# SIMON PROPERTY GROUP INC. (SPG) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from SIMON PROPERTY GROUP INC.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1063761/000155837023001840/spg-20221231x10k.htm
Accession: 0001558370-23-001840
Filing date: 2023-02-23
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/SPG/
All MD&A years: /company/SPG/mda/
Previous year: /company/SPG/mda/fy2021/ (FY 2021)
Next year: /company/SPG/mda/fy2023/ (FY 2023)

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, 2022, we owned or held an interest in 196 income-producing properties in the United States, which consisted of 94 malls, 69 Premium Outlets, 14 Mills, six lifestyle centers, and 13 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 North America, Europe and Asia. Internationally, as of December 31, 2022, we had ownership in 34 Premium Outlets and Designer Outlet properties primarily located in Asia, Europe, and Canada. As of December 31, 2022, 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 14 countries in Europe.

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

[[GREPCENT_TABLE]]
[["","\u25cf","fixed minimum lease consideration and fixed common area maintenance (CAM) reimbursements, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","variable lease consideration primarily based on tenants\u2019 sales, as well as reimbursements for real estate taxes, utilities, marketing and certain other items."]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["","\u25cf","attracting and retaining high quality tenants and utilizing economies of scale to reduce operating expenses,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","expanding and re-tenanting existing highly productive locations at competitive rental rates,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","selectively acquiring or increasing our interests in high quality real estate assets or portfolios of assets,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","generating consumer traffic in our retail properties through marketing initiatives and strategic corporate alliances, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","selling selective non-core assets."]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","\u25cf","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,"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","offering property operating services to our tenants and others, including waste handling and facility services, and the provision of energy services,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","selling or leasing land adjacent to our properties, commonly referred to as \u201coutlots\u201d or \u201coutparcels,\u201d and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","generating interest income on cash deposits and investments in loans, including those made to related entities."]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["","\u25cf","provide the capital necessary to fund growth,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","maintain sufficient flexibility to access capital in many forms, both public and private, including but not limited to, having in place, the Operating Partnership\u2019s $4.0 billion unsecured revolving credit facility, or the Credit Facility, its $3.5 billion supplemental unsecured revolving credit facility, or its Supplemental Facility, together, the Credit Facilities and its global unsecured commercial paper note program, or the Commercial Paper program, of $2.0 billion, or the non-U.S. dollar equivalent thereof, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","manage our overall financial structure in a fashion that preserves our investment grade credit ratings."]]
[[/GREPCENT_TABLE]]

We consider FFO, comparable 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 measures 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 had a material negative impact on economic and market conditions around the world. 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 at times 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, density limitations and social distancing measures. As a result of the COVID-19 pandemic and these measures, the Company has experienced and may continue to 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 and investments.  Due to certain restrictive governmental orders placed on us, our domestic portfolio lost approximately 13,500 shopping days in 2020, the majority of which occurred in the second quarter.

As we developed and implemented our response to the impact of the COVID-19 pandemic and restrictions 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.  In the second quarter of 2020, in connection with the property closures, we implemented a series of actions to reduce costs and increase liquidity in light of the economic impacts of the pandemic, including:

[[GREPCENT_TABLE]]
[["","\u25cf","significantly reduced all non-essential corporate spending,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","significantly reduced property operating expenses, including discretionary marketing spend,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","implemented a temporary furlough of certain corporate and field employees due to the closure of the Company\u2019s 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"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","suspended more than $1.0 billion of redevelopment and new development projects."]]
[[/GREPCENT_TABLE]]

​

As the economic environment has recovered from the pandemic, our operations have returned to more normalized pre-pandemic levels with respect to our operating expenses and capital spend.  

Results Overview

Diluted earnings per share and diluted earnings per unit decreased $0.32 during 2022 to $6.52 as compared to $6.84 in 2021. The decrease in diluted earnings per share and diluted earnings per unit was primarily attributable to:

[[GREPCENT_TABLE]]
[["","\u25cf","a non-cash gain in 2021 on acquisitions and disposals of $203.4 million, or $0.54 per diluted share/unit, related to the disposition of our interest in three properties of $176.8 million, or $0.47 per diluted share/unit, a non-cash gain on the consolidation of one property of $3.7 million, or $0.01 per diluted share/unit, and net gains of $21.0 million, or $0.06 per diluted share/unit, related to property insurance recoveries of previously depreciated assets, primarily due to hurricane, flood and wind storm damage,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","a gain in 2021 on the disposal, exchange, or revaluation of equity interests of $178.7 million, or $0.48 per diluted share/unit, of which $159.8 million, or $0.43 per diluted share/unit, was non-cash,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","decreased income from unconsolidated entities of $134.9 million, or $0.36 per diluted share/unit, the majority of which is due to unfavorable year-over-year operations from our other platform investments as well as the reversal of a previously established deferred tax liability at Kl\u00e9pierre in 2021 resulting in a non-cash gain, of which our share was $118.4 million, which is partially offset by improved operations and core fundamentals in our other unconsolidated entities and TRG,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","an unrealized unfavorable change in fair value of publicly traded equity instruments of $53.1 million, or $0.14 per diluted share/unit, partially offset by"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","a non-cash gain in 2022 on the disposal, exchange, or revaluation of equity interests, net of $121.2 million, or $0.32 per diluted share/unit,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","decreased tax expense of $73.7 million, or $0.20 per diluted share/unit, primarily due to unfavorable year-over-year operations from other platform investments and a favorable $32.0 million tax impact created by the lower gain on disposal, exchange, or revaluation of equity interests transactions noted above,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","decreased interest expense in 2022 of $34.5 million, or $0.09 per diluted share/unit, primarily due to the early extinguishment of nine secured loans in the fourth quarter of 2021, the disposition of three retail properties in 2021, and the refinancing of two retail properties at lower interest rates in 2021, partially offset by an increase in interest rates as further discussed below,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","a charge on early extinguishment of debt of $51.8 million, or $0.14 per diluted share/unit, in 2021, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","improved operating performance and solid core business fundamentals in 2022, as discussed below, and the impact of our acquisition, development and expansion activity."]]
[[/GREPCENT_TABLE]]

Portfolio NOI increased 5.7% in 2022 as compared to 2021. Average base minimum rent for U.S. Malls and Premium Outlets increased 2.3% to $55.13 psf as of December 31, 2022, from $53.91 psf as of December 31, 2021. Ending occupancy for our U.S. Malls and Premium Outlets increased 1.5% to 94.9% as of December 31, 2022, from 93.4% as of December 31, 2021, primarily due to leasing activity, partially offset by 2021 tenant bankruptcy activity.

