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 that are included in this Annual Report on Form 10-K.

Overview

Simon Property Group, Inc. 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, or the Internal Revenue Code. REITs will generally not be liable for U.S. federal corporate income taxes as long as they distribute not less than 100% of their REIT taxable income. Simon Property Group, L.P. is our majority-owned Delaware partnership subsidiary that owns all of our real estate properties and other assets. In this discussion, unless stated otherwise or the context otherwise requires, references to "Simon" mean Simon Property Group, Inc. and references to the "Operating Partnership" mean Simon Property Group, L.P. References to "we," "us" and "our" mean collectively Simon, the Operating Partnership and those entities/subsidiaries owned or controlled by Simon and/or the Operating Partnership. According to the Operating Partnership's partnership agreement, the Operating Partnership is required to pay all expenses of Simon.

We own, develop and manage premier shopping, dining, entertainment and mixed-use destinations, which consist primarily of malls, Premium Outlets®, and The Mills®. As of December 31, 2020, we owned or held an interest in 203 income-producing properties in the United States, which consisted of 99 malls, 69 Premium Outlets, 14 Mills, four lifestyle centers, and 17 other retail properties in 37 states and Puerto Rico. We also own an 80% noncontrolling interest in The Taubman Realty Group, LLC, or TRG, which has an interest in 24 regional, super-regional, and outlet malls in the U.S. and Asia. In addition, we have redevelopment and expansion projects, including the addition of anchors, big box tenants, and restaurants, underway at several properties in the United States, Canada, Europe and Asia. Internationally, as of December 31, 2020, we had ownership in 31 Premium Outlets and Designer Outlet properties primarily located in Asia, Europe, and Canada. We also have four international outlet properties under development. As of December 31, 2020, we also owned a 22.4% 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 15 countries in Europe.

We generate the majority of our lease income from retail, dining, entertainment, and other tenants including consideration received from:

	●	fixed minimum lease consideration and fixed common area maintenance (CAM) reimbursements, and

	●	variable lease consideration primarily based on tenants’ sales, as well as reimbursements for real estate taxes, utilities, marketing and certain other items.

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 revenues 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 outlet properties.

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 portfolio NOI 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.

COVID-19

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus, or COVID-19, a global pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic has already had a significant negative impact on economic and market conditions around the world in 2020, and, notwithstanding the fact that vaccines have started to be administered in the United States and elsewhere, the pandemic continues to adversely impact economic activity in real estate. The impact of the COVID-19 pandemic continues to evolve and governments and other authorities, including where we own or hold interests in properties, have imposed measures intended to control its spread, including restrictions on freedom of movement, group gatherings and business operations such as travel bans, border closings, business closures, quarantines, stay-at-home, shelter-in-place orders, capacity limitations and social distancing measures. Governments and other authorities are in varying stages of lifting or modifying some of these measures, however certain governments and other authorities have already been forced to, and others may in the future, reinstate these measures or impose new, more restrictive measures, if the risks, or the tenants’ and consumers’ perception of the risks, related to the COVID-19 pandemic worsen at any time. Although tenants and consumers have been adapting to the COVID-19 pandemic, with tenants adding services like curbside pickup, and while consumer risk-tolerance is evolving, such adaptations and evolution may take time, and there is no guarantee that retail will return to pre-pandemic levels even once the pandemic subsides. As a result of the COVID-19 pandemic and these measures, the Company may experience material impacts including changes in the ability to recognize revenue due to changes in our assessment of the probability of collection of lease income and asset impairment charges as a result of changing cash flows generated by our properties. Due to certain restrictive governmental orders placed on us, our domestic portfolio lost approximately 13,500 shopping days during the year.

As of October 7, 2020, all of our domestic properties and certain of our retailer investments had reopened, but we do not have certainty that additional closures in the future will not be required.

As we developed and implemented our response to the impact of the COVID-19 pandemic and restriction intended to prevent its spread on our business, our primary focus has been on the health and safety of our employees, our shoppers and the communities in which we serve. We implemented a series of actions to reduce costs and increase liquidity in light of the economic impacts of the pandemic, including:

	●	significantly reduced all non-essential corporate spending,

	●	significantly reduced property operating expenses, including discretionary marketing spend,

	●	implemented a temporary furlough of certain corporate and field employees due to the closure of the Company’s U.S. properties as a result of restrictive governmental orders; reduced certain corporate and field personnel and implemented a temporary freeze on company hiring efforts, and

	●	suspended more than $1.0 billion of redevelopment and new development projects.

Results Overview

Diluted earnings per share and diluted earnings per unit decreased $3.22 during 2020 to $3.59 as compared to $6.81 in 2019. The decrease in diluted earnings per share and diluted earnings per unit was primarily attributable to:

	●	a lawsuit settled with our former insurance broker in 2019 related to the significant flood damage sustained at Opry Mills in May 2010 of $68.0 million, or $0.19 per diluted share/unit,

	●	a gain in 2019 related to the disposition of our interest in a multi-family residential investment of $16.2 million, or $0.05 per diluted share/unit,

	●	decreased consolidated lease income of $941.4 million, or $2.65 per diluted share/unit, comprised of decreased fixed lease income of $422.0 million and decreased variable lease income of $519.4 million, which was primarily due to COVID-19 disruption,

	●	decreased other income, excluding the two aforementioned 2019 transactions, of $106.1 million, or $0.30 per diluted share/unit, primarily related to decreased Simon Brand Ventures and gift card revenues due to COVID-19 disruption,

	●	a net loss in 2020 of $115.0 million, or $0.32 per diluted share/unit, primarily related to impairment charges in 2020 related to Klépierre, our investment in HBS, one consolidated property, and three joint venture properties, partially offset by gains from disposition activity in 2020, of $14.9 million, or $0.04 per diluted share/unit which was lower than 2019 net gains,

	●	decreased income from unconsolidated entities of $224.5 million, or $0.63 per diluted share/unit, primarily due to unfavorable domestic and international operations and year-over-year operations from retailer investments of $7.5 million, or $0.02 per diluted share/unit, all of which were impacted by COVID-19 disruption, and

	●	an unrealized unfavorable change in fair value of equity instruments of $11.4 million, or $0.03 per diluted share/unit, partially offset by

	●	decreased consolidated total operating expenses of $211.7 million, or $0.60 per diluted share/unit, which was primarily related to cost reduction efforts as a result of the COVID-19 disruption,

	●	a charge on early extinguishment of debt of $116.3 million, or $0.33 per diluted share/unit, in 2019, and

	●	decreased tax expense of $34.7 million, or $0.10 per diluted share/unit.

Portfolio NOI decreased 17.1% in 2020 as compared to 2019. Average base minimum rent for U.S. Malls and Premium Outlets increased 2.2% to $55.80 psf as of December 31, 2020, from $54.59 psf as of December 31, 2019. Leasing spreads in our U.S. Malls and Premium Outlets decreased to an open/close leasing spread (based on total tenant payments — base minimum rent plus common area maintenance) of $4.41 psf ($60.08 openings compared to $64.49 closings) as of December 31, 2020, representing a 6.8% decrease. Ending occupancy for our U.S. Malls and Premium Outlets decreased 3.8% to 91.3% as of December 31, 2020, from 95.1% as of December 31, 2019, primarily due to 2020 tenant bankruptcy activity, partially offset by leasing activity.

