UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2018~~March 31, 2019

SIMON PROPERTY GROUP, INC.

SIMON PROPERTY GROUP, L.P.

(Exact name of registrant as specified in its charter)

Delaware (Simon Property Group, Inc.) Delaware (Simon Property Group, L.P.) (State of incorporation or organization)	001‑14469 (Simon Property Group, Inc.) 001-36110 (Simon Property Group, L.P.) (Commission File No.)	04‑6268599 (Simon Property Group, Inc.) 34-1755769 (Simon Property Group, L.P.) (I.R.S. Employer Identification No.)
225 West Washington Street Indianapolis, Indiana 46204 (Address of principal executive offices)
(317) 636‑1600 (Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Simon Property Group, Inc. Yes ☒ No ☐	Simon Property Group, L.P. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).


Simon Property Group, Inc. Yes ☒ No ☐	Simon Property Group, L.P. Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange ~~Act (check one):~~Act:

Simon Property Group, Inc.:
Large accelerated filer ☒	Accelerated filer ☐	Non‑accelerated filer ☐	Smaller reporting company ☐
			Emerging growth company ☐

Simon Property Group, L.P.:
Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Simon Property Group, Inc. ☐

Simon Property Group, L.P. ☐

Indicate by check mark whether Registrant is a shell company (as defined by Rule 12b‑2 of the Exchange Act).

Simon Property Group, Inc. Yes ☐ No ☒

Simon Property Group, L.P. Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


	Title of each class	Trading Symbols	Name of each exchange on which registered
Simon Property Group, Inc.	Common stock, $0.0001 par value	SPG	New York Stock Exchange
Simon Property Group, Inc.	83/₈% Series J Cumulative Redeemable Preferred Stock, $0.0001 par value	SPGJ	New York Stock Exchange
Simon Property Group, L.P.	2.375% Senior Unsecured Notes due 2020	SPG/20	New York Stock Exchange

As of ~~September 30, 2018,~~March 31, 2019, Simon Property Group, Inc. had ~~309,296,415~~308,985,608 shares of common stock, par value $0.0001 per share, and 8,000 shares of Class B common stock, par value $0.0001 per share, outstanding. Simon Property Group, L.P. has no common stock outstanding.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10‑Q for the quarterly period ended ~~September 30, 2018~~March 31, 2019 of Simon Property Group, Inc., a Delaware corporation, and Simon Property Group, L.P., a Delaware limited partnership. 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.

Simon is a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. We are structured as an umbrella partnership REIT under which substantially all of our business is conducted through the Operating Partnership, Simon’s majority‑owned partnership subsidiary, for which Simon is the general partner. As of ~~September 30, 2018,~~March 31, 2019, Simon owned an approximate ~~86.8%~~86.9% ownership interest in the Operating Partnership, with the remaining ~~13.2%~~13.1% ownership interest owned by limited partners. As the sole general partner of the Operating Partnership, Simon has exclusive control of the Operating Partnership’s day‑to‑day management.

We operate Simon and the Operating Partnership as one business. The management of Simon consists of the same members as the management of the Operating Partnership. As general partner with control of the Operating Partnership, Simon consolidates the Operating Partnership for financial reporting purposes, and Simon has no material assets or liabilities other than its investment in the Operating Partnership. Therefore, the assets and liabilities of Simon and the Operating Partnership are the same on their respective financial statements.

We believe that combining the quarterly reports on Form 10‑Q of Simon and the Operating Partnership into this single report provides the following benefits:

enhances investors’ understanding of Simon and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

eliminates duplicative disclosure and provides a more streamlined presentation since substantially all of the disclosure in this report applies to both Simon and the Operating Partnership; and

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

We believe it is important for investors to understand the few differences between Simon and the Operating Partnership in the context of how we operate as a consolidated company. The primary difference is that Simon itself does not conduct business, other than acting as the general partner of the Operating Partnership and issuing equity or equity‑related instruments from time to time. In addition, Simon itself does not incur any indebtedness, as all debt is incurred by the Operating Partnership or entities/subsidiaries owned or controlled by the Operating Partnership.

The Operating Partnership holds, directly or indirectly, substantially all of our assets, including our ownership interests in our joint ventures. The Operating Partnership conducts substantially all of our business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity issuances by Simon, which are contributed to the capital of the Operating Partnership in exchange for, in the case of common stock issuances by Simon, common units of partnership interest in the Operating Partnership, or units, or, in the case of preferred stock issuances by Simon, preferred units of partnership interest in the Operating Partnership, or preferred units, the Operating Partnership, directly or indirectly, generates the capital required by our business through its operations, the incurrence of indebtedness, proceeds received from the disposition of certain properties and joint ventures and the issuance of units or preferred units to third parties.

The presentation of stockholders’ equity, partners’ equity and noncontrolling interests are the main areas of difference between the consolidated financial statements of Simon and those of the Operating Partnership. The differences between stockholders’ equity and partners’ equity result from differences in the equity issued at the Simon and Operating Partnership levels. The units held by limited partners in the Operating Partnership are accounted for as partners’ equity in the Operating Partnership’s financial statements and as noncontrolling interests in Simon’s financial statements. The noncontrolling interests in the Operating Partnership’s financial statements include the interests of unaffiliated partners in various consolidated partnerships. The noncontrolling interests in Simon’s financial statements include the same noncontrolling interests at the Operating Partnership level and, as previously stated, the units held by limited partners of the Operating Partnership. Although classified differently, total equity of Simon and the Operating Partnership is the same.

To help investors understand the differences between Simon and the Operating Partnership, this report provides:

separate consolidated financial statements for Simon and the Operating Partnership;

a single set of condensed notes to such consolidated financial statements that includes separate discussions of noncontrolling interests and stockholders’ equity or partners’ equity, accumulated other comprehensive income (loss) and per share and per unit data, as applicable;

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a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that also includes discrete information related to each entity; and

separate Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds sections related to each entity.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of Simon and the Operating Partnership in order to establish that the requisite certifications have been made and that Simon and the Operating Partnership are each compliant with Rule 13a‑14(a) or Rule 15d‑14(a) of the Securities Exchange Act of 1934 and 18 U.S.C. §1350. The separate discussions of Simon and the Operating Partnership in this report should be read in conjunction with each other to understand our results on a consolidated basis and how management operates our business.

In order to highlight the differences between Simon and the Operating Partnership, the separate sections in this report for Simon and the Operating Partnership specifically refer to Simon and the Operating Partnership. In the sections that combine disclosure of Simon and the Operating Partnership, this report refers to actions or holdings of Simon and the Operating Partnership as being “our” actions or holdings. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures, holds assets and incurs debt, we believe that references to “we,” “us” or “our” in this context is appropriate because the business is one enterprise and we operate substantially all of our business through the Operating Partnership.

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Simon Property Group, Inc.

Simon Property Group, L.P.

Form 10‑Q

INDEX

			Page
Part I — Financial Information

	Item 1.	Consolidated Financial Statements of Simon Property Group, Inc. (Unaudited)
		Consolidated Balance Sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	5
		Consolidated Statements of Operations and Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	6
		Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	7
		Consolidated Statements of Equity for the three months ended March 31, 2019 and 2018	8

		Consolidated Financial Statements of Simon Property Group, L.P. (Unaudited)
		Consolidated Balance Sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	89
		Consolidated Statements of Operations and Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	910
		Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	1011
		Consolidated Statements of Equity for the three months ended March 31, 2019 and 2018	12

		Condensed Notes to Consolidated Financial Statements	1113
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3332
	Item 3.	Qualitative and Quantitative Disclosures About Market Risk	4744
	Item 4.	Controls and Procedures	4744

Part II — Other Information

	Item 1.	Legal Proceedings	4845
	Item 1A.	Risk Factors	4845
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4845
	Item 3.	Defaults Upon Senior Securities	4845
	Item 4.	Mine Safety Disclosures	4846
	Item 5.	Other Information	4846
	Item 6.	Exhibits	4947

Signatures			5048

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Simon Property Group, Inc.

Unaudited Consolidated Balance Sheets

(Dollars in thousands, except share amounts)


	September 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
ASSETS:
Investment properties, at cost	$	36,943,299	$	36,393,464	$	37,193,798	$	37,092,670
Less - accumulated depreciation		12,638,409		11,935,949		13,119,895		12,884,539
		24,304,890		24,457,515		24,073,903		24,208,131
Cash and cash equivalents		695,718		1,482,309		436,802		514,335
Tenant receivables and accrued revenue, net		722,730		742,672		733,159		763,815
Investment in unconsolidated entities, at equity		2,281,688		2,266,483		2,197,309		2,220,414
Investment in Klépierre, at equity		1,776,655		1,934,676		1,676,635		1,769,488
Deferred costs and other assets		1,298,012		1,373,983		1,723,968		1,210,040
Total assets	$	31,079,693	$	32,257,638	$	30,841,776	$	30,686,223
LIABILITIES:
Mortgages and unsecured indebtedness	$	23,678,264	$	24,632,463	$	23,185,965	$	23,305,535
Accounts payable, accrued expenses, intangibles, and deferred revenues		1,268,099		1,269,190		1,157,477		1,316,861
Cash distributions and losses in unconsolidated entities, at equity		1,534,550		1,406,378		1,559,534		1,536,111
Other liabilities		503,342		520,363		1,012,976		500,597
Total liabilities		26,984,255		27,828,394		26,915,952		26,659,104
Commitments and contingencies
Limited partners’ preferred interest in the Operating Partnership and noncontrolling redeemable interests in properties		197,937		190,480		225,882		230,163
EQUITY:
Stockholders’ Equity
Capital stock (850,000,000 total shares authorized, $0.0001 par value, 238,000,000 shares of excess common stock, 100,000,000 authorized shares of preferred stock):
Series J 83/8% cumulative redeemable preferred stock, 1,000,000 shares authorized, 796,948 issued and outstanding with a liquidation value of $39,847		42,830		43,077		42,666		42,748
Common stock, $0.0001 par value, 511,990,000 shares authorized, 320,411,571 and 320,322,774 issued and outstanding, respectively		32		32
Common stock, $0.0001 par value, 511,990,000 shares authorized, 320,435,571 and 320,411,571 issued and outstanding, respectively						32		32
Class B common stock, $0.0001 par value, 10,000 shares authorized, 8,000 issued and outstanding		—		—		—		—
Capital in excess of par value		9,736,720		9,614,748		9,706,021		9,700,418
Accumulated deficit		(4,896,754)		(4,782,173)		(4,979,489)		(4,893,069)
Accumulated other comprehensive loss		(118,593)		(110,453)		(120,962)		(126,017)
Common stock held in treasury, at cost, 11,115,156 and 9,163,920 shares, respectively		(1,380,619)		(1,079,063)
Common stock held in treasury, at cost, 11,449,963 and 11,402,103 shares, respectively						(1,435,309)		(1,427,431)
Total stockholders’ equity		3,383,616		3,686,168		3,212,959		3,296,681
Noncontrolling interests		513,885		552,596		486,983		500,275
Total equity		3,897,501		4,238,764		3,699,942		3,796,956
Total liabilities and equity	$	31,079,693	$	32,257,638	$	30,841,776	$	30,686,223

The accompanying notes are an integral part of these statements.

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Simon Property Group, Inc.

Unaudited Consolidated Statements of Operations and Comprehensive Income

(Dollars in thousands, except per share amounts)


	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended
	September 30,				September 30,				March 31,
	2018		2017		2018		2017		2019		2018
REVENUE:
Minimum rent	$	864,514	$	861,184	$	2,581,792	$	2,559,535
Overage rent		39,601		36,634		104,533		94,601
Tenant reimbursements		385,543		386,713		1,138,855		1,146,156
Lease income									$	1,280,058	$	1,267,893
Management fees and other revenues		28,784		28,946		85,506		90,860		27,544		28,181
Other income		90,563		90,161		286,491		219,796		145,232		98,108
Total revenue		1,409,005		1,403,638		4,197,177		4,110,948		1,452,834		1,394,182
EXPENSES:
Property operating		119,021		118,807		335,420		330,226		111,549		113,448
Depreciation and amortization		316,175		317,037		953,309		950,265		328,643		316,936
Real estate taxes		119,315		111,953		344,950		332,027		115,459		114,187
Repairs and maintenance		23,632		25,352		73,507		72,654		27,922		27,684
Advertising and promotion		36,688		36,006		107,979		108,450		37,125		34,800
Provision for credit losses		4,984		2,895		13,915		10,765
Home and regional office costs		32,714		31,451		106,093		110,906		52,560		41,064
General and administrative		12,172		13,014		35,713		40,089		9,136		12,628
Other		26,913		57,055		69,293		102,678		20,102		31,502
Total operating expenses		691,614		713,570		2,040,179		2,058,060		702,496		692,249
OPERATING INCOME		717,391		690,068		2,156,998		2,052,888
OPERATING INCOME BEFORE OTHER ITEMS										750,338		701,933
Interest expense		(199,469)		(199,032)		(611,585)		(604,408)		(198,733)		(205,492)
Loss on extinguishment of debt		—		—		—		(128,618)
Income and other taxes		(10,118)		(14,511)		(26,475)		(16,981)		(10,102)		(6,220)
Income from unconsolidated entities		134,408		116,110		325,263		277,212		90,444		90,026
Gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net		—		—		144,949		4,989
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net										—		135,277
CONSOLIDATED NET INCOME		642,212		592,635		1,989,150		1,585,082		631,947		715,524
Net income attributable to noncontrolling interests		85,111		78,018		262,722		209,070		82,638		94,036
Preferred dividends		834		834		2,503		2,503		834		834
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	556,267	$	513,783	$	1,723,925	$	1,373,509	$	548,475	$	620,654
BASIC AND DILUTED EARNINGS PER COMMON SHARE:
Net income attributable to common stockholders	$	1.80	$	1.65	$	5.57	$	4.41	$	1.78	$	2.00

Consolidated Net Income	$	642,212	$	592,635	$	1,989,150	$	1,585,082	$	631,947	$	715,524
Unrealized gain (loss) on derivative hedge agreements		5,241		(8,598)		20,355		(31,396)		9,342		(6,146)
Net loss (gain) reclassified from accumulated other comprehensive loss into earnings		1,591		(19,362)		5,929		(14,303)
Net loss reclassified from accumulated other comprehensive loss into earnings										1,088		2,153
Currency translation adjustments		(10,763)		12,922		(35,797)		42,815		(4,744)		13,092
Changes in available-for-sale securities and other		(22)		6,787		(88)		6,324		144		(289)
Comprehensive income		638,259		584,384		1,979,549		1,588,522		637,777		724,334
Comprehensive income attributable to noncontrolling interests		84,466		76,935		261,260		209,424		83,411		95,140
Comprehensive income attributable to common stockholders	$	553,793	$	507,449	$	1,718,289	$	1,379,098	$	554,366	$	629,194

The accompanying notes are an integral part of these statements.

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Simon Property Group, Inc.

Unaudited Consolidated Statements of Cash Flows

(Dollars in thousands)


	For the Nine Months Ended				For the Three Months Ended
	September 30,				March 31,
	2018		2017		2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated Net Income	$	1,989,150	$	1,585,082	$	631,947	$	715,524
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization		1,009,671		1,012,335		339,918		334,672
Loss on debt extinguishment		—		128,618
Gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net		(144,949)		(4,989)
Gains on sales of marketable securities		—		(21,541)
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net						—		(135,277)
Unrealized change in fair value of equity instruments		(1,212)		—		(5,317)		3,029
Gain on interest in unconsolidated entity (Note 5)		(35,621)		—
Straight-line rent		(14,923)		(21,433)
Straight-line lease income						(11,981)		(6,276)
Equity in income of unconsolidated entities		(325,263)		(277,212)		(90,444)		(90,026)
Distributions of income from unconsolidated entities		289,411		270,938		82,918		77,870
Changes in assets and liabilities
Tenant receivables and accrued revenue, net		27,668		19,925		36,842		71,858
Deferred costs and other assets		(74,922)		(75,688)		(20,013)		(62,839)
Accounts payable, accrued expenses, intangibles, deferred revenues and other liabilities		32,156		103,418		(126,523)		(65,058)
Net cash provided by operating activities		2,751,166		2,719,453		837,347		843,477
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions		—		(87,741)
Funding of loans to related parties		(4,641)		(68,206)		—		(1,833)
Capital expenditures, net		(585,957)		(487,321)		(216,781)		(172,756)
Cash impact from the consolidation of properties		11,276		7,536
Investments in unconsolidated entities		(51,883)		(111,225)		(11,980)		(10,859)
Purchase of marketable and non-marketable securities		(23,273)		(5,503)		(6,905)		(7,542)
Proceeds from sales of marketable and non-marketable securities		—		53,923
Insurance proceeds for property restoration		16,160		—		1,757		—
Distributions of capital from unconsolidated entities and other		428,862		331,693		120,347		69,316
Net cash used in investing activities		(209,456)		(366,844)		(113,562)		(123,674)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock and other, net of transaction costs		(247)		(246)		(82)		(82)
Purchase of shares related to stock grant recipients' tax withholdings		(2,911)		(2,789)		(249)		(276)
Redemption of limited partner units		(7,619)		—		(135)		(6,267)
Purchase of treasury stock		(307,296)		(396,169)		(7,628)		(227,901)
Distributions to noncontrolling interest holders in properties		(11,524)		(8,936)		(1,803)		(8,376)
Contributions from noncontrolling interest holders in properties		161		289		—		24
Preferred distributions of the Operating Partnership		(1,436)		(1,436)		(479)		(479)
Distributions to stockholders and preferred dividends		(1,829,610)		(1,655,307)		(634,222)		(606,086)
Distributions to limited partners		(276,530)		(251,066)		(96,010)		(91,523)
Loss on debt extinguishment		—		(128,618)
Proceeds from issuance of debt, net of transaction costs		5,895,653		8,071,035		2,587,324		1,756,056
Repayments of debt		(6,786,942)		(8,031,020)		(2,648,034)		(2,649,995)
Net cash used in financing activities		(3,328,301)		(2,404,263)		(801,318)		(1,834,905)
DECREASE IN CASH AND CASH EQUIVALENTS		(786,591)		(51,654)		(77,533)		(1,115,102)
CASH AND CASH EQUIVALENTS, beginning of period		1,482,309		560,059		514,335		1,482,309
CASH AND CASH EQUIVALENTS, end of period	$	695,718	$	508,405	$	436,802	$	367,207

The accompanying notes are an integral part of these statements.

