Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Form 10-K. Historical results and percentage relationships set forth in the Consolidated Statements of Income contained in the Consolidated Financial Statements, including trends which might appear, should not be taken as indicative of future operations.

Executive Summary

Kimco Realty Corporation is one of the nation’s largest publicly-traded owners and operators of neighborhood and community shopping centers. As of December 31, 2012, the Company had interests in 896 shopping center properties (the “Combined Shopping Center Portfolio”), aggregating 131.3 million square feet of gross leasable area (“GLA”) and 829 other property interests, primarily through the Company’s preferred equity investments, other real estate investments and non-retail properties, totaling 26.6 million square feet of GLA, for a grand total of 1,725 properties aggregating 157.9 million square feet of GLA, located in 44 states, Puerto Rico, Canada, Mexico, Chile, Brazil and Peru.

The executive officers are engaged in the day-to-day management and operation of real estate exclusively with the Company, with nearly all operating functions, including leasing, asset management, maintenance, construction, legal, finance and accounting, administered by the Company.

The Company’s vision is to be the premier owner and operator of shopping centers with its core business operations focusing on owning and operating neighborhood and community shopping centers through investments in North America. This vision has entailed a shift away from non-retail assets that the Company currently holds. These investments include non-retail preferred equity investments, marketable securities, mortgages on non-retail properties and several urban mixed-use properties. The Company has been actively selling its non-retail assets and investments. As of December 31, 2012, these investments had a book value of $398.4 million, which represents less than 3.5% of the Company’s total assets, before depreciation. In addition, the Company has an active capital recycling program of selling retail assets deemed non-strategic. If the Company accepts sales prices for these non-retail and/or non-strategic assets that are less than their net carrying values, the Company would be required to take impairment charges. In order to execute the Company’s vision, the Company’s strategy is to continue to strengthen its balance sheet by pursuing deleveraging efforts over time, providing it the necessary flexibility to invest opportunistically and selectively, primarily focusing on neighborhood and community shopping centers. In addition, the Company has an institutional management business with domestic and foreign institutional partners for the purpose of investing in neighborhood and community shopping centers.

The following highlights the Company’s significant transactions, events and results that occurred during the year ended December 31, 2012:

Portfolio Information:

	·	Net income available to common shareholders increased by $63.0 million to $172.7 million for the year ended December 31, 2012, as compared to $109.7 million for the corresponding period in 2011.

	·	Funds from operations (“FFO”) as adjusted increased from $1.20 for the year ended December 31, 2011 to $1.26 for the year ended December 31, 2012 (see additional disclosure on FFO beginning on page 31).

	·	Same Property net operating income (“NOI”) increased by $18.8 million or 2.3% for the year ended December 31, 2012, as compared to the corresponding period in 2011; excluding the negative impact of foreign currency fluctuation, this increase would have been $23.6 million or 2.9% (see additional disclosure on NOI beginning on page 32).

	·	Occupancy rose from 93.3% at December 31, 2011 to 94.0% at December 31, 2012 in the Combined Shopping Center Portfolio.

	·	Occupancy rose from 93.1% at December 31, 2011 to 93.9% at December 31, 2012 for the U.S. combined shopping center portfolio.

	·	Recognized U.S. cash-basis leasing spreads of 9.8%; new leases increased 27.8% and renewals/options increased 4.5%.

	·	Executed 2,678 leases, renewals and options totaling over 10.0 million square feet in the Combined Shopping Center Portfolio.

Acquisition Activity:

	·	Acquired 24 shopping center properties, five outparcels and 69 net leased parcels comprising an aggregate 3.1 million square feet of GLA, for an aggregate purchase price of $634.5 million including the assumption of $179.2 million of non-recourse mortgage debt encumbering seven of the properties.

Disposition Activity:

	·	During 2012, the Company monetized non-retail assets of $83.0 million and reduced its non-retail book values by $114.1 million to $398.4 million.

	·	Included in the monetization above are the disposition of four properties and one land parcel, in separate transactions, for an aggregate sales price of $40.3 million. These transactions resulted in an aggregate net gain of $4.8 million, before income taxes.

	·	Also included in the monetization above is (i) the receipt of $24.8 million from payment of mortgage receivables, (ii) the Company’s receipt of $14.6 million in distributions from two preferred equity investments and one joint venture investment and (iii) $10.4 million in distributions from two cost method investments.

	·	Additionally, during 2012, the Company disposed of 59 operating properties, four land parcels and four outparcels, in separate transactions, for an aggregate sales price of $443.0 million. These transactions resulted in an aggregate gain of $91.5 million and impairment charges of $22.5 million, before income taxes and noncontrolling interests.

Capital Activity (for additional details see Liquidity and Capital Resources below):

	·	During 2012, the Company issued 16,000,000 depositary shares of 6.00% Class I Cumulative Redeemable Preferred Stock, 9,000,000 depositary shares of 5.50% Class J Cumulative Redeemable Preferred Stock and 7,000,000 depositary shares of 5.625% Class K Cumulative Redeemable Preferred Stock resulting in aggregate proceeds after expenses of $774.1 million to the Company.

	·	Additionally, during 2012, the Company redeemed all of its outstanding 18,400,000 depositary shares of the Company’s 7.75% Class G Cumulative Redeemable Preferred Stock and all of its outstanding 7,000,000 depositary shares of the Company’s 6.65% Class F Cumulative Redeemable Preferred Stock resulting in aggregate payments of $635.0 million.

	·	Also during 2012, the Company (i) repaid the $17.0 million outstanding on its 5.98% medium-term notes, which matured in July 2012 and (ii) repaid the $198.9 million outstanding on its 6.00% senior unsecured note, which matured in November 2012.

	·	The Company also obtained a new $400.0 million unsecured term loan with a consortium of banks, which accrues interest at LIBOR plus 105 basis points. The term loan is scheduled to mature in April 2014, with three additional one-year options to extend the maturity date, at the Company’s discretion, to April 17, 2017.

Impairments:

	·	Real estate market conditions, including capitalization rates, discount rates and vacancies had continued to improve throughout 2012; however, declines in certain real estate markets continued to have a negative effect on transactional activity as it related to dispositions of select real estate assets. This factor, in addition to the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions caused the Company to recognize impairment charges of $59.6 million (including $22.5 million which is classified within discontinued operations), before income tax benefit and noncontrolling interests. Potential future adverse market and economic conditions could cause the Company to recognize additional impairments in the future (see Footnote 2 of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K).

	·	In addition to the impairment charges above, various unconsolidated joint ventures in which the Company holds noncontrolling interests recognized impairment charges relating to certain properties during 2012. The Company’s share of these charges was $11.1 million, before income taxes (see Footnotes 2 and 8 of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K).

Critical Accounting Policies

The Consolidated Financial Statements of the Company include the accounts of the Company, its wholly-owned subsidiaries and all entities in which the Company has a controlling interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity in accordance with the consolidation guidance of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”). The Company applies these provisions to each of its joint venture investments to determine whether the cost, equity or consolidation method of accounting is appropriate. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates are based on, but not limited to, historical results, industry standards and current economic conditions, giving due consideration to materiality. The most significant assumptions and estimates relate to revenue recognition and the recoverability of trade accounts receivable, depreciable lives, valuation of real estate and intangible assets and liabilities, valuation of joint venture investments and other investments, realizability of deferred tax assets and uncertain tax positions. Application of these assumptions requires the exercise of judgment as to future uncertainties, and, as a result, actual results could materially differ from these estimates.

The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties, investments in joint ventures, marketable securities and other investments. The Company’s reported net earnings are directly affected by management’s estimate of impairments and/or valuation allowances.

Revenue Recognition and Accounts Receivable

Base rental revenues from rental property are recognized on a straight-line basis over the terms of the related leases. Certain of these leases also provide for percentage rents based upon the level of sales achieved by the lessee. These percentage rents are recorded once the required sales level is achieved. Operating expense reimbursements are recognized as earned. Rental income may also include payments received in connection with lease termination agreements. In addition, leases typically provide for reimbursement to the Company of common area maintenance, real estate taxes and other operating expenses.

The Company makes estimates of the uncollectability of its accounts receivable related to base rents, straight-line rent, expense reimbursements and other revenues. The Company analyzes accounts receivable and historical bad debt levels, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims. The Company’s reported net earnings are directly affected by management’s estimate of the collectability of accounts receivable.

Real Estate

The Company’s investments in real estate properties are stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations and replacements, which improve and extend the life of the asset, are capitalized.

Upon acquisition of real estate operating properties, the Company estimates the fair value of acquired tangible assets (consisting of land, building, building improvements and tenant improvements) and identified intangible assets and liabilities (consisting of above and below-market leases, in-place leases and tenant relationships), assumed debt and redeemable units issued at the date of acquisition, based on evaluation of information and estimates available at that date. Based on these estimates, the Company allocates the estimated fair value to the applicable assets and liabilities. Fair value is determined based on an exit price approach, which contemplates the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If, up to one year from the acquisition date, information regarding fair value of the assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments are made to the purchase price allocation on a retrospective basis. The Company expenses transaction costs associated with business combinations in the period incurred.

Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets, as follows:

Buildings and building improvements	15 to 50 years
Fixtures, leasehold and tenant improvements (including certain identified intangible assets)	Terms of leases or useful lives, whichever is shorter

The Company is required to make subjective assessments as to the useful lives of its properties for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those properties. These assessments have a direct impact on the Company’s net earnings.

