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

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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, 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, 2014, the Company had interests in 754 shopping center properties (the “Combined Shopping Center Portfolio”), aggregating 109.5 million square feet of gross leasable area (“GLA”) and 533 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 11.7 million square feet of GLA, for a grand total of 1,287 properties aggregating 121.2 million square feet of GLA, located in 41 states, Puerto Rico, Canada, Mexico, and Chile.

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 strategy is to be the premier owner and operator of neighborhood and community shopping centers through investments primarily in the U.S. To achieve this strategy the Company is (i) striving to transform the quality of its portfolio by disposing of lesser quality assets and acquiring larger higher quality properties in key markets identified by the Company, (ii) simplifying its business by exiting Mexico and South America and reducing the number of joint venture investments and (iii) pursuing redevelopment opportunities within its portfolio to increase overall value and certain development opportunities for long-term investment. The Company has an active capital recycling program and during the second quarter of 2014, the Company implemented a plan to accelerate the disposition of certain non-strategic U.S. properties. This plan effectively shortened the Company’s anticipated hold period for these properties and as such caused the Company to recognize impairment charges on certain consolidated operating properties. If the Company accepts sales prices for these assets that are less than their net carrying values, the Company would be required to take additional impairment charges. In order to execute the Company’s strategy, the Company intends 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 the U.S. The Company also has an institutional management business with domestic and foreign institutional partners for the purpose of investing in neighborhood and community shopping centers. In an effort to further its simplification strategy, the Company is actively pursuing opportunities to reduce its institutional management business through partner buy-outs, property acquisitions from institutional joint ventures and/or third party property sales.

The following highlights the Company’s significant transactions, events and results that occurred during the year ended December 31, 2014:

Portfolio Information:

	●	Net income available to common shareholders increased by $187.7 million to $365.7 million for the year ended December 31, 2014, as compared to $178.0 million for the corresponding period in 2013.

	●	Funds from operations (“FFO”) increased from $1.35 per diluted share for the year ended December 31, 2013, to $1.45 per diluted share for the year ended December 31, 2014 (see additional disclosure on FFO beginning on page 31).

	●	FFO as adjusted increased from $1.33 per diluted share for the year ended December 31, 2013, to $1.40 per diluted share for the year ended December 31, 2014 (see additional disclosure on FFO beginning on page 31).

	●	Combined Same Property net operating income (“NOI”) increased 2.5% for the year ended December 31, 2014, as compared to the corresponding period in 2013; excluding the negative impact of foreign currency fluctuation, this increase would have been 3.3% (see additional disclosure on NOI beginning on page 32).

	●	Occupancy rose from 94.6% at December 31, 2013, to 95.6% at December 31, 2014 in the Combined Shopping Center Portfolio.

	●	Occupancy rose from 94.9% at December 31, 2013, to 95.7% at December 31, 2014 for the U.S. combined shopping center portfolio.

	●	Generated U.S. cash-basis leasing spreads of 8.8%; new leases increased 19.5% and renewals/options increased 6.3%.

	●	Executed 2,124 leases, renewals and options totaling approximately 9.8 million square feet in the Combined Shopping Center Portfolio.

Acquisition Activity (see Footnotes 3 and 7 of the Notes to Consolidated Financial Statements included in this Form 10-K):

	●	Acquired 63 shopping center properties and five outparcels comprising an aggregate 7.1 million square feet of GLA, for an aggregate purchase price of $1.4 billion including the assumption of $702.6 million of non-recourse mortgage debt encumbering 53 of the properties. The Company acquired 34 of these properties for an aggregate sales price of $1.0 billion from joint ventures in which the Company held noncontrolling ownership interests. The Company evaluated these transactions pursuant to the Financial Accounting Statements Boards (“FASB”) Consolidation guidance. As such, the Company recognized an aggregate gain of $107.2 million from the fair value adjustment associated with its original ownership due to a change in control.

	●	Additionally, during the year ended December 31, 2014, the Company acquired $53.5 million in land related to three development projects which will be held as long-term investments. The Company anticipates completing these projects over the next four years.

U.S. Disposition Activity (see Footnotes 4, 5, and 6 of the Notes to Consolidated Financial Statements included in this Form 10-K):

	●	During 2014, the Company disposed of 63 operating properties, in separate transactions, for an aggregate sales price of $535.8 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $166.6 million, before income taxes of $8.7 million, and aggregate impairment charges of $60.4 million, before income tax benefits of $2.0 million.

Latin America Disposition Activity (see Footnotes 4, 5, 6 and 7 of Notes to the Consolidated Financial Statements included in this Form 10-K):

	●	During 2014, the Company sold 27 consolidated properties in its Latin American portfolio for an aggregate sales price of $297.7 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $33.4 million, after income taxes of $3.3 million and aggregate impairment charges of $24.7 million.

	●	During 2014, joint ventures in which the Company held noncontrolling interests sold 14 operating properties located throughout Mexico for $324.5 million. These transactions resulted in an aggregate net gain to the Company of $40.0 million, after income tax, and aggregate impairment charges of $0.9 million.

	●	These transactions contributed to the Company’s substantial liquidation of its investment in Mexico and Peru during the fourth quarter, which resulted in the release of a cumulative foreign currency translation loss of $134.4 million, after noncontrolling interests of $5.8 million. This loss has been recorded on the Company’s Consolidated Statements of Income as follows: (i) $92.9 million is included in Impairment/loss on operating properties, net of tax, within Discontinued operations (ii) $47.3 million is included in Equity in income of joint ventures, net and (iii) $5.8 million is included in Net income attributable to noncontrolling interest.

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

	●	During March 2014, the Company established a new $1.75 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which is scheduled to expire in March 2018, with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2019. The Credit Facility, which can be increased to $2.25 billion through an accordion feature, accrues interest at a rate of LIBOR plus 92.5 basis points on drawn funds.

	●	During 2014, the Company issued $500.0 million of 7-year Senior Unsecured Notes at an interest rate of 3.20% payable semi-annually in arrears which are scheduled to mature in May 2021. Net proceeds were used for general corporate purposes including reducing borrowings under the Credit Facility and repayment of maturing debt.

	●	Also during 2014, the Company repaid (i) its $100.0 million 5.95% senior unsecured notes, which matured in June 2014 and (ii) its remaining $194.6 million 4.82% senior unsecured notes, which also matured in June 2014.