Our effective overall borrowing rate at December 31, 2022 on our consolidated indebtedness increased 36 basis points to 3.22% as compared to 2.86% at December 31, 2021. This increase was primarily due to an increase in the effective overall borrowing rate on variable rate debt of 273 basis points (3.93% at December 31, 2022 as compared to 1.20% at December 31, 2021) offset by a decrease in the effective overall borrowing rate on fixed rate debt of 13 basis points (3.15% at December 31, 2022 as compared to 3.28% at December 31, 2021).  The weighted average years to maturity of our consolidated indebtedness was 7.5 years and 7.8 years at December 31, 2022 and 2021, respectively.

Our financing activity for the year ended December 31, 2022 included:

[[GREPCENT_TABLE]]
[["","\u25cf","increasing our Euro denominated borrowings by \u20ac750.0 million ($779.0 million U.S. dollar equivalent as of the issuance date) under the Supplemental Facility, and using the proceeds to repay \u20ac750.0 million ($777.1 million U.S. dollar equivalent as of the payoff date) of senior unsecured notes at maturity,"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","decreasing our borrowings under the Operating Partnership\u2019s global unsecured commercial paper note program, or the Commercial Paper program, by $500.0 million, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","completing on January 11, 2022, the issuance of the following senior unsecured notes: $500 million with a floating interest rate of SOFR plus 43 basis points and $700 million with a fixed interest rate of 2.650%, with maturity dates of January 11, 2024 and February 1, 2032, respectively. The proceeds were used to repay $1.05 billion outstanding under the Supplemental Facility, on January 12, 2022."]]
[[/GREPCENT_TABLE]]

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 and TRG from our other U.S. operations. We also do not include any information for properties located outside the United States.

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

[[GREPCENT_TABLE]]
[["","\u25cf","properties that are consolidated in our consolidated financial statements,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","properties we account for under the equity method of accounting as joint ventures, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the foregoing two categories of properties on a total portfolio basis."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","%/Basis Point","\u200b","\u200b","\u200b","\u200b","%/Basis Point","\u200b","\u200b","\u200b","\u200b"],["\u200b","","2022","","Change (1)","","2021","","Change (1)","","2020","\u200b"],["U.S. Malls and Premium Outlets:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Ending Occupancy","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","\u200b","94.9%","\u200b","140 bps","\u200b","\u200b","93.5%","\u200b","200 bps","\u200b","\u200b","91.5%","\u200b"],["Unconsolidated","\u200b","\u200b","94.9%","\u200b","180 bps","\u200b","\u200b","93.1%","\u200b","220 bps","\u200b","\u200b","90.9%","\u200b"],["Total Portfolio","\u200b","\u200b","94.9%","\u200b","150 bps","\u200b","\u200b","93.4%","\u200b","210 bps","\u200b","\u200b","91.3%","\u200b"],["Average Base Minimum Rent per Square Foot","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","$","53.95","\u200b","2.6%","\u200b","$","52.59","\u200b","-2.6%","\u200b","$","53.98","\u200b"],["Unconsolidated","\u200b","$","58.36","\u200b","1.4%","\u200b","$","57.55","\u200b","-5.6%","\u200b","$","60.97","\u200b"],["Total Portfolio","\u200b","$","55.13","\u200b","2.3%","\u200b","$","53.91","\u200b","-3.4%","\u200b","$","55.80","\u200b"],["U.S. TRG:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Ending Occupancy","\u200b","","94.5%","\u200b","330 bps","\u200b","","91.2%","\u200b","60 bps","\u200b","","90.6%","\u200b"],["Average Base Minimum Rent per Square Foot","\u200b","$","61.76","\u200b","5.2%","\u200b","$","58.69","\u200b","5.3%","\u200b","$","55.75","\u200b"],["The Mills:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Ending Occupancy","\u200b","","98.2%","\u200b","60 bps","\u200b","","97.6%","\u200b","230 bps","\u200b","","95.3%","\u200b"],["Average Base Minimum Rent per Square Foot","\u200b","$","34.89","\u200b","3.2%","\u200b","$","33.80","\u200b","0.1%","\u200b","$","33.77","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Percentages may not recalculate due to rounding. Percentage and basis point changes are representative of the change from the comparable prior period."]]
[[/GREPCENT_TABLE]]

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.

Current Leasing Activities

During the twelve months ended December 31, 2022, we signed 1,262 new leases and 1,517 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 9.1 million square feet, of which 7.0 million square feet related to consolidated properties. During 2021, we signed 992 new leases and 1,460 renewal leases with a fixed minimum rent, comprising approximately 8.3 million square feet, of which 6.5 million square feet related to consolidated properties. The average annual initial base minimum rent for new leases was $55.41 per square foot in 2022 and $55.90 per square foot in 2021 with an average tenant allowance on new leases of $53.01 per square foot

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and $53.75 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.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","December 31,","","%/basis point","","December 31,","","%/basis point","","December 31,"],["\u200b","\u200b","2022","\u200b","Change","\u200b","2021","\u200b","Change","\u200b","2020"],["Ending Occupancy","\u200b","\u200b","99.8%","\u200b","0 bps","\u200b","\u200b","99.8%","\u200b","+30 bps","\u200b","\u200b","99.5%"],["Average Base Minimum Rent per Square Foot","\u200b","\u00a5","5,779","\u200b","4.90%","\u200b","\u00a5","5,509","\u200b","1.14%","\u200b","\u00a5","5,447"]]
[[/GREPCENT_TABLE]]

​

Critical Accounting 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.

[[GREPCENT_TABLE]]
[["","\u25cf","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\u2019s 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\u2019s bankruptcy filing and our expectations of the assumption by the tenant in bankruptcy proceeding of leases at the Company\u2019s 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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","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\u2019s operational performance such as declining cash flows, occupancy or total sales per square foot, the Company\u2019s 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"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","To maintain Simon\u2019s 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\u2019s REIT status. In the unlikely event that we fail to maintain Simon\u2019s 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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","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\u2019 ability to pay rents based upon the tenants\u2019 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."]]
[[/GREPCENT_TABLE]]

Results of Operations

The following acquisitions, dispositions, and openings of consolidated properties affected our consolidated results in the comparative periods:

[[GREPCENT_TABLE]]
[["","\u25cf","On June 17, 2022, we acquired an additional interest in Gloucester Premium Outlets from a joint venture, resulting in the consolidation of this property."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","During the second quarter of 2022, we disposed of one retail property."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","During 2021, we disposed of three retail properties."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","During the first quarter of 2021, we consolidated one Designer Outlet property in Europe that had previously been accounted for under the equity method."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","During the fourth quarter of 2020, we disposed of one consolidated retail property."]]
[[/GREPCENT_TABLE]]

The following acquisitions, dispositions, and openings of noncontrolling interests in joint venture entities affected our income from unconsolidated entities in the comparative periods:

[[GREPCENT_TABLE]]
[["","\u25cf","During the fourth quarter of 2022, we disposed of one retail property."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","During the fourth quarter of 2022, we sold to ABG all of our interests in the licensing venture of Eddie Bauer for additional interests in ABG. Our noncontrolling interest in ABG is approximately 12.3% after this transaction."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On December 19, 2022, we completed the acquisition of a 50% noncontrolling legal ownership interest in Jamestown, a global real estate investment and asset management company, as well as separate interests in certain real estate and working capital, for total cash consideration of $173.4 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On November 3, 2022, we opened Fukaya-Hanazono Premium Outlets, a 296,300 square foot center in Fukaya City, Japan. We own a 40% interest in this center."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","During the third quarter of 2022, we disposed of one retail property."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","During the fourth quarter of 2021, we disposed of our noncontrolling interest in one retail property."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On December 20, 2021, we sold a portion of our interest in ABG for cash consideration of $65.5 million and purchased additional interests in ABG for cash consideration of $100.0 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On October 15, 2021, we opened Jeju Premium Outlets, a 92,000 square foot center in Jeju Province, South Korea. We own a 50% interest in this center."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On July 1, 2021, we sold to ABG all of our interests in the licensing ventures of Forever 21 and Brooks Brothers for additional interests in ABG."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On June 1, 2021, we and our partner, ABG, acquired the licensing rights of Eddie Bauer. Our noncontrolling interest in the licensing venture is 49% and was acquired for cash consideration of $100.8 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On April 12, 2021, we opened West Midlands Designer Outlet, a 197,000 square foot center in Cannock, United Kingdom. We own a 23.2% interest in this center."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","In the first quarter of 2021, we and our partner, ABG, both acquired additional 12.5% interests in the licensing and operations of Forever 21 for $56.3 million bringing our interest to 50%. Subsequently the Forever 21 operations were merged into SPARC Group."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On December 29, 2020, we completed the acquisition of an 80% ownership interest in TRG."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","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%."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","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%."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On February 13, 2020 through our European investee, we opened Malaga Designer Outlet, a 191,000 square foot center in Malaga, Spain. We own a 46% interest in this center."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","In January 2020, we acquired additional interests of 5.05% and 1.37% in SPARC Group, and ABG, respectively."]]
[[/GREPCENT_TABLE]]

For the purposes of the following comparisons between the years ended December 31, 2022 and 2021 and the years ended December 31, 2021 and 2020, 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, 2022 vs. Year Ended December 31, 2021

Lease income increased $168.5 million, of which the property transactions accounted for a $23.2 million decrease.  Comparable lease income increased $191.7 million, or 4.1%.  Total lease income increased primarily due to an increase in fixed lease income of $156.6 million primarily due to an increase in fixed minimum lease consideration, higher occupancy, and an increase in variable lease income of $11.9 million primarily related to higher consideration based on tenant sales.  

Total other income decreased $4.2 million, primarily due to a decrease in lease settlement income of $38.8 million, a $14.9 million gain from the sale of our interest in a multi-family residential property in 2021, and a $6.8 million non-cash dilution gain on a non-retail investment in 2021, partially offset by an $20.8 million increase in fee and other income, a $17.9 million increase related to Simon Brand Ventures and gift card revenues, a $9.8 million increase related to land sale activity and a $7.8 million increase in interest income.

Property operating expenses increased $48.4 million primarily due to the return to a more normalized operating environment following the peak of the COVID pandemic.

Other expense increased $11.7 million primarily due to an increase in legal fees and foreign currency revaluations.

Interest expense decreased $34.5 million primarily related to the early extinguishment of nine secured loans, the disposition of three retail properties, and the refinancing of two retail properties at lower interest rates in 2021, partially

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offset by the issuances of Euro and USD bonds and interest increases due to variable rates in 2022.

During 2021, we recorded a loss on extinguishment of debt of $51.8 million as a result of the early redemption of unsecured notes and the payoff of mortgages at nine properties.

During 2022, we recorded a $159.0 million non-cash gain as a result of the sale to ABG of all of our interests in the Eddie Bauer licensing venture for additional interests in ABG, partially offset by a loss of $37.8 million on the revaluation or disposal of other investments. During 2021, we recorded a non-cash gain of $159.8 million as a result of the sale to ABG of all of our interests in the licensing ventures of Forever 21 and Brooks Brothers for additional interests in ABG and a gain on the sale of a portion of our interest in ABG of $18.8 million, as discussed further in Note 6.

Income and other tax expense decreased $73.7 million due to the impact in 2021 on deferred tax expense as a result of the ABG transaction noted above, which had a non-cash tax impact of $55.9 million, offset by the impact in 2022 on deferred tax expense of the 2022 ABG transaction noted above, which had a non-cash tax impact of $39.7 million, and lower tax expense in 2022 on our share of operating results from our other platform investments.

Income from unconsolidated entities decreased $134.9 million primarily due to unfavorable results of operations year over year from our other platform investments of $216.1 million, as well as the reversal in 2021 of a previously established deferred tax liability at Klépierre resulting in a non-cash gain, of which our share was $118.4 million, partially offset by favorable year over year results of operations across the properties and TRG in 2022.

During 2022, we recorded a $19.9 million gain on the disposition of one unconsolidated property, a $2.1 million gain related to excess insurance proceeds and a $1.3 million gain on the disposition of certain assets by Klépierre, partially offset by a $17.7 million loss primarily related to the disposition of one consolidated property.  During 2021, we recorded gains of $184.0 million related to the disposition of three consolidated properties, our interest in one unconsolidated property and the impact from the consolidation of one property that was previously unconsolidated, and gains of $21.2 million related to property insurance recoveries of previously depreciated assets.

Simon’s net income attributable to noncontrolling interests decreased $6.2 million due to a decrease in the net income of the Operating Partnership.

Year Ended December 31, 2021 vs. Year Ended December 31, 2020

Lease income increased $434.4 million, of which the property transactions accounted for a $17.6 million decrease.  Comparable lease income increased $452.0 million, or 10.6%.  Total lease income increased primarily due to an increase in variable lease income of $603.8 million primarily related to higher consideration based on tenant sales and lower negative variable lease income due to abatements granted in 2020 as a result of the COVID-19 pandemic, partially offset by decreases in fixed minimum lease and CAM consideration recorded on a straight-line basis of $169.4 million.  

Total other income increased $65.3 million, primarily due to an increase in lease settlement income of $39.8 million, a $14.9 million gain on the sale of our interest in a multi-family residential property, an $11.5 million increase related to Simon Brand Ventures and gift card revenues, a $6.8 million increase from the non-cash dilution gain on a non-retail investment, and a $3.3 million net increase in dividend, interest and other income, partially offset by a $7.8 million decrease related to higher land and outparcel sale activity in 2020, and a $3.2 million decrease related to business interruption proceeds received in 2020.

Property operating expenses increased $66.6 million primarily due to the reopening of properties that had been closed during 2020 as a result of the COVID-19 pandemic and the effect of the restrictions intended to prevent its spread and cost reduction efforts, as previously discussed.