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Simon Property Group, Inc.

Unaudited Consolidated Statements of Equity

(Dollars in thousands)


					Accumulated						Common
					Other		Capital in				Stock
	Preferred		Common		Comprehensive		Excess of		Accumulated		Held in		Noncontrolling		Total
	Stock		Stock		Income (Loss)		Par Value		Deficit		Treasury		interests		Equity
January 1, 2019	$	42,748	$	32	$	(126,017)	$	9,700,418	$	(4,893,069)	$	(1,427,431)	$	500,275	$	3,796,956
Exchange of limited partner units (24,000 common shares, note 8)								253						(253)		—
Series J preferred stock premium amortization		(82)														(82)
Redemption of limited partner units (774 units)								(127)						(8)		(135)
Amortization of stock incentive								1,309								1,309
Treasury stock purchase (46,377 shares)												(7,628)				(7,628)
Long-term incentive performance units														3,701		3,701
Issuance of unit equivalents and other (1,483 common shares repurchased)								1		(1,507)		(250)		(2)		(1,758)
Adjustment to limited partners’ interest from change in ownership in the Operating Partnership								4,167						(4,167)		—
Distributions to common stockholders and limited partners, excluding Operating Partnership preferred interests										(634,222)				(96,010)		(730,232)
Distributions to other noncontrolling interest partners														(552)		(552)
Other comprehensive income						5,055								775		5,830
Net income, excluding $479 attributable to preferred interests in the Operating Partnership and a $1,065 loss attributable to noncontrolling redeemable interests in properties										549,309				83,224		632,533
March 31, 2019	$	42,666	$	32	$	(120,962)	$	9,706,021	$	(4,979,489)	$	(1,435,309)	$	486,983	$	3,699,942

January 1, 2018	$	43,077	$	32	$	(110,453)	$	9,614,748	$	(4,782,173)	$	(1,079,063)	$	552,596	$	4,238,764
Exchange of limited partner units (6,000 common shares, note 8)								70						(70)		—
Series J preferred stock premium amortization		(83)														(83)
Stock incentive program (236 common shares, net)								(37)				37				—
Redemption of limited partner units (40,503 units)								(5,793)						(474)		(6,267)
Amortization of stock incentive								2,060								2,060
Treasury stock purchase (1,473,588 shares)												(227,901)				(227,901)
Long-term incentive performance units														8,307		8,307
Cumulative effect of accounting change										7,264						7,264
Issuance of unit equivalents and other (1,608 common shares repurchased)								3		(14,935)		(276)		24		(15,184)
Adjustment to limited partners’ interest from change in ownership in the Operating Partnership								36,221						(36,221)		—
Distributions to common stockholders and limited partners, excluding Operating Partnership preferred interests										(606,086)				(91,523)		(697,609)
Distributions to other noncontrolling interest partners														(489)		(489)
Other comprehensive income						7,706								1,104		8,810
Net income, excluding $479 attributable to preferred interests in the Operating Partnership and a $619 loss attributable to noncontrolling redeemable interests in properties										621,488				94,176		715,664
March 31, 2018	$	42,994	$	32	$	(102,747)	$	9,647,272	$	(4,774,442)	$	(1,307,203)	$	527,430	$	4,033,336

The accompanying notes are an integral part of these statements.

Table of Contents

Simon Property Group, L.P.

Unaudited Consolidated Balance Sheets

(Dollars in thousands, except unit amounts)

September 30,

December 31,

2018

2017

ASSETS:

Investment properties, at cost

$
36,943,299

$
36,393,464

Less — accumulated depreciation

12,638,409

11,935,949

24,304,890

24,457,515

Cash and cash equivalents

695,718

1,482,309

Tenant receivables and accrued revenue, net

722,730

742,672

Investment in unconsolidated entities, at equity

2,281,688

2,266,483

Investment in Klépierre, at equity

1,776,655

1,934,676

Deferred costs and other assets

1,298,012

1,373,983

Total assets

$
31,079,693

$
32,257,638

LIABILITIES:

Mortgages and unsecured indebtedness

$
23,678,264

$
24,632,463

Accounts payable, accrued expenses, intangibles, and deferred revenues

1,268,099

1,269,190

Cash distributions and losses in unconsolidated entities, at equity

1,534,550

1,406,378

Other liabilities

503,342

520,363

Total liabilities

26,984,255

27,828,394

Commitments and contingencies

Preferred units, various series, at liquidation value, and noncontrolling redeemable interests in properties

197,937

190,480

EQUITY:

Partners’ Equity

Preferred units, 796,948 units outstanding. Liquidation value of $39,847

42,830

43,077

General Partner, 309,304,415 and 311,166,854 units outstanding, respectively

3,340,786

3,643,091

Limited Partners, 47,212,857 and 46,879,625 units outstanding, respectively

509,943

548,858

Total partners’ equity

3,893,559

4,235,026

Nonredeemable noncontrolling interests in properties, net

3,942

3,738

Total equity

3,897,501

4,238,764

Total liabilities and equity

$
31,079,693

$
32,257,638

~~The accompanying notes are an integral part of these statements.~~

~~Table of Contents~~

~~Simon Property Group, L.P.~~

~~Unaudited Consolidated Statements of Operations and Comprehensive Income~~

~~(Dollars in thousands, except per unit amounts)~~

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2018

2017

2018

2017

REVENUE:








Minimum rent

$
864,514

$
861,184

$
2,581,792

$
2,559,535

Overage rent

39,601

36,634

104,533

94,601

Tenant reimbursements

385,543

386,713

1,138,855

1,146,156

Management fees and other revenues

28,784

28,946

85,506

90,860

Other income

90,563

90,161

286,491

219,796

Total revenue

1,409,005

1,403,638

4,197,177

4,110,948

EXPENSES:

Property operating

119,021

118,807

335,420

330,226

Depreciation and amortization

316,175

317,037

953,309

950,265

Real estate taxes

119,315

111,953

344,950

332,027

Repairs and maintenance

23,632

25,352

73,507

72,654

Advertising and promotion

36,688

36,006

107,979

108,450

Provision for credit losses

4,984

2,895

13,915

10,765

Home and regional office costs

32,714

31,451

106,093

110,906

General and administrative

12,172

13,014

35,713

40,089

Other

26,913

57,055

69,293

102,678

Total operating expenses

691,614

713,570

2,040,179

2,058,060

OPERATING INCOME

717,391

690,068

2,156,998

2,052,888

Interest expense

(199,469)

(199,032)

(611,585)

(604,408)

Loss on extinguishment of debt

—

—

—

(128,618)

Income and other taxes

(10,118)

(14,511)

(26,475)

(16,981)

Income from unconsolidated entities

134,408

116,110

325,263

277,212

Gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net

—

—

144,949

4,989

CONSOLIDATED NET INCOME

642,212

592,635

1,989,150

1,585,082

Net income (loss) attributable to noncontrolling interests

497

(550)

684

(721)

Preferred unit requirements

1,313

1,313

3,939

3,939

NET INCOME ATTRIBUTABLE TO UNITHOLDERS

$
640,402

$
591,872

$
1,984,527

$
1,581,864

NET INCOME ATTRIBUTABLE TO UNITHOLDERS ATTRIBUTABLE TO:

General Partner

$
556,267

513,783

$
1,723,925

$
1,373,509

Limited Partners

84,135

78,089

260,602

208,355

Net income attributable to unitholders

$
640,402

$
591,872

$
1,984,527

$
1,581,864

BASIC AND DILUTED EARNINGS PER UNIT:

Net income attributable to unitholders

$
1.80

$
1.65

$
5.57

$
4.41

Consolidated net income

$
642,212

$
592,635

$
1,989,150

$
1,585,082

Unrealized gain (loss) on derivative hedge agreements

5,241

(8,598)

20,355

(31,396)

Net loss (gain) reclassified from accumulated other comprehensive loss into earnings

1,591

(19,362)

5,929

(14,303)

Currency translation adjustments

(10,763)

12,922

(35,797)

42,815

Changes in available-for-sale securities and other

(22)

6,787

(88)

6,324

Comprehensive income

638,259

584,384

1,979,549

1,588,522

Comprehensive income attributable to noncontrolling interests

318

316

1,063

1,388

Comprehensive income attributable to unitholders

$
637,941

$
584,068

$
1,978,486

$
1,587,134


	March 31,		December 31,
	2019		2018
ASSETS:
Investment properties, at cost	$	37,193,798	$	37,092,670
Less — accumulated depreciation		13,119,895		12,884,539
		24,073,903		24,208,131
Cash and cash equivalents		436,802		514,335
Tenant receivables and accrued revenue, net		733,159		763,815
Investment in unconsolidated entities, at equity		2,197,309		2,220,414
Investment in Klépierre, at equity		1,676,635		1,769,488
Deferred costs and other assets		1,723,968		1,210,040
Total assets	$	30,841,776	$	30,686,223
LIABILITIES:
Mortgages and unsecured indebtedness	$	23,185,965	$	23,305,535
Accounts payable, accrued expenses, intangibles, and deferred revenues		1,157,477		1,316,861
Cash distributions and losses in unconsolidated entities, at equity		1,559,534		1,536,111
Other liabilities		1,012,976		500,597
Total liabilities		26,915,952		26,659,104
Commitments and contingencies
Preferred units, various series, at liquidation value, and noncontrolling redeemable interests in properties		225,882		230,163
EQUITY:
Partners’ Equity
Preferred units, 796,948 units outstanding. Liquidation value of $39,847		42,666		42,748
General Partner, 308,993,608 and 309,017,468 units outstanding, respectively		3,170,293		3,253,933
Limited Partners, 46,782,598 and 46,807,372 units outstanding, respectively		479,989		492,877
Total partners’ equity		3,692,948		3,789,558
Nonredeemable noncontrolling interests in properties, net		6,994		7,398
Total equity		3,699,942		3,796,956
Total liabilities and equity	$	30,841,776	$	30,686,223

The accompanying notes are an integral part of these statements.

Table of Contents

Simon Property Group, L.P.

Unaudited Consolidated Statements of Operations and Comprehensive Income

(Dollars in thousands, except per unit amounts)


	For the Three Months Ended
	March 31,
	2019		2018
REVENUE:
Lease income	$	1,280,058	$	1,267,893
Management fees and other revenues		27,544		28,181
Other income		145,232		98,108
Total revenue		1,452,834		1,394,182
EXPENSES:
Property operating		111,549		113,448
Depreciation and amortization		328,643		316,936
Real estate taxes		115,459		114,187
Repairs and maintenance		27,922		27,684
Advertising and promotion		37,125		34,800
Home and regional office costs		52,560		41,064
General and administrative		9,136		12,628
Other		20,102		31,502
Total operating expenses		702,496		692,249
OPERATING INCOME BEFORE OTHER ITEMS		750,338		701,933
Interest expense		(198,733)		(205,492)
Income and other taxes		(10,102)		(6,220)
Income from unconsolidated entities		90,444		90,026
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net		—		135,277
CONSOLIDATED NET INCOME		631,947		715,524
Net loss attributable to noncontrolling interests		(917)		(92)
Preferred unit requirements		1,313		1,313
NET INCOME ATTRIBUTABLE TO UNITHOLDERS	$	631,551	$	714,303
NET INCOME ATTRIBUTABLE TO UNITHOLDERS ATTRIBUTABLE TO:
General Partner	$	548,475	$	620,654
Limited Partners		83,076		93,649
Net income attributable to unitholders	$	631,551	$	714,303
BASIC AND DILUTED EARNINGS PER UNIT:
Net income attributable to unitholders	$	1.78	$	2.00

Consolidated net income	$	631,947	$	715,524
Unrealized gain (loss) on derivative hedge agreements		9,342		(6,146)
Net loss reclassified from accumulated other comprehensive loss into earnings		1,088		2,153
Currency translation adjustments		(4,744)		13,092
Changes in available-for-sale securities and other		144		(289)
Comprehensive income		637,777		724,334
Comprehensive income attributable to noncontrolling interests		148		527
Comprehensive income attributable to unitholders	$	637,629	$	723,807

The accompanying notes are an integral part of these statements.

Table of Contents

Simon Property Group, L.P.

Unaudited Consolidated Statements of Cash Flows

(Dollars in thousands)


	For the Nine Months Ended				For the Three Months Ended
	September 30,				March 31,
	2018		2017		2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated Net Income	$	1,989,150	$	1,585,082	$	631,947	$	715,524
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization		1,009,671		1,012,335		339,918		334,672
Loss on debt extinguishment		—		128,618
Gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net		(144,949)		(4,989)
Gains on sales of marketable securities		—		(21,541)
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net						—		(135,277)
Unrealized change in fair value of equity instruments		(1,212)		—		(5,317)		3,029
Gain on interest in unconsolidated entity (Note 5)		(35,621)		—
Straight-line rent		(14,923)		(21,433)
Straight-line lease income						(11,981)		(6,276)
Equity in income of unconsolidated entities		(325,263)		(277,212)		(90,444)		(90,026)
Distributions of income from unconsolidated entities		289,411		270,938		82,918		77,870
Changes in assets and liabilities
Tenant receivables and accrued revenue, net		27,668		19,925		36,842		71,858
Deferred costs and other assets		(74,922)		(75,688)		(20,013)		(62,839)
Accounts payable, accrued expenses, intangibles, deferred revenues and other liabilities		32,156		103,418		(126,523)		(65,058)
Net cash provided by operating activities		2,751,166		2,719,453		837,347		843,477
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions		—		(87,741)
Funding of loans to related parties		(4,641)		(68,206)		—		(1,833)
Capital expenditures, net		(585,957)		(487,321)		(216,781)		(172,756)
Cash impact from the consolidation of properties		11,276		7,536
Investments in unconsolidated entities		(51,883)		(111,225)		(11,980)		(10,859)
Purchase of marketable and non-marketable securities		(23,273)		(5,503)		(6,905)		(7,542)
Proceeds from sales of marketable and non-marketable securities		—		53,923
Insurance proceeds for property restoration		16,160		—		1,757		—
Distributions of capital from unconsolidated entities and other		428,862		331,693		120,347		69,316
Net cash used in investing activities		(209,456)		(366,844)		(113,562)		(123,674)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of units and other		(247)		(246)		(82)		(82)
Purchase of units related to stock grant recipients' tax withholdings		(2,911)		(2,789)		(249)		(276)
Redemption of limited partner units		(7,619)		—		(135)		(6,267)
Purchase of general partner units		(307,296)		(396,169)		(7,628)		(227,901)
Distributions to noncontrolling interest holders in properties		(11,524)		(8,936)		(1,803)		(8,376)
Contributions from noncontrolling interest holders in properties		161		289		—		24
Partnership distributions		(2,107,576)		(1,907,809)		(730,711)		(698,088)
Loss on debt extinguishment		—		(128,618)
Mortgage and unsecured indebtedness proceeds, net of transaction costs		5,895,653		8,071,035		2,587,324		1,756,056
Mortgage and unsecured indebtedness principal payments		(6,786,942)		(8,031,020)		(2,648,034)		(2,649,995)
Net cash used in financing activities		(3,328,301)		(2,404,263)		(801,318)		(1,834,905)
DECREASE IN CASH AND CASH EQUIVALENTS		(786,591)		(51,654)		(77,533)		(1,115,102)
CASH AND CASH EQUIVALENTS, beginning of period		1,482,309		560,059		514,335		1,482,309
CASH AND CASH EQUIVALENTS, end of period	$	695,718	$	508,405	$	436,802	$	367,207

The accompanying notes are an integral part of these statements.

1011

Table of Contents

Simon Property Group, L.P.

Unaudited Consolidated Statements of Equity

(Dollars in thousands)


	Preferred		Simon (Managing		Limited		Noncontrolling		Total
	Units		General Partner)		Partners		interests		Equity
January 1, 2019	$	42,748	$	3,253,933	$	492,877	$	7,398	$	3,796,956
Series J preferred stock premium and amortization		(82)								(82)
Limited partner units exchanged to common units (24,000 units)				253		(253)				—
Amortization of stock incentive				1,309						1,309
Redemption of limited partner units (774 units)				(127)		(8)				(135)
Treasury unit purchase (46,377 units)				(7,628)						(7,628)
Long-term incentive performance units						3,701				3,701
Issuance of unit equivalents and other (1,483 common units)				(1,756)		(2)				(1,758)
Adjustment to limited partners’ interest from change in ownership in the Operating Partnership				4,167		(4,167)				—
Distributions to limited partners, excluding preferred interests classified as temporary equity		(834)		(633,388)		(96,010)		(552)		(730,784)
Other comprehensive income				5,055		775				5,830
Net income, excluding preferred distributions on temporary equity preferred units of $479 and a $1,065 loss attributable to noncontrolling redeemable interests in properties		834		548,475		83,076		148		632,533
March 31, 2019	$	42,666	$	3,170,293	$	479,989	$	6,994	$	3,699,942

January 1, 2018	$	43,077	$	3,643,091	$	548,858	$	3,738	$	4,238,764
Series J preferred stock premium and amortization		(83)								(83)
Limited partner units exchanged to common units (6,000 units)				70		(70)				—
Stock incentive program (236 common units, net)				—						—
Amortization of stock incentive				2,060						2,060
Redemption of limited partner units (40,503 units)				(5,793)		(474)				(6,267)
Treasury unit purchase (1,473,588 units)				(227,901)						(227,901)
Long-term incentive performance units						8,307				8,307
Cumulative effect of accounting change				7,264						7,264
Issuance of unit equivalents and other (1,608 common units)				(15,208)				24		(15,184)
Adjustment to limited partners’ interest from change in ownership in the Operating Partnership				36,221		(36,221)				—
Distributions to limited partners, excluding preferred interests classified as temporary equity		(834)		(605,252)		(91,523)		(489)		(698,098)
Other comprehensive income				7,706		1,104				8,810
Net income, excluding preferred distributions on temporary equity preferred units of $479 and a $619 loss attributable to noncontrolling redeemable interests in properties		834		620,654		93,649		527		715,664
March 31, 2018	$	42,994	$	3,462,912	$	523,630	$	3,800	$	4,033,336

The accompanying notes are an integral part of these statements.

