Impairment Charges

12 Months Ended

Dec. 31, 2011

16.

Impairment Charges:

Impairment of Real Estate Properties

During 2011, 2010 and 2009 we recognized impairment charges related to certain of our real estate properties as outlined below (in thousands):


	Years Ended December 31,
	2011		2010		2009
Included in Continuing Operations:
Land	$	-	$	734,668	$	136,996
Operating properties		21,237		1,349		172,342
Other real estate		-		595		22,254
Impairment of real estate properties - continuing operations		21,237		736,612		331,592
Discontinued Operations - operating properties and land subject to ground leases		2,659		87,702		-

Total impairment charges	$	23,896	$	824,314	$	331,592

Land

During the fourth quarter of 2010, we made a strategic decision to more aggressively pursue land sales. As a result of this decision, we undertook a complete evaluation of all land positions. As a result of our change in intent, if the carrying value exceeded fair value, based on valuations and other relevant market data, we adjusted the carrying value of the land targeted for disposition to fair value. Accordingly, we recognized impairment charges of $687.6 million based on our change in intent and evaluation of the fair value of our land as of December 31, 2010. We also recognized $47.1 million related to land sold as part of a larger transaction as discussed below.

Similarly, in 2009, we had identified certain land parcels that we expected to sell at that time and, as a result of declining values, we recognized impairment charges on certain land parcels of $137.0 million.

Operating Properties

In 2011, we recorded impairment charges of $21.2 million in continuing operations related to real estate properties we expect to sell. The impairment charge was calculated based on carrying values of these assets as compared with the fair value. Impairment charges of $2.7 million recorded in discontinued operations relate to the South Korean properties sold to a third party in 2011.

In 2010, we made a decision to sell our retail and mixed-use properties and certain other non-core real estate investments. As a result, we classified all of these assets and related liabilities as Assets and Liabilities Held for Sale in our accompanying Consolidated Balance Sheet as of December 31, 2010. Based on the carrying values of these assets and liabilities, as compared with the estimated sales proceeds less costs to sell, we recognized an impairment charge of $168.8 million ($47.1 million relates to land and is included in Impairment of Real Estate Properties, $44.3 million relates to the joint ventures and other assets and is recorded in Impairment of Goodwill and Other Assets; and $77.4 million is associated with the operating properties and is included in Discontinued Operations – Net Gains on Dispositions, Net of Related Impairment Charges and Taxes). We also recorded impairment charges of $10.3 million related primarily to our industrial properties in South Korea that we sold in 2011.

The impairment charges related to operating properties and other real estate that we recognized during 2009 were based primarily on valuations of real estate, which had declined due to market conditions that we no longer expected to hold for long-term investment.

Impairment of Goodwill and Other Assets

We recognized impairment charges related to goodwill and other assets as outlined below (in thousands):


	Years Ended December 31,
	2011		2010		2009
Goodwill	$	-	$	368,451	$	-
Investment in and advances to unconsolidated investees		103,824		41,437		143,640
Notes receivable		22,608		2,857		-
Other assets		-		-		20,004

Total impairment of goodwill and other assets	$	126,432	$	412,745	$	163,644

Goodwill

In 2010, we recorded an impairment charge related to goodwill allocated to the Americas and Europe Real Estate Operations reporting units of $235.5 million and $132.9 million, respectively. As part of our review, we compared the estimated fair value of each reporting unit with its carrying value, including goodwill. We estimated the fair value of assets and liabilities in each reporting unit through various valuation techniques as outlined in our summary of significant accounting policies. For the Real Estate Operations reporting units in the Americas and Europe, the carrying values exceeded the fair values. We then calculated the implied goodwill for each reporting unit by allocating the estimated fair values to the underlying assets and liabilities and determined that goodwill was impaired for each reporting unit.

The fair value of these reporting units in 2010 decreased due principally to the strategic decision we made in the fourth quarter of 2010 to significantly downsize our development platform. As a result, we targeted for sale to third parties a substantial portion of our land that we had previously expected to develop, some of which was acquired in the acquisitions that originally created the goodwill. In addition, we planned to sell to third parties our non-core and certain other assets that we acquired in connection with these same acquisitions.

Other Assets

In the second quarter of 2011, we recorded impairment charges of $103.8 million primarily related to two of our investments in unconsolidated investees. This included one investment in the U.S., Prologis North American Industrial Fund III, where our carrying value exceeded the fair value. This entity has not had the same appreciation in value in its portfolio that we have experienced in our consolidated portfolio and in several of our other investees. Based on the duration of time that the value of our investment has been less than carrying value and the lack of recovery as compared to our other real estate investments, we no longer believed the decline to be temporary. Also included was our investment in a joint venture in South Korea that we sold to our fund partner in July 2011. We had previously recognized an impairment associated with this investment due to the decline in value that we believed to be other than temporary.

We had a receivable from an entity that developed retail and mixed use properties in Europe that was secured by land parcels. In late 2011, the entity went into administration. In exchange for the note receivable, we received three land parcels and debt. Based on the fair value of the land less the assumption of debt received in the exchange and information available to us in the fourth quarter of 2011, the remaining receivable balance of $20.5 million was impaired. We also recognized a $2.1 million impairment charge related to land securing a note receivable that was foreclosed in January 2012.

In 2010, we recorded impairment charges of $41.4 million for investments in joint ventures and $2.9 million of a note receivable in connection with the expected sale of these non-core real estate investments, as discussed above in real estate impairments.

In 2009, we recorded impairment charges on certain of our investments in and advances to unconsolidated investees, notes receivable and other assets as we did not believe these amounts were recoverable based on the present value of the estimated future cash flows associated with these assets. The impairment charges related to our investment in and advances to two unconsolidated co-investment ventures and an entity that develops retail and mixed use properties in Europe, discussed above.