On a continuous basis, management assesses whether there are any indicators, including property operating performance and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may be impaired. A property value is considered impaired only if management’s estimate of current and projected operating cash flows (undiscounted and unleveraged) of the property over its remaining useful life is less than the net carrying value of the property. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred, the carrying value of the property would be adjusted to reflect the estimated fair value of the property.

When a real estate asset is identified by management as held-for-sale, the Company ceases depreciation of the asset and estimates the sales price of such asset net of selling costs. If, in management’s opinion, the net sales price of the asset is less than the net book value of such asset, an adjustment to the carrying value would be recorded to reflect the estimated fair value of the property.

Investments in Unconsolidated Joint Ventures

The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting as the Company exercises significant influence, but does not control, these entities. These investments are recorded initially at cost and are subsequently adjusted for cash contributions and distributions. Earnings for each investment are recognized in accordance with each respective investment agreement and, where applicable, are based upon an allocation of the investment’s net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period.

The Company’s joint ventures and other real estate investments primarily consist of co-investments with institutional and other joint venture partners in neighborhood and community shopping center properties, consistent with its core business. These joint ventures typically obtain non-recourse third-party financing on their property investments, thus contractually limiting the Company’s exposure to losses to the amount of its equity investment, and, due to the lender’s exposure to losses, a lender typically will require a minimum level of equity in order to mitigate its risk. The Company’s exposure to losses associated with its unconsolidated joint ventures is primarily limited to its carrying value in these investments. The Company, on a limited selective basis, obtained unsecured financing for certain joint ventures. These unsecured financings are guaranteed by the Company with guarantees from the joint venture partners for their proportionate amounts of any guaranty payment the Company is obligated to make.

On a continuous basis, management assesses whether there are any indicators, including property operating performance and general market conditions, that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other-than-temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.

The Company’s estimated fair values are based upon a discounted cash flow model for each specific property that includes all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums. Capitalization rates, discount rates and credit spreads utilized in these models are based upon rates that the Company believes to be within a reasonable range of current market rates for each respective property.

Realizability of Deferred Tax Assets and Uncertain Tax Positions

The Company is subject to federal, state and local income taxes on the income from its activities relating to its TRS activities and subject to local taxes on certain non-U.S. investments. The Company accounts for income taxes using the asset and liability method, which requires that deferred tax assets and liabilities be recognized based on future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if based on the evidence available, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.

The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed. Information about an enterprise's current financial position and its results of operations for the current and preceding years is supplemented by all currently available information about future years. The Company must use judgment in considering the relative impact of negative and positive evidence.

The Company believes, when evaluating deferred tax assets within its taxable REIT subsidiaries, special consideration should be given to the unique relationship between the Company as a REIT and its taxable REIT subsidiaries. This relationship exists primarily to protect the REIT’s qualification under the Code by permitting, within certain limits, the REIT to engage in certain business activities in which the REIT cannot directly participate. As such, the REIT controls which and when investments are held in, or distributed or sold from, its taxable REIT subsidiaries. This relationship distinguishes a REIT and taxable REIT subsidiary from an enterprise that operates as a single, consolidated corporate taxpayer.

The Company primarily utilizes a twenty year projection of pre-tax book income and taxable income as positive evidence to overcome any negative evidence. Although items of income and expense utilized in the projection are objectively verifiable there is also significant judgment used in determining the duration and timing of events that would impact the projection. Based upon the Company’s analysis of negative and positive evidence the Company will make a determination of the need for a valuation allowance against its deferred tax assets. If future income projections do not occur as forecasted, the Company will reevaluate the need for a valuation allowance. In addition, the Company can employ additional strategies to realize its deferred tax assets, including transferring a greater portion of its property management business to the TRS, sale of certain built-in gain assets, and reducing intercompany debt.

The Company recognizes and measures benefits for uncertain tax positions, which requires significant judgment from management. Although the Company believes it has adequately reserved for any uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in the Company’s income tax expense in the period in which a change is made, which could have a material impact on operating results (see Footnote 22 of the Notes to Consolidated Financial Statements included in this Form 10-K).

Results of Operations

Comparison 2012 to 2011

		2012				2011				Increase/ (Decrease)				% change
		(amounts in millions)
Revenues from rental property (1)		$	884.8			$	825.7			$	59.1				7.2	%
Rental property expenses: (2)
Rent		$	12.8			$	13.9			$	(1.1	)			(7.9	)%
Real estate taxes			115.3				108.8				6.5				6.0	%
Operating and maintenance			118.8				114.1				4.7				4.1	%
		$	246.9			$	236.8			$	10.1				4.3	%
Depreciation and amortization (3)		$	249.5			$	231.7			$	17.8				7.7	%

(1)

Revenues from rental property increased primarily from the combined effect of (i) the acquisition of operating properties during 2012 and 2011, providing incremental revenues for the year ended December 31, 2012 of $50.9 million, as compared to the corresponding period in 2011, (ii) an increase in revenues relating to the Company’s Latin American portfolio of $8.0 and (iii) the completion of certain development and redevelopment projects, tenant buyouts and overall growth in the current portfolio, providing incremental revenues of $0.9 million, for the year ended December 31, 2012, as compared to the corresponding period in 2011, partially offset by (iv) a decrease in revenues of $0.7 million for the year ended December 31, 2012, as compared to the corresponding period in 2011, primarily resulting from the partial sale of certain properties during 2012 and 2011.

(2)

Rental property expenses include (i) rent expense relating to ground lease payments for which the Company is the lessee; (ii) real estate tax expense for consolidated properties for which the Company has a controlling ownership interest and (iii) operating and maintenance expense, which consists of property related costs including repairs and maintenance costs, roof repair, landscaping, parking lot repair, snow removal, utilities, property insurance costs, security and various other property related expenses. Rental property expenses increased for the year ended December 31, 2012, as compared to the corresponding period in 2011, primarily due to (i) an increase in real estate taxes of $6.5 million, primarily due to acquisitions of properties during 2012 and 2011, (ii) an increase in repairs and maintenance costs of $5.5 million, primarily due to acquisitions of properties during 2012 and 2011 (iii) an increase in insurance premiums and claims of $1.7 million and (iv) an increase in utilities of $1.8 million, partially offset by (v) a decrease in snow removal costs of $5.2 million and (vi) a decrease in rent expense of $1.1 million.

(3)	Depreciation and amortization increased for the year ended December 31, 2012, as compared to the corresponding period in 2011, primarily due to (i) operating property acquisitions during 2012 and 2011, (ii) the placement of certain development properties into service and (iii) tenant vacancies, partially offset by (iv) certain operating property dispositions during 2012 and 2011.

Management and other fee income increased $2.2 million to $37.5 million for the year ended December 31, 2012, as compared to $35.3 million for the corresponding period in 2011. This increase is due to an increase in property management fees of $0.8 million, primarily due to the acquisitions of properties within the Company’s joint venture portfolio during 2012 and 2011, and an increase in transaction related fees of $1.4 million recognized during 2012, as compared to 2011.

General and administrative costs include employee-related expenses (salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel expense, and other company-specific expenses. General and administrative expenses increased $5.6 million to $124.5 million for the year ended December 31, 2012, as compared to $118.9 million for the corresponding period in 2011. This increase is primarily a result of (i) an increase of $2.6 million in severance costs related to the departure of an executive officer in January 2012, (ii) an increase in professional and consulting fees of $2.1 million, primarily due to increased transactional activity, and (iii) an increase in other personnel related costs during 2012, as compared to the corresponding period in 2011.

During year ended December 31, 2012, the Company recognized impairment charges of $59.6 million ($22.5 million of which is included in discontinued operations) before income tax benefit and noncontrolling interest. During the year ended December 31, 2011, the Company recognized impairment charges of $32.8 million ($19.7 million of which is included in discontinued operations) before income tax benefit and noncontrolling interest. These impairments were primarily calculated based on the usage of estimated sales prices and comparable sales information as inputs. The Company determined that its valuation in these assets was classified within Level 3 of the FASB’s fair value hierarchy. These impairment charges resulted from the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions.

Interest, dividends and other investment income decreased $14.4 million to $2.2 million for the year ended December 31, 2012, as compared to $16.6 million for the corresponding period in 2011. This decrease is primarily due to (i) the Company’s sale of its investment in Valad notes during 2011, resulting in a decrease in interest income of $6.2 million, (ii) a decrease in other investment income of $6.4 million relating to the receipt of cash distributions during 2011 in excess of the Company’s carrying value of a cost method investment, (iii) a reduction in interest income of $0.5 million due to repayments of notes in 2012 and 2011 and (iv) a decrease in gains on sales of securities of $0.5 million.

Other expense, net increased $3.3 million to $8.0 million for the year ended December 31, 2012, as compared to $4.7 million for the corresponding period in 2011. This change is primarily due to (i) an increase in acquisition related costs of $3.1 million relating to an increase in transactional activity, (ii) a decrease in gains on foreign currency of $2.4 million relating to changes in foreign currency exchange rates, partially offset by (iii) an increase of $2.5 million in gains on land sales during 2012, as compared to the corresponding period in 2011.

Interest expense increased $4.1 million to $227.6 million for the year ended December 31, 2012, as compared to $223.5 million for the corresponding period in 2011. This increase is primarily related to a decrease in capitalization of interest due to the placement of certain development and redevelopment properties into service during 2012, as compared to the corresponding period in 2011.

