FAIR VALUE MEASUREMENTS

The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:


Level 1 -	Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date.


Level 2 -	Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability.


Level 3 -	Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment.

The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance.

Fair Value Measurements on a Recurring Basis

The Company sold all of its marketable securities, which consisted of corporate equity securities that were classified as available-for-sale, during 2015 and realized a gain of $16,560 for the difference between the net proceeds of $20,755 less the adjusted cost of $4,195. During the year ended December 31, 2015, the Company did not recognize any write-downs for other-than-temporary impairments related to these securities.

The Company used interest rate swaps to mitigate the effect of interest rate movements on its variable-rate debt. The Company had four interest rate swaps, which matured on April 1, 2016, that qualified as hedging instruments and were designated as cash flow hedges. The swaps predominantly met the effectiveness test criteria since inception and changes in their fair values were, thus, primarily reported in OCI/L and reclassified into earnings in the same period or periods during which the hedged item affected earnings. See Note 2 and Note 6 for additional information regarding the Company’s former interest rate hedging instruments.

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of mortgage and other notes receivable is a reasonable estimate of fair value. The estimated fair value of mortgage and other indebtedness was $4,199,357 and $4,737,077 at December 31, 2017 and 2016, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage and other indebtedness using estimated market rates at which similar loans would be made currently.

Fair Value Measurements on a Nonrecurring Basis

The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company considers both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each Property such as NOI, occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the Property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Company classifies such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. See below for a description of the estimates and assumptions the Company used in its impairment analysis. See Note 2 for additional information describing the Company's impairment review process.

The following table sets forth information regarding the Company’s assets that are measured at fair value on a nonrecurring basis and related impairment charges for the years ended December 31, 2017 and 2016:



			Fair Value Measurements at Reporting Date Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
2017:
Long-lived assets	$	81,350	$	—	$	—	$	81,350	$	71,401

2016:
Long-lived assets	$	46,200	$	—	$	—	$	46,200	$	116,822

Long-lived Assets Measured at Fair Value in 2017

During the year ended December 31, 2017, the Company recognized impairments of real estate of $71,401 primarily related to two malls, a parcel project near an outlet center and one outparcel. The Properties were classified for segment reporting purposes as listed below (see section below for information on outparcels). See Note 11 for segment information.

Impairment

Date

Property

Location

Segment

Classification

Loss on

Impairment

Fair

Value

March

Vacant land ⁽¹⁾

Woodstock, GA

Malls

3,147

—

⁽²⁾

June

Acadiana Mall ⁽³⁾

Lafayette, LA

Malls

43,007

67,300

June / September

Prior period sales adjustments ⁽⁴⁾

Various

Malls/
All Other

606

—

⁽²⁾

September

Hickory Point Mall⁽⁵⁾

Forsyth, IL

Malls

24,525

14,050

71,285

81,350

(1)

The Company wrote down the book value of its interest in a consolidated joint venture that owned land adjacent to one of its outlet malls upon the divestiture of its interests to a fair value of $1,000. In conjunction with the divestiture and assignment of the Company's interests in this consolidated joint venture, the Company was relieved of its debt obligation by the joint venture partner. See Note 6 for more information.


(2)	The long-lived asset was not included in the Company's consolidated balance sheets at December 31, 2017 as the Company no longer had an interest in the property.

(3)

Acadiana Mall - In accordance with the Company's quarterly impairment review process, the Company wrote down the book value of the mall to its estimated fair value of $67,300. Management determined the fair value of Acadiana Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of ten years, with a sale at the end of the holding period, a capitalization rate of 15.5% and a discount rate of 15.75%. The mall has experienced declining tenant sales and cash flows as a result of the downturn of the economy in its market area and an anchor announced in the second quarter 2017 that it will close its store later in 2017. The loan secured by Acadiana Mall matured in April 2017 and is in default. See Note 6 for more information. The revenues of Acadiana Mall accounted for approximately 1.9% of total consolidated revenues for the year ended December 31, 2017.


