Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Recurring Fair Value Measurements:

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and 2011, aggregated by the level in the fair value hierarchy in which those measurements fall, are as follows (in thousands):

	Quoted Prices  in Active  Markets for Identical Assets and Liabilities (Level 1)		Significant  Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at December 31, 2012
Assets:
Investments in grantor trusts	$	16,030					$	16,030
Derivative instruments:
Interest rate contracts			$	9,926			9,926
Total	$	16,030	$	9,926	$	—	$	25,956
Liabilities:
Derivative instruments:
Interest rate contracts			$	768			$	768
Deferred compensation plan obligations	$	16,030					16,030
Total	$	16,030	$	768	$	—	$	16,798

	Quoted Prices  in Active  Markets for Identical Assets and Liabilities (Level 1)		Significant  Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at December 31, 2011
Assets:
Investments in grantor trusts	$	14,693					$	14,693
Derivative instruments:
Interest rate contracts			10,816				10,816
Total	$	14,693	$	10,816	$	—	$	25,509
Liabilities:
Derivative instruments:
Interest rate contracts			$	674			$	674
Deferred compensation plan obligations	$	14,693					14,693
Total	$	14,693	$	674	$	—	$	15,367

A reconciliation of the outstanding balance of the subordinate tax increment revenue bonds using significant unobservable inputs (Level 3) is as follows (in thousands):

	Fair Value  Measurements  Using Significant  Unobservable  Inputs (Level 3)
Outstanding, January 1, 2011	$	10,700
Settlement of recalled bonds (1)	(10,700		)
Outstanding, December 31, 2011	$	—

(1) Settlement of recalled bonds represents the recall of previously issued subordinated tax increment revenue bonds that were available for sale and were replaced with held to maturity subordinated tax increment revenue bonds associated with the exchange transaction in April 2011.

Nonrecurring Fair Value Measurements:

Property and Property Held for Sale Impairments

Property is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property, including any identifiable intangible assets, site costs and capitalized interest, may not be recoverable. In such an event, a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future on an undiscounted basis to the carrying amount of such property. If we conclude that an impairment may have occurred, estimated fair values are determined by management utilizing cash flow models, market capitalization rates and market discount rates, or by obtaining third-party broker valuation estimates, appraisals, bona fide purchase offers or the expected sales price of an executed sales agreement in accordance with our fair value measurements accounting policy. Market capitalization rates and market discount rates are determined by reviewing current sales of similar properties and transactions, and utilizing management’s knowledge and expertise in property marketing.

Investments in Real Estate Joint Ventures and Partnerships Impairments

The fair value of our investment in partially owned real estate joint ventures and partnerships is estimated by management based on a number of factors, including the performance of each investment, the life and other terms of the investment, holding periods, market conditions, cash flow models, market capitalization rates and market discount rates, or by obtaining third-party broker valuation estimates, appraisals and bona fide purchase offers in accordance with our fair value measurements accounting policy. Market capitalization rates and market discount rates are determined by reviewing current sales of similar properties and transactions, and utilizing management’s knowledge and expertise in property marketing. We recognize an impairment loss if we determine the fair value of an investment is less than its carrying amount and that loss in value is other than temporary.

Subordinate Tax Increment Revenue Bonds Impairment

Investments in tax increment revenue bonds are reviewed for impairment if changes in circumstances or forecasts indicate that the carrying amount may not be recoverable and if it is uncertain if the investment will be held to maturity. In such an event, a comparison is made of the projected recoverability of cash flows from the tax increment revenue bonds to the carrying amount of each investment. If we conclude that an impairment may have occurred, fair values are determined by management utilizing third-party sales revenue projections until the maturity of the bonds and discounted cash flow models.

Assets measured at fair value on a nonrecurring basis at December 31, 2012 aggregated by the level in the fair value hierarchy in which those measurements fall, are as follows (in thousands):

	Quoted Prices  in Active  Markets for Identical  Assets and Liabilities (Level 1)		Significant  Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Total Gains (Losses) (1)
Property (2)			$	5,773	$	13,906	$	19,679	$	(2,971	)
Investment in real estate joint ventures and partnerships (3)			24,231				24,231		(6,608		)
Total	$	—	$	30,004	$	13,906	$	43,910	$	(9,579	)

(1) Total gains (losses) exclude impairments on disposed assets because they are no longer held by us.

(2) In accordance with our policy of evaluating and recording impairments on the disposal of long-lived assets, property with a carrying amount of $22.4 million was written down to a fair value of $19.7 million less costs to sell of $.3 million, resulting in a loss of $3.0 million, which was included in earnings for the period. Management’s estimate of the fair value of these properties was determined using bona fide purchase offer for the Level 2 inputs. See the quantitative information about the significant unobservable inputs used for our Level 3 fair value measurements table below.

(3) Our net investment in real estate joint ventures and partnerships with a carrying amount of $30.8 million was written down to a fair value of $24.2 million, resulting in a loss of $6.6 million, which was included in earnings for the period. Management’s estimate of the fair value of this investment was determined using the weighted average of the bona fide purchase offers received for the Level 2 inputs.

