All references to numbered Notes are to specific footnotes to our consolidated financial statements included in this Quarterly Report and whose descriptions are incorporated into the applicable response by reference. The following discussion should be read in conjunction with such consolidated financial statements and related Notes. Capitalized terms used, but not defined, in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") have the same meanings as in such Notes.

Forward-looking information

We may make forward-looking statements in this Quarterly Report and in other reports that we file with the SEC. In addition, our senior management may make forward-looking statements orally to analysts, investors, creditors, the media and others.

Forward-looking statements include:

† descriptions of plans or objectives for future operations;

† projections of our revenues, net operating income, core net operating income, earnings per share, Funds From Operations ("FFO"), capital expenditures, income tax and other contingent liabilities, dividends, leverage, capital structure or other financial items;

†          forecasts of our future economic performance; or

†          descriptions of assumptions underlying or relating to any of the
foregoing,

Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements often include words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "target," "can," "could," "may," "should," "would" or similar expressions. Forward-looking statements should not be unduly relied upon. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made and we might not update them to reflect changes that occur after the date they are made.

There are several factors, many beyond our control, which could cause results to differ materially from our expectations, some of which are described in Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2011 (our "Annual Report"), and as recast in the Form 8-K filed on June 27, 2012. These factors are incorporated herein by reference. Any factor could by itself, or together with one or more other factors, adversely affect our business, results of operations or financial condition. There are also other factors that we have not described in this Quarterly Report or in our Annual Report that could cause results to differ from our expectations.

Overview - Introduction

Our primary business is to own, manage, lease and develop regional malls. The substantial majority of our properties are located in the United States; however, we also own interests in regional malls and property management activities (through unconsolidated joint ventures) in Brazil. As of June 30, 2012, we are the owner, either entirely or with joint venture partners, of 151 regional malls comprising approximately 142 million square feet of gross leasable area. We provide management and other services to substantially all of our properties, including properties which we own through joint venture arrangements and which are unconsolidated for GAAP purposes. Our management operating philosophies and strategies are the same whether the properties are consolidated or unconsolidated.

Overview

In 2011, we embarked on a strategy to execute transactions to achieve our long-term goals of enhancing the quality of our portfolio and maximizing total returns for our shareholders. We continued this strategy to improve the overall quality of our portfolio during 2012, as we successfully completed transactions promoting our long-term strategy as summarized below:

† on January 12, 2012, we distributed our shares in RPI to the GGP shareholders of record as of the close of business on December 30, 2011. GGP shareholders were entitled to receive approximately 0.0375 shares of RPI common stock for each share of GGP common stock held as of December 30, 2011. Subsequent to the spin-off, we retained an approximately 1% interest in RPI. These properties are presented within discontinued operations in our Consolidated Statements of Operations and Comprehensive Income (Loss) . The transaction decreased our outstanding mortgage loans by $1.12 billion;

† we sold our interests in approximately 1.3 million square feet of gross leasable area of non-core assets including an anchor box, two regional malls, and one strip center for $92.0 million which reduced our property level debt by $62.0 million;

† acquired 747 thousand square feet of gross leasable area for $26.7 million, which allows us to recapture real estate in our portfolio and provides us with redevelopment opportunities; and

† we acquired 11 Sears anchor pads (including fee interests in five anchor pads and long-term leasehold interests in six anchor pads) for $270.0 million. This portfolio represents a significant opportunity to recapture valuable real estate within our portfolio and allows us to execute expansion and redevelopment opportunities, including re-tenanting the anchor space and adding new in-line GLA.

† we acquired the remaining 49% interest in The Oaks and Westroads, previously owned through a joint venture, for $191.1 million which included the assumption of $93.7 million in additional debt. The properties were previously recorded under the equity method of accounting and are now consolidated. The acquisition resulted in a remeasurement of the net assets acquired to fair value. We recorded a gain of $18.5 million.

As a result of our efforts, our portfolio now has sales of $533 per square foot. We will continue to evaluate other opportunities to improve our portfolio.

