such known risks and uncertainties include, without limitation:
• general industry, economic and business conditions;

• interest rate fluctuations;

• costs and availability of capital and capital requirements;

• costs and availability of real estate;

• inability to consummate acquisition opportunities and other risks associated with acquisitions;

• competition from other companies and retail formats;

• changes in retail rental rates in our markets;

• shifts in customer demands;

• tenant bankruptcies or store closings;

• changes in vacancy rates at our properties;

• changes in operating expenses;

• changes in applicable laws, rules and regulations; and

• the ability to obtain suitable equity and/or debt financing and the continued availability of financing in the amounts and on the terms necessary to support our future refinancing requirements and business.

This list of risks and uncertainties is only a summary and is not intended to be exhaustive. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.
EXECUTIVE OVERVIEW
We are a self-managed, self-administered, fully integrated real estate investment trust ("REIT") that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air centers, associated centers, community centers and office properties. Our properties are located in 27 states, but are primarily in the southeastern and midwestern United States. We have elected to be taxed as a REIT for federal income tax purposes.
As of September 30, 2012, we owned controlling interests in 77 regional malls/open-air centers (including one mixed-use center), 29 associated centers (each located adjacent to a regional mall), five community centers and 13 office buildings, including our corporate office building. We consolidate the financial statements of all entities in which we have a controlling financial interest or where we are the primary beneficiary of a variable interest entity ("VIE"). As of September 30, 2012, we owned noncontrolling interests in ten regional malls/open-air centers, three associated centers, five community centers and six office buildings. Because one or more of the other partners have substantive participating rights, we do not control these partnerships and joint ventures and, accordingly, account for these investments using the equity method. We had controlling interests in the development of one outlet center and expansion of one outlet center, both of which are owned in 75/25 joint ventures at September 30, 2012. We also had controlling interests in one mall expansion, two community center developments and one mall redevelopment under construction at September 30, 2012. We also hold options to acquire certain development properties owned by third parties.
Third quarter 2012 continued the upward trend in our key metrics. Occupancy levels rose across all segments of our portfolio as compared to the prior year period, with an overall increase of 170 basis points for our total portfolio. Leasing results for the portfolio in the third quarter of 2012 were also positive with an 8.7% increase over the prior gross rent per square foot. Same-store sales per square foot for our stabilized malls increased 4.1% for the nine months ended September 30, 2012. We completed a new preferred offering in October 2012, which yielded net proceeds of approximately $166.6 million at a dividend rate of 6.625%. Subsequent to September 30, 2012, we received fully executed commitments to modify two of our credit facilities, converting the facilities from secured to unsecured, increasing the aggregate capacity to $1.2 billion, reducing the average interest rate by 60 basis points and extending the outside maturity dates by three years, providing us with additional financial flexibility.

RESULTS OF OPERATIONS
Properties that were in operation for the entire year during 2011 and the nine
months ended September 30, 2012 are referred to as the "Comparable
Properties." Since January 1, 2011, we have acquired or opened three outlet
centers and two malls as follows:
                                                               Date
                Property                    Location      Opened/Acquired
New Development:
The Outlet Shoppes at Oklahoma City (1) Oklahoma City, OK   August 2011

Acquisitions:
Northgate Mall                          Chattanooga, TN   September 2011
The Outlet Shoppes at El Paso (1)       El Paso, TX         April 2012
The Outlet Shoppes at Gettysburg (2)    Gettysburg, PA      April 2012
Dakota Square Mall                      Minot, ND            May 2012



(1)             The Outlet Shoppes at Oklahoma City and The Outlet Shoppes at El
                Paso are 75/25 joint ventures, which are included in the
                Company's operations on a consolidated basis.


(2)             The Outlet Shoppes at Gettysburg is a 50/50 joint venture and is
                included in the Company's operations on a consolidated basis.

