The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes that are included in this annual report. Capitalized terms used, but not defined, in this Management's Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the consolidated financial statements.

Executive Overview

We are a self-managed, self-administered, fully integrated 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 shopping centers 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 December 31, 2012, we owned controlling interests in 77 regional malls/open-air and outlet centers (including one mixed-use center), 28 associated centers (each located adjacent to a regional shopping mall), six 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. As of December 31, 2012, we owned non-controlling interests in nine regional malls, four associated centers, four community centers and seven 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, owned in a 75%/25% joint venture at December 31, 2012, one community center development, one mall expansion and two mall redevelopments under construction at December 31, 2012. We also hold options to acquire certain development properties owned by third parties.

Operationally, we continue to pursue strategic acquisitions, prune non-core and mature assets, and invest in our Properties through development and expansion initiatives. Occupancy increased 100 basis points in 2012 to 94.6% across our total portfolio as compared to the prior year and we signed more than 6.1 million square feet of leases. Same-store sales per square foot excluding license agreements, for stabilized mall tenants 10,000 square feet or less for 2012 increased 3.2% over the prior year to $353 per square foot. See "Mall Store Sales" section included herein for further information about our same-store sales metrics. Occupancy gains, sales increases and positive leasing spreads contributed to positive growth in our same-center NOI.

Our financing strategy centers on positioning our balance sheet to achieve an investment grade rating, which should provide us with increased flexibility and access to favorable financing options in the public debt markets. As part of this process, we extended and modified our two largest credit facilities to convert them from secured to unsecured and increase their aggregate capacity to $1.2 billion. Additionally, we are retiring property-specific loans as they mature to increase the size of our unencumbered NOI and gross asset value. We believe the process to achieve an investment grade rating could take up to two years.

FFO of our Operating Partnership, as adjusted, increased 5.8% to $412.8 million for the year ending December 31, 2012

as compared to $390.2 million in the prior year. FFO was positively impacted by growth in same-center NOI and decreases in interest rate expense due to lower rates on our lines of credit and favorable refinancings. FFO is a key performance measure for real estate companies. Please see the more detailed discussion of this measure on page 70.

Results of Operations

Comparison of the Year Ended December 31, 2012 to the Year Ended December 31, 2011
Properties that were in operation for the entire year during both 2012 and 2011 are referred to as the "2012 Comparable Properties." Since January 1, 2011, we have acquired or opened three outlet centers, three malls and one community center as follows:

               Property                       Location        Date Opened /Acquired
New Developments:
The Outlet Shoppes at Oklahoma City (1)   Oklahoma City, OK        August 2011
Waynesville Commons                       Waynesville, NC         October 2012

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
Kirkwood Mall (3)                         Bismarck, ND            December 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 accompanying consolidated statements of operations on a consolidated basis.
(2) The Outlet Shoppes at Gettysburg is a 50/50 joint venture and is included in the accompanying consolidated statements of operations on a consolidated basis.
(3) The Company acquired a 49.0% interest in Kirkwood Mall in December 2012 and executed an agreement to acquire the remaining 51.0% interest within 90 days, subject to lender approval. This Property is included in the accompanying consolidated statements of operations on a consolidated basis. The Properties listed above are included in our operations on a consolidated basis and are collectively referred to as the "2012 New Properties." In addition to the above Properties, in December 2012, we purchased the remaining 40.0% noncontrolling interest in Imperial Valley Mall in El Centro, CA from our joint venture partner. The results of operations of this Property, previously accounted for using the equity method of accounting, are included in our operations on a consolidated basis beginning December 27, 2012. The transactions related to the 2012 New Properties impact the comparison of the results of operations for the year ended December 31, 2012 to the results of operations for the year ended December 31, 2011. In October 2011, we formed a joint venture, CBL/T-C, with TIAA-CREF. As described in Note 5 to the consolidated financial statements, we began accounting for our remaining interest in three of our malls, CoolSprings Galleria, Oak Park Mall and West County Center, which were previously accounted for on a consolidated basis, using the equity method of accounting upon formation of the joint venture. These Properties are collectively referred to as the "CBL/T-C Properties". This transaction impacts the comparison of the results of operations for the year ended December 31, 2012 to the results of operations for the year ended December 31, 2011. Revenues
Total revenues decreased by $16.7 million for 2012 compared to the prior year. Rental revenues and tenant reimbursements decreased $17.0 million due to a decrease of $70.4 million related to the CBL/T-C Properties partially offset by an increase of $39.8 million from the 2012 New Properties and an increase of $13.6 million from the 2012 Comparable Properties. The increase in rental revenues and tenant reimbursements of the 2012 Comparable Properties was driven by increases of $14.5 million in minimum rents and $1.1 million in sponsorship income partially offset by a decrease of $2.3 million in tenant reimbursements. High occupancy levels and continued improvement in leasing spreads led to the increase in minimum rents.
Our cost recovery ratio decreased to 99.7% for 2012 compared to 101.7% for 2011. The increase in management, development and leasing fees of $3.8 million was mainly attributable to a new contract to provide property management services to a portfolio of six third party malls in 2012 as well as income from the CBL/T-C joint venture.
Other revenues decreased $3.5 million primarily due to a decrease of $2.4 million in revenues of our subsidiary that provides security and maintenance services to third parties.