	●	The Company repaid its 1.0 billion Mexican peso (“MXN”) (USD $76.3 million) term loan which was scheduled to mature in March 2018, and bore interest at a rate equal to TIIE (Equilibrium Interbank Interest Rate) plus 1.35% during September 2014.

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 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, where applicable), assumed debt and redeemable units issued at the date of acquisition, based on evaluation of information and estimates available at that date. 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, if material, 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		Terms of leases or useful
(including certain identified intangible assets)		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, changes in anticipated holding period 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 anticipated hold period 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 joint venture 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.

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 basis. 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 positive and negative 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 21 of the Notes to Consolidated Financial Statements included in this Form 10-K).

Results of Operations

Comparison 20__14 to 20__13

	2014		2013		Increase
	(amounts in millions)

Revenues from rental properties (1)	$	958.9	$	825.2	$	133.7	16.2%
Rental property expenses: (2)
Rent	$	14.3	$	13.3	$	1.0	7.5%
Real estate taxes		124.7		108.7		16.0	14.7%
Operating and maintenance		119.7		99.4		20.3	20.4%
	$	258.7	$	221.4	$	37.3	16.8%
Depreciation and amortization (3)	$	258.1	$	224.7	$	33.4	14.9%

(1)

Revenues from rental property increased primarily from the combined effect of (i) the acquisition of operating properties during 2014 and 2013, providing incremental revenues for the year ended December 31, 2014, of $110.1 million, as compared to the corresponding period in 2013 and (ii) an overall increase in the consolidated shopping center portfolio occupancy to 95.7% at December 31, 2014, as compared to 94.0% at December 31, 2013, the completion of certain redevelopment projects, tenant buyouts and net growth in the current portfolio, providing incremental revenues for the year ended December 31, 2014, of $23.6 million, as compared to the corresponding period in 2013.

(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, 2014, as compared to the corresponding period in 2013, primarily due to acquisitions of properties during 2014 and 2013, resulting in (i) an increase in real estate taxes of $16.0 million, (ii) an increase in repairs and maintenance costs of $6.8 million, (iii) an increase in snow removal costs of $3.4 million, (iv) an increase in property services of $3.7 million, (v) an increase in utilities expense of $1.8 million and (vi) an increase in insurance expense of $3.9 million, due to an increase in insurance claims.

(3)	Depreciation and amortization increased for the year ended December 31, 2014, as compared to the corresponding period in 2013, primarily due to operating property acquisitions during 2014 and 2013.

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 decreased $5.3 million to $122.2 million for the year ended December 31, 2014, as compared to $127.5 million for the corresponding period in 2013. This decrease is primarily due to a decrease in professional fees of $3.4 million in connection with the Company’s response to a subpoena from the Enforcement Division of the SEC and a parallel investigation by the DOJ, in connection with the investigation of Wal-Mart Stores, Inc. with respect to the Foreign Corrupt Practices Act (see Item 3) and a decrease in personnel related costs of $1.8 million for the year ended December 31, 2014, as compared to the corresponding period in 2013.

During the year ended December 31, 2014, the Company recognized impairment charges of $217.8 million, of which $178.0 million, before income tax benefits of $1.7 million, is included in discontinued operations. These impairment charges consist of (i) $118.4 million related to adjustments to property carrying values, (ii) the release of a cumulative foreign currency translation loss of $92.9 million relating to the substantial liquidation of the Company’s investment in Mexico, (iii) $4.8 million related to a cost method investment and (iv) $1.6 million related to a preferred equity investment. The adjustments to property carrying values were recognized in connection with the Company’s efforts to market certain properties and management’s assessment as to the likelihood and timing of such potential transactions and the anticipated hold period for such properties. During the second quarter ended June 30, 2014, the Company implemented a plan to accelerate its disposition of certain properties. This plan effectively shortened the Company’s anticipated hold period for these properties and as a result the Company recognized impairment charges on various operating properties. Certain of the calculations to determine fair value utilized unobservable inputs and as such are classified as Level 3 of the fair value hierarchy. For additional disclosure, see Footnote 15 of the Notes to Consolidated Financial Statements included in this Form 10-K.

During the year ended December 31, 2013, the Company recognized impairment charges of $190.2 million of which $158.0 million, before noncontrolling interests and income tax, is included in discontinued operations. These impairment charges consist of (i) $175.6 million related to adjustments to property carrying values, (ii) $10.4 million related to a cost method investment, (iii) $1.0 million related to certain joint venture investments and (iv) $3.2 million related to a preferred equity investment. Certain of the calculations to determine fair value utilized unobservable inputs and as such are classified as Level 3 of the fair value hierarchy. For additional disclosure, see Footnote 15 of the Notes to Consolidated Financial Statements included in this Form 10-K.

Interest, dividends and other investment income decreased $15.8 million to $1.0 million for the year ended December 31, 2014, as compared to $16.8 million for the corresponding period in 2013. This decrease is primarily due to (i) a decrease in realized gains of $12.1 million resulting from the sale of certain marketable securities during the year ended December 31, 2013, (ii) a decrease in excess cash distributions related to cost method investments of $2.8 million for the year ended December 31, 2013 and (iii) a decrease in dividend income of $1.2 million resulting from the sale of certain marketable securities during the year ended December 31, 2013.

Other (expense)/income, net changed $9.7 million to an expense of $8.5 million for the year ended December 31, 2014, as compared to income of $1.2 million for the corresponding period in 2013. This change is primarily due to a decrease in gains from land sales of $8.0 million and an increase in acquisition related costs of $1.4 million related to an increase in acquisitions during 2014 as compared to 2013.

Interest expense decreased $8.4 million to $203.8 million for the year ended December 31, 2014, as compared to $212.2 million for the year ended December 31, 2013. This decrease is primarily related to lower implied interest rates and reduced borrowing levels during 2014, as compared to 2013.

Provision for income taxes, net decreased $10.3 million to $22.4 million for the year ended December 31, 2014, as compared to $32.7 million for the corresponding period in 2013. This change is primarily due to (i) a decrease in foreign tax expense of $9.5 million primarily relating to the sale of certain unconsolidated properties during 2013 within the Company’s Latin American portfolio which were subject to foreign taxes at a consolidated reporting entity level offset by an increase in other foreign uncertain tax positions of $5.5 million, (ii) a decrease in tax provision of $9.1 million relating to a change in control gain recognized during the year ended December 31, 2013, (iii) a decrease in tax provision of $3.4 million related to gains on land sales during 2013, and (iv) a decrease in tax provision of $2.4 million related to gains on sale of certain marketable securities during 2013, partially offset by (v) a partial release of the deferred tax valuation allowance of $8.7 million during the year ended December 31, 2013 related to the Company’s FNC Realty Corp. (“FNC”) portfolio based on the Company’s estimated future earnings of FNC and (vi) a decrease in tax benefit of $4.3 million relating to equity losses recognized in connection with the Company’s Albertson’s investment.

