Financial Instruments

6 Months Ended

Jun. 30, 2011

Financial Instruments [Abstract]

FINANCIAL INSTRUMENTS

8. FINANCIAL INSTRUMENTS

     Cash Flow and Fair Value Hedges

     In June 2011, the Company entered into an interest rate swap with a notional amount of $100.0 million. This swap was executed to hedge a portion of interest rate risk associated with variable-rate borrowings. The swap converts LIBOR into a fixed rate on the Term Loan.

     In March 2011, the Company entered into an interest rate swap with a notional amount of $85.0 million. This swap was executed to hedge a portion of interest rate risk associated with variable-rate borrowings. The swap converts LIBOR into a fixed rate for seven-year mortgage debt entered into in 2011.

     In March 2011, the Company terminated an interest rate swap with a notional amount of $50.0 million. The swap converted LIBOR into a fixed rate on the Company’s Revolving Credit Facilities. The fair value of the interest rate swap as of the termination date was not material.

     In February 2011, the Company entered into treasury locks with an aggregate notional amount of $200.0 million. The treasury locks were terminated in connection with the issuance of the $300.0 million aggregate principal amount of senior notes in March 2011, resulting in a payment of approximately $2.2 million to the counterparty. The treasury locks were executed to hedge the benchmark interest rate associated with forecasted interest payments associated with the then-anticipated issuance of fixed-rate borrowings. The effective portion of these hedging relationships has been deferred in accumulated other comprehensive income and will be reclassified into earnings over the term of the debt as an adjustment to earnings, based on the effective-yield method.

     Measurement of Fair Value

     At June 30, 2011, the Company used pay-fixed interest rate swaps to manage its exposure to changes in benchmark interest rates (the “Swaps”). The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. The Company determined that the significant inputs used to value its derivatives fell within Level 2 of the fair value hierarchy.

     Items Measured at Fair Value on a Recurring Basis

     The following table presents information about the Company’s financial assets and liabilities (in millions), which consist of interest rate swap agreements (included in other liabilities) and marketable securities (included in other assets) from investments in the Company’s elective deferred compensation plan at June 30, 2011, measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions):

	Fair Value Measurement at
	June 30, 2011
	Level 1		Level 2		Level 3		Total
Derivative financial instruments	$	—	$	5.6	$	—	$	5.6
Marketable securities	$	2.9	$	—	$	—	$	2.9

     The unrealized loss of $0.4 million included in other comprehensive income (loss) (“OCI”) is attributable to the net change in unrealized gains or losses relating to derivative liabilities that remain outstanding at June 30, 2011, none of which were reported in the Company’s condensed consolidated statements of operations because they are documented and qualify as hedging instruments. The unrealized loss of $0.4 million is in addition to the $2.2 million payment made to the counterparty related to the treasury locks that were executed and settled during the six months ended June 30, 2011.

      Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable, Accrued Expenses and Other Liabilities

     The carrying amounts reported in the condensed consolidated balance sheets for these financial instruments, excluding the liability associated with the equity derivative instruments, approximated fair value because of their short-term maturities.

     Notes Receivable and Advances to Affiliates

     The fair value is estimated by discounting the current rates at which management believes similar loans would be made. The fair value of these notes was approximately $110.2 million and $120.8 million at June 30, 2011 and December 31, 2010, respectively, as compared to the carrying amounts of $110.7 million and $122.6 million, respectively. The carrying value of the tax increment financing bonds, which was $6.2 million and $13.8 million at June 30, 2011 and December 31, 2010, respectively, approximated their fair value as of both periods. The fair value of loans to affiliates has been estimated by management based upon its assessment of the interest rate, credit risk and performance risk.

      Debt

     The fair market value of debt is determined using the trading price of public debt, or a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality and risk profile including the Company’s non-performance risk.

     Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments.

     Debt instruments at June 30, 2011 and December 31, 2010, with carrying values that are different than estimated fair values, are summarized as follows (in thousands):

	June 30, 2011				December 31, 2010
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Senior notes	$	2,256,598	$	2,510,932	$	2,043,582	$	2,237,320
Revolving credit facilities and term loan		670,555		673,578		879,865		875,851
Mortgage payable and other indebtedness		1,286,998		1,288,906		1,378,553		1,394,393
	$	4,214,151	$	4,473,416	$	4,302,000	$	4,507,564

      Risk Management Objective of Using Derivatives

     The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and, from time to time, the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the values of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

     The Company has an interest in consolidated joint ventures that own real estate assets in Canada and Russia. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. As such, the Company uses non-derivative financial instruments to economically hedge a portion of this exposure. The Company manages currency exposure related to the net assets of its Canadian and European subsidiaries primarily through foreign currency-denominated debt agreements.

