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 condensed consolidated balance sheets as of March 31, 2014 and December 31, 2013:



			Fair Value Measurements at Reporting Date Using
	Fair Value at March 31, 2014		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	$	14,974	$	14,974	$	—	$	—

Liabilities:
Interest rate swaps	$	3,603	$	—	$	3,603	$	—



			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	$	—

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 for any periods presented.

Intangible lease assets and other assets in the condensed consolidated balance sheets include marketable securities consisting of corporate equity securities 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. 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 month periods ended March 31, 2014 and 2013, the Company did not record any write-downs related to other-than-temporary impairments. The Company did not recognize any realized gains or losses related to sales of marketable securities during the three month periods ended March 31, 2014 and 2013. The fair values of the Company’s available-for-sale securities are based on quoted market prices and are classified under Level 1.

The following is a summary of the available-for-sale securities held by the Company as of March 31, 2014 and December 31, 2013:



			Gross Unrealized
	Adjusted Cost		Gains		Losses		Fair Value
March 31, 2014:
Common stocks	$	4,195	$	10,779	$	—	$	14,974



			Gross Unrealized
	Adjusted Cost		Gains		Losses		Fair Value
December 31, 2013:
Common stocks	$	4,195	$	9,778	$	—	$	13,973

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 as of March 31, 2014 and four interest rate swaps and one interest rate cap at December 31, 2013, that qualified as hedging instruments and were 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 condensed consolidated balance sheets. The swaps and cap have met the effectiveness test criteria since inception and changes in their fair values are, thus, reported in other comprehensive income (loss) ("OCI/L") 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 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 Note 6 for further 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 $5,070,485 and $5,126,300 at March 31, 2014 and December 31, 2013, 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 $4,799,817 and $4,857,523 at March 31, 2014 and December 31, 2013, respectively.

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 net operating income ("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 March 31, 2014 used various probability-weighted scenarios comparing the 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 and capitalization rates ranging from 9% to 12%.

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
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
2014:
Long-lived assets	$	67,128	$	—	$	—	$	67,128	$	17,150

Long-lived Assets Measured at Fair Value in 2014

In accordance with the Company's quarterly impairment review process, the Company recorded a non-cash impairment of real estate of $12,050 in the first quarter of 2014 related to Chapel Hill Mall, located in Akron, OH, to write-down the depreciated book value to its estimated fair value of $53,348 as of March 31, 2014. The mall has experienced declining cash flows which are insufficient to cover the debt service on the mortgage secured by the property. The loan is currently in default. Additionally, the Company recognized a non-cash impairment of real estate of $5,100 when it adjusted the book value of Lakeshore Mall, located in Sebring, FL, to its estimated fair value of $13,780 based on a binding purchase agreement signed in April 2014. The sale closed in May 2014. See Note 16 for additional information.

A reconciliation of each mall's carrying values for the three months ending March 31, 2014 is as follows:



	Lakeshore Mall ⁽¹⁾			Chapel Hill Mall ⁽²⁾			Total
Beginning carrying value, January 1, 2014	$	19,127		$	66,062		$	85,189
Capital expenditures	11			—			11
Depreciation expense	(258		)	(664		)	(922		)
Loss on impairment of real estate	(5,100		)	(12,050		)	(17,150		)
Ending carrying value, March 31, 2014	$	13,780		$	53,348		$	67,128


(1)	The revenues of Lakeshore Mall accounted for approximately 0.4% of total consolidated revenues for the trailing twelve months ended March 31, 2014.


(2)	The revenues of Chapel Hill Mall accounted for approximately 1.0% of total consolidated revenues for the trailing twelve months ended March 31, 2014.