Equity in income of joint ventures, net decreased $49.1 million to $159.6 million for the year ended December 31, 2014, as compared to $208.7 million for the corresponding period in 2013. This decrease is primarily the result of (i) the release of a cumulative foreign currency translation loss of $47.3 million relating to the substantial liquidation of the Company’s investment in Mexico, (ii) a decrease in gains of $21.7 million resulting from the sale of properties within various joint venture investments and interests in joint ventures primarily located in Latin America during 2013, (iii) a decrease in equity in income of $1.4 million due to the sale of the InTown portfolio in 2013 and (iv) a decrease of equity in income of $7.5 million related to the sale of various joint ventures within the Company’s Latin American portfolio during 2014, partially offset by (v) an increase in equity in income of $15.6 million primarily resulting from a cash distribution received in excess of the Company’s carrying basis during 2014, and (vi) a decrease in impairment charges of $8.2 million relating to various joint venture properties primarily located in Mexico taken during the year ended 2013, as compared to 2014.

During 2014, the Company acquired 34 properties from joint ventures in which the Company had noncontrolling interests. The Company recorded an aggregate net gain on change in control of interests of $107.2 million related to the fair value adjustment associated with its original ownership of these properties.

Equity in income from other real estate investments, net increased $6.9 million to $38.0 million for the year ended December 31, 2014, as compared to $31.1 million for the corresponding period in 2013. This increase is primarily due to an increase of $10.7 million in equity in income, resulting from lower net losses in the Albertson’s joint venture during the year ended December 31, 2014, as compared to the corresponding period in 2013, partially offset by a decrease of $5.8 million in earnings from the Company’s Preferred Equity Program primarily resulting from the sale of the Company’s interests in certain preferred equity investments during 2014 and 2013.

During 2014, the Company disposed of 90 operating properties, in separate transactions, for an aggregate sales price of $833.5 million, including 27 operating properties in Latin America. These transactions, which are included in Discontinued Operations on the Company’s Consolidated Statements of Income, resulted in (i) an aggregate gain of $203.3 million, before income taxes of $12.0 million (ii) the release of a cumulative foreign currency translation loss of $92.9 million relating to the substantial liquidation of the Company’s investment in Mexico and (iii) aggregate impairment charges of $85.1 million before income tax benefits of $1.7 million.

During 2013, the Company disposed of 36 operating properties and three out-parcels in separate transactions, for an aggregate sales price of $279.5 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $25.4 million and impairment charges of $61.9 million, before income tax.

Additionally, during 2013, the Company sold eight properties in its Latin American portfolio for an aggregate sales price of $115.4 million. These transactions, which are included in Discontinued operations in the Company’s Consolidated Statements of Income, resulted in an aggregate gain of $23.3 million, before income taxes, and aggregate impairment charges of $26.9 million (including the release of a cumulative foreign currency translation loss of $7.8 million associated with the sale of the Company’s interest in two properties within Brazil, which represents a full liquidation of the Company’s investment in Brazil), before income taxes.

Net income attributable to the Company increased $187.7 million to $424.0 million for the year ended December 31, 2014, as compared to $236.3 million for the corresponding period in 2013. On a diluted per share basis, net income attributable to the Company was $0.89 for 2014, as compared to net income of $0.43 for 2013. These changes are primarily attributable to (i) incremental earnings due to the acquisition of operating properties during 2014 and 2013 and increased profitability from the Company’s operating properties, (ii) an increase in gains on sale of operating properties, (iii) an increase in gain on change in control of interests, (iv) a decrease in tax provision relating to decreased gains on sales from joint venture properties during 2014, and (v) an increase in equity in income of other real estate investments, net, partially offset by, (vi), a decrease in equity in income of joint ventures, net, including the release of a cumulative foreign currency translation loss relating to the substantial liquidation of the Company’s Mexican Portfolio (vii) a decrease in interest, dividends and other investment income, (viii) a decrease in other income/(expense), net and (ix) an increase in impairment charges, including the release of a cumulative foreign currency translation loss relating to the substantial liquidation of the Company’s Mexican Portfolio, during the year ended December 31, 2014, as compared to the corresponding period in 2013.

Results of Operations

Comparison 20__13 to 20__12

	2013		2012		Increase
	(amounts in millions)

Revenues from rental properties (1)	$	825.2	$	755.9	$	69.3	9.2	%
Rental property expenses: (2)
Rent	$	13.3	$	12.7	$	0.6	4.7	%
Real estate taxes		108.7		101.8		6.9	6.8	%
Operating and maintenance		99.4		92.4		7.0	7.6	%
	$	221.4	$	206.9	$	14.5	7.0	%
Depreciation and amortization (3)	$	224.7	$	214.8	$	9.9	4.6	%

(1)

Revenues from rental properties increased primarily from the combined effect of (i) the acquisition of operating properties during 2013 and 2012, providing incremental revenues for the year ended December 31, 2013 of $46.5 million, as compared to the corresponding period in 2012, (ii) an overall increase in the consolidated shopping center portfolio occupancy to 94.0% at December 31, 2013, as compared to 93.4% at December 31, 2012 and the completion of certain development and redevelopment projects, tenant buyouts and net growth in the current portfolio, providing incremental revenues for the year ended December 31, 2013, of $22.7 million, as compared to the corresponding period in 2012, and (iii) an increase in revenues relating to the Company’s Latin America portfolio of $0.1 million for the year ended December 31, 2013, as compared to the corresponding period in 2012.

(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, 2013, as compared to the corresponding period in 2012, primarily due to acquisitions of properties during 2013 and 2012 resulting in (i) an increase in real estate taxes of $6.9 million, (ii) an increase in repairs and maintenance costs of $5.0 million, (iii) an increase in snow removal costs of $2.1 million, (iv) an increase in property services of $1.6 million and (v) an increase in utilities expense of $1.3 million, partially offset by (vi) a decrease in insurance expense of $3.0 million due to a decrease in insurance claims.

(3)	Depreciation and amortization increased for the year ended December 31, 2013, as compared to the corresponding period in 2012, primarily due to (i) operating property acquisitions during 2013 and 2012 and (ii) expensing of unamortized tenant costs related to tenant vacancies prior to their lease expiration, partially offset by (iii) certain operating property dispositions during 2013 and 2012.

