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

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The following discussion should be read in conjunction with the consolidated financial statements and notes thereto that are included in this Annual Report on Form 10-K.

Overview

Simon Property Group, Inc., Simon or the Company, is a Delaware corporation that operates as a self-administered and self-managed real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended. REITs will generally not be liable for federal corporate income taxes as long as they continue to distribute not less than 100% of their taxable income. Simon Property Group, L.P., or the Operating Partnership, is our majority-owned partnership subsidiary that owns all of our real estate properties and other assets. In this discussion, the terms "we", "us" and "our" refer to Simon, the Operating Partnership, and its subsidiaries.

We own, develop and manage retail real estate properties, which consist primarily of malls, Premium Outlets® and The Mills®. As of December 31, 2014, we owned or held an interest in 207 income-producing properties in the United States, which consisted of 109 malls, 68 Premium Outlets, 13 Mills, three community centers, and 14 other retail properties in 37 states and Puerto Rico. We have four outlets under development and have redevelopment and expansion projects, including the addition of anchors and big box tenants, underway at more than 25 properties in the U.S. and Asia. Internationally, as of December 31, 2014, we had ownership interests in nine Premium Outlets in Japan, three Premium Outlets in South Korea, two Premium Outlets in Canada, one Premium Outlet in Mexico, and one Premium Outlet in Malaysia. As of December 31, 2014, we had noncontrolling ownership interests in five outlet properties in Europe through our joint venture with McArthurGlen. Of the five properties, two are located in Italy and one each is located in Austria, the Netherlands, and the United Kingdom. Additionally, as of December 31, 2014, we owned a 28.9% equity stake in Klépierre SA, or Klépierre, a publicly traded, Paris-based real estate company, which owns, or has an interest in, shopping centers located in 13 countries in Europe. On July 29, 2014 Klépierre announced that it had entered into a conditional agreement to acquire Corio N.V., or Corio, pursuant to which Corio shareholders would receive 1.14 Klépierre ordinary shares for each Corio ordinary share. On January 15, 2015 the tender offer transaction closed, and it is anticipated that Klépierre will own all of the equity of Corio on March 31, 2015 through a merger transaction, after which our percentage ownership will be diluted to approximately 18.3%.

On May 28, 2014, as further discussed in Note 3 to the notes to the consolidated financial statements, we completed the spin-off of our interests in 98 properties comprised of substantially all of our strip center business and our smaller enclosed malls to Washington Prime Group Inc., or Washington Prime, an independent, publicly traded REIT (now doing business as WP GLIMCHER). The historical results of operations of the Washington Prime properties as well as the related assets and liabilities are presented as discontinued operations in the accompanying consolidated financial statements.

We generate the majority of our revenues from leases with retail tenants including:

base minimum rents,

overage and percentage rents based on tenants' sales volume, and

recoverable expenditures such as property operating, real estate taxes, repair and maintenance, and advertising and promotional expenditures.

Revenues of our management company, after intercompany eliminations, consist primarily of management fees that are typically based upon the revenues of the property being managed.

We invest in real estate properties to maximize total financial return which includes both operating cash flows and capital appreciation. We seek growth in earnings, funds from operations, or FFO, and cash flows by enhancing the profitability and operation of our properties and investments. We seek to accomplish this growth through the following:

attracting and retaining high quality tenants and utilizing economies of scale to reduce operating expenses,

expanding and re-tenanting existing highly productive locations at competitive rental rates,

selectively acquiring or increasing our interests in high quality real estate assets or portfolios of assets,

generating consumer traffic in our retail properties through marketing initiatives and strategic corporate alliances, and

selling selective non-core assets.

We also grow by generating supplemental revenue from the following activities:

establishing our malls as leading market resource providers for retailers and other businesses and consumer-focused corporate alliances, including payment systems (such as handling fees relating to the sales of bank-issued prepaid cards), national marketing alliances, static and digital media initiatives, business development, sponsorship, and events,

offering property operating services to our tenants and others, including waste handling and facility services, and the provision of energy services,

selling or leasing land adjacent to our properties, commonly referred to as "outlots" or "outparcels," and

generating interest income on cash deposits and investments in loans, including those made to related entities.

We focus on high quality real estate across the retail real estate spectrum. We expand or redevelop properties to enhance profitability and market share of existing assets when we believe the investment of our capital meets our risk-reward criteria. We selectively develop new properties in markets we believe are not adequately served by existing retail outlets.

We routinely review and evaluate acquisition opportunities based on their ability to enhance our portfolio. Our international strategy includes partnering with established real estate companies and financing international investments with local currency to minimize foreign exchange risk.

To support our growth, we employ a three-fold capital strategy:

provide the capital necessary to fund growth,

maintain sufficient flexibility to access capital in many forms, both public and private, and

manage our overall financial structure in a fashion that preserves our investment grade credit ratings.

We consider FFO, net operating income, or NOI, and comparable property NOI (NOI for properties owned and operating in both periods under comparison) to be key measures of operating performance that are not specifically defined by accounting principles generally accepted in the United States, or GAAP. We use these measures internally to evaluate the operating performance of our portfolio and provide a basis for comparison with other real estate companies. Reconciliations of these measures to the most comparable GAAP measure are included below in this discussion.

Results Overview

Diluted earnings per common share increased $0.28 during 2014 to $4.52 as compared to $4.24 in 2013. The increase in diluted earnings per share was primarily attributable to:

improved operating performance and core business fundamentals in 2014 and the impact of our acquisition and expansion activity,

decreased interest expense in 2014 as further discussed below,

increased lease settlement and land sale activity as further discussed below, and

a 2014 gain on acquisitions and disposals of $158.3 million, or $0.44 per diluted share, primarily related to Klépierre's sale of a portfolio of 126 retail galleries of which our share was $133.9 million, or $0.37 per diluted share,

partially offset by a 2013 gain of $93.4 million, or $0.26 per diluted share, due to the sale or disposal of our interests in certain properties as further discussed below and the acquisition of a controlling interest in an outlet center,

the loss of $117.3 million of net income attributable to the discontinued operations of Washington Prime, or $0.33 per diluted share, along with transaction expenses related to the spin-off of $38.2 million, or $0.10 per diluted share, and

a loss on extinguishment of debt of $127.6 million, or $0.35 per diluted share.

Core business fundamentals improved during 2014 primarily driven by higher tenant sales and strong leasing activity. Our share of portfolio NOI grew by 6.7% in 2014 as compared to 2013. Comparable property NOI also grew 5.1% for our portfolio of U.S. Malls, Premium Outlets and The Mills. Total sales per square foot, or psf, increased 0.2% from $618 psf at December 31, 2013, to $619 psf at December 31, 2014, for our U.S. Malls and Premium Outlets. Average base minimum rent

for U.S. Malls and Premium Outlets increased 4.4% to $47.01 psf as of December 31, 2014, from $45.01 psf as of December 31, 2013. Releasing spreads remained positive in our U.S. Malls and Premium Outlets as we were able to lease available square feet at higher rents than the expiring rental rates on the same space, resulting in a releasing spread (based on total tenant payments — base minimum rent plus common area maintenance) of $9.59 psf ($67.51 openings compared to $57.92 closings) as of December 31, 2014, representing a 16.6% increase over expiring payments. Ending occupancy for our U.S. Malls and Premium Outlets was 97.1% as of December 31, 2014, as compared to 96.9% as of December 31, 2013, an increase of 20 basis points.

