Note 5 - Discontinued operations, land dispositions and write-off of investment in unconsolidated joint venture

In connection with management's review of the Company's real estate investments, the Company determined (1) to completely exit the Ohio market, principally the Discount Drug Mart portfolio of drugstore/convenience centers, and concentrate on the mid-Atlantic and Northeast coastal regions (four properties "held for sale" as of December 31, 2011), (2) to concentrate on grocery-anchored strip centers, by disposing of its mall and single-tenant/triple-net-lease properties (11 properties "held for sale" as of December 31, 2011), and (3) to focus on improving operations and performance at the Company's remaining properties, and to reduce development activities, by disposing of certain development projects, land acquired for development, and other non-core assets (five properties "held for sale/conveyance" as of December 31, 2011). In addition, discontinued operations reflect the anticipated consummation of the Homburg joint venture buy/sell transactions (seven properties "held for sale" as of December 31, 2011).

The carrying values of the assets and liabilities of these properties, principally the net book values of the real estate and the related mortgage loans payable to be assumed by the buyers (or conveyed to the mortgagee), have been reclassified as "held for sale/conveyance" on the Company's consolidated balance sheets at December 31, 2011 and December 31, 2010. The Company anticipates that sales of all such properties classified as "held for sale" will be concluded during 2012. In addition, the properties' results of operations have been classified as "discontinued operations" for all periods presented. Impairment charges relating to operating properties are included in discontinued operations in the accompanying statements of operations; impairment charges relating to land parcels are included in operating income in the accompanying statements of operations. The impairment charge amounts included in operating income for 2010 and 2009 relate to properties transferred to the Cedar/RioCan joint venture. The following is a summary of these charges:


	Years ended December 31,
	2011		2010		2009
Impairment charges - land parcels and properties
transferred to Cedar/RioCan joint venture	$	7,148,000	$	2,493,000	$	23,636,000
Write-off of investment in unconsolidated
joint venture	$	7,961,000	$	-	$	-
Impairment charges - properties held for
sale/conveyance	$	88,458,000	$	39,822,000	$	3,559,000

Impairment charges included in discontinued operations for 2011 included $11.1 million related to the Discount Drug Mart portfolio, $33.1 million related to malls, $5.3 million related to single-tenant/triple-net-lease properties, $36.6 million related to development projects and other non-core properties, and $2.4 million related to the Homburg joint venture properties. Impairment charges included in discontinued operations for 2010 included $26.8 million related to the Discount Drug Mart portfolio, $12.6 million related to malls, $0.1 million related to a single-tenant/triple-net-lease property, and $0.3 million related to a development project. Impairment charges included in discontinued operations for 2009 included $2.4 million related to the Discount Drug Mart portfolio and $1.2 million related to single-tenant/triple-net-lease properties.

The impairment charges were based on a comparison of the carrying values of the properties with either (1) the actual sales price less costs to sell for the properties sold or contract amounts for properties in the process of being sold, (2) estimated sales prices based on discounted cash flow analyses, if no contract amounts were as yet being negotiated, as discussed in more detail in Note 6 — "Fair Value Measurements", (3) an "as is" appraisal with respect to the single-tenant property in Philadelphia, Pennsylvania to be conveyed to the mortgagee, or (4) with respect to the land parcels, estimated sales prices. Prior to the Company's plan to dispose of properties reclassified to "held for sale/conveyance", the Company performed recoverability analyses based on the estimated undiscounted cash flows that were expected to result from the real estate investments' use and eventual disposal. The projected undiscounted cash flows of each property reflected that the carrying value of each real estate investment would be recovered. However, as a result of the properties' meeting the "held for sale" criteria, such properties were written down to the lower of their carrying value and estimated fair values less costs to sell as described above.

The following is a summary of the components of (loss) income from discontinued operations:


	Years ended December 31,
	2011			2010			2009
Revenues:
Rents	$	26,986,000		$	30,287,000		$	34,944,000
Expense recoveries		6,531,000			7,093,000			8,626,000
Other		527,000			81,000			1,127,000
Total revenues		34,044,000			37,461,000			44,697,000
Expenses:
Operating, maintenance and management		9,045,000			10,108,000			10,181,000
Real estate and other property-related taxes		5,375,000			5,411,000			5,888,000
Depreciation and amortization		5,356,000			11,571,000			12,559,000
Interest expense		9,255,000			8,647,000			9,015,000
		29,031,000			35,737,000			37,643,000
Income from discontinued operations before
impairment charges		5,013,000			1,724,000			7,054,000
Impairment charges		(88,458,000	)		(39,822,000	)		(3,559,000	)
(Loss) income from discontinued operations	$	(83,445,000	)	$	(38,098,000	)	$	3,495,000

Gain on sales of discontinued operations	$	884,000		$	170,000		$	557,000

During 2011, the Company completed the following transactions related to properties "held for sale/conveyance":

Property

Location

Date
Sold

Sales
Price

Gain on
Sale

Bergstrasse Land

Ephrata, PA

2/14/2011

1,900,000

33,000

Two properties

3/30/2011

4,032,000

Fairfield Plaza

Fairfield, CT

4/15/2011

10,840,000

470,000

CVS at Kingston

Kingston, NY

11/14/2011

5,250,000

185,000

CVS at Kinderhook

Kinderhook, NY

12/8/2011

4,000,000

196,000

Shoppes at SalemRun

Fredericksburg, VA

12/12/2011

1,675,000

Virginia Center Commons

Glen Allen, VA

12/21/2011

3,550,000

Nine properties

12/28/2011

25,257,000

The Company is also planning to arrange conveyances of three other Ohio properties to their respective mortgagees by deed-in-lieu of foreclosure processes, whereby the Company's subsidiaries would be released from all obligations, including any unpaid principal and interest. No payments have been made on these mortgages subsequent to December 31, 2011.