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 $4.0 million to $127.5 million for the year ended December 31, 2013, as compared to $123.5 million for the corresponding period in 2012. This increase is primarily a result of an increase in professional fees related to the Company’s response to a subpoena from the Enforcement Division of the SEC and a parallel investigation by the DOJ, in connection with the investigation of Wal-Mart Stores, Inc. with respect to the Foreign Corrupt Practices Act (see Item 3).

During the year ended December 31, 2013, the Company recognized impairment charges of $190.2 million of which $158.0 million, before noncontrolling interests and income tax, is included in Discontinued operations. These impairment charges consist of (i) $175.6 million related to adjustments to property carrying values, (ii) $10.4 million related to a cost method investment, (iii) $1.0 million related to certain joint venture investments and (iv) $3.2 million related to a preferred equity investment. Certain of the calculations to determine fair value utilized unobservable inputs and as such are classified as Level 3 of the fair value hierarchy. For additional disclosure, see Footnote 15 of the Notes to Consolidated Financial Statements included in this Form 10-K.

During the year ended December 31, 2012, the Company recognized impairment charges related to adjustments to property carrying values of $59.6 million, of which $49.3 million, before income taxes and noncontrolling interests, is included in Discontinued operations. The Company’s estimated fair values for these assets were primarily based upon (i) estimated sales prices from third party offers relating to property carrying values and joint venture investments. The Company does not have access to the unobservable inputs used by the third parties to determine these estimated fair values. The discounted cash flows model includes all estimated cash inflows and outflows over a specified holding period. These cash flows were comprised of unobservable inputs which include forecasted revenues and expenses based upon market conditions and expectations for growth. Based on these inputs the Company determined that its valuation of these investments was classified within Level 3 of the fair value hierarchy. The property carrying value 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.

Mortgage financing income decreased $3.2 million to $4.3 million for the year ended December 31, 2013, as compared to $7.5 million for the corresponding period in 2012. This decrease is primarily due to a decrease in interest income resulting from the repayment of certain mortgage receivables during 2013 and 2012.

Interest, dividends and other investment income increased $14.8 million to $16.8 million for the year ended December 31, 2013, as compared to $2.0 million for the corresponding period in 2012. This increase is primarily due to an increase in realized gains of $12.1 million resulting from the sale of certain marketable securities during 2013 and an increase in cash distributions received in excess of basis related to cost method investments of $2.2 million for the year ended December 31, 2013, as compared to the corresponding period in 2012.

Other (expense)/income, net changed $8.1 million to $1.2 million of income for the year ended December 31, 2013, as compared to $6.9 million of an expense for the year ended December 31, 2012. This change is primarily due to (i) increases in gains on land sales of $8.2 million for year ended December 31, 2013, as compared to the corresponding period in 2012 and (ii) an increase in gains on foreign currency of $1.5 million relating to changes in foreign currency exchange rates, partially offset by (iii) an increase in other corporate expenses of $1.9 million for the year ended December 31, 2013, as compared to the corresponding period in 2012.

Interest expense decreased $11.5 million to $212.2 million for the year ended December 31, 2013, as compared to $223.7 million for the year ended December 31, 2012. This decrease is primarily related to lower interest rates on borrowings during 2013, as compared to 2012.

Provision for income taxes, net increased $17.1 million to $32.7 million for the year ended December 31, 2013, as compared to $15.6 million for the corresponding period in 2012. This increase is primarily due to (i) an increase in foreign taxes of $23.6 million primarily relating to the sale of the Company’s joint venture interest in a portfolio of 84 operating properties in Mexico, (ii) an increase in income tax expense of $9.1 million relating to a change in control gain resulting from the purchase of a partner’s noncontrolling joint venture interest, (iii) a tax provision of $6.0 million resulting from incremental earnings due to increased profitability from properties within the Company’s taxable REIT subsidiaries and (iv) a tax provision of $2.4 million related to gains on sale of certain marketable securities, partially offset by (v) a partial release of the deferred tax valuation allowance of $8.7 million related to FNC based on the Company’s estimated future earnings of FNC, (vi) an increase in income tax benefit of $7.9 million related to impairments taken during 2013, as compared to the 2012, and (vii) a decrease in tax provision of $9.4 million relating to a decrease in equity in income recognized in connection with the Albertson’s investment.

Equity in income of joint ventures, net increased $95.8 million to $208.7 million for the year ended December 31, 2013, as compared to $112.9 million for the corresponding period in 2012. This increase is primarily the result of (i) an increase in gains of $120.7 million resulting from the sale of properties within various joint venture investments, primarily located in Mexico during 2013, as compared to 2012, (ii) an increase in equity in income from three joint ventures of $4.0 million due to the Company’s increase in ownership percentage and (iii) incremental earnings due to increased profitability from properties within the Company’s joint venture program, partially offset by (iv) an increase in impairment charges of $18.4 million recognized against certain joint venture investment properties primarily located in Mexico, resulting from pending property sales, taken during 2013, as compared to 2012, (v) 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 during 2012 and (vi) a decrease in equity in income of $2.6 million from the Company’s InTown Suites investment during 2013, as compared to 2012, resulting from the sale of this investment in 2013.

During June 2013, the Company sold its unconsolidated investment in the InTown portfolio for a sales price of $735.0 million which included the assignment of $609.2 million in debt. This transaction resulted in a deferred gain to the Company of $21.7 million. The Company maintains its guarantee on a portion of the debt ($139.7 million as of December 31, 2013) assumed by the buyer. The guarantee is collateralized by the buyer’s ownership interest in the portfolio. The Company is entitled to a guarantee fee, for the initial term of the loan, which is scheduled to mature in December 2015. The guarantee fee is calculated based upon the difference between LIBOR plus 1.15% and 5.0% per annum multiplied by the outstanding amount of the loan. Additionally, the Company has entered into a commitment to provide financing up to the outstanding amount of the guaranteed portion of the loan for five years past the date of maturity. This commitment can be in the form of extensions with the current lender, a new lender or financing directly from the Company to the buyer. Due to this continued involvement, the Company deferred its gain until such time that the guarantee and commitment expire. On February 24, 2015, the outstanding debt balance of $139.7 million was fully repaid and as such, the Company was relieved of its related commitments and guarantee.

