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FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2012
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

NOTE 7—FAIR VALUE MEASUREMENTS

        The carrying amounts of cash and cash equivalents, escrow, deposits and other assets and receivables, and accrued expenses and other liabilities are not measured at fair value on a recurring basis, but are considered to be recorded at amounts that approximate fair value.

        At December 31, 2012, the $233,170,000 estimated fair value of the Company's mortgages and loan payable is more than their carrying value by approximately $7,199,000 assuming a blended market interest rate of 4.8% based on the 9.2 year weighted average remaining term of the mortgages and loan. At December 31, 2011, the $208,355,000 estimated fair value of the Company's mortgages and loan payable (including the mortgages payable-property held-for-sale) was more than their carrying value by approximately $10,418,000 assuming a blended market interest rate of 4.5% based on the 4.75 year weighted average remaining term of the mortgages and loan.

        The fair value of the Company's mortgages and loan payable were estimated using unobservable 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. These fair value measurements fall within Level 3 of the fair value hierarchy.

Financial Instruments Measured at Fair Value

        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.

        The fair value of the Company's available-for-sale securities and derivative financial instruments was determined using the following inputs as of December 31, 2012 (amounts in thousands):

 
    
    
   Fair Value
Measurements
Using
Fair Value
Hierarchy on
a Recurring Basis		  
 
   Year Ended
December 31,		   Carrying and
Fair Value		  
 
   Level 1   Level 2  

Financial assets:

                          

Available-for-sale securities:

                          

Equity securities

     2012   $ 278   $ 278   $ —  

 

     2011     631     631     —  

Financial liabilities:

                          

Derivative financial instruments

     2012     1,470     —     1,470  

 

     2011     923     —     923  

        The Company does not currently own any financial instruments that are classified as Level 3.

Available-for-sale securities

        The Company's available-for-sale securities have a total cost of $150,000 and are included in other assets on the balance sheet. At December 31, 2012, unrealized gains on such securities were $129,000 and unrealized losses were $1,000 with the aggregate net unrealized gain of $128,000 included in accumulated other comprehensive loss 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 other than temporary impairments because the Company expects the value of these securities to recover and plans on holding them until at least such recovery occurs.

        During 2012, the Company sold certain available-for-sale securities for gross proceeds of $373,000 and recognized a gain of $9,000. At December 31, 2011, the Company recorded an impairment charge of $126,000 on such securities. During 2010, the Company sold three corporate bonds for total gross proceeds of $2,356,000 and recognized a total gain of $149,000.

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, 2012, these derivatives are included in other liabilities on the 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. As of December 31, 2012, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has 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, 2012, if a counterparty were to default, the Company would receive a net interest benefit.