Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements

13. Fair Value Measurements

The Company measured its plan assets at fair value on a recurring basis each annual reporting period. Investments in real estate, notes receivable, and retained interest may be recorded at fair value on a nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, such as internally-developed valuation models which require the reporting entity to develop its own assumptions.

Guarantees

In October 2009, the Company entered into a strategic alliance agreement with Southwest Airlines to facilitate the commencement of low-fare air service in May 2010 to the Northwest Florida Beaches International Airport (see Note 19, Commitments and Contingencies). The Company agreed to reimburse Southwest Airlines in the form of a guarantee if it incurred losses on its service at the airport during the first three years of service by making specified break-even payments. At inception, the Company measured the associated standby guarantee liability at fair value based upon a discounted cash flow analysis based on management’s best estimates of future cash flows to be paid by the Company pursuant to the strategic alliance agreement. These cash flows were estimated using numerous estimates including future fuel costs, passenger load factors, air fares, and seasonality. Subsequently, the guarantee is measured at the greater of the fair value of the guarantee liability at inception or the amount that is probable and reasonably estimable of occurring.

Effective July 1, 2012, the Company and Southwest Airlines mutually agreed to terminate this agreement and the Company eliminated the liability of $0.8 million that was recorded as of December 31, 2011.

Long Lived Assets

The Company reviews its long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Homes are measured at lower of carrying value or fair value. The fair value of these homes is determined based upon final sales prices of inventory sold during the period (level 2 inputs) or estimates of selling prices based on current market data (level 3 inputs). Other properties for which management does not intend to sell in the near term or under current market conditions and has the ability to hold are evaluated for impairment based on management’s best estimate of the long-term use and eventual disposition of the property (level 3 inputs) For projects under development, an estimate of future cash flows on an undiscounted basis is performed using estimated future expenditures necessary to maintain and complete the existing project, including infrastructure and amenity costs, and using management’s best estimates about future sales prices, sales volumes, sales velocity and holding periods (level 3 inputs). The estimated length of expected development periods, related economic cycles and inherent uncertainty with respect to these projects such as the impact of changes in development plans including changes in intended use such as whether land is sold in bulk or in individual lots, or is sold in developed or undeveloped condition and the Company’s intent and ability to hold the projects through the development period, could result in changes to these estimates. For operating properties, an estimate of undiscounted cash flows requires management to make similar assumptions about the use and eventual disposition of such properties.

The Company uses varying methods to determine fair value, such as (i) analyzing expected future cash flows, (ii) determining resale values by market, or (iii) applying a capitalization rate to net operating income using prevailing rates in a given market. Fair value of a property may be derived either from discounting projected cash flows at an appropriate discount rate (10% to 20%), through appraisals of the underlying property, or a combination thereof.

The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments and impairments during the year. The Company’s non-financial assets measured at fair value on a nonrecurring basis were as follows at December 31, 2012 and 2011.

At December 31, 2012			Level 3		Fair Value December 31, 2012		Total Impairment Charge
Investment in real estate			$	300	$	300	$	2,551
At December 31, 2011	Level 2		Level 3		Fair Value December 31, 2011		Total Impairment Charge
Investment in real estate	$	1,224	$	93,127	$	94,351	$	377,270
Notes receivable		—		—		—		55
	$	1,224	$	93,127	$	94,351	$	377,325

In December 2012, the Company entered into agreement with the Airport, which the Company agreed to cease operating its covered airport parking for a period of seven years, which in turn the Airport released the Company from a twenty-eight year remaining land lease on another parcel with approximately $4.2 million of total future payments. As a result of ceasing operations at the covered airport parking the future estimated undiscounted cash flows did not cover the current carrying value of the covered airport parking; thus the Company wrote the covered airport parking facility down to its current fair value based on a current property appraisal.

As a result of the Company’s impairment analyses in 2011, investment in real estate with a carrying amount of $471.7 million was written down to fair value of $94.4 million resulting in impairment charges of $377.3 million. Additionally, the Company wrote off a note receivable with a book value of $0.1 million.

Fair Value of Financial Instruments

The Company uses the following methods and assumptions in estimating fair value for financial instruments:

• The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate their carrying values at December 31, 2012 and 2011, due to the short-term nature of these assets and liabilities. The Company’s debt is at rates that approximate current market rates for these instruments. These financial instruments would be categorized as level 1.

• The fair value of the Company’s pledged treasury securities are based on quoted market rates.

• The fair value of the Company’s retained interest investment is the present value of the expected future cash flows at the effective yield.

The carrying amount and fair value of the Company’s financial instruments were as follows (the table below excludes financial instruments with carrying values that approximate their fair values):

	Note		December 31, 2012						December 31, 2011
			Carrying value		Fair value		Level		Carrying value		Fair value		Level
Assets
Pledged treasury securities		7	$	26,818	$	30,432		1	$	23,299	$	32,394		1
Retained interest investment		9		9,481		12,727		3		10,707		13,202		3