Our effective overall borrowing rate at December 31, 2020 on our consolidated indebtedness decreased 18 basis points to 2.98% as compared to 3.16% at December 31, 2019. This decrease was primarily due to a decrease in the effective overall borrowing rate on variable rate debt of 130 basis points (1.31% at December 31, 2020 as compared to 2.61% at December 31, 2019) partially offset by an increase in the effective overall borrowing rate on fixed rate debt of four basis points (3.50% at December 31, 2020 as compared to 3.46% at December 31, 2019). The weighted average years to maturity of our consolidated indebtedness was 7.3 years and 7.4 years at December 31, 2020 and 2019, respectively.

Our financing activity for the year ended December 31, 2020 included:

	●	amending and replacing in its entirety the Operating Partnership’s existing $4.0 billion unsecured revolving credit facility, or Credit Facility, by entering into an unsecured credit facility comprised of (i) an amendment and extension of the Credit Facility and (ii) a $2.0 billion delayed-draw term loan facility, or Term Facility,

	●	borrowing $3.1 billion under the Credit Facility and subsequently repaying $3.1 billion under the Credit Facility,

	●	borrowing $875.0 million under the Operating Partnership’s $3.5 billion unsecured revolving credit facility, or Supplemental Facility, and together with the Credit Facility and Term Facility, the Facilities, and subsequently repaying $875.0 million,

	●	decreasing our borrowings under the Operating Partnership’s global unsecured commercial paper note program, or the Commercial Paper program, by $704.0 million,

	●	borrowing $2.0 billion under the Term Facility,

	●	issuing 22,137,500 shares of common stock in a public offering for $1.6 billion, net of issue costs,

	●	completing, on July 9, 2020, the issuance by the Operating Partnership of the following senior unsecured notes: $500 million with a fixed interest rate of 3.50%, $750 million with a fixed interest rate 2.65%, and $750 million with a fixed interest rate of 3.80%, with maturity dates of September 2025 (the “2025 Notes”), June 2030, and June 2050, respectively. The 2025 Notes were issued as additional notes under an indenture pursuant to which the Operating Partnership previously issued $600 million principal amount of 3.50% senior notes due September 2025 on August 17, 2015. Proceeds from the unsecured notes offering funded the optional redemption at par of senior unsecured notes in July and August 2020, as discussed below, and repaid a portion of the indebtedness under the Facilities,

	●	completing, on July 22, 2020, the optional redemption at par of the Operating Partnership’s $500 million 2.50% notes due September 1, 2020, and

	●	completing, on August 6, 2020, the optional redemption at par of the Operating Partnership’s €375 million 2.375% notes due October 2, 2020.

Subsequent Activity

On January 21, 2021 the Operating Partnership completed the issuance of the following senior unsecured notes: $800 million with a fixed interest rate of 1.75%, and $700 million with a fixed interest rate of 2.20%, with maturity dates of January 2028 and 2031, respectively.

On January 27, 2021 the Operating Partnership completed the planned optional redemption of its $550 million 2.50% notes due on July 15, 2021, including the make-whole amount. Further on February 2, 2021, the Operating Partnership repaid $750 million under the Term Facility.

United States Portfolio Data

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

The following table sets forth these key operating statistics for the combined U.S. Malls and Premium Outlets:

	●	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.

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	%/Basis Point	​	​	​	​	%/Basis Point	​	​	​
​		2020		​	Change (1)	​	2019		​	Change (1)	​	2018
U.S. Malls and Premium Outlets:	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Ending Occupancy	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Consolidated	​	​	91.5	%	-380	bps	​	95.3	%	-60	bps	​	95.9	%
Unconsolidated	​	​	90.9	%	-360	bps	​	94.5	%	-130	bps	​	95.8	%
Total Portfolio	​	​	91.3	%	-380	bps	​	95.1	%	-80	bps	​	95.9	%
Average Base Minimum Rent per Square Foot	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Consolidated	​	$	53.98	​	1.7	%	$	53.06	​	1.0	%	$	52.51	​
Unconsolidated	​	$	60.97	​	3.8	%	$	58.71	​	0.2	%	$	58.59	​
Total Portfolio	​	$	55.80	​	2.2	%	$	54.59	​	0.8	%	$	54.18	​
The Mills:	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Ending Occupancy	​		95.3	%	-170	bps		97.0	%	-60	bps		97.6	%
Average Base Minimum Rent per Square Foot	​	$	33.77	​	2.1	%	$	33.09	​	1.4	%	$	32.63	​

(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 Reported Sales per Square Foot. Given the impact of COVID-19 and the governmental restrictions placed on us, we are not presenting reported retail sales per square foot as we do not believe the trends for the period are indicative of future operating trends.

Current Leasing Activities

During 2020, we signed 460 new leases and 1,175 renewal leases (excluding mall anchors and majors, new development, redevelopment and leases with terms of one year or less) with a fixed minimum rent across our U.S. Malls and Premium Outlets portfolio, comprising approximately 6.1 million square feet, of which 4.8 million square feet related to consolidated properties. During 2019, we signed 990 new leases and 1,281 renewal leases with a fixed minimum rent, comprising approximately 7.6 million square feet, of which 5.7 million square feet related to consolidated properties. The average annual initial base minimum rent for new leases was $53.97 per square foot in 2020 and $56.80 per square foot in 2019 with an average tenant allowance on new leases of $51.01 per square foot and $47.57 per square foot, respectively.

Japan 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,			%/basis point		December 31,			%/basis point		December 31,
​	​	2020		​	Change	​	2019		​	Change	​	2018
Ending Occupancy	​	​	99.5%	​	+0 bps	​	​	99.5%	​	-20 bps	​	​	99.7%	​
Average Base Minimum Rent per Square Foot	​	¥	5,447	​	3.38%	​	¥	5,269	​	2.19%	​	¥	5,156	​

​

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles, or 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 the 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 fixed lease income on a straight-line basis over the terms of the leases, when we believe substantially all lease income, including the related straight-line rent receivable, is probable of collection. Our assessment of collectability incorporates available operational performance measures such as sales and the aging of billed amounts as well as other publicly available information with respect to our tenant’s financial condition, liquidity and capital resources, including declines in such conditions due to, or amplified by, the COVID-19 pandemic. When a tenant seeks to reorganize its operations through bankruptcy proceedings, we assess the collectability of receivable balances including, among other things, the timing of a tenant’s bankruptcy filing and our expectations of the assumption by the tenant in bankruptcy proceeding of leases at the Company’s properties on substantially similar terms. In the event that we determine accrued receivables are not probable of collection, lease income will be recorded on a cash basis, with the corresponding tenant receivable and straight-line rent receivable charged as a direct write-off against lease income in the period of the change in our collectability determination.