During 2011, the Company sold a merchant building property to an unconsolidated joint venture in which the Company has a noncontrolling interest for a sales price of $37.6 million resulting in a pretax gain of $12.1 million after a deferral of $2.1 million due to the Company’s continued involvement in the property.

Provision for income taxes, net decreased by $17.4 million to $3.9 million for the year ended December 31, 2012, as compared to $21.3 million for the corresponding period in 2011. This decrease is primarily due to (i) an increase in income tax benefit of $10.2 million related to impairments taken during the year ended December 31, 2012, as compared to the corresponding period in 2011, (ii) a decrease in the income tax provision expense of $5.7 million in connection with a gain on sale of a development property during 2011, (iii) a decrease in tax provision of $2.8 million resulting from the receipt of a cash distribution during 2011 in excess of the Company’s carrying value of a cost method investment and (iv) a decrease in tax provision of $2.7 million resulting from a decrease in equity in income recognized in connection with the Albertson’s investment during 2012, as compared to 2011, partially offset by (v) an increase in foreign withholding taxes of $5.4 million primarily resulting from an unrealized foreign exchange gains recognized for Mexican tax purposes on U.S. denominated mortgage debt within the Company’s Latin American property portfolio.

Equity in income of joint ventures, net increased $49.4 million to $112.9 million for the year ended December 31, 2012, as compared to $63.5 million for the corresponding period in 2011. This increase is primarily the result of (i) an increase in gains on sale and promote income recognized of $12.6 million, (ii) the recognition of $7.5 million in income on the sale of certain air rights at a property within one of the Company’s joint venture investments in Canada, (iii) an increase in equity in income of $5.9 million from the Company’s InTown Suites investment primarily resulting from increased operating profitability, (iv) the recognition of $2.1 million in income resulting from cash distributions received in excess of the Company’s carrying value of its investment in an unconsolidated joint venture, (v) a decrease in impairment charges of $3.2 million resulting from fewer impairment charges recognized against certain joint venture properties during the year ended December 31, 2012, as compared to the corresponding period in 2011, (vi) a decrease in equity in loss of $4.0 million resulting from the disposition of a portfolio of properties during 2011, (vii) an increase in equity in income of $6.0 million from the Company’s joint venture investments in Canada (viii) an increase in equity in income of $3.7 million from the Company’s joint venture investments in Mexico and (ix) incremental earnings due to increased profitability from properties within the Company’s joint venture program.

During 2012, the Company acquired four properties from joint ventures in which the Company had noncontrolling interests. The Company recorded an aggregate gain on change in control of interests of $15.6 million related to the fair value adjustment associated with its original ownership. During 2011, the Company acquired one property from a joint venture in which the Company had a noncontrolling interest. The Company recorded an aggregate gain on change in control of interests of $0.6 million related to the fair value adjustment associated with its original ownership.

During 2012, the Company disposed of 62 operating properties and two outparcels, in separate transactions, for an aggregate sales price of $418.9 million. These transactions resulted in an aggregate gain of $85.9 million and impairment charges of $22.5 million, before income taxes, which is included in Discontinued operations in the Company’s Consolidated Statements of Income.

During 2011, the Company disposed of 27 operating properties, one development property and one outparcel, in separate transactions, for an aggregate sales price of $124.9 million. These transactions resulted in an aggregate gain of $17.3 million and aggregate impairment charges of $16.9 million, before income taxes, which is included in Discontinued operations in the Company’s Consolidated Statements of Income.

During 2011, a consolidated joint venture in which the Company had a preferred equity investment disposed of a property for a sales price of $6.1 million. As a result of this capital transaction, the Company received $1.4 million of profit participation, before noncontrolling interest of $0.1 million. This profit participation has been recorded as Income from other real estate investments and is reflected in Income from discontinued operating properties in the Company’s Consolidated Statements of Income.

During 2012, the Company sold a previously consolidated operating property to a newly formed unconsolidated joint venture in which the Company has a 20% noncontrolling interest for a sales price of $55.5 million. This transaction resulted in a pre-tax gain of $10.0 million, of which the Company deferred $2.0 million due to its continued involvement. This gain has been recorded as Gain on sale of operating properties, net of tax in the Company’s Consolidated Statements of Income.

Net income attributable to the Company increased $97.0 million to $266.1 million for the year ended December 31, 2012, as compared to $169.1 million for the corresponding period in 2011. On a diluted per share basis, net income attributable to the Company was $0.42 for 2012, as compared to net income of $0.27 for 2011. These increases are primarily attributable to (i) additional incremental earnings due to increased profitability from the Company’s operating properties and the acquisition of operating properties during 2012 and 2011, (ii) an increase in gains on disposition of operating properties and change in control of interests, (iii) an increase in equity in income of joint ventures, net primarily due to gains on sales of operating properties sold within various joint venture portfolios during 2012 and (iv) a decrease in provision for income taxes, partially offset by (v) an increase in impairment charges recognized during the year ended December 31, 2012, as compared to the corresponding period in 2011, (vi) a decrease in interest, dividends and other investment income resulting primarily from the sale of certain marketable securities during 2011 and (vii) a decrease in gain on sale of development properties recognized during 2012, as compared to 2011. The 2012 diluted per share results were decreased by a reduction in net income available to common shareholders of $21.7 million resulting from the deduction of original issuance costs associated with the redemption of the Company’s 6.65% Class F Cumulative Redeemable Preferred Stock and 7.75% Class G Cumulative Redeemable Preferred Stock.

Comparison 2011 to 2010

		2011				2010				Increase				% change
		(amounts in millions)
Revenues from rental property (1)		$	825.7			$	786.9			$	38.8				4.9	%
Rental property expenses: (2)
Rent		$	13.9			$	13.7			$	0.2				1.5	%
Real estate taxes			108.8				105.3				3.5				3.3	%
Operating and maintenance			114.1				108.4				5.7				5.3	%
		$	236.8			$	227.4			$	9.4				4.1	%
Depreciation and amortization (3)		$	231.7			$	217.2			$	14.5				6.7	%

(1)

Revenues from rental property increased primarily from the combined effect of (i) the acquisition of operating properties during 2011 and 2010, providing incremental revenues for the year ended December 31, 2011 of $35.7 million, as compared to the corresponding period in 2010 and (ii) the completion of certain development and redevelopment projects, tenant buyouts and overall growth in the current portfolio, providing incremental revenues of $4.2 million, for the year ended December 31, 2011, as compared to the corresponding period in 2010, which was partially offset by (iii) a decrease in revenues of $1.1 million for the year ended December 31, 2011, as compared to the corresponding period in 2010, primarily resulting from the partial sale of certain properties during 2011 and 2010.

(2)

Rental property expenses include (i) rent expense relating to ground lease payments for which the Company is the lessee; (ii) real estate tax expense for consolidated properties for which the Company has a controlling ownership interest and (iii) operating and maintenance expense, which consists of property related costs including repairs and maintenance costs, roof repair, landscaping, parking lot repair, snow removal, utilities, property insurance costs, security and various other property related expenses. Rental property expenses increased primarily due to (i) operating property acquisitions during 2011 and 2010, and (ii) the placement of certain development properties into service, which resulted in lower capitalization of carrying costs.

(3)	Depreciation and amortization increased primarily due to (i) operating property acquisitions during 2011 and 2010, (ii) the placement of certain development properties into service and (iii) tenant vacancies.

Management and other fee income decreased $4.6 million to $35.3 million for the year ended December 31, 2011, as compared to $39.9 million for the corresponding period in 2010. This decrease is primarily due to a decrease in property management fees of $2.4 million recognized during 2011, as compared to 2010, primarily due to the disposition of properties during 2011 and 2010 and a decrease in transaction related fees of $2.2 million recognized during 2011, as compared to 2010.

General and administrative costs include employee-related expenses (salaries, bonuses, equity awards, benefits, severance costs and payroll taxes), professional fees, office rent, travel expense, and other company-specific expenses. General and administrative expenses increased $9.9 million to $118.9 million for the year ended December 31, 2011, as compared to $109.0 million for the corresponding period in 2010. This change is primarily a result of an increase in equity awards expense related to grants issued during 2011 and 2010 and an increase in other personnel related costs during 2011, as compared to the corresponding periods in 2010.

During 2011, the Company recognized aggregate impairment charges of $32.2 million ($19.7 million of which is included in discontinued operations), before income taxes and noncontrolling interest, relating to adjustments to property carrying values, investments in other real estate investments, investment in real estate joint ventures and other investments. The Company’s estimated fair values relating to these impairment assessments were based upon their respective estimated sales prices. Based on these inputs, the Company determined that its valuation in these investments was classified within Level 3 of the FASB fair value hierarchy. These impairment charges resulted from the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions. Additionally, during 2011, the Company recorded impairment charges of $0.6 million due to the decline in value of certain marketable securities that were deemed to be other-than-temporary.