Our effective overall borrowing rate at December 31, 2014 on our consolidated indebtedness decreased 39 basis points to 4.41% as compared to 4.80% at December 31, 2013. This reduction was primarily due to a decrease in the effective overall borrowing rate on fixed rate debt of 38 basis points (4.72% at December 31, 2014 as compared to 5.10% at December 31, 2013) combined with a decrease in the effective overall borrowing rate on variable rate debt of 6 basis points (1.16% at December 31, 2014 as compared to 1.22% at December 31, 2013). At December 31, 2014, the weighted average years to maturity of our consolidated indebtedness was 6.2 years as compared to 4.2 years at December 31, 2013.

Our financing activities for the year ended December 31, 2014, included:

Completing cash tender offers for any and all of five series of the Operating Partnership's outstanding senior unsecured notes with maturity dates ranging from 2015 to 2017. The total principal amount of the notes tendered and accepted for purchase was approximately $1.322 billion, with a weighted average duration of 1.7 years and a weighted average coupon rate of 5.60%. The Operating Partnership purchased the tendered notes using cash on hand and the proceeds from an offering of $1.3 billion of senior unsecured notes that closed on September 10, 2014. The senior notes offering was comprised of $900.0 million of 3.375% notes due 2024 and $400.0 million of 4.25% notes due 2044. Combined, the new issues of senior notes have a weighted average duration of 16.1 years and a weighted average coupon rate of 3.64%. A portion of the proceeds from the senior notes offering was also used to fund the redemption on September 30, 2014 of all $250.0 million outstanding principal amount of the 7.875% notes due 2016 issued by one of our subsidiaries. We recorded a $127.6 million loss on extinguishment of debt in the third quarter of 2014 as a result of the tender offers and redemption.

In addition to the debt tender offers and redemption described above, redeeming at par or repaying at maturity $1.3 billion of senior unsecured notes with fixed rates ranging from 4.20% to 6.75%.

Issuing $600.0 million of senior unsecured notes at a fixed interest rate of 2.20% with a maturity date of February 1, 2019 and $600.0 million of senior unsecured notes at a fixed interest rate of 3.75% with a maturity date of February 1, 2024 on January 21, 2014.

Repaying $300.0 million on our $4.0 billion unsecured revolving credit facility, or Credit Facility.

Unencumbering two properties by repaying $1.1 billion in mortgage loans.

Establishing a global unsecured commercial paper note program, or the Commercial Paper program, which provides a borrowing capacity of $500.0 million. The outstanding amount of Commercial Paper at December 31, 2014 was $409.2 million, of which $209.2 million was related to U.S. dollar equivalent of Euro-denominated notes.

United States Portfolio Data

The portfolio data discussed in this overview includes the following key operating statistics: ending occupancy, average base minimum rent per square foot, and total sales per square foot for our domestic assets. We include acquired properties in this data beginning in the year of acquisition and remove disposed properties in the year of disposition. The Washington Prime properties have been removed from the portfolio data for all periods presented. For comparative purposes, we separate the information related to The Mills from our other U.S. operations. We also do not include any properties located outside of the United States.

The following table sets forth these key operating statistics for:

properties that are consolidated in our consolidated financial statements,

properties we account for under the equity method of accounting as joint ventures, and

the foregoing two categories of properties on a total portfolio basis.

		2014		%/Basis Points Change (1)		2013		%/Basis Points Change (1)		2012
U.S. Malls and Premium Outlets:
Ending Occupancy
Consolidated		97.3%		–20 bps		97.5%		+100 bps		96.5%
Unconsolidated		96.4%		+100 bps		95.4%		—		95.4%
Total Portfolio		97.1%		+20 bps		96.9%		+70 bps		96.2%
Average Base Minimum Rent per Square Foot
Consolidated		$45.34		4.6%		$43.33		4.8%		$41.33
Unconsolidated		$51.89		3.8%		$50.00		2.2%		$48.92
Total Portfolio		$47.01		4.4%		$45.01		4.2%		$43.19
Total Sales per Square Foot
Consolidated		$603		—		$603		2.6%		$588
Unconsolidated		$679		1.3%		$670		2.0%		$657
Total Portfolio		$619		0.2%		$618		2.5%		$603
The Mills®:
Ending Occupancy		98.4%		–10 bps		98.5%		+130 bps		97.2%
Average Base Minimum Rent per Square Foot		$25.43		6.9%		$23.79		5.4%		$22.58
Total Sales per Square Foot		$541		2.3%		$529		3.7%		$510

(1)

Percentages may not recalculate due to rounding. Percentage and basis point changes are representative of the change from the comparable prior period.

Ending Occupancy Levels and Average Base Minimum Rent per Square Foot. Ending occupancy is the percentage of gross leasable area, or GLA, which is leased as of the last day of the reporting period. We include all company owned space except for mall anchors, mall majors, mall freestanding and mall outlots in the calculation. Base minimum rent per square foot is the average base minimum rent charge in effect for the reporting period for all tenants that would qualify to be included in ending occupancy.

Total Sales per Square Foot. Total sales include total reported retail tenant sales on a trailing 12-month basis at owned GLA (for mall stores with less than 10,000 square feet) in the malls and The Mills and all reporting tenants at the Premium Outlets. Retail sales at owned GLA affect revenue and profitability levels because sales determine the amount of minimum rent that can be charged, the percentage rent realized, and the recoverable expenses (common area maintenance, real estate taxes, etc.) that tenants can afford to pay.

Current Leasing Activities

During 2014, we signed 773 new leases and 1,581 renewal leases (excluding mall anchors and majors, new development, redevelopment, expansion, downsizing, and relocation) with a fixed minimum rent across our U.S. malls and Premium Outlets portfolio, comprising approximately 7.4 million square feet of which 5.5 million square feet related to consolidated properties. During 2013, we signed 950 new leases and 1,391 renewal leases with a fixed minimum rent,

comprising approximately 10.3 million square feet of which 7.7 million square feet related to consolidated properties. The average annual initial base minimum rent for new leases was $58.57 per square foot in 2014 and $49.85 per square foot in 2013 with an average tenant allowance on new leases of $38.83 per square foot and $34.69 per square foot, respectively.

International Property Data

The following are selected key operating statistics for our Premium Outlets in Japan. The information used to prepare these statistics has been supplied by the managing venture partner.

		December 31, 2014		%/basis point Change		December 31, 2013		%/basis point Change		December 31, 2012
Ending Occupancy		99.1%		–30 bps		99.4%		–10 bps		99.5%
Total Sales per Square Foot		¥94,933		4.37%		¥90,959		3.69%		¥87,720
Average Base Minimum Rent per Square Foot		¥4,910		0.45%		¥4,888		2.05%		¥4,790

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements. From time to time, we reevaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information. Below is a discussion of accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain. For a summary of our significant accounting policies, see Note 3 of the notes to consolidated financial statements.

We, as a lessor, retain substantially all of the risks and benefits of ownership of the investment properties and account for our leases as operating leases. We accrue minimum rents on a straight-line basis over the terms of their respective leases. Substantially all of our retail tenants are also required to pay overage rents based on sales over a stated base amount during the lease year. We recognize overage rents only when each tenant's sales exceed its sales threshold.