Table of Contents

Simon Property Group, Inc.
Simon Property Group, L.P.
Condensed Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in thousands, except share, per share, unit and per unit amounts
and where indicated in millions or billions)

1. Organization

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. According to the Operating Partnership’s partnership agreement, the Operating Partnership is required to pay all expenses of Simon. In these condensed notes to the consolidated financial statements, 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. Unless otherwise indicated, these condensed notes to consolidated financial statements apply to both Simon and 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 ~~September 30, 2018,~~March 31, 2019, we owned or held an interest in ~~207~~206 income‑producing properties in the United States, which consisted of 107 malls, 69 Premium Outlets, 14 Mills, four lifestyle centers, and 1312 other retail properties in 37 states and Puerto Rico. Internationally, as of ~~September 30, 2018,~~March 31, 2019, we had ownership ~~interests~~ in ~~nine~~28 Premium Outlets ~~in Japan, four Premium Outlets in South Korea, three Premium Outlets in Canada, two Premium Outlets in Malaysia~~ and ~~one Premium Outlet in Mexico. We also own an interest in eight~~ Designer Outlet properties ~~in Europe, of which six properties are consolidated, and one Designer Outlet property in Canada. Of the eight properties in Europe, two are~~primarily located in ~~Italy, two are located in the Netherlands~~Asia, Europe, and ~~one each is located in Austria, Germany, France and the United Kingdom.~~Canada. As of ~~September 30, 2018,~~March 31, 2019, we also owned a ~~21.2%~~21.6% 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 16 countries in Europe.

2. Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of all controlled subsidiaries, and all significant intercompany amounts have been eliminated. Due to the seasonal nature of certain operational activities, the results for the interim periods ended ~~September 30, 2018~~March 31, 2019 are not necessarily indicative of the results to be expected for the full year.

These consolidated financial statements have been prepared in accordance with the instructions to Form 10‑Q and include all of the information and disclosures required by accounting principles generally accepted in the United States (GAAP) for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation (including normal recurring accruals) have been included. The consolidated financial statements in this Form 10‑Q should be read in conjunction with the audited consolidated financial statements and related notes contained in the combined ~~2017~~2018 Annual Report on Form 10‑K of Simon and the Operating Partnership. Certain reclassifications considered necessary for a fair presentation have been made to the prior period financial statements in order to conform to the current year presentation. These reclassifications have not changed the results of operations.

As of ~~September 30, 2018,~~March 31, 2019, we consolidated 135 wholly‑owned properties and 1918 additional properties that are less than wholly‑owned, but which we control or for which we are the primary beneficiary. We account for the remaining 81 properties, or the joint venture properties, as well as our investments in Klépierre, Aéropostale, Authentic Brands Group, LLC, or ABG, and HBS Global Properties, or HBS, using the equity method of accounting, as we have determined we have significant influence over their operations. We manage the day‑to‑day operations of 57 of the 81 joint venture properties, but have determined that our partner or partners have substantive participating rights with respect to the assets and operations of these joint venture properties. Our investments in joint ventures in Japan, South Korea, Mexico, Malaysia, Germany, Canada, and the United Kingdom comprise 20 of the remaining 24 properties. These international properties are managed by joint ventures in which we share control.

Preferred distributions of the Operating Partnership are accrued at declaration and represent distributions on outstanding preferred units of partnership interests, or preferred units, and are included in net income attributable to noncontrolling interests. We allocate net operating results of the Operating Partnership after preferred distributions to limited partners and to Simon based on the partners’ respective weighted average ownership interests in the Operating Partnership. Net operating results of the Operating Partnership attributable to limited partners are reflected in net income attributable to noncontrolling interests. Simon’s weighted average ownership interest in the Operating Partnership was 86.8% and 86.9% for the three months ended March 31,

1113

Table of Contents

~~Operating Partnership attributable to limited partners are reflected in net income attributable to noncontrolling interests.~~2019 and 2018, respectively. As of March 31, 2019 and December 31, 2018, Simon’s ~~weighted average~~ ownership interest in the Operating Partnership was 86.9% and 86.8% ~~for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018 and December 31, 2017, Simon’s ownership interest in the Operating Partnership was 86.8% and 86.9%~~, respectively. We adjust the noncontrolling limited partners’ interests at the end of each period to reflect their interest in the net assets of the Operating Partnership.

Preferred unit requirements in the Operating Partnership’s accompanying consolidated statements of operations and comprehensive income represent distributions on outstanding preferred units and are recorded when declared.

3. Significant Accounting Policies

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents. Cash equivalents are carried at cost, which approximates fair value. Cash equivalents generally consist of commercial paper, bankers’ acceptances, Eurodollars, repurchase agreements, and money market deposits or securities. Financial instruments that potentially subject us to concentrations of credit risk include our cash and cash equivalents and our trade accounts receivable. We place our cash and cash equivalents with institutions of high credit quality. However, at certain times, such cash and cash equivalents are in excess of Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insurance limits.

Equity Instruments and Debt Securities

Equity instruments and debt securities consist primarily of the debt securities of our captive insurance subsidiary, equity instruments, our deferred compensation plan investments, and certain investments held to fund the debt service requirements of debt previously secured by investment properties. At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, we had equity instruments with readily determinable fair values of ~~$97.2~~$84.1 million and ~~$88.3~~$78.1 million, respectively. Effective January 1, 2018, changes in fair value of these equity instruments are recorded in earnings. We recognized a cumulative effect adjustment of $7.3 million as of January 1, 2018 to reclassify unrealized gains previously reported in accumulated other comprehensive income as a result of the adoption of Accounting Standards Update (ASU) 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” For the three months ended March 31, 2019 and 2018, we recorded a $3.8 million gain and a $1.9 million loss, respectively, for non-cash mark-to-market adjustments related to these equity securities with readily determinable fair values, which is included in other expense in our consolidated statements of operations and comprehensive income. At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, we had equity instruments without readily determinable fair values of ~~$176.4~~$176.4 million and ~~$186.9~~$175.7 million, respectively, for which we have elected the measurement ~~alternative.~~alternative under this guidance. We regularly evaluate these investments for any impairment in their estimated fair value, as well as any observable price changes for an identical or similar equity instrument of the same issuer, and determined that no material adjustment in the carrying value was required for the three ~~or nine~~ months ended ~~September 30,~~March 31, 2019, and 2018.

Our deferred compensation plan equity instruments are valued based upon quoted market prices. The investments have a matching liability as the amounts are fully payable to the employees that earned the compensation. Changes in value of these securities and changes to the matching liability to employees are both recognized in earnings and, as a result, there is no impact to consolidated net income.

On July 26, 2017, we sold our investment in certain equity instruments. The aggregate proceeds received from the sale were $53.9 million, and we recognized a gain on the sale of $21.5 million, which is included in other income in the accompanying consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2017.

At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, we held debt securities of ~~$66.8~~$46.3 million and ~~$55.7~~$40.1 million, respectively, in our captive insurance subsidiary. The types of securities included in the investment portfolio of our captive insurance subsidiary are typically U.S. Treasury or other U.S. government securities as well as corporate debt securities with maturities ranging from less than 1one year to 10ten years. These securities are classified as available‑for‑sale and are valued based upon quoted market prices or other observable inputs when quoted market prices are not available. The amortized cost of debt securities, which approximates fair value, held by our captive insurance subsidiary is adjusted for amortization of premiums and accretion of discounts to maturity. Changes in the values of these securities are recognized in accumulated other comprehensive income (loss) until the gain or loss is realized or until any unrealized loss is deemed to be other‑than‑temporary. We review any declines in value of these securities for other‑than‑temporary impairment and consider the severity and duration of any decline in value. To the extent an other‑than‑temporary impairment is deemed to have occurred, an impairment is recorded and a new cost basis is established.

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for other‑than‑temporary impairment and consider the severity and duration of any decline in value. To the extent an other‑than‑temporary impairment is deemed to have occurred, an impairment is recorded and a new cost basis is established.

Our captive insurance subsidiary is required to maintain statutory minimum capital and surplus as well as maintain a minimum liquidity ratio. Therefore, our access to these securities may be limited.

Fair Value Measurements

Level 1 fair value inputs are quoted prices for identical items in active, liquid and visible markets such as stock exchanges. Level 2 fair value inputs are observable information for similar items in active or inactive markets, and appropriately consider counterparty creditworthiness in the valuations. Level 3 fair value inputs reflect our best estimate of inputs and assumptions market participants would use in pricing an asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation estimate. We have no investments for which fair value is measured on a recurring basis using Level 3 inputs.

The equity instruments with readily determinable fair values we held at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were primarily classified as having Level 1 and Level 2 fair value inputs. In addition, we had derivative instruments which were classified as having Level 2 inputs, which consist primarily of foreign currency forward contracts and interest rate swap agreements with a gross asset balance of ~~$12.9~~$16.1 million and $10.9 million at ~~September 30,~~March 31, 2019 and December 31, 2018, respectively, and a gross liability balance of ~~$8.6~~$1.1 million and ~~$18.1~~$6.2 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

Note 67 includes a discussion of the fair value of debt measured using Level 2 inputs. Level 3 inputs to our purchase accounting and impairment analyses include our estimations of net operating results of the property, capitalization rates and discount rates.

Noncontrolling Interests

Simon

Details of the carrying amount of our noncontrolling interests are as follows:


	As of		As of		As of		As of
	September 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
Limited partners’ interests in the Operating Partnership	$	509,943	$	548,858	$	479,989	$	492,877
Nonredeemable noncontrolling interests in properties, net		3,942		3,738		6,994		7,398
Total noncontrolling interests reflected in equity	$	513,885	$	552,596	$	486,983	$	500,275

Net income attributable to noncontrolling interests (which includes nonredeemable and redeemable noncontrolling interests in consolidated properties, limited partners’ interests in the Operating Partnership and preferred distributions payable by the Operating Partnership on its outstanding preferred units) is a component of consolidated net income. In addition, the individual components of other comprehensive income (loss) are presented in the aggregate for both controlling and noncontrolling interests, with the portion attributable to noncontrolling interests deducted from comprehensive income attributable to common stockholders.

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A rollforward of noncontrolling interests is as follows:


	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended
	September 30,				September 30,				March 31,
	2018		2017		2018		2017		2019		2018
Noncontrolling interests, beginning of period	$	507,604		564,444	$	552,596	$	649,464	$	500,275	$	552,596
Net income attributable to noncontrolling interests after preferred distributions and income attributable to redeemable noncontrolling interests in consolidated properties		84,452		78,405		261,665		209,743		83,224		94,176
Distributions to noncontrolling interest holders		(93,637)		(86,125)		(277,550)		(254,026)		(96,562)		(92,012)
Other comprehensive (loss) income allocable to noncontrolling interests:
Unrealized gain (loss) on derivative hedge agreements		717		(1,135)		2,710		(4,116)		1,227		(804)
Net loss (gain) reclassified from accumulated other comprehensive loss into earnings		214		(2,555)		785		(1,887)
Net loss reclassified from accumulated other comprehensive loss into earnings										143		283
Currency translation adjustments		(1,573)		1,712		(4,944)		5,511		(614)		1,663
Changes in available-for-sale securities and other		(3)		895		(12)		846		19		(38)
		(645)		(1,083)		(1,461)		354		775		1,104
Adjustment to limited partners’ interest from change in ownership in the Operating Partnership		(74,990)		(7,350)		(127,707)		(75,685)		(4,167)		(36,221)
Units issued to limited partners		84,103		—		84,103		—
Units exchanged for common shares		(934)		(252)		(1,004)		(1,605)		(253)		(70)
Units redeemed		—		—		(572)		—		(8)		(474)
Long-term incentive performance units		7,885		9,374		23,654		28,932		3,701		8,307
Contributions by noncontrolling interests, net, and other		47		51		161		287		(2)		24
Noncontrolling interests, end of period	$	513,885	$	557,464	$	513,885	$	557,464	$	486,983	$	527,430

The Operating Partnership

Our evaluation of the appropriateness of classifying the Operating Partnership’s common units of partnership interest, or units, held by Simon and the Operating Partnership's limited partners within permanent equity considered several significant factors. First, as a limited partnership, all decisions relating to the Operating Partnership’s operations and distributions are made by Simon, acting as the Operating Partnership’s sole general partner. The decisions of the general partner are made by Simon's Board of Directors or management. The Operating Partnership has no other governance structure. Secondly, the sole asset of Simon is its interest in the Operating Partnership. As a result, a share of common stock of Simon, or common stock, if owned by the Operating Partnership, is best characterized as being similar to a treasury share and thus not an asset of the Operating Partnership.

Limited partners of the Operating Partnership have the right under the Operating Partnership’s partnership agreement to exchange their units for shares of common stock or cash, as selected by Simon as the sole general partner. Accordingly, we classify units held by limited partners in permanent equity because Simon may elect to issue shares of common stock to limited partners exercising their exchange rights rather than using cash. Under the Operating Partnership’s partnership agreement, the Operating Partnership is required to redeem units held by Simon only when Simon has repurchased shares of common stock. We classify units held by Simon in permanent equity because the decision to redeem those units would be made by Simon.

Net income attributable to noncontrolling interests (which includes nonredeemable and redeemable noncontrolling interests in consolidated properties) is a component of consolidated net income.

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A rollforward of noncontrolling interests is as follows:


	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended
	September 30,				September 30,				March 31,
	2018		2017		2018		2017		2019		2018
Noncontrolling nonredeemable interests in properties, net — beginning of period	$	3,632		4,264	$	3,738	$	5,116	$	7,398	$	3,738
Net income attributable to noncontrolling nonredeemable interests		318		316		1,063		1,388		148		527
Distributions to noncontrolling nonredeemable interestholders		(56)		(800)		(1,020)		(2,960)
Distributions to noncontrolling nonredeemable interest holders										(552)		(489)
Contributions by noncontrolling nonredeemable interests, net, and other		48		51		161		287		—		24
Noncontrolling nonredeemable interests in properties, net — end of period	$	3,942	$	3,831	$	3,942	$	3,831	$	6,994	$	3,800

Accumulated Other Comprehensive Income (Loss)

Simon

The changes in components of our accumulated other comprehensive income (loss) attributable to common stockholders consisted of the following net of noncontrolling interest as of ~~September 30, 2018:~~March 31, 2019:


					Net unrealized								Net unrealized
	Currency		Accumulated		losses on				Currency		Accumulated		(losses) gains
	translation		derivative		marketable				translation		derivative		on marketable
	adjustments		gains, net		securities		Total		adjustments		gains, net		securities		Total
Beginning balance	$	(118,138)	$	8,055	$	(370)	$	(110,453)	$	(158,904)	$	32,933	$	(46)	$	(126,017)
Other comprehensive (loss) income before reclassifications		(30,853)		17,645		(76)		(13,284)		(4,130)		8,115		125		4,110
Amounts reclassified from accumulated other comprehensive income (loss)		—		5,144		—		5,144		—		945		—		945
Net current-period other comprehensive (loss) income		(30,853)		22,789		(76)		(8,140)		(4,130)		9,060		125		5,055
Ending balance	$	(148,991)	$	30,844	$	(446)	$	(118,593)	$	(163,034)	$	41,993	$	79	$	(120,962)

The reclassifications out of accumulated other comprehensive income (loss) consisted of the following during the three months ended March 31:


	2019		2018
	Amount reclassified		Amount reclassified
Details about accumulated other	from accumulated		from accumulated
comprehensive income (loss)	other comprehensive		other comprehensive		Affected line item where
components:	income (loss)		income (loss)		net income is presented
Accumulated derivative losses, net	$	(1,088)	$	(2,153)	Interest expense
		143		282	Net income attributable to noncontrolling interests
	$	(945)	$	(1,871)

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The ~~reclassifications out of accumulated other comprehensive income (loss) consisted of the following during the nine months ended September 30:~~

2018

2017


Amount reclassified

Amount reclassified


Details about accumulated other

from accumulated

from accumulated

comprehensive income (loss)

other comprehensive

other comprehensive

Affected line item where

components:

income (loss)

income (loss)

net income is presented

Accumulated derivative losses, net

$
(5,929)

$
(7,238)

Interest expense

785

955

Net income attributable to noncontrolling interests

$
(5,144)

$
(6,283)

Realized gain on sale of marketable securities

$
—

$
21,541

Other income

—

(2,843)

Net income attributable to noncontrolling interests

$
—

$
18,698

~~The~~ Operating Partnership

The changes in accumulated other comprehensive income (loss) by component consisted of the following as of ~~September 30, 2018:~~March 31, 2019:


					Net unrealized								Net unrealized
	Currency		Accumulated		losses on				Currency		Accumulated		(losses) gains
	translation		derivative		marketable				translation		derivative		on marketable
	adjustments		gains, net		securities		Total		adjustments		gains, net		securities		Total
Beginning balance	$	(135,940)	$	9,263	$	(425)	$	(127,102)	$	(182,978)	$	37,916	$	(52)	$	(145,114)
Other comprehensive (loss) income before reclassifications		(35,797)		20,355		(88)		(15,530)		(4,744)		9,342		144		4,742
Amounts reclassified from accumulated other comprehensive income (loss)		—		5,929		—		5,929		—		1,088		—		1,088
Net current-period other comprehensive (loss) income		(35,797)		26,284		(88)		(9,601)		(4,744)		10,430		144		5,830
Ending balance	$	(171,737)	$	35,547	$	(513)	$	(136,703)	$	(187,722)	$	48,346	$	92	$	(139,284)

~~Table of Contents~~

The reclassifications out of accumulated other comprehensive income (loss) consisted of the following during the ~~nine~~three months ended ~~September 30:~~March 31:

2018

2017

2019

2018

Amount reclassified

Details about accumulated other

from accumulated

comprehensive income (loss)

other comprehensive

Affected line item where

other comprehensive

Affected line item where

components:

income (loss)

net income is presented

income (loss)

net income is presented

Accumulated derivative losses, net

(5,929)

(7,238)

Interest expense

(1,088)

(2,153)

Interest expense

Realized gain on sale of marketable securities

—

21,541

Other income

Derivative Financial Instruments

We record all derivatives on our consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have designated a derivative as a hedge and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. We may use a variety of derivative financial instruments in the normal course of business to selectively manage or hedge a portion of the risks associated with our indebtedness and interest payments. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and caps. We require that hedging derivative instruments be highly effective in reducing the risk exposure that they are designated to hedge. We formally designate any instrument that meets these hedging criteria as a hedge at the inception of the derivative contract. ~~We have no credit‑risk‑related hedging or derivative activities.~~

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, we had no outstanding interest rate derivatives. We generally do not apply hedge accounting to interest rate caps, which had a nominal value as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

We are also exposed to fluctuations in foreign exchange rates on financial instruments which are denominated in foreign currencies, primarily in Yen and Euro. We use currency forward contracts, cross currency swap contracts and foreign currency denominated debt to manage our exposure to changes in foreign exchange rates on certain Yen and Euro‑denominated receivables and net investments. Currency forward contracts involve fixing the Yen:USD or Euro:USD exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward contracts are typically cash settled in U.S. dollars for their fair value at or close to their settlement date.

