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 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 table sets forth information regarding the Company’s financial instruments that were measured at fair value on a recurring basis in the accompanying consolidated balance sheets as of December 31, 2015. The interest rate swaps matured April 1, 2016:



			Fair Value Measurements at Reporting Date Using
	Fair Value at December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Interest rate swaps	$	434	$	—	$	434	$	—

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, 2016 and 2015.

Intangible lease assets and other assets in the consolidated balance sheets included marketable securities consisting of corporate equity securities that were 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 sold all of its marketable securities during 2015 and realized a gain of $16,560 for the difference between the net proceeds of $20,755 less the adjusted cost of $4,195. The Company did not recognize any realized gains or losses related to sales of marketable securities during 2016 and 2014. During the years ended December 31, 2016, 2015 and 2014, the Company did not recognize any write-downs for other-than-temporary impairments.

The Company uses interest rate swaps to mitigate the effect of interest rate movements on its variable-rate debt. The Company had four interest rate swaps as of December 31, 2015, that qualified as hedging instruments and were designated as cash flow hedges. The interest rate swaps are reflected in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. The swaps 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 $4,737,077 and $4,945,622 at December 31, 2016 and 2015, 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 net mortgage and other indebtedness was $4,465,294 and $4,710,628 at December 31, 2016 and 2015, 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 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. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. See below for a description of the estimates and assumptions the Company used in its impairment analysis. 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, 2016 and 2015:



			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
2016:
Long-lived assets	$	46,200	$	—	$	—	$	46,200	$	116,822

2015:
Long-lived assets	$	125,000	$	—	$	—	$	125,000	$	104,900

Long-lived Assets Measured at Fair Value in 2016

During the year ended December 31, 2016, the Company recognized impairments of real estate of $116,822 when it wrote down nine malls, an associated center, a community center, three office buildings and three outparcels to their estimated fair values. The Properties are classified for segment reporting purposes as listed below (see section below for information on outparcels). See Note 11 for segment information.

Impairment
Date

Property

Location

Segment
Classification

Loss on
Impairment

Fair
Value ⁽¹⁾

September

Randolph Mall, Regency Mall
& Walnut Square ⁽²⁾

Asheboro, NC; Racine, WI & Dalton, GA

Malls

43,144

—

September

One Oyster Point & Two Oyster Point ⁽³⁾

Newport News, VA

All Other

3,844

6,000

September

Oak Branch Business Center ⁽⁴⁾

Greensboro, NC

All Other

100

—

September

Cobblestone Village at Palm Coast ⁽⁵⁾

Palm Coast, FL

Community Centers

6,448

—

June

The Lakes Mall & Fashion Square ⁽⁶⁾

Muskegon, MI & Saginaw, MI

Malls

32,096

—

June

Wausau Center ⁽⁷⁾

Wausau, WI

Malls

10,738

11,000

March

Bonita Lakes Mall & Crossing ⁽⁸⁾

Meridian, MS

Malls/Associated Centers

5,323

—

March

Midland Mall ⁽⁹⁾

Midland, MI

Malls

4,681

29,200

March

River Ridge Mall ⁽¹⁰⁾

Lynchburg, VA

Malls

9,594

—

115,968

46,200


(1)	The long-lived asset is measured at fair value and included in Net Investment in Real Estate Assets in the Company's consolidated balance sheets at December 31, 2016.

(2)

The Company wrote down the book values of the three malls to their estimated fair value of $31,318 and recorded a loss on impairment of $43,294 in the third quarter of 2016 based upon a sales price of $32,250 in a signed contract with a third party buyer, adjusted to reflect estimated disposition costs. The Company reduced the loss on impairment in the fourth quarter of 2016 by $150 to reflect actual closing costs. The revenues of the malls accounted for approximately 1.5% of total consolidated revenues for the trailing twelve months ended September 30, 2016. The malls were sold in December 2016.

(3)

In accordance with the Company's quarterly impairment review process, the Company recorded impairment to write down the depreciated book value of two office buildings to their estimated fair value as a result of a change in the expected holding period to a range of 1 to 2 years. Other factors used in the discounted cash flow analysis included a capitalization rate of 8.0%, a discount rate of 10.0% and estimated selling costs of 2.0%. The office buildings are classified as held for sale as of December 31, 2016. The revenues of the office buildings accounted for approximately 0.3% of total consolidated revenues for the year ended December 31, 2016. The office buildings were sold subsequent to December 31, 2016. See Note 4 and Note 19 for more information.

