Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements

Fair Value Measurements

16. Fair Value Measurements

        In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses reported in earnings. We have not elected the fair market value option for any of our financial assets or financial liabilities.

        The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments. We do not invest our cash in auction rate securities. The carrying value and fair value of our financial instruments as of December 31, 2012 and 2011 assuming election of the fair market value option (in thousands):

	At December 31, 2012					At December 31, 2011
	Carrying Value		Fair Value			Carrying Value		Fair Value
Mortgage loans receivable	$	39,299	$	44,939	(1)	$	53,081	$	61,844	(1)
Marketable debt securities		—		—			6,485		6,500	(2)
Bonds payable		2,635		2,635	(3)		3,200		3,200	(3)
Bank borrowings		115,500		115,500	(3)		56,000		56,000	(3)
Senior unsecured notes		185,800		194,838	(4)		100,000		101,223	(4)
Earn-out liabilities		6,744		6,744	(5)		6,305		6,305	(5)

⁽¹⁾

Our investment in mortgage loans receivable is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash inflows of the mortgage loans receivable at December 31, 2012 and 2011 was 6.0%.

⁽²⁾

Our investment in marketable debt securities is classified as Level 2. The fair value is measured using quoted market rates based on most recent transactions from an independent third party source. The pricing of our marketable debt securities as of December 31, 2011 was 100.0%. During 2012, these marketable debt securities were redeemed at par value. See Note 4. Marketable Securities for further discussion.

⁽³⁾

Our bonds payable and bank borrowings are at a variable interest rate. The estimated fair value of our bonds payable and bank borrowings approximated their carrying values at December 31, 2012 and 2011 based upon prevailing market interest rates for similar debt arrangements.

⁽⁴⁾

Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is measured based upon management's estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities. At December 31, 2012, the discount rate used to value our future cash outflow of our senior unsecured notes was 3.8% for those maturing before year 2020 and 4.3% for those maturing beyond year 2020. At December 31, 2011, the discount rate used to value our future cash outflow of our senior unsecured notes was 4.8%.

⁽⁵⁾

Our contingent obligation under the earn-out liabilities is classified as Level 3. We estimated the fair value of the contingent earn-out payments using a discounted cash flow analysis. The discount rate that we use consists of a risk-free U.S. Treasury rate plus a company specific credit spread which we believe is acceptable by willing market participants. At December 31, 2012 and 2011, the discount rate used to value our future cash outflow of the earn-out liability was 6.6% and 6.8%, respectively.