Fair Value Measurements

Recurring Fair Value Measurements:

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016, 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 March 31, 2017
Assets:
Investments, mutual funds held in a grantor trust	$	27,484					$	27,484
Investments, mutual funds	8,130						8,130
Derivative instruments:
Interest rate contracts			$	872			872
Total	$	35,614	$	872	$	—	$	36,486
Liabilities:
Deferred compensation plan obligations	$	27,484					$	27,484
Total	$	27,484	$	—	$	—	$	27,484



	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, 2016
Assets:
Investments, mutual funds held in a grantor trust	$	26,328					$	26,328
Investments, mutual funds	7,670						7,670
Derivative instruments:
Interest rate contracts			$	126			126
Total	$	33,998	$	126	$	—	$	34,124
Liabilities:
Deferred compensation plan obligations	$	26,328					$	26,328
Total	$	26,328	$	—	$	—	$	26,328

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.

No assets were measured at fair value on a nonrecurring basis at December 31, 2016. Assets measured at fair value on a nonrecurring basis at March 31, 2017 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⁾			$	12,901	$	5,896	$	18,797	$	(10,265	)
Property held for sale ⁽³⁾			15,998				15,998		(3,123		)
Investment in real estate joint ventures and partnerships ⁽⁴⁾					961		961		(95		)
Total	$	—	$	28,899	$	6,857	$	35,756	$	(13,483	)

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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 $29.1 million was written down to a fair value of $18.8 million, resulting in a loss of $10.3 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)	Property held for sale with a carrying amount of $19.1 million was written down to a fair value of $16.6 million, less costs to sale of $.6 million, resulting in a loss of $3.1 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 offers for the Level 2 inputs.


(4)	Our net investment in real estate joint ventures and partnerships with a carrying amount of $1.1 million was written down to a fair value of $1.0 million, resulting in a loss of $.1 million, which was included in earnings for the period. See the quantitative information about the significant unobservable inputs used for our Level 3 fair value measurements table below.

Fair Value Disclosures:

Unless otherwise described 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):



	March 31, 2017						December 31, 2016
	Carrying Value		Fair Value Using Significant Other Observable Inputs (Level 2)		Fair Value Using Significant Unobservable Inputs (Level 3)		Carrying Value		Fair Value Using Significant Other Observable Inputs (Level 2)		Fair Value Using Significant Unobservable Inputs (Level 3)
Other Assets:
Tax increment revenue bonds⁽¹⁾	$	23,910			$	23,910	$	23,910			$	23,910
Investments, held to maturity⁽²⁾	4,241		$	4,241			5,240		$	5,248
Debt:
Fixed-rate debt	2,070,858				2,119,536		2,089,769				2,132,082
Variable-rate debt	252,589				251,321		266,759				265,230

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(1)	At March 31, 2017 and December 31, 2016, the credit loss balance on our tax increment revenue bonds was $31.0 million.


(2)	Investments held to maturity are recorded at cost. As of March 31, 2017, no unrealized gain or loss was recognized on these investments, and at December 31, 2016, an $8 thousand unrealized gain was recognized.

The quantitative information about the significant unobservable inputs used for our Level 3 fair value measurements as of March 31, 2017 and December 31, 2016 reported in the above tables, is as follows:



Description	Fair Value at					Unobservable Inputs	Range
	March 31, 2017		December 31, 2016				Minimum					Maximum
	(in thousands)				Valuation Technique		2017			2016		2017			2016
Property	$	5,896	$	—	Discounted cash flows	Discount rate	7.5		%			12.0		%
						Capitalization rate	7.0		%			10.0		%
						Holding period (years)	5					10
						Expected future inflation rate ⁽¹⁾						2.0		%
						Market rent growth rate ⁽¹⁾	2.0		%			3.0		%
						Expense growth rate ⁽¹⁾						2.0		%
						Vacancy rate ⁽¹⁾	—		%			20.0		%
						Renewal rate ⁽¹⁾						70.0		%
						Average market rent rate ⁽¹⁾	$	11.00				$	16.00
						Average leasing cost per square foot ⁽¹⁾	$	10.00				$	35.00
Investment in real estate joint ventures and partnerships	961		—		Bona fide purchase offers	Contract price
Tax increment revenue bonds	23,910		23,910		Discounted cash flows	Discount rate	6.5		%	6.5	%	7.5		%	7.5	%
						Expected future growth rate	1.0		%	1.0	%	2.5		%	2.0	%
						Expected future inflation rate	1.0		%	1.0	%	3.0		%	3.0	%
Fixed-rate debt	2,119,536		2,132,082		Discounted cash flows	Discount rate	3.0		%	3.0	%	5.1		%	5.2	%
Variable-rate debt	251,321		265,230		Discounted cash flows	Discount rate	1.9		%	1.6	%	2.6		%	2.4	%

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(1)	Only applies to one property valuation.

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