During 2010, the Company recognized impairment charges of $34.5 million ($6.5 million of which is included in discontinued operations), before income taxes and noncontrolling interest, relating to adjustments to property carrying values, real estate under development, investments in other real estate investments and other investments. The Company’s estimated fair values relating to these impairment assessments were based upon estimated sales prices and discounted cash flow models that included all estimated cash inflows and outflows over a specified holding period. These cash flows are comprised of unobservable inputs which include contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models were based upon observable rates that the Company believes to be within a reasonable range of current market rates for the respective properties. Based on these inputs, the Company determined that its valuation in these investments was classified within Level 3 of the FASB fair value hierarchy. Additionally, during 2010, the Company recorded impairment charges of $4.6 million due to the decline in value of certain marketable securities that were deemed to be other-than-temporary.

Mortgage financing income decreased $2.1 million to $7.3 million for the year ended December 31, 2011, as compared to $9.4 million for the corresponding period in 2010. This decrease is primarily due to a decrease in interest income resulting from the repayment of certain mortgage receivables during 2011 and 2010.

Interest, dividends and other investment income decreased $4.6 million to $16.6 million for the year ended December 31, 2011, as compared to $21.2 million for the corresponding period in 2010. This decrease is primarily due to the sale of Valad notes resulting in a decrease in interest income of $13.5 million, partially offset by (i) an increase in bank interest income of $1.1 million during 2011, as compared to the corresponding period in 2010, primarily resulting from the change in cash balances during 2011 and (ii) an income distribution of $7.4 million from a cost method investment during 2011.

During the year ended December 31, 2010, the Company incurred early extinguishment of debt charges aggregating $10.8 million in connection with the optional make-whole provisions of notes that were repaid prior to maturity and prepayment penalties on five mortgages that the Company paid prior to their maturity.

During 2011, the Company sold a merchant building property to an unconsolidated joint venture in which the Company has a noncontrolling interest for a sales price of $37.6 million resulting in a pretax gain of $12.1 million after a deferral of $2.1 million due to the Company’s continued involvement in the property.

During 2010, the Company disposed of a land parcel for a sales price of $0.8 million resulting in a gain of $0.4 million. Additionally, the Company recognized $1.7 million in income on previously sold development properties during the year ended December 31, 2010.

Provision for income taxes, net increased by $18.1 million to $21.3 million for the year ended December 31, 2011, as compared to $3.2 million for the corresponding period in 2010. This change is primarily due to (i) a decrease in income tax benefit of $10.3 million related to fewer impairments taken during the year ended December 31, 2011, as compared to the corresponding period in 2010, (ii) an increase in the income tax provision expense of $4.8 million in connection with gains on sale of development properties during 2011, as compared to 2010, (iii) a decrease in tax benefit of $4.9 million as a result of reduced interest expense for the Company’s taxable REIT subsidiaries, (iv) a tax provision of $2.7 million resulting from the receipt of a cash distribution in excess of the Company’s carrying value of a cost method investment during 2011 and (v) a tax provision of $1.4 million resulting from incremental earnings due to increased profitability from properties within the Company’s taxable REIT subsidiaries, partially offset by (vi) a decrease in foreign taxes of $6.8 million primarily resulting from an unrealized foreign exchange loss recognized for Mexican tax purposes on U.S. denominated mortgage debt within the Company’s Latin American property portfolio.

Equity in income of joint ventures, net increased $28.9 million to $63.5 million for the year ended December 31, 2011, as compared to $34.6 million for the corresponding period in 2010. This increase is primarily the result of (i) a decrease in impairment charges of $10.0 million resulting from fewer impairment charges recognized against certain joint venture properties during the year ended December 31, 2011, as compared to the corresponding period in 2010, (ii) an increase in equity in income of $4.2 million from the Company’s InTown Suites investment primarily resulting from increased operating profitability, (iii) an increase in equity in income of $2.3 million from the Company’s joint venture investments in Canada primarily resulting from the Company increasing its noncontrolling ownership interest in certain Canadian portfolios, (iv) an increase in equity in income of $2.1 million from the Company’s joint venture investments in Latin America primarily resulting from lease-up activities at properties that were placed into service, (v) a decrease of $7.2 million in equity in loss from a joint venture in which the Company no longer has an equity basis and is therefore no longer required to record equity losses, (vi) an increase in gains on sales of $4.4 million for 2011, as compared to 2010 and (vii) incremental earnings due to increased profitability from properties within the Company’s joint venture program, partially offset by (viii) the recognition of $8.0 million in income resulting from cash distributions received in excess of the Company’s carrying value of its investment in an unconsolidated limited liability partnership during the year ended December 31, 2010.

Equity in income from other real estate investments, net decreased $9.0 million to $51.8 million for the year ended December 31, 2011, as compared to $60.8 million for the corresponding period in 2010. This decrease is primarily due to a decrease of $7.2 million in equity in income from the Albertson’s joint venture resulting from lower cash distributions received in excess of the Company’s investment during 2011, as compared to the corresponding period during 2010 and a decrease of $2.7 million in equity in earnings including profit participation earned from the Company’s Preferred Equity Program during 2011, as compared to the corresponding period in 2010.

During 2011, the Company disposed of 27 operating properties, one development property and one outparcel, in separate transactions, for an aggregate sales price of $124.9 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $17.3 million and aggregate impairment charges of $16.9 million, before income taxes.

Additionally, during 2011, a consolidated joint venture in which the Company had a preferred equity investment disposed of a property for a sales price of $6.1 million. As a result of this capital transaction, the Company received $1.4 million of profit participation, before noncontrolling interest of $0.1 million. This profit participation has been recorded as Income from other real estate investments and is reflected in Income from discontinued operating properties in the Company’s Consolidated Statements of Income.

During 2010, the Company (i) sold seven operating properties, which were previously consolidated, to two new joint ventures in which the Company holds noncontrolling equity interests for an aggregate sales price of $438.1 million including the assignment of $159.9 million of non-recourse mortgage debt encumbering three of the properties and (ii) disposed of, in separate transactions, seven operating properties for an aggregate sales price of $100.5 million including the assignment of $81.0 million of non-recourse mortgage debt encumbering one of the properties. These transactions resulted in aggregate gains of $4.4 million and aggregate losses/impairments of $5.0 million.

Additionally, during 2010, the Company disposed of (i) three properties, in separate transactions, for an aggregate sales price of $23.8 million and (ii) five properties from a consolidated joint venture in which the Company had a preferred equity investment for a sales price of $40.8 million. These transactions resulted in an aggregate profit participation of $20.8 million, before income tax of $1.0 million and noncontrolling interest of $4.9 million. This profit participation has been recorded as Income from other real estate investments and is reflected in Income from discontinued operating properties, net of tax in the Company’s Consolidated Statements of Income.

Net income attributable to the Company increased $26.2 million to $169.1 million for the year ended December 31, 2011, as compared to $142.9 million for the corresponding period in 2010. On a diluted per share basis, net income attributable to the Company was $0.27 for 2011, as compared to net income of $0.22 for 2010. These increases are primarily attributable to (i) additional incremental earnings due to increased profitability from the Company’s operating properties and the acquisition of operating properties during 2011 and 2010, (ii) an increase in gain on sale of development properties recognized during 2011, as compared to 2010, (iii) increased equity in income of joint ventures, net primarily due to incremental earnings from increased profitability within the joint venture portfolios and fewer impairment charges recognized against certain joint venture properties during the year ended December 31, 2011, as compared to the corresponding period in 2010 and (iv) early extinguishment of debt charges recognized during 2010, aggregating $10.8 million, partially offset by (v) an increase in provision for income taxes.

Liquidity and Capital Resources

The Company’s capital resources include accessing the public debt and equity capital markets, mortgage and construction loan financing and immediate access to an unsecured revolving credit facility with bank commitments of $1.75 billion.

The Company’s cash flow activities are summarized as follows (in millions):

		Year Ended December 31,
		2012				2011				2010
Net cash flow provided by operating activities		$	479.1			$	448.6			$	479.9
Net cash flow (used for)/provided by investing activities		$	(51.0	)		$	(20.8	)		$	37.9
Net cash flow used for financing activities		$	(399.1	)		$	(440.1	)		$	(514.7	)

Operating Activities

The Company anticipates that cash on hand, operating cash flows, borrowings under its revolving credit facility, issuance of equity and public debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company. Net cash flow provided by operating activities for the year ended December 31, 2012, was primarily attributable to (i) cash flow from the diverse portfolio of rental properties, (ii) the acquisition of operating properties during 2012 and 2011, (iii) new leasing, expansion and re-tenanting of core portfolio properties and (iv) distributions from the Company’s joint venture programs.

Cash flow provided by operating activities for the year ended December 31, 2012, was $479.1 million, as compared to $448.6 million for the comparable period in 2011. The change of $30.5 million is primarily attributable to higher operational income, increased distributions from joint ventures and other real estate investments and changes in accounts and notes receivable due to timing of receipts.

Investing Activities

Cash flow used for investing activities for the year ended December 31, 2012, was $51.0 million, as compared to $20.8 million for the comparable period in 2011. This change of $30.2 million resulted primarily from (i) an increase in acquisition of and improvements to operating real estate of $209.2 million, (ii) a decrease in proceeds from the sale/repayments of marketable securities of $187.8 million, (iii) an increase in investments and advances to real estate joint ventures of $48.2 million, (iv) a decrease in reimbursements of investments and advances to other real estate investments and other investments of $43.7 million and (v) investment in mortgage loans receivable of $16.0 million, partially offset by, (vi) an increase in proceeds from the sale of operating and development properties of $269.4 million, (vii) an increase in reimbursements of investments and advances to real estate joint ventures of $124.3 million, (viii) an increase in collections of mortgage receivables of $44.5 million and (ix) a decrease in acquisition of and improvements to real estate under development of $35.4 million.