	●	We review investment properties for impairment on a property-by-property basis to identify and evaluate events or changes in circumstances which indicate that the carrying value of investment properties may not be recoverable. These circumstances include, but are not limited to, changes in a property’s operational performance such as declining cash flows, occupancy or total sales per square foot, the Company’s intent and ability to hold the related asset, and, if applicable, the remaining time to maturity of underlying financing arrangements. We measure any impairment of investment property when the estimated undiscounted operating income before depreciation and amortization during the anticipated holding period 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 our estimate of its fair value. We also review our investments, including investments in unconsolidated entities, to identify and evaluate whether events or changes in circumstances indicate that the carrying amount of our investments may not be recoverable. We will record an impairment charge if we determine the fair value of the investments are less than their carrying value and such impairment is other-than-temporary. Our evaluation of changes in economic or operating conditions and whether an impairment is other-than-temporary may include developing estimates of fair value, forecasted cash flows or operating income before depreciation and amortization. We estimate undiscounted cash flows and fair value using observable and unobservable data such as operating income, hold periods, estimated capitalization and discount rates, or relevant market multiples, leasing prospects and local market information and whether certain impairments are other-than-temporary. Changes in economic and operating conditions, including changes in the financial condition of our tenants, and changes to our intent and ability to hold the related asset, 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 Simon’s status as a REIT, we must distribute at least 90% of REIT taxable income in any given year and meet certain asset and income tests. We monitor our business and transactions that may potentially impact Simon’s REIT status. In the unlikely event that we fail to maintain Simon’s REIT status, and available relief provisions do not apply, we would be required to pay U.S. federal income taxes at regular corporate income tax rates during the period Simon did not qualify as a REIT. If Simon lost its REIT status, it could not elect to be taxed as a REIT for four taxable years following the year during which qualification was lost unless its 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.

	●	In the period of a significant acquisition of real estate, we make estimates as part of our valuation of the purchase price of asset acquisitions (including the components of excess investment in joint ventures) to the various components of the acquisition based upon the relative fair value of each component. The most significant components of our real estate valuations are typically the determination of relative 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 fair value of land and other intangibles, our estimates of the values of these components will affect the amount of depreciation or amortization 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.

Results of Operations

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

	●	During the fourth quarter of 2020, we disposed of one consolidated retail property.

	●	On September 19, 2019, we acquired the remaining 50% interest in a hotel adjacent to one of our properties from our joint venture partner.

	●	During the third quarter of 2019, we disposed of two retail properties.

	●	On September 27, 2018, we opened Denver Premium Outlets, a 330,000 square foot center in Thornton (Denver), Colorado. We own a 100% interest in this center.

	●	On September 25, 2018, we acquired the remaining 50% interest in the previously unconsolidated The Outlets at Orange in Los Angeles, California from our joint venture partner.

	●	During 2018, we disposed of two retail properties.

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

	●	On December 29, 2020, we completed the acquisition of an 80% ownership interest in TRG, which is engaged in the ownership of 24 regional, super-regional, and outlet malls in the U.S. and Asia.

	●	On December 7, 2020, we and a group of co-investors acquired certain assets and liabilities of J.C. Penney, a department store retailer, out of bankruptcy. Our interest in the venture is 41.67%.

	●	On June 23, 2020, we opened Siam Premium Outlets, a 264,000 square foot center in Bangkok, Thailand. We own a 50% interest in this center.

	●	On February 19, 2020 we and a group of co-investors acquired certain assets and liabilities of Forever 21, a retailer of apparel and accessories, out of bankruptcy. The interests were acquired through two separate joint ventures, a licensing venture and an operating venture. Our interest in each of the retail operations venture and in the licensing venture is 37.5%.

	●	On February 13, 2020 through our European investee, we opened Malaga Designer Outlets, a 191,000 square foot center in Malaga, Spain. We own a 46% interest in this center.

	●	In January 2020, we acquired additional interests of 5.05% and 1.37% in SPARC Group, formerly known as Aeropostale and Authentic Brands Groups, LLC, or ABG, respectively.

	●	On October 16, 2019 we acquired a 45% interest in Rue Gilt Groupe, or RGG, to create a new multi-platform venture dedicated to digital value shopping.

	●	On May 22, 2019, we and our partner opened Premium Outlets Querétaro, a 274,800 square foot center in Santiago de Querétaro, Mexico. We own a 50% interest in this center.

	●	During the fourth quarter of 2018, our interest in the 41 German department store properties owned through our investment in HBS Global Properties, or HBS, was sold, as further discussed in Note 6 of the notes to the consolidated financial statements.

	●	During 2018, we contributed our interest in the licensing venture of Aéropostale for additional interests in Authentic Brands Group LLC, or ABG. Our original interest in ABG was 5.4% and is currently 6.8%.

	●	On May 2, 2018, we and our partner opened Premium Outlet Collection Edmonton International Airport, a 424,000 square foot shopping center in Edmonton (Alberta), Canada. We have a 50% noncontrolling interest in this new center.

For the purposes of the following comparisons between the years ended December 31, 2020 and 2019 and the years ended December 31, 2019 and 2018, 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, 2020 vs. Year Ended December 31, 2019

Lease income decreased $941.4 million, of which the property transactions accounted for $3.9 million of the decrease. Comparable lease income decreased $937.5 million, or 17.9%. Total lease income decreased primarily due to decreases in fixed minimum lease and CAM consideration recorded on a straight-line basis of $422.0 million and reduced variable lease income of $519.4 million, primarily related to lower consideration based on tenant sales and negative variable lease income due to abatements as a result of the COVID-19 pandemic.

Total other income decreased $190.2 million, primarily due to a $75.7 million decrease related to Simon Brand Venture and gift card revenues, a $68.0 million decrease related to a gain on settlement with our former insurance broker in 2019, a $16.2 million gain on the 2019 sale of our interest in a multi-family residential property, a $10.9 million decrease in distributions from investments, a $9.1 million decrease in interest income and lower business interruption insurance proceeds received in connection with our two Puerto Rico properties as a result of hurricane damages of $5.2 million, partially offset by a $6.2 million gain on a partial sale and mark-to-market adjustment of our retained interest in a non-retail investment and a $4.1 million gain related to the sale of outparcels.

Property operating expenses decreased $104.0 million primarily due to the closure of properties as a result of the COVID-19 pandemic and governmental restrictions intended to prevent its spread and cost reduction efforts, as previously discussed.

Repairs and maintenance expenses decreased $19.6 million primarily due to the closure of properties as a result of the COVID-19 pandemic and governmental restrictions intended to prevent its spread and cost reduction efforts, as previously discussed.

Advertising and promotion decreased $51.7 million primarily due to the closure of properties as a result of the COVID-19 pandemic and governmental restrictions intended to prevent its spread and cost reduction efforts, as previously discussed.

General and administrative expense decreased $12.3 million due to lower executive compensation.

Other expense increased $27.8 million primarily related to an increase in legal fees and expenses.

During 2019, we recorded a loss on extinguishment of debt of $116.3 million as a result of the early redemption of senior unsecured notes.

Income and other tax expense changed by $34.7 million primarily as a result of a higher tax benefit due to larger losses on our share of operating results in the retail operations venture of SPARC Group as compared to 2019, and reduced withholding and income taxes related to certain of our international investments, partially offset by tax expense from a bargain purchase gain recorded as a result of the acquisition of our interest in Forever 21.