During 2013, the Company acquired four properties from joint ventures in which the Company had noncontrolling interests. The Company recorded an aggregate net gain on change in control of interests of $21.7 million related to the fair value adjustment associated with its original ownership of these properties. 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.

Equity in income from other real estate investments, net decreased $22.3 million to $31.1 million for the year ended December 31, 2013, as compared to $53.4 million for the corresponding period in 2012. This decrease is primarily due to a decrease of $23.5 million in equity in income from the Albertson’s joint venture primarily due to start-up costs associated with the purchase of additional Albertson’s stores from SuperValu Inc. during 2013, as compared to 2012.

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 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 decreased $29.8 million to $236.3 million for the year ended December 31, 2013, as compared to $266.1 million for the corresponding period in 2012. On a diluted per share basis, net income attributable to the Company was $0.43 for 2013, as compared to net income of $0.42 for 2012. These changes 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 2013 and 2012, (ii) 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 2013 and (iii) an increase in gains on sale of marketable securities during 2013, partially offset by (iv) an increase in impairment charges recognized during the year ended December 31, 2013, as compared to the corresponding period in 2012 and (v) a decrease in gains on sale of operating properties. 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.

Liquidity and Capital Resources

The Company’s capital resources include accessing the public debt and equity capital markets, mortgage and construction loan financing, borrowings under term loans 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,
	2014			2013			2012
Net cash flow provided by operating activities	$	629.3		$	570.0		$	479.1
Net cash flow provided by/(used for) investing activities	$	126.7		$	72.2		$	(51.0	)
Net cash flow used for financing activities	$	(717.5	)	$	(635.4	)	$	(399.1	)

Operating Activities

The Company anticipates that cash on hand, 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, 2014, was primarily attributable to (i) cash flow from the diverse portfolio of rental properties, (ii) the acquisition of operating properties during 2014 and 2013, (iii) new leasing, expansion and re-tenanting of core portfolio properties and (iv) operational distributions from the Company’s joint venture programs.

Cash flow provided by operating activities for the year ended December 31, 2014, was $629.3 million, as compared to $570.0 million for the comparable period in 2013. The change of $59.3 million is primarily attributable to (i) higher operational income from operating properties including properties acquired during 2014 and 2013 and (ii) changes in other operating assets and liabilities due to timing of payments, partially offset by (iii) changes in accounts payable and accrued expenses due to timing of payments and (iv) decreased operational distributions from joint ventures and other real estate investments.

Investing Activities

Cash flows provided by investing activities for the year ended December 31, 2014, was $126.7 million, as compared to cash flows provided by investing activities of $72.2 million for the comparable period in 2013. This increase of $54.5 million resulted primarily from (i) an increase in proceeds from the sale of operating properties of $226.9 million, (ii) a decrease in investments and advances to real estate joint ventures of $202.7 million, (iii) a decrease in investment in marketable securities of $22.1 million, (iv) a decrease in investment in other investments of $21.4 million and (v) a decrease in investment in other real estate investments of $19.2 million, partially offset by, (vi) a decrease in reimbursements of investments and advances to real estate joint ventures of $217.6 million, (vii) an increase in acquisitions of real estate under development of $65.7 million, (viii) an increase in investment/collection, net in mortgage loans receivable of $59.4 million, (ix) an increase in acquisition of operating real estate of $30.5 million, (x) a decrease in proceeds from sale/repayments of marketable securities of $22.6 million, (xi) an increase in improvements to operating real estate of $24.5 million, (xii) a decrease in reimbursements of investments and advances to other real estate investments of $13.8 million, and (xiii) a decrease in reimbursements of other investments of $9.2 million.

Acquisitions of Operating Real Estate

During the years ended December 31, 2014 and 2013, the Company expended $384.8 million, towards the acquisition of operating real estate properties. The Company’s strategy is to continue to transform its operating portfolio through its capital recycling program by acquiring what the Company believes are high quality U.S. retail properties and disposing of lesser quality assets. The Company anticipates acquiring approximately $1.1 billion to $1.3 billion of operating properties during 2015. The Company intends to fund these acquisitions with proceeds from property dispositions, cash flow from operating activities, assumption of mortgage debt, if applicable, increased borrowings through the Company's term loan and availability under the Company’s revolving line of credit.

Improvements to Operating Real Estate

During the years ended December 31, 2014 and 2013, the Company expended $131.8 million and $107.3 million, respectively, towards improvements to operating real estate. These amounts are made up of the following (in thousands):

	Year Ended December 31,
	2014		2013
Redevelopment/renovations	$	86,639	$	39,531
Tenant improvements/tenant allowances		40,060		57,473
Other		5,096		10,273
Total	$	131,795	$	107,277

Additionally, during the years ended December 31, 2014 and 2013, the Company capitalized interest of $2.4 million and $1.3 million, respectively, and capitalized payroll of $3.4 million and $1.6 million, respectively, in connection with the Company’s improvements to its operating real estate.

During the years ended December 31, 2014 and 2013, the Company capitalized personnel costs of $15.5 million and $15.2 million, respectively, to deferred leasing costs and $0.6 million and $1.3 million, respectively, to software development costs.

The Company has an ongoing program to redevelop and re-tenant its properties to maintain or enhance its competitive position in the marketplace. The Company is actively pursuing redevelopment opportunities within its operating portfolio which it believes will increase the overall value by bringing in new tenants and improving the assets’ value. The Company has identified three categories of redevelopment, (i) large scale redevelopment, which involves building new square footage, (ii) value creation redevelopment, which includes the subdivision of large anchor spaces into multiple tenant layouts, and (iii) creation of out-parcels and pads which are located in the front of the shopping center properties. The Company anticipates its capital commitment toward these redevelopment projects and re-tenanting efforts during 2015 will be approximately $200 million to $250 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.

Ground-Up Development

The Company is engaged in certain ground-up development projects, which will be held as long-term investments by the Company. As of December 31, 2014, the Company had in progress a total of four ground-up development projects located in the U.S. The Company anticipates its capital commitment toward these development projects during 2015 will be approximately $50 million to $100 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, 2014, the Company expended $93.8 million for investments and advances to real estate joint ventures, primarily related to the repayment of mortgage debt and received $222.6 million from reimbursements of investments and advances to real estate joint ventures, including refinancing of debt and sales of properties (see Footnote 7 of the Notes to Consolidated Financial Statements included in this Form 10-K).