     Cash Flow Hedges of Interest Rate Risk

     The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Company generally uses interest rate swaps as part of its interest rate risk management strategy. Swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The following table discloses certain information regarding the Swaps:

Aggregate Notional		LIBOR Fixed
Amount (in millions)		Rate			Maturity Date
$	100		4.8	%	February 2012
$	100		1.0	%	June 2014
$	85		2.8	%	September 2017

     All components of the Swaps were included in the assessment of hedge effectiveness. The Company expects that within the next 12 months it will reflect an increase to interest expense (and a corresponding decrease to earnings) of approximately $5.8 million.

     The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated OCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2011, such derivatives were used to hedge the forecasted variable cash flows associated with existing obligations. The ineffective portion of the change in the fair value of derivatives is recognized directly in earnings. During the six-month periods ended June 30, 2011 and 2010, the amount of hedge ineffectiveness recorded was not material.

     The table below presents the fair value of the Company’s Swaps as well as their classification on the condensed consolidated balance sheets as of June 30, 2011 and December 31, 2010, as follows (in millions):

	Liability Derivatives
	June 30, 2011			December 31, 2010
Derivatives Designated as	Balance Sheet	Fair		Balance Sheet	Fair
Hedging Instruments	Location	Value		Location	Value
Interest rate products	Other liabilities	$	5.6	Other liabilities	$	5.2

     The effect of the Company’s derivative instruments on net loss is as follows (in millions):

											Location of
											Gain or
											(Loss)
											Reclassified	Amount of Gain Reclassified from
	Amount of Gain (Loss) Recognized in										from	Accumulated OCI into Loss
	OCI on Derivatives (Effective Portion)										Accumulated	(Effective Portion)
Derivatives	Three-Month					Six-Month					OCI into	Three-Month			Six-Month
in Cash	Periods Ended					Periods Ended					Loss	Periods Ended			Periods Ended
Flow	June 30					June 30					(Effective	June 30			June 30
Hedging	2011			2010		2011			2010		Portion)	2011	2010		2011	2010
Interest rate											Interest
products	$	(1.0	)	$	4.1	$	(2.6	)	$	7.6	expense	$ —	$	0.1	$ —	$	0.2

     The Company is exposed to credit risk in the event of non-performance by the counterparties to the Swaps. The Company believes it mitigates its credit risk by entering into swaps with major financial institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions. The Company has not, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.

     Credit-Risk-Related Contingent Features

     The Company has agreements with each of its Swap counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its Swaps resulting in an acceleration of payment.

     Net Investment Hedges

     The Company is exposed to foreign exchange risk from its consolidated and unconsolidated international investments. The Company has foreign currency-denominated debt agreements, which expose the Company to fluctuations in foreign exchange rates. The Company has designated these foreign currency borrowings as a hedge of its net investment in its Canadian and European subsidiaries. Changes in the spot rate value are recorded as adjustments to the debt balance with offsetting unrealized gains and losses recorded in OCI. Because the notional amount of the non-derivative instrument substantially matches the portion of the net investment designated as being hedged, and the non-derivative instrument is denominated in the functional currency of the hedged net investment, the hedge ineffectiveness recognized in earnings was not material.

     The effect of the Company’s net investment hedge derivative instruments on OCI is as follows (in millions):

	Amount of Gain (Loss) Recognized in OCI on
	Derivatives (Effective Portion)
	Three-Month Periods					Six-Month Periods
	Ended June 30					Ended June 30
Derivatives in Net Investment Hedging Relationships	2011			2010		2011			2010
Euro — denominated revolving credit facilities designated as a hedge of the Company’s net investment in its subsidiary	$	(0.9	)	$	6.7	$	(3.5	)	$	12.4
Canadian dollar — denominated revolving credit facilities designated as a hedge of the Company’s net investment in its subsidiaries	$	(0.1	)	$	3.1	$	(3.1	)	$	(0.2	)

     See discussion of equity derivative instruments in Note 10.