(4)

The office building was sold in September 2016. A loss on impairment of $122 was recorded in the third quarter of 2016 to adjust the book value to its estimated value based upon a signed contract with a third party buyer, adjusted to reflect estimated disposition costs. The loss on impairment was reduced by $22 in the fourth quarter of 2016 to reflect actual closing costs. See Note 4 for more information.

(5)

In accordance with the Company's quarterly impairment review process, the Company recorded a loss on impairment of $6,298 in the third quarter of 2016 based upon a signed contract with a third party buyer, adjusted to reflect estimated disposition costs. Other factors used in the discounted cash flow analysis included a capitalization rate of 9.0%, a discount rate of 10.75% and estimated selling costs of 2.0%. The revenue of the community center accounted for approximately 0.1% of total consolidated revenues for the trailing twelve months ended September 30, 2016. An additional impairment loss of $150 was recognized in the fourth quarter of 2016 for an adjustment to the sales price when the sale closed in December 2016. See Note 4.

(6)

The Company adjusted the book value of the malls to their estimated fair value of $65,447 based upon the sales price of $66,500 in the signed contract with a third party buyer, adjusted to reflect estimated disposition costs. The revenues of The Lakes Mall and Fashion Square accounted for approximately 1.6% of total consolidated revenues for the trailing twelve months ended June 30, 2016. These Properties were sold in July 2016. See Note 4 for additional information.

(7)

In accordance with the Company's quarterly impairment review process, the Company recorded impairment to write down the depreciated book value of the mall to its estimated fair value. After evaluating redevelopment options, the Company determined that an appropriate risk-adjusted return was not achievable and reduced its holding period. The mall is encumbered by a non-recourse loan with a balance of $17,689 as of December 31, 2016 and has experienced declining sales and the loss of two anchor stores. The revenues of Wausau Center accounted for approximately 0.3% of total consolidated revenues for the year ended December 31, 2016. The Company notified the lender that it would not make its scheduled July 1, 2016 debt payment and the mall is in foreclosure. See Note 6. With the assistance of a third-party appraiser, management determined the fair value of Wausau Center using a discounted cash flow methodology. The discounted cash flow used assumptions including a 10-year holding period with a sale at the end of the holding period, a capitalization rate of 13.25%, a discount rate of 13.0% and estimated selling costs of 4.0%. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management's estimates of future possible outcomes.

(8)

The Company adjusted the book value of Bonita Lakes Mall and Bonita Lakes Crossing ("Bonita Lakes") to its estimated fair value of $27,440, which represented the contractual sales price of $27,910 with a third party buyer, adjusted to reflect estimated disposition costs. The revenues of Bonita Lakes accounted for approximately 0.7% of total consolidated revenues for the trailing twelve months ended March 31, 2016. See Note 4 for further information on the sale that closed in the second quarter of 2016.

(9)

The Company wrote down the mall to its estimated fair value. The fair value analysis used a discounted cash flow methodology with assumptions including a 10-year holding period with a sale at the end of the holding period, a capitalization rate of 9.75%, a discount rate of 11.5% and estimated selling costs of 2.0%. The Company notified the lender that it would not pay off the loan that was scheduled to mature in August 2016 and the mall went into receivership in September 2016. See Note 6. The revenues of Midland Mall accounted for approximately 0.6% of total consolidated revenues for the year ended December 31, 2016. The mall was returned to the lender subsequent to December 31, 2016 as the foreclosure process was complete. See Note 19 for further information.

(10)

The Company sold a 75% interest in its wholly owned investment in River Ridge Mall to a newly formed joint venture in March 2016 and recognized a loss on impairment of $9,510 in the first quarter of 2016 when it adjusted the book value of the mall to its estimated net sales price based upon a contract with a third party buyer, adjusted to reflect estimated disposition costs. The impairment loss includes a $2,100 reserve for a roof and electrical work that the Company must fund in the future. An additional loss on impairment of $84 was recognized in the fourth quarter of 2016 to reflect actual closing costs. The revenues of River Ridge Mall accounted for approximately 0.6% of total consolidated revenues for the trailing twelve months ended March 31, 2016. The Company's investment in River Ridge is included in Investments in Unconsolidated Affiliates on the Company's consolidated balance sheets at December 31, 2016. See Note 5 for further information.