Acquisitions of and Improvements to Operating Real Estate

During the year ended December 31, 2012, the Company expended $552.5 million towards acquisition of and improvements to operating real estate including $78.9 million (inclusive of $2.4 million in capitalized costs) expended in connection with redevelopments and re-tenanting projects. (See Footnote 4 of the Notes to the Consolidated Financial Statements included in this Form 10-K.)

The Company has an ongoing program to reformat and re-tenant its properties to maintain or enhance its competitive position in the marketplace. The Company anticipates its capital commitment toward these reformatting and re-tenanting efforts and other redevelopment projects during 2013 will be approximately $90.0 million to $100.0 million. The funding of these capital requirements will be provided by cash flow from operating activities and availability under the Company’s revolving line of credit.

Investments and Advances to Real Estate Joint Ventures

During the year ended December 31, 2012, the Company expended $219.9 million for investments and advances to real estate joint ventures and received $187.9 million from reimbursements of investments and advances to real estate joint ventures, primarily due to the refinance of debt and sales of properties. (See Footnote 8 of the Notes to the Consolidated Financial Statements included in this Form 10-K.)

Acquisitions of and Improvements to Real Estate Under Development

The Company is engaged in ground-up development projects which will be held as long-term investments by the Company. The ground-up development projects generally have significant pre-leasing prior to the commencement of construction. As of December 31, 2012, the Company had a total of three ground-up development projects, consisting of two projects located in the U.S. and one project located in Peru.

The Company anticipates its capital commitment during 2013 toward these and other development projects will be approximately $15.0 million to $25.0 million. The funding of these capital requirements will be provided by cash flow from operating activities and availability under the Company’s revolving line of credit.

Dispositions and Transfers

During the year ended December 31, 2012, the Company received net proceeds of $449.5 million relating to the sale of various operating properties. (See Footnotes 5 and 7 of the Notes to the Consolidated Financial Statements included in this Form 10-K.)

Financing Activities

Cash flow used for financing activities for the year ended December 31, 2012, was $399.1 million, as compared to $440.1 million for the comparable period in 2011. This change of $41.0 million resulted primarily from (i) the redemption of the Company’s 6.65% Class F Preferred Stock and 7.75% Class G Preferred Stock of $635.0 million, (ii) an increase in principal payments of $221.5 million, (iii) an increase in the repayment of unsecured term loan/notes of $123.3 million, (iv) a decrease of $103.6 million in net borrowings under unsecured revolving credit facility, (v) an increase in dividends paid of $29.0 million due to the issuance of the Company’s 6.00% Class I Preferred Stock and 5.50% Class J Preferred Stock and (vi) an increase in repurchases of common stock of $24.9 million, partially offset by (vii) an increase of $790.2 million from the issuance of stock, primarily relating to the issuance of the Company’s 6.00% Class I Preferred Stock, 5.50% Class J Preferred Stock and 5.625% Class K Preferred Stock and (viii) an increase of $400.0 million in proceeds from the unsecured term loan.

The Company continually evaluates its debt maturities, and, based on management’s current assessment, believes it has viable financing and refinancing alternatives that will not materially adversely impact its expected financial results. The credit environment has improved and the Company continues to pursue borrowing opportunities with large commercial U.S. and global banks, select life insurance companies and certain regional and local banks. The Company has noticed a continuing trend that although pricing remains dependent on specific deal terms, generally spreads for non-recourse mortgage financing are gradually compressing from levels a year ago. The unsecured debt markets are functioning well and credit spreads are at manageable levels. The Company continues to assess 2013 and beyond to ensure the Company is prepared if the current credit market conditions deteriorate.

Debt maturities for 2013 consist of: $640.5 million of consolidated debt; $570.6 million of unconsolidated joint venture debt; and $98.2 million of preferred equity debt, assuming the utilization of extension options where available. The 2013 consolidated debt maturities are anticipated to be extended, refinanced or repaid with operating cash flows and borrowings from the Company’s credit facility, which at December 31, 2012, the Company had $1.5 billion available. The 2013 unconsolidated joint venture and preferred equity debt maturities are anticipated to be extended or repaid through debt refinancing and partner capital contributions, as deemed appropriate.

The Company intends to maintain strong debt service coverage and fixed charge coverage ratios as part of its commitment to maintain its investment-grade debt ratings. The Company plans to continue strengthening its balance sheet by pursuing deleveraging efforts over time. The Company may, from time-to-time, seek to obtain funds through additional common and preferred equity offerings, unsecured debt financings and/or mortgage/construction loan financings and other capital alternatives.

Since the completion of the Company’s IPO in 1991, the Company has utilized the public debt and equity markets as its principal source of capital for its expansion needs. Since the IPO, the Company has completed additional offerings of its public unsecured debt and equity, raising in the aggregate over $8.7 billion. Proceeds from public capital market activities have been used for the purposes of, among other things, repaying indebtedness, acquiring interests in neighborhood and community shopping centers, funding ground-up development projects, expanding and improving properties in the portfolio and other investments. The Company will continue to access these markets, as available.

The Company has a $1.75 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which is scheduled to expire in October 2015 and has a one-year extension option. This credit facility, provides funds to finance general corporate purposes, including (i) property acquisitions, (ii) investments in the Company’s institutional management programs, (iii) development and redevelopment costs and (iv) any short-term working capital requirements. Interest on borrowings under the Credit Facility accrues at LIBOR plus 1.05% and fluctuates in accordance with changes in the Company’s senior debt ratings and has a facility fee of 0.20% per annum. As part of this Credit Facility, the Company has a competitive bid option whereby the Company could auction up to $875.0 million of its requested borrowings to the bank group. This competitive bid option provides the Company the opportunity to obtain pricing below the currently stated spread. In addition, as part of the Credit Facility, the Company has a $500.0 million sub-limit which provides it the opportunity to borrow in alternative currencies such as Canadian Dollars, British Pounds Sterling, Japanese Yen or Euros. Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to covenants requiring the maintenance of (i) maximum leverage ratios on both unsecured and secured debt and (ii) minimum interest and fixed coverage ratios. As of December 31, 2012, the Credit Facility had a balance of $249.9 million outstanding and $27.3 million appropriated for letters of credit.

Pursuant to the terms of the Credit Facility, the Company, among other things, is subject to maintenance of various covenants. The Company is currently in compliance with these covenants. The financial covenants for the Credit Facility are as follows:

Covenant		Must Be		As of 12/31/12
Total Indebtedness to Gross Asset Value (“GAV”)		<60%		44	%
Total Priority Indebtedness to GAV		<35%		9	%
Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense		>1.75x		3.23	x
Fixed Charge Total Adjusted EBITDA to Total Debt Service		>1.50x		2.17	x

For a full description of the Credit Facility’s covenants refer to the Credit Agreement dated as of October 27, 2011 filed in the Company’s Current Report on Form 8-K dated November 2, 2011.

During April 2012, the Company obtained a $400.0 million unsecured term loan with a consortium of banks, which accrues interest at LIBOR plus 105 basis points. The term loan is scheduled to mature in April 2014, with three additional one-year options to extend the maturity date, at the Company’s discretion, to April 17, 2017. Pursuant to the terms of the Credit Agreement, the Company, among other things is subject to covenants requiring the maintenance of (i) maximum indebtedness ratios and (ii) minimum interest and fixed charge coverage ratios. Proceeds from this term loan were used for general corporate purposes including the repayment of debt. The term loan covenants are similar to the Credit Facility covenants described above.

During March 2008, the Company obtained a Mexican peso (“MXN”) 1.0 billion term loan, which bears interest at a rate of 8.58%, subject to change in accordance with the Company’s senior debt ratings, and is scheduled to mature in March 2013. The Company utilized proceeds from this term loan to fully repay the outstanding balance of a MXN 500.0 million unsecured revolving credit facility, which was terminated by the Company. Remaining proceeds from this term loan were used for funding MXN denominated investments. As of December 31, 2012, the outstanding balance on this term loan was MXN 1.0 billion (USD $76.9 million). The Mexican term loan covenants are similar to the Credit Facility covenants described above. During December 2012, the lender agreed to extend this term loan for an additional five years at an interest rate of TIIE (Equilibrium Interbank Interest Rate) plus 1.35%, which will be effective subsequent to the scheduled maturity in March 2013. The Company has the option to swap this rate to a fixed rate at any time during the term of the loan.

During April 2012, the Company filed a shelf registration statement on Form S-3, which is effective for a term of three years, for the future unlimited offerings, from time-to-time, of debt securities, preferred stock, depositary shares, common stock and common stock warrants. The Company, pursuant to this shelf registration statement may, from time-to-time, offer for sale its senior unsecured debt for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions, development and redevelopment costs and (ii) managing the Company’s debt maturities. (See Footnote 13 of the Notes to Consolidated Financial Statements included in this Form 10-K.)

