Impairment Losses

12 Months Ended

Dec. 31, 2011

Impairment Losses [Abstract]

IMPAIRMENT LOSSES

5. IMPAIRMENT LOSSES

During 2011, management began a strategic review and analysis of its residential and land businesses, as well as certain operating properties, in an attempt to determine the most effective way to maximize the value of its holdings. As a result of this review, the Company revised the cash flow projections for its land and residential holdings and two operating properties, and in the fourth quarter of 2011, recorded impairment charges as discussed below. Additionally, in February 2012, the Company determined that it would liquidate its holdings of certain non-core assets in bulk on a more accelerated timeline and at lower prices than initially planned and re-deploy this capital primarily into office properties within its core markets.

Impairment Losses in Costs and Expenses

During 2011, 2010 and 2009, the Company recorded the following impairment losses in costs and expenses on the accompanying Statements of Operations (in thousands):

		September 30,		September 30,		September 30,
	2011		2010		2009
Residential and land	$	96,523	$	—	$	—
Operating properties		7,632
Investment in Verde Realty		3,508		—		—
60 N. Market/related note receivable		100		586		1,600
Handy Road land		—		1,968		—
10 Terminus Place				—		34,900
Company airplane				—		4,012
	$	107,763	$	2,554	$	40,512

2011 Impairment Losses

In the fourth quarter of 2011, the Company revised the cash flow projections in light of the strategic review and analysis discussed above for its land and residential holdings as well as two operating properties that were being held for long term investment. The cash flow revisions reflected a higher probability that the Company would sell the assets in the short term than holding them for long term investment and development opportunities. As a result of these revisions, the undiscounted cash flows of 12 land and residential projects and two operating properties were less than their carrying amounts, and the Company recorded impairment losses to adjust these carrying amounts to fair value.

In the first quarter of 2011, the Company recorded an other-than-temporary impairment on its investment in Verde Realty (“Verde”), a cost method investment in a non-public real estate investment trust, to adjust the carrying amount of the Company’s investment to fair value, as a result of an analysis performed in connection with Verde’s withdrawal of its proposed public offering.

2010 Impairment Losses

Handy Road was an encumbered, undeveloped parcel of land in suburban Atlanta, Georgia, that the Company was holding for future development or sale. In 2010, the Company determined that it would convey the land to the bank through foreclosure. As a result, the Company recognized an impairment loss to record the land at its fair value. 60 North Market is a multi-family residential project in Asheville, North Carolina that was acquired by the Company in 2009. In 2010, the Company recorded an impairment loss on the project as it determined the fair value of the project had declined further since its acquisition.

2009 Impairment Losses

10 Terminus Place is a multi-family residential project in Atlanta, Georgia. In 2009, market conditions for for-sale multi-family residential projects deteriorated, and the Company recorded an impairment loss to record the project at estimated fair value. The 60 North Market project was acquired by the Company in satisfaction of a note receivable, and the Company recorded an impairment loss upon acquisition. In addition, the Company sold its corporate airplane at an amount lower than its cost basis, which resulted in an impairment loss.

Impairment Loss on Investment in Unconsolidated Joint Ventures

The Company recorded the following impairment losses on its investments in unconsolidated joint ventures in 2011, 2010 and 2009 in the accompanying Statements of Operations (in thousands):

		September 30,		September 30,		September 30,
	2011		2010		2009
Temco	$	608	$	—	$	6,700
CL Realty		—		—		20,300
T200		—		—		17,993
Glenmore		—		—		6,065
	$	608	$	—	$	51,058

In 2011, CL Realty and Temco recorded impairment losses based on a change in intent to sell the majority of the assets held by each venture. In addition, the Company recorded an other than temporary impairment on its investment in Temco by adjusting the Company’s investment in Temco (see table above), due to basis differences. There was no other than temporary impairment on the Company’s investment in CL Realty. In February 2012, CL Realty and Temco entered into a contract with Forestar Realty Inc., the partner in the ventures, to sell certain assets. Under this agreement, the Company effectively agreed to sell its interests in 18 residential development projects and related residential land owned by CL Realty and Temco for $23.5 million (See Note 4). The sales price approximates the adjusted carrying amounts of the assets at the ventures and therefore no significant gain or loss is anticipated.

In 2009, the Company recorded an other-than-temporary impairment loss on its investments in CL Realty and Temco as a result of an extended market decline in the residential lot business. The Company also recorded an other-than-temporary impairment loss on its investment in T200 when it determined that it was probable that it would be required to fund a guarantee of the venture’s construction loan and other commitments to the venture (see below and Note 4 for discussion of venture level impairment losses taken at T200 in 2009). In addition, prior to and upon consolidation of Glenmore Garden Villas (“Glenmore”), a townhome project in Charlotte, North Carolina, originally owned in a joint venture, the Company recorded an impairment loss on its investment in Glenmore to record its assets and related debt at fair value.

Impairment Losses within Unconsolidated Joint Ventures

The Company was also affected by impairment losses recognized within certain of its unconsolidated joint ventures. These impairment losses were recorded on specific assets held by the joint ventures in accordance with accounting standards for long-lived assets, and are discussed above and in Note 4 within the 2011 joint venture impairments also discussed above. A summary of the Company’s share of these impairments for the years ended December 31, 2011, 2010 and 2009 are as follows (in thousands):

		September 30,		September 30,		September 30,
	2011		2010		2009
Temco	$	14,580	$	—	$	631
CL Realty		13,565		2,229		2,619
Terminus 200 LLC		—		—		20,931
Pine Mountain Builders		—		1,517		—
	$	28,145	$	3,746	$	24,181

Fair Value Considerations for Property

The Company is required to assess the fair value of its impaired consolidated real estate assets and the value of its unconsolidated joint venture investments with indicators of impairment. The value of impaired real estate assets and investments is determined using widely accepted valuation techniques, including discounted cash flow analyses on the expected cash flow of each asset, as well as the income capitalization approach, which considers prevailing market capitalization rates, analyses of recent comparable sales transactions, information from actual sales negotiations and bona fide purchase offers received from third parties. In general, the Company considers multiple valuation techniques when measuring fair value. However, in certain circumstances, a single valuation technique may be more appropriate.

The fair value measurements used in these evaluations are considered to be Level 3 valuations within the fair value hierarchy in the accounting rules, as there are significant unobservable inputs. The total of the real estate assets, including investments in joint ventures, reported at fair market value under Level 3 evaluations was $104.5 million. Examples of inputs the Company utilizes in its fair value calculations are discount rates, market capitalization rates, expected lease rental rates, timing of new leases, an estimate of future sales prices and comparable sales prices of similar assets, if available. All of the impairment charges outlined above were recorded in the Statements of Operations, either in costs and expenses or within Income (Loss) from Unconsolidated Joint Ventures.