~~We had the following Euro:USD forward contracts designated as net investment hedges at September 30, 2018 and December 31, 2017 (in millions):~~

Asset (Liability) Value as of

September 30,

December 31,

Notional Value

Maturity Date

2018

2017

€
50.0

May 15, 2019

0.4

(2.4)

€
50.0

May 15, 2019

(2.1)

(4.9)

€
50.0

May 15, 2020

(2.9)

(5.2)

€
50.0

May 14, 2021

(3.6)

(5.5)

~~Asset balances in the above table are included in deferred costs and other assets. Liability balances in the above table are included in other liabilities.~~

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InWe had the ~~first quarter of~~following Euro:USD forward contracts designated as net investment hedges at March 31, 2019 and December 31, 2018 ~~we entered into~~(in millions):


			Asset (Liability) Value as of
			March 31,		December 31,
Notional Value		Maturity Date	2019		2018
€	50.0	May 15, 2019		—		(0.8)
€	50.0	May 15, 2020		0.2		(1.5)
€	50.0	May 14, 2021		(0.3)		(2.0)

Asset balances in the above table are included in deferred costs and other assets. Liability balances in the above table are included in other liabilities.

We use a Euro-denominated cross-currency swap agreement to manage our exposure to changes in foreign exchange rates by swapping $150.0 million of 4.38% fixed rate U.S. dollar-denominated debt to 1.37% fixed rate Euro-denominated debt of €121.6 million. The cross-currency swap matures on December 1, 2020. The fair value of our cross‑currency swap agreement at ~~September 30, 2018 is $8.0~~March 31, 2019 was $14.2 million and is included in deferred costs and other assets. ~~In the third quarter of 2018, we entered into~~We use a Yen-denominated cross-currency swap agreement designated as a net investment hedge to manage our exposure to changes in foreign exchange rates by swapping $200.1 million of 4.38% fixed rate U.S. dollar-denominated debt to ¥22.3 billion of 1.19% fixed rate Yen-denominated debt. Contemporaneously, we repaid Yen-denominated borrowings of $201.3 million (U.S. dollar equivalent) on the Operating Partnership’s $4.0 billion unsecured revolving credit facility, or Credit Facility. The cross-currency swap matures on December 1, 2020. The fair value of our cross-currency swap agreement at ~~September 30, 2018 is $4.0~~March 31, 2019 was $0.9 million and is included in deferred costs and other assets.

We have designated the currency forward contracts and cross-currency swaps as net investment hedges. Accordingly, we report the changes in fair value in other comprehensive income (loss). Changes in the value of these forward contracts are offset by changes in the underlying hedged Euro or Yen-denominated joint venture investment.

The total gross accumulated other comprehensive income related to the Operating Partnership’s derivative activities, including our share of the other comprehensive income from unconsolidated entities, approximated ~~$35.6~~$48.4 million and ~~$9.3~~$37.9 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

New Accounting Pronouncements

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, "Leases," codified as Accounting Standards ~~Update (ASU) 2014‑09, "Revenue~~Codification (ASC) 842, which will result in lessees recognizing most leased assets and corresponding lease liabilities on the balance sheet. Lessor accounting will remain substantially similar to the current accounting; however, certain refinements were made to conform the standard with the recently issued revenue recognition guidance in ASU 2014-09, “Revenue From Contracts With ~~Customers." ASU 2014-09 amends~~Customers”, specifically related to the existing accounting standards for revenue recognition. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers. The guidance also provides a model for the measurementallocation and recognition of ~~gains~~contract consideration earned from lease and ~~losses on~~non-lease revenue components. ASC 842 also limits the ~~sale~~capitalization of ~~certain nonfinancial assets, such as property, including real estate.~~

~~Our revenues impacted~~leasing costs to initial direct costs, which, if applied in 2018, would have reduced our capitalized leasing costs and correspondingly increased expenses by ~~this standard primarily include management, development, leasing and financing fee revenues for services performed~~approximately $45 million, of which $11.3 million related to ~~various domestic joint ventures that we manage, licensing fees~~the quarter ended March 31, 2018.

Substantially all of our revenues and the revenues of our equity method investments are earned from ~~various international properties, sales~~arrangements that are within the scope of real estate, including land parcels and operating properties, and other ancillary income earned at our properties. For the years ended December 31, 2017 and 2016, these revenues were less than 6.0% and 7.0% of consolidated revenue, respectively. The amount and timing of revenue recognition from our services to joint ventures, licensing fee arrangements, and ancillary income under the newly effective standard is consistent with the prior measurement and pattern of recognition. In addition, we do not actively sell operating properties as part of our core business strategy and, accordingly, the sale of properties does not generally constitute a significant part of our revenue and cash flows. We adopted the standard using the modified retrospective approach on January 1,ASC 842. On July 30, 2018, and there was no cumulative effect adjustment recognized. Our revenues impacted by this standard are included in management fees and other revenues and in other income in the accompanying consolidated statements of operations and comprehensive income.

~~In January 2016,~~ the FASB issued ASU ~~2016-01, "Financial Instruments — Overall: Recognition~~2018-11, also codified as ASC 842, which created a practical expedient that provides lessors an option not to separate lease and ~~Measurement~~non-lease components when certain criteria are met and instead account for those components as a single lease component. We determined that our lease arrangements will meet the criteria under the practical expedient to account for lease and non-lease components as a single lease component, which alleviates the requirement upon adoption of ~~Financial Assets~~ASC 842 that we reallocate or separately present consideration from lease and Financial Liabilities," which requires entities to recognize changes in equity investments with readily determinable fair values in net income. We recognized a cumulative effect adjustment of $7.3 million as of adoptionnon-lease components. Beginning on January 1, ~~2018~~2019, we will recognize consideration received from fixed common area maintenance arrangements on a straight-line basis as this consideration is attributed to reclassify unrealized gains previously reported in accumulated other comprehensive income for equity instruments with readily determinable fair values that were previously accounted for as available-for-sale securities and certain equity instruments previously accounted for using the cost method for which the measurement alternative described below was not elected. For those equity instruments that do not have readily determinable fair values, the ASU permits the application of a measurement alternative using the cost of the investment, less any impairments, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer. This guidance will be applied prospectively upon the occurrence of an event which establishes fair value to all other equity instruments we account for using the measurement alternative.lease component.

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~~In February 2016,~~We, as a lessor, retain substantially all of the ~~FASB issued ASU 2016-02, "Leases," which will result in lessees recognizing most leased assets~~risks and ~~corresponding~~benefits of ownership of the investment properties and continue to account for our leases as operating leases. We accrue fixed lease ~~liabilities~~income on a straight‑line basis over the ~~balance sheet. Lessor accounting will remain substantially similar to~~terms of the current accounting; however, certain refinements were made to conform the standard with the recently issued revenue recognition guidance in ASU 2014-09, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. ASU 2016-02 also limits the capitalization of leasing costs to initial direct costs, which will likely result in a reduction to our capitalized leasing costs and an increase in expenses, though the amount of such change is highly dependent upon the leasing compensation structures in place at the time of adoption.

leases. Substantially all of our ~~revenues and~~retail tenants are also required to pay overage rents based on sales over a stated base amount during the ~~revenues~~lease year. We recognize this variable lease consideration only when each tenant’s sales exceed the applicable sales threshold. We amortize any tenant inducements as a reduction of revenue utilizing the straight‑line method over the term of the related lease or occupancy term of the tenant, if shorter.

We structure our leases to allow us to recover a significant portion of our ~~equity method investments are earned~~property operating, real estate taxes, repairs and maintenance, and advertising and promotion expenses from ~~arrangements that are within the scope of ASU 2016-02. Upon adoption of ASU 2016-02, consideration related to non-lease components identified in~~ our ~~lease arrangements will be accounted for using the guidance in ASU 2014-09, which we have determined would (i) necessitate that we reallocate consideration received under many~~tenants. A substantial portion of our ~~lease arrangements between~~leases, other than those for anchor stores, require the ~~lease and non-lease component, (ii) result in recognizing revenue allocated~~tenant to reimburse us for a substantial portion of our ~~primary non-lease component (consideration received from fixed~~operating expenses, including common area maintenance, ~~arrangements)~~or CAM, real estate taxes and insurance. This significantly reduces our exposure to increases in costs and operating expenses resulting from inflation or otherwise. Such property operating expenses typically include utility, insurance, security, janitorial, landscaping, food court and other administrative expenses. For substantially all of our leases in the U.S. mall portfolio, we receive a fixed payment from the tenant for the CAM component which is recognized as revenue on a straight-line basis over the term of the lease. When not reimbursed by the fixed‑CAM component, CAM expense reimbursements are based on the tenant’s proportionate share of the allocable operating expenses and ~~(iii) require separate presentation~~CAM capital expenditures for the property. We accrue reimbursements from tenants for recoverable portions of ~~revenue~~all of these expenses as variable lease consideration in the period the applicable expenditures are incurred. We recognize differences between estimated recoveries and the final billed amounts in the subsequent year. These differences were not material in any period presented. Our advertising and promotional costs are expensed as incurred. Provisions for credit losses are recognized ~~from~~as a reduction of lease income. Refer to note 9 for further disclosure of lease income.

Minimum fixed lease consideration under non-cancelable tenant operating leases for each of the next five years and ~~non-lease components~~thereafter, excluding variable lease consideration, for the years ending December 31, as of March 31, 2019, is as follows:


2019	$	3,612,041
2020		3,329,392
2021		2,971,303
2022		2,586,127
2023		2,116,053
Thereafter		5,623,425
	$	20,238,341

Further, ASC 842 requires recognition on our ~~statements~~consolidated balance sheets of operations and comprehensive income. However, on July 30, 2018, the FASB issued ASU 2018-11, which created a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single component. We believe we meet the criteria to account for lease and non-lease components as a single component, which would alleviate the requirement upon adoption of ASU 2016-02 that we reallocate or separately present lease and non-lease components. We would, however, recognize consideration received from fixed common area maintenance arrangements on a straight-line basis.

~~Further, upon adoption of ASU 2016-02,~~ leases of land and other arrangements where we are the ~~lessee will be~~lessee. Upon adoption on January 1, 2019, we recognized ~~on our balance sheet. Undiscounted~~a right of use asset and corresponding lease liability of $524.0 million representing the present value of future ~~minimum~~ lease payments ~~beginning with the date of adoption due~~required under ~~long-term ground leases with termination dates which range~~our lessee arrangements. We utilized lease terms ranging from 2019 to 2090 ~~excluding~~including periods for which exercising an extension ~~options, over~~option is reasonably assured, and discount rates from 3.97% to 5.52% when determining the ~~term~~present value of ~~these~~future lease payments. All of our existing lessee arrangements upon adoption will continue to be classified as operating leases ~~total approximately $782.8 million~~and the pattern of lease expense recognition will be unchanged. Refer to note 10 for further disclosure regarding ground leases recognized as ~~of September 30, 2018. The adoption of the guidance will~~a result ~~in the recognition of leased assets and corresponding liabilities discounted over the life of the applicable leases.~~

We will adopt ASU 2016-02 and any subsequent amendments beginning in the first quarter of 2019. In ASU 2018-11, the FASB also provided a transition option that would permit the application of the new guidance as of the adoption ~~date rather than to all periods presented. We are currently evaluating the impact that the adoption~~ of ~~the new standard and related ASUs will have on our consolidated financial statements and method of adoption.~~ASC 842.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses," which ~~introduces~~introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities, and net investments in leases as well as reinsurance and trade receivables. ~~On August 20,~~In November 2018, the FASB issued ~~a proposal that would clarify~~ASU 2018-19, which clarifies that operating lease receivables ~~would be~~are outside the scope of the new standard. This standard will be effective for us in fiscal years beginning after December 15, 2019. We are currently evaluating the impact that the adoption of the new standard will have on our consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets,” which clarifies the scope and application of Accounting Standards Codification 610-20 on the sale or transfer of nonfinancial assets and in substance assets to noncustomers, including partial sales. The standard generally aligns the measurement of a retained interest in a nonfinancial asset with that of a retained interest in a business. It also eliminates the use of the carryover basis for contributions of real estate into a joint venture where control of the real estate is not retained, which will result in the recognition of a gain or loss upon contribution. We adopted the standard using the modified retrospective approach on January 1, 2018 and there was no cumulative effect adjustment to recognize.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which introduced amendments to the hedge accounting model to allow for better alignment with risk management practices in addition to simplifying the hedge accounting model. The provisions may permit more risk

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~~management strategies~~

4. Real Estate Acquisitions and Dispositions

Unless otherwise noted, gains and losses on property transactions are included in gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net in the accompanying consolidated statements of operations and comprehensive income. We capitalize asset acquisition costs and expense costs related to ~~qualify~~business combinations, as well as disposition related costs as they are incurred. We incurred a minimal amount of transaction expenses during the three months ended March 31, 2019 and 2018.

On September 25, 2018, we acquired the remaining 50% interest in The Outlets at Orange from our joint venture partner. The Operating Partnership issued 475,183 units, or approximately $84.1 million, as consideration for ~~hedge accounting, including interest~~the acquisition. The property is subject to a $215.0 million, 4.22% fixed rate ~~hedges~~mortgage. We accounted for this transaction as an asset acquisition and ~~foreign currency hedges. We early adopted~~substantially all of our investment has been determined to relate to investment property.

During the ~~ASU on January 1,~~first three months of 2018, ~~as permitted under~~we recorded net gains of $135.3 million primarily related to our disposition activity which included the ~~standard. There was no impact on our~~foreclosure of a consolidated ~~financial statements at adoption.~~property in satisfaction of its $200 million non-recourse mortgage.

4.5. Per Share and Per Unit Data

We determine basic earnings per share and basic earnings per unit based on the weighted average number of shares of common stock or units, as applicable, outstanding during the period and we consider any participating securities for purposes of applying the two-class method. We determine diluted earnings per share and diluted earnings per unit based on the weighted average number of shares of common stock or units, as applicable, outstanding combined with the incremental weighted average number of shares or units, as applicable, that would have been outstanding assuming all potentially dilutive securities were converted into shares of common stock or units, as applicable, at the earliest date possible. The following tables set forth the components of basic and diluted earnings per share and basic and diluted earnings per unit.

Simon


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Net Income attributable to Common Stockholders — Basic and Diluted	$	556,267	$	513,783	$	1,723,925	$	1,373,509	$	548,475	$	620,654
Weighted Average Shares Outstanding — Basic and Diluted		309,294,045		310,853,299		309,739,557		311,740,360		308,978,053		310,583,643

For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, potentially dilutive securities include units that are exchangeable for common stock and long-term incentive performance units, or LTIP units, granted under our long-term incentive performance programs that are convertible into units and exchangeable for common stock. No securities had a material dilutive effect for the three ~~or nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. We have not adjusted net income attributable to common stockholders and weighted average shares outstanding for income allocable to limited partners or units, respectively, as doing so would have no dilutive impact. We accrue dividends when they are declared.

The Operating Partnership


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Net Income attributable to Unitholders — Basic and Diluted	$	640,402	$	591,872	$	1,984,527	$	1,581,864	$	631,551	$	714,303
Weighted Average Units Outstanding — Basic and Diluted		356,073,080		358,115,572		356,562,262		359,029,893		355,778,250		357,446,988

For the three and nine months ended September 30, 2018, potentially dilutive securities include LTIP units. No securities had a material dilutive effect for the three or nine months ended September 30, 2018 and 2017. We accrue distributions when they are declared.

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5.For the three months ended March 31, 2019, potentially dilutive securities include LTIP units. No securities had a material dilutive effect for the three months ended March 31, 2019 and 2018. We accrue distributions when they are declared.

6. Investment in Unconsolidated Entities and International Investments

Real Estate Joint Ventures and Investments

Joint ventures are common in the real estate industry. We use joint ventures to finance properties, develop new properties and diversify our risk in a particular property or portfolio of properties. As discussed in ~~Note~~note 2, we held joint venture interests in 81 properties as of ~~September 30, 2018.~~March 31, 2019.

Certain of our joint venture properties are subject to various rights of first refusal, buy‑sell provisions, put and call rights, or other sale or marketing rights for partners which are customary in real estate joint venture agreements and the industry. We and our partners in these joint ventures may initiate these provisions (subject to any applicable lock up or similar restrictions), which may result in either the sale of our interest or the use of available cash or borrowings, or the use of limited partnership interests in the Operating Partnership, to acquire the joint venture interest from our partner.

We may provide financing to joint ventures primarily in the form of interest bearing construction loans. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, we had construction loans and other advances to related parties totaling $86.0 million and ~~$87.0~~$85.8 million, respectively, which are included in deferred costs and other assets in the accompanying consolidated balance sheets.

Unconsolidated Entity Transactions

During the first three months of 2019, we disposed of our interests in a multi-family residential investment. Our share of the gross proceeds was $17.3 million. The gain of $15.6 million is included in other income in the accompanying consolidated statement of operations and comprehensive income.