Our total portfolio Core NOI (as defined below) increased 6.0% from $491.8 million for the three months ended June 30, 2011 to $521.3 million for the three months ended June 30, 2012, and increased 4.6% from $998.2 million for the six months ended June 30, 2011 to $1.04 billion for the six months ended June 30, 2012. These increases were primarily due to increased minimum rents and comparatively flat operating expenses during both the three and six months ended June 30, 2012. Our Core FFO (as defined below) increased 24.1% from $184.0 million for the three months ended June 30, 2011 to $228.3 million for the three months ended June 30, 2012, and increased 14.8% from $392.1 million for the six months ended June 30, 2011 to $450.3 million for the six months ended June 30, 2012. These increases were primarily due to increases in Core NOI and management fees and other corporate revenues during both the three and six months ended June 30, 2012.

Our key operational objectives include the following:

† lease vacant space;

† increase the permanent occupancy of the regional mall portfolio, including converting temporary leases to permanent leases, which have longer contractual terms and significantly higher minimum rents and tenant recovery rates;

† opportunistically acquire whole or partial interests in high-quality regional malls and anchor pads that improve the overall quality of our portfolio;

† execute on planned redevelopment projects within our portfolio;

† dispose of properties in our portfolio that do not fit within our long-term strategy, including certain of our office properties, retail strip centers and regional malls; and

† continue to refinance our maturing debt, and certain debt prepayable without penalty, with the goal of lowering our overall borrowing costs and managing future maturities.

We seek to increase long-term NOI (as defined below) growth through proactive management and leasing of our regional malls. Our leasing strategy is to identify and provide the right stores and the appropriate merchandise for each of our regional malls. We believe that the most significant operating factor affecting incremental cash flow and NOI is increased rents earned from tenants at our properties. These rental revenue increases are primarily achieved by:

† renewing expiring leases and re-leasing existing space at rates higher than expiring or existing rates;

† increasing occupancy at the properties so that more space is generating rent; and

† increased tenant sales in which we participate through overage rent.

Operating Metrics



U.S. Regional Mall Metrics



The following table summarizes selected operating metrics for our portfolio of
regional malls:



                                          Rents per square foot (1)     Percentage Leased (2)    Tenant Sales (3)
June 30, 2012
Consolidated Properties                  $                     66.37                    94.10 %  $             510
Unconsolidated Properties                $                     72.93                    94.70 %  $             594
Total Domestic Portfolio                 $                     68.16                    94.30 %  $             533

June 30, 2011
Consolidated Properties                  $                     65.15                    93.00 %  $             475
Unconsolidated Properties                $                     71.70                    94.00 %  $             526
Total Domestic Portfolio                 $                     66.91                    93.20 %  $             489

% Change
Consolidated Properties                                         1.87 %                110 bps                 7.37 %
Unconsolidated Properties                                       1.72 %                 70 bps                12.93 %
Total Domestic Portfolio                                        1.87 %                110 bps                 9.00 %

(2) Represents contractual obligations for space in regional malls or predominantly retail centers and excludes traditional anchor stores.

(3) Comparative rolling twelve month tenant sales for mall stores less than 10,000 square feet.

Lease Spread Metrics



The following table summarizes signed leases that are scheduled to commence in
2012 compared to expiring leases for the prior tenant in the same suite.



                        Number      Square                 Initial Rent Per     Expiring Rent Per    Average Rent
                       of Leases     Feet        Term       Square Foot(1)       Square Foot(2)         Spread
New Leases(3)                575   1,693,552        8.4   $            61.28   $             50.66   $       10.62
Renewal Leases               787   2,364,529        5.4   $            60.27   $             58.96   $        1.31
New/Renewal Leases         1,362   4,058,081        6.7   $            60.69   $             55.38   $        5.31

(2) Represents expiring rent at end of lease consisting of base minimum rent, common area costs and real estate taxes.