Income from unconsolidated entities decreased $224.5 million primarily due to unfavorable year-over-year domestic and international property operations, as well as results of operations from our retailer investments, both of which were impacted by COVID-19 disruption, partially offset by a $35.0 million pre-tax non-cash bargain purchase gain recorded as a result of the acquisition of our interest in Forever 21 and a gain from the sale of a non-retail asset, of which our share

was $17.8 million.

During 2020, we recorded $125.6 million of impairment charges related to one consolidated property, an other-than-temporary impairment on our equity investment in three joint venture properties, an other-than-temporary impairment to reduce our investment in HBS to its estimated fair value, and a $4.3 million loss, net, related to the impairment and disposition of certain assets by Klépierre, partially offset by a $12.3 million gain on the disposal of our interest in one consolidated property, a $1.9 million excess gain on insurance proceeds related to our two properties in Puerto Rico and a $1.0 million gain related to the disposition of a shopping center by one of our joint venture investments. During 2019, we recorded net gains of $62.1 million primarily related to Klépierre’s disposition of certain shopping centers, offset by a $47.2 million impairment charge related to our investment in HBS.

Simon’s net income attributable to noncontrolling interests decreased $156.8 million due to a decrease in the net income of the Operating Partnership.

Year Ended December 31, 2019 vs. Year Ended December 31, 2018

Lease income increased $85.4 million during 2019, of which the property transactions accounted for $33.2 million of the increase. Comparable lease income increased $52.2 million, or 1.0%, due to increases in fixed minimum lease and CAM consideration recorded on a straight-line basis, as a result of the adoption of ASC 842.

Total other income increased $27.9 million, primarily due to a $68.0 million increase related to a lawsuit settled with our former insurance broker in 2019 related to the significant flood damage sustained at Opry Mills in May 2010, a $16.2 million gain on the sale of our interest in a multi-family residential property, a $12.4 million increase in interest income, an $11.2 million increase in Simon Brand Venture and gift card revenues, an increase of $10.4 million in land sales including gains as a result of land contributions for densification projects at two of our properties, and the impact of consolidated franchise and hotel revenues, partially offset by a $35.6 million non-cash gain recorded in 2018 associated with our contribution of our interest in the Aéropostale licensing venture for additional interests in ABG, a $26.7 million decrease in lease settlement income, a $23.9 million decrease in income related to distributions from an international investment received in 2018 and a $9.5 million decrease related to business interruption insurance proceeds received in connection with our two Puerto Rico properties as a result of hurricane damages.

Depreciation and amortization expense increased $58.0 million, of which the property transactions accounted for $11.0 million. The comparable properties increased $47.0 million primarily as a result of an increase in tenant allowance write-offs in 2019 and the acceleration of depreciation on a property upon initiation of a major redevelopment.

Home and regional office costs increased $53.4 million, primarily due to the suspension of leasing cost capitalization in 2019 as a result of the adoption of a new accounting pronouncement.

General and administrative expense decreased $11.7 million due to lower executive compensation.

Other expense increased $15.8 million primarily related to a $4.9 million unfavorable non-cash mark-to-market on certain of our non-real estate equity instruments, and the impact of consolidated franchise and hotel operational expenses.

During 2019, we recorded a loss on extinguishment of debt of $116.3 million as a result of the early redemption of senior unsecured notes.

Income from unconsolidated entities decreased $30.9 million as a result of the sale of German assets within our HBS joint venture in 2018, and the impact from the consolidation of a property that was previously unconsolidated in the third quarter of 2018, partially offset by favorable results of operations from our international joint venture investments.

During 2019, we recorded net gains of $62.1 million primarily related to Klépierre’s disposition of certain shopping centers, offset by a $47.2 million impairment charge related to our investment in HBS. During 2018, we recorded net gains of $12.5 million related to property insurance recoveries of previously depreciated assets and $276.3 million primarily related to our disposition of two retail properties, as well as the disposal of our interest in the German department stores owned through our investment in HBS, as further discussed in Note 6 of the notes to the consolidated financial statements.

Simon’s net income attributable to noncontrolling interests decreased $60.7 million due to a decrease in the net income of 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 comprised only 12.1% of our total consolidated debt at December 31, 2020. We also enter into interest rate protection agreements from time to time 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 $2.6 billion in the aggregate during 2020. The Facilities and the Commercial Paper program provide alternative sources of liquidity as our cash needs vary from time to time. Borrowing capacity under these sources may be increased as discussed further below.

Our balance of cash and cash equivalents increased $342.2 million during 2020 to $1.0 billion as of December 31, 2020 as further discussed below.

On December 31, 2020, we had an aggregate available borrowing capacity of approximately $6.7 billion under the Facilities, net of outstanding borrowings of $2.1 billion, amounts outstanding under the Commercial Paper program of $623.0 million and letters of credit of $12.3 million. For the year ended December 31, 2020, the maximum aggregate outstanding balance under the Facilities was $3.9 billion and the weighted average outstanding balance was $1.8 billion. The weighted average interest rate was 1.04% for the year ended December 31, 2020.

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

Our business model and Simon’s status as a REIT require us to regularly access the debt markets to raise funds for acquisition, development and redevelopment activity, and to refinance maturing debt. Simon 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 and the Supplemental Facility, or together the Credit Facilities, and the Commercial Paper program to address our debt maturities and capital needs through 2021.

Cash Flows

Our net cash flow from operating activities and distributions of capital from unconsolidated entities totaled $2.6 billion during 2020. In addition, we had net proceeds from our debt financing and repayment activities of $2.3 billion in 2020. These activities are further discussed below under “Financing and Debt.” During 2020, we also:

	●	funded the acquisition of the ventures which purchased certain assets of Forever 21, acquired additional interests in SPARC Group and ABG, funded the acquisition of the ventures which purchased certain assets of J.C. Penney, and funded the acquisition of an 80% ownership interest in TRG, the aggregate cash portion of which was $3.6 billion,

	●	issued 22,137,500 shares of common stock in a public offering for $1.6 billion, net of issue costs,

	●	paid stockholder dividends and unitholder distributions totaling approximately $1.7 billion and preferred unit distributions totaling $5.3 million,

	●	funded consolidated capital expenditures of $484.1 million (including development and other costs of $26.3 million, redevelopment and expansion costs of $399.3 million, and tenant costs and other operational capital expenditures of $58.5 million),

	●	funded investments in unconsolidated entities of $191.4 million,

	●	funded investments in equity instruments of $33.0 million,

	●	received proceeds on the sale of equity instruments of $30.0 million,

	●	received insurance proceeds from third-party carriers for property restoration related to hurricane damages of $31.2 million,

	●	funded the repurchase of $152.6 million of Simon’s common stock and redeemed units of the Operating Partnership for $16.1 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 and/or distributions to partners necessary to

maintain Simon’s REIT qualification on a long-term basis. At this time, we do not expect the impact of COVID-19 to impact our ability to fund these needs for the foreseeable future; however its ultimate impact is difficult to predict. 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 the following, however a severe and prolonged disruption and instability in the global financial markets, including the debt and equity capital markets, may affect our ability to access necessary capital:

	●	excess cash generated from operating performance and working capital reserves,

	●	borrowings on the 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 2021, 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 tenants. A significant deterioration in projected cash flows from operations, including one due to the impact of the COVID-19 pandemic and restrictions intended to restrict its spread, could cause us to increase our reliance on available funds from the Credit Facilities and Commercial Paper program, further curtail planned capital expenditures, or seek other additional sources of financing.