On September 25, 2018, as discussed in ~~Note 9,~~note 4, we acquired the remaining 50% interest in The Outlets at Orange from our joint venture partner. The Operating Partnership issued 475,183 units at a price of $176.99 to acquire this remaining interest. As a result of this acquisition, we now own 100% of this property.

~~On September 11,~~As of March 31, 2019 and December 31, 2018, we ~~announced~~had an 11.7% legal noncontrolling equity interest in HBS, a joint venture we formed with ~~Macerich~~Hudson’s Bay Company. Our share of net income (loss), net of amortization of our excess investment, was ($2.6) million and $4.0 million for the three months ended March 31, 2019 and 2018, respectively. Total revenues, operating income and consolidated net income (loss) were approximately $33.4 million, $1.4 million and ($10.2) million, respectively, for the three months ended March 31, 2019 and $87.2 million, $76.8 million and $51.6 million, respectively, for the three months ended March 31, 2018.

European Investments

At March 31, 2019, we owned 63,924,148 shares, or approximately 21.6%, of Klépierre, which had a quoted market price of $34.98 per share. Our share of net income, net of amortization of our excess investment, was $17.8 million and $22.9 million for the three months ended March 31, 2019 and 2018, respectively. Based on applicable Euro:USD exchange rates and after our conversion of Klépierre’s results to ~~co-develop, co-own,~~GAAP, Klépierre’s total revenues, operating income and ~~jointly lease~~consolidated net income were approximately $377.2 million, $147.4 million and $114.6 million, respectively, for the ~~approximately 400,000 square foot Los Angeles Premium Outlets, followed~~three months ended March 31, 2019 and $410.3 million, $135.8 million and $202.3 million, respectively, for the three months ended March 31, 2018.

During the three months ended March 31, 2018, Klépierre completed the disposal of its interests in certain shopping centers. In connection with these disposals, we recorded a gain of $13.4 million, representing our share of the gains recognized by ~~a proposed phase II of an additional 166,000 square feet. As of September 30, 2018, we had contributed $13.1 million to the venture. We own a 50% noncontrolling interest in this project,~~Klépierre, which ~~is scheduled to open in the fall of 2021.~~

On June 7, 2018, Aventura Mall, a property in which we own a 33.3% interest, refinanced its $1.2 billion mortgage and its $200.8 million construction loan with a $1.75 billion mortgage at a fixed interest rate of 4.12% that matures on July 1, 2028. An early repayment charge of $30.9 million was incurred at the property, which along with the write-off of deferred debt issuance costs of $6.5 million, is included in interest expense in the accompanying combined joint venture statements of operations. Our $12.5 million share of the charge associated with the repayment is included in income from unconsolidated entities in the accompanying consolidated statements of operations and comprehensive income. Excess proceeds from the financing were distributed to the venture partners in June 2018.

In May 2017, Colorado Mills, a property in which we have a 37.5% interest, sustained significant hail damage. During the second quarter of 2017, the property recorded an impairment charge of approximately $32.5 million basedgain on the net carrying value of the assets damaged, which was fully offset by anticipated insurance recoveries. As of September 30, 2018, the property had received business interruption proceeds and also property damage proceeds of $58.3 million, which resulted in the property recording a $25.8 million gain in 2018. Our share of the gain, $9.7 million, is reflected within the gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net in the accompanying consolidated ~~statements~~statement of operations and comprehensive income.

On September 15, 2016, we and a group of co-investors acquired certain assets and liabilities of Aéropostale, a retailer of apparel and accessories, out of bankruptcy. The interests were acquired through two separate joint ventures, a licensing venture andWe have an ~~operating venture. In April 2018, we contributed our entire~~ interest in ~~the licensing venture in exchange for additional~~a European investee that had interests in ~~ABG, a brand development, marketing,~~nine Designer Outlet properties as of March 31, 2019 and ~~entertainment company.~~December 31, 2018, respectively. As ~~a result, we recognized a $35.6 million non‑cash gain representing the increase in value~~ of March 31, 2019, our previously held interest in the licensing venture, which is included in other income in the accompanying consolidated statements of operations and comprehensive income. At September 30, 2018, our noncontrolling equity methodlegal percentage ownership interests in ~~the operations venture of Aéropostale and in ABG were 44.95% and 5.78%, respectively.~~these properties ranged from 45% to 94%.

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As of September 30, 2018 and December 31, 2017, we had an 11.7% noncontrolling equity interest in HBS, a joint venture we formed with Hudson’s Bay Company. HBS has 42 properties in the U.S. and, subsequent to formation, acquired 41 properties from Kaufhof. As of September 30, 2018, we had contributed $68.3 million for improvements to certain properties. In addition, we contributed $178.5 million in connection with the HBS acquisition of the Kaufhof department stores. On September 11, 2018, Hudson’s Bay Company announced that HBS intends to sell its interest in the Kaufhof department stores to Hudson’s Bay Company and SIGNA Retail Holdings. HBS will retain its ownership in the properties in the U.S. and we will continue to hold an 11.7% noncontrolling interest in the remaining HBS joint venture subsequent to the closing of the transaction, which is expected to occur in the fourth quarter of 2018. Our share of net income, net of amortization of our excess investment, was $4.3 million and $4.8 million for the three months ended September 30, 2018 and 2017, respectively, and $11.9 million and $11.3 million for the nine months ended September 30, 2018 and 2017, respectively. Total revenues, operating income and consolidated net income were approximately $258.8 million, $162.2 million and $90.6 million, respectively, for the nine months ended September 30, 2018 and $265.8 million, $246.9 million and $176.2 million, respectively, for the nine months ended September 30, 2017.

~~European Investments~~

At September 30, 2018, we owned 63,924,148 shares, or approximately 21.2%, of Klépierre, which had a quoted market price of $35.43 per share. Our share of net income, net of amortization of our excess investment, was $22.4 million and $14.1 million for the three months ended September 30, 2018 and 2017, respectively, and $70.0 million and $37.2 million for the nine months ended September 30, 2018 and 2017, respectively. Based on applicable Euro:USD exchange rates and after our conversion of Klépierre’s results to GAAP, Klépierre’s total revenues, operating income and consolidated net income were approximately $1.2 billion, $496.4 million and $485.8 million, respectively, for the nine months ended September 30, 2018 and $1.1 billion, $406.3 million and $298.3 million, respectively, for the nine months ended September 30, 2017.

During the nine months ended September 30, 2018 and September 30, 2017, Klépierre completed the disposal of its interests in certain shopping centers. In connection with these disposals, we recorded a gain of $13.4 million and $5.0 million, respectively, representing our share of the gains recognized by Klépierre, which is included in gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net in the accompanying consolidated statements of operations and comprehensive income.

We have an interest in a European investee that had interests in nine Designer Outlet properties as of September 30, 2018 and December 31, 2017, respectively. As of September 30, 2018, our legal percentage ownership interests in these properties ranged from 45% to 94%.

In addition, we have a 50.0% noncontrolling interest in a European property management and development company that provides services to the Designer Outlet properties.

We also have minority interests in Value Retail PLC and affiliated entities, which own or have interests in and operate nine luxury outlets located throughout Europe and we have a direct minority ownership in three of those outlets. At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the carrying value of these equity instruments was $140.8 million and is included in deferred costs and other assets.

Asian Joint Ventures

We conduct our international Premium Outlet operations in Japan through a joint venture with Mitsubishi Estate Co., Ltd. We have a 40% noncontrolling ownership interest in this joint venture. The carrying amount of our investment in this joint venture was ~~$221.2~~$235.2 million and ~~$230.3~~$232.1 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, including all related components of accumulated other comprehensive income (loss). We conduct our international Premium Outlet operations in South Korea through a joint venture with Shinsegae International Co. We have a 50% noncontrolling ownership interest in this joint venture. The carrying amount of our investment in this joint venture was ~~$159.8~~$169.9 million and ~~$149.1~~$166.3 million as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, including all related components of accumulated other comprehensive income (loss).

Summary Financial Information

A summary of our equity method investments and share of income from such investments, excluding Klépierre, Aéropostale, ABG, and HBS follows.

COMBINED BALANCE SHEETS


	March 31,		December 31,
	2019		2018
Assets:
Investment properties, at cost	$	18,887,972	$	18,807,449
Less - accumulated depreciation		6,971,412		6,834,633
		11,916,560		11,972,816
Cash and cash equivalents		1,012,497		1,076,398
Tenant receivables and accrued revenue, net		407,040		445,148
Deferred costs and other assets		617,399		390,818
Total assets	$	13,953,496	$	13,885,180
Liabilities and Partners’ Deficit:
Mortgages	$	15,202,622	$	15,235,415
Accounts payable, accrued expenses, intangibles, and deferred revenue		876,348		976,311
Other liabilities		560,101		344,205
Total liabilities		16,639,071		16,555,931
Preferred units		67,450		67,450
Partners’ deficit		(2,753,025)		(2,738,201)
Total liabilities and partners’ deficit	$	13,953,496	$	13,885,180
Our Share of:
Partners’ deficit	$	(1,184,895)	$	(1,168,216)
Add: Excess Investment		1,581,225		1,594,198
Our net Investment in unconsolidated entities, at equity	$	396,330	$	425,982

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~~Summary Financial Information~~

~~A summary of our equity method investments and share of income from such investments, excluding Klépierre, and our investments in Aéropostale, ABG and HBS follows.~~

~~COMBINED BALANCE SHEETS~~

September 30,

December 31,

2018

2017

Assets:

Investment properties, at cost

$
18,632,287

$
18,328,747

Less - accumulated depreciation

6,672,267

6,371,363

11,960,020

11,957,384

Cash and cash equivalents

1,013,153

956,084

Tenant receivables and accrued revenue, net

403,315

403,125

Deferred costs and other assets

395,144

355,585

Total assets

$
13,771,632

$
13,672,178

Liabilities and Partners’ Deficit:

Mortgages

$
15,231,476

$
14,784,310

Accounts payable, accrued expenses, intangibles, and deferred revenue

903,599

1,033,674

Other liabilities

351,116

365,857

Total liabilities

16,486,191

16,183,841

Preferred units

67,450

67,450

Partners’ deficit

(2,782,009)

(2,579,113)

Total liabilities and partners’ deficit

$
13,771,632

$
13,672,178

Our Share of:

Partners’ deficit

$
(1,204,237)

$
(1,144,620)

Add: Excess Investment

1,614,277

1,733,063

Our net Investment in unconsolidated entities, at equity

$
410,040

$
588,443

“Excess Investment” represents the unamortized difference of our investment over our share of the equity in the underlying net assets of the joint ventures or other investments acquired and ~~is allocated on a~~has been determined to relate to the fair value ~~basis primarily to~~of the investment properties, lease related intangibles, and debt premiums and discounts. We amortize excess investment over the life of the related depreciable components of investment properties, typically no greater than 40 years, the terms of the applicable leases and the applicable debt maturity, respectively. The amortization is included in the reported amount of income from unconsolidated entities.

~~Table of Contents~~

COMBINED STATEMENTS OF OPERATIONS


	For The Three				For The Nine				For The Three
	Months Ended				Months Ended				Months Ended
	September 30,				September 30,				March 31,
	2018		2017		2018		2017		2019		2018
REVENUE:
Minimum rent	$	483,685	$	466,601	$	1,443,617	$	1,383,361
Overage rent		52,417		52,560		163,144		150,376
Tenant reimbursements		222,153		215,774		666,068		644,020
Lease income									$	758,979	$	752,606
Other income		73,259		74,208		232,747		210,287		75,922		81,108
Total revenue		831,514		809,143		2,505,576		2,388,044		834,901		833,714
OPERATING EXPENSES:
Property operating		151,873		145,288		437,718		410,301		144,721		146,293
Depreciation and amortization		161,964		156,682		488,098		469,884		170,258		159,836
Real estate taxes		60,654		54,668		197,497		185,228		68,717		68,267
Repairs and maintenance		20,035		18,811		63,968		59,512		22,376		23,196
Advertising and promotion		20,318		19,837		65,425		63,871		24,326		24,224
Provision for credit losses		1,300		1,063		13,378		7,629
Other		43,916		45,174		143,533		133,558		49,316		49,732
Total operating expenses		460,060		441,523		1,409,617		1,329,983		479,714		471,548
Operating Income		371,454		367,620		1,095,959		1,058,061
Operating Income Before Other Items										355,187		362,166
Interest expense		(163,855)		(149,746)		(505,540)		(438,393)		(156,016)		(150,932)
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net		—		—		25,792		—		21,587		—
Net Income	$	207,599	$	217,874	$	616,211	$	619,668	$	220,758	$	211,234
Third-Party Investors’ Share of Net Income	$	101,750	$	110,581	$	304,174	$	314,531	$	112,668	$	106,183
Our Share of Net Income		105,849		107,293		312,037		305,137		108,090		105,051
Amortization of Excess Investment		(21,526)		(22,608)		(64,447)		(68,045)		(20,792)		(21,527)
Our Share of Gain on Sale or Disposal of, or Recovery on, Assets and Interests in Unconsolidated Entities, net		—		—		(9,672)		—
Our Share of Gain on Sale or Disposal of Assets and Interest in Other Income in the Consolidated Financial Statements										(9,155)		—
Income from Unconsolidated Entities	$	84,323	$	84,685	$	237,918	$	237,092	$	78,143	$	83,524

Our share of income from unconsolidated entities in the above table, aggregated with our share of the results of Klépierre, ~~and our investments in~~ Aéropostale, ABG, and HBS, is presented in income from unconsolidated entities in the accompanying consolidated statements of operations and comprehensive income. Unless otherwise noted, our share of the gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net is reflected within gain ~~upon acquisition of controlling interests,~~on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net in the accompanying consolidated statements of operations and comprehensive income.

Table of Contents

6.7. Debt

Unsecured Debt

At ~~September 30, 2018,~~March 31, 2019, our unsecured debt consisted of ~~$15.7~~$15.0 billion of senior unsecured notes of the Operating Partnership, $125.0 million outstanding under the Operating Partnership’s $4.0 billion unsecured revolving credit facility, or Credit Facility, and ~~$996.9 million~~$1.3 billion outstanding under the Operating Partnership’s global unsecured commercial paper note program, or Commercial Paper program.

On ~~September 30, 2018,~~March 31, 2019, we had an aggregate available borrowing capacity of ~~$6.4~~$6.1 billion under the Credit Facility and the Operating Partnership’s $3.5 billion unsecured revolving credit facility, or Supplemental Facility, and together with the Credit Facility, the Credit Facilities. The maximum aggregate outstanding balance under the Credit Facilities during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 was ~~$423.1~~$125.0 million and the weighted average outstanding balance was ~~$276.2~~$125.0 million. Letters of credit of ~~$11.6~~$11.4 million were outstanding under the Credit Facilities as of ~~September 30, 2018.~~March 31, 2019.

The Credit Facility’s initial borrowing capacity of $4.0 billion may be increased to $5.0 billion during its term and provides for borrowings denominated in U.S. dollars, Euro, Yen, Sterling, Canadian dollars and Australian dollars. Borrowings in currencies other than the U.S. dollar are limited to 95% of the maximum revolving credit amount, as defined. The initial maturity date of the Credit Facility is June 30, 2021 and can be extended for an additional year to June 30, 2022 at our sole option, subject to our continued compliance with the terms thereof. The base interest rate on the Credit Facility is LIBOR plus 77.5 basis points with a facility fee of 10 basis points.

~~On February 15, 2018, the Operating Partnership amended and extended the Supplemental Facility.~~ The Supplemental Facility’s initial borrowing capacity of $3.5 billion may be increased to $4.5 billion during its term and provides for borrowings denominated in U.S. dollars, Euro, Yen, Sterling, Canadian dollars and Australian dollars. The initial maturity date of the Supplemental Facility was extended to June 30, 2022 and can be extended for an additional year to June 30, 2023 at our sole option, subject to our continued compliance with the terms thereof. The base interest rate on the Supplemental Facility ~~was reduced to~~is LIBOR plus 77.5 ~~basis points from LIBOR plus 80~~ basis points with a facility fee of 10 basis points.

The Operating Partnership also has available a Commercial Paper program of ~~$1.0~~$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 ~~September 30, 2018,~~March 31, 2019, we had ~~$996.9 million~~$1.3 billion outstanding under the Commercial Paper program, fully comprised of U.S. dollar-denominated notes with a weighted average interest rate of ~~2.16%~~2.58%. These borrowings have a weighted average maturity date of ~~December~~July 3, ~~2018~~2019 and reduce amounts otherwise available under the Credit Facilities.

On ~~January 3, 2018,~~February 1, 2019, the Operating Partnership ~~redeemed~~repaid at ~~par $750.0~~maturity $600.0 million of senior unsecured notes with a fixed interest rate of ~~1.50%~~2.20%.

~~On July 10, 2018, the Operating Partnership repaid Yen-denominated borrowings of $201.3 million (U.S. dollar equivalent) on the Credit Facility.~~

Mortgage Debt

Total mortgage indebtedness was ~~$7.0 billion and $6.9~~$6.8 billion at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017, respectively.~~

~~During the nine months ended September 30, 2018, we repaid a mortgage loan of $86.6 million with an interest rate of 7.79%, unencumbering the property.~~

On July 30, 2018, Noventa di Piave Designer Outlet, in which we own a 90% interest, refinanced its €110.0 million, 1.68% variable rate mortgage maturing in 2020 with a €260.0 million, 2.00% fixed rate mortgage that matures in 2025.

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On September 25, 2018, as discussed in Note 9, we acquired the remaining 50% interest in The Outlets at Orange from our joint venture partner, resulting in the consolidation of the existing fixed rate mortgage of $215.0 million. The loan matures on April 1, 2024 and bears interest at 4.22%.2018.

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 ~~September 30, 2018,~~March 31, 2019, we were in compliance with all covenants of our unsecured debt.

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At ~~September 30, 2018, we or~~March 31, 2019, our consolidated subsidiaries were the borrowers under 4645 non‑recourse mortgage notes secured by mortgages on 4948 properties, 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 ~~September 30, 2018,~~March 31, 2019, 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.

