Business Combinations

9 Months Ended

Sep. 30, 2011

Business Combinations [Abstract]

Business Combinations

Note 4. Business Combinations

Effective April 13, 2011, we acquired our partner's 50% interest in an unconsolidated joint venture ("Palm Coast") related to a development property in Palm Coast, Florida, which resulted in the consolidation of this property within our shopping center segment. Management has determined that this transaction qualified as a business combination to be accounted for under the acquisition method.

Effective April 1, 2010, we assumed control of two 50%-owned unconsolidated joint ventures ("Sheridan") related to a development project in Sheridan, Colorado, which resulted in the consolidation of these joint ventures within our shopping center segment that had previously been accounted for under the equity method. Control was assumed through a modification of the joint venture agreements in which we assumed all management, voting and approval rights without transferring consideration to our joint venture partner. Each partner's percentage interest in the joint ventures remained unchanged. Management has determined that these transactions qualified as business combinations to be accounted for under the acquisition method.

Accordingly, the assets and liabilities of these transactions were recorded in our consolidated balance sheet at their estimated fair values as of their respective effective date, with any applicable partner's share of the resulting net change included in noncontrolling interests. Fair value of assets acquired, liabilities assumed and equity interests was estimated using market-based measurements, including cash flow and other valuation techniques. The fair value measurement is based on both significant inputs for similar assets and liabilities in comparable markets and significant inputs that are not observable in the markets in accordance with our fair value measurements accounting policy. Key assumptions include third-party broker valuation estimates, discount rate of 8% as of April 13, 2011, and discount rates ranging from 8% to 17% as of April 1, 2010, a terminal capitalization rate for similar properties, and factors that we believe market participants would consider in estimating fair value. The results of these transactions are included in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income beginning April 13, 2011 and April 1, 2010, respectively.

The following table summarizes the transactions related to the business combinations, including the assets acquired and liabilities assumed as indicated (in thousands):

	Palm Coast     April 13, 2011			Sheridan     April 1, 2010
Fair value of our equity interests before business combinations	$	7,578		$	(21,858	)
Fair value of consideration transferred	$	11,462	(1)	$	-
Amounts recognized for assets and liabilities assumed:
Assets:
Property	$	32,807		$	32,940
Unamortized debt and lease costs		2,421			5,182
Accrued rent and accounts receivable		211			213
Cash and cash equivalents		1,402			1,522
Other, net		694			151,464	(2)
Liabilities:
Debt, net		-			(101,741	) (3)
Accounts payable and accrued expenses		(137	)		(647	)
Other, net		(318	)		(1,334	)
Total net assets	$	37,080		$	87,599
Noncontrolling interests of the real estate joint ventures	$	-		$	(18,573	)

(1) Consideration included $.5 million of cash and $11.0 million in debt extinguished.

(2) Included primarily a $97.0 million debt service guaranty asset, tax increment revenue bonds of $51.3 million and intangible and other assets.

(3) Excluded the effect of $123.9 million in intercompany debt that is eliminated upon consolidation.

Although we do not anticipate any changes in the Palm Coast fair value measurements, the measurements may be subject to change within 12 months of the business combination date if new facts or circumstances are brought to our attention that were previously unknown but existed as of the business combination date.

As a result of the Palm Coast acquisition, we recognized a gain of $4.6 million which is attributable to the realization upon consolidation of our preferred return on equity. For the nine months ended September 30, 2011, this gain is included in discontinued operations in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income as the property had been classified as held for sale as of September 30, 2011. Additionally, as a result of our Sheridan business combination, we recognized an impairment loss of $15.8 million as a result of revaluing our 50% equity interest held in the real estate joint ventures before the business combinations, which is reported as an impairment loss in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the nine months ended September 30, 2010. For the three months ended September 30, 2011, Palm Coast's impact increased revenues and the net loss attributable to common shareholders by $.9 million and $1.1 million, respectively. For the nine months ended September 30, 2011, Palm Coast's impact increased revenues and the net loss attributable to common shareholders by $1.7 million and $.8 million, respectively. For the three and nine months ended September 30, 2010, Sheridan's impact increased revenues by $.7 million and $1.2 million, respectively. For the three months ended September 30, 2010, Sheridan's impact increased net income attributable to common shareholders by $.1 million, and decreased net income attributable to common shareholders by $.8 million for the nine months ended September 30, 2010.

The following table summarizes the pro forma impact of the real estate joint ventures as if Palm Coast and Sheridan had been consolidated on January 1, 2010, the earliest year presented, as follows (in thousands, except per share amounts):

	Three Months Ended September 30,					Nine Months Ended September 30,
	Pro Forma			Pro Forma		Pro Forma			Pro Forma
	2011(1)			2010 (1)		2011(1)			2010 (1)
Revenues	$	138,565		$	134,957	$	406,531		$	403,259
Net (loss) income	$	(35,958	)	$	19,299	$	(15,888	)	$	42,486
Net (loss) income attributable to common shareholders	$	(42,089	)	$	8,718	$	(42,085	)	$	13,101
Earnings per share – basic	$	(.35	)	$	.07	$	(.35	)	$	.11
Earnings per share – diluted	$	(.35	)	$	.07	$	(.35	)	$	.11

(1) There are no non-recurring pro forma adjustments included within or excluded from the amounts in the preceding table.