Operating Expenses
Total operating expenses decreased $37.1 million for 2012 compared to the prior year due to a $26.9 million decrease in loss on impairment of real estate. Property operating expenses, including real estate taxes and maintenance and repairs, decreased $7.3 million due to a decrease of $21.6 million related to the CBL/T-C Properties partially offset by increases of $13.3 million related to the 2012 New Properties and $1.0 million attributable to the 2012 Comparable Properties. The $1.0 million increase in property operating expenses of the 2012 Comparable Properties is primarily attributable to increases of $2.5 million in real estate taxes and $2.4 million in payroll costs, which were partially offset by decreases of $2.8 million in utilities and snow removal costs, $0.4 million in land rent expense, $0.4 million in promotion-related costs and $0.3 million in insurance expense.
The decrease in depreciation and amortization expense of $5.6 million resulted from a decrease of $23.8 million related to the CBL/T-C Properties and $1.3 million from the 2012 Comparable Properties, partially offset by an increase of $19.5 million from the 2012 New Properties. The decrease attributable to the 2012 Comparable Properties is primarily attributable to lower amortization of tenant allowances due to write-offs of unamortized tenant allowances in the prior year period related to certain store closings partially offset by ongoing capital expenditures for renovations, expansions and deferred maintenance. General and administrative expenses increased $6.5 million primarily as a result of an increase of $3.9 million in payroll and related expenses, a decrease of $0.8 for capitalized overhead related to development projects, an increase of $0.7 million in legal and other professional services and an increase of $0.7 million related to accelerating the vesting of certain restricted stock awards. The balance of the increase was attributable to increased costs in acquisition costs and several other general and administrative accounts. As a percentage of revenues, general and administrative expenses were 5.0% in 2012 compared to 4.3% in 2011. General and administrative expenses as a percentage of revenues were slightly higher in 2012 due to lower revenues as a result of the deconsolidation of the CBL/T-C Properties.
During 2012, we recorded a non-cash impairment of real estate of $24.4 million. The $24.4 million impairment is attributable to a $20.3 million loss recorded to reduce the fair value of land available for the future expansion of an associated center, a $3.0 million loss to write down the book value of an associated center and a $1.1 million loss from the sale of three outparcels. During 2011, we recorded a non-cash impairment of real estate of $51.3 million, which consisted of $50.7 million related to Columbia Place in Columbia, SC and $0.6 million related to a loss on the sale of a land parcel. Columbia Place experienced declining cash flows as a result of changes in property-specific market conditions, which were further exacerbated by economic conditions that negatively impacted leasing activity and occupancy. See Note 15 to the consolidated financial statements for further discussion of impairment charges. Other expenses decreased $3.8 million primarily due to lower expenses of $2.2 million related to our subsidiary that provides security and maintenance services to third parties, a write-down of $1.5 million recorded in 2011 to reduce the carrying value of a mortgage note receivable to equal its estimated realizable value, for which we foreclosed on the land that served as collateral on the loan, and a decrease of $0.1 million in abandoned projects expense. Other Income and Expenses
Interest and other income increased $1.4 million in 2012 compared to the prior year period, primarily as a result of two mezzanine loans for two outlet centers. We earned $0.4 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 acquisition of member interests in both outlet centers in 2012. We also earned $0.4 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 $22.6 million in 2012 compared to the prior year period. Interest expense related to the CBL/T-C Properties decreased $25.2 million partially offset by an increase of $10.3 million related to the 2012 New Properties. The remaining decrease was primarily related to our continued efforts to deleverage our balance sheet as we used our credit facilities to retire higher rate mortgages loans and refinanced other Properties at favorable fixed rates. Our weighted average interest rate was 4.86% as of December 31, 2012 compared to 5.04% as of December 31, 2011. Additionally, we modified and extended our two largest credit facilities in the fourth quarter of 2012 reducing average spreads by 60 basis points.
During 2012, we recorded a gain on extinguishment of debt of $0.3 million in connection with the early retirement of a mortgage loan. During 2011, we recorded a gain on extinguishment of debt of $1.0 million as a result of the early retirement of debt on two malls.
We recorded a gain on investment of $45.1 million during 2012 related to the acquisition of a controlling interest in Imperial Valley Mall, located in El Centro, CA, when we acquired our joint venture partner's 40% interest.