Fair Value of Debt

The carrying value of our variable‑rate mortgages and other loans approximates their fair values. We estimate the fair values of consolidated fixed rate mortgages using cash flows discounted at current borrowing rates and other indebtedness using cash flows discounted at current market rates. We estimate the fair values of consolidated fixed rate unsecured notes using quoted market prices, or, if no quoted market prices are available, we use quoted market prices for securities with similar terms and maturities. The book value of our consolidated fixed rate mortgages and unsecured indebtedness including commercial paper was ~~$22.8~~$22.3 billion and ~~$23.4~~$22.4 billion as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The fair values of these financial instruments and the related discount rate assumptions as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 are summarized as follows:


	September 30,			December 31,			March 31,			December 31,
	2018			2017			2019			2018
Fair value of fixed rate mortgages and unsecured indebtedness	$	22,554		$	24,003
Fair value of consolidated fixed rate mortgages and unsecured indebtedness							$	23,865		$	22,323
Weighted average discount rates assumed in calculation of fair value for fixed rate mortgages		4.96	%		4.25	%		4.29	%		4.55	%
Weighted average discount rates assumed in calculation of fair value for unsecured indebtedness		4.80	%		4.10	%		4.21	%		4.50	%

7.8. Equity

During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, Simon issued ~~92,732~~24,000 shares of common stock to ~~two~~a limited ~~partners~~partner of the Operating Partnership in exchange for an equal number of units pursuant to the partnership agreement of the Operating Partnership. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, the Operating Partnership redeemed ~~49,219~~774 units from ~~four~~three limited partners for ~~$7.6~~$0.1 million. These transactions increased Simon’s ownership interest in the Operating Partnership.

On ~~September 25,~~February 13, 2017, Simon’s Board of Directors authorized a two-year extension of the previously authorized $2.0 billion common stock repurchase plan through March 31, 2019. On February 11, 2019, Simon's Board of Directors authorized a new common stock repurchase plan. Under the new plan, Simon may repurchase up to $2.0 billion of its common stock during the two-year period ending February 11, 2021 in the open market or in privately negotiated transactions as market conditions warrant. During the three months ended March 31, 2019, Simon purchased 46,377 shares at an average price of $164.49 per share as part of the previous program. During the three months ended March 31, 2018, Simon purchased 1,473,588 shares at an average price of $154.66 per share as part of the previous program. As Simon repurchases shares under these programs, the Operating Partnership ~~issued 475,183~~repurchases an equal number of units from Simon.

We paid a common stock dividend of $2.05 per share in ~~connection with~~ the ~~acquisition~~first quarter of 2019 and $1.95 per share for the ~~remaining 50% interest in~~three months ended March 31, 2018. The ~~Outlets at Orange, as discussed in Note 9.~~Operating Partnership paid distributions per unit for the same amounts. Simon’s Board of Directors declared a quarterly cash dividend for the second quarter of 2019 of $2.05 per share of common stock payable on May 31, 2019 to stockholders of record on May 17, 2019. The distribution rate on units is equal to the dividend rate on common stock.

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On February 13, 2017, Simon’s Board of Directors authorized a two-year extension of the previously authorized $2.0 billion common stock repurchase plan through March 31, 2019. Simon may repurchase the shares in the open market or in privately negotiated transactions as market conditions warrant. During the nine months ended September 30, 2018, Simon purchased 1,988,247 shares at an average price of $154.56 per share as part of this program. During the nine months ended September 30, 2017, Simon purchased 2,399,051 shares at an average price of $165.14 per share as part of this program. As Simon repurchases shares under this program, the Operating Partnership repurchases an equal number of units from Simon.

We paid a common stock dividend of $2.00 per share in the third quarter of 2018 and $5.90 per share for the nine months ended September 30, 2018. The Operating Partnership paid distributions per unit for the same amounts. We paid dividends of $1.80 and $5.30 per share for the three and nine months ended September 30, 2017, respectively. The Operating Partnership paid distributions per unit for the same amounts. Simon’s Board of Directors declared a quarterly cash dividend for the fourth quarter of 2018 of $2.00 per share of common stock payable on November 30, 2018 to stockholders of record on November 16, 2018. The distribution rate on units is equal to the dividend rate on common stock.

Temporary Equity

Simon

Simon classifies as temporary equity those securities for which there is the possibility that Simon could be required to redeem the security for cash irrespective of the probability of such a possibility. As a result, Simon classifies one series of preferred units in the Operating Partnership and noncontrolling redeemable interests in properties in temporary equity. Each of these securities is discussed further below.

Limited Partners’ Preferred Interest in the Operating Partnership and Noncontrolling Redeemable Interests in Properties. The redemption features of the preferred units in the Operating Partnership contain provisions which could require the Operating Partnership to settle the redemption in cash. As a result, this series of preferred units in the Operating Partnership remains classified outside permanent equity. The remaining interests in a property or portfolio of properties which are redeemable at the option of the holder or in circumstances that may be outside Simon’s control are accounted for as temporary equity. The carrying amount of the noncontrolling interest is adjusted to the redemption amount assuming the instrument is redeemable at the balance sheet date. Changes in the redemption value of the underlying noncontrolling interest are recorded within accumulated ~~deficit.~~deficit in the consolidated statements of equity in issuance of unit equivalents and other. There were no noncontrolling interests redeemable at amounts in excess of fair value as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. The following table summarizes the preferred units in the Operating Partnership and the amount of the noncontrolling redeemable interests in properties as follows:


	As of		As of		As of		As of
	September 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
7.50% Cumulative Redeemable Preferred Units, 260,000 units authorized, 255,373 issued and outstanding	$	25,537	$	25,537	$	25,537	$	25,537
Other noncontrolling redeemable interests in properties		172,400		164,943		200,345		204,626
Limited partners’ preferred interest in the Operating Partnership and noncontrolling redeemable interests in properties	$	197,937	$	190,480	$	225,882	$	230,163

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The Operating Partnership

The Operating Partnership classifies as temporary equity those securities for which there is the possibility that the Operating Partnership could be required to redeem the security for cash, irrespective of the probability of such a possibility. As a result, the Operating Partnership classifies one series of preferred units and noncontrolling redeemable interests in properties in temporary equity. The following table summarizes the preferred units and the amount of the noncontrolling redeemable interests in properties as follows:


	As of		As of		As of		As of
	September 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
7.50% Cumulative Redeemable Preferred Units, 260,000 units authorized, 255,373 issued and outstanding	$	25,537	$	25,537	$	25,537	$	25,537
Other noncontrolling redeemable interests in properties		172,400		164,943		200,345		204,626
Total preferred units, at liquidation value, and noncontrolling redeemable interests in properties	$	197,937	$	190,480	$	225,882	$	230,163

Stock Based Compensation

Awards under our stock based compensation plans primarily take the form of LTIP unit and restricted stock grants. Restricted stock and awards under the LTIP programs are all performance based and are based on various individual, corporate and business unit performance measures as further described below. The expense related to these programs, net of amounts capitalized, is included within home and regional office costs and general and administrative costs in the accompanying statements of operations and comprehensive income.

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LTIP Programs. The Compensation Committee has approved long‑term, performance based incentive compensation programs, or the LTIP programs, for certain senior executive officers. Awards under the LTIP programs take the form of LTIP units, a form of limited partnership interest issued by the Operating Partnership, which are subject to the participant maintaining employment with us through certain dates and other conditions as described in the applicable award agreements. Awarded LTIP units not earned in accordance with the conditions set forth in the applicable award agreements are forfeited. Earned and fully vested LTIP units are equivalent to units of the Operating Partnership. During the performance period, participants are entitled to receive distributions on the LTIP units awarded to them equal to 10% of the regular quarterly distributions paid on a unit of the Operating Partnership. As a result, we account for these LTIP units as participating securities under the two‑class method of computing earnings per share.

Awards under the LTIP programs for 2016 will be considered earned if, and only to the extent to which, applicable total shareholder return, or TSR, performance measures, as defined in the applicable award agreements, are achieved during the applicable performance periods. Once earned, LTIP units are subject to a two-year vesting period. One‑half of the earned LTIP units will vest on January 1 of each of the second and third years following the end of the applicable performance period.

In 2018, the Compensation Committee established and granted awards under a redesigned LTIP program, or the 2018 LTIP program. Awards under the 2018 LTIP program were granted in two tranches, Tranche A LTIP units and Tranche B LTIP units. Each of the Tranche A LTIP units and the Tranche B LTIP units will be considered earned if, and only to the extent to which, the respective goals based on Funds From Operations, or FFO, per share or Relative TSR Goal performance criteria, as defined in the applicable award agreements, are achieved during the applicable two-year and three-year performance periods of the Tranche A LTIP units and Tranche B LTIP units, respectively. One‑half of the earned Tranche A LTIP units will vest on January 1, 2021 with the other one-half vesting on January 1, 2022. All of the earned Tranche B LTIP units will vest on January 1, 2022.

The grant date fair value of the portion of the LTIP units based on achieving the target FFO performance criteria is ~~$6.25~~$6.1 million for the Tranche A LTIP units and the Tranche B LTIP units, for a total of ~~$12.5~~$12.1 million. The 2018 LTIP program provides that the value of the FFO-based award may be adjusted up or down based on ~~the Company’s~~Simon’s performance compared to the target FFO performance criteria and has a maximum potential fair value of ~~$18.75~~$18.2 million. The value of the FFO-based award is recorded

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as expense over the period from the grant date to the date at which the awards, if earned, would become vested, based on our assessment as to whether it is probable that the performance criteria will be achieved during the applicable performance periods.

The grant date fair values of any LTIP units based on TSR performance are estimated using a Monte Carlo model, and the resulting fixed expense is recorded regardless of whether the TSR performance criteria are achieved if the required service is delivered. The grant date fair values are being amortized into expense over the period from the grant date to the date at which the awards, if earned, would become vested.

The Compensation Committee approved LTIP unit grants as shown in the table below. The extent to which LTIP units were earned, and the aggregate grant date fair value, are as follows:


LTIP Program	LTIP Units Earned	Grant Date Fair Value of TSR Award	Grant Date Target Value of FFO-Based Award
~~2013-2015 LTIP program~~	~~466,405~~	~~$28.5 million~~	—
2014-2016 LTIP program	120,314	$27.5 million	—
2015-2017 LTIP program	—	$~~25.1~~21.6 million	—
2016-2018 LTIP program	~~To be determined in 2019~~ —	$~~26.3~~22.7 million	—
2018 LTIP program - Tranche A	To be determined in 2020	$~~6.25~~6.1 million	$~~6.25~~6.1 million
2018 LTIP program - Tranche B	To be determined in 2021	$~~6.25~~6.1 million	$~~6.25~~6.1 million

We recorded compensation expense, net of capitalization, related to these LTIP programs of approximately ~~$13.0~~$3.9 million and ~~$9.7~~$4.8 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.

Restricted ~~Stock.~~Stock The Compensation Committee awarded 43,043 shares of restricted stock to employees during the nine months ended September 30, 2018 at a weighted-average fair market value of $154.35 per share. During the nine months ended September 30, 2018, our non-employee Directors were awarded an aggregate of 12,648 shares of restricted stock at a weighted average fair market value of $158.71 per share. These shares represent a portion of the compensation we pay our non-employee Directors, and all of the shares have been placed in a non-employee Director deferred compensation account maintained by us. The grant date fair value of the employee restricted stock awards is being recognized as expense over the three-year vesting service period. The grant date fair value of the non-employee Director restricted stock awards is being recognized as expense over the one-year vesting service period. In accordance with the Operating Partnership's partnership agreement, the Operating Partnership issued an equal number of units to Simon that are subject to the same vesting conditions as the restricted stock.

We recorded compensation expense, net of capitalization, related to restricted stock of approximately ~~$6.0~~$2.7 million and ~~$7.6~~$2.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.

Other Compensation Arrangements. On July 6, 2011, in connection with the execution of an employment agreement, the Compensation Committee granted David Simon, Simon’s Chairman, ~~and~~ Chief Executive Officer and President, a retention award

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in the form of 1,000,000 LTIP units, or the Award, for his continued service ~~as Simon’s Chairman and Chief Executive Officer~~ through July 5, 2019. Effective December 31, 2013, the Award was modified, or the Current Award, and as a result the LTIP units ~~now~~would become earned and eligible to vest based on the attainment of Company‑based performance goals, in addition to the service‑based vesting requirement included in the original Award. The Current Award does not contain an opportunity for Mr. Simon to receive additional LTIP units above and beyond the original Award should our performance exceed the higher end of the performance criteria. The performance criteria of the Current Award are based on the attainment of specific FFO per share. Because the performance criteria has been met, a maximum of 360,000 LTIP units, or the A units, 360,000 LTIP units, or the B units, and 280,000 LTIP units, or the C units, became earned on December 31, 2015, December 31, 2016 and December 31, 2017, respectively. Based on the Company’s performance in 2015, 360,000 A units were earned. Based on the Company’s performance in 2016, 360,000 B units were earned. Based on the Company’s performance in 2017, 280,000 C units were earned. If the relevant performance criteria had not been achieved, all or a portion of the Current Award would have been forfeited. The earned A units vested on January 1, 2018, earned B units ~~will vest~~vested on January 1, 2019 and earned C units will vest on June 30, 2019, subject to Mr. Simon’s continued

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employment through such applicable date. The grant date fair value of the retention award of $120.3 million is being recognized as expense over the eight‑year term of his employment agreement on a straight‑line basis based ~~through~~on the applicable vesting periods of the A units, B units and C units.

~~Changes~~

9. Lease Income

As discussed in ~~Equity~~

~~Simon~~

~~The following table provides~~note 3, fixed lease income under our operating leases includes fixed minimum lease consideration and fixed CAM reimbursements which are accrued on a ~~reconciliation~~straight-line basis over the terms of the ~~beginning~~leases. Variable lease income includes consideration based on sales, as well as reimbursements for real estate taxes, utilities, marketing, and ~~ending carrying amounts of total equity, equity attributable to common stockholders and equity attributable to noncontrolling interests:~~certain other items.

Accumulated





Common




Other

Capital in

Stock

Preferred

Common

Comprehensive

Excess of

Accumulated

Held in

Noncontrolling

Total


Stock

Stock

Income (Loss)

Par Value

Deficit

Treasury

interests

Equity

January 1, 2018

$
43,077

$
32

$
(110,453)

$
9,614,748

$
(4,782,173)

$
(1,079,063)

$
552,596

$
4,238,764

Exchange of limited partner units for common shares

1,004

(1,004)

—

Issuance of limited partner units

84,103

84,103

Treasury stock purchase

(307,296)

(307,296)

Redemption of limited partner units

(7,047)

(572)

(7,619)

LTIP units

23,654

23,654

Cumulative effect of accounting change

7,264

7,264

Purchase and disposition of noncontrolling interests, net and other

(247)

308

(18,663)

5,740

161

(12,701)

Adjustment to limited partners’ interest from change in ownership in the Operating Partnership

127,707

(127,707)

—

Distributions to common stockholders and limited partners, excluding Operating Partnership preferred interests

(1,829,610)

(276,530)

(2,106,140)

Distributions to other noncontrolling interest partners

(1,020)

(1,020)

Comprehensive income, excluding $1,436 attributable to preferred interests in the Operating Partnership and a $379 loss attributable to noncontrolling redeemable interests in properties

(8,140)

1,726,428

260,204

1,978,492

September 30, 2018

$
42,830

$
32

$
(118,593)

$
9,736,720

$
(4,896,754)

$
(1,380,619)

$
513,885

$
3,897,501


	For the Three Months Ended
	March 31,
	2019		2018
Fixed lease income	$	1,081,560	$	1,060,951
Variable lease income		198,498		206,942
Total lease income	$	1,280,058	$	1,267,893

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Simon Property Group, Inc.
Simon Property Group, L.P.
Condensed NotesLease income for the three months ended March 31, 2018 has been reclassified to Consolidated Financial Statements
(Unaudited)
(Dollars in thousands, except share, per share, unit and per unit amounts
and where indicated in millions or billions)conform to the current year presentation.

~~The Operating Partnership~~

~~The following table provides a reconciliation of the beginning and ending carrying amounts of total equity, equity attributable to partners and equity attributable to noncontrolling interests:~~

Preferred

Simon (Managing

Limited

Noncontrolling

Total


Units

General Partner)

Partners

interests

Equity

January 1, 2018

$
43,077

$
3,643,091

$
548,858

$
3,738

$
4,238,764

Issuance of limited partner units

84,103

84,103

Limited partner units exchanged to units

1,004

(1,004)

—

Treasury unit purchase

(307,296)

(307,296)

Redemption of limited partner units

(7,047)

(572)

(7,619)

LTIP Units

23,654

23,654

Cumulative effect of accounting change

7,264

7,264

Purchase and disposition of noncontrolling interests, net and other

(247)

(12,615)

161

(12,701)

Adjustment to limited partners’ interest from change in ownership in the Operating Partnership

127,707

(127,707)

—

Distributions to limited partners, excluding preferred interests classified as temporary equity

(2,503)

(1,827,107)

(276,530)

(1,020)

(2,107,160)

Comprehensive income, excluding $1,436 attributable to preferred interests in the Operating Partnership and a $379 loss attributable to noncontrolling redeemable interests in properties

2,503

1,715,785

259,141

1,063

1,978,492

September 30, 2018

$
42,830

$
3,340,786

$
509,943

$
3,942

$
3,897,501

8.10. Commitments and Contingencies

Litigation

We are involved from time-to-time in various legal and regulatory proceedings that arise in the ordinary course of our business, including, but not limited to, commercial disputes, environmental matters, and litigation in connection with transactions such as acquisitions and divestitures. We believe that current proceedings will not have a material adverse effect on our financial condition, liquidity, or results of operations. We record a liability when a loss is considered probable and the amount can be reasonably estimated.

During the first quarter of 2019, we settled a lawsuit with our former insurance broker, Aon Risk Services Central Inc., related to the significant flood damage sustained at Opry Mills in May 2010. In accordance with a previous agreement with the prior co-investor in Opry Mills, a portion of the settlement was remitted to the co-investor. Our share of the settlement was approximately $68.0 million, which was recorded as other income in the accompanying consolidated statement of operations and comprehensive income.