Repairs and maintenance expenses increased $15.5 million primarily due to the reopening of properties that had been closed during 2020 as a result of the COVID-19 pandemic and the effect of the restrictions intended to prevent its spread and cost reduction efforts, as previously discussed.

Advertising and promotion expenses increased $15.7 million primarily due to the reopening of properties that had been closed during 2020 as a result of the COVID-19 pandemic and the effect of the restrictions intended to prevent its spread and cost reduction efforts.

General and administrative expense increased $7.8 million primarily due to an increase in compensation.

Other expense increased $2.8 million primarily due to an increase in the write-off of development projects we are no longer intending to pursue, partially offset by a decrease related to legal fees.

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During 2021, we recorded a loss on extinguishment of debt of $51.8 million as a result of the early redemption of unsecured notes and the payoff of mortgages at nine properties.

During 2021, we recorded gains on sale or exchange of equity interests of $178.7 million as a result of the contribution to ABG of all of our interests in the licensing ventures of Forever 21 and Brooks Brothers in exchange for additional interests in ABG and the sale of a portion of our interest in ABG, as discussed further in Note 6.

Income and other tax (expense) benefit increased $161.8 million due to increased deferred tax expense as a result of the ABG transactions noted above which had a non-cash tax impact of $55.9 million and $92.1 million related to strong operating performance of our other platform investments as well as earnings from our acquisition of an interest in certain retailers throughout 2020.

Income from unconsolidated entities increased $563.0 million primarily due to favorable results of operations from our other platform investments, including earnings from our acquisition of an interest in J.C. Penney in the later part of 2020, and international investments which included the reversal of a previously established deferred tax liability at Klépierre resulting in a non-cash gain, of which our share was $118.4 million, partially offset by amortization of our excess investment in TRG.

During 2021, we recorded gains of $184.0 million related to the disposition of three consolidated properties, our interest in one unconsolidated property and the impact from the consolidation of one property that was previously unconsolidated, and gains of $21.2 million related to property insurance recoveries of previously depreciated assets.  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 an investment 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.

Simon’s net income attributable to noncontrolling interests increased $154.3 million due to an increase 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 9.0% of our total consolidated debt at December 31, 2022. 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 $4.2 billion in the aggregate during 2022. The Credit 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 $87.7 million during 2022 to $621.6 million as of December 31, 2022 as further discussed below.

On December 31, 2022, we had an aggregate available borrowing capacity of approximately $6.6 billion under the Facilities, net of outstanding borrowings of $927.8 million and letters of credit of $10.0 million. For the year ended December 31, 2022, the maximum aggregate outstanding balance under the Credit Facilities was $1.2 billion and the weighted average outstanding balance was $260.7 million. The weighted average interest rate was 2.15% for the year ended December 31, 2022.

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 Facilities and the Commercial Paper program to address our debt maturities and capital needs through 2023.

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Cash Flows

Our net cash flow from operating activities and distributions of capital from unconsolidated entities totaled $4.2 billion during 2022. In addition, we had net repayments of debt from our debt financing and repayment activities of $0.3 billion in 2022. These activities are further discussed below under “Financing and Debt.” During 2022, we also:

[[GREPCENT_TABLE]]
[["","\u25cf","funded the acquisition of a noncontrolling interest in Jamestown for cash consideration of $173.4 million,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","paid stockholder dividends and unitholder distributions totaling approximately $2.6 billion and preferred unit distributions totaling $5.3 million,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","funded consolidated capital expenditures of $650.0 million (including development and other costs of $108.2 million, redevelopment and expansion costs of $282.5 million, and tenant costs and other operational capital expenditures of $259.3 million),"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","funded investments in unconsolidated entities of $235.8 million, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","funded the repurchase of $180.4 million of Simon\u2019s common stock."]]
[[/GREPCENT_TABLE]]

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.  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:

[[GREPCENT_TABLE]]
[["","\u25cf","excess cash generated from operating performance and working capital reserves,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","borrowings on the Credit Facilities and Commercial Paper program,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","additional secured or unsecured debt financing, or"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","additional equity raised in the public or private markets."]]
[[/GREPCENT_TABLE]]

We expect to generate positive cash flow from operations in 2023, 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, 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, 2022, our unsecured debt consisted of $18.6 billion of senior unsecured notes of the Operating Partnership, $125.0 million outstanding under the Credit Facility, and $802.8 million (U.S. dollar equivalent) of Euro-denominated borrowings outstanding under the Supplemental Facility.  

The Credit Facility also included an additional single, delayed-draw $2.0 billion term loan facility, or Term Facility, or together with the Credit Facility and the Supplemental Facility, the Credit Facilities, which the Operating Partnership drew on December 15, 2020, and repaid in 2021.

The Credit Facility can be increased in the form of additional commitments in an aggregate not to exceed $1.0 billion, for a total aggregate size of $5.0 billion, subject to obtaining additional lender commitments and satisfying certain customary conditions precedent.  Borrowings may be denominated in U.S. dollars, Euro, Yen, Pounds, 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 Credit Facility is June 30, 2024. The Credit Facility can be extended for two additional six-month periods to June 30, 2025, at our sole option, subject to satisfying certain customary conditions precedent.

Borrowings under the Credit Facility bear interest, at our election, at either (i) (x) for Term Benchmark Loans, the Adjusted Term SOFR Rate, the applicable Local Rate, the Adjusted EURIBOR Rate, or the Adjusted TIBOR Rate, (y) for

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RFR Loans, if denominated in Sterling, SONIA plus a benchmark adjustment and if denominated in Dollars, Daily Simple SOFR plus a benchmark adjustment, or (z) for Daily SOFR Loans, the Adjusted Floating Overnight Daily SOFR Rate, in each case of clauses (x) through (z) above, plus a margin determined by our corporate credit rating of between 0.650% and 1.400% or (ii) for loans denominated in U.S. Dollars only, the base rate (which rate is equal to the greatest of the prime rate, the federal funds effective rate plus 0.500% or Adjusted Term SOFR Rate for one month plus 1.000%) (the “Base Rate”), plus a margin determined by our corporate credit rating of between 0.000% and 0.400%. The Credit Facility includes a facility fee determined by our corporate credit rating of between 0.100% and 0.300% on the aggregate revolving commitments under the Credit Facility.  Based upon our current credit ratings, the interest rate on the Credit Facility is SOFR plus 72.5 basis points, plus a spread adjustment to account for the transition from LIBOR to SOFR.

The Supplemental Facility’s 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, Pounds, Sterling, Canadian dollars and Australian dollars. Borrowings in currencies other than the U.S. dollar are limited to 100% of the maximum revolving credit amount, as defined. The initial maturity date of the Supplemental Facility is January 31, 2026 and can be extended for an additional year to January 31, 2027 at our sole option, subject to satisfying certain customary conditions precedent.