Assets measured at fair value on a nonrecurring basis at December 31, 2011, aggregated by the level in the fair value hierarchy in which those measurements fall, are as follows (in thousands):

	Quoted Prices  in Active  Markets for Identical  Assets and Liabilities (Level 1)		Significant  Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Total Gains (Losses) (1)
Property (2)			$	389	$	98,207	$	98,596	$	(36,907	)
Property held for sale (3)			43,657		1,500		45,157		(13,799		)
Investment in real estate joint ventures and partnerships (4)					6,311		6,311		(1,752		)
Subordinate tax increment revenue bonds (5)					26,723		26,723		(18,737		)
Total	$	—	$	44,046	$	132,741	$	176,787	$	(71,195	)

(1) Total gains (losses) are reflected throughout 2011 and exclude impairments on disposed assets because they are no longer held by us.

(2) In accordance with our policy of evaluating and recording impairments on the disposal of long-lived assets, property with a carrying amount of $135.5 million was written down to a fair value of $98.6 million, resulting in a loss of $36.9 million, which was included in earnings for the period. Management’s estimate of the fair value of these properties was determined using the expected sales price of an executed agreement for the Level 2 input and using third party broker valuations, bona fide purchase offers, cash flow models and discount rates ranging from 8% to 13% for the Level 3 inputs.

(3) Property held for sale with a carrying amount of $57.0 million was written down to a fair value of $45.2 million less costs to sell of $2.0 million, resulting in a loss of $13.8 million, which was included in discontinued operations in the Consolidated Statements of Operations and Comprehensive Income for the period. Management’s estimate of the fair value of these properties was determined using the expected sales price of executed agreements for the Level 2 inputs and a cash flow model using a discount rate of 10% for the Level 3 input.

(4) Our net investment in real estate joint ventures and partnerships with a carrying amount of $8.1 million was written down to a fair value of $6.3 million, resulting in a loss of $1.8 million, which was included in earnings for the period. Management’s estimate of the fair value of these investments was determined using the life and other terms of the investment, our partner’s financial condition, cash flow models and market capitalization rates ranging from 7% to 9% for the Level 3 inputs.

(5) A net credit loss on the exchange of bonds of $18.7 million was recognized upon the recall and replacement of our investment in tax increment revenue bonds by the Agency in April 2011. The exchange transaction resulted in us receiving approximately $16.5 million in cash proceeds and $57.7 million in new subordinated bonds replacing the face value of our $51.3 million of senior bonds and $22.4 million of subordinate bonds, which had been previously written down to a fair value of $10.7 million. The carrying value of the $57.7 million subordinated bonds received in the exchange were written down to their fair value of $26.7 million, of which a loss of $11.7 million was previously recognized in December 2010. The net credit loss resulted as management did not expect to recover the par value of the bonds based upon changes in terms of the bonds and future sales tax revenue projections of the development project through their maturity. Management’s estimates of the fair value of these investments were determined using third-party sales revenue projections, future growth rates ranging from 1% to 4% and inflation rates ranging from 1% to 2% for the Level 3 inputs.

Fair Value Disclosures:

Unless otherwise listed below, short-term financial instruments and receivables are carried at amounts which approximate their fair values based on their highly-liquid nature, short-term maturities and/or expected interest rates for similar instruments.

Schedule of our fair value disclosures is as follows (in thousands):

	December 31,
	2012				2011
	Carrying Value		Fair Value Using Significant Unobservable Inputs (Level 3)		Carrying Value		Fair Value Using Significant Unobservable Inputs (Level 3)
Notes receivable from real estate joint ventures and partnerships	$	89,776	$	93,572	$	149,204	$	153,532
Tax increment revenue bonds	26,505		26,505		26,505		26,505
Debt:
Fixed-rate debt	1,992,599		2,094,122		2,014,834		2,054,670
Variable-rate debt	211,431		223,759		517,003		531,353

A reconciliation of the credit loss recognized on our subordinated tax increment revenue bonds at December 31, 2012 is as follows (in thousands):

	Credit Loss Recognized
Beginning balance, January 1, 2011	$	11,717
Additions	19,305
Ending balance, December 31, 2011	$	31,022
Additions	—
Ending balance, December 31, 2012	$	31,022

The quantitative information about the significant unobservable inputs used for our Level 3 fair value measurements as of December 31, 2012 reported in the above tables, is as follows:

Description	Fair Value at December 31, 2012		Valuation Technique	Unobservable Inputs	Range
					Minimum		Maximum
Property	$	13,906	Broker valuation estimate	Indicative bid (1)
			Bona fide purchase offers	Contract price (1)
			Discounted cash flows	Discount rate			10.0		%
				Capitalization rate	9.3	%	9.5		%
				Holding period (years)			1
				Expected future inflation rate (2)			3.0		%
				Market rent growth rate (2)			3.0		%
				Expense growth rate (2)			3.0		%
				Vacancy rate (2)			5.0		%
				Renewal rate (2)			75.0		%
				Average market rent rate (2)			$	10.52
				Average leasing cost per square foot (2)			$	16.50
Notes receivable from real estate joint ventures and partnerships	93,572		Discounted cash flows	Discount rate			3.0		%
Tax increment revenue bonds	26,505		Discounted cash flows	Discount rate			7.5		%
				Expected future growth rate	1.0	%	4.0		%
				Expected future inflation rate	1.0	%	2.0		%
Fixed-rate debt	2,094,122		Discounted cash flows	Discount rate	1.1	%	6.5		%
Variable-rate debt	223,759		Discounted cash flows	Discount rate	1.4	%	5.0		%

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(1) These fair values were developed by third parties, subject to our corroboration for reasonableness.

(2) Only applies to one property valuation.