Impairment Charges and Reserves

6 Months Ended

Jun. 30, 2019

Asset Impairment Charges [Abstract]

Impairment Charges and Reserves

10. 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):  

	Three Months					Six Months
	Ended June 30,					Ended June 30,
	2019		2018			2019		2018
Assets marketed for sale(A)	$	—	$	—		$	0.6	$	—
Assets included in the spin-off of RVI(B)		—		18.1			—		48.5
Reserve (adjustment) of preferred equity interests(C)		4.6		(1.6	)		5.7		2.3
Total impairment charges	$	4.6	$	16.5		$	6.3	$	50.8

(A) The impairment recorded during the six months ended June 30, 2019, was triggered by an indicative bid received.

(B) In 2018, charges were triggered by indicative bids received and changes in market assumptions due to the disposition process beginning in 2017.

(C) As a result of an aggregate valuation allowance on its preferred equity interests in the BRE DDR Joint Ventures (Note 3).  

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.  For investments in unconsolidated joint ventures, the Company also considered the valuation of any underlying joint venture debt.  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 Company’s impairment charges and reserves on both financial and nonfinancial assets that were measured on a fair value basis for the six months ended June 30, 2019.  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
June 30, 2019
Long-lived assets held and used	$	—	$	—	$	0.8	$	0.8	$	0.6
Preferred equity interests		—		—		166.1		166.1		5.7

The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value of non-recurring items (in millions):

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at
Description	June 30, 2019		Valuation Technique	Unobservable Inputs	Range
Impairment of consolidated assets	$	0.8	Indicative Bid(A)	Indicative Bid(A)	N/A
Reserve of preferred equity interests		166.1	Discounted Cash Flow	Discount Rate	8.7%-8.8%
				Terminal Capitalization Rate	8.2%-8.6%
				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.