We review investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable. These circumstances include, but are not limited to, a decline in a property's cash flows, occupancy or comparable sales per square foot. We measure any impairment of investment property when the estimated undiscounted operating income before depreciation and amortization plus its residual value is less than the carrying value of the property. To the extent impairment has occurred, we charge to income the excess of carrying value of the property over its estimated fair value. We may decide to sell properties that are held for use and the sale prices of these properties may differ from their carrying values. We also review our investments, including investments in unconsolidated entities, if events or circumstances change indicating that the carrying amount of our investments may not be recoverable. We will record an impairment charge if we determine that a decline in the fair value of the investments below carrying value is other-than-temporary. Changes in economic and operating conditions that occur subsequent to our review of recoverability of investment property and other investments could impact the assumptions used in that assessment and could result in future charges to earnings if assumptions regarding those investments differ from actual results.

To maintain our status as a REIT, we must distribute at least 90% of our taxable income in any given year and meet certain asset and income tests. We monitor our business and transactions that may potentially impact our REIT status. In the unlikely event that we fail to maintain our REIT status, and available relief provisions do not apply, then we would be required to pay federal income taxes at regular corporate income tax rates during the period we did not qualify as a REIT. If we lost our REIT status, we could not elect to be taxed as a REIT for four taxable years following the year during which qualification was lost unless our failure was due to reasonable cause and certain other conditions were met. As a result, failing to maintain REIT status would result in a significant increase in the income tax expense recorded and paid during those periods.

We make estimates as part of our allocation of the purchase price of acquisitions (including the components of excess investment in joint ventures) to the various components of the acquisition based upon the fair value of each component. The most significant components of our allocations are typically the allocation of fair value to the buildings as-if-vacant, land and market value of in-place leases. In the case of the fair value of buildings and the allocation of value to land and other intangibles, our estimates of the values of these components will affect the amount of depreciation we record over the estimated useful life of the property acquired or the remaining lease term. In the case of the market value of in-place leases, we make our best estimates of the tenants' ability to pay rents based upon the tenants' operating performance at the property, including the competitive position of the property in its market as well as sales psf, rents psf, and overall occupancy cost for the tenants in place at the acquisition date. Our assumptions affect the amount of future revenue that we will recognize over the remaining lease term for the acquired in-place leases.

A variety of costs are incurred in the development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed and held available for occupancy and cease capitalization of costs upon opening.

Results of Operations

In addition to the activity discussed above in the "Results Overview" section, the following acquisitions, openings, and dispositions of consolidated properties affected our consolidated results from continuing operations in the comparative periods:

On January 30, 2014, we acquired the remaining 50% interest in the previously unconsolidated Arizona Mills from our joint venture partner.

On January 10, 2014, we acquired one of our partner's redeemable interests in a portfolio of ten properties, seven of which we had previously consolidated.

During 2014, we disposed of three retail properties.

On October 10, 2013, we re-opened the redeveloped The Shops at Nanuet, a 750,000 square foot open-air, main street center located in Nanuet, New York.

On May 30, 2013, we acquired a 390,000 square foot outlet center located near Portland, Oregon.

On April 4, 2013, we opened Phoenix Premium Outlets in Chandler, Arizona, a 360,000 square foot upscale outlet center.

During 2013, we disposed of two malls, four community centers, and two retail properties.

On December 4, 2012, we acquired the remaining 50% noncontrolling interest in two previously consolidated outlet properties located in Livermore, California, and Grand Prairie, Texas, which opened on November 8, 2012 and August 16, 2012, respectively.

On June 14, 2012, we opened Merrimack Premium Outlets, a 410,000 square foot outlet center located in Hillsborough County, serving the Greater Boston and Nashua markets.

On March 29, 2012, Opry Mills re-opened after completion of the restoration of the property following the significant flood damage which occurred in May 2010.

On March 22, 2012, we acquired, through an acquisition of substantially all of the assets of TMLP, additional interests in 26 joint venture properties in a transaction we refer to as the Mills transaction. Nine of these properties became consolidated properties at the acquisition date.

During 2012, we disposed of one mall, two community centers and six retail properties.

In addition to the activities discussed above and in "Results Overview", the following acquisitions, dispositions, and openings of joint venture properties affected our income from unconsolidated entities in the comparative periods:

On October 30, 2014, we and our partner, Calloway Real Estate Investment Trust, or Calloway, opened Premium Outlets Montreal in Canada, a 365,000 square foot outlet center serving the Greater Montreal area. We have a 50% noncontrolling interest in this new center.

On August 14, 2014, we and our partner opened Twin Cities Premium Outlets, a 409,000 square foot outlet center. We have a 35% noncontrolling interest in this new center.

On July 31, 2014, we and our partner, Tanger Factory Outlet Centers, or Tanger, opened Charlotte Premium Outlets, a 399,000 square foot outlet center. We have a 50% noncontrolling interest in this new center.

On April 16, 2014, Klépierre disposed of a portfolio of 126 properties located in France, Spain, and Italy.

On April 10, 2014, through our joint venture with McArthurGlen, we acquired an additional 22.5% noncontrolling interest in Ashford Designer Outlet, increasing our percentage ownership interest of this property to 45%.

On January 10, 2014, as discussed above, we acquired one of our partner's redeemable interests in a portfolio of ten properties, seven of which were consolidated and three were unconsolidated prior to the transaction. The three unconsolidated properties remained unconsolidated following the transaction.

On October 16, 2013, through our joint venture with McArthurGlen, we acquired noncontrolling interests in portions of four Designer Outlets, which include Parndorf (Vienna, Austria), La Reggia (Naples, Italy), Noventa di Piave (Venice, Italy), and Roermond (Roermond, Netherlands).

On August 29, 2013, we and our partner, Shinsegae Group, opened Busan Premium Outlets, a 360,000 square foot outlet located in Busan, South Korea.

On August 22, 2013, we and our partner, Woodmont Outlets, opened St. Louis Premium Outlets, a 350,000 square foot outlet center. We have a 60% noncontrolling interest in this new center.

On August 2, 2013, through our joint venture with McArthurGlen, we acquired a 22.5% noncontrolling interest in Ashford Designer Outlet located in Kent, UK.

On August 1, 2013, we and our partner, Calloway, opened Toronto Premium Outlets in Canada, a 360,000 square foot outlet center serving the Greater Toronto area.

On April 19, 2013, we and our partner, Mitsubishi Estate Co., LTD., opened Shisui Premium Outlets, a 230,000 square foot outlet center located in Shisui (Chiba), Japan.

During 2013, we disposed of our interest in three retail properties.

On December 31, 2012, we contributed The Shops at Mission Viejo, a wholly-owned property, to a newly formed joint venture in exchange for an interest in Woodfield Mall, a property contributed to the same joint venture by our joint venture partner.

On October 19, 2012, we and our partner, Tanger, opened Tanger Outlets in Galveston/Houston, a 350,000 square foot upscale outlet center located in Texas City, Texas. We have a 50% noncontrolling interest in this new center.

On June 4, 2012, we acquired a 50% interest in a 465,000 square foot outlet center located in Destin, Florida.

As discussed above, on March 22, 2012, we acquired additional interests in 26 joint venture properties in the Mills transaction. Of these 26 properties, 16 remained unconsolidated at the acquisition date.

On March 14, 2012, we acquired a 28.7% equity stake in Klépierre. On May 21, 2012, Klépierre paid a dividend, which we elected to receive in additional shares, increasing our ownership to approximately 28.9%.