Borrowings under the Supplemental Facility bear interest, at our election, at either (i) (x) for Term Benchmark Loans, the Adjusted Term SOFR Rate, the applicable Local Rate, the Adjusted EURIBOR Rate, or the Adjusted TIBOR Rate, (y) for RFR Loans, if denominated in Sterling, SONIA plus a benchmark adjustment and if denominated in Dollars, Daily Simple SOFR plus a benchmark adjustment, or (z) for Daily SOFR Loans, the Adjusted Floating Overnight Daily SOFR Rate, in each case of clauses (x) through (z) above, plus a margin determined by our corporate credit rating of between 0.650% and 1.400% or (ii) for loans denominated in U.S. Dollars only, the base rate (which rate is equal to the greatest of the prime rate, the federal funds effective rate plus 0.500% or Adjusted Term SOFR Rate for one month plus 1.000%) (the “Base Rate”), plus a margin determined by our corporate credit rating of between 0.000% and 0.400%. The Supplemental Facility includes a facility fee determined by our corporate credit rating of between 0.100% and 0.300% on the aggregate revolving commitments under the Supplemental Facility.  Based upon our current credit ratings, the interest rate on the Supplemental Facility is SOFR plus 72.5 basis points, plus a spread adjustment to account for the transition from LIBOR to SOFR.

On December 31, 2022 we had an aggregate available borrowing capacity of $6.6 billion under the Facilities. The maximum aggregate outstanding balance under the Facilities during the year ended December 31, 2022 was $1.2 billion and the weighted average outstanding balance was $260.7 million. Letters of credit of $10.0 million were outstanding under the Facilities as of December 31, 2022.

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, 2022, we had no outstanding balance under the Commercial Paper program.  Borrowings under the Commercial Paper program reduce amounts otherwise available under the Credit Facilities.

On January 21, 2021 the Operating Partnership completed the issuance of the following senior unsecured notes: $800 million with a fixed interest rate of 1.750%, and $700 million with a fixed interest rate of 2.20%, with maturity dates of February 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 March 19, 2021, the Operating Partnership completed the issuance of €750 million ($893.0 million U.S. dollar equivalent as of the issuance date) of senior unsecured notes at a fixed rate of 1.125% with a maturity date of March 19, 2033, the proceeds of which were used on March 23, 2021 to repay the remaining $1.25 billion under the Term Facility reducing it to zero.

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On August 18, 2021, the Operating Partnership completed the issuance of the following senior unsecured notes: $550 million with a fixed interest rate of 1.375%, and $700 million with a fixed interest rate of 2.250%, with maturity dates of January 15, 2027, and 2032, respectively.

In the third quarter of 2021, the Operating Partnership completed the optional redemption of all of its outstanding $550 million 2.350% notes due on January 30, 2022, $600 million 2.625% notes due on June 15, 2022, and $500 million 2.750% notes due on February 1, 2023. We recorded a $28.6 million loss on extinguishment of debt as a result on the optional redemptions.

On December 14, 2021, the Operating Partnership drew $1.05 billion under the Supplemental Facility, the proceeds of which funded the early extinguishment of 9 mortgages with a principal balance of $1.16 billion. We recorded a $20.3 million loss on extinguishment of debt as a result of this transaction.

On January 11, 2022, the Operating Partnership completed the issuance of the following senior unsecured notes: $500 million with a floating interest rate of SOFR plus 43 basis points, and $700 million with a fixed interest rate of 2.650%, with maturity dates of January 11, 2024 and February 1, 2032, respectively. The proceeds were used to repay $1.05 billion outstanding under the Supplemental Facility on January 12, 2022.

On November 16, 2022, the Operating Partnership drew €750.0 million ($779.0 million U.S. dollar equivalent) under the Supplemental Facility and used the proceeds on November 17, 2022 to repay €750.0 million ($777.1 million U.S. dollar equivalent) of senior unsecured notes at maturity.

Subsequent to December 31, 2022, the Operating Partnership completed interest rate swap agreements with a combined notional value at €750.0 million to swap the interest rate of the Euro denominated borrowings outstanding under the Supplemental Facility to an all-in fixed rate of 3.81%. This interest rate swap matures on January 17, 2024.

Mortgage Debt

Total mortgage indebtedness was $5.5 billion and $5.4 billion at December 31, 2022 and 2021, 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, 2022, we were in compliance with all covenants of our unsecured debt.

At December 31, 2022, our consolidated subsidiaries were the borrowers under 38 non-recourse mortgage notes secured by mortgages on 41 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, 2022, 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.

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Summary of Financing

Our consolidated debt, adjusted to reflect outstanding derivative instruments, and the effective weighted average interest rates as of December 31, 2022 and 2021, consisted of the following (dollars in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","\u200b","\u200b","","Effective","","\u200b","\u200b","","Effective"],["\u200b","\u200b","Adjusted Balance","\u200b","Weighted","\u200b","Adjusted","\u200b","Weighted"],["\u200b","\u200b","as of","\u200b","Average","\u200b","Balance as of","\u200b","Average"],["Debt Subject to","\u200b","December 31, 2022","","Interest Rate(1)","\u200b","December 31, 2021","","Interest Rate(1)","\u200b"],["Fixed Rate","\u200b","$","22,673,703","","3.15%","\u200b","$","23,364,566","","2.99%","\u200b"],["Variable Rate","\u200b","","2,286,583","","3.93%","\u200b","","1,956,456","","1.22%","\u200b"],["\u200b","\u200b","$","24,960,286","","3.22%","\u200b","$","25,321,022","","2.86%","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Effective weighted average interest rate excludes the impact of net discounts and debt issuance costs."]]
[[/GREPCENT_TABLE]]

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, 2022, and subsequent years thereafter (dollars in thousands) assuming the obligations remain outstanding through initial maturities:

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","2023","","2024-2025","","2026-2027","","After 2027","","Total"],["Long Term Debt (1)","\u200b","$","1,342,656","\u200b","$","5,988,390","\u200b","$","7,202,582","\u200b","$","10,501,408","\u200b","$","25,035,036","\u200b"],["Interest Payments (2)","\u200b","","803,119","\u200b","","1,343,300","\u200b","","870,646","\u200b","","3,527,289","\u200b","","6,544,353","\u200b"],["Consolidated Capital Expenditure Commitments (3)","\u200b","","192,707","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","192,707","\u200b"],["Lease Commitments (4)","\u200b","","33,163","\u200b","","61,443","\u200b","","61,510","\u200b","","828,521","\u200b","","984,637","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Represents principal maturities only and, therefore, excludes net discounts and debt issuance costs."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Variable rate interest payments are estimated based on the LIBOR or other applicable rate at December 31, 2022."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Represents contractual commitments for capital projects and services at December 31, 2022. Our share of estimated 2023 development, redevelopment and expansion activity is further discussed below under \u201cDevelopment Activity\u201d."]]
[[/GREPCENT_TABLE]]

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

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, 2022, the Operating Partnership guaranteed joint venture-related mortgage indebtedness of $128.0 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 $84.0 million of insurance proceeds from third-party carriers related to the two properties located in Puerto Rico, of which $48.3 million was used for property restoration and remediation and to reduce the insurance recovery receivable.  During the years ended December 31, 2021 and 2020, we recorded $2.1 million

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and $5.2 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 $14.0 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 year ended December 31, 2021, we recorded a $3.5 million gain related to property insurance recovery of previously depreciated assets.  This amount was recorded in gain (loss) on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net.