(3) Represents new leases where downtime between the new and old tenant in the suite was less than nine months.

We have incurred capital expenditures of $46.0 million for the six months ended June 30, 2012 and $23.3 million for the six months ended June 30, 2011 relating to our operating properties. In addition, we incurred tenant allowances of $60.9 million for the six months ended June 30, 2012 and $48.2 million for the six months ended June 30, 2011 related to tenant leases which were being built out at our properties during the respective periods.

Results of Operations

Three months ended June 30, 2012 and 2011

We review our results of operations based on NOI for the three months ended June 30, 2012 and 2011. The components of NOI are discussed below. Increases and decreases discussed below reflect various components of NOI for the three months ended June 30, 2012 with respect to the three months ended June 30, 2011.

The following table summarizes minimum rents for the three months ended June 30, 2012 and 2011.

                                       Three Months Ended June 30,
                                         2012               2011           $ Change      % Change

Components of Minimum rents:
Base minimum rents                  $       401,418    $       392,587    $     8,831          2.2 %
Lease termination income                      2,681              1,993            688         34.5
Straight-line rent                           15,857             21,613         (5,756 )      (26.6 )
Above- and below-market tenant
leases, net                                 (24,307 )          (25,791 )        1,484         (5.8 )
Total Minimum rents                 $       395,649    $       390,402    $     5,247          1.3 %

Base minimum rents increased by $8.8 million primarily due to increased occupancy and positive lease spreads as well as presented in the operating metrics section above.

Overage rents increased $2.2 million primarily due to increased tenant sales.

Management fees and other corporate revenues primarily represent the revenues earned from the management of our joint venture properties. Management fees and other corporate revenues increased $7.4 million primarily due to an increase in development and financing fees. In addition, there was an increase in management and leasing fees resulting from the management of a new joint venture formed in the fourth quarter of 2011.

Other revenue primarily includes parking, vending and promotions, which are revenues generated by the properties.

Other property operating costs increased $2.7 million primarily due to a one-time refund of operating costs at one property in the prior year which was partially offset by lower payroll costs in the current year.

The provision for doubtful accounts decreased $2.0 million primarily as the result of a bankruptcy recovery from a tenant received during the second quarter of 2012.

Property management and other costs represents regional and home office costs and include items such as corporate payroll, rent for office space, supplies and professional fees, which represent corporate overhead costs not generated at the properties. Property management and other costs decreased $5.5 million primarily due to reduced payroll and increased capitalized overhead, which were partially offset by increased national marketing costs.

General and administrative costs represent the costs to run the public company and include executive costs, audit fees, professional fees and administrative fees related to the public company, and in 2011, also include bankruptcy costs or reimbursements incurred post-emergence. General and administrative expenses increased $8.6 million primarily due to the reversal of a previously accrued bankruptcy cost of $5.7 million and gains on bankruptcy settlements during the three months ended June 30, 2011.

Depreciation and amortization decreased $35.8 million primarily due to fully depreciated and written off tenant-specific in-place lease intangibles as tenants vacated prior to the end of their lease term during the period from June 2011 to June 2012.

Interest expense decreased $47.7 million primarily due to default interest incurred on the Homart Note and the 2006 Credit Facility totaling $57.8 million (Note 14) during the three months ended June 30, 2011. Additionally, we incurred less interest expense related to our mortgage debt due to refinancing activity since June 2011, as outlined in the Liquidity and Capital Resources section below. These decreases were partially offset by write-offs of debt market rate adjustments that increased interest expense $19.3 million.

The Warrant liability adjustment represents the non-cash income or expense recognized as a result of the change in the fair value of the Warrant liability (Note 8). We incurred expense of $146.6 million for the three months ended June 30, 2012 as the result of an increase in our stock price which was partially offset by a decrease in implied volatility. We incurred expense of $94.8 million for the three months ended June 30, 2011 as the result of an increase in our stock price which was partially offset by a decrease in implied volatility.