On January 9, 2012, we sold our entire ownership interest in Gallerie Commerciali Italia, S.p.A, or GCI, a joint venture which at the time owned 45 properties located in Italy to our venture partner, Auchan S.A.

On January 6, 2012, we acquired an additional 25% interest in Del Amo Fashion Center.

During 2012, we disposed of our interests in three retail properties and one mall.

For the purposes of the following comparisons between the years ended December 31, 2014 and 2013 and the years ended December 31, 2013 and 2012, the above transactions are referred to as the property transactions. In the following

discussions of our results of operations, "comparable" refers to properties we owned and operated in both years in the year-to-year comparisons.

Year Ended December 31, 2014 vs. Year Ended December 31, 2013

Minimum rents increased $186.4 million during 2014, of which the property transactions accounted for $32.0 million of the increase. Comparable rents increased $154.4 million, or 5.8%, primarily attributable to an increase in base minimum rents.

Tenant reimbursements increased $104.2 million, due to a $14.8 million increase attributable to the property transactions and a $89.4 million, or 7.6%, increase in the comparable properties primarily due to utility reimbursements, annual fixed contractual increases related to common area maintenance, real estate tax recoveries and additional marketing recoveries related to costs incurred during our property rebranding initiative and increased digital and social media advertising costs.

Total other income increased $32.7 million, principally as a result of a $16.1 million increase in lease settlement income, $8.3 million increase attributable to dividend income and a $7.6 million increase in land sale activity.

Property operating expense increased $27.6 million due to a $6.5 million increase related to the property transactions, and a $21.1 million increase related to the comparable properties primarily as a result of increased utility expenses partially due to the harsh winter.

Depreciation and amortization expense increased $36.1 million primarily due to the additional depreciable assets related to the property transactions and our continued redevelopment and expansion activities.

Advertising and promotion increased $18.8 million primarily related to costs incurred during our property rebranding initiative and increased digital and social media advertising costs.

Provision for credit losses increased $4.8 million as a result of increased reserves due to an increase in tenant bankruptcies and a decrease in recoveries as compared to 2013. The 2014 expense is in line with longer term historical levels.

Home and regional office costs increased $17.6 million primarily related to higher personnel costs including incentive compensation and one-time expenses related to the spin-off of Washington Prime.

Other expenses increased $7.9 million primarily due to the net foreign currency impact of the change in foreign currency rates from 2013 to 2014.

Interest expense decreased $89.5 million primarily due to the net impact of our financing activities during 2014 and the reduction in the effective overall borrowing rate as previously discussed.

During 2014, we recorded a loss on extinguishment of debt of $127.6 million as a result of the debt tender offers and redemption during the third quarter of 2014.

Income and other taxes decreased $11.5 million primarily due to a decrease in state income taxes and taxes related to certain of our international investments.

Income from unconsolidated entities increased $20.4 million primarily due to favorable results of operations from the development and redevelopment of joint venture properties and 2013 results including an extinguishment charge related to the refinancing of Aventura Mall.

During 2014, we recorded a gain related to Klépierre's sale of a portfolio of 126 properties and our disposal of three retail properties. Additionally, we acquired the remaining 50% interest in Arizona Mills from our joint venture partner. The property was previously accounted for under the equity method and we recognized a non-cash gain upon consolidation of this property. The aggregate gain recognized on these transactions was $158.3 million. During 2013, we disposed of our interest in two malls, four community centers, and five retail properties and recorded a gain on the acquisition of an outlet center. The aggregate gain recognized on these transactions was approximately $93.4 million.

Discontinued operations decreased $117.3 million due to 2014 including approximately five months ownership of the Washington Prime properties, whereas 2013 included twelve full months of ownership of those properties. The 2013 results also include a $14.2 million gain on the disposal of three strip centers held within a joint venture portfolio of Washington Prime properties. Additionally, on February 28, 2014 one strip center was sold by that same joint venture for a gain of $0.2 million. In 2014, we also incurred $38.2 million in transaction costs related to the Washington Prime spin-off.

Net income attributable to noncontrolling interests increased $11.0 million due to an increase in the net income of the Operating Partnership.

Year Ended December 31, 2013 vs. Year Ended December 31, 2012

Minimum rents increased $182.0 million during 2013, of which the property transactions accounted for $99.7 million of the increase. Comparable rents increased $82.3 million, or 3.7%, primarily attributable to an $78.2 million increase in base minimum rents. Overage rents increased $27.1 million, or 14.5%, as a result of an increase in tenant sales at the comparable properties in 2013 compared to 2012 of $20.1 million as well as an increase related to the property transactions of $7.0 million.

Tenant reimbursements increased $100.8 million, due to a $40.4 million increase attributable to the property transactions and a $60.4 million, or 6.1%, increase in the comparable properties primarily due to annual fixed contractual increases related to common area maintenance and higher reimbursements for the tenants' pro rata share of real estate taxes.

Total other income decreased $20.9 million, principally as a result of the following:

a $18.3 million decrease in interest income primarily related to the repayment of related party loans and loans held for investment,

a $12.4 million gain in 2012 on the sale of our investments in two multi-family residential facilities,

an $4.3 million decrease in land sale activity, and

a $7.0 million decrease in lease settlement income due to a higher number of terminated leases in 2012,

partially offset by an increase related to a $7.9 million gain on the sale of a non-retail office building in 2013,

a $7.7 million increase in financing and other fee revenue earned from joint ventures, net of eliminations, and

a $5.5 million increase in net other activity.

Depreciation and amortization expense increased $39.3 million primarily due to the additional depreciable assets related to the property transactions and our continued redevelopment and expansion activities.

Real estate tax expense increased $25.8 million primarily due to an $14.9 million increase related to the property transactions.

Repairs and maintenance expense increased $4.3 million primarily as a result of increased snow removal costs compared to the prior year period.

During 2013, we recorded a provision for credit losses of $7.2 million whereas in the prior year the provision was $10.9 million. Both amounts reflect the overall strong economic health of our tenants.

Home and regional office costs increased $17.0 million primarily related to higher personnel costs.

Interest expense increased $13.9 million primarily due to an increase of $21.9 million related to the property transactions partially offset by the net impact of the financing activities and reduction in the effective overall borrowing rate.

Income and other taxes increased $23.8 million due to taxes related to certain of our international investments and an increase in state income taxes.

Income from unconsolidated entities increased $75.5 million primarily due to the increase in ownership in the joint venture properties acquired as part of the Mills transaction, the 2012 acquisition of an equity stake in Klépierre, our acquisition and expansion activity and favorable results of operations from joint venture properties partially offset by an extinguishment charge related to the refinancing of Aventura Mall.

During 2013, we disposed of our interests in two malls, four community centers and five retail properties, and recorded a gain on the acquisition of an outlet center. The aggregate gain recognized on these transactions was approximately $93.4 million. During 2012, we disposed of our interest in GCI, four unconsolidated properties, and eight consolidated retail properties for a net gain of $43.7 million and acquired a controlling interest in nine properties previously accounted for under the equity method in the Mills transaction which resulted in the recognition of a non-cash gain of $488.7 million. In addition, we recorded an other-than-temporary impairment charge of $22.4 million on our remaining investment in SPG-FCM Ventures, LLC, which holds our investment in TMLP, representing the excess of carrying value over the estimated fair value.

Discontinued operations increased $28.4 million as a result of favorable results of operations. The 2013 results also include a $14.2 million gain on the disposal of three strip centers held within a joint venture portfolio of Washington Prime properties.