The Company’s supplemental indenture governing its medium term notes and senior notes contains the following covenants, all of which the Company is compliant with:

Covenant		Must Be		As of 12/31/12
Consolidated Indebtedness to Total Assets		<60%		38	%
Consolidated Secured Indebtedness to Total Assets		<40%		9	%
Consolidated Income Available for Debt Service to Maximum Annual Service Charge		>1.50x		4.2	x
Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness		>1.50x		2.8	x

For a full description of the various indenture covenants refer to the Indenture dated September 1, 1993, First Supplemental Indenture dated August 4, 1994, the Second Supplemental Indenture dated April 7, 1995, the Third Supplemental Indenture dated June 2, 2006, the Fifth Supplemental Indenture dated as of September 24, 2009, the Fifth Supplemental Indenture dated as of October 31, 2006 and First Supplemental Indenture dated October 31, 2006, as filed with the SEC. See Exhibits Index on page 38, for specific filing information.

During 2012, the Company (i) repaid the $17.0 million outstanding on its 5.98% medium-term notes, which matured in July 2012, (ii) repaid the $198.9 million outstanding on its 6.00% senior unsecured note, which matured in November 2012, (iii) assumed $185.3 million of individual non-recourse mortgage debt relating to the acquisition of seven operating properties, including an increase of $6.1 million associated with fair value debt adjustments, (iv) paid off $284.8 million of mortgage debt that encumbered 19 operating properties and (v) assigned five mortgages aggregating $17.1 million in connection with property dispositions.

During March 2012, the Company issued 16,000,000 Depositary Shares (the "Class I Depositary Shares"), each representing a one-thousandth fractional interest in a share of the Company's 6.00% Class I Cumulative Redeemable Preferred Stock, $1.00 par value per share (the "Class I Preferred Stock"). Dividends on the Class I Depositary Shares are cumulative and payable quarterly in arrears at the rate of 6.00% per annum based on the $25.00 per share initial offering price, or $1.50 per annum. The Class I Depositary Shares are redeemable, in whole or part, for cash on or after March 20, 2017, at the option of the Company, at a redemption price of $25.00 per depositary share, plus any accrued and unpaid dividends thereon. The Class I Depositary Shares are not convertible or exchangeable for any other property or securities of the Company. The net proceeds received from this offering of $387.2 million were used for general corporate purposes, including the reduction of borrowings outstanding under the Company’s revolving credit facility and the redemption of shares of the Company’s preferred stock.

During July 2012, the Company issued 9,000,000 Depositary Shares (the "Class J Depositary Shares"), each representing a one-thousandth fractional interest in a share of the Company's 5.50% Class J Cumulative Redeemable Preferred Stock, $1.00 par value per share (the "Class J Preferred Stock"). Dividends on the Class J Depositary Shares are cumulative and payable quarterly in arrears at the rate of 5.50% per annum based on the $25.00 per share initial offering price, or $1.375 per annum. The Class J Depositary Shares are redeemable, in whole or part, for cash on or after July 25, 2017, at the option of the Company, at a redemption price of $25.00 per depositary share, plus any accrued and unpaid dividends thereon. The Class J Depositary Shares are not convertible or exchangeable for any other property or securities of the Company. The net proceeds received from this offering of $217.8 million were used for the redemption of all the outstanding depositary shares representing the Company’s Class F preferred stock, which redemption occurred on August 15, 2012, as discussed below, with the remaining proceeds used towards the redemption of outstanding depositary shares representing the Company’s Class G preferred stock, which redemption occurred on October 10, 2012, as discussed below, and general corporate purposes.

On August 15, 2012, the Company redeemed of all of its outstanding 7,000,000 depositary shares of the Company’s 6.65% Class F Cumulative Redeemable Preferred Stock, $1.00 par value per share (the “Class F Preferred Stock”) for $175.0 million, before payment of accrued and unpaid dividends of $1.0 million. In connection with this redemption the Company recorded a charge of $6.2 million resulting from the difference between the redemption amount and the carrying amount of the Class F Preferred Stock on the Company’s Consolidated Balance Sheets in accordance with the FASB’s guidance on Distinguishing Liabilities from Equity. The $6.2 million was subtracted from net income to arrive at net income available to common shareholders and is used in the calculation of earnings per share for the year ended December 31, 2012.

On October 10, 2012, the Company redeemed all of its outstanding 18,400,000 depositary shares of the Company’s 7.75% Class G Cumulative Redeemable Preferred Stock, $1.00 par value per share (the “Class G Preferred Stock”) for $460.0 million, before payment of accrued and unpaid dividends of $8.5 million. In connection with this redemption the Company recorded a non-cash charge of $15.5 million resulting from the difference between the redemption amount and the carrying amount of the Class G Preferred Stock on the Company’s Consolidated Balance Sheets in accordance with the FASB’s guidance on Distinguishing Liabilities from Equity. The $15.5 million was subtracted from net income to arrive at net income available to common shareholders and is used in the calculation of earnings per share for the year ended December 31, 2012.

During November 2012, the Company issued 7,000,000 Depositary Shares (the "Class K Depositary Shares"), each representing a one-thousandth fractional interest in a share of the Company's 5.625% Class K Cumulative Redeemable Preferred Stock, $1.00 par value per share (the "Class K Preferred Stock"). Dividends on the Class K Depositary Shares are cumulative and payable quarterly in arrears at the rate of 5.625% per annum based on the $25.00 per share initial offering price, or $1.40625 per annum. The Class K Depositary Shares are redeemable, in whole or part, for cash on or after December 7, 2017, at the option of the Company, at a redemption price of $25.00 per depositary share, plus any accrued and unpaid dividends thereon. The Class K Depositary Shares are not convertible or exchangeable for any other property or securities of the Company. The net proceeds received from this offering of $169.1 million, after expenses, were used for general corporate purposes, including funding towards the repayment of maturing Senior Unsecured Notes.

The Company, from time to time, repurchases shares of its common stock in amounts that offset new issuances of common shares in connection with the exercise of stock options or the issuance of restricted stock awards. These share repurchases may occur in open market purchases, privately negotiated transactions or otherwise, subject to prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. During the year ended December 31, 2012, the Company repurchased 1.6 million shares of the Company’s common stock for $30.9 million, of which $22.6 million was provided to the Company from stock options exercised.

In addition to the public equity and debt markets as capital sources, the Company may, from time-to-time, obtain mortgage financing on selected properties and construction loans to partially fund the capital needs of its ground-up development projects. As of December 31, 2012, the Company had over 400 unencumbered property interests in its portfolio.

In connection with its intention to continue to qualify as a REIT for federal income tax purposes, the Company expects to continue paying regular dividends to its stockholders. These dividends will be paid from operating cash flows. The Company’s Board of Directors will continue to evaluate the Company’s dividend policy on a quarterly basis as they monitor sources of capital and evaluate the impact of the economy and capital markets availability on operating fundamentals. Since cash used to pay dividends reduces amounts available for capital investment, the Company generally intends to maintain a conservative dividend payout ratio, reserving such amounts as it considers necessary for the expansion and renovation of shopping centers in its portfolio, debt reduction, the acquisition of interests in new properties and other investments as suitable opportunities arise and such other factors as the Board of Directors considers appropriate. Cash dividends paid were $382.7 million in 2012, $353.8 million in 2011 and $307.0 million in 2010.

Although the Company receives substantially all of its rental payments on a monthly basis, it generally intends to continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution will be invested by the Company in short-term money market or other suitable instruments. The Company’s Board of Directors declared a quarterly cash dividend of $0.21 per common share payable to shareholders of record on January 2, 2013, which was paid on January 15, 2013. Additionally, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per common share payable to shareholders of record on April 3, 2013, which is scheduled to be paid on April 15, 2013.

The Company is subject to taxes on its activities in Canada, Mexico, Brazil, Chile, and Peru. During 2012, less than $0.1 million of withholding and transaction taxes were withheld from distributions related to foreign activities. In general, under local country law applicable to the structures the Company has in place and applicable treaties, the repatriation of cash to the Company from its subsidiaries and joint ventures in Canada, Mexico and Brazil generally are not subject to withholding tax. The Company does not anticipate the need to repatriate foreign funds from Chile, Peru or Brazil to provide for its cash flow needs in the U.S. and, as such, no significant withholding or transaction taxes are expected in the foreseeable future.

Contractual Obligations and Other Commitments

The Company has debt obligations relating to its revolving credit facility, MTNs, senior notes, mortgages and construction loans with maturities ranging from less than one year to 23 years. As of December 31, 2012, the Company’s total debt had a weighted average term to maturity of 3.4 years. In addition, the Company has non-cancelable operating leases pertaining to its shopping center portfolio. As of December 31, 2012, the Company has 47 shopping center properties that are subject to long-term ground leases where a third party owns and has leased the underlying land to the Company to construct and/or operate a shopping center. In addition, the Company has 10 non-cancelable operating leases pertaining to its retail store lease portfolio. The following table summarizes the Company’s debt maturities (excluding extension options and fair market value of debt adjustments aggregating $10.6 million) and obligations under non-cancelable operating leases as of December 31, 2012 (in millions):

		Payments due by period
Contractual Obligations:		2013				2014				2015				2016				2017				Thereafter				Total
Long-Term Debt-Principal(1)		$	659.7			$	900.7			$	731.2			$	553.1			$	468.9			$	871.1			$	4,184.7
Long-Term Debt-Interest(2)		$	197.8			$	152.8			$	131.6			$	96.9			$	67.3			$	107.2			$	753.6
Operating Leases:
Ground Leases		$	12.6			$	12.2			$	11.1			$	10.3			$	9.9			$	172.6			$	228.7
Retail Store Leases		$	2.3			$	1.7			$	1.3			$	1.0			$	0.5			$	0.1			$	6.9

(1) Maturities utilized do not reflect extension options, which range from one to five years.