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 $27.5 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 year ended December 31, 2021, we recorded a $17.5 million gain related to property insurance recovery of previously depreciated assets.  This amount was recorded in gain (loss) on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net.  

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.  On June 17, 2022, we acquired an additional interest in Gloucester Premium Outlets from a joint venture partner for $14.0 million in cash consideration, including a pro-rata share of working capital, resulting in the consolidation of this property. The property is subject to an $85.7 million 3.29% variable rate mortgage loan. We accounted for this transaction as an asset acquisition and substantially all of our investment has been determined to relate to investment property.

The Company sponsored, through a wholly-owned subsidiary, a special purpose acquisition corporation, or SPAC, named Simon Property Group Acquisition Holdings, Inc. On February 18, 2021 the SPAC announced the pricing of its initial public offering, which was consummated on February 23, 2021, generating gross proceeds of $345.0 million.  The SPAC was a consolidated VIE which was formed for the purpose of effecting a business combination and was targeting innovative businesses that operate within Simon’s “Live, Work, Play, Stay, Shop” ecosystem.  

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.

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.

In December 2022, the SPAC was liquidated and dissolved.  In connection with this event, we recorded a loss of $10.2 million, representing our sponsor investment in the SPAC.

During 2022, we disposed of our interest in one consolidated retail property. The proceeds from this transaction were $59.0 million, resulting in a loss of $15.6 million. We also recorded a non-cash gain of $19.9 million related to the disposition of one unconsolidated retail property in satisfaction of its $99.6 million non-recourse mortgage loan. These are included in a gain on acquisitions of controlling interest, sale or disposal of, or recovery on, assets and interest in unconsolidated entities and impairment, net in the accompanying consolidated statement of operations and comprehensive income.

During 2021, we recorded net gains of $176.8 million primarily related to disposition activity which included the foreclosure of three consolidated retail properties in satisfaction of their respective $180.0 million, $120.9 million and $100.0

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million non-recourse mortgage loans. We also disposed of our interest in an unconsolidated property resulting in a gain of $3.4 million.      

Joint Venture Formation Activity and Other Investment Activity

On December 19, 2022, we completed the acquisition of a 50% noncontrolling legal ownership interest in Jamestown, a global real estate investment and asset management company, as well as separate interests in certain real estate and working capital, for total cash consideration of $173.4 million.

During the fourth quarter of 2022, we sold to ABG our interests in the licensing venture of Eddie Bauer for additional interests in ABG. As a result, in the fourth quarter of 2022, we recognized a non-cash pre-tax gain of $159.0 million, representing the difference between the fair value of the interests received and the $98.8 million carrying value of the intellectual property licensing venture less costs to sell. On July 1, 2021, we sold to ABG all of our interests in both the Forever 21 and Brooks Brothers licensing ventures for additional interests in ABG. As a result, in the third quarter of 2021, we recognized a non-cash pre-tax gain of $159.8 million, representing the difference between the fair value of the interests received and the $102.7 million carrying value of the intellectual property licensing ventures less costs to sell. On December 20, 2021, we sold a portion of our interest in ABG, resulting in a pre-tax gain of $18.8 million. In connection with this transaction, we recorded tax expense of $8.0 million which is included in income and other tax (expense) benefit in the consolidated statements of operations and comprehensive income. Subsequently, we acquired additional interests in ABG for cash consideration of $100.0 million. At December 31, 2022, our interest in ABG was approximately 12.3%.

During the first quarter of 2022, SPARC Group acquired certain assets and operations of Reebok and entered into a long-term strategic partnership with ABG to become the core licensee and operating partner for Reebok in the United States.

On June 1, 2021, we and our partner, ABG, acquired the intellectual property of Eddie Bauer. Our noncontrolling interest in the licensing venture is 49% and was acquired for cash consideration of $100.8 million.

In the first quarter of 2021, we and our partner, ABG, each acquired additional 12.5% interests in the licensing and operations of Forever 21, our share of which was $56.3 million, bringing our interest to 50%. Subsequently the Forever 21 operations were merged into SPARC Group.

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.

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.  

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 North America, Europe, and Asia.

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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 $980 million.  Simon’s share of remaining net cash funding required to complete the new development and redevelopment projects currently under construction is approximately $239 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 7-10% 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):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","2022","","2021","","2020"],["New Developments","\u200b","$","108","\u200b","$","96","\u200b","$","27","\u200b"],["Redevelopments and Expansions","\u200b","","283","\u200b","","300","\u200b","","399","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Tenant Allowances","\u200b","","207","\u200b","","127","\u200b","","53","\u200b"],["Operational Capital Expenditures","\u200b","","52","\u200b","","5","\u200b","","5","\u200b"],["Total","\u200b","$","650","\u200b","$","528","\u200b","$","484","\u200b"]]
[[/GREPCENT_TABLE]]

​

​

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 2023 or 2024 is $199 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, 2022 (in millions):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","Gross","\u200b","Our","\u200b","Our Share of","\u200b","Our Share of","\u200b","Projected/Actual"],["\u200b","\u200b","\u200b","\u200b","Leasable","\u200b","Ownership","\u200b","Projected Net Cost","\u200b","Projected Net Cost","\u200b","Opening"],["Property","","Location","","Area (sqft)","","Percentage","","(in Local Currency)","","(in USD) (1)","","Date"],["New Development Projects:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Fukaya-Hanazono Premium Outlets","\u200b","Fukaya City, Japan","\u200b","296,300","\u200b","40%","\u200b","JPY","6,153","\u200b","$","46.9","\u200b","Opened Oct. - 2022"],["Paris-Giverny Designer Outlet","\u200b","Vernon (Normandy), France","\u200b","228,000","\u200b","74%","\u200b","EUR","128.9","\u200b","$","137.9","\u200b","Apr. - 2023"],["Expansion:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Busan Premium Outlet Phase 2","\u200b","Busan, South Korea","\u200b","194,000","\u200b","50%","\u200b","KRW","72,933","\u200b","$","57.8","\u200b","Oct. - 2024"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","USD equivalent based upon December 31, 2022 foreign currency exchange rates."]]
[[/GREPCENT_TABLE]]

Dividends, Distributions and Stock Repurchase Program

Simon paid a common stock dividend of $1.80 per share in the fourth quarter of 2022 and $6.90 per share for the year ended December 31, 2022. The Operating Partnership paid distributions per unit for the same amounts. In 2021, Simon paid dividends of $1.65 and $7.15 per share for the three and twelve month periods ended December 31, 2021, respectively. The Operating Partnership paid distributions per unit for the same amounts. On February 6, 2023, Simon’s Board of Directors declared a quarterly cash dividend for the first quarter of 2023 of $1.80 per share, payable on March 31, 2023 to shareholders of record on March 10, 2023.  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 May 9, 2022, Simon's Board of Directors authorized a common stock repurchase plan.  Under the plan, Simon may repurchase up to $2.0 billion of its common stock during the two-year period commencing on May 16, 2022 and ending

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on May 16, 2024 in the open market or in privately negotiated transactions as market conditions warrant.  During the year ended December 31, 2022, Simon purchased 1,830,022 shares at an average price of $98.57 per share.  As Simon repurchases shares under this program, the Operating Partnership repurchases an equal number of units from Simon.