Net income attributable to noncontrolling interests decreased $53.2 million due to a decrease in the net income of the Operating Partnership and a decline in the percentage ownership of the limited partners in the Operating Partnership.

Liquidity and Capital Resources

Because we own long-lived income-producing assets, our financing strategy relies primarily on long-term fixed rate debt. Floating rate debt currently comprises only 8.8% of our total consolidated debt at December 31, 2014. We also enter into interest rate protection agreements to manage our interest rate risk. We derive most of our liquidity from positive net cash flow from operations and distributions of capital from unconsolidated entities that totaled $3.2 billion during 2014. In addition, the Credit Facility, the $2.0 billion supplemental unsecured revolving credit facility, or Supplemental Facility, and the Commercial Paper program provide alternative sources of liquidity as our cash needs vary from time to time. Borrowing capacity under these credit facilities may be increased as discussed further below.

Our balance of cash and cash equivalents from continuing operations decreased $1.1 billion during 2014 to $612.3 million as of December 31, 2014 as further discussed in "Cash Flows" below.

On December 31, 2014, we had an aggregate available borrowing capacity of approximately $5.0 billion under the two credit facilities, net of outstanding borrowings of $558.5 million and letters of credit of $38.9 million. For the year ended December 31, 2014, the maximum amount outstanding under the two credit facilities was $1.2 billion and the weighted average amount outstanding was $855.4 million. The weighted average interest rate was 0.99% for the year ended December 31, 2014. Further, on October 6, 2014, the Operating Partnership entered into a global Commercial Paper program as further discussed below.

We and the Operating Partnership have historically had access to public equity and long and short-term unsecured debt markets and access to secured debt and private equity from institutional investors at the property level.

Our business model and status as a REIT requires us to regularly access the debt markets to raise funds for acquisition, development and redevelopment activity, and to refinance maturing debt. We may also, from time to time, access the equity capital markets to accomplish our business objectives. We believe we have sufficient cash on hand and availability under the Credit Facility, the Supplemental Facility, and the Commercial Paper program to address our debt maturities and capital needs through 2015.

Cash Flows

Our net cash flow from operating activities and distributions of capital from unconsolidated entities totaled $3.2 billion during 2014. In addition, we had net repayments from our debt financing and repayment activities, including the $127.6 million debt extinguishment charge, of $1.8 billion in 2014 and net proceeds from debt financings related to the Washington Prime spin-off of $1.0 billion. These activities are further discussed below under "Financing and Debt" or Note 3 of the notes to the consolidated financial statements. During 2014, we or the Operating Partnership also:

funded the acquisition of one of our partner's remaining redeemable interests in a portfolio of ten properties, acquired the remaining 50% ownership interest in Arizona Mills from our joint venture partner, contributed funds into an existing partnership in exchange for a new series of preferred partnership units, and acquired an undeveloped land parcel, the aggregate cash portion of which was $258.1 million,

paid stockholder dividends and unitholder distributions totaling $1.9 billion,

funded consolidated capital expenditures of $796.7 million (includes development and other costs of $51.6 million, redevelopment and expansion costs of $516.0 million, and tenant costs and other operational capital expenditures of $229.1 million),

funded investments in unconsolidated entities of $239.8 million and received repayments of construction loans to joint ventures of $120.1 million, net of funding, and

purchased marketable and non-marketable securities of $391.2 million.

In general, we anticipate that cash generated from operations will be sufficient to meet operating expenses, monthly debt service, recurring capital expenditures, and dividends to stockholders necessary to maintain our REIT qualification on a long-term basis. In addition, we expect to be able to generate or obtain capital for nonrecurring capital expenditures, such

as acquisitions, major building redevelopments and expansions, as well as for scheduled principal maturities on outstanding indebtedness, from:

excess cash generated from operating performance and working capital reserves,

borrowings on our credit facilities and Commercial Paper program,

additional secured or unsecured debt financing, or

additional equity raised in the public or private markets.

We expect to generate positive cash flow from operations in 2015, and we consider these projected cash flows in our sources and uses of cash. These cash flows are principally derived from rents paid by our retail tenants. A significant deterioration in projected cash flows from operations could cause us to increase our reliance on available funds from our credit facilities, curtail planned capital expenditures, or seek other additional sources of financing as discussed above.

Financing and Debt

Unsecured Debt

At December 31, 2014, our unsecured debt consisted of $13.4 billion of senior unsecured notes of the Operating Partnership, net of discounts, $558.5 million outstanding under our Credit Facility, $240.0 million outstanding under an unsecured term loan, and $409.2 million outstanding under the Commercial Paper program. The December 31, 2014 balance on the Credit Facility included $372.2 million (U.S. dollar equivalent) of Euro-denominated borrowings and $186.4 million (U.S. dollar equivalent) of Yen-denominated borrowings. At December 31, 2014 the outstanding amount under the Commercial Paper program was $409.2 million, of which $209.2 million was related to U.S. dollar equivalent of Euro-denominated notes. Foreign currency denominated borrowings under both the Credit Facility and Commercial Paper program are designated as net investment hedges of a portion of our international investments.

On December 31, 2014, we had an aggregate available borrowing capacity of approximately $5.0 billion under the Credit Facility and the Supplemental Facility. The maximum outstanding balance of the credit facilities during the year ended December 31, 2014 was $1.2 billion and the weighted average outstanding balance was $855.4 million. Letters of credit of $38.9 million were outstanding under the facilities as of December 31, 2014.

On April 7, 2014, the Operating Partnership amended and extended the Credit Facility. The initial borrowing capacity of $4.0 billion may be increased to $5.0 billion during its term and provides for borrowings denominated in U.S. Dollars, Euros, Yen, Sterling, Canadian Dollars and Australian Dollars. Borrowings in currencies other than the U.S. Dollar are limited to 75% of the maximum revolving credit amount, as defined. The initial maturity date of the Credit Facility was extended to June 30, 2018 and can be extended for an additional year to June 30, 2019 at our sole option. The base interest rate on the amended Credit Facility was reduced to LIBOR plus 80 basis points and the additional facility fee was reduced to 10 basis points.

The Supplemental Facility's borrowing capacity of $2.0 billion may be increased to $2.5 billion during its term. The Supplemental Facility will initially mature on June 30, 2016 and can be extended for an additional year at our sole option. As of December 31, 2014, the base interest rate on the Supplemental Facility was LIBOR plus 95 basis points with an additional facility fee of 15 basis points. Like the Credit Facility, the Supplemental Facility provides for a money market competitive bid option program and allows for multi-currency borrowings. During the fourth quarter of 2014, we moved $184.9 million (U.S. dollar equivalent) of Yen-denominated borrowings from the Supplemental Facility to the Credit Facility.

On October 6, 2014, the Operating Partnership entered into a global Commercial Paper program. Under the terms of this program, the Operating Partnership may issue unsecured commercial paper notes, denominated in U.S. dollars, Euros and other currencies, up to a maximum aggregate amount outstanding at any time of $500.0 million, or the non-U.S. dollar equivalent thereof. Notes issued in non-U.S. currencies may be issued by one or more subsidiaries of the Operating Partnership and are guaranteed by the Operating Partnership. Notes will be sold under customary terms in the U.S and Euro commercial paper note markets and will rank (either by themselves or as a result of the guarantee described above) pari passu with all of the Operating Partnership's other unsecured senior indebtedness. Our Commercial Paper program is supported by our credit facilities and if necessary or appropriate, we may make one or more draws under the credit facilities to pay amounts outstanding from time to time on the Commercial Paper program. At December 31, 2014, we had $409.2 million outstanding comprised of $200.0 million outstanding in U.S. dollar denominated notes and $209.2 million (U.S. dollar equivalent) of Euro denominated notes with weighted average interest rates of 0.19% and 0.13%, respectively. The borrowings mature on various dates from January 7, 2015 to March 18, 2015.

