Note 12 - Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

12. Fair Value Measurements

All financial instruments of the Company are reflected in the accompanying Condensed Consolidated Balance Sheets at amounts which, in management’s estimation based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values except those listed below, for which fair values are disclosed.  The valuation method used to estimate fair value for fixed-rate and variable-rate debt is based on discounted cash flow analyses, with assumptions that include credit spreads, market yield curves, trading activity, loan amounts and debt maturities.  The fair values for marketable securities are based on published values, securities dealers’ estimated market values or comparable market sales.  Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.

As a basis for considering market participant assumptions in fair value measurements, the FASB’s Fair Value Measurements and Disclosures guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The following are financial instruments for which the Company’s estimate of fair value differs from the carrying amounts (in thousands):

	June 30, 2014				December 31, 2013
	Carrying Amounts		Estimated Fair Value		Carrying Amounts		Estimated Fair Value
Marketable securities (1)	$	75,019	$	74,969	$	62,766	$	62,824
Notes payable (2)	$	3,533,306	$	3,658,419	$	3,186,047	$	3,333,614
Mortgages payable (3)	$	1,197,065	$	1,254,995	$	1,035,354	$	1,083,801

(1) As of June 30, 2014 and December 31, 2013, the Company determined that $72.2 million and $59.7 million, respectively, of the Marketable securities estimated fair value were classified within Level 1 of the fair value hierarchy and the remaining $2.8 million and $3.1 million, respectively, were classified within Level 3 of the fair value hierarchy.

(2) The Company determined that its valuation of Notes payable was classified within Level 2 of the fair value hierarchy. 

(3) The Company determined that its valuation of Mortgages payable was classified within Level 3 of the fair value hierarchy. 

The Company has certain financial instruments that must be measured under the FASB’s Fair Value Measurements and Disclosures guidance, including available for sale securities. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

The table below presents the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

	Balance at June 30, 2014		Level 1		Level 2		Level 3
Marketable equity securities	$	72,230	$	72,230	$	-	$	-

	Balance at December 31, 2013		Level 1		Level 2		Level 3
Marketable equity securities	$	59,723	$	59,723	$	-	$	-

 Assets measured at fair value on a non-recurring basis at June 30, 2014 and December 31, 2013, are as follows (in thousands):

	Balance at June 30, 2014		Level 1		Level 2		Level 3
Real estate	$	113,644	$	-	$	-	$	113,644
Cost method investment	$	2,591	$	-	$	-	$	2,591

	Balance at December 31, 2013		Level 1		Level 2		Level 3
Real estate	$	217,529	$	-	$	-	$	217,529
Joint venture investments	$	59,693	$	-	$	-	$	59,693
Other real estate investments	$	2,050	$	-	$	-	$	2,050
Cost method investment	$	4,670	$	-	$	-	$	4,670

During the six months ended June 30, 2014, the Company recognized impairment charges of $100.0 million of which $9.3 million, before noncontrolling interests, is included in discontinued operations. These impairment charges consist of (i) $97.8 million related to adjustments to property carrying values and (ii) $2.2 million related to a cost method investment. During the six months ended June 30, 2013, the Company recognized impairment charges of $81.5 million of which $56.3 million, before noncontrolling interests, is included in discontinued operations. These impairment charges consist of (i) $73.7 million related to adjustments to property carrying values based on signed contracts or letters of intent and (ii) $7.8 million related to a cost method investment.

The Company’s estimated fair value as it relates to the cost method investment, was based upon a discounted cash flow model. The discounted cash flow model includes all estimated cash inflows and outflows over a specified holding period. These cash flows were comprised of unobservable inputs which include forecasted revenues and expenses based upon market conditions and expectations for growth. The capitalization rate of 6.0% and discount rate of 9.1% which were utilized in this model were based upon observable rates that the Company believes to be within a reasonable range of current market rates for the respective investment.

The Company’s estimated fair values, as it relates to property carrying values were primarily based upon (i) estimated sales prices from third party offers based on signed contracts or letters of intent (this method was used to determine $41.0 million of the $97.8 million in impairments recognized during the six months ended June 30, 2014), for which the Company does not have access to the unobservable inputs used to determine these estimated fair values, and (ii) discounted cash flow models (this method was used to determine $56.8 million of the $97.8 million in impairments recognized during the six months ended June 30, 2014). The discounted cash flow models include all estimated cash inflows and outflows over a specified holding period. These cash flows were comprised of unobservable inputs which include forecasted revenues and expenses based upon market conditions and expectations for growth. The capitalization rates primarily ranging from 5.0% to 15.0% and discount rates primarily ranging from 6.0% to 16.0% which were utilized in the models were based upon observable rates that the Company believes to be within a reasonable range of current market rates for each respective investments.

Based on these inputs the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy. (See Footnote 2 for additional discussion regarding impairment charges).