During 2010, the Company completed the following transactions related to properties "held for sale/conveyance":


		Date		Sales		Gain on
Property	Location	Sold		Price		Sale
Carrollton Discount Drug Mart Plaza	Carrollton, OH	1/28/2010	$	3,300,000	$	-
Pondside Plaza	Geneseo, NY	2/4/2010		1,600,000		-
Family Dollar at Zanesville	Zanesville, OH	2/25/2010		575,000		170,000
PowellDiscount Drug Mart Plaza	Powell, OH	3/23/2010		5,150,000		-
Long Reach Village	Columbia, MD	10/29/2010		5,500,000		-

Homburg Joint Venture. In February 2011, Homburg Invest Inc. ("HII") exercised its buy/sell option pursuant to the terms of the joint venture agreements for each of the nine properties owned by the venture. The offered values for the properties, in the aggregate, amounted to approximately $55.0 million over existing property-specific financing (approximately $100.9 million at December 31, 2011). Currently, the Company has made elections to purchase HII's 80% interest in two of the nine properties, Meadows Marketplace, located in Hershey, Pennsylvania and Fieldstone Marketplace, located in New Bedford, Massachusetts. At the closing, the Company will pay approximately $5.5 million to HII for its 80% interest in the two properties; the outstanding balances of the mortgage loans payable on the properties were approximately $27.7 million at December 31, 2011. The Company also determined not to meet HII's buy/sell offers for each of the remaining seven properties, which are now being treated as "held for sale/conveyance". At the closing, the Company will receive proceeds of approximately $8.3 million from HII for its 20% interest in the seven properties; the outstanding balances of the mortgage loans payable on the properties aggregated approximately $73.2 million at December 31, 2011. The Company's property management agreements for the seven properties will terminate upon the closing of the sale. Although there are still uncertainties with respect to the obtaining of the required approvals of the lenders holding mortgages on the properties, the Company anticipates that the contemplated transactions will close in 2012.

Philadelphia Redevelopment Property. The tenant at two properties, one owned in an unconsolidated joint venture and the other owned 100% by the Company (acquired in October 2010), vacated both premises in April 2011, at which time both the joint venture and the Company's wholly-owned subsidiary had CMBS non-recourse first mortgage loans secured by the properties in the amounts of $14.7 million due for payment in May 2011 and $12.9 million due for payment in March 2012, respectively ($250,000 of the $12.9 million loan is guaranteed by the Company). The Company reviewed its investment alternatives and determined that it would not be prudent to proceed with the development, sale or lease of the properties, or to advance the funds necessary to pay off the mortgages. Such determination was based on the uncertainty in obtaining favorable revisions to zoning, difficult existing deed restrictions, the uncertainty in achieving required economic returns given the extensive additional capital investments required, and uncertain current market conditions for sale or lease. Accordingly, the Company wrote off its investment in the joint venture ($8.0 million - see Note 2 - "Summary of Significant Accounting Policies – Principles of Consolidation/Basis of Preparation"), and recorded an impairment charge related to the value of the 100%-owned property ($9.1 million, included in discontinued operations). No payments have been made on the 100%-owned property mortgage since May 2011, although the Company has been accruing interest expense and will pay certain property-related maintenance/security expenses as they become due. The Company is negotiating a conveyance of the property to the mortgagee by a deed-in-lieu of foreclosure process, whereby the Company's subsidiary would be released from all obligations, including any unpaid principal and interest (other than the aforementioned $250,000 guaranty). At the time of such conveyance, the Company would recognize a gain based on the excess of the carrying amount of the liabilities (mortgage principal and any accrued property-related expenses) over the carrying amount of the property (approximately $6.8 million as of December 31, 2011).

Ohio Properties. Impairment charges related to these properties recorded in 2011 included additional charges of approximately $10.5 million, principally representing adjustments to the net realizable values of certain of the properties treated as "held for sale/conveyance" as of December 31, 2010. The additional charges were based principally on changes in the structure of previously-negotiated transactions, whereby (1) the Company terminated a contract to swap three properties for certain land parcels in Ohio and instead entered into a new agreement to sell the properties for cash and assumption of existing debt, and (2) as a result of amending its contract for the sale of the 12 properties discussed below, the Company revalued the properties on an individual, and not portfolio, basis (the buyers in both cases being members of the group from which the Company originally acquired substantially all of its drug store/convenience centers).

On April 27, 2011, the Company made a two-year $4.1 million loan to the developers of a site located in Columbus, Ohio (the developers are certain other members of the group from which the Company acquired substantially all of its drug store/convenience centers). The loan was made in consideration of the borrowers facilitating (but not being parties to) the contract for the sale of the 12 properties. The loan (which may be increased, under certain conditions, by an additional $300,000) bears interest at 6.25% per annum and is collateralized by a first mortgage on the development parcel. The balance of the loan and accrued interest aggregated $4.3 million as of December 31, 2011.

On April 29, 2011, the Company entered into a contract, as subsequently amended, for the sale of 12 properties, subject to the obtaining of approvals of the lenders holding mortgages on the properties. The $28.0 million net aggregate sales price for the properties, after reflecting estimated closing costs and expenses, includes mortgage loans payable to be assumed and approximates the properties' carrying values. The sales of nine of the properties closed on December 28, 2011. Two of the remaining properties were sold in early 2012, with the remaining property expected to be sold during 2012.