On September 3, 2014, the Operating Partnership commenced cash tender offers for any and all of five series of its outstanding senior unsecured notes with maturity dates ranging from 2015 to 2017. The total principal amount of notes tendered and accepted for purchase was approximately $1.322 billion, with a weighted average remaining duration of 1.7 years and a weighted average coupon rate of 5.60%. The Operating Partnership purchased the tendered notes using cash on hand and the proceeds from an offering of $1.3 billion of senior unsecured notes that closed on September 10, 2014. The senior notes offering was comprised of $900.0 million of 3.375% notes due 2024 and $400.0 million of 4.25% notes due 2044. Combined, the new issues of senior notes have a weighted average duration of 16.1 years and a weighted average coupon rate of 3.64%. A portion of the proceeds from the senior notes offering was also used to fund the redemption on September 30, 2014 of all $250.0 million outstanding principal amount of the 7.875% notes due 2016 issued by one of our subsidiaries. We recorded a $127.6 million loss of extinguishment of debt in the third quarter of 2014 as a result of the tender offers and redemption.

On January 21, 2014, the Operating Partnership issued $600.0 million of senior unsecured notes at a fixed interest rate of 2.20% with a maturity date of February 1, 2019 and $600.0 million of senior unsecured notes at a fixed interest rate of 3.75% with a maturity date of February 1, 2024. Proceeds from the unsecured notes offering were used to repay debt and for general corporate purposes.

In addition to the debt tender offers and redemption described above, during 2014 we used cash on hand to redeem at par or repay at maturity $1.3 billion of senior unsecured notes with fixed rates ranging from 4.20% to 6.75%.

Mortgage Debt

Total mortgage indebtedness was $6.2 billion and $7.3 billion at December 31, 2014 and 2013, respectively.

On January 2, 2014, we repaid the $820.0 million outstanding mortgage at Sawgrass Mills originally maturing July 1, 2014 and on February 28, 2014, we repaid the $269.0 million outstanding mortgage at Great Mall originally maturing August 28, 2015. During 2014, we disposed of our interests in three retail properties and their related mortgage debt of $90.0 million.

Covenants

Our unsecured debt agreements contain financial covenants and other non-financial covenants. If we were to fail to comply with these covenants, after the expiration of the applicable cure periods, the debt maturity could be accelerated or other remedies could be sought by the lender including adjustments to the applicable interest rate. As of December 31, 2014, we were in compliance with all covenants of our unsecured debt.

At December 31, 2014, we or our subsidiaries were the borrowers under 38 non-recourse mortgage notes secured by mortgages on 52 properties, including five separate pools of cross-defaulted and cross-collateralized mortgages encumbering a total of 21 properties. Under these cross-default provisions, a default under any mortgage included in the cross-defaulted pool may constitute a default under all mortgages within that pool and may lead to acceleration of the indebtedness due on each property within the pool. Certain of our secured debt instruments contain financial and other non-financial covenants which are specific to the properties which serve as collateral for that debt. If the borrower fails to comply with these covenants, the lender could accelerate the debt and enforce its right against their collateral. At December 31, 2014, the applicable borrowers under these non-recourse mortgage notes were in compliance with all covenants where non-compliance could individually, or giving effect to applicable cross-default provisions in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows.

Summary of Financing

Our consolidated debt, adjusted to reflect outstanding derivative instruments, and the effective weighted average interest rates as of December 31, 2014 and 2013, consisted of the following (dollars in thousands):

Debt Subject to		Adjusted Balance as of December 31, 2014			Effective Weighted Average Interest Rate			Adjusted Balance as of December 31, 2013			Effective Weighted Average Interest Rate
Fixed Rate		$	19,015,271			4.72	%	$	20,907,618			5.10	%
Variable Rate			1,837,722			1.16	%		1,762,299			1.22	%
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		$	20,852,993			4.41	%	$	22,669,917			4.80	%
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Contractual Obligations and Off-balance Sheet Arrangements

In regards to long-term debt arrangements, the following table summarizes the material aspects of these future obligations on our consolidated indebtedness as of December 31, 2014, and subsequent years thereafter (dollars in thousands) assuming the obligations remain outstanding through initial maturities including applicable exercise of available extension options:

		2015			2016 and 2017			2018 and 2019			After 2019			Total
Long Term Debt (1)		$	1,174,796		$	5,935,795		$	3,952,670		$	9,780,710		$	20,843,971
Interest Payments (2)			907,771			1,430,850			972,343			2,462,576			5,773,540
Consolidated Capital Expenditure Commitments (3)			366,113						—			—			366,113
Lease Commitments (4)			29,775			70,657			63,679			907,110			1,071,221

(1)

Represents principal maturities only and therefore, excludes net premiums of $9,022.

(2)

Variable rate interest payments are estimated based on the LIBOR rate at December 31, 2014.

(3)

Represents contractual commitments for capital projects and services at December 31, 2014. Our share of estimated 2015 development, redevelopment and expansion activity is further discussed below in the "Development Activity" section.

(4)

Represents only the minimum non-cancellable lease period, excluding applicable lease extension and renewal options.

Our off-balance sheet arrangements consist primarily of our investments in joint ventures which are common in the real estate industry and are described in Note 7 to the notes to consolidated financial statements. Our joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint venture debt is secured by a first mortgage, is without recourse to the joint venture partners, and does not represent a liability of the partners, except to the extent the partners or their affiliates expressly guarantee the joint venture debt. As of December 31, 2014, the Operating Partnership guaranteed joint venture related mortgage indebtedness of $223.5 million (of which we have a right of recovery from our venture partners of $78.7 million). Mortgages guaranteed by us are secured by the property of the joint venture which could be sold in order to satisfy the outstanding obligation and which has an estimated fair value in excess of the guaranteed amount. We may elect to fund cash needs of a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans, although such fundings are not required contractually or otherwise.

Acquisitions and Dispositions

Buy-sell, marketing rights, and other exit mechanisms are common in real estate partnership agreements. Most of our partners are institutional investors who have a history of direct investment in retail real estate. We and our partners in our joint venture properties may initiate these provisions (subject to any applicable lock up or similar restrictions). If we determine it is in our stockholders' best interests for us to purchase the joint venture interest and we believe we have adequate liquidity to execute the purchase without hindering our cash flows, then we may initiate these provisions or elect to buy our partner's interest. If we decide to sell any of our joint venture interests, we expect to use the net proceeds to reduce outstanding indebtedness or to reinvest in development, redevelopment, or expansion opportunities.

Acquisitions. On January 15, 2015, we acquired a 100% interest in Jersey Gardens (renamed The Mills at Jersey Gardens) in Elizabeth, New Jersey and University Park Village in Fort Worth, Texas, properties previously owned by Glimcher Realty Trust for $677.9 million of cash and the assumption of existing mortgage debt of $405.0 million.

On April 10, 2014, through our joint venture with McArthurGlen, we acquired an additional 22.5% noncontrolling interest in Ashford Designer Outlet, increasing our percentage ownership of this property to 45%.