Financing and Debt

Unsecured Debt

At December 31, 2020, our unsecured debt consisted of $17.1 billion of senior unsecured notes of the Operating Partnership, $125.0 million outstanding under the Credit Facility, $2.0 billion outstanding under the Term Facility, and $623.0 million outstanding under Commercial Paper program.

On March 16, 2020, the Operating Partnership replaced in its entirety its existing $4.0 billion unsecured revolving credit facility by entering into an unsecured credit facility comprised of (i) an amendment and extension of the Credit Facility and (ii) the Term Facility. The Credit Facility and the Term Facility can be increased in the form of either additional commitments under the Credit Facility or incremental term loans under the Term Facility in an aggregate amount for all such increases not to exceed $1.0 billion, for a total aggregate size of $7.0 billion, in each case, subject to obtaining additional lender commitments and satisfying certain customary conditions precedent. Borrowings may be denominated in U.S. dollars, Euro, Yen, Sterling, Canadian dollars and Australian dollars. Borrowings in currencies other than the U.S. dollar are limited to 95% of the maximum revolving credit amount, as defined. The initial maturity date of the Term Facility and Credit Facility are June 30, 2022 and June 30, 2024, respectively. Each of the Term Facility and Credit Facility can be extended for two additional six-month periods to June 30, 2023 and June 30, 2025, respectively, at our sole option, subject to satisfying certain customary conditions precedent. The Term Facility was available via a single draw during the nine-month period following March 16, 2020, which the Operating Partnership drew on December 15, 2020.

Borrowings under the Credit Facility bear interest, at the Operating Partnership’s election, at either (i) LIBOR plus a margin determined by the Operating Partnership’s corporate credit rating of between 0.65% and 1.40% or (ii) the base rate (which rate is equal to the greatest of the prime rate, the federal funds effective rate plus 0.50% or LIBOR plus 1.00%) (the “Base Rate”), plus a margin determined by the Operating Partnership’s corporate credit rating of between 0.00% and 0.40%. The Credit Facility includes a facility fee determined by the Operating Partnership’s corporate credit rating of between 0.10% and 0.30% on the aggregate revolving commitments under the Credit Facility. The Credit Facility contains a money market competitive bid option program that allows the Operating Partnership to hold auctions to achieve lower pricing for short-term borrowings. Borrowings under the Term Facility bear interest, at the Operating Partnership’s election, at either (i) LIBOR plus a margin determined based on the Operating Partnership’s corporate credit rating of between 0.725% and 1.60% or (ii) the base rate (equal to the greatest of the prime rate, the federal funds effective rate plus 0.50% or LIBOR plus 1.00%) plus a margin determined by the Operating Partnership’s corporate credit rating of between 0.00% and 0.60%. The Term Facility includes a ticking fee equal to 0.10% of the unused term loan commitment under the Term Facility, which ticking fee commenced accruing on the date that is forty-five days after the closing of the Term Facility.

The Supplemental Facility’s initial borrowing capacity of $3.5 billion may be increased to $4.5 billion during its term and provides for borrowings denominated in U.S. dollars, Euro, Yen, Sterling, Canadian dollars and Australian dollars. The initial maturity date of the Supplemental Facility was extended to June 30, 2022 and can be extended for an additional year

to June 30, 2023 at our sole option, subject to our continued compliance with the terms thereof. The base interest rate on the Supplemental Facility is LIBOR plus 77.5 basis points, with an additional facility fee of 10 basis points.

On December 31, 2020, we had an aggregate available borrowing capacity of $6.7 billion under the Facilities. The maximum aggregate outstanding balance under the Facilities during the year ended December 31, 2020 was $3.9 billion and the weighted average outstanding balance was $1.8 billion. Letters of credit of $12.3 million were outstanding under the Facilities as of December 31, 2020.

The Operating Partnership also has available a Commercial Paper program of $2.0 billion, or the non-U.S. dollar equivalent thereof. The Operating Partnership may issue unsecured commercial paper notes, denominated in U.S. dollars, Euro and other currencies. 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 rank (either by themselves or as a result of the guarantee described above) pari passu with the Operating Partnership's other unsecured senior indebtedness. The Commercial Paper program is supported by the Credit Facilities and if necessary or appropriate, we may make one or more draws under either of the Credit Facilities to pay amounts outstanding from time to time on the Commercial Paper program. On December 31, 2020, we had $623.0 million outstanding under the Commercial Paper program, fully comprised of U.S. dollar denominated notes with a weighted average interest rate of 0.29%. These borrowings have a weighted average maturity date of February 19, 2021 and reduce amounts otherwise available under the Credit Facilities.

On July 9, 2020, the Operating Partnership completed the issuance of the following senior unsecured notes: $500.0 million with a fixed interest rate of 3.50%, $750 million with a fixed interest rate of 2.65%, and $750 million with a fixed interest rate of 3.80%, with maturity dates of September 2025 (the “2025” Notes”), June 2030, and June 2050, respectively. The 2025 Notes were issued as additional notes under an indenture pursuant to which the Operating Partnership previously issued $600 million principal amount of 3.50% senior notes due September 2025 on August 17, 2015. Proceeds from the unsecured notes offering funded the optional redemption at par of senior unsecured notes in July and August 2020, as discussed below, and repaid a portion of the indebtedness under the Facilities.

On July 10, 2020 the Operating Partnership repaid $1.75 billion under the Credit Facility and $750.0 million under the Supplemental Facility.

On July 22, 2020, the Operating Partnership completed the optional redemption at par of its $500 million 2.50% notes due September 1, 2020.

On August 6, 2020 the Operating Partnership completed the optional redemption at par of its €375 million 2.375% notes due October 2, 2020.

On January 21, 2021 the Operating Partnership completed the issuance of the following senior unsecured notes: $800 million with a fixed interest rate of 1.75%, and $700 million with a fixed interest rate of 2.20%, with maturity dates of January 2028 and 2031, respectively.

On January 27, 2021 the Operating Partnership completed the planned optional redemption of its $550 million 2.50% notes due on July 15, 2021, including the make-whole amount. Further, on February 2, 2021, the Operating Partnership repaid $750 million under the Term Facility.

On October 7, 2019 the Operating Partnership completed the early redemption of its $900 million 4.375% notes due March 1, 2021, $700 million 4.125% notes due December 1, 2021, $600 million 3.375% notes due March 15, 2022 and €375 million of the €750 million 2.375% notes due October 2, 2020. We recorded a $116.3 million loss on extinguishment of debt in the fourth quarter of 2019 as a result of the early redemption.

Mortgage Debt

Total consolidated mortgage indebtedness, which is typically secured by the underlying assets and non-recourse to the Operating Partnership, was $7.0 billion and $6.9 billion at December 31, 2020 and 2019, respectively.

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, 2020, we were in compliance with all covenants of our unsecured debt.