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Lease Commitments

As of March 31, 2019, a total of 23 of our consolidated properties are subject to ground leases. The termination dates of these ground leases range from 2019 to 2090, including periods for which exercising an extension option is reasonably assured. These ground leases generally require us to make fixed annual rental payments, or a fixed annual rental payment plus a percentage rent component based upon the revenues or total sales of the property. In addition, we have several regional office locations that are subject to leases with termination dates ranging from 2019 to 2028. These office leases generally require us to make fixed annual rental payments plus pay our share of common area, real estate, and utility expenses. Some of our ground and office leases include escalation clauses. All of our lease arrangements are classified as operating leases. We incurred ground lease expense and office lease expense, which are included in other expense and home office and regional expense, respectively, as follows:


	For the Three Months
	Ended
	March 31, 2019
Lease Cost
Operating lease cost	$	7,165
Variable lease cost		4,144
Sublease income		(167)
Total lease cost	$	11,142

For the quarter ended March 31, 2018, we incurred $12,125 of lease expense.


	For the Three Months
	Ended
	March 31, 2019
Other Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	12,068

Weighted-average remaining lease term - operating leases		36.2 years
Weighted-average discount rate - operating leases		4.87%

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Minimum lease payments due under these leases for years ending December 31, excluding applicable extension options and renewal options unless reasonably certain of exercise and any sublease income, are as follows:


2019	$	32,444
2020		32,438
2021		32,722
2022		32,733
2023		32,864
Thereafter		949,754
	$	1,112,955
Impact of discounting		(590,761)
Operating lease liabilities	$	522,194

Lease liabilities are included within other liabilities in the consolidated balance sheet. Right of use assets are included within deferred costs and other assets in the consolidated balance sheet.

Guarantees of Indebtedness

Joint venture debt is the liability of the joint venture and is typically secured by the joint venture property, which is non‑recourse to us. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Operating Partnership guaranteed joint venture related mortgage indebtedness of ~~$215.5~~$211.3 million and ~~$211.6~~$216.1 million, respectively (of which we have a right of recovery from our venture partners of $10.8 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.

Concentration of Credit Risk

Our U.S. Malls, Premium Outlets, and The Mills rely heavily upon anchor tenants to attract customers; however, anchor retailers do not contribute materially to our financial results as many anchor retailers own their spaces. All material operations are within the United States and no customer or tenant accounts for 5% or more of our consolidated revenues.

Hurricane Impacts

During the third quarter of 2017, two of our wholly-owned properties located in Puerto Rico sustained significant damage as a result of Hurricane Maria. ~~Due~~Since the date of the loss, we have received $62.8 million of insurance proceeds from third-party carriers related to the ~~conditions on~~two properties located in Puerto Rico, of which $40.5 million was used for property restoration and remediation and to reduce the ~~island, we were unable to determine a reliable estimate or a range of reliable estimates of~~insurance recovery receivable. During the ~~extent of the damages at these properties at the end of the third~~first quarter of ~~2017. During~~2019, we recorded $4.4 million as business interruption proceeds in other income in the ~~fourth quarter~~accompanying consolidated statement of operations and comprehensive income.

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of 2017, as additional information became available, we recorded an impairment of approximately $19.0 million related to damages at these properties, which was offset by an insurance recovery receivable.

During the nine months ended September 30, 2018, we received $50.3 million of insurance proceeds related to the two properties located in Puerto Rico, of which $33.3 million was used for property restoration and remediation and to reduce the insurance recovery receivable, and $17.0 million was recorded as business interruption proceeds and is included in other income ~~in the accompanying consolidated statements of operations and comprehensive income.~~

~~9. Real Estate Acquisitions and Dispositions~~

During the first nine months of 2018, we recorded net gains of $144.9 million primarily related to disposition activity which included the foreclosure of a consolidated property in satisfaction of its $200 million non-recourse mortgage.

Unless otherwise noted, gains and losses on the above are included in gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net in the accompanying consolidated statements of operations and comprehensive income. We capitalize asset acquisition costs and expense costs related to business combinations, as well as disposition related costs as they are incurred. We incurred a minimal amount of transaction expenses during the nine months ended September 30, 2018 and 2017.

On September 25, 2018, we acquired the remaining 50% interest in The Outlets at Orange from our joint venture partner. The Operating Partnership issued 475,183 units, or approximately $84.1 million, as consideration for the acquisition. The property is subject to a $215.0 million 4.22% fixed rate mortgage. We accounted for this transaction as an asset acquisition and substantially all of our investment has been determined to relate to investment property.

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Item 2. 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 included in this report.

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. According to the Operating Partnership’s partnership agreement, the Operating Partnership is required to pay all expenses of Simon. 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 ~~September 30, 2018,~~March 31, 2019, we owned or held an interest in ~~207~~206 income‑producing properties in the United States, which consisted of 107 malls, 69 Premium Outlets, 14 Mills, four lifestyle centers, and 1312 other retail properties in 37 states and Puerto Rico. In addition, we have redevelopment and expansion projects, including the addition of anchors, big box tenants, and restaurants, underway at properties in the United States, Canada, ~~Europe~~Asia and ~~Asia.~~Europe. Internationally, as of ~~September 30, 2018,~~March 31, 2019, we had ownership ~~interests~~ in ~~nine~~28 Premium Outlets ~~in Japan, four Premium Outlets in South Korea, three Premium Outlets in Canada, two Premium Outlets in Malaysia~~ and ~~one Premium Outlet in Mexico. We also own an interest in eight~~ Designer Outlet properties ~~in Europe, of which six properties are consolidated, and one Designer Outlet property in Canada. Of the eight properties in Europe, two are~~primarily located in ~~Italy, two are located in the Netherlands~~Asia, Europe, and ~~one each is located in Austria, Germany, France and the United Kingdom.~~Canada. We also have ~~three~~four international outlet properties under development. As of ~~September 30, 2018,~~March 31, 2019, we also owned a ~~21.2%~~21.6% 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 16 countries in Europe.

We generate the majority of our revenues from leases with retail tenants including:

base minimum rents,

overage and percentage rents based on tenants’ sales volumes, and

recoverable expenditures such as property operating, real estate taxes, repair and maintenance, and advertising and promotional expenditures.

Revenues of our management company, after intercompany eliminations, consist primarily of management fees that are typically based upon the revenues of the property being managed.

We invest in real estate properties to maximize total financial return which includes both operating cash flows and capital appreciation. We seek growth in earnings, funds from operations, or FFO, and cash flows by enhancing the profitability and operation of our properties and investments. We seek to accomplish this growth through the following:

attracting and retaining high quality tenants and utilizing economies of scale to reduce operating expenses,

expanding and re‑tenanting existing highly productive locations at competitive rental rates,

selectively acquiring or increasing our interests in high quality real estate assets or portfolios of assets,

generating consumer traffic in our retail properties through marketing initiatives and strategic corporate alliances, and

selling selective non‑core assets.

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

establishing our malls as leading market resource providers for retailers and other businesses and consumer‑focused corporate alliances, including payment systems (such as handling fees relating to the sales of bank‑issued prepaid cards), national marketing alliances, static and digital media initiatives, business development, sponsorship, and events,

offering property operating services to our tenants and others, including waste handling and facility services, and the provision of energy services,

selling or leasing land adjacent to our properties, commonly referred to as “outlots” or “outparcels,” and

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generating interest income on cash deposits and investments in loans, including those made to related entities.

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We focus on high quality real estate across the retail real estate spectrum. We expand or redevelop properties to enhance profitability and market share of existing assets when we believe the investment of our capital meets our risk‑reward criteria. We selectively develop new properties in markets we believe are not adequately served by existing retail outlet properties.

We routinely review and evaluate acquisition opportunities based on their ability to enhance our portfolio. Our international strategy includes partnering with established real estate companies and financing international investments with local currency to minimize foreign exchange risk.

To support our growth, we employ a three‑fold capital strategy:

provide the capital necessary to fund growth,

maintain sufficient flexibility to access capital in many forms, both public and private, and

manage our overall financial structure in a fashion that preserves our investment grade credit ratings.

We consider FFO, net operating income, or NOI, portfolio NOI and comparable property NOI (NOI for properties owned and operated in both periods under comparison) to be key measures of operating performance that are not specifically defined by accounting principles generally accepted in the United States, or GAAP. We use these measures internally to evaluate the operating performance of our portfolio and provide a basis for comparison with other real estate companies. Reconciliations of these measures to the most comparable GAAP measure are included below in this discussion.

Results Overview

Diluted earnings per share and diluted earnings per unit ~~increased $1.16~~decreased $0.22 during the first ~~nine~~three months of ~~2018~~2019 to ~~$5.57~~$1.78 from ~~$4.41~~$2.00 for the same period last year. The ~~increase~~decrease in diluted earnings per share and diluted earnings per unit was primarily attributable to:

2018 net gains primarily related to disposition activity of $135.3 million, or $0.38 per diluted share/unit,

decreased consolidated lease settlement activity in 2019 of $24.2 million, or $0.07 per diluted share/unit, and

decreased income related to distributions from an international investment in 2018 of $20.7 million, or $0.06 per diluted share/unit, partially offset by

improved operating performance and solid core business fundamentals in ~~2018~~2019 and the impact of our acquisition, development and expansion activity,

~~2018 net gains primarily~~a lawsuit settled with our former insurance broker in 2019 related to ~~disposition activity~~the significant flood damage sustained at Opry Mills in May 2010 of ~~$144.9~~$68.0 million, or ~~$0.41~~$0.19 per diluted share/unit,

a ~~non-cash~~gain in 2019 related to the disposition of our interest in a multi-family residential investment ~~gain~~ of ~~$35.6~~$15.6 million, or ~~$0.10 per diluted share/unit, in 2018,~~

~~a charge on early extinguishment of debt of $128.6 million, or $0.36 per diluted share/unit, in 2017,~~

~~business interruption insurance proceeds from Puerto Rico hurricane damages of $17.0 million, or $0.05 per diluted share/unit, in 2018,~~

~~increased consolidated lease settlement activity in 2018 of $5.1 million, or $0.01~~$0.04 per diluted share/unit, and

~~increased income related to distributions from an international investment in 2018 of $23.3 million, or $0.07 per diluted share/unit, partially offset by~~

~~2017 gains of $21.5 million, or $0.06 per diluted share/unit, from the sale of marketable securities,~~

~~our share of an early repayment charge and write-off of deferred debt issuance costs in 2018 related to refinancing at Aventura Mall, of $12.5 million, or $0.03 per diluted share/unit, and~~

~~increased~~decreased interest expense in ~~2018~~2019 of ~~$7.2~~$6.8 million, or $0.02 per diluted share/unit.

Solid core business fundamentals during the first ~~nine~~three months of ~~2018~~2019 were primarily driven by strong leasing activity. Portfolio NOI grew ~~by 4.1%~~1.7% for the ~~nine~~three month period in ~~2018~~2019 over the prior year period. Comparable property NOI grew ~~2.3%~~1.6% for our portfolio of U.S. Malls, Premium Outlets, and The Mills. Total sales per square foot, or psf, increased from ~~$622~~$641 psf at ~~September 30, 2017~~March 31, 2018 to ~~$650~~$660 psf, or ~~4.5%~~3.0%, at ~~September 30, 2018,~~March 31, 2019, for our U.S. Malls and Premium Outlets. Average base minimum rent for U.S. Malls and Premium Outlets increased ~~2.8%~~1.5% to ~~$53.88~~$54.34 psf as of ~~September 30, 2018,~~March 31, 2019, from ~~$52.42~~$53.54 psf as of ~~September 30, 2017.~~March 31, 2018. Leasing spreads in our U.S. Malls and Premium Outlets were favorable as we were able to lease available square feet at higher rents, resulting in an open/close leasing spread (based on total tenant payments — base minimum rent plus common area maintenance) of ~~$7.59~~$14.17 psf ($~~62.33~~66.00 openings compared to ~~$54.74~~$51.83 closings) as of ~~September 30, 2018,~~March 31, 2019, representing a ~~13.9%~~27.3% increase. Ending occupancy for our U.S. Malls and Premium Outlets increased ~~0.2%~~0.5% to ~~95.5%~~95.1% as of ~~September 30, 2018,~~March 31, 2019, from ~~95.3%~~94.6% as of ~~September 30, 2017.~~

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March 31, 2018.

Our effective overall borrowing rate at ~~September 30, 2018~~March 31, 2019 on our consolidated indebtedness increased ~~nine~~four basis points to ~~3.32%~~3.35% as compared to ~~3.23%~~3.31% at ~~September 30, 2017.~~March 31, 2018. This increase was primarily due to an increase in the effective overall borrowing rate on variable rate debt of ~~102~~76 basis points ~~(3.05%~~(3.08% at ~~September 30, 2018~~March 31, 2019 as compared to ~~2.03%~~2.32% at ~~September 30, 2017) combined with an increase in the effective overall borrowing rate on fixed rate debt of six basis points (3.37% at September 30, 2018 as compared to 3.31% at September 30, 2017)~~March 31, 2018), partially offset by a decrease in the amount of our variable rate debt. The weighted average years to maturity of our consolidated indebtedness

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was ~~6.6~~6.2 years and ~~7.0~~6.4 years at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Our financing activity for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 included:

~~Repaying our Yen denominated borrowings of $201.3 million (U.S. dollar equivalent) on the Operating Partnership’s $4.0 billion unsecured revolving credit facility, or Credit Facility.~~

Increasing our borrowings under the Operating Partnership’s global unsecured commercial paper note program, or the Commercial Paper ~~Program,~~program, by ~~$18.5~~$553.1 million through the issuance of U.S. dollar denominated notes.

~~Redeeming~~Repaying at ~~par $750.0~~maturity $600.0 million of senior unsecured notes with a fixed interest rate of ~~1.50%~~2.20% on ~~January 3, 2018.~~

~~Unencumbering a property by repaying an $86.6 million mortgage loan with an interest rate of 7.79%.~~

Refinancing the $1.2 billion mortgage and $200.8 million construction loan at Aventura Mall, in which we have a 33.3% interest, with a $1.75 billion mortgage at a fixed interest rate of 4.12% that matures on JulyFebruary 1, ~~2028.~~

Refinancing the €110.0 million, 1.68% variable rate mortgage maturing in 2020 at Noventa di Piave Designer Outlet, in which we have a 90.0% interest, with a €260.0 million, 2.00% fixed rate mortgage that matures in 2025.2019.

United States Portfolio Data

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

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

properties that are consolidated in our consolidated financial statements,

properties we account for under the equity method of accounting as joint ventures, and

the foregoing two categories of properties on a total portfolio basis.


	September 30,		September 30,		%/Basis Points	March 31,		March 31,		%/Basis Points
	2018		2017		Change (1)	2019		2018		Change (1)
U.S. Malls and Premium Outlets:
Ending Occupancy
Consolidated		95.5%		95.4%	10 bps		95.1%		94.7%	40 bps
Unconsolidated		95.5%		94.8%	70 bps		94.9%		94.5%	40 bps
Total Portfolio		95.5%		95.3%	20 bps		95.1%		94.6%	50 bps
Average Base Minimum Rent per Square Foot
Consolidated	$	52.19	$	50.82	2.7%	$	52.70	$	51.79	1.8%
Unconsolidated	$	58.38	$	56.80	2.8%	$	58.67	$	58.20	0.8%
Total Portfolio	$	53.88	$	52.42	2.8%	$	54.34	$	53.54	1.5%
Total Sales per Square Foot
Consolidated	$	633	$	608	4.1%	$	640	$	625	2.4%
Unconsolidated	$	701	$	665	5.4%	$	719	$	686	4.8%
Total Portfolio	$	650	$	622	4.5%	$	660	$	641	3.1%
The Mills:
Ending Occupancy		98.5%		98.1%	40 bps		97.4%		98.3%	-90 bps
Average Base Minimum Rent per Square Foot	$	31.75	$	30.71	3.4%	$	32.87	$	31.38	4.7%
Total Sales per Square Foot	$	609	$	582	4.7%	$	610	$	599	1.8%

(1)

Percentages may not recalculate due to rounding. Percentage and basis point changes are representative of the change from the comparable prior period.

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Ending Occupancy Levels and Average Base Minimum Rent per Square Foot. Ending occupancy is the percentage of gross leasable area, or GLA, which is leased as of the last day of the reporting period. We include all company owned space except for mall anchors, mall majors, mall freestanding and mall outlots in the calculation. Base minimum rent per square foot is the average base minimum rent charge in effect for the reporting period for all tenants that would qualify to be included in ending occupancy.

Total Sales per Square Foot. Total sales include total reported retail tenant sales on a trailing 12‑month basis at owned GLA (for mall stores with less than 10,000 square feet) in the malls and The Mills and stores with less than 20,000 square feet in the Premium Outlets. Retail sales at owned GLA affect revenue and profitability levels because sales determine the amount of minimum rent that can be charged, the percentage rent realized, and the recoverable expenses (common area maintenance, real estate taxes, etc.) that tenants can afford to pay.

Current Leasing Activities

During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, we signed ~~762~~210 new leases and ~~904~~270 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

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U.S. Malls and Premium Outlets portfolio, comprising approximately ~~5.6~~1.5 million square feet, of which ~~4.0~~1.1 million square feet related to consolidated properties. During the comparable period in ~~2017,~~2018, we signed ~~654~~182 new leases and ~~974~~278 renewal leases with a fixed minimum rent, comprising approximately ~~5.2~~1.7 million square feet, of which ~~3.7~~1.5 million square feet related to consolidated properties. The average annual initial base minimum rent for new leases was ~~$55.68~~$62.58 per square foot in ~~2018~~2019 and ~~$59.90~~$54.88 per square foot in ~~2017~~2018 with an average tenant allowance on new leases of ~~$51.51~~$55.43 per square foot and ~~$51.60~~$46.63 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.