We recognized a gain on sale of real estate assets of $2.3 million in 2012 related to the sale of a vacant anchor space at one of our malls and the sale of eight parcels of land. During 2011, we recognized a gain on sales of real estate assets of $59.4 million. Of this amount, $54.3 million was related to the sale of a portion of our interests in the CBL/T-C Properties and $5.1 million was 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 $2.2 million during 2012. Gains related to the sales of three outparcels comprised $1.4 million of the increase. Increases in revenues from several new tenants and favorable rent increases for existing tenants at several unconsolidated Properties also contributed to this increase, reflecting improved occupancy and rental rates consistent with the 2012 Comparable Properties.
The income tax provision of $1.4 million in 2012 primarily relates to our Management Company, which is a taxable REIT subsidiary, and consists of a current tax benefit of $1.7 million and a deferred income tax provision of $3.1 million. During 2011, we recorded an income tax benefit of $0.3 million, consisting of a current tax provision of $5.4 million, partially offset by a deferred income tax benefit of $5.7 million. Our taxable REIT subsidiary had higher income in 2012 compared to 2011 primarily as a result of an increase in the management fee income from our own portfolio of Properties. Because this fee income is from our consolidated Properties, the fee income is eliminated in our consolidated financial statements; however, there is still a tax effect to the taxable REIT subsidiary.
Loss from discontinued operations for 2012 of $19.6 million includes an aggregate loss of $26.5 million on impairment of real estate which was partially offset by the operating results of two malls and four community centers that were sold during 2012, the operating results of two office buildings classified as held for sale as of December 31, 2012 and a $0.1 million gain on sale of real estate related to one community center that was sold in 2012.

Operating income from discontinued operations for 2011 of $23.9 million includes a gain on extinguishment of debt of $31.4 million for one mall sold in 2011, the operating results of one mall and one community center that were sold in 2011, the operating results of two malls and four community centers that were sold in 2012 and the operating results of two office buildings that were classified as held for sale as of December 31, 2012, which were partially offset by an aggregate loss on impairment of real estate of $7.4 million.
We also recorded a gain on discontinued operations of $0.9 million in 2012 related to the sale of a community center.

Comparison of the Year Ended December 31, 2011 to the Year Ended December 31, 2010

Properties that were in operation for the entire year during both 2011 and 2010 are referred to as the "2011 Comparable Properties." From January 1, 2010 to December 31, 2011, we acquired or opened one mall, one outlet center and two community centers as follows:

               Property                       Location        Date Opened/Acquired
New Developments:
The Pavilion at Port Orange (1)           Port Orange, FL          March 2010
The Forum at Grandview - Phase I          Madison, MS            November 2010
The Outlet Shoppes at Oklahoma City (2)   Oklahoma City, OK       August 2011

Acquisition:
Northgate Mall                            Chattanooga, TN        September 2011

(1) The Pavilion at Port Orange is a 50/50 joint venture that is accounted for using the equity method of accounting and is included in equity in earnings (losses) of unconsolidated affiliates in the accompanying consolidated statements of operations.

