FAIR VALUE MEASUREMENTS

The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosure, ("ASC 820") 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 asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance.

Fair Value Measurements on a Recurring Basis

The following tables set forth information regarding the Company’s financial instruments that are measured at fair value on a recurring basis in the accompanying consolidated balance sheets as of December 31, 2013 and 2012:



			Fair Value Measurements at Reporting Date Using
	Fair Value at December 31, 2013		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	$	13,973	$	13,973	$	—	$	—
Interest rate cap	—		—		—		—

Liabilities:
Interest rate swaps	$	4,007	$	—	$	4,007	$	—



			Fair Value Measurements at Reporting Date Using
	Fair Value at December 31, 2012		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	$	27,679	$	16,556	$	—	$	11,123
Privately-held debt and equity securities	2,475		—		—		2,475
Interest rate cap	—		—		—		—

Liabilities:
Interest rate swaps	$	5,805	$	—	$	5,805	$	—

The Company recognizes transfers in and out of every level at the end of each reporting period. There were no transfers between Levels 1, 2 or 3 during the years ended December 31, 2013 and 2012.

Intangible lease assets and other assets in the consolidated balance sheets include marketable securities consisting of corporate equity securities 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 AOCI in redeemable noncontrolling interests, shareholders’ equity and partners' capital, and noncontrolling interests. The Company did not recognize any realized gains or losses related to sales of marketable securities during the year ended December 31, 2013. The Company recognized realized gains of $224 and realized losses of $22 related to sales of marketable securities during the years ended December 31, 2012 and 2011, respectively. During the years ended December 31, 2013, 2012 and 2011, the Company did not recognize any write-downs for other-than-temporary impairments. The fair values of the Company’s available-for-sale securities are based on quoted market prices and are classified under Level 1. Tax increment financing bonds ("TIF bonds") which were classified as Level 3 as of December 31, 2012, were redeemed in January 2013. See Note 2 for a summary of the available-for-sale securities held by the Company.

The Company uses interest rate swaps and caps to mitigate the effect of interest rate movements on its variable-rate debt. The Company had four interest rate swaps and one interest rate cap as of December 31, 2013 and 2012, that qualify as hedging instruments and are designated as cash flow hedges. The interest rate cap is included in intangible lease assets and other assets and the interest rate swaps are reflected in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. The swaps and cap have predominantly met the effectiveness test criteria since inception and changes in their fair values are, thus, primarily reported in OCI/L and are reclassified into earnings in the same period or periods during which the hedged item affects earnings. The fair values of the Company’s interest rate hedges, classified under Level 2, are determined based on prevailing market data for contracts with matching durations, current and anticipated LIBOR information, consideration of the Company’s credit standing, credit risk of the counterparties and reasonable estimates about relevant future market conditions. See Notes 2 and 6 for additional information regarding the Company’s interest rate hedging instruments.

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 and other notes receivable is a reasonable estimate of fair value. The estimated fair value of mortgage and other indebtedness was $5,126,300 and $5,058,411 at December 31, 2013 and 2012, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage and other indebtedness using estimated market rates at which similar loans would be made currently. The carrying amount of mortgage and other indebtedness was $4,857,523 and $4,745,683 at December 31, 2013 and 2012, respectively.

Prior to February 2013, the Company held TIF bonds, which had a 2028 maturity date and were received in a private placement as consideration for infrastructure improvements made by the Company related to the development of a community center. The Company had the intent and ability to hold the TIF bonds through the recovery period. The Company adjusted the bonds to their net realizable value as of December 31, 2012 and they were redeemed in January 2013. Due to the significant unobservable estimates and assumptions used in the valuation of the TIF bonds, such as the forecasted growth in sales and lack of marketability discount, the Company had classified the TIF bonds under Level 3 in the fair value hierarchy.

