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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2011
Fair Value Measurements |
Fair Value Measurements |
3. Fair Value Measurements Accounting standards define fair value as the exit price, or the amount that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standards also establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy of these inputs is broken down into three levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs include (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active and (3) inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is most significant to the fair value measurement. The assets held in connection with our non-qualified elective deferred compensation plan (comprised primarily of mutual funds and equity securities) and the corresponding liability to the participants are measured at fair value on a recurring basis on our consolidated balance sheet using quoted market prices, as are other marketable securities that we hold. The deferred compensation plan assets and other marketable securities are included in the line entitled restricted cash and marketable securities on our consolidated balance sheets. The offsetting liability associated with the deferred compensation plan is adjusted to fair value at the end of each accounting period based on the fair value of the plan assets and reported in other liabilities on our consolidated balance sheets. The assets and corresponding liability of our non-qualified elective deferred compensation plan and other marketable securities that we hold are classified in Level 1 of the fair value hierarchy. The fair values of our interest rate derivatives are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While we determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our interest rate derivatives also utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of December 31, 2011, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivatives and determined that these adjustments are not significant. As a result, we determined that our interest rate derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. As discussed in Note 9, we own warrants to purchase common shares in The KEYW Holding Corporation ("KEYW"). We acquired these warrants in March 2010 and began accounting for such warrants as derivatives in November 2010 when KEYW became a publicly-traded company. We compute the fair value of these warrants using the Black-Scholes option-pricing model. Under that model, the risk-free interest rate is based on the U.S. Treasury yield curve in effect as of the valuation date. The expected life is based on the period of time until the expiration of the warrants. Expected volatility is based on an average of the historical volatility of companies in KEYW's industry that we deem to be comparable. Expected dividend yield is based on the dividend yield on KEYW's common shares as of the date of valuation. The warrants are classified in Level 2 of the fair value hierarchy. The tables below set forth our financial assets and liabilities that are accounted for at fair value on a recurring basis as of December 31, 2011 and 2010 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):
Description |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
December 31, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable securities in deferred compensation plan(1) |  |  |  |  |  |  |  |  |  |  |  |  |
Mutual funds |  | $ | 5,878 |  | $ | — |  | $ | — |  | $ | 5,878 |
Common stocks |  |  | 909 |  |  | — |  |  | — |  |  | 909 |
Preferred stocks |  |  | 320 |  |  | — |  |  | — |  |  | 320 |
Cash and cash equivalents |  |  | 281 |  |  | — |  |  | — |  |  | 281 |
Other |  |  | 200 |  |  | — |  |  | — |  |  | 200 |
Common stocks(1) |  |  | 13,928 |  |  | — |  |  | — |  |  | 13,928 |
Interest rate derivative(2) |  |  | — |  |  | 716 |  |  | — |  |  | 716 |
Warrants to purchase common shares in KEYW(2) |  |  | — |  |  | 125 |  |  | — |  |  | 125 |
Assets |  | $ | 21,516 |  | $ | 841 |  | $ | — |  | $ | 22,357 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred compensation plan liability(3) |  | $ | 7,588 |  | $ | — |  | $ | — |  | $ | 7,588 |
Interest rate derivatives |  |  | — |  |  | 30,863 |  |  | — |  |  | 30,863 |
Liabilities |  | $ | 7,588 |  | $ | 30,863 |  | $ | — |  | $ | 38,451 |
December 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable securities in deferred compensation plan(1) |  |  |  |  |  |  |  |  |  |  |  |  |
Mutual funds |  | $ | 6,114 |  | $ | — |  | $ | — |  | $ | 6,114 |
Common stocks |  |  | 1,132 |  |  | — |  |  | — |  |  | 1,132 |
Preferred stocks |  |  | 320 |  |  | — |  |  | — |  |  | 320 |
Cash and cash equivalents |  |  | 422 |  |  | — |  |  | — |  |  | 422 |
Other |  |  | 200 |  |  | — |  |  | — |  |  | 200 |
Common stock(1) |  |  | 363 |  |  | — |  |  | — |  |  | 363 |
Interest rate derivative(2) |  |  | — |  |  | 644 |  |  | — |  |  | 644 |
Warrants to purchase common shares in KEYW(2) |  |  | — |  |  | 466 |  |  | — |  |  | 466 |
Assets |  | $ | 8,551 |  | $ | 1,110 |  | $ | — |  | $ | 9,661 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred compensation plan liability(3) |  | $ | 8,188 |  | $ | — |  | $ | — |  | $ | 8,188 |
Interest rate derivatives |  |  | — |  |  | 4,226 |  |  | — |  |  | 4,226 |
Liabilities |  | $ | 8,188 |  | $ | 4,226 |  | $ | — |  | $ | 12,414 |
(1) Included in the line entitled "restricted cash and marketable securities" on our consolidated balance sheet. (2) Included in the line entitled "prepaid expenses and other assets" on our consolidated balance sheet. (3) Included in the line entitled "other liabilities" on our consolidated balance sheet. We recognized impairment losses in 2011 on certain properties and other assets associated with such properties. Accordingly, certain properties and related assets were adjusted to fair value in 2011. The fair values of these assets were determined using widely accepted valuation techniques, including discounted cash flows using appropriate discount and capitalization rates, analysis of recent comparable transactions and actual sale negotiations. The table below sets forth the fair value hierarchy of the valuation techniques used by us in determining such fair values (dollars in thousands).
Description |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total |  | Impairment Losses Recognized |
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Year Ended December 31, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets(1): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Properties, net |  | $ | — |  | $ | 15,994 |  | $ | 304,900 |  | $ | 320,894 |  | $ | 150,093 |
Deferred rent receivable |  |  | — |  |  | 36 |  |  | 6,321 |  |  | 6,357 |  |  | — |
Intangible assets on real estate acquisitions |  |  | — |  |  | 235 |  |  | 8,341 |  |  | 8,576 |  |  | — |
Deferred leasing and financing costs |  |  | — |  |  | 51 |  |  | 7,041 |  |  | 7,092 |  |  | — |
Prepaid and other assets |  |  | — |  |  | — |  |  | 163 |  |  | 163 |  |  | 928 |
(1) Reflects balance sheet classifications of assets at time of fair value measurement, excluding the effect of held for sale classifications. The carrying values of cash and cash equivalents, restricted cash, accounts receivables, other assets (excluding mortgage loans receivable) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturities of these instruments. We estimated the fair values of our mortgage loans receivable disclosed in Note 9 by using discounted cash flow analyses based on an appropriate market rate for a similar type of instrument. We estimated the fair values of our debt disclosed in Note 10 based on quoted market prices for publicly-traded debt and on the discounted estimated future cash payments to be made for other debt; the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled principal and interest payments. Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of such fair value amounts may not be possible and may not be a prudent management decision. For additional fair value information, please refer to Note 9 for mortgage loans receivable, Note 10 for debt and Note 11 for interest rate derivatives.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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