On February 11, 2019, Simon's Board of Directors authorized a common stock repurchase plan.  Under the plan, Simon was authorized to 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 warranted.  During the year ended December 31, 2020, Simon purchased 1,245,654 shares at an average price of $122.50 per share.  As Simon repurchased shares under this program, the Operating Partnership repurchased an equal number of units from Simon.  

Forward-Looking Statements

Certain statements made in this press release may be deemed "forward–looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward–looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained, and it is possible that the Company's 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: changes in economic and market conditions that may adversely affect the general retail environment, including but not limited to those caused by inflation, recessionary pressures, wars, such as in Ukraine, and supply chain disruptions; the inability to renew leases and relet vacant space at existing properties on favorable terms; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; an increase in vacant space at our properties; the potential for violence, civil unrest, criminal activity or terrorist activities at our properties;  natural disasters; the availability of comprehensive insurance coverage; the intensely competitive market environment in the retail industry, including e-commerce; security breaches that could compromise our information technology or infrastructure; the increased focus on ESG metrics and reporting; environmental liabilities; 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; our continued ability to maintain our status as a REIT; changes in tax laws or regulations that result in adverse tax consequences; risks associated with the acquisition, development, redevelopment, expansion, leasing and management of properties; the inability to lease newly developed properties on favorable terms; the loss of key management personnel; uncertainties regarding the impact of pandemics, epidemics or public health crises, and the associated governmental restrictions on our business, financial condition, results of operations, cash flow and liquidity; changes in market rates of interest; 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; risks relating to our joint venture properties, including guarantees of certain joint venture indebtedness; and general risks related to real estate investments, including the illiquidity of real estate investments. The Company discusses these and other risks and uncertainties under the heading "Risk Factors" in Part 1, Item 1A of the Annual Report on Form 10-K.  The Company may update that discussion in subsequent other periodic reports, but except as required by law, the Company undertakes 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, comparable 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:

[[GREPCENT_TABLE]]
[["","\u25cf","excluding real estate related depreciation and amortization,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","excluding gains and losses from extraordinary items,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","excluding gains and losses from the sale, disposal or property insurance recoveries of, or any impairment related to, depreciable retail operating properties,"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","plus the allocable portion of FFO of unconsolidated joint ventures based upon economic ownership interest, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","all determined on a consistent basis in accordance with GAAP."]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["","\u25cf","do not represent cash flow from operations as defined by GAAP,"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","should not be considered as an alternative to net income determined in accordance with GAAP as a measure of operating performance, and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","are not an alternative to cash flows as a measure of liquidity."]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","2022","","2021","","2020","\u200b"],["\u200b","\u200b","(in thousands)","\u200b"],["Consolidated Net Income","\u200b","$","2,452,385","\u200b","$","2,568,707","\u200b","$","1,277,324","\u200b"],["Adjustments to Arrive at FFO:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Depreciation and amortization from consolidated properties","\u200b","","1,214,441","\u200b","","1,254,039","\u200b","","1,308,419","\u200b"],["Our share of depreciation and amortization from unconsolidated entities, including Kl\u00e9pierre, TRG and other corporate investments (A)","\u200b","","845,784","\u200b","","887,390","\u200b","","536,133","\u200b"],["(Gain) loss on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net","\u200b","","(5,647)","\u200b","","(206,855)","\u200b","","114,960","\u200b"],["Unrealized losses in fair value of publicly traded equity instruments, net, excluded from FFO (B)","\u200b","\u200b","\u2014","\u200b","\u200b","3,177","\u200b","\u200b","19,632","\u200b"],["Net (income) loss attributable to noncontrolling interest holders in properties","\u200b","","(2,738)","\u200b","","6,053","\u200b","","4,378","\u200b"],["Noncontrolling interests portion of depreciation and amortization, gain on consolidation of properties, and gain on disposal of properties","\u200b","","(18,234)","\u200b","","(20,295)","\u200b","","(18,631)","\u200b"],["Preferred distributions and dividends","\u200b","","(5,252)","\u200b","","(5,252)","\u200b","","(5,252)","\u200b"],["FFO of the Operating Partnership","\u200b","$","4,480,739","\u200b","$","4,486,964","\u200b","$","3,236,963","\u200b"],["Unrealized losses in fair value of publicly traded equity instruments, net, included in FFO (B)","\u200b","\u200b","61,204","\u200b","\u200b","4,918","\u200b","$","\u2014","\u200b"],["Non-cash gain related to the reversal of a deferred tax liability within an international investment","\u200b","\u200b","\u2014","\u200b","\u200b","(118,428)","\u200b","\u200b","\u2014","\u200b"],["Gain on disposal, exchange, or revaluation of equity interests, net (after tax)","\u200b","\u200b","(88,314)","\u200b","\u200b","(122,763)","\u200b","\u200b","\u2014","\u200b"],["Debt related charges","\u200b","\u200b","\u2014","\u200b","\u200b","51,841","\u200b","\u200b","\u2014","\u200b"],["Comparable FFO of the Operating Partnership","\u200b","$","4,453,629","\u200b","$","4,302,532","\u200b","$","3,236,963","\u200b"],["FFO allocable to limited partners","\u200b","\u200b","564,946","\u200b","\u200b","564,407","\u200b","\u200b","424,063","\u200b"],["Dilutive FFO allocable to common stockholders","\u200b","$","3,915,793","\u200b","$","3,922,557","\u200b","$","2,812,900","\u200b"],["Diluted net income per share to diluted FFO per share reconciliation:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted net income per share","\u200b","$","6.52","\u200b","$","6.84","\u200b","$","3.59","\u200b"],["Depreciation and amortization from consolidated properties and our share of depreciation and amortization from unconsolidated entities, including Kl\u00e9pierre, TRG and other corporate investments, net of noncontrolling interests portion of depreciation and amortization (A)","\u200b","","5.44","\u200b","","5.64","\u200b","","5.14","\u200b"],["(Gain) loss on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net","\u200b","","(0.01)","\u200b","","(0.55)","\u200b","","0.32","\u200b"],["Unrealized losses in fair value of publicly traded equity instruments, net, excluded from FFO (B)","\u200b","\u200b","\u2014","\u200b","\u200b","0.01","\u200b","\u200b","0.06","\u200b"],["Diluted FFO per share","\u200b","$","11.95","\u200b","$","11.94","\u200b","$","9.11","\u200b"],["Unrealized losses in fair value of publicly traded equity instruments, net, included in FFO (B)","\u200b","\u200b","0.16","\u200b","\u200b","0.01","\u200b","$","\u2014","\u200b"],["Non-cash gain related to the reversal of a deferred tax liability within an international investment","\u200b","\u200b","\u2014","\u200b","\u200b","(0.32)","\u200b","\u200b","\u2014","\u200b"],["Gain on disposal, exchange, or revaluation of equity interests, net (after tax)","\u200b","\u200b","(0.24)","\u200b","\u200b","(0.33)","\u200b","\u200b","\u2014","\u200b"],["Debt related charges","\u200b","\u200b","\u2014","\u200b","\u200b","0.14","\u200b","\u200b","\u2014","\u200b"],["Comparable FFO per share","\u200b","$","11.87","\u200b","$","11.44","\u200b","$","9.11","\u200b"],["Basic and Diluted weighted average shares outstanding","\u200b","","327,817","\u200b","","328,587","\u200b","","308,738","\u200b"],["Weighted average limited partnership units outstanding","\u200b","","47,295","\u200b","","47,280","\u200b","","46,544","\u200b"],["Basic and Diluted weighted average shares and units outstanding","\u200b","","375,112","\u200b","","375,867","\u200b","","355,282","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(A)","The twelve months ended December 31, 2022 and 2021 include amortization of our excess investment in TRG of $195.3 million and $201.7 million, respectively. The three months ended December 31, 2021 includes $56.6 million of additional amortization expense related to the nine months ended September 30, 2021 as a result of the finalization of purchase accounting."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(B)","Unrealized losses in fair value of publicly traded equity instruments, net, excluded from FFO relate to mark-to-market adjustments of retail real estate. Unrealized losses in fair value of publicly traded equity instruments, net, included in FFO relate to mark-to-market adjustments of non-retail real estate."]]
[[/GREPCENT_TABLE]]