	September 30,		September 30,		%/Basis Points	March 31,		March 31,		%/Basis Points
	2018		2017		Change	2019		2018		Change
Ending Occupancy		99.6%		99.9%	-30 bps		99.6%		99.6%	+0 bps
Total Sales per Square Foot	¥	106,308	¥	104,243	1.98%	¥	107,643	¥	106,210	1.35%
Average Base Minimum Rent per Square Foot	¥	5,127	¥	5,056	1.40%	¥	5,184	¥	5,075	2.14%

Results of Operations

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

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

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

During ~~the nine months ended September 30,~~ 2018, we disposed of ~~one~~two retail ~~property.~~

~~On April 21, 2017, through our European investee, we acquired Rosada Designer Outlet, a 247,500 square foot center in Roosendaal, Netherlands. We have a 94% interest in this new center.~~

~~On April 13, 2017, through our European investee, we opened Provence Designer Outlet, a 269,000 square foot center in Miramas, France. We have a 90% interest in this new center.~~properties.

The following acquisitions, dispositions and openings of equity method investments and properties affected our income from unconsolidated entities in the comparative periods:

During the fourth quarter of 2018, our interest in the 41 German department store properties owned through our investment in HBS Global Properties, or HBS, was sold.

During 2018, we contributed our interest in the licensing venture of Aéropostale for additional interests in Authentic Brands Group LLC, or ABG. Our noncontrolling interest in ABG is ~~5.78%~~5.4%.

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

~~During 2017, we disposed of our interests in one retail property.~~

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~~On September 14, 2017, we and our partner opened The Shops at Clearfork, a 500,000 square foot center in Fort Worth, Texas. We have a 45% noncontrolling interest in this new center.~~

~~On June 29, 2017, we and our partner opened Norfolk Premium Outlets, a 332,000 square foot center in Norfolk, Virginia. We have a 65% noncontrolling interest in this new center.~~

~~On June 15, 2017, we and our partner opened Genting Highlands Premium Outlets in Kuala Lumpur, Malaysia. We have a 50% noncontrolling interest in this 278,000 square foot center.~~

~~On April 6, 2017, we and our partner opened Siheung Premium Outlets, a 444,400 square foot center in Siheung (Seoul), South Korea. We have a 50% noncontrolling interest in this new~~ center.

For the purposes of the following comparison between the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ 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 or held interests in and operated in both of the periods under comparison.

During the third quarter of 2017, two of our wholly-owned properties located in Puerto Rico sustained significant damage as a result of Hurricane Maria. For purposes of the below comparisons, these properties are also included in the property transactions due to the fact they were not open for business during the entirety of the periods being compared.

Three months ended ~~September 30, 2018~~March 31, 2019 vs. Three months ended ~~September 30, 2017~~March 31, 2018

~~Minimum rents~~Lease income increased ~~$3.3~~$12.2 million during ~~2018,~~2019, of which the ~~comparable rents increased~~property transactions accounted for $10.1 million ~~or 1.6%, primarily attributable to an increase in base minimum rents, offset partially by a $6.8 million decrease related to~~of the ~~property transactions. Overage rents~~increase. Comparable lease income increased ~~$3.0~~$2.1 million, or ~~8.4%, as a result of an increase in tenant sales.~~0.2%.

Total other income increased ~~$0.4~~$47.1 million, primarily due to a ~~$17.0~~$68.0 million increase related to a lawsuit settled with our former insurance broker in 2019 related to the significant flood damage sustained at Opry Mills in May 2010, a $15.6 million gain on the sale of our interest in a multi-family residential property and a $4.4 million increase related to business interruption insurance proceeds received in connection with two of our Puerto Rico properties as a result of hurricane damages, ~~a $3.0 million increase in income related to a distribution from an international investment and a $2.2 million increase in gift card revenues, substantially~~partially offset by a ~~$21.5~~$24.2 million decrease ~~related to the sale of marketable securities during 2017.~~

~~Real estate tax expense increased $7.4~~in lease settlement income and a $20.7 million ~~as a result of higher tax assessments in 2018.~~

~~Other expense decreased $30.1 million primarily related to a~~ decrease in legal fees and expenses of $21.5 million and the write off of pre-development costs and other investments in 2017 of $11.2 million, partially offset by an unfavorable $5.5 million mark-to-market adjustment on an equity instrument.

~~Income and other taxes decreased $4.4 million due to a reduction in withholding and income taxes related to certain of our international investments.~~

Income from unconsolidated entities increased $18.3 million primarily due to the stronger operations of the retail operations venture of Aéropostale and favorable results of operations from our international joint venture investments and development activity.

~~Simon’s net income attributable to noncontrolling interests increased $7.1 million due to an increase in the net income of the Operating Partnership.~~

~~Nine months ended September 30, 2018 vs. Nine months ended September 30, 2017~~

Minimum rents increased $22.3 million during 2018, of which the comparable rents increased $37.9 million, or 1.6%, primarily attributable to an increase in base minimum rents, offset partially by an $15.6 million decrease related to the property transactions. Overage rents increased $9.9 million, or 10.5%, as a result of an increase in tenant sales.

Total other income increased $66.7 million, primarily due to a $35.6 million increase related to a non-cash gain associated with our contribution of our interest in the Aéropostale licensing venture for additional interests in ABG, a $23.3 million increase in income related to distributions from an international investment ~~a $17.0 million increase related to business interruption insurance proceeds~~ received in ~~connection with two of our Puerto Rico properties as result of hurricane damages, a $5.1 million increase in lease settlement income~~2018.

Depreciation and ~~a $7.2 million increase in Simon Brand Venture and net other revenues, partially offset by a $21.5 million decrease related to the sale of marketable securities during 2017.~~

~~Real estate tax~~amortization expense increased ~~$12.9~~$11.7 million, of which the property transactions accounted for $2.9 million. The comparable properties increased $8.8 million as a result of ~~higher tax assessments~~tenant allowance write-offs in ~~2018.~~2019.

Home and regional office costs ~~decreased $4.8~~increased $11.5 million, primarily due to the suspension of leasing cost capitalization in 2019, as a result of ~~lower personnel and executive compensation expense.~~

~~General and administrative expense decreased $4.4 million due to lower executive compensation.~~the adoption of a new accounting pronouncement.

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Other expense decreased ~~$33.4~~$11.4 million primarily related to a favorable $8.3 million non-cash mark-to-market adjustment on an investment in equity instruments in 2019 as compared to 2018 and a decrease in legal fees and expenses of ~~$22.8 million and the write off of pre-development costs and other investments in 2017 of $11.3~~$2.7 million.

~~During 2017, we recorded a loss on extinguishment of debt of $128.6 million as a result of an early redemption of a series of senior unsecured notes.~~

Income and other taxes increased ~~$9.5~~$3.9 million due to ~~a lower tax benefit from improved performance and a lower tax rate on our share of results in the retail operations venture of Aéropostale as compared to 2017, and~~ increased withholding and income taxes related to certain of our international investments.

Income from unconsolidated entities increased $48.1 million primarily due to the stronger operations of the retail operations venture of Aéropostale and favorable results of operations from our international joint venture investments and our acquisition and development activity, offset partially by our share of an early repayment charge at one of our joint venture properties.

During 2018, we recorded net gains of ~~$9.7 million related to a property insurance recovery of previously depreciated assets and $135.2~~$135.3 million primarily related to our disposition activity. ~~During 2017, we recorded a $5.0 million gain related to Klépierre’s sale of certain assets.~~

Simon’s net income attributable to noncontrolling interests ~~increased $53.7~~decreased $11.4 million due to ~~an increase~~a decrease in the net income of the Operating Partnership.

Liquidity and Capital Resources

Because we own long‑lived income‑producing assets, our financing strategy relies primarily on long‑term fixed rate debt. Floating rate debt comprised only 3.5% of our total consolidated debt at ~~September 30, 2018.~~March 31, 2019. 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 ~~$3.2 billion~~$957.7 million in the aggregate during the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The Operating Partnership has a $4.0 billion unsecured revolving credit facility, or Credit Facility, and a $3.5 billion supplemental unsecured revolving credit facility, or Supplemental Facility, and together with the Credit Facility, the Credit Facilities. 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 decreased ~~$786.6~~$77.5 million during the first ~~nine~~three months of ~~2018~~2019 to ~~$695.7~~$436.8 million as of ~~September 30, 2018~~March 31, 2019 as further discussed in “Cash Flows” below.

On ~~September 30, 2018,~~March 31, 2019, we had an aggregate available borrowing capacity of approximately ~~$6.4~~$6.1 billion under the Credit Facilities, net of outstanding borrowings of $125.0 million and amounts outstanding under the Commercial Paper program of ~~$996.9 million~~$1.3 billion and letters of credit of ~~$11.6~~$11.4 million. For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, the maximum aggregate outstanding balance under the Credit Facilities was ~~$423.1~~$125.0 million and the weighted average outstanding balance was ~~$276.2~~$125.0 million. The weighted average interest rate was ~~1.60%~~3.28% for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019.

Simon has historically had access to public equity markets and the Operating Partnership has historically had access to private and public long and short-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 ~~2018.~~2019.

Cash Flows

Our net cash flow from operating activities and distributions of capital from unconsolidated entities for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 totaled ~~$3.2 billion.~~$957.7 million. In addition, we had net repayments from our debt financing and repayment activities of ~~$891.3~~$60.7 million in ~~2018.~~2019. These activities are further discussed below under “Financing and Debt.” During the first ~~nine~~three months of ~~2018,~~2019, we also:

paid stockholder dividends and unitholder distributions totaling approximately ~~$2.1 billion~~$730.7 million and preferred unit distributions totaling ~~$3.9~~$1.3 million,

funded consolidated capital expenditures of ~~$586.0~~$216.8 million (including development and other costs of ~~$68.3~~$38.3 million, redevelopment and expansion costs of ~~$314.8~~$119.6 million, and tenant costs and other operational capital expenditures of ~~$202.9~~$58.9 million),

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funded investments in unconsolidated entities of ~~$51.9~~$12.0 million,

received insurance proceeds for property restoration, remediation, and business interruption from hurricane damages in Puerto Rico of ~~$50.3~~$6.1 million, and

funded the repurchase of ~~$307.3~~$7.6 million of Simon’s common ~~stock and the redemption of $7.6 million of the Operating Partnership’s units.~~stock.

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

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capital expenditures, such as acquisitions, major building redevelopments and expansions, as well as for scheduled principal maturities on outstanding indebtedness, from:

excess cash generated from operating performance and working capital reserves,

borrowings on the Credit Facilities and Commercial Paper program,

additional secured or unsecured debt financing, or

additional equity raised in the public or private markets.

We expect to generate positive cash flow from operations in ~~2018,~~2019, 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, curtail planned capital expenditures, or seek other additional sources of financing as discussed above.

Financing and Debt

Unsecured Debt

On ~~September 30, 2018,~~March 31, 2019, we had an aggregate available borrowing capacity of ~~$6.4~~$6.1 billion under the Credit Facilities. The maximum aggregate outstanding balance under the Credit Facilities during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 was ~~$423.1~~$125.0 million and the weighted average outstanding balance was ~~$276.2~~$125.0 million. Letters of credit of ~~$11.6~~$11.4 million were outstanding under the Credit Facilities as of ~~September 30, 2018.~~March 31, 2019.

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On ~~January 3, 2018,~~February 1, 2019, the Operating Partnership ~~redeemed~~repaid at ~~par $750.0~~maturity $600.0 million of senior unsecured notes with a fixed interest rate of ~~1.50%~~2.20%.

~~On July 10, 2018, the Operating Partnership repaid Yen-denominated borrowings of $201.3 million (U.S. dollar equivalent) on the Credit Facility.~~

Mortgage Debt

Total mortgage indebtedness was ~~$7.0 billion and $6.9~~$6.8 billion at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017, respectively.~~

~~During the nine months ended September 30, 2018, we repaid a mortgage loan of $86.6 million with an interest rate of 7.79%, unencumbering the property.~~

On June 7, 2018, Aventura Mall, in which we own a 33.3% interest, refinanced its $1.2 billion mortgage and its $200.8 million construction loan with a $1.75 billion mortgage at a fixed interest rate of 4.12% that matures on July 1, 2028. The property incurred an early repayment charge of $30.9 million and wrote off deferred debt issuance costs of $6.5 million, our $12.5 million share of which is included in income from unconsolidated entities in the accompanying consolidated statements of operations and comprehensive income.

On September 25, 2018, as discussed in Note 9 of the notes to our consolidated financial statements, we acquired the remaining 50% interest in The Outlets at Orange from our joint venture partner, resulting in the consolidation of the existing fixed rate mortgage of $215.0 million. The loan matures on April 1, 2024 and bears interest at 4.22%.2018.

Covenants

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At ~~September 30, 2018,~~March 31, 2019, we or our subsidiaries were the borrowers under 4645 non‑recourse mortgage notes secured by mortgages on 4948 properties, 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 ~~September 30, 2018,~~March 31, 2019, the applicable borrowers under these non‑recourse mortgage notes were in compliance with all covenants where non‑compliance could individually or in the aggregate, giving effect to applicable cross‑default provisions, have a material adverse effect on our financial condition, liquidity or results of operations.

Summary of Financing

Our consolidated debt, adjusted to reflect outstanding derivative instruments, and the effective weighted average interest rates as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, consisted of the following (dollars in thousands):


			Effective			Effective				Effective			Effective
	Adjusted Balance		Weighted	Adjusted		Weighted		Adjusted Balance		Weighted	Adjusted		Weighted
	as of		Average	Balance as of		Average		as of		Average	Balance as of		Average
Debt Subject to	September 30, 2018		Interest Rate(1)	December 31, 2017		Interest Rate(1)		March 31, 2019		Interest Rate(1)	December 31, 2018		Interest Rate(1)
Fixed Rate	$	22,828,071	3.37%	$	23,374,732	3.30%		$	22,347,134	3.37%	$	22,461,191	3.37%
Variable Rate		850,193	3.05%		1,189,311	2.19%			838,831	3.08%		844,344	3.17%
	$	23,678,264	3.32%	$	24,564,043	3.25%	��	$	23,185,965	3.35%	$	23,305,535	3.35%

(1)

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

Contractual Obligations

There have been no material changes to our outstanding capital expenditure and lease commitments previously disclosed in the combined ~~2017~~2018 Annual Report on Form 10‑K of Simon and the Operating Partnership.

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In regards to long‑term debt arrangements, the following table summarizes the material aspects of these future obligations on our consolidated indebtedness as of ~~September 30, 2018,~~March 31, 2019, for the remainder of ~~2018~~2019 and subsequent years thereafter (dollars in thousands), assuming the obligations remain outstanding through initial maturities, including applicable exercise of available extension options:


	2018		2019 - 2020		2021 - 2022		After 2022		Total		2019		2020 - 2021		2022 - 2023		After 2023		Total
Long Term Debt (1) (2)	$	1,093,289	$	2,641,828	$	6,764,208	$	13,247,107	$	23,746,432	$	1,367,845	$	5,218,908	$	5,312,204	$	11,343,355	$	23,242,312
Interest Payments (3)		201,648		1,536,608		1,186,368		3,190,645		6,115,269		769,975		1,399,846		982,725		2,736,624		5,889,170

(1)

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

(2)

The amount due in ~~2018~~2019 includes ~~$996.9 million~~$1.3 billion in Global Commercial Paper – USD.

(3)

Variable rate interest payments are estimated based on the LIBOR rate at ~~September 30, 2018.~~March 31, 2019.

Off‑Balance Sheet Arrangements

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 5~~note 6 of the condensed notes to our consolidated financial statements. Our joint ventures typically fund their cash needs through secured 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 ~~September 30, 2018,~~March 31, 2019, the Operating Partnership guaranteed joint venture‑related mortgage indebtedness of ~~$215.5~~$211.3 million (of which we have a right of recovery from our joint venture partners of $10.8 million as of ~~September 30, 2018)~~March 31, 2019). 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 typically required contractually or otherwise.

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Hurricane Impacts

~~As discussed further in Note 8~~ D~~of the notes to our consolidated financial statements, during~~uring the third quarter of 2017, two of our wholly-owned properties located in Puerto Rico experienced property damage and business interruption as a result of ~~the hurricane~~Hurricane Maria.

~~During~~Since the ~~nine months ended September 30, 2018,~~date of the loss, we have received ~~$50.3~~$62.8 million of insurance proceeds from third-party carriers related to the two properties located in Puerto Rico, of which ~~$33.3~~$40.5 million was used for property restoration and remediation and to reduce the ~~outstanding~~ insurance ~~receivable, and $17.0~~recovery receivable. During the first quarter of 2019, we recorded $4.4 million ~~was recorded~~ as business interruption proceeds in other income in the accompanying consolidated statement of operations and comprehensive income.

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

Dispositions. We may continue to pursue the disposition of properties that no longer meet our strategic criteria or that are not a primary retail venue within their trade area.

During the first ~~nine~~three months of 2019, we disposed of our interests in one multi-family residential investment. Our share of the gross proceeds on this transaction was $17.3 million. Our share of the gain of $15.6 million is included in other income in the accompanying consolidated statement of operation and comprehensive income.

During the first three months of 2018, we recorded net gains of ~~$144.9~~$135.3 million primarily related to our disposition activity which included the foreclosure of a consolidated property in satisfaction of its $200 million non-recourse mortgage. As discussed in ~~Note 5,~~note 6 of the condensed notes to our consolidated financial statements, Klépierre also disposed of its interests in certain shopping centers resulting in a gain, of which our share was $13.4 million.

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~~Joint Venture Formation and Other Investment Activity~~

On September 11, 2018, Hudson’s Bay Company announced that HBS, a joint venture we formed with Hudson’s Bay Company, intends to sell its interest in the Kaufhof department stores to Hudson’s Bay Company and SIGNA Retail Holdings. HBS will retain its ownership in the properties in the U.S. and we will continue to hold an 11.7% noncontrolling interest in the remaining HBS joint venture subsequent to the closing of the transaction, which is expected to occur in the fourth quarter of 2018.

On September 15, 2016, we and a group of co-investors acquired certain assets and liabilities of Aéropostale, 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. In April 2018, we contributed our entire interest in the licensing venture in exchange for additional interests in ABG, a brand development, marketing, and entertainment company. As a result, we recognized a $35.6 million non‑cash gain representing the increase in value of our previously held interest in the licensing venture, which