The equity in income (loss) of Unconsolidated Real Estate Affiliates increased $21.3 million primarily due to growth in property operations and gains from the purchase of additional interest in and sale of investment properties of $8.7 million at our Brazil joint venture, a decrease in interest expense of $2.5 million as a result of refinancing activity at one of our joint ventures, and a decrease in amortization expense of $6.1 million as a result of less tenant-specific intangibles across all of our Unconsolidated Real Estate Affiliates. The remaining increase is due to improved operations at all of our joint ventures.

Six Months Ended June 30, 2012 and 2011

We review our results of operations based on NOI for the six months ended June 30, 2012 and 2011. The components of NOI are discussed below. Increases and decreases discussed below reflect various components of NOI for the six months ended June 30, 2012 with respect to the six months ended June 30, 2011.

The following table summarizes minimum rents for the six months ended June 30, 2012 and 2011.

                                     Six Months Ended June 30,
                                       2012              2011          $ Change      % Change

Components of Minimum rents:
Base minimum rents                $      794,264    $      781,405    $    12,859          1.6 %
Lease termination income                   6,833             5,429          1,404         25.9
Straight-line rent                        32,173            47,160        (14,987 )      (31.8 )
Above- and below-market tenant
leases, net                              (49,631 )         (46,817 )       (2,814 )        6.0
Total Minimum rents               $      783,639    $      787,177    $    (3,538 )       (0.4 )%

Base minimum rents increased by $12.9 million primarily due to increased occupancy and positive lease spreads as well as presented in the operating metrics section above.

Overage rents increased $5.0 million primarily due to increased tenant sales.

Management fees and other corporate revenues primarily represent the revenues earned from the management of our joint venture properties. Management fees and other corporate revenues increased $8.2 million primarily due to an increase in development and financing fees. In addition, there was an increase in management and leasing fees resulting from the management of a new joint venture formed in the fourth quarter of 2011.

Other revenue primarily includes parking, vending and promotions, which are revenues generated by the properties.

Property maintenance costs decreased $6.2 million due to a decrease in labor costs and snow removal as a result of a mild winter, which were partially offset by higher costs for contract services.

The provision for doubtful accounts decreased $0.5 million primarily as the result of a bankruptcy recovery from a tenant received during the second quarter of 2012.

Property management and other costs represents regional and home office costs and include items such as corporate payroll, rent for office space, supplies and professional fees, which represent corporate overhead costs not generated at the properties. Property management and other costs decreased $11.2 million primarily due to reduced payroll and severance costs and increased capitalized overhead, which were partially offset by increased professional services and national marketing costs.

General and administrative costs represent the costs to run the public company and include executive costs, audit fees, professional fees and administrative fees related to the public company, and in 2011, also include bankruptcy costs or reimbursements incurred post-emergence. General and administrative expenses increased $18.4 million primarily due to the reversal during the six months ended June 30, 2011 of a previously accrued bankruptcy cost of $18.0 million and gains on bankruptcy settlements.

Depreciation and amortization decreased $46.0 million primarily due to fully depreciated and written off tenant-specific in-place lease intangibles as tenants vacated prior to the end of their lease term during the period from June 2011 to June 2012.

Interest expense decreased $51.5 million primarily due to default interest incurred on the Homart Note and the 2006 Credit Facility totaling $57.8 million (Note 14) during the six months ended June 30, 2011. Additionally, we incurred less interest expense related to our mortgage debt due to refinancing activity since June 2011, as outlined in the Liquidity and Capital Resources section below. These decreases were partially offset by write-offs of debt market rate adjustments that increased interest expense $20.3 million.

The Warrant liability adjustment represents the non-cash income or expense recognized as a result of the change in the fair value of the Warrant liability (Note 8). We incurred expense of $289.7 million for the six months ended June 30, 2012 as the result of an increase in our stock price which was partially offset by a decrease in implied volatility. We incurred expense of $18.3 million during the six months ended June 30, 2011, as the result of an increase in our stock price which was partially offset by a decrease in implied volatility.