The properties listed above are included in our results of operations on a consolidated basis and are collectively referred to as the "New Properties." The transactions related to the New Properties impact the comparison of the results of operations for the three and nine months ended September 30, 2012 to the results of operations for the three and nine months ended September 30, 2011. In October 2011, we formed a joint venture, CBL/T-C, LLC, with TIAA-CREF. Upon formation of the joint venture, we began accounting for our remaining interest in three of our malls, CoolSprings Galleria, Oak Park Mall and West County Center, using the equity method of accounting. These properties were previously accounted for on a consolidated basis. These properties are collectively referred to as the "CBL/T-C Properties." This transaction impacts the comparison of the results of operations for the three and nine months ended September 30, 2012 to the results of operations for the three and nine months ended September 30, 2011.
Comparison of the Three Months Ended September 30, 2012 to the Three Months Ended September 30, 2011
Revenues
Total revenues decreased $7.7 million for the three months ended September 30, 2012 compared to the prior year period. Rental revenues and tenant reimbursements decreased by $8.4 million due to a decrease of $23.3 million related to the CBL/T-C Properties partially offset by increases of $12.5 million from the New Properties and $2.4 million from the Comparable Properties. The increase in revenues of the Comparable Properties was primarily driven by a $2.5 million increase in base rents, as a result of increases in occupancy and improvements in leasing spreads.
Our cost recovery ratio for the quarter ended September 30, 2012 was 97.8% compared with 101.4% for the prior-year period.
Other revenues decreased $0.5 million primarily due to a decrease of $0.3 million in revenue related to our subsidiary that provides security and maintenance services to third parties.
Operating Expenses
Total operating expenses decreased $36.0 million for the three months ended September 30, 2012 compared to the prior year period. Property operating expenses, including real estate taxes and maintenance and repairs, decreased $1.3 million due to a reduction in expenses of $7.4 million attributable to the CBL/T-C Properties partially offset by increases of $4.2 million of expenses attributable to the New Properties and $1.9 million related to the Comparable Properties. The increase in property operating expenses of the Comparable Properties is primarily attributable to increases of $1.0 million in real estate taxes, $0.9 million in maintenance and repairs expense and $0.4 million in property-level payroll expenses, partially offset by a decrease of $0.4 million in utilities expense.