The following table provides a reconciliation of changes between the beginning and ending balances of the TIF bonds (Level 3):



	Year Ended December 31,
Available-for-sale securities (Level 3):	2013			2012
Balance, beginning of period	$	11,123		$	11,829
Redemption of TIF bonds	(11,002		)	—
Reclassification adjustment AOCI	—			1,542
Transfer out of Level 3 ⁽¹⁾	(121		)	(2,248		)
Balance, end of period	$	—		$	11,123


(1)	The TIF bonds were adjusted to their net realizable value as of December 31, 2012 and redeemed in January 2013. The difference in estimate was recorded as a transfer to long-lived assets.

Prior to May 2013, the Company held a secured convertible promissory note from Jinsheng, in which the Company also holds a cost-method investment. See Note 5 for additional information. The secured convertible note was non-interest bearing and secured by shares of Jinsheng. Since the secured convertible note was non-interest bearing and there was no active market for Jinsheng’s debt, the Company performed a probability-weighted discounted cash flow analysis for its valuation as of December 31, 2012 using various sale, redemption and initial public offering ("IPO") exit strategies. The fair value analysis as of December 31, 2012 forecasted a 0% to 10% reduction in estimated cash flows. Sale and IPO scenarios employed capitalization rates ranging from 10% to 12% which were discounted 20% for lack of marketability. Due to the significant unobservable estimates and assumptions used in the valuation of the note, such as revenue estimates and the lack of marketability discount, the Company had classified it under Level 3 in the fair value hierarchy. The Company exercised its right to demand payment of the note and received $4,875 from Jinsheng in May 2013, recognizing a realized gain of $2,400. The Company had previously recorded a $2,400 other-than-temporary impairment related to the Jinsheng note in 2009 due to China's declining real estate market.

The following table provides a reconciliation of changes between the beginning and ending balances of the Jinsheng note (Level 3):



	Year Ended December 31,
Privately-held debt and equity securities (Level 3):	2013			2012
Balance, beginning of period	$	2,475		$	2,475
Net settlement	(4,875		)	—
Realized gain recorded in earnings	2,400			—
Balance, end of period	$	—		$	2,475

Fair Value Measurements on a Nonrecurring Basis

The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company considers both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each Property such as NOI, occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the Property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Company classifies such long-lived assets under Level 3 in the fair value hierarchy. The fair value analysis as of December 31, 2013 used various probability-weighted scenarios comparing each Property's net book value to the sum of its estimated fair value. Assumptions included up to a 10-year holding period with a sale at the end of the holding period, capitalization rates ranging from 10% to 12% and an estimated sales cost of 1%. See Note 2 for additional information describing the Company's impairment review process.

The following table sets forth information regarding the Company’s assets that are measured at fair value on a nonrecurring basis and related impairment charges for the years ended December 31, 2013 and 2012:



			Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
2013:
Long-lived assets	$	31,900	$	—	$	—	$	31,900	$	67,665

2012:
Long-lived assets	$	8,173	$	—	$	—	$	8,173	$	23,315

Long-lived Assets Measured at Fair Value in 2013

During the year ended December 31, 2013, the Company wrote down two Properties to their estimated fair value. As part of the Company's quarterly impairment review process, the Company recorded a non-cash impairment of real estate of $47,212 in the fourth quarter of 2013 to write-down the depreciated book value of Madison Square Mall, located in Huntsville, AL, from $55,212 to an estimated fair value of $8,000 as of December 31, 2013. Additionally, in accordance with the Company's quarterly impairment review process, the Company recorded a non-cash impairment of real estate of $20,453 in the second quarter of 2013 related to Citadel Mall, located in Charleston, SC, to write-down the depreciated book value of $44,353 to its estimated fair value of $23,900 as of June 30, 2013. The Mall experienced declining cash flows which were insufficient to cover the debt service on the mortgage secured by the Property. See Note 19 for information on the foreclosure of Citadel Mall subsequent to December 31, 2013.