(4)	Relates to true-ups of estimated expenses to actual expenses for properties sold in prior periods.

(5)

Hickory Point Mall - In accordance with the Company's quarterly impairment review process, the Company wrote down the book value of the mall to its estimated fair value of $14,050. Management determined the fair value of Hickory Point Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of ten years, with a sale at the end of the holding period, a capitalization rate of 18.0% and a discount rate of 19.0%. The mall has experienced decreased occupancy and cash flows as a result of the downturn of the economy in its market area. The Company is in preliminary discussions with the lender to modify the loan secured by the mall due to the additional deterioration in its operating metrics. The revenues of Hickory Point Mall accounted for approximately 0.5% of total consolidated revenues for the year ended December 31, 2017.

Other Impairment Loss in 2017

During the year ended December 31, 2017, the Company recorded an impairment of $116 related to the sale of one outparcel. Outparcels are classified for segment reporting purposes in the All Other category. See Note 11 for segment information.

Long-lived Assets Measured at Fair Value in 2016:

During the year ended December 31, 2016, the Company recognized impairments of real estate of $116,822 when it wrote down nine malls, an associated center, a community center, three office buildings and three outparcels to their estimated fair values. The Properties are classified for segment reporting purposes as listed below (see section below for information on outparcels). See Note 11 for segment information.

Impairment
Date

Property

Location

Segment
Classification

Loss on
Impairment

Fair
Value

March

Bonita Lakes Mall & Crossing ⁽¹⁾

Meridian, MS

Malls/
All Other

5,323

—

⁽²⁾

March

Midland Mall ⁽³⁾

Midland, MI

Malls

4,681

29,200

March

River Ridge Mall⁽⁴⁾

Lynchburg, VA

Malls

9,594

—

⁽²⁾

June

The Lakes Mall & Fashion Square ⁽⁵⁾

Muskegon, MI & Saginaw, MI

Malls

32,096

—

⁽²⁾

June

Wausau Center ⁽⁶⁾

Wausau, WI

Malls

10,738

11,000

September

Randolph Mall, Regency Mall & Walnut Square⁽⁷⁾

Asheboro, NC; Racine, WI &
Dalton, GA

Malls

43,144

—

⁽²⁾

September

One Oyster Point & Two Oyster Point ⁽⁸⁾

Newport News, VA

All Other

3,844

6,000

September

Oak Branch Business Center ⁽⁹⁾

Greensboro, NC

All Other

100

—

⁽²⁾

September

Cobblestone Village at

Palm Coast ⁽¹⁰⁾

Palm Coast, FL

All Other

6,448

—

⁽²⁾

115,968

46,200

(1)

Bonita Lakes Mall & Crossing - The Company adjusted the book value of Bonita Lakes Mall and Bonita Lakes Crossing ("Bonita Lakes") to its estimated fair value of $27,440, which represented the contractual sales price of $27,910 with a third party buyer, adjusted to reflect estimated disposition costs. The revenues of Bonita Lakes accounted for approximately 0.7% of total consolidated revenues for the trailing twelve months ended March 31, 2016. See Note 4 for further information on the sale that closed in the second quarter of 2016.


(2)	The long-lived asset was not included in the Company's consolidated balance sheets at December 31, 2016 as the Company no longer had an interest in the property.

(3)

Midland Mall - The Company wrote down the mall to its estimated fair value. The fair value analysis used a discounted cash flow methodology with assumptions including a ten-year holding period with a sale at the end of the holding period, a capitalization rate of 9.75%, a discount rate of 11.5% and estimated selling costs of 2.0%. The Company notified the lender that it would not pay off the loan that was scheduled to mature in August 2016 and the mall went into receivership in September 2016. The revenues of Midland Mall accounted for approximately 0.6% of total consolidated revenues for the year ended December 31, 2016. The mall was returned to the lender during the first quarter of 2017 as the foreclosure process was complete. See Note 4 and Note 6 for further information.