The decrease in depreciation and amortization expense of $3.5 million resulted from decreases of $8.0 million related to the CBL/T-C Properties and $0.3 million attributable to the Comparable Properties partially offset by an increase of $4.8 million related to the New Properties. The decrease attributable to the Comparable Properties is primarily due to write-offs of unamortized tenant allowances and in-place lease assets recorded during the third quarter of 2011 related to the closure of a Borders store and lower depreciation on Columbia Place due to the impairment of that property in the third quarter of 2011.
General and administrative expenses increased $0.1 million primarily as a result of a decrease of $0.4 million for capitalized overhead related to development projects partially offset by decreases in several other general and administrative expenses. As a percentage of revenues, general and administrative expenses were 3.9% and 3.8% for the third quarters of 2012 and 2011, respectively. General and administrative expenses as a percentage of revenues will be slightly higher going forward due to lower revenues as a result of the deconsolidation of the CBL/T-C Properties.
We recorded an impairment of real estate in continuing operations of $21.7 million during the third quarter of 2012, comprised of $17.8 million related to Willowbrook Plaza, a community center located in Houston, TX; $3.0 million related to The Courtyard at Hickory Hollow, an associated center located in Antioch, TN; and $0.9 million from the sale of two outparcels. The non-cash impairments of Willowbrook Plaza and The Courtyard at Hickory Hollow reduced the depreciable basis of these properties to their estimated fair values. In the third quarter of 2011, we recorded a non-cash impairment of real estate of $51.3 million related to Columbia Place.
Other expenses decreased $1.6 million primarily attributable to lower expenses of $1.6 million related to our subsidiary that provides security and maintenance services.
Other Income and Expenses
Interest and other income increased $0.2 million compared to the prior year period. The $0.2 million increase relates to interest income from a note receivable from a third party related to the development of The Outlet Shoppes at Atlanta, located in Woodstock, GA.
Interest expense decreased $7.7 million for the three months ended September 30, 2012 compared to the prior year period. Decreases of $8.3 million for the CBL/T-C Properties and $2.9 million for the Comparable Properties were partially offset by an increase of $3.5 million related to the New Properties. The decrease attributable to the Comparable Properties primarily results from a reduction in interest expense due to our ongoing efforts to reduce debt levels as we obtained new mortgage financings which resulted in significant interest rate savings compared with the retired loans.
During the third quarter of 2012, we recorded a gain on extinguishment of debt of $0.2 million in connection with the early retirement of a mortgage loan. During the third quarter of 2012, we recognized a gain on sales of real estate assets of $1.7 million from the sale of four parcels of land. We recognized a gain on sales of real estate assets of $2.9 million during the third quarter of 2011 related to the sale of a vacant anchor space at one of our malls and the sale of one parcel of land.
Equity in earnings of unconsolidated affiliates increased by $1.1 million during the third quarter of 2012 compared to the prior year period. The $1.1 million increase is primarily attributable to gains of $1.0 million related to the sale of two outparcels as well as increases in occupancy across our portfolio of unconsolidated affiliates.
The income tax provision of $1.2 million for the three months ended September 30, 2012 relates to the Management Company, which is a taxable REIT subsidiary, and consists of a current tax benefit of $0.2 million and a deferred income tax provision of $1.4 million. During the three months ended September 30, 2011, we recorded an income tax provision of $4.7 million, consisting of a current tax provision of $4.8 million and a deferred tax benefit of $0.1 million.
The operating loss of discontinued operations for the three months ended September 30, 2012 of $9.0 million includes an $8.4 million impairment of real estate related to two malls that were classified as held for sale in the third quarter of 2012 as well as settlement of estimated expenses based on actual amounts for properties sold in previous periods. The operating loss of discontinued operations for the three months ended September 30, 2011 of $0.1 million represents the settlement of estimated expenses based on actual amounts for properties sold during previous periods. The gain on discontinued operations of $0.1 million for the third quarter of 2012 represents a $0.1 million gain from a community center sold during the period. The loss on discontinued operations of less than $0.1 million for the third quarter of 2011 represents the operating results for the three properties discussed above for 2012, two community centers that were sold in the first quarter of 2012, and a community center that was sold in the fourth quarter of 2011.
Comparison of the Nine Months Ended September 30, 2012 to the Nine Months Ended September 30, 2011
Revenues
Total revenues decreased $30.2 million for the nine months ended September 30, 2012 compared to the prior year period. Rental revenues and tenant reimbursements decreased by $30.5 million due to a decrease of $69.4 million related to the