A reconciliation of each Property's carrying values for the year ended December 31, 2013 is as follows:



	Madison Square ⁽¹⁾			Citadel Mall ⁽²⁾			Total
Beginning carrying value, January 1, 2013	$	57,231		$	45,178		$	102,409
Capital expenditures	5			262			267
Depreciation expense	(2,024		)	(1,380		)	(3,404		)
Loss on impairment of real estate	(47,212		)	(20,453		)	(67,665		)
Ending carrying value, December 31, 2013	$	8,000		$	23,607		$	31,607

(1) The revenues of Madison Square accounted for approximately 0.7% of total consolidated revenues for the year ended December 31, 2013.

(2) The revenues of Citadel Mall accounted for approximately 0.6% of total consolidated revenues for the year ended December 31, 2013.

Long-lived Assets Measured at Fair Value in 2012

During the year ended December 31, 2012, the Company recorded write-downs related to two Properties. In conjunction with the Company's acquisition of the remaining 40.0% interest in Imperial Valley Commons L.P., a joint venture in which the Company held a 60.0% ownership interest, the Company recorded a non-cash impairment of real estate of $20,315 in the fourth quarter of 2012 to write-down the book value of vacant land available for the future expansion of Imperial Valley Commons, located in El Centro, CA, from $25,645 to its estimated fair value of $5,330. Development of this asset has been negatively impacted by recent economic conditions and other competition in the market area that have affected pre-development leasing activity. Additionally, in the third quarter of 2012, in accordance with the Company's quarterly impairment review process, the Company recorded a non-cash impairment of real estate of $3,000 related to The Courtyard at Hickory Hollow, an associated center located in Antioch, TN, to write-down the depreciated book value as of September 30, 2012 from $5,843 to an estimated fair value of $2,843 as of the same date.

A reconciliation of each Property's carrying values for the year ended December 31, 2012 is as follows:



	Imperial Valley Commons L.P. ⁽¹⁾			The Courtyard at Hickory Hollow ⁽²⁾			Total
Beginning carrying value, January 1, 2012	$	25,403		$	5,754		$	31,157
Capital expenditures	264			644			908
Depreciation expense	(22		)	(124		)	(146		)
Loss on impairment of real estate	(20,315		)	(3,000		)	(23,315		)
Ending carrying value, December 31, 2012	$	5,330		$	3,274		$	8,604

(1) Imperial Valley Commons L.P. had no revenue for the year ended December 31, 2012 because it consists of land available for expansion.

(2) The revenues of The Courtyard at Hickory Hollow accounted for approximately 0.03% of total consolidated revenues for the year ended December 31, 2012.

Other Impairment Losses

2013

During the year ended December 31, 2013, the Company recorded an impairment of real estate of $1,799 related to the sale of an outparcel that was sold for net proceeds after sales costs of $4,292, which was less than its carrying amount of $6,091. Additionally, the Company recorded a non-cash impairment of $585 to write-down the depreciated book value of the corporate airplane owned by the Management Company to its fair value at its trade-in date.

2012

During the year ended December 31, 2012, the Company recorded an impairment of real estate of $1,064 related to the sale of three outparcels for total net proceeds after sales costs of $1,186, which were less than their total carrying amounts of $2,250.

2011

During the year ended December 31, 2011, the Company recorded an impairment of real estate of $621 related to an outparcel that was sold for net proceeds after sales costs of $1,477, which was less than its carrying amount of $2,098. Additionally, in accordance with the Company's impairment review process, the Company recorded a non-cash impairment of real estate of $50,683 in the third quarter of 2011 to write-down the depreciated book value of Columbia Place, a mall located in Columbia, SC to an estimated fair value of $6,063 as of September 30, 2011. Columbia Place experienced declining cash flows as a result of changes in property-specific market conditions, which were further exacerbated by economic conditions that negatively impacted leasing activity and occupancy. The loan secured by Columbia Place is currently in default and the Company anticipates foreclosure proceedings will be complete by the end of the second quarter of 2014.