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The following schedule reconciles consolidated net income to our beneficial share of NOI.

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","For the Year"],["\u200b","\u200b","Ended December 31,"],["\u200b","","2022","","2021"],["\u200b","\u200b","(in thousands)"],["Reconciliation of NOI of consolidated entities:","\u200b","\u200b","","","\u200b","\u200b"],["Consolidated Net Income","\u200b","$","2,452,385","\u200b","$","2,568,707"],["Income and other tax expense","\u200b","","83,512","\u200b","","157,199"],["Gain on disposal, exchange, or revaluation of equity interests, net","\u200b","\u200b","(121,177)","\u200b","\u200b","(178,672)"],["Interest expense","\u200b","","761,253","\u200b","","795,712"],["Income from unconsolidated entities","\u200b","","(647,977)","\u200b","","(782,837)"],["Loss on extinguishment of debt","\u200b","\u200b","--","\u200b","\u200b","51,841"],["Unrealized losses in fair value of publicly traded equity instruments, net","\u200b","","61,204","\u200b","","8,095"],["Gain on acquisition of controlling interest, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net","\u200b","","(5,647)","\u200b","","(206,855)"],["Operating Income Before Other Items","\u200b","","2,583,553","\u200b","","2,413,190"],["Depreciation and amortization","\u200b","","1,227,371","\u200b","","1,262,715"],["Home and regional office costs","\u200b","\u200b","184,592","\u200b","\u200b","184,660"],["General and administrative","\u200b","\u200b","34,971","\u200b","\u200b","30,339"],["Other expenses (1)","\u200b","\u200b","13,413","\u200b","\u200b","19,811"],["NOI of consolidated entities","\u200b","$","4,043,900","\u200b","$","3,910,715"],["Less: Noncontrolling interest partners share of NOI","\u200b","\u200b","(27,685)","\u200b","\u200b","(20,720)"],["Beneficial NOI of consolidated entities","\u200b","$","4,016,215","\u200b","$","3,889,995"],["Reconciliation of NOI of unconsolidated entities:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net Income","\u200b","$","807,435","\u200b","$","668,061"],["Interest expense","\u200b","","599,245","\u200b","","605,591"],["Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net","\u200b","","(50,336)","\u200b","","(34,814)"],["Operating Income Before Other Items","\u200b","","1,356,344","\u200b","","1,238,838"],["Depreciation and amortization","\u200b","","666,762","\u200b","","686,790"],["Other expenses (1)","\u200b","\u200b","1,309","\u200b","\u200b","26,013"],["NOI of unconsolidated entities","\u200b","$","2,024,415","\u200b","$","1,951,641"],["Less: Joint Venture partners share of NOI","\u200b","\u200b","(1,059,095)","\u200b","\u200b","(1,021,839)"],["Beneficial NOI of unconsolidated entities","\u200b","$","965,320","\u200b","$","929,802"],["Add: Beneficial interest of NOI from TRG","\u200b","\u200b","474,214","\u200b","\u200b","430,965"],["Add: Beneficial interest of NOI from Other Platform Investments and Investments","\u200b","\u200b","604,750","\u200b","\u200b","743,213"],["Beneficial interest of Combined NOI","\u200b","$","6,060,499","\u200b","$","5,993,975"],["Less: Beneficial interest of Corporate and Other NOI Sources (2)","\u200b","","138,315","\u200b","","230,046"],["Less: Beneficial interest of NOI from Other Platform Investments (3)","\u200b","\u200b","355,019","\u200b","\u200b","533,299"],["Less: Beneficial interest of NOI from Investments (4)","\u200b","\u200b","230,984","\u200b","\u200b","182,422"],["Beneficial interest of Portfolio NOI","\u200b","$","5,336,181","\u200b","$","5,048,208"],["Beneficial interest of Portfolio NOI Change","\u200b","\u200b","5.7","%","\u200b","\u200b"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Represents the write-off of pre-development costs, our beneficial interest of which was $11.4 million and $18.3 million with respect to consolidated entities and $0.4 million and $13.0 million with respect to our share of unconsolidated entities, for the year ended December 31, 2022 and 2021, respectively."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Includes income components excluded from portfolio NOI and domestic property NOI (domestic lease termination income, interest income, land sale gains, straight line lease income, above/below market lease adjustments), Simon management company revenues, foreign exchange impact, and other assets."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Other Platform Investments include J.C. Penney, SPARC, ABG, and RGG."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","Includes our share of NOI of Kl\u00e9pierre (at constant currency) and other corporate investments."]]
[[/GREPCENT_TABLE]]

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