Impairment Charges and Reserves

12 Months Ended

Dec. 31, 2022

14.

Impairment Charges and Reserves

The Company recorded impairment charges and reserves based on the difference between the carrying value of the assets or investments and the estimated fair market value as follows (in millions):


	For the Year Ended December 31,
	2022		2021		2020
Sale of building to tenant(A)	$	2.5	$	—	$	—
Assets marketed for sale(B)		—		7.3		3.2
Undeveloped land(B)		—		—		2.0
Reserve of preferred equity interests(C)		—		—		19.4
Total impairment charges	$	2.5	$	7.3	$	24.6

(a)

In the second quarter of 2022, the impairment charges recorded were a result of a tenant exercising a $7.0 million fixed-price purchase option on their building pursuant to the lease agreement. This asset was sold in the fourth quarter of 2022.

(b)

In 2021, the impairment charges recorded were triggered by a change in the hold period assumptions. In 2020, the impairment charges recorded were triggered by indicative bids received.

(c)

As a result of an aggregate valuation allowance on its preferred equity interests in the BRE DDR Joint Ventures that were transferred or redeemed in the fourth quarter of 2020.

Items Measured at Fair Value

For operational real estate assets, the significant valuation assumptions included the capitalization rate used in the income capitalization valuation, as well as the projected property net operating income. For the valuation of the preferred equity interests, prior to the closing of the BRE DDR Joint Ventures transactions in the fourth quarter of 2020, the significant assumptions used in the discounted cash flow analysis included the discount rate, projected net operating income, the timing of the expected redemption and the exit capitalization rates. These valuations were calculated based on market conditions and assumptions made by management at the time the valuation adjustments and impairments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.

The following table presents information about the fair value of real estate that was impaired, and therefore, measured on a fair value basis, along with the related impairment charge, for the years ended December 31, 2022, 2021 and 2020. The table also indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions).


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total		Total Impairment Charges
December 31, 2022
Long-lived assets held and used	$	—	$	—	$	7.0	$	7.0	$	2.5
December 31, 2021
Long-lived assets held and used		—		—		10.0		10.0		7.3
December 31, 2020
Long-lived assets held and used		—		—		11.5		11.5		5.2
Preferred equity interests		—		—		94.2		94.2		19.4

The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value for the years ended December 31, 2022 and 2021 (in millions):

Quantitative Information About Level 3 Fair Value Measurements

Valuation

Weighted

Description

Fair Value

Technique

Unobservable Inputs

Range

Average

December 31, 2022

Impairment of consolidated assets

7.0

Indicative Bid(A)

Indicative Bid(A)

N/A

N/A

December 31, 2021

Impairment of consolidated assets

10.0

Indicative Bid(A)

Indicative Bid(A)

N/A

N/A

(A)

Fair value measurements based upon an indicative bid and developed by third-party sources (including offers and comparable sales values), subject to the Company’s corroboration for reasonableness. The Company does not have access to certain unobservable inputs used by these third parties to determine these estimated fair values.

Assets where the Company identified an impairment charge, were generally sold within one year of the period in which the impairment charge recorded.