(2) For loans which have interest at floating rates, future interest expense was calculated using the rate as of December 31, 2012.

The Company has accrued $16.9 million of non-current uncertain tax benefits and related interest under the provisions of the authoritative guidance that addresses accounting for income taxes, which are included in Other liabilities on the Company’s Consolidated Balance Sheets at December 31, 2012. These amounts are not included in the table above because a reasonably reliable estimate regarding the timing of settlements with the relevant tax authorities, if any, cannot be made.

The Company has $100.0 million of medium term notes, $175.0 million of unsecured notes, $201.3 million of Canadian unsecured notes, a $76.9 million Mexican term loan, $2.2 million of unsecured debt and $85.1 million of secured debt scheduled to mature in 2013. The Company anticipates satisfying these maturities with a combination of operating cash flows, its unsecured revolving credit facility, exercise of extension options, where available, and new debt issuances.

The Company has issued letters of credit in connection with completion and repayment guarantees for loans encumbering certain of the Company’s redevelopment projects and guarantee of payment related to the Company’s insurance program. As of December 31, 2012, these letters of credit aggregate $33.6 million.

On a select basis, the Company provides guarantees on interest bearing debt held within real estate joint ventures in which the Company has noncontrolling ownership interests. The Company is often provided with a back-stop guarantee from its partners. The Company had the following outstanding guarantees as of December 31, 2012 (amounts in millions):

Name of Joint Venture		Amount of Guarantee			Interest rate		Maturity, with extensions			Terms	Type of debt
InTown Suites Management, Inc. (1)		$	145.2		LIBOR plus 1.15%			2015		25% partner back-stop	Unsecured credit facility
Hillsborough		$	2.8		LIBOR plus 1.05%			2013		Jointly and severally with partner	Promissory note
Victoriaville		$	5.1		3.92%			2020		Jointly and severally with partner	Promissory note

(1) During October 2012, a purchase and sale agreement was executed to sell the InTown Suites company and related real estate assets for a gross sales price of $735 million, including $617 million of existing debt. The sale is contingent upon satisfactorily completing a due diligence process and other closing conditions, including lender approvals. The Company expects to complete this transaction in the first half of 2013. If the transaction is completed, the Company has agreed to maintain $145.2 million in preexisting guarantees of outstanding debt to be assumed by the buyer.

In connection with the construction of its development projects and related infrastructure, certain public agencies require posting of performance and surety bonds to guarantee that the Company’s obligations are satisfied. These bonds expire upon the completion of the improvements and infrastructure. As of December 31, 2012, the Company had $20.7 million in performance and surety bonds outstanding.

Off-Balance Sheet Arrangements

Unconsolidated Real Estate Joint Ventures

The Company has investments in various unconsolidated real estate joint ventures with varying structures. These joint ventures primarily operate shopping center properties or are established for development projects. Such arrangements are generally with third-party institutional investors, local developers and individuals. The properties owned by the joint ventures are primarily financed with individual non-recourse mortgage loans, however, the Company, on a selective basis, obtains unsecured financing for certain joint ventures. These unsecured financings are guaranteed by the Company with guarantees from the joint venture partners for their proportionate amounts of any guaranty payment the Company is obligated to make (see guarantee table above). Non-recourse mortgage debt is generally defined as debt whereby the lenders’ sole recourse with respect to borrower defaults is limited to the value of the property collateralized by the mortgage. The lender generally does not have recourse against any other assets owned by the borrower or any of the constituent members of the borrower, except for certain specified exceptions listed in the particular loan documents (See Footnote 8 of the Notes to Consolidated Financial Statements included in this Form 10-K). These investments include the following joint ventures:

Venture		Kimco Ownership Interest				Number of Properties				Total GLA (in thousands)				Non-Recourse Mortgage Payable (in millions)				Recourse Notes Payable (in millions)				Number of Encumbered Properties				Average Interest Rate				Weighted Average Term (months)
KimPru (c)			15.0	%			61				10,694			$	1,010.2			$	-				41				5.54	%			44.5
RioCan Venture (k)			50.0	%			45				9,307			$	923.2			$	-				37				5.16	%			41.2
KIR (d)			45.0	%			58				12,417			$	914.6			$	-				43				5.22	%			78.6
KUBS (e)			17.9	%(a)			40				5,741			$	691.9			$	-				40				5.40	%			39.1
InTown Suites (j)		(l)					138				N/A			$	469.2			$	145.2	(b)			138				4.46	%			46.1
BIG Shopping Centers (f)			37.7	%(a)			22				3,627			$	443.8			$	-				18				5.52	%			45.5
SEB Immobilien (h)			15.0	%			13				1,800			$	243.8			$	-				13				5.11	%			55.3
CPP (g)			55.0	%			6				2,424			$	141.5			$	-				3				5.19	%			31.0
Kimco Income Fund (i)			15.2	%			12				1,522			$	161.4			$	-				12				5.45	%			20.7

(a)	Ownership % is a blended rate.
(b)	See Contractual Obligations and Other Commitments regarding guarantees by the Company and its joint venture partners.
(c)	Represents the Company’s joint ventures with Prudential Real Estate Investors.
(d)	Represents the Kimco Income Operating Partnership, L.P., formed in 1998.
(e)	Represents the Company’s joint ventures with UBS Wealth Management North American Property Fund Limited.
(f)	Represents the Company’s joint ventures with BIG Shopping Centers (TLV:BIG), an Israeli public company.
(g)	Represents the Company’s joint ventures with The Canadian Pension Plan Investment Board (CPPIB).
(h)	Represents the Company’s joint ventures with SEB Immobilien Investment GmbH.
(i)	Represents the Kimco Income Fund, formed in 2004.
(j)	Represents the Company’s joint ventures with Westmont Hospitality Group.
(k)	Represents the Company’s joint ventures with RioCan Real Estate Investment Trust.
(l)	The Company’s share of this investment is subject to fluctuation and is dependent upon property cash flows.

The Company has various other unconsolidated real estate joint ventures with varying structures. As of December 31, 2012, these other unconsolidated joint ventures had individual non-recourse mortgage loans aggregating $1.9 billion and unsecured notes payable aggregating $2.8 million. The aggregate debt as of December 31, 2012, of all of the Company’s unconsolidated real estate joint ventures is $7.1 billion, of which the Company’s proportionate share of this debt is $2.8 billion. As of December 31, 2012, these loans had scheduled maturities ranging from one month to 10 years and bear interest at rates ranging from 1.21% to 10.50%. Approximately $570.6 million of the aggregate outstanding loan balance matures in 2013, of which the Company’s proportionate share is $274.1 million. These maturing loans are anticipated to be repaid with operating cash flows, debt refinancing and partner capital contributions, as deemed appropriate. (See Footnote 8 of the Notes to Consolidated Financial Statements included in this Form 10-K).

Other Real Estate Investments

The Company previously provided capital to owners and developers of real estate properties through its Preferred Equity program. The Company accounts for its preferred equity investments under the equity method of accounting. As of December 31, 2012, the Company’s net investment under the Preferred Equity Program was $157.2 million relating to 107 properties. As of December 31, 2012, these preferred equity investment properties had individual non-recourse mortgage loans aggregating $694.3 million. Due to the Company’s preferred position in these investments, the Company’s share of each investment is subject to fluctuation and is dependent upon property cash flows. The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its invested capital.

Additionally, during July 2007, the Company invested $81.7 million of preferred equity capital in a portfolio comprised of 403 net leased properties which are divided into 30 master leased pools with each pool leased to individual corporate operators. These properties consist of a diverse array of free-standing restaurants, fast food restaurants, convenience and auto parts stores. As of December 31, 2012, the remaining 397 properties were encumbered by third party loans aggregating $358.9 million, not including $63.7 million in net fair market value of debt adjustments, with interest rates ranging from 5.08% to 10.47%, a weighted average interest rate of 9.3% and maturities ranging from one to 10 years.

At December 31, 2012, the Company had a 90% equity participation interest in an existing leveraged lease of 11 properties, which is reported as a net investment in leveraged lease in accordance with the FASB’s Lease guidance. The properties are leased under a long-term bond-type net lease whose primary term expires in 2016, with the lessee having certain renewal option rights. These 11 properties were encumbered by third-party non-recourse debt of $21.1 million that is scheduled to fully amortize during the primary term of the lease from a portion of the periodic net rents receivable under the net lease. As an equity participant in the leveraged lease, the Company has no recourse obligation for principal or interest payments on the debt, which is collateralized by a first mortgage lien on the properties and collateral assignment of the lease. Accordingly, this debt has been offset against the related net rental receivable under the lease.

Funds from Operations

Funds From Operations (“FFO”) is a supplemental non-GAAP measure utilized to evaluate the operating performance of real estate companies. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income/(loss) attributable to common shareholders computed in accordance with generally accepted accounting principles (“GAAP”), excluding (i) gains or losses from sales of operating real estate assets and (ii) extraordinary items, plus (iii) depreciation and amortization of operating properties and (iv) impairment of depreciable real estate and in substance real estate equity investments and (v) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from operations on the same basis.

The Company presents FFO as it considers it an important supplemental measure of our operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting results. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.