At December 31, 2020, our consolidated subsidiaries were the borrowers under 46 non-recourse mortgage notes secured by mortgages on 49 properties and other assets, including two separate pools of cross-defaulted and cross-collateralized mortgages encumbering a total of five 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 that serve as collateral for that debt. If the applicable borrower under these non-recourse mortgage notes were to fail to comply with these covenants, the lender could accelerate the debt and enforce its rights against their collateral. At December 31, 2020, the applicable borrowers under these non-recourse mortgage notes were in compliance with all covenants where non-compliance could individually or in the aggregate, giving effect to applicable cross-default provisions, have a material adverse effect on our financial condition, liquidity or results of operations.

Summary of Financing

Our consolidated debt, adjusted to reflect outstanding derivative instruments, and the effective weighted average interest rates as of December 31, 2020 and 2019, consisted of the following (dollars in thousands):

​	​	​	​	​	​	​	​	​	​	​	​
​		​	​		Effective		​	​		Effective
​	​	Adjusted Balance		​	Weighted	​	Adjusted		​	Weighted
​	​	as of		​	Average	​	Balance as of		​	Average
Debt Subject to	​	December 31, 2020			Interest Rate(1)	​	December 31, 2019			Interest Rate(1)	​
Fixed Rate	​	$	23,477,498		3.50%	​	$	23,298,167		3.46%	​
Variable Rate	​		3,245,863		1.31%	​		865,063		2.61%	​
​	​	$	26,723,361		2.98%	​	$	24,163,230		3.16%	​

(1)	Effective weighted average interest rate excludes the impact of net discounts and debt issuance costs.

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, 2020, and subsequent years thereafter (dollars in thousands) assuming the obligations remain outstanding through initial maturities:

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​		2021			2022-2023			2024-2025			After 2025			Total
Long Term Debt (1) (2) (5)	​	$	2,322,729	​	$	6,664,864	​	$	6,034,695	​	$	11,768,557	​	$	26,790,845	​
Interest Payments (3)	​		787,627	​		1,367,869	​		1,065,883	​		3,888,169	​		7,109,548	​
Consolidated Capital Expenditure Commitments (3)	​		183,447	​		—	​		—	​		—	​		183,447	​
Lease Commitments (4)	​		32,787	​		65,765	​		66,185	​		886,336	​		1,051,073	​

(1)	Represents principal maturities only and, therefore, excludes net discounts and debt issuance costs.

(2)	Variable rate interest payments are estimated based on the LIBOR or other applicable rate at December 31, 2020.

(3)	Represents contractual commitments for capital projects and services at December 31, 2020. Our share of estimated 2020 development, redevelopment and expansion activity is further discussed below under “Development Activity”.

(4)	Represents only the minimum non-cancellable lease period, excluding applicable lease extension and renewal options, unless reasonably certain of exercise.

(5)	The amount due in 2021 includes $623.0 million in Global Commercial Paper.

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 6 of the notes to the consolidated financial statements. Our joint ventures typically fund their cash needs through secured non-recourse 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, 2020, the Operating Partnership guaranteed joint venture-related mortgage

indebtedness of $219.2 million. Mortgages guaranteed by the Operating Partnership 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.

Hurricane Impacts

As discussed further in Note 10 of the notes to the consolidated financial statements, during the third quarter of 2017, two of our wholly-owned properties located in Puerto Rico sustained significant property damage and business interruption as a result of Hurricane Maria.

Since the date of the loss, we have received $81.1 million of insurance proceeds from third-party carriers related to the two properties located in Puerto Rico, of which $47.5 million was used for property restoration and remediation and to reduce the insurance recovery receivable. During the years ended December 31, 2020 and 2019, we recorded $5.2 million and $10.5 million, respectively, as business interruption income, which was recorded in other income in the accompanying consolidated statements of operations and comprehensive income.

During the third quarter of 2020, one of our properties located in Texas experienced property damage and business interruption as a result of Hurricane Hanna. We wrote-off assets of approximately $9.6 million, and recorded an insurance recovery receivable, and have received $14.3 million of insurance proceeds from third-party carriers. The proceeds were used for property restoration and remediation and reduced the insurance recovery receivable.

During the third quarter of 2020, one of our properties located in Louisiana experienced property damage and business interruption as a result of Hurricane Laura. We wrote-off assets of approximately $11.1 million and recorded an insurance recovery receivable, and have received $20.6 million of insurance proceeds from third-party carriers. The proceeds were used for property restoration and remediation and reduced the insurance recovery receivable.

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 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. In January 2020, we acquired additional interests of 5.05% and 1.37% in SPARC Group and ABG, respectively, for $6.7 million and $33.5 million, respectively. During the third quarter of 2020, SPARC acquired certain assets and operations of Brooks Brothers and Lucky Brands out of bankruptcy. At September 30, 2020, our noncontrolling equity method interests in the operations venture of SPARC Group and in ABG were 50.0% and 6.8%, respectively.

On September 19, 2019, we acquired the remaining 50% interest in a hotel adjacent to one of our properties from our joint venture partner for cash consideration of $12.8 million. As of closing, the property was subject to a $21.5 million, 4.02% variable rate mortgage.

On September 25, 2018, we acquired the remaining 50% interest in The Outlets at Orange from our joint venture partner. The Operating Partnership issued 475,183 units, or approximately $84.1 million, as consideration for the acquisition. The property is subject to a $215.0 million 4.22% fixed rate mortgage loan.

Dispositions. We may 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.

During 2020, we disposed of our interest in one consolidated retail property. A portion of the gross proceeds on this transaction of $33.4 million was used to partially repay a cross-collateralized mortgage. Our share of the $12.3 million gain is included in (loss) gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net in the accompanying consolidated statement of operations and comprehensive income.

During 2019, we disposed of our interests in one multi-family residential investment. Our share of the gross proceeds on this transaction was $17.9 million. Our share of the gain of $16.2 million is included in other income in the accompanying consolidated statement of operations and comprehensive income. We also recorded net gains of $62.1 million, primarily

related to Klépierre’s disposition of its interests in certain shopping centers, of which our share was $58.6 million, as discussed in Note 6 to the consolidated financial statements.

During 2018, we recorded net gains of $288.8 million primarily related to disposition activity which included the foreclosure of two consolidated retail properties in satisfaction of their $200.0 million and $80.0 million non-recourse mortgage loans and, as discussed in Note 6 of the notes to the consolidated financial statements, our interest in the German department store properties owned through our investment in HBS was sold during the fourth quarter of 2018. Also, as discussed further in Note 6 of the notes to the consolidated financial statements, Klépierre disposed of its interests in certain shopping centers resulting in a gain of which our share was $20.2 million.

Joint Venture Formation Activity

On December 29, 2020, we completed the acquisition of an 80% ownership interest in TRG, which has an ownership interest in 24 regional, super-regional, and outlet malls in the U.S. and Asia. Under the terms of the transaction, we, through the Operating Partnership, acquired all of Taubman Centers, Inc. common stock for $43.00 per share in cash. Total consideration for the acquisition, including the redemption of Taubman’s $192.5 million 6.5% Series J Cumulative Preferred Shares and its $170.0 million 6.25% Series K Cumulative Preferred Shares, and the issuance of 955,705 Operating Partnership units, was approximately $3.5 billion. Our investment includes the 6.38% Series A Cumulative Redeemable Preferred Units for $362.5 million issued to us.