Other Impairment Loss in 2016

During the year ended December 31, 2016, the Company recorded impairments of $854 related to the sales of three outparcels. These outparcels are classified for segment reporting purposes in the All Other category. See Note 11 for segment information.

Long-lived Assets Measured at Fair Value in 2015

During the year ended December 31, 2015, the Company wrote down four properties to their estimated fair values. These Properties were Chesterfield Mall, Mayfaire Community Center, Chapel Hill Crossing and Madison Square. Of these four Properties, all but Chesterfield Mall were disposed of as of December 31, 2015 as described below.

In accordance with the Company's quarterly impairment review process, the Company recorded impairments of real estate of $99,969 in the fourth quarter of 2015 related to Chesterfield Mall, located in Chesterfield, MO, to write-down the depreciated book value to its estimated fair value of $125,000 as of December 31, 2015. The mall had experienced declining cash flows as competition from several new outlet shopping centers in the area impacted its sales. The fair value analysis for Chesterfield Mall as of December 31, 2015 used assumptions including an 11-year holding period with a sale at the end of the holding period, a capitalization rate of 8.25% and a discount rate of 8.25%. The revenues of Chesterfield Mall accounted for approximately 1.5% of total consolidated revenues for the year ended December 31, 2015. The mall is in foreclosure, which is expected to be complete in early 2017. See Note 6.

The Company wrote down the book values of Chapel Hill Crossing and Mayfaire Community Center to their net sales prices and recognized a non-cash impairment of real estate of $1,914 and $397, respectively, in the fourth quarter of 2015. Chapel Hill Crossing, an associated center located in Akron, OH was sold for $2,300 and Mayfaire Community Center located in Wilmington, NC was sold for $56,300. See Note 4 for additional information related to these sales.

The Company also recognized impairment of real estate of $2,620 in the second quarter of 2015 when it adjusted the book value of Madison Square, a mall located in Huntsville, AL, to its net sales price of $5,000 based on its sale in April 2015. See Note 4 for further information on this sale.

Other Impairment Loss in 2015

During 2015, the Company recorded an impairment of real estate of $161 related to the sale of a building at a formerly owned mall for total net proceeds after sales costs of $750, which was less than its carrying amount of $911. The Company also recognized $884 of impairment from the sale of two outparcels.

Long-lived Assets Measured at Fair Value in 2014

During the year ended December 31, 2014, the Company wrote down three properties to their estimated fair values. These properties were Chapel Hill Mall, Lakeshore Mall and Pemberton Plaza. All three of these properties were disposed of as of December 31, 2014 as described below.

In accordance with the Company's quarterly impairment review process, the Company recorded impairments 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 had experienced declining cash flows which were insufficient to cover the debt service on the mortgage secured by the property and the non-recourse loan was in default. The revenues of Chapel Hill Mall accounted for approximately 0.4% of total consolidated revenues for the year ended December 31, 2014. In the third quarter of 2014, the Company conveyed Chapel Hill Mall to the lender by a deed-in-lieu of foreclosure.

The Company recognized impairment of real estate of $5,100 in the first quarter of 2014 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 and the Company recognized an impairment loss of $106 in the second quarter of 2014 as a result of additional closing costs. The revenues of Lakeshore Mall accounted for approximately 0.2% of total consolidated revenues for the year ended December 31, 2014.

In the third quarter of 2014, the Company recognized an impairment loss of $497 to write down the book value of Pemberton Plaza, a community center located in Vicksburg, MS, to its sales price. The revenues of Pemberton Plaza accounted for approximately 0.0% of total consolidated revenues for the year ended December 31, 2014.

Other Impairment Loss in 2014

During 2014, the Company recorded an impairment of real estate of $105 related to the sale an outparcel for total net proceeds after sales costs of $176, which was less than its total carrying amount of $281.