CBL/T-C Properties partially offset by increases of $29.4 million from the New Properties and $9.5 million from the Comparable Properties. The increase in revenues of the Comparable Properties was primarily driven by a $9.0 million increase in rental revenue, as a result of the increases in occupancy, improvements in leasing spreads and a bankruptcy settlement of $1.6 million from a former tenant.
Our cost recovery ratio for the nine months ended September 30, 2012 was 97.3% compared with 100.5% for the prior-year period.
Other revenues decreased $2.5 million primarily due to a decrease of $1.8 million in revenues related to our subsidiary that provides security and maintenance services to third parties.
Operating Expenses
Total operating expenses decreased $50.6 million for the nine months ended September 30, 2012 compared to the prior year period. Property operating expenses, including real estate taxes and maintenance and repairs, decreased $8.3 million due to a reduction in expenses of $21.3 million attributable to the CBL/T-C Properties partially offset by increases of $10.2 million of expenses attributable to the New Properties and $2.8 million of expense related to the Comparable Properties. The increase in property operating expenses of the Comparable Properties is primarily attributable to increases of $2.8 million in payroll and related costs and $1.5 million in real estate taxes partially offset by a decrease of $1.5 million in snow removal costs.
The decrease in depreciation and amortization expense of $11.8 million resulted from decreases of $23.8 million related to the CBL/T-C Properties and $1.7 million from the Comparable Properties partially offset by an increase of $13.7 million related to the New Properties. The decrease attributable to the Comparable Properties is primarily due to $2.2 million of write-offs of unamortized tenant allowances recorded in 2011 related to the closure of two Borders stores partially offset by ongoing capital expenditures for renovations, expansions and deferred maintenance.
General and administrative expenses increased $2.8 million primarily as a result of increases of $2.0 million in payroll and related costs, $0.7 million in acquisition-related costs, and $0.3 million for legal expenses, which were partially offset by a decrease of $0.3 million in travel costs. As a percentage of revenues, general and administrative expenses were 4.7% and 4.2% for the nine months ended September 30, 2012 and 2011, respectively. General and administrative expenses as a percentage of revenues will be slightly higher going forward due to lower revenues as a result of the deconsolidation of the CBL/T-C Properties.
We recorded an impairment of real estate of $21.7 million in 2012, comprised of $17.8 million related to Willowbrook Plaza, a community center located in Houston, TX; $3.0 million related to The Courtyard at Hickory Hollow, an associated center located in Antioch, TN; and $0.9 million from the sale of two outparcels. The non-cash impairment write-downs for Willowbrook Plaza and The Courtyard at Hickory Hollow reduced the depreciable basis of these properties to their estimated fair values. In 2011, we recorded a non-cash impairment of real estate of $51.3 million related to Columbia Place.
Other expenses decreased $3.6 million primarily due to a write-down of $1.9 million recorded in 2011 to reduce the carrying value of two mortgage note receivables to equal their estimated realizable values and a decrease of $1.9 million in expenses related to our subsidiary that provides security and maintenance services.
Other Income and Expenses
Interest and other income increased $1.4 million compared to the prior year period, primarily as a result of two mezzanine loans for two outlet centers. We earned $0.6 million in interest income on these loans and subsequently recognized $0.6 million of unamortized discounts on these loans when they terminated in connection with the acquisitions of member interests in both outlet centers in 2012. We also received $0.2 million of interest income on a note receivable related to the development of The Outlet Shoppes at Atlanta, located in Woodstock, GA.
Interest expense decreased $24.5 million for the nine months ended September 30, 2012 compared to the prior year period as a result of decreases of $24.8 million attributable to the CBL/T-C Properties and $7.8 million related to the Comparable Properties partially offset by an increase of $8.1 million related to the New Properties. The decrease attributable to the Comparable Properties is primarily due to a reduction in interest expense as we used our lines of credit, which had lower interest rates, to retire maturing loans and then obtained new mortgage financings which also resulted in significant interest rate savings compared with the retired loans.
During the nine months ended September 30, 2012, we recorded a gain on extinguishment of debt of $0.2 million related to the early retirement of debt on a mortgage loan. During the nine months ended September 30, 2011, we recorded a gain on extinguishment of debt of $0.6 million related to the early retirement of debt on Mid Rivers Mall in St. Louis, MO. Both gains were due to the write-off of unamortized debt premiums when the related loans were retired. During the nine months ended September 30, 2012, we recognized a gain on sales of real estate assets of $1.8 million related to the sale of a vacant anchor space at one of our malls and the sale of seven parcels of land. We recognized a gain on sales of real estate assets of $3.6 million during the nine months ended September 30, 2011 related to the sale of a vacant anchor space

at one of our malls and five parcels of land.
Equity in earnings of unconsolidated affiliates increased by $1.2 million during the nine months ended September 30, 2012 compared to the prior year period. The $1.2 million increase is primarily attributable to a gain of $1.0 million related to the sale of two outparcels as well as increases in rental revenues due to improved occupancy across our portfolio of unconsolidated affiliates. The income tax provision of $1.2 million for the nine months ended September 30, 2012 relates to the Management Company, which is a taxable REIT subsidiary, and consists of a current benefit of $2.4 million and a deferred income tax provision of $3.7 million. During the nine months ended September 30, 2011, we recorded an income tax benefit of $1.8 million, consisting of a current tax provision of $3.2 million and a deferred tax benefit of $5.0 million.