(2) The Outlet Shoppes at Oklahoma City is a 75/25 joint venture, which is included in the accompanying consolidated statements of operations on a consolidated basis.

The Forum at Grandview, The Outlet Shoppes at Oklahoma City and Northgate Mall are included in our operations on a consolidated basis and are collectively referred to as the "2011 New Properties." In addition to the above Properties, in October 2010, we purchased the remaining 50% interest in Parkway Place in Huntsville, AL, from our joint venture partner. The results of operations of this Property, previously accounted for using the equity method of accounting, are included in our operations on a consolidated basis beginning October 1, 2010.The transactions related to the 2011 New Properties impact the comparison of the results of operations for the year ended December 31, 2011 to the results of operations for the year ended December 31, 2010.

Revenues
Total revenues increased by $5.6 million for 2011 compared to the prior year. Rental revenues and tenant reimbursements decreased $0.5 million due to a decrease of $19.4 million related to the CBL/T-C Properties partially offset by an increase of $10.8 million from the 2011 Comparable Properties and an increase of $8.1 million from the 2011 New Properties. The purchase of the additional interest in Parkway Place in October 2010 comprised $8.6 million of the increase from the 2011 Comparable Properties. The remaining increase in rental revenues and tenant reimbursements of the 2011 Comparable Properties was primarily driven by a $2.2 million increase in minimum rents as a result of overall improvement in leasing spreads and higher occupancy levels.
Our cost recovery ratio decreased to 101.7% for 2011 compared to 104.0% for 2010.
The increase in management, development and leasing fees of $0.5 million was mainly attributable to the management fees from the CBL/T-C Properties after the formation of CBL/T-C.
Other revenues increased $5.6 million primarily due to an increase of $3.9 million in revenues of our subsidiary that provides security and maintenance services to third parties.
Operating Expenses
Total operating expenses increased $48.4 million for 2011 compared to the prior year due to a $50.1 million increase in loss on impairment of real estate. Property operating expenses, including real estate taxes and maintenance and repairs, increased $2.6 million due to higher expenses of $6.1 million related to the 2011 Comparable Properties, of which $2.5 million is attributable to the consolidation of Parkway Place, and $3.0 million related to the 2011 New Properties, which were partially offset by a decrease of $6.4 million related to the CBL/T-C Properties. The increase in property operating expenses of the 2011 Comparable Properties is primarily attributable to increases of $2.9 million in security and maintenance expense, $1.9 million in utilities expense and $1.3 million in promotion-related costs.
The decrease in depreciation and amortization expense of $9.1 million resulted from a decrease of $8.7 million related to the CBL/T-C Properties and $2.4 million from the 2011 Comparable Properties, partially offset by an increase of $2.0 million from the 2011 New Properties. The decrease attributable to the 2011 Comparable Properties is primarily attributable to lower amortization of tenant allowances due to write-offs of unamortized tenant allowances in the prior year period related to certain store closings partially offset by an increase related to the consolidation of Parkway Place.
General and administrative expenses increased $1.4 million primarily as a result of increases of $1.1 million in payroll and related expenses, $0.6 million in legal and consulting expenses and $0.6 million in insurance expense, partially offset by a reduction of $0.6 million in travel costs. As a percentage of revenues, general and administrative expenses were 4.3% in 2011 compared to 4.1% in 2010.
During 2011, we recorded a non-cash impairment of real estate of $51.3 million, which consisted of $50.7 million related to Columbia Place in Columbia, SC and $0.6 million related to a loss on the sale of a land parcel. Columbia Place experienced declining cash flows as a result of changes in property-specific market conditions, which were further exacerbated by the recent economic conditions that negatively impacted leasing activity and occupancy. See Carrying Value of Long-Lived Assets in the Critical Accounting Policies and Estimates section herein for further discussion of impairment charges.
Other expenses increased $3.4 million primarily due to higher expenses of $3.8 million related to our subsidiary that provides security and maintenance services to third parties, partially offset by a decrease of $0.3 million in abandoned projects expense.
Other Income and Expenses
Interest and other income decreased $1.3 million in 2011 compared to the prior year period due to the elimination of interest income on advances to two joint ventures and a mortgage note receivable. Interest income declined on one joint venture to which we had outstanding advances when it was sold in June 2010 and, in October 2010, we purchased our partner's 50% share of the joint venture that owned Parkway Place to which we previously had outstanding advances. In addition, interest income is no longer being accrued on a mortgage note receivable for which we foreclosed on the land that served as collateral on the loan.
Interest expense decreased $14.0 million in 2011 compared to the prior year. The CBL/T-C Properties comprised $8.1 million of the decrease, which was partially offset by an increase of $2.0 million related to the 2011 New Properties. The remaining decrease was primarily related to our continued efforts to deleverage our balance sheet as we decreased our consolidated debt by $720.4 million to $4,489.4 million from December 31, 2010 to December 31, 2011. Additionally, during the second and third quarters of 2011, our secured credit facilities were modified to remove a 1.50% floor on LIBOR and to