On December 7, 2020, we and a group of co-investors acquired certain assets and liabilities of J.C. Penney, a department store retailer, out of bankruptcy. Our noncontrolling interest in the venture is 41.67% and was acquired for cash consideration of $125.0 million.

On February 19, 2020, we and a group of co-investors acquired certain assets and liabilities of Forever 21, a retailer of apparel and accessories, out of bankruptcy. The interests were acquired through two separate joint ventures, a licensing venture and an operating venture. Our noncontrolling interest in each of the retail operations venture and in the licensing venture is 37.5%. Our aggregate investment in the ventures was $67.6 million. In connection with the acquisition of our interest, the Forever 21 joint venture recorded a non-cash bargain purchase gain of which our share of $35.0 million pre-tax is included in income from unconsolidated entities in the consolidated statement of operations and comprehensive income.

On October 16, 2019, we contributed approximately $276.8 million consisting of cash and the Shop Premium Outlets, or SPO, assets for a 45% noncontrolling interest in Rue Gilt Groupe, or RGG, to create a new multi-platform venture dedicated to digital value shopping, as further discussed in Note 6 to the consolidated financial statements.

Development Activity

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, big box tenants, and restaurants are underway at several properties in the United States, Canada, Europe, and Asia.

In response to the COVID-19 pandemic, the Company has suspended more than $1.0 billion of capital in development projects. The Company will re-evaluate all suspended projects over time. Construction continues on certain redevelopment and new development projects in the U.S. and internationally that are nearing completion. Our share of the costs of all new development, redevelopment and expansion projects currently under construction is approximately $829 million. Simon’s share of remaining net cash funding required to complete the new development and redevelopment projects currently under construction is approximately $89 million. We expect to fund these capital projects with cash flows from operations. We seek a stabilized return on invested capital in the range of 8-10% for all of our new development, expansion and redevelopment projects.

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

​	​	​	​	​	​	​	​	​	​	​
​		2020			2019			2018
New Developments	​	$	27	​	$	73	​	$	87	​
Redevelopments and Expansions	​		399	​		498	​		419	​
Tenant Allowances	​		53	​		162	​		144	​
Operational Capital Expenditures	​		5	​		143	​		132	​
Total	​	$	484	​	$	876	​	$	782	​

​

​

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. Our consolidated net income exposure to changes in the volatility of the Euro, Yen, Peso, Won, and other foreign currencies is not material. We expect our share of estimated committed capital for international development projects to be completed with projected delivery in 2021 or 2022 is $36 million, primarily funded through reinvested joint venture cash flow and construction loans.

The following table describes recently completed and new development and expansion projects as well as our share of the estimated total cost as of December 31, 2020 (in millions):

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	Gross	​	Our	​	Our Share of		​	Our Share of		​	Projected
​	​	​	​	Leasable	​	Ownership	​	Projected Net Cost		​	Projected Net Cost		​	Opening
Property		Location		Area (sqft)		Percentage		(in Local Currency)			(in USD) (1)			Date
New Development Projects:	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Málaga Designer Outlet	​	Málaga, Spain	​	191,000	​	46%	​	EUR	50.3	​	$	61.7	​	Opened Feb. - 2020
Siam Premium Outlets Bangkok	​	Bangkok, Thailand	​	264,000	​	50%	​	THB	1,654	​	$	55.2	​	Opened Jun. - 2020
West Midlands Designer Outlet	​	Cannock (West Midlands), England	​	197,000	​	23%	​	GBP	31.2	​	$	42.6	​	Mar. 2021
Expansions:	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Gotemba Premium Outlets Phase 4	​	Gotemba, Japan	​	178,000	​	40%	​	JPY	7,476	​	$	72.5	​	Opened Jun. - 2020
Rinku Premium Outlets Phase 5	​	Izumisano (Osaka), Japan	​	110,000	​	40%	​	JPY	3,219	​	$	31.2	​	Opened Aug. - 2020
La Reggia Designer Outlet Phase 3	​	Marcianise (Naples), Italy	​	58,000	​	92%	​	EUR	30.9	​	$	37.9	​	Nov. 2021

(1)	USD equivalent based upon December 31, 2020 foreign currency exchange rates.

Dividends, Distributions and Stock Repurchase Program

Simon paid a common stock dividend of $1.30 per share in the fourth quarter of 2020 and $4.70 per share for the year ended December 31, 2020. The Operating Partnership paid distributions per unit for the same amounts. In 2019, Simon paid dividends of $2.10 and $8.30 per share for the three and twelve month periods ended December 31, 2019, respectively. The Operating Partnership paid distributions per unit for the same amounts. On December 15, 2020, Simon’s Board of Directors declared a quarterly cash dividend for the fourth quarter of 2020 of $1.30 per share, payable on January 22, 2021 to shareholders of record on December 24, 2020. The distribution rate on units is equal to the dividend rate on common stock. In order to maintain its status as a REIT, Simon must pay a minimum amount of dividends. Simon’s future dividends and the Operating Partnership’s future distributions will be determined by Simon’s Board of Directors, in its sole discretion, based on actual and projected financial condition, liquidity and results of operations, cash available for dividends and limited partner distributions, cash reserves as deemed necessary for capital and operating expenditures, financing covenants, if any, and the amount required to maintain Simon’s status as a REIT.

On February 13, 2017, Simon’s Board of Directors authorized a two-year extension of the previously authorized $2.0 billion common stock repurchase plan through March 31, 2019. On February 11, 2019, Simon's Board of Directors authorized a new common stock repurchase plan. Under the plan, Simon could repurchase up to $2.0 billion of its common stock during the two-year period ending February 11, 2021 in the open market or in privately negotiated transactions as market conditions warrant. During the year ended December 31, 2020, Simon purchased 1,245,654 shares at an average price of $122.50 per share. During the year ended December 31, 2019, Simon purchased 2,247,074 shares at an average price of $160.11 per share, of which 46,377 shares at an average price of $164.49 were purchased as part of the previous program. At December 31, 2020, we had remaining authority to repurchase approximately $1.5 billion of common stock, which has subsequently expired. As Simon repurchases shares under these programs, the Operating Partnership repurchases an equal number of units from Simon.

Forward-Looking Statements

Certain statements made in this section or elsewhere in this Annual Report on Form 10-K 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: uncertainties regarding the impact of the COVID-19 pandemic and governmental restrictions intended to prevent its spread on our business, financial condition, results of operations, cash flow and liquidity and our ability to access the capital markets, satisfy our debt service obligations and make distributions to our stockholders; changes in economic and market conditions that may adversely affect the general retail environment; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; the intensely competitive market environment in the retail industry, including e-commerce; an increase in vacant space at our properties; the inability to lease newly developed properties and renew leases and relet space at existing properties on favorable terms; our international activities subjecting us to risks that are different from or greater than those associated with our domestic operations, including changes in foreign exchange rates; risks associated with the acquisition, development, redevelopment, expansion, leasing and management of properties; general risks related to real estate investments, including the illiquidity of real estate investments; the impact of our substantial indebtedness on our future operations, including covenants in the governing agreements that impose restrictions on us that may affect our ability to operate freely; any disruption in the financial markets that may adversely affect our ability to access capital for growth and satisfy our ongoing debt service requirements; any change in our credit rating; changes in market rates of interest; the transition of LIBOR to an alternative reference rate; our continued ability to maintain our status as a REIT; changes in tax laws or regulations that result in adverse tax consequences; risks relating to our joint venture properties, including guarantees of certain joint venture indebtedness; environmental liabilities; natural disasters; the availability of comprehensive insurance coverage; the potential for terrorist activities; security breaches that could compromise our information technology or infrastructure; and the loss of key management personnel; and. We discussed these and other risks and uncertainties under the heading "Risk Factors" in Part 1, Item 1A of this Annual Report on Form 10-K. We may update that discussion in subsequent other periodic reports, but except as required by law, 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 portfolio 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 upon the definition set forth by the National Association of Real Estate Investment Trusts (“NAREIT”) Funds From Operations White Paper – 2018 Restatement. Our main business includes acquiring, owning, operating, developing, and redeveloping real estate in conjunction with the rental of real estate. Gains and losses of assets incidental to our main business are included in FFO. We determine FFO to be our share of consolidated net income computed in accordance with GAAP:

