Investments

Investments. At December 31, 2011, our long-term investment portfolio included the real estate assets of ALLETE Properties, debt and equity securities consisting primarily of securities held to fund employee benefits and land available-for-sale in Minnesota.



Investments
As of December 31	2011		2010
Millions
ALLETE Properties		$91.3		$94.0
Available-for-sale Securities	24.7		25.2
Other	16.3		6.8
Total Investments		$132.3		$126.0


Note 7.	Investments (Continued)



ALLETE Properties
As of December 31	2011			2010
Millions
Land Inventory Beginning Balance		$86.0			$74.9
Deeds to Collateralized Property (a)	1.8			9.9
Land Impairment (b)	(1.7		)	—
Cost of Real Estate Sold	(0.3		)	—
Capitalized Improvements and Other	0.2			1.2
Land Inventory Ending Balance	86.0			86.0
Long-Term Finance Receivables (net of allowances of $0.6 and $0.8) (a)	2.0			3.7
Other	3.3			4.3
Total Real Estate Assets		$91.3			$94.0


(a)	In 2010, the deeds to collateralized property resulted primarily from an entity which filed for Chapter 11 bankruptcy and were recorded at fair value net of estimated selling costs.


(b)	The land impairment charge was a result of an impairment analysis conducted in the fourth quarter of 2011 where the cost basis was reduced to the estimated fair value.

Land Inventory. Land inventory is accounted for as held for use and is recorded at cost, unless the carrying value is determined not to be recoverable in accordance with the accounting standards for property, plant and equipment, in which case the land inventory is written down to fair value. Land values are reviewed for impairment on a quarterly basis. In the fourth quarter of 2011, an impairment analysis of estimated future undiscounted cash flows was conducted and indicated that the cash flows were not adequate to recover the carrying basis of certain properties not strategic to our three major development projects. Consequently, we reduced the cost basis to estimated fair value resulting in a pretax impairment charge of $1.7 million. Fair value was determined based on property tax assessed values, discounted cash flow analysis, or a combination thereof. No impairments were recorded for the year ended December 31, 2010.

Long-Term Finance Receivables. As of December 31, 2011, long-term finance receivables were $2.0 million net of allowance ($3.7 million net of allowance as of December 31, 2010). The decrease is primarily the result of the transfer of properties back to ALLETE Properties by deed-in-lieu of foreclosure, in satisfaction of amounts previously owed under long-term financing receivables. Long-term finance receivables are collateralized by property sold, accrue interest at market-based rates and are net of an allowance for doubtful accounts. As of December 31, 2011, we had allowance for doubtful accounts of $0.6 million ($0.8 million as of December 31, 2010). The decrease in allowance for doubtful accounts is primarily due to recovery of real estate taxes and accrued interest on previously delinquent notes receivable.

If a purchaser defaults on a sales contract, the legal remedy is usually limited to terminating the contract and retaining the purchaser’s deposit. The property is then available for resale. In many cases, contract purchasers incur significant costs during due diligence, planning, designing and marketing the property before the contract closes, therefore they have substantially more at risk than the deposit.

Available-for-Sale Investments. We account for our available-for-sale portfolio in accordance with the guidance for certain investments in debt and equity securities. Our available-for-sale securities portfolio consisted of securities established to fund certain employee benefits and auction rate securities.



Available-For-Sale Securities
Millions			Gross Unrealized
As of December 31	Cost		Gain		(Loss)	Fair Value
2011		$27.3		$0.1	$(2.7)		$24.7
2010		$27.4		$0.2	$(2.4)		$25.2
2009		$33.1		$0.1	$(3.7)		$29.5


Note 7.	Investments (Continued)



	Net		Gross Realized		Net Unrealized Gain (Loss) in Other
Year Ended December 31	Proceeds		Gain	(Loss)	Comprehensive Income
2011		$5.5	—	—	$(0.4)
2010	$(1.7)		—	—		$1.4
2009		$6.7	—	—		$4.5

Auction Rate Securities. As of December 31, 2010, our ARS were classified as a short-term investment as the remaining balance of $6.7 million was redeemed at carrying value on January 5, 2011.