Fair Value Measurements

Recurring Fair Value Measurements:

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 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 at December 31, 2013
			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at December 31, 2013
Assets:
Investments, mutual funds held in a grantor trust	$	18,583					$	18,583
Investments, mutual funds and time deposit	8,408		$	50,034			58,442
Derivative instruments:
Interest rate contracts			5,282				5,282
Total	$	26,991	$	55,316	$	—	$	82,307
Liabilities:
Derivative instruments:
Interest rate contracts			$	476			$	476
Deferred compensation plan obligations	$	18,583					18,583
Total	$	18,583	$	476	$	—	$	19,059



	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
			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at December 31, 2012
Assets:
Investments, mutual funds held in a grantor trust	$	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

Nonrecurring Fair Value Measurements:

Property 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.

Assets measured at fair value on a nonrecurring basis at December 31, 2013, 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⁾			$	3,300	$	8,576	$	11,876	$	(2,358	)
Total	$	—	$	3,300	$	8,576	$	11,876	$	(2,358	)

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(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 $14.3 million was written down to a fair value of $11.9 million, resulting in a loss of $2.4 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.

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	)

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(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 fair value of these properties was determined using a 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 fair value of this investment was determined using the weighted average of the bona fide purchase offers received for the Level 2 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,
	2013				2012
	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	$	13,330	$	13,549	$	89,776	$	93,572
Tax increment revenue bonds ⁽¹⁾	25,850		25,850		26,505		26,505
Debt:
Fixed-rate debt	2,136,265		2,150,891		1,992,599		2,094,122
Variable-rate debt	163,579		172,349		211,431		223,759

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(1)	At December 31, 2013 and 2012, the credit loss balance on our tax increment revenue bonds was $31.0 million.

The quantitative information about the significant unobservable inputs used for our Level 3 fair value measurements as of December 31, 2013 and 2012 reported in the above tables, is as follows:



Description	Fair Value at December 31,					Unobservable Inputs	Range
	Fair Value at December 31,						Range
	2013		2012				Minimum				Maximum
	(in thousands)				Valuation Technique		2013		2012		2013		2012
Property	$	8,576	$	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	13,549		93,572		Discounted cash flows	Discount rate					2.7	%	3.0		%
Tax increment revenue bonds	25,850		26,505		Discounted cash flows	Discount rate					7.5	%	7.5		%
						Expected future growth rate	1.0	%	1.0	%	2.0	%	4.0		%
						Expected future inflation rate	1.0	%	1.0	%	2.0	%	2.0		%
Fixed-rate debt	2,150,891		2,094,122		Discounted cash flows	Discount rate	1.3	%	1.1	%	7.4	%	6.5		%
Variable-rate debt	172,349		223,759		Discounted cash flows	Discount rate	.8	%	1.4	%	5.0	%	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.