The operating loss of discontinued operations for the nine months ended September 30, 2012 of $6.3 million represents the operating results of Towne Mall and Hickory Hollow Mall that were classified as held for sale in the third quarter of 2012 as well as three community centers, Massard Crossing, Oak Hollow Square and the second phase of Settlers Ridge, that were sold during the year. We also recorded a gain of $0.1 million on the sale of Massard Crossing in the third quarter of 2012, a $0.3 million loss on impairment of real estate in the first quarter of 2012 to true-up certain estimated amounts to actual amounts related to the sale of Oak Hollow Square, and a gain of $0.9 million on the sale of the second phase of Settlers Ridge in the first quarter of 2012. The results of operations of these two properties, including the gain on sale of real estate and loss on impairment of real estate, are included in discontinued operations for the nine months ended September 30, 2012. Operating income of $23.5 million from discontinued operations for the nine months ended September 30, 2011 reflects the operating results of Oak Hollow Mall that was sold in February 2011. In accordance with the lender's agreement to modify the outstanding principal balance and accrued interest to equal the net sales price for the property, we recorded a gain on the extinguishment of debt of $31.4 million in the first quarter of 2011. We also recorded a loss on impairment of real estate in the first quarter of 2011 of $2.7 million to write down the book value of Oak Hollow Mall to the net sales price. We recorded a loss on impairment of real estate of $4.5 million in the second quarter of 2011 to write down the book value of the second phase of Settlers Ridge to its then estimated fair value. The results of operations of this property, including the gain on extinguishment of debt and loss on impairment of real estate, are included in discontinued operations for the nine months ended September 30, 2011. Discontinued operations for all periods presented include the settlement of estimated expenses based on actual amounts for properties sold during previous periods.

Same-Center Net Operating Income
We present same-center net operating income ("NOI") as a supplemental performance measure of the operating performance of our same-center properties. NOI is defined as operating revenues (rental revenues, tenant reimbursements, and other income) less property operating expenses (property operating, real estate taxes, and maintenance and repairs). We compute NOI based on our pro rata share of both consolidated and unconsolidated properties. Our definition of NOI may be different than that used by other real estate companies, and accordingly, our calculation of NOI may not be comparable to other real estate companies. Since same-center NOI includes only those revenues and expenses related to the operations of comparable properties, we believe same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, and operating costs and the impact of those trends on our results of operations. Additionally, there are instances when tenants terminate their leases prior to the scheduled expiration date and pay us lease termination fees. These one-time lease termination fees may distort same-center NOI and not be indicative of the ongoing operations of our shopping center properties. Therefore, we believe presenting same-center NOI, excluding lease termination fees, is useful to investors.
We include a property in our same-center pool when we owned all or a portion of the property as of September 30, 2012 and we owned it and it was in operation for both the entire preceding calendar year and the current year-to-date reporting period ending September 30, 2012. The only properties excluded from the same-center pool that would otherwise meet this criteria are non-core properties and properties included in discontinued operations. As of September 30, 2012, we have excluded Columbia Place, Hickory Hollow Mall and Towne Mall from our same-center pool as these are classified as non-core properties. New Properties are excluded from same-center NOI, until they meet this criteria.

Due to the exclusions noted above, same-center NOI should only be used as a supplemental measure of our performance and not as an alternative to GAAP operating income (loss) or net income (loss). A reconciliation of our same-center NOI to net income attributable to the Company for the three and nine months ended September 30, 2012 and 2011 is as follows (in thousands):

                                             Three Months                   Nine Months
                                          Ended September 30,           Ended September 30,
                                          2012           2011           2012           2011
Net income (loss) attributable to the
Company                               $    8,074     $  (16,726 )   $   63,514     $   50,969

Adjustments: (1)
Depreciation and amortization             76,920         78,210        228,109        232,198
Interest expense                          72,441         77,539        214,708        230,805
Abandoned projects expense                     8              -           (115 )           51
. . .