The Company also presents FFO as adjusted as an additional supplemental measure as it believes it is more reflective of the Company’s core operating performance. The Company believes FFO as adjusted provides investors and analysts an additional measure in comparing the Company’s performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. FFO as adjusted is generally calculated by the Company as FFO excluding certain transactional income and expenses and non-operating impairments which management believes are not reflective of the results within the Company’s operating real estate portfolio.

FFO is a supplemental non-GAAP financial measure of real estate companies’ operating performances, which does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative for net income as a measure of liquidity. Our method of calculating FFO and FFO as adjusted may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The Company’s reconciliation of net income available to common shareholders to FFO and FFO as adjusted for the three months and years ended December 31, 2012 and 2011 is as follows (in thousands, except per share data):

		Three Months Ended								Year Ended
		December 31,								December 31,
		2012				2011				2012				2011
Net income available to common shareholders		$	59,231			$	31,556			$	172,673			$	109,688
Gain on disposition of operating property, net of noncontrolling interests			(49,023	)			(11,398	)			(84,828	)			(19,444	)
Gain on disposition of joint venture operating properties			(4,914	)			(819	)			(27,927	)			(4,050	)
Depreciation and amortization - real estate related			63,246				60,561				257,278				246,746
Depreciation and amortization - real estate joint ventures, net of noncontrolling interests			32,228				34,529				133,734				138,482
Remeasurement of derivative instrument			-				-				-				4,287
Impairments of operating properties, net of tax and noncontrolling interests			26,440				21,014				59,510				42,043
FFO			127,208				135,443				510,440				517,752
Transactional (income)/charges:
Promote income from other real estate investments			(10,996	)			(9,715	)			(20,746	)			(9,829	)
Promote income from real estate joint ventures			(1,151	)			(2,403	)			(5,072	)			(2,675	)
Gains from development/land sales, net of tax			(14	)			(3,699	)			(8,309	)			(5,317	)
Income from other real estate investments			-				-				-				(1,311	)
Foreign currency exchange gains			-				-				-				(839	)
Acquisition costs			701				1,143				9,160				5,466
Charge off of assets relating to sales			3,785				1,032				3,785				1,032
Executive severance costs			-				-				2,472				-
Excess distribution from a cost method investment			(398	)			(287	)			(398	)			(13,116	)
Gain on sale of marketable securities			-				(778	)			-				(4,895	)
Impairments on other investments, net of tax and noncontrolling interest			-				3,002				-				4,463
Preferred stock redemption costs			15,490				-				21,703				-
Other expense/(income), net			143				227				1,166				(951	)
Total transactional charges/(income), net			7,560				(11,932	)			3,761				(27,972	)
FFO as adjusted		$	134,768			$	123,511			$	514,201			$	489,780
Weighted average shares outstanding for FFO calculations:
Basic			406,345				406,554				405,997				406,530
Units			1,522				1,532				1,455				1,528
Dilutive effect of equity awards			1,829				787				2,106				1,140
Diluted (1)			409,696				408,873				409,558				409,198
FFO per common share – basic		$	0.31			$	0.33			$	1.26			$	1.27
FFO per common share – diluted (1)		$	0.31			$	0.33			$	1.25			$	1.27
FFO as adjusted per common share – basic		$	0.33			$	0.30			$	1.26			$	1.20
FFO as adjusted per common share – diluted (1)		$	0.33			$	0.30			$	1.26			$	1.20

	(1)	For the three and twelve months ended December 31, 2012 and 2011, the effect of certain convertible units would have an anti-dilutive effect upon the calculation of Income from continuing operations per share. Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per share calculations.

Same Property Net Operating Income

Same Property Net Operating Income (“Same Property NOI”) is a supplemental non-GAAP financial measure of real estate companies’ operating performance. Same Property NOI is considered by management to be an important performance measure of the Company’s operations and management believes that it is helpful to investors as a measure of the Company’s operating performance because it includes only the net operating income of properties that have been owned for the entire current and prior year reporting periods and excludes properties under development and pending stabilization. As such, Same Property NOI assists in eliminating disparities in net income due to the development, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent performance measure for the comparison of the Company's properties.

Same Property NOI is calculated using revenues from rental properties (excluding straight-line rents, lease termination fees and above/below market rents) less operating and maintenance expense, real estate taxes and rent expense, plus the Company’s proportionate share of Same Property NOI from unconsolidated real estate joint ventures, calculated on the same basis. Same Property NOI includes all properties that are owned for the entire current and prior year reporting periods and excludes properties under development and properties pending stabilization. Properties are deemed stabilized at the earlier of (i) reaching 90% leased or (ii) one year following a projects inclusion in operating real estate (two years for Latin American properties).

Same Property NOI is a supplemental non-GAAP financial measure of real estate companies’ operating performance and should not be considered an alternative to net income in accordance with GAAP or as a measure of liquidity. Our method of calculating Same Property NOI may differ from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The following is a reconciliation of the Company’s Income from continuing operations to Same Property NOI (in thousands):

		Three Months Ended December 31,								Year Ended December 31,
		2012				2011				2012				2011
Income from continuing operations		$	45,887			$	44,961			$	211,978			$	158,977
Adjustments:
Management and other fee income			(10,469	)			(8,494	)			(37,522	)			(35,320	)
General and administrative expenses			29,166				28,689				124,480				118,873
Impairment of property carrying values			18,463				5,320				37,111				13,077
Depreciation and amortization			64,070				58,307				249,493				231,712
Other income			54,601				42,883				223,441				188,468
(Benefit)/provision for income taxes, net			(802	)			6,968				3,939				21,330
Gains on change in control of interests			(1,399	)			-				(15,555	)			(569	)
Equity in income of other real estate investments, net			(18,057	)			(16,690	)			(53,397	)			(51,813	)
Non same property net operating income			(38,057	)			(32,434	)			(171,115	)			(128,991	)
Non operational expense from joint ventures			77,357				84,797				289,234				328,804
Net operating income from noncontrolling interests			(2,239	)			(2,971	)			(10,255	)			(11,565	)
Same Property NOI		$	218,521			$	211,336			$	851,832			$	832,983

Same Property NOI increased by $7.2 million or 3.4% for the three months ended December 31, 2012, as compared to the corresponding period in 2011. This increase is primarily the result of (i) an increase of $4.7 million related to lease-up and rent commencements, (ii) an increase of $2.0 million in other property and ancillary income, and (iii) the impact from changes in foreign currency exchange rates of $0.5 million.

Same Property NOI increased by $18.8 million or 2.3% for the year ended December 31, 2012, as compared to the corresponding period in 2011. This increase is primarily the result of (i) an increase of $15.8 million related to lease-up and rent commencements and (ii) an increase of $7.8 million in other property and ancillary income, partially offset by, (iii) the negative impact from changes in foreign currency exchange rates of $4.8 million.

Effects of Inflation

Many of the Company's leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive payment of additional rent calculated as a percentage of tenants' gross sales above pre-determined thresholds, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses often include increases based upon changes in the consumer price index or similar inflation indices. In addition, many of the Company's leases are for terms of less than 10 years, which permits the Company to seek to increase rents to market rates upon renewal. Most of the Company's leases require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. The Company periodically evaluates its exposure to short-term interest rates and foreign currency exchange rates and will, from time-to-time, enter into interest rate protection agreements and/or foreign currency hedge agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate debt and fluctuations in foreign currency exchange rates.

Market and Economic Conditions; Real Estate and Retail Shopping Sector

In the U.S., economic and market conditions have improved. Credit conditions have continued to allow increased access and availability to secured mortgage debt and the unsecured bond and equity markets. However, there remains concern over high unemployment rates in the U.S. and concerns over uncertain economic conditions in Europe. These conditions have contributed to slow growth in the U.S. and international economies.

Historically, real estate has been subject to a wide range of cyclical economic conditions that affect various real estate markets and geographic regions with differing intensities and at different times. Different regions of the United States have and may continue to experience varying degrees of economic growth or distress. Adverse changes in general or local economic conditions could result in the inability of some tenants of the Company to meet their lease obligations and could otherwise adversely affect the Company’s ability to attract or retain tenants. The Company’s shopping centers are typically anchored by two or more national tenants who generally offer day-to-day necessities, rather than high-priced luxury items. In addition, the Company seeks to reduce its operating and leasing risks through ownership of a portfolio of properties with a diverse geographic composition and tenant base.

The Company monitors potential credit issues of its tenants, and analyzes the possible effects to the financial statements of the Company and its unconsolidated joint ventures. In addition to the collectability assessment of outstanding accounts receivable, the Company evaluates the related real estate for recoverability as well as any tenant related deferred charges for recoverability, which may include straight-line rents, deferred lease costs, tenant improvements, tenant inducements and intangible assets.

The retail shopping sector overall has continued to steadily improve during 2012, however select markets, which experienced rapid expansion prior to the economic recession, such as Nevada, Arizona and select portions of California are experiencing slower growth. If growth in the retail shopping sector does not continue, the Company may experience tenants delaying lease commencements or declining to extend or renew leases upon expiration. These conditions also have forced some weaker retailers, in some cases, to declare bankruptcy and/or close stores. Certain retailers have announced store closings even though they have not filed for bankruptcy protection. However, any of these particular store closings affecting the Company often represent a small percentage of the Company’s overall gross leasable area and the Company does not currently expect store closings to have a material adverse effect on the Company’s overall performance.

New Accounting Pronouncements

See Footnote 1 of the Company’s Consolidated Financial Statements included in this Form 10-K.