Financing Activities

Cash flow used for financing activities for the year ended December 31, 2014, was $717.5 million, as compared to $635.4 million for the comparable period in 2013. This change of $82.1 million resulted primarily from (i) a decrease in proceeds from unsecured term loan/notes of $121.6 million, (ii) an increase in principal payments of $70.7 million, (iii) an increase in repayments/borrowings, net under the Company’s unsecured revolving credit facility of $36.6 million, (iv) an increase in dividends paid of $27.5 million, (v) a decrease in proceeds from mortgage loan financing of $20.3 million and (vi) a decrease in proceeds from issuance of stock of $6.3 million, partially offset by, (vii) a decrease in repayments under unsecured term loan/notes of $175.9 million and (viii) a decrease in redemption of noncontrolling interests of $28.8 million.

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 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 have been stable. The unsecured debt markets are functioning well and credit spreads are at manageable levels. The Company continues to assess 2015 and beyond to ensure the Company is prepared if credit market conditions weaken.

Debt maturities for 2015 consist of: $483.1 million of consolidated debt; $525.7 million of unconsolidated joint venture debt; and $58.7 million of preferred equity debt, assuming the utilization of extension options where available. The 2015 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, 2014, had $1.65 billion available). The 2015 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 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 $9.8 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.

During March 2014, the Company established a new $1.75 billion unsecured revolving credit facility (the “Credit Facility”) with a group of banks, which is scheduled to expire in March 2018 with two additional six-month options to extend the maturity date, at the Company’s discretion, to March 2019. This Credit Facility replaced the Company’s then existing $1.75 billion unsecured revolving credit facility which was scheduled to mature in October 2015. The Credit Facility, which can be increased to $2.25 billion through an accordion feature, accrues interest at a rate of LIBOR plus 92.5 basis points on drawn funds. In addition, the Credit Facility includes a $500 million sub-limit which provides the Company the opportunity to borrow in alternative currencies including 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, 2014, the Credit Facility had a balance of $100.0 million outstanding and $1.0 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 12/31/14
Total Indebtedness to Gross Asset Value (“GAV”)	<60%	35%
Total Priority Indebtedness to GAV	<35%	10%
Unencumbered Asset Net Operating Income to Total Unsecured Interest Expense	>1.75x	4.26x
Fixed Charge Total Adjusted EBITDA to Total Debt Service	>1.50x	3.34x

For a full description of the Credit Facility’s covenants refer to the Credit Agreement dated as of March 17, 2014, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 20, 2014.

The Company had a 1.0 billion Mexican peso (“MXN”) term loan which was scheduled to mature in March 2018 and bore interest at a rate equal to TIIE (Equilibrium Interbank Interest Rate) plus 1.35%. During September 2014, the Company repaid the MXN 1.0 billion (USD $76.3 million) term loan.

As of December 31, 2014, the Company had a $400.0 million unsecured term loan with a consortium of banks, which accrued interest at LIBOR plus 105 basis points (1.21% as of December 31, 2014). This term loan was 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. During January 2014, the Company exercised its option to extend the maturity date to April 17, 2015. During January 2015, the Company entered into a new $650.0 million unsecured term loan credit facility which is scheduled to mature in January 2017, with three one-year extension options at the Company’s discretion to January 2020, and accrues interest at a spread (currently 0.95%) to LIBOR or at the Company’s option at a base rate as defined per the agreement. The proceeds from the new $650 million term loan were used to repay the $400.0 million term loan and general corporate purposes. Pursuant to the terms of the term loan 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. The term loan covenants are similar to the Credit Facility covenants described above.

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 12 of the Notes to Consolidated Financial Statements included in this Form 10-K.)

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

Covenant	Must Be	As of 12/31/14
Consolidated Indebtedness to Total Assets	<60%	39%
Consolidated Secured Indebtedness to Total Assets	<40%	12%
Consolidated Income Available for Debt Service to Maximum Annual Service Charge	>1.50x	5.7x
Unencumbered Total Asset Value to Consolidated Unsecured Indebtedness	>1.50x	2.7x

For a full description of the various indenture covenants refer to the Indenture dated September 1, 1993; the First Supplemental Indenture dated August 4, 1994; the Second Supplemental Indenture dated April 7, 1995; the Third Supplemental Indenture dated June 2, 2006; the Fourth Supplemental Indenture dated April 26, 2007; the Fifth Supplemental Indenture dated as of September 24, 2009; the Sixth Supplemental Indenture dated as of May 23, 2013; the Seventh Supplemental Indenture dated as of April 24, 2014; the Indenture dated April 21, 2005; the First Supplemental Indenture dated June 2, 2006; the Second Supplemental Indenture dated August 16, 2006; the Third Supplemental Indenture dated April 13, 2010; the Fourth Supplemental Indenture dated July 22, 2013; the First Supplemental Indenture dated October 31, 2006; and the Fifth Supplemental Indenture dated as of October 31, 2006, as filed with the SEC. See the Exhibits Index for specific filing information.

During April 2014, the Company issued $500.0 million of 7-year Senior Unsecured Notes at an interest rate of 3.20% payable semi-annually in arrears which are scheduled to mature in May 2021. The Company used the net proceeds from the offering of $495.4 million, after deducting the underwriting discount and offering expenses, for general corporate purposes including reducing borrowings under the Credit Facility and repayment of maturing debt. In connection with this issuance, the Company entered into a seventh supplemental indenture which, among other things, revised, for all securities created on or after the date of the seventh supplemental indenture, the definition of Unencumbered Total Asset Value, used to determine compliance with certain covenants within the indenture.

During 2014, the Company repaid (i) its $100.0 million 5.95% senior unsecured notes, which matured in June 2014, and (ii) its remaining $194.6 million 4.82% senior unsecured notes, which also matured in June 2014.

Additionally, during 2014, the Company (i) assumed $742.0 million of individual non-recourse mortgage debt relating to the acquisition of 53 operating properties, including an increase of $39.4 million associated with fair value debt adjustments (ii) paid off $328.0 million of mortgage debt that encumbered 21 properties and (iii) obtained $15.7 million of individual non-recourse debt relating to one operating property.

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, 2014, the Company had over 370 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 $427.9 million in 2014, $400.4 million in 2013 and $382.7 million in 2012.

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. On October 28, 2014, the Board of Directors declared a quarterly cash dividend per common share of $0.24 payable to shareholders of record on January 2, 2015, which was paid on January 15, 2015. Additionally, on February 4, 2015, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per common share payable to shareholders of record on April 6, 2015, which is scheduled to be paid on April 15, 2015.

The Company is subject to taxes on its activities in Canada, Mexico, and Chile. 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 and Mexico generally are not subject to withholding tax. The Company does not anticipate the need to repatriate foreign funds from Chile 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. The Company will be subject to withholding taxes in Chile on the distribution of any proceeds from sale transactions. The Company is subject to and also includes in its tax provision non-U.S. income taxes on certain investments located in jurisdictions outside the U.S. These investments are held by the Company at the REIT level and not in the Company’s taxable REIT subsidiary. Accordingly, the Company does not expect a U.S. income tax impact associated with the repatriation of undistributed earnings from the Company’s foreign subsidiaries.

Contractual Obligations and Other Commitments

The Company has debt obligations relating to its revolving credit facility, term loan, MTNs, senior notes and mortgages with maturities ranging from less than one year to 20 years. As of December 31, 2014, the Company’s total debt had a weighted average term to maturity of 3.7 years. In addition, the Company has non-cancelable operating leases pertaining to its shopping center portfolio. As of December 31, 2014, the Company has 49 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 9 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 $40.1 million) and obligations under non-cancelable operating leases as of December 31, 2014 (in millions):

	Payments due by period
Contractual Obligations:	2015		2016		2017		2018		2019		Thereafter		Total
Long-Term Debt-Principal (1) (3)	$	907.2	$	663.4	$	748.5	$	602.2	$	310.0	$	1,348.9	$	4,580.2
Long-Term Debt-Interest (2)	$	196.9	$	158.6	$	120.4	$	83.1	$	74.0	$	123.2	$	756.2
Operating Leases:
Ground Leases	$	13.2	$	12.5	$	11.6	$	10.3	$	10.4	$	164.8	$	222.8
Retail Store Leases	$	2.1	$	2.1	$	1.6	$	1.1	$	0.4	$	0.4	$	7.7

(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, 2014.

(3) During January 2015, the Company repaid its $400.0 million term loan which was scheduled to mature in 2015 with a new $650.0 million unsecured term loan that is scheduled to mature in 2017, with three one-year extension options, and bears interest at a rate equal to LIBOR plus 0.95%.

The Company has accrued $4.6 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, 2014. 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 $250.0 million of medium term notes, $100.0 million of unsecured notes and $134.7 million of secured debt scheduled to mature in 2015. 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, 2014, these letters of credit aggregate $24.9 million.

On a select basis, the Company has provided guarantees on interest bearing debt held within real estate joint ventures. The Company is often provided with a back-stop guarantee from its partners. The Company had the following outstanding guarantees as of December 31, 2014 (amounts in millions):

Name of Joint Venture	Amount of Guarantee				Terms	Type of debt
InTown Suites Management, Inc.	$	139.7	LIBOR plus 1.15%	2015	(1)	Unsecured credit facility
Victoriaville	$	2.1	3.92%	2020	Jointly and severally with partner	Promissory note
Anthem K-12, LP	$	42.2	Various (2)	Various (2)	Jointly and severally with partner	Promissory note

(1)

During June 2013, the Company sold its unconsolidated investment in the InTown portfolio. The Company continues to maintain its guarantee of a portion of the debt assumed by the buyer ($139.7 million as of December 31, 2014). The guarantee is collateralized by the buyer’s ownership interest in the portfolio. Additionally, the Company has a commitment to provide financing up to the outstanding amount of the guaranteed portion of the loan for five years past the date of maturity. This commitment can be in the form of extensions with the current lender or a new lender or financing directly from the Company to the buyer. On February 24, 2015, the outstanding debt balance of $139.7 million was fully repaid and as such, the Company was relieved of its related commitments and guarantee.

(2)	As of December 31, 2014, the interest rates range from 3.62% to 4.97% and maturity dates with extensions range from 2015 to 2022.

In connection with the construction of its development/redevelopment 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, 2014, the Company had $22.0 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, has 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 (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 7 of the Notes to Consolidated Financial Statements included in this Form 10-K). These investments include the following joint ventures:

Venture					Non- Recourse Mortgage Payable (in millions)
KimPru (a)	15.0	%	60	10,573	$	920.4	39	5.53	%	23.0
RioCan Venture (b)	50.0	%	45	9,307	$	642.6	28	4.29	%	39.9
KIR (c)	48.6	%	54	11,519	$	866.4	46	5.04	%	61.9
BIG Shopping Centers (d)	50.1	%	6	1,029	$	144.6	6	5.52	%	22.0
Kimstone (e)(g)	33.3	%	39	5,595	$	704.4	38	4.45	%	28.7
CPP (f)	55.0	%	7	2,425	$	112.1	2	5.05	%	10.1

	(a)	Represents the Company’s joint ventures with Prudential Real Estate Investors.
	(b)	Represents the Company’s joint ventures with RioCan Real Estate Investment Trust.
	(c)	Represents the Company’s joint ventures with certain institutional investors.
	(d)	Represents the Company’s remaining joint venture with BIG Shopping Centers (TLV:BIG), an Israeli public company (see Footnote 7 of the Notes to Consolidated Financial Statements included in this Form 10-K).
	(e)	Represents the Company’s joint ventures with Blackstone.
	(f)	Represents the Company’s joint ventures with The Canadian Pension Plan Investment Board (CPPIB).
	(g)	On February 2, 2015, the Company purchased the remaining 66.7% interest in the 39-property Kimstone portfolio for a gross purchase price of $1.4 billion, including the assumption of $638.0 million in mortgage debt (see Footnote 26 of the Notes to Consolidated Financial Statements included in this Form 10-K).

The Company has various other unconsolidated real estate joint ventures with varying structures. As of December 31, 2014, these other unconsolidated joint ventures had individual non-recourse mortgage loans aggregating $1.2 billion. The aggregate debt as of December 31, 2014, of all of the Company’s unconsolidated real estate joint ventures is $4.6 billion, of which the Company’s proportionate share of this debt is $1.8 billion. As of December 31, 2014, these loans had scheduled maturities ranging from one month to 19 years and bear interest at rates ranging from 1.92% to 8.39%. Approximately $525.7 million of the aggregate outstanding loan balance matures in 2015, of which the Company’s proportionate share is $206.0 million. These maturing loans are anticipated to be repaid with operating cash flows, debt refinancing and partner capital contributions, as deemed appropriate (see Footnote 7 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, 2014, the Company’s net investment under the Preferred Equity Program was $229.1 million relating to 443 properties, including 385 net leased properties. As of December 31, 2014, these preferred equity investment properties had individual non-recourse mortgage loans aggregating $717.0 million. These loans had scheduled maturities ranging from three months to 19 years and bear interest at rates ranging from 3.4% to 10.47%. 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.