	●	excluding real estate related depreciation and amortization,

	●	excluding gains and losses from extraordinary items,

	●	excluding gains and losses from the sale, disposal or property insurance recoveries of, or any impairment related to, depreciable retail operating properties,

	●	plus the allocable portion of FFO of unconsolidated joint ventures based upon economic ownership interest, and

	●	all determined on a consistent basis in accordance with GAAP.

You should understand that our computations 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 an alternative to net income determined in accordance with GAAP as a measure of operating performance, and

	●	are not an alternative to cash flows as a measure of liquidity.

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

​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​
​	​	2020		​	2019		​	2018		​	​
​	​	(in thousands)								​
Funds from Operations (A)	​	$	3,236,963	​	$	4,272,271	​	$	4,324,601	​	​
Change in FFO from prior period	​		(24.2)	%		(1.2)	%		7.6	%	​
Consolidated Net Income	​	$	1,277,324	​	$	2,423,188	​	$	2,822,343	​	​
Adjustments to Arrive at FFO:	​	​	​	​	​	​	​	​	​	​	​
Depreciation and amortization from consolidated properties	​		1,308,419	​		1,329,843	​		1,270,888	​	​
Our share of depreciation and amortization from unconsolidated entities, including Klépierre and other corporate investments	​		536,133	​		551,596	​		533,595	​	​
Loss (gain) on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net	​		114,960	​		(14,883)	​		(288,827)	​	​
Unrealized losses (gains) in fair value of equity instruments	​	​	19,632	​	​	8,212	​	​	15,212	​	​
Net loss (gain) attributable to noncontrolling interest holders in properties	​		4,378	​		(991)	​		(11,327)	​	​
Noncontrolling interests portion of depreciation and amortization and loss (gain) on disposal of properties	​		(18,631)	​		(19,442)	​		(12,031)	​	​
Preferred distributions and dividends	​		(5,252)	​		(5,252)	​		(5,252)	​	​
FFO of the Operating Partnership (A)	​	$	3,236,963	​	$	4,272,271	​	$	4,324,601	​	​
FFO allocable to limited partners	​		424,063	​		563,342	​		568,817	​	​
Dilutive FFO allocable to common stockholders (A)	​	$	2,812,900	​	$	3,708,929	​	$	3,755,784	​	​
Diluted net income per share to diluted FFO per share reconciliation:	​	​	​	​	​	​	​	​	​	​	​
Diluted net income per share	​	$	3.59	​	$	6.81	​	$	7.87	​	​
Depreciation and amortization from consolidated properties and our share of depreciation and amortization from unconsolidated entities, including Klépierre and other corporate investments, net of noncontrolling interests portion of depreciation and amortization	​		5.14	​		5.25	​		5.01	​	​
Loss (gain) on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net	​		0.32	​		(0.04)	​		(0.79)	​	​
Unrealized losses (gains) in fair value of equity instruments	​	​	0.06	​	​	0.02	​	​	0.04	​	​
Diluted FFO per share (A)	​	$	9.11	​	$	12.04	​	$	12.13	​	​
Basic and Diluted weighted average shares outstanding	​		308,738	​		307,950	​		309,627	​	​
Weighted average limited partnership units outstanding	​		46,544	​		46,774	​		46,893	​	​
Basic and Diluted weighted average shares and units outstanding	​		355,282	​		354,724	​		356,520	​	​

(A)

Includes FFO of the Operating Partnership related to a loss on extinguishment of debt of $116.3 million for the year ended December 31, 2019. Includes Diluted FFO per share/unit related to a loss on extinguishment of debt of $0.33 for the year ended December 31, 2019. Includes Diluted FFO allocable to common stockholders related to a loss on extinguishment of debt of $100.9 million for the year ended December 31, 2019.

The following schedule reconciles consolidated net income to NOI.

​	​	​	​	​	​	​	​
​	​	For the Year
​	​	Ended December 31,
​		2020			2019
​	​	(in thousands)
Reconciliation of NOI of consolidated entities:	​	​			​	​	​
Consolidated Net Income	​	$	1,277,324	​	$	2,423,188	​
Income and other tax expense (benefit)	​		(4,637)	​		30,054	​
Interest expense	​		784,400	​		789,353	​
Income from unconsolidated entities	​		(219,870)	​		(444,349)	​
Loss on extinguishment of debt	​	​	--	​	​	116,256	​
Unrealized losses (gains) in fair value of equity instruments	​		19,632	​		8,212	​
Loss (gain) on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net	​		114,960	​		(14,883)	​
Operating Income Before Other Items	​		1,971,809	​		2,907,831	​
Depreciation and amortization	​		1,318,008	​		1,340,503	​
Home and regional office costs	​	​	171,668	​	​	190,109	​
General and administrative	​	​	22,572	​	​	34,860	​
NOI of consolidated entities	​	$	3,484,057	​	$	4,473,303	​
Reconciliation of NOI of unconsolidated entities:	​	​	​	​	​	​	​
Net Income	​	$	453,816	​	$	892,506	​
Interest expense	​		616,332	​		636,988	​
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net	​		—	​		(24,609)	​
Operating Income Before Other Items	​		1,070,148	​		1,504,885	​
Depreciation and amortization	​		692,424	​		681,764	​
NOI of unconsolidated entities	​	$	1,762,572	​	$	2,186,649	​
Add: Our share of NOI from Klépierre, and other corporate investments	​	​	253,093	​	​	293,979	​
Combined NOI	​	$	5,499,722	​	$	6,953,931	​
Less: Corporate and Other NOI Sources (1)	​		228,874	​		548,117	​
Less: Our share of NOI from Retailer Investments	​	​	21,507	​	​	40,149	​
Less: Our share of NOI from Investments (2)	​	​	194,174	​	​	269,598	​
Portfolio NOI	​	$	5,055,167	​	$	6,096,067	​
Portfolio NOI Change	​	​	(17.1)	%	​	​	​

(1)	Includes income components excluded from portfolio NOI (domestic lease termination income, interest income, land sale gains, straight line lease income, above/below market lease adjustments), unrealized and realized gains/losses on non-real estate related equity instruments, Northgate, Simon management company revenues, and other assets.

(2)	Includes our share of NOI of Klépierre (at constant currency) and other corporate investments.