Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy based on whether the inputs to valuation techniques are observable or unobservable.  The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:

Level 1 – Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date.

Level 2 – Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability.

Level 3 – Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability.  Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment.

The following tables set forth information regarding the Company’s financial instruments that are measured at fair value in the condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010:

			Fair Value Measurements at Reporting Date Using
	Fair Value at September 30, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Available-for-sale securities	$	32,014	$	20,185	$	—	$	11,829
Privately held debt and equity securities	2,475		—		—		2,475
Interest rate caps	1		—		1		—
Liabilities:
Interest rate swaps	$	5,560	$	—	$	5,560	$	—

			Fair Value Measurements at Reporting Date Using
	Fair Value at December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Available-for-sale securities	$	22,052	$	22,052	$	—	$	—
Privately held debt and equity securities	2,475		—		—		2,475
Interest rate cap	3		—		3		—

Intangible lease assets and other assets in the consolidated balance sheets include marketable securities consisting of corporate equity securities, mortgage/asset-backed securities, mutual funds and bonds that are classified as available for sale.  Net unrealized gains and losses on available-for-sale securities that are deemed to be temporary in nature are recorded as a component of accumulated other comprehensive income in redeemable noncontrolling interests, shareholders’ equity and noncontrolling interests.  If a decline in the value of an investment is deemed to be other than temporary, the investment is written down to fair value and an impairment loss is recognized in the current period to the extent of the decline in value.  During the three and nine month periods ended September 30, 2011 and 2010, the Company did not record any write-downs related to other-than-temporary impairments.  During the nine months ended September 30, 2011, the Company recognized realized losses of $22 related to sales of marketable securities.  The fair value of the Company’s available-for-sale securities is based on quoted market prices and, thus, is classified under Level 1.  The following is a summary of the equity securities held by the Company as of September 30, 2011 and December 31, 2010:

			Gross Unrealized
	Adjusted Cost		Gains		Losses			Fair Value
September 30, 2011:
Common stocks	$	4,207	$	6,373	$	(5	)	$	10,575
Mutual funds	5,539		18		(99		)	5,458
Mortgage/asset-backed securities	1,748		12		—			1,760
Government and government sponsored entities	14,960		46		(1,542		)	13,464
Corporate bonds	699		24		—			723
International bonds	33		1		—			34
	$	27,186	$	6,474	$	(1,646	)	$	32,014

			Gross Unrealized
	Adjusted Cost		Gains		Losses			Fair Value
December 31, 2010:
Common stocks	$	4,207	$	8,347	$	(4	)	$	12,550
Mutual funds	5,318		37		(39		)	5,316
Mortgage/asset-backed securities	1,571		—		(6		)	1,565
Government and government sponsored entities	1,864		8		(11		)	1,861
Corporate bonds	710		18		—			728
International bonds	32		—		—			32
	$	13,702	$	8,410	$	(60	)	$	22,052

The Company holds a secured convertible promissory note from Jinsheng Group (“Jinsheng”), in which the Company also holds a cost-method investment.  The secured convertible note is non-interest bearing and is secured by shares of Jinsheng.  Since the secured convertible note is non-interest bearing and there is no active market for Jinsheng’s debt, the Company performed an analysis on the note considering credit risk and discounting factors to determine the fair value.  Due to the significant estimates and assumptions used in the valuation of the note, the Company has classified it under Level 3.  The Company performed quantitative and qualitative analyses of its investment as of September 30, 2011 and determined that the current balance of the secured convertible note of $2,475 is not impaired.  See Note 5 for further discussion.

The Company uses interest rate hedges to mitigate the effect of interest rate movements on its variable-rate debt.  The Company had four interest rate swaps and two interest rate caps as of September 30, 2011 and one interest rate cap as of December 31, 2010 that qualify as hedging instruments and are designated as cash flow hedges.  The interest rate caps are included in intangible lease assets and other assets and the interest rate swaps are reflected in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets.  The swaps and caps have predominantly met the effectiveness test criteria since inception and changes in their fair values are, thus, primarily reported in other comprehensive income and are reclassified into earnings in the same period or periods during which the hedged items affect earnings.  The fair values of the Company’s interest rate hedges, classified under Level 2, are determined using a proprietary model which is based on prevailing market data for contracts with matching durations, current and anticipated London Interbank Offered Rate (“LIBOR”) information, consideration of the Company’s credit standing, credit risk of the counterparties and reasonable estimates about relevant future market conditions.  See Note 6 for further information regarding the Company’s interest rate hedging activity.

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments.  Based on the interest rates for similar financial instruments, the carrying value of mortgage notes receivable is a reasonable estimate of fair value.  The estimated fair value of mortgage and other indebtedness was $5,534,315 and $5,709,860 at September 30, 2011 and December 31, 2010, respectively.  The estimated fair value was calculated by discounting future cash flows for the notes payable using estimated market rates at which similar loans would be made currently.

The following table sets forth information regarding the Company’s assets that are measured at fair value on a nonrecurring basis:

			Fair Value Measurements at Reporting Date Using
	Fair Value at September 30, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
Asset:
Long-lived assets	$	22,481	$	—	$	—	$	22,481	$	55,140

In accordance with the Company's quarterly impairment review process, the Company recorded a non-cash impairment of real estate of $50,683 in the third quarter of 2011 related to Columbia Place in Columbia, SC, to write-down the depreciated book value as of September 30, 2011 from $56,746 to an estimated fair value of $6,063 as of the same date. Columbia Place has experienced declining cash flows as a result of changes in property-specific market conditions, which were further exacerbated by the recent economic conditions, that have negatively impacted leasing activity and occupancy.

The Company recorded an impairment of real estate of $622 related to an outparcel that was sold in September 2011 for net proceeds after selling costs of $1,477, which was less than its carrying amount of $2,099.

The Company recorded a non-cash impairment of real estate of $4,457 during the second quarter of 2011 related to Settlers Ridge - Phase II, which was under construction at June 30, 2011.  The property had a carrying value of $19,330 as of June 30, 2011 that was written down to its estimated fair value of $14,873 as of the same date. The property is expected to be sold upon completion and stabilization and the loss was recorded to write down the book value of the property to its estimated fair value.  The fair value was estimated using the expected sales price and the projected book value of the completed property.

The fair value reflected in the table above reflects the estimated fair value of $6,063 of Columbia Place as of September 30, 2011 and the estimated fair value of Settlers Ridge Phase II of $14,873 as of June 30, 2011, adjusted for capital expenditures and depreciation expense during the third quarter of 2011.

The revenues of Columbia Place and Settlers Ridge Phase II accounted for approximately 1.0% of total consolidated revenues for the trailing twelve months ended September 30, 2011. A reconciliation of each property's carrying values for the nine months ended September 30, 2011 is as follows:

	Columbia Place			Settlers Ridge Phase II			Total
Beginning carrying value, January 1, 2011	$	58,207		$	12,461		$	70,668
Capital expenditures	14			8,505			8,519
Depreciation expense	(1,475		)	(91		)	(1,566		)
Loss on impairment of real estate	(50,683		)	(4,457		)	(55,140		)
Ending carrying value, September 30, 2011	$	6,063		$	16,418		$	22,481