Impairment Charges and Reserves

12 Months Ended

Dec. 31, 2020

Asset Impairment Charges [Abstract]

Impairment Charges and Reserves

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,
	2020		2019		2018
Reserve of preferred equity interests(A)	$	19.4	$	15.5	$	11.4
Assets marketed for sale(B)		3.2		0.6		5.8
Undeveloped land(B)		2.0		2.8		0.9
Assets included in the spin-off of RVI(B)		—		—		62.6
Total impairment charges	$	24.6	$	18.9	$	80.7

(A) As a result of an aggregate valuation allowance on its preferred equity interests in the BRE DDR Joint Ventures recognized prior to the closing of the transactions with Blackstone (Note 3).

(B) In 2020 and 2019, impairments recorded were triggered by indicative bids received.  In 2018, impairments recorded were triggered by changes in asset hold-period assumptions and/or expected future cash flows in conjunction with the change in its executive management team and strategic direction to increase the volume of asset sales to accelerate progress on its deleveraging goal.

Items Measured at Fair Value

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 the valuation of the preferred equity interests, prior to the closing of the transactions with Blackstone (Note 3), 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 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 and expected hold period.  For projects under development or not at stabilization, the significant 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.  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 financial assets, including assets disposed, that were measured on a fair value basis for the years ended December 31, 2020, 2019 and 2018.  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, 2020
Long-lived assets held and used	$	—	$	—	$	11.5	$	11.5	$	5.2
Preferred equity interests		—		—		94.2		94.2		19.4
December 31, 2019
Long-lived assets held and used		—		—		5.0		5.0		3.4
Preferred equity interests		—		—		108.5		108.5		15.5
December 31, 2018
Long-lived assets held and used		—		—		51.5		51.5		6.7
Assets included in the spin-off of RVI		—		—		1,028.0		1,028.0		62.6
Preferred equity interests		—		—		185.5		185.5		11.4

The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value for the year ended December 31, 2020 (in millions):

	Quantitative Information About Level 3 Fair Value Measurements
			Valuation			Weighted
Description	Fair Value		Technique	Unobservable Inputs	Range	Average
Impairment of consolidated assets	$	11.5	Indicative Bid(A)	Indicative Bid(A)	N/A	N/A
Preferred equity interests		94.2	Discounted Cash Flow	Discount Rate	6.6%–10.6%	7.9%
				Terminal Capitalization Rate	6.6%–10.5%	8.2%
				NOI Growth Rate	0%	0%

The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value for the year ended December 31, 2019 (in millions):

	Quantitative Information About Level 3 Fair Value Measurements
Description	Fair Value		Valuation Technique	Unobservable Inputs	Range
Impairment of consolidated assets	$	5.0	Indicative Bid(A)	Indicative Bid(A)	N/A
Preferred equity interests		108.5	Discounted Cash Flow	Discount Rate	8.9%–9.9%
				Terminal Capitalization Rate	8.3%–9.4%
				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.