Impairment Charges and Reserves

6 Months Ended

Jun. 30, 2017

Asset Impairment Charges [Abstract]

Impairment Charges and Reserves

12. Impairment Charges and Reserves

In 2017, 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):  

	Three Months		Six Months
	Ended June 30,		Ended June 30,
	2017		2017
Assets marketed for sale(A)	$	19.0	$	41.0
Undeveloped land previously held for development(A)		9.1		9.1
Total continuing operations	$	28.1	$	50.1
Reserve of preferred equity interests(B)		—		76.0
Total impairment charges	$	28.1	$	126.1

(A) Triggered by changes in asset hold-period assumptions and/or expected future cash flows.

(B) As a result of an aggregate valuation allowance on its preferred equity interests in the BRE DDR Joint Ventures (Note 2).  

Items Measured at Fair Value on a Non-Recurring Basis

The Company is required to assess the fair value of certain impaired consolidated and unconsolidated joint venture investments.  The valuation of impaired real estate assets and investments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset, as well as the income capitalization approach considering prevailing market capitalization rates, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence.  In general, the Company considers multiple valuation techniques when measuring fair value of an investment.  However, in certain circumstances, a single valuation technique may be appropriate.  

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 projects under development or not at stabilization, the significant valuation assumptions included the discount rate, the timing and the estimated costs for the construction completion and project stabilization, projected net operating income and the exit capitalization rate.  For the valuation of the preferred equity interests, 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 were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.  

The following table presents information about the Company’s impairment charges on both financial and nonfinancial assets that were measured on a fair value basis for the six months ended June 30, 2017.  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 Losses
June 30, 2017
Long-lived assets held and used	$	—	$	—	$	59.5	$	59.5	$	50.1
Preferred equity interests		—		—		319.3		319.3		76.0

The following tables present quantitative information about the significant unobservable inputs used by the Company to determine the fair value of non-recurring items (in millions, except price per acre (in thousands)):

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range
Description	June 30, 2017		Valuation Technique	Unobservable Inputs	2017
Impairment of consolidated assets	$	0.5	Indicative Bid(A)/ Contracted Price	Indicative Bid(A)/ Contracted Price	N/A
		40.0	Income Capitalization Approach/ Sales Comparison Approach	Market Capitalization Rate		10%
	14.8		Discounted Cash Flow	Discount Rate		9%
				Terminal Capitalization Rate		10%
		4.2	Sales Comparison Approach	Price per Acre	$218
Reserve of preferred equity interests		319.3	Discounted Cash Flow	Discount Rate	8.3%–8.6%
				Terminal Capitalization Rate	5.3%–10.3%
				NOI Growth Rate		1%

(A) Fair value measurements based upon indicative bids were 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.