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FAIR VALUE OF FINANCIAL INSTRUMENTS
 12 Months Ended
Dec. 31, 2011
FAIR VALUE OF FINANCIAL INSTRUMENTS  
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Not Measured at Fair Value

        The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which adjustments to measure at fair value are not reported:

        Cash and cash equivalents:    The carrying amounts reported in the balance sheet for these instruments approximate their fair values.

        Mortgages payable:    At December 31, 2011, the $216,792,000 estimated fair value of the Company's mortgages payable is more than their carrying value by approximately $10,943,000, assuming a blended market interest rate of 4.5% based on a 4.75 year weighted average remaining term of the mortgages.

        Line of credit:    The $20,000,000 carrying amount of the Company's line of credit approximates its fair value at December 31, 2011.

        The fair value of the Company's mortgages and line of credit was estimated using other observable inputs such as available market information and discounted cash flow analysis based on borrowing rates the Company believes it could obtain with similar terms and maturities.

        Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Financial Instruments Measured at Fair Value

        The Company's financial assets and liabilities, other than mortgages payable and line of credit, are generally short-term in nature, and consist of cash and cash equivalents, rents and other receivables, other assets, and accounts payable and accrued expenses. The carrying amounts of these assets and liabilities are not measured at fair value on a recurring basis, but are considered to be recorded at amounts that approximate fair value due to their short-term nature.

        The fair value of the Company's available-for-sale securities and derivative financial instrument was determined using the following inputs as of December 31, 2011 (amounts in thousands):

 
    
   Fair Value
Measurements
Using Fair Value
Hierarchy 		 
 
   Carrying and
Fair Value 		 
 
   Level 1   Level 2  

Financial assets:

                    

Available-for-sale securities:

                    

Equity securities

   $ 631   $ 631   $ —  

Financial liabilities:

                    

Derivative financial instrument

     923     —     923  

Available-for-sale securities

        The Company's available-for-sale securities have a total cost of $514,000, after recognizing an other-than-temporary impairment charge of $126,000 in 2011. At December 31, 2011, unrealized gains on such securities were $119,000 and unrealized losses were $2,000. The aggregate net unrealized gain of $117,000 is included in accumulated other comprehensive income on the balance sheet. Fair values are approximated on current market quotes from financial sources that track such securities. All of the available-for-sale securities in an unrealized loss position are equity securities and amounts are not considered to be an other-than-temporary impairment (other than the securities that the Company recorded a $126,000 impairment charge) because the Company expects the value of these securities to recover and plans on holding them until at least such recovery.

        During 2010, the Company sold three corporate bonds for total gross proceeds of $2,356,000 and recognized a total gain of $149,000. At December 31, 2009, the total unrealized gain on these bonds was $186,000 which was included in accumulated other comprehensive income on the balance sheet.

Derivative financial instruments

        Fair values are approximated using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. At December 31, 2011, these derivatives are included in other liabilities on the consolidated balance sheet.

        Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with it use Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparty. However, as of December 31, 2011, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuation is classified in Level 2 of the fair value hierarchy. Additionally, based on the rates in effect as of December 31, 2011, if a counterparty were to default, the Company would receive a net interest benefit.