reduce the amount of the spreads above LIBOR based on our leverage. During 2011, we recorded a gain on extinguishment of debt of $1.0 million as a result of accelerated premium amortization related to the early retirement of debt on two malls.
We recorded a gain on investment of $0.9 million during 2010 related to the acquisition of the remaining 50% interest in Parkway Place in Huntsville, AL from our joint venture partner. There were no transactions of this nature in 2011.
During 2011, we recognized gain on sales of real estate assets of $59.4 million. Of this amount, $54.3 million was related to the sale of a portion of our interests in the CBL/T-C Properties and $5.1 million was related to the sale of a vacant anchor space at one of our malls and five parcels of land. We recognized a gain on sales of real estate assets of $2.9 million during 2010 from the sale of eight parcels of land.
Equity in earnings (losses) of unconsolidated affiliates increased by $6.3 million during 2011. One joint venture Property that opened in March 2010 contributed to the increase compared to the prior year. Increases in revenues and tenant reimbursements were key drivers at several unconsolidated Properties, reflecting improved occupancy and rental rates consistent with the 2011 Comparable Properties. Additionally, our share of the earnings of the CBL/T-C Properties accounted for $0.3 million of the increase. In addition, outparcel sales increased approximately $0.3 million compared to the prior year. These increases were partially offset by a decline in earnings from Parkway Place as a result of the acquisition of the remaining 50% interest from our joint venture partner in October 2010. Results of Parkway Place are now reported on a consolidated basis.
The income tax benefit of $0.3 million in 2011 primarily relates to our taxable REIT subsidiary and consists of a current tax provision of $5.4 million and a deferred income tax benefit of $5.7 million. During 2010, we recorded an income tax benefit of $6.4 million, consisting of a current tax benefit of $8.4 million, partially offset by a deferred income tax provision of $2.0 million. Our taxable REIT subsidiary had higher income in 2011 compared to 2010 primarily as a result of an increase in the management fee income from our own portfolio of Properties. Because this fee income is from our consolidated Properties, the fee income is eliminated in our consolidated financial statements; however, there is still a tax effect to the taxable REIT subsidiary.
Operating income from discontinued operations for 2011 of $23.9 million includes a gain on extinguishment of debt of $31.4 million for one mall sold in 2011, the operating results of one mall and one community center that were sold in 2011, the operating results of two malls and four community centers that were sold in 2012 and the operating results of two office buildings that were classified as held for sale as of December 31, 2012, which were partially offset by an aggregate loss on impairment of real estate of $7.4 million.
Loss on discontinued operations for 2010 of $36.5 million includes an aggregate loss on impairment of real estate assets of $39.1 million primarily from one mall sold in 2011 and one community center was sold in 2010, which were partially offset by operating results of one mall and two community centers that were sold in 2010, operating results of one mall and one community center that were sold in 2011, operating results of two malls and three community centers that were sold in 2012 and operating results of two office buildings that were classified as held for sale as of December 31, 2012, Same-Center Net Operating Income
We present same-center 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 . . .