in connection with this derivative position. In the three months ended March 31, 2012, we recognized income of $1,045,000 from the mark-to-market of the underlying common shares.

As of March 31, 2013, the aggregate economic net loss on our investment in J.C. Penney, including shares sold, was $227,095,000.

Since the inception of our investment in Lexington in 2008, we accounted for it under the equity method of accounting, because of our ability to exercise significant influence over Lexington's operating and financial policies. As a result of Lexington's common share issuances, our ownership interest has been reduced over time from approximately 17.2% to 8.8% as of March 31, 2013. In the first quarter of 2013, we concluded that we no longer have the ability to exercise significant influence over Lexington's operating and financial policies, and began accounting for this investment as a marketable equity security – available for sale, in accordance with Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities.

Below is a summary of our marketable securities portfolio as of March 31, 2013 and December 31, 2012.

		As of March 31, 2013						As of December 31, 2012
				GAAP		Unrealized				GAAP		Unrealized
		Fair Value		Cost		Gain		Fair Value		Cost		Gain
Equity securities:
	Lexington	$	217,934	$	72,549	$	145,385	$	-	$	-	$	-
	J.C. Penney		129,704		129,704		-		366,291		366,291		-
	Other		35,349		12,513		22,836		31,897		12,466		19,431
		$	382,987	$	214,766	$	168,221	$	398,188	$	378,757	$	19,431