At December 31, 2014, 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 $11.2 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, 2014 and 2013 is as follows (in thousands, except per share data):

	Three Months Ended December 31,								Year Ended December 31,
	2014				2013				2014				2013
Net income available to common shareholders	$	38,207			$	47,035			$	365,707			$	177,987
Gain on disposition of operating properties, net of tax and noncontrolling interests		(71,152	)			(16,503	)			(189,572	)			(45,330	)
Gain on disposition of joint venture operating properties and change in control of interests		(56,262	)			(5,530	)			(193,791	)			(113,937	)
Depreciation and amortization - real estate related		70,878				64,511				263,885				250,253
Depreciation and amortization - real estate joint ventures, net of noncontrolling interests		21,113				24,448				92,343				117,743
Impairments of operating properties, net of tax and noncontrolling interests		153,937		(2)		20,707				257,660				165,825
FFO		156,721				134,668				596,232				552,541
Transactional (income)/charges:
Profit participation from other real estate investments		(13,627	)			(474	)			(16,426	)			(13,650	)
Transactional losses from other real estate investments		-				3,091				3,497				3,091
Loss/(gains) from land sales, net of tax		436				(1,775	)			(2,550	)			(3,448	)
Acquisition costs, net of tax		2,172				2,296				7,033				5,623
Deferred tax asset valuation allowance release		-				-				-				(9,126	)
Severance costs		-				2,225				2,869				2,225
Distributions in excess of Company’s investment basis		(2,168	)			(167	)			(17,691	)			(2,213	)
Gain on sale of marketable securities		-				(5,339	)			-				(10,668	)
Impairments on other investments, net of tax and noncontrolling interest		1,621				455				6,494				20,754
Other income, net		(513	)			(180	)			(2,567	)			(1,419	)
Total transactional charges/(income), net		(12,079	)			132				(19,341	)			(8,831	)
FFO as adjusted	$	144,642			$	134,800			$	576,891			$	543,710
Weighted average shares outstanding for FFO calculations:
Basic		409,740				408,139				409,088				407,631
Units		1,531				1,522				1,536				1,523
Dilutive effect of equity awards		3,171				2,414				3,139				2,541
Diluted (1)		414,442		(1)		412,075		(1)		413,763		(1)		411,695		(1)

FFO per common share – basic	$	0.38			$	0.33			$	1.46			$	1.36
FFO per common share – diluted (1)	$	0.38		(1)	$	0.33		(1)	$	1.45		(1)	$	1.35		(1)
FFO as adjusted per common share – basic	$	0.35			$	0.33			$	1.41			$	1.33
FFO as adjusted per common share – diluted (1)	$	0.35		(1)	$	0.33		(1)	$	1.40		(1)	$	1.33		(1)

	(1)	Reflects the potential impact if certain units were converted to common stock at the beginning of the period. FFO would be increased by $795 and $641 for the three months ended December 31, 2014 and 2013, and $3,033 and $2,516 for the years ended December 31, 2014 and 2013, respectively.
	(2)	Includes cumulative foreign currency translation loss of $134.3 million due to the substantial liquidation of the Company's Mexican Portfolio.

Combined Same Property Net Operating Income

Combined Same Property Net Operating Income (“Combined 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. Combined 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 including those properties under redevelopment and excludes properties under development and 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. As such, Combined 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.

Combined Same Property NOI is calculated using revenues from rental properties (excluding straight-line rents, lease termination fees, above/below market rents and includes charges for bad debt) less operating and maintenance expense, real estate taxes and rent expense, plus the Company’s proportionate share of Combined Same Property NOI from unconsolidated real estate joint ventures, calculated on the same basis. Our method of calculating Combined 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 Combined Same Property NOI and U.S. Same Property Net Operating Income “U.S. Same Property NOI” (in thousands):

	Three Months Ended December 31,						Year Ended December 31,
	2014			2013			2014			2013
Income from continuing operations	$	74,474		$	56,705		$	384,506		$	288,454
Adjustments:
Management and other fee income		(8,764	)		(9,565	)		(35,009	)		(36,317	)
General and administrative expenses		27,675			31,543			122,201			127,470
Impairment charges		11,420			609			39,808			32,247
Depreciation and amortization		72,767			59,571			258,074			224,713
Other income		53,153			39,569			208,208			189,894
Provision for income taxes, net		7,727			6,333			22,438			32,654
Gain on change in control of interests, net		(23,462	)		-			(107,235	)		(21,711	)
Equity in income of other real estate investments, net		(21,638	)		(1,225	)		(38,042	)		(31,136	)
Non same property net operating income		(22,557	)		(12,021	)		(83,755	)		(80,373	)
Non-operational expense from joint ventures, net		61,988			54,227			148,918			171,503
Combined Same Property NOI		232,783			225,746			920,112			897,398
Impact from foreign currency		-			(1,907	)		-			(6,672	)
Combined Same Property NOI, before foreign currency impact		232,783			223,839			920,112			890,726
Canadian Same Property NOI, before foreign currency impact		(23,316	)		(23,060	)		(94,940	)		(92,286	)
U.S. Same Property NOI	$	209,467		$	200,779		$	825,172		$	798,440

Combined Same Property NOI, before foreign currency impact increased by $8.9 million or 4.0% for the three months ended December 31, 2014, as compared to the corresponding period in 2013. Combined Same Property NOI increased by $7.0 million or 3.1% for the three months ended December 31, 2014, as compared to the corresponding period in 2013. This increase is primarily the result of (i) an increase of $6.6 million related to lease-up and rent commencements in the portfolio and (ii) an increase of $2.3 million in other property income, partially offset by (iii) the impact from changes in foreign currency exchange rates of $1.9 million.

Combined Same Property NOI, before foreign currency impact increased by $29.4 million or 3.3% for the year ended December 31, 2014, as compared to the corresponding period in 2013. Combined Same Property NOI increased by $22.7 million or 2.5% for the year ended December 31, 2014, as compared to the corresponding period in 2013. This increase is primarily the result of (i) an increase of $25.8 million related to lease-up and rent commencements in the portfolio and (ii) an increase of $3.6 million in other property income, partially offset by (iii) the impact from changes in foreign currency exchange rates of $6.7 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.

New Accounting Pronouncements

See Footnote 1 of the Notes to Consolidated Financial Statements included in this Form 10-K.

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