On January 30, 2014, we acquired the remaining 50% interest in Arizona Mills from our joint venture partner, as well as approximately 39 acres of land in Oyster Bay, New York, for approximately $145.8 million, consisting of cash consideration and 555,150 units of the Operating Partnership. Arizona Mills is subject to a mortgage which was $166.9 million at the time of the acquisition. The consolidation of this previously unconsolidated property resulted in a remeasurement of our previously held interest to fair value and a corresponding non-cash gain of $2.7 million in the first quarter of 2014. We now own 100% of this property.

On January 10, 2014, we acquired one of our partner's redeemable interests in a portfolio of ten properties for approximately $114.4 million subject to a pre-existing contractual arrangement. The amount paid to acquire the interests in

the seven properties which were previously consolidated was included in limited partners' preferred interest in the Operating Partnership and noncontrolling redeemable interests in properties at December 31, 2013.

Dispositions. We continue to pursue the disposition of properties that no longer meet our strategic criteria or that are not a primary retail venue within their trade area.

As discussed in Note 3 to the notes to the consolidated financial statements, on May 28, 2014, we completed the spin-off of our interests in 98 properties comprised of substantially all of our strip center business and our smaller enclosed malls to Washington Prime.

During 2014, we disposed of our interests in three consolidated retail properties. The aggregate gain recognized on these transactions was approximately $21.8 million.

On September 26, 2014, we sold our investment in a hotel located at Coconut Point in Estero, Florida. The gain from this sale was $4.5 million, which is included in other income in the accompanying consolidated statements of operations and comprehensive income.

Development Activity

New Domestic Developments, Redevelopments and Expansions. During 2014, construction began on the following Premium Outlets:

Gloucester Premium Outlets, a 375,000 square foot project located in Gloucester, New Jersey, which is scheduled to open in August 2015. We own a 50% noncontrolling interest in this project. Our estimated share of the cost of this project is $61.4 million.

Tucson Premium Outlets, a 366,000 square foot project, which is scheduled to open in October 2015. We own a 100% interest in this project. The estimated cost of this project is $95.0 million.

Tampa Premium Outlets, a 441,000 square foot project, which is scheduled to open in October 2015. We own a 100% interest in this project. The estimated cost of this project is $129.2 million.

During 2014, the following Premium Outlets opened:

Charlotte Premium Outlets, a 399,000 square foot project located in Charlotte, North Carolina, opened on July 31, 2014. We own a 50% noncontrolling interest in this project, which is a joint venture with Tanger. Our share of the cost of this project is approximately $46.0 million.

Twin Cities Premium Outlets, a 409,000 square foot project located in Eagan, Minnesota, opened on August 14, 2014. We own a 35% noncontrolling interest in this project. Our share of the cost of this project is approximately $37.9 million.

We recently announced plans to develop The Shops at Clearfork, a new 500,000 square foot project located in Fort Worth, Texas, which is scheduled to open in February 2017. We own a 45% noncontrolling interest in this project.

We routinely incur costs related to construction for significant redevelopment and expansion projects at our properties. Redevelopment and expansion projects, including the addition of anchors and big box tenants, are underway at 25 properties in the U.S.

Summary of Capital Expenditures. The following table summarizes total capital expenditures on consolidated properties on a cash basis (in millions):

		2014			2013			2012
New Developments		$	52		$	40		$	216
Redevelopments and Expansions			500			509			332
Tenant Allowances			143			124			112
Operational Capital Expenditures			79			75			74
Capital Expenditures on Washington Prime properties			23			93			68
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Total		$	797		$	841		$	802
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Our share of the costs of all development and redevelopment projects currently under construction is approximately $2.1 billion. We expect to fund these capital projects with cash flows from operations. Our estimated stabilized return on invested capital typically ranges between 8-12% for all of our new development, expansion and redevelopment projects.

International Development Activity. We typically reinvest net cash flow from our international joint ventures to fund future international development activity. We believe this strategy mitigates some of the risk of our initial investment and our exposure to changes in foreign currencies. We have also funded most of our foreign investments with local currency-denominated borrowings that act as a natural hedge against fluctuations in exchange rates. We expect our share of international development costs for 2015 will be approximately $118.0 million, primarily funded through reinvested joint venture cash flow and construction loans.

The following table describes these new development and expansion projects as well as our share of the estimated total cost as of December 31, 2014 (in millions):

Property		Location		Gross Leasable Area (sqft)			Our Ownership Percentage			Our Share of Projected Net Cost (in Local Currency)			Our Share of Projected Net Cost (in USD)			Projected Opening Date
New Development Projects:
Montreal Premium Outlets		Montreal (Quebec), Canada			360,000			50	%		CAD 74.2		$	63.9		Opened Oct. - 2014
Vancouver Designer Outlet		Vancouver (British Columbia), Canada			242,000			45	%		CAD 68.7		$	59.3		Summer - 2015
Expansions:
Premium Outlets Punta Norte Phase 3		Mexico City, Mexico			55,000			50	%		MXN 43.8		$	3.0		Opened Nov. - 2014
Toki Premium Outlets Phase 4		Gifu (Osaka), Japan			77,000			40	%		JPY 1,805		$	15.1		Opened Nov. - 2014
Yeoju Premium Outlets Phase 2		Gyeonggi Province, South Korea			259,000			50	%		KRW 79,361		$	72.5		March - 2015
Shisui Premium Outlets Phase 2		Shisui (Chiba), Japan			130,000			40	%		JPY 2,895		$	24.2		May - 2015

Dividends

Common stock dividends during 2014 aggregated $5.15 per share. Common stock dividends during 2013 aggregated $4.65 per share. In January 2015, our Board of Directors declared a cash dividend of $1.40 per share of common stock payable on February 27, 2015 to stockholders of record on February 13, 2015. We must pay a minimum amount of dividends to maintain our status as a REIT. Our future dividends and future distributions of the Operating Partnership will be determined by the Board of Directors based on actual results of operations, cash available for dividends and limited partner distributions, cash reserves as deemed necessary for capital and operating expenditures, and the amount required to maintain our status as a REIT.

Forward-Looking Statements

Certain statements made in this section or elsewhere in this report may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that its expectations will be attained, and it is possible that our actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to: our ability to meet debt service requirements, the availability and terms of financing, changes in our credit rating, changes in market rates of interest and foreign exchange rates for foreign currencies, changes in value of investments in foreign entities, the ability to hedge interest rate and currency risk, risks associated with the acquisition, development, expansion, leasing and management of properties, general risks related to retail real estate, the liquidity of real estate investments, environmental liabilities, international, national, regional and local economic conditions, changes in market rental rates, security breaches that could compromise our information technology or infrastructure or personally identifiable data of customers of our retail properties, trends in the retail industry, relationships with anchor tenants, the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, risks relating to joint venture properties, the intensely competitive market environment in the retail industry, costs of common area maintenance, risks related to international activities, insurance costs and coverage, the loss of key management personnel, terrorist activities, changes in economic and market conditions and maintenance of our status as a real estate investment trust. We discussed these and other risks and uncertainties under the heading "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K. We may update that discussion in subsequent Quarterly Reports on Form 10-Q, but otherwise we undertake no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

Non-GAAP Financial Measures

Industry practice is to evaluate real estate properties in part based on performance measures such as FFO, diluted FFO per share, NOI and comparable property NOI. We believe that these non-GAAP measures are helpful to investors because they are widely recognized measures of the performance of REITs and provide a relevant basis for comparison among REITs. We also use these measures internally to measure the operating performance of our portfolio.