The equity in income (loss) of Unconsolidated Real Estate Affiliates increased $30.2 million primarily due to growth in property operations and gains from the purchase of additional interest in and sale of investment properties of $9.1 million at our Brazil joint venture, a decrease in interest expense of $3.5 million as a result of refinancing activity at one of our joint ventures, and a decrease in amortization expense of $10.8 million as a result of less tenant-specific intangibles across all of our Unconsolidated Real Estate Affiliates. The remaining increase is due to improved operations at all of our joint ventures.

Liquidity and Capital Resources

Our primary uses of cash include payment of operating expenses, working capital, debt service, including principal and interest, reinvestment in properties, redevelopment of properties, tenant allowances and dividends. Our primary sources of cash include operating cash flows, including our share of cash flows produced by our Unconsolidated Real Estate Affiliates, incremental cash from refinancings and borrowings under our revolving credit facility.

Our capital plan is to refinance our existing debt, lower our borrowing costs, manage our future maturities and provide the necessary capital to fund growth.
We believe that we currently have sufficient liquidity to satisfy all of our commitments in the form of $497.2 million of unrestricted cash and $1.00 billion of available credit under our credit facility as of June 30, 2012, as well as anticipated cash provided by operations. The credit facility has an uncommitted accordion feature for a total facility of up to $1.25 billion and a term of four years. The facility bears interest at LIBOR plus 225 basis points and is determined by the Company's leverage level.

We have executed and continue to execute a refinancing strategy of extending the average debt maturity profile while reducing interest rates. We will continue to modify our capital structure to provide the necessary financial flexibility for the Company.

During 2012, we executed the following refinancing and capital transactions (at our proportionate share):

† on January 12, 2012, we distributed our shares in RPI to the GGP shareholders of record as of the close of business on December 30, 2011, decreasing our outstanding mortgage loans by $1.12 billion;

† through June 30, 2012, we refinanced $2.66 billion of mortgage notes at an average interest rate of 4.20% and average term of 9.0 years. The average interest rate of the original loans was 5.24% and the remaining term-to-maturity was 3.9 years. These refinancings included the financings of Ala Moana, a $1.4 billion secured interest-only mortgage note, and The Grand Canal Shoppes/The Shoppes at The Palazzo, a $625 million secured financing; and

† we sold our interests in one anchor box, two regional malls, and one strip center for an aggregate $92.0 million with net proceeds of $30.0 million.

† on August 3, 2012, we closed on the $763.5 million secured financings of five consolidated properties. The loans mature between January 2019 and September 2024 and bear interest at a weighted-average rate of 5.80% per annum and replace loans in the same amount with an average interest rate of 7.5%. The financings also resulted in unencumbering two properties.

As of June 30, 2012, we have $6.80 billion of debt pre-payable at par. We may pursue opportunities to refinance this debt at better terms. Our long term goal is to improve our overall debt to earnings before interest, taxes and depreciation and amortization, or EBIDTA, and leverage ratios by improving operations, amortization of debt and refinancing debt at improved terms.

As a result of our efforts and objectives noted above, the total debt maturing in the next 5 years has decreased to 37% from 74%.

Our key financing and capital raising objectives include the following:

† continue to refinance our maturing debt, and certain debt prepayable without penalty, with the goal of lowering our overall borrowing costs and managing future maturities; and

† dispose of properties in our portfolio that do not fit within our long-term strategy, including certain of our office properties, retail strip centers and regional malls.

We may also raise capital through public or private issuances of debt securities, preferred stock, common stock, common units of the Operating Partnership or other capital raising activities.

As of June 30, 2012, our proportionate share of total debt aggregated $19.28 billion. Our total debt consists of our share of consolidated debt of $16.40 billion, of which $14.50 billion is secured and $1.90 billion is corporate unsecured,

and $2.88 billion of our share of the secured debt of our Unconsolidated Real . . .