(4)

River Ridge Mall - The Company sold a 75% interest in its wholly owned investment in River Ridge Mall to a newly formed joint venture in March 2016 and recognized a loss on impairment of $9,510 in the first quarter of 2016 when it adjusted the book value of the mall to its estimated net sales price based upon a contract with a third party buyer, adjusted to reflect estimated disposition costs. The impairment loss included a $2,100 reserve for a roof and electrical work that the Company subsequently funded. An additional loss on impairment of $84 was recognized in the fourth quarter of 2016 to reflect actual closing costs. The revenues of River Ridge Mall accounted for approximately 0.6% of total consolidated revenues for the trailing twelve months ended March 31, 2016. The Company's investment in River Ridge was included in investments in unconsolidated affiliates on the Company's consolidated balance sheets until the sale of its interests to its partner in the third quarter of 2017. See Note 5 for further information.

(5)

The Lakes Mall & Fashion Square - The Company adjusted the book value of the malls to their estimated fair value of $65,447 based upon the sales price of $66,500 in the signed contract with a third party buyer, adjusted to reflect estimated disposition costs. The revenues of The Lakes Mall and Fashion Square accounted for approximately 1.6% of total consolidated revenues for the trailing twelve months ended June 30, 2016. These Properties were sold in July 2016. See Note 4 for additional information.

(6)

Wausau Center - In accordance with the Company's quarterly impairment review process, the Company recorded impairment to write down the depreciated book value of the mall to its estimated fair value. After evaluating redevelopment options, the Company determined that an appropriate risk-adjusted return was not achievable and reduced its holding period. The mall was encumbered by a non-recourse loan with a balance of $17,689 as of December 31, 2016 and had experienced declining sales and the loss of two anchor stores. With the assistance of a third-party appraiser, management determined the fair value of Wausau Center using a discounted cash flow methodology. The discounted cash flow used assumptions including a ten-year holding period with a sale at the end of the holding period, a capitalization rate of 13.25%, a discount rate of 13.0% and estimated selling costs of 4.0%. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management's estimates of future possible outcomes. The revenues of Wausau Center accounted for approximately 0.3% of total consolidated revenues for the year ended December 31, 2016. The Company notified the lender that it would not make its scheduled July 1, 2016 debt payment and the foreclosure process was completed and the mall was subsequently returned to the lender during the third quarter of 2017. See Note 4 and Note 6 for more information.

(7)

Randolph Mall, Regency Mall & Walnut Square - The Company wrote down the book values of the three malls to their estimated fair value of $31,318 and recorded a loss on impairment of $43,294 in the third quarter of 2016 based upon a sales price of $32,250 in a signed contract with a third party buyer, adjusted to reflect estimated disposition costs. The Company reduced the loss on impairment in the fourth quarter of 2016 by $150 to reflect actual closing costs. The revenues of the malls accounted for approximately 1.5% of total consolidated revenues for the trailing twelve months ended September 30, 2016. The malls were sold in December 2016.

(8)

One & Two Oyster Point - In accordance with the Company's quarterly impairment review process, the Company recorded impairment to write down the depreciated book value of two office buildings to their estimated fair value as a result of a change in the expected holding period to a range of one to two years. Other factors used in the discounted cash flow analysis included a capitalization rate of 8.0%, a discount rate of 10.0% and estimated selling costs of 2.0%. The office buildings were classified as held for sale as of December 31, 2016 until their subsequent sale in the first quarter of 2017. The revenues of the office buildings accounted for approximately 0.3% of total consolidated revenues for the year ended December 31, 2016. See Note 4 for more information.

(9)

Oak Branch Business Center - The office building was sold in September 2016. A loss on impairment of $122 was recorded in the third quarter of 2016 to adjust the book value to its estimated value based upon a signed contract with a third party buyer, adjusted to reflect estimated disposition costs. The loss on impairment was reduced by $22 in the fourth quarter of 2016 to reflect actual closing costs. See Note 4 for more information.

(10)

Cobblestone Village at Palm Coast - In accordance with the Company's quarterly impairment review process, the Company recorded a loss on impairment of $6,298 in the third quarter of 2016 based upon a signed contract with a third party buyer, adjusted to reflect estimated disposition costs. Other factors used in the discounted cash flow analysis included a capitalization rate of 9.0%, a discount rate of 10.75% and estimated selling costs of 2.0%. The revenue of the community center accounted for approximately 0.1% of total consolidated revenues for the trailing twelve months ended September 30, 2016. An additional impairment loss of $150 was recognized in the fourth quarter of 2016 for an adjustment to the sales price when the sale closed in December 2016. See Note 4.

Other Impairment Loss in 2016

During the year ended December 31, 2016, the Company recorded impairments of $854 related to the sales of three outparcels. These outparcels were classified for segment reporting purposes in the All Other category. See Note 11 for segment information.

Long-lived Assets Measured at Fair Value in 2015

During the year ended December 31, 2015, the Company wrote down four properties to their estimated fair values. These Properties were Chesterfield Mall, Mayfaire Community Center, Chapel Hill Crossing and Madison Square. Of these four Properties, all but Chesterfield Mall were disposed of as of December 31, 2015 as described below. Chesterfield Mall was subsequently returned to the lender in 2017. For segment reporting purposes, Properties other than Malls are classified in the All Other category. See Note 11 for segment information.

Impairment

Date

Property

Location

Segment

Classification

Loss on

Impairment

Fair

Value

April

Madison Square ⁽¹⁾

Huntsville, AL

Mall

2,620

—

⁽²⁾

December

Chapel Hill Crossing ⁽³⁾

Akron, OH

All Other

1,914

—

⁽²⁾

December

Chesterfield Mall ⁽⁴⁾

Chesterfield, MO

Mall

99,969

125,000

December

Mayfaire Community Center ⁽⁵⁾

Wilmington, NC

All Other

397

—

⁽²⁾

104,900

125,000


(1)	Madison Square - The Company adjusted the book value of Madison Square to its net sales price of $5,000. See Note 4 for further information on the sale that closed in the second quarter of 2015.


(2)	The long-lived asset was not included in the Company's consolidated balance sheets at December 31, 2015 as the Company no longer had an interest in the property.


(3)	Chapel Hill Crossing - The Company wrote down the book value of Chapel Hill Crossing to its net sales price of $2,300 and recognized a non-cash impairment of real estate. See Note 4 for additional information on the sale that closed in the fourth quarter of 2015.

(4)

Chesterfield Mall - In accordance with the Company's quarterly impairment review process, the Company recorded impairment of real estate to write-down the depreciated book value of the mall to its estimated fair value. The mall had experienced declining cash flows as competition from several new outlet shopping centers in the area impacted its sales. The fair value analysis used assumptions including an 11-year holding period with a sale at the end of the holding period, a capitalization rate of 8.25% and a discount rate of 8.25%. The revenues of the mall accounted for approximately 1.5% of total consolidated revenues for the year ended December 31, 2015. Foreclosure of the mall was completed in the second quarter of 2017. See Note 4 and Note 6 for more information.


(5)	Mayfaire Community Center - The Company wrote down the book value of Mayfaire Community Center to its net sales price of $56,300 and recognized a non-cash impairment of real estate. See Note 4 for additional information on the sale that closed in the fourth quarter of 2015.

Other Impairment Loss in 2015

During 2015, the Company recorded an impairment of real estate of $161 related to the sale of a building at a formerly owned mall for total net proceeds after sales costs of $750, which was less than its carrying amount of $911. The Company also recognized $884 of impairment from the sale of two outparcels. Outparcels are classified for segment reporting purposes in the All Other category. See Note 11 for segment information.