We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts, or NAREIT, as consolidated net income computed in accordance with GAAP:

excluding real estate related depreciation and amortization,

excluding gains and losses from extraordinary items and cumulative effects of accounting changes,

excluding gains and losses from the sales or disposals of previously depreciated retail operating properties,

excluding impairment charges of depreciable real estate,

plus the allocable portion of FFO of unconsolidated entities accounted for under the equity method of accounting based upon economic ownership interest, and

all determined on a consistent basis in accordance with GAAP.

We have adopted NAREIT's clarification of the definition of FFO that requires us to include the effects of nonrecurring items not classified as extraordinary, cumulative effect of accounting changes, or a gain or loss resulting from the sale or disposal of, or any impairment charges related to, previously depreciated operating properties.

We include in FFO gains and losses realized from the sale of land, outlot buildings, marketable and non-marketable securities, and investment holdings of non-retail real estate. We also include in FFO the impact of foreign currency exchange gains and losses, legal expenses, transaction expenses and other items required by GAAP.

You should understand that our computation of these non-GAAP measures might not be comparable to similar measures reported by other REITs and that these non-GAAP measures:

do not represent cash flow from operations as defined by GAAP,

should not be considered as alternatives to consolidated net income determined in accordance with GAAP as a measure of operating performance, and

are not alternatives to cash flows as a measure of liquidity.

The following schedule reconciles total FFO to consolidated net income and diluted net income per share to diluted FFO per share.

		2014			2013			2012
		(in thousands)
Funds from Operations		$	3,235,298		$	3,205,693		$	2,884,915
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Increase in FFO from prior period			0.9%			11.1%			18.3%
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Consolidated Net Income		$	1,651,526		$	1,551,590		$	1,719,632
Adjustments to Arrive at FFO:
Depreciation and amortization from consolidated properties			1,204,624			1,273,646			1,242,741
Our share of depreciation and amortization from unconsolidated entities, including Klépierre			549,138			511,200			456,011
Gain upon acquisition of controlling interests, sale or disposal of assets and interests in unconsolidated entities, and impairment charge on investment in unconsolidated entities, net			(158,550	)		(107,515	)		(510,030	)
Net income attributable to noncontrolling interest holders in properties			(2,491	)		(8,990	)		(8,520	)
Noncontrolling interests portion of depreciation and amortization			(3,697	)		(8,986	)		(9,667	)
Preferred distributions and dividends			(5,252	)		(5,252	)		(5,252	)
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FFO of the Operating Partnership (A) (B)		$	3,235,298		$	3,205,693		$	2,884,915
FFO allocable to limited partners			469,479			460,923			464,567
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Dilutive FFO Allocable to Simon		$	2,765,819		$	2,744,770		$	2,420,348
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Diluted net income per share to diluted FFO per share reconciliation:
Diluted net income per share		$	4.52		$	4.24		$	4.72
Depreciation and amortization from consolidated properties and our share of depreciation and amortization from unconsolidated entities, including Klépierre, net of noncontrolling interests portion of depreciation and amortization			** 4.82**			4.91			4.67
Gain upon acquisition of controlling interest, sale or disposal of assets and interests in unconsolidated entities, and impairment charge on investment in unconsolidated entities, net			(0.44	)		(0.30	)		(1.41	)
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Diluted FFO per share (A) (B)		$	8.90		$	8.85		$	7.98
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Basic weighted average shares outstanding			310,731			310,255			303,137
Adjustments for dilution calculation:
Effect of stock options			—			—			1
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Diluted weighted average shares outstanding			310,731			310,255			303,138
Weighted average limited partnership units outstanding			52,745			52,101			58,186
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Diluted weighted average shares and units outstanding			363,476			362,356			361,324
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(A)

Includes FFO of the Operating Partnership related to the Washington Prime properties, net of transaction expenses, of $108.0 million, $360.3 million and $350.1 million for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, respectively. Includes Diluted FFO per share related to Washington Prime properties, net of transaction expenses, of $0.30, $0.99 and $0.97 for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

(B)

FFO of the Operating Partnership includes a loss on extinguishment of debt of $127.6 million, or $0.35 per diluted share, for the year ended December 31, 2014.

The following schedule reconciles consolidated net income to NOI and sets forth the computations of comparable property NOI.

		For the Year Ended December 31,
		2014			2013
		(in thousands)
Reconciliation of NOI of consolidated properties:
Consolidated Net Income		$	1,651,526		$	1,551,590
Discontinued operations			(67,524	)		(184,797	)
Discontinued operations transaction expenses			38,163			—
Income and other taxes			28,085			39,538
Interest expense			992,601			1,082,081
Income from unconsolidated entities			(226,774	)		(206,380	)
Loss on extinguishment of debt			127,573			—
Gain upon acquisition of controlling interests and sale or disposal of assets and interests in unconsolidated entities, net			(158,308	)		(93,363	)
​	​	​	​	​	​	​	​
Operating Income			2,385,342			2,188,669
Depreciation and amortization			1,143,827			1,107,700
​	​	​	​	​	​	​	​
NOI of consolidated properties		$	3,529,169		$	3,296,369
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Reconciliation of NOI of unconsolidated entities:
Net Income		$	677,371		$	641,099
Interest expense			598,900			680,321
Income from operations of discontinued joint venture interests			(5,079	)		(14,200	)
Gain on disposal of discontinued operations, net			—			(51,164	)
​	​	​	​	​	​	​	​
Operating Income			1,271,192			1,256,056
Depreciation and amortization			604,199			512,702
​	​	​	​	​	​	​	​
NOI of unconsolidated entities		$	1,875,391		$	1,768,758
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Total consolidated and unconsolidated NOI
from continuing operations		$	5,404,560		$	5,065,127
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Change in total NOI from continuing operations from prior period			6.7%
Adjustments to NOI:
NOI of discontinued consolidated properties			169,828			409,848
NOI of discontinued unconsolidated properties			17,445			44,352
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Total NOI of our portfolio		$	5,591,833		$	5,519,327
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Add: Our share of NOI from Klépierre			223,013			276,391
Less: Joint venture partners' share of NOI from continuing operations			966,154			949,841
Less: Joint venture partners' share of NOI from discontinued operations			12,998			33,620
​	​	​	​	​	​	​	​
Our share of NOI		$	4,835,694		$	4,812,257
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Total NOI of our portfolio		** $**	** 5,591,833**		$	5,519,327
NOI from non comparable properties (1)			961,053			1,112,166
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Total NOI of comparable properties (2)		$	4,630,780		$	4,407,161
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Increase in NOI of U.S. Malls, Premium Outlets, and The Mills that are comparable properties			5.1%
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(1)

NOI excluded from comparable property NOI relates to Washington Prime properties, international properties, other retail properties, TMLP properties, any of our non-retail holdings and results of our corporate and management company operations, NOI of U.S. Malls, Premium Outlets and The Mills not owned and operated in both periods under comparison and excluded income noted in footnote 2 below.

(2)

Excludes lease termination income, interest income, land sale gains, straight line rent, above/below market rent adjustments, and the impact of significant redevelopment activities.

Management's Report on Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and disposition of assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on that assessment, we believe that, as of December 31, 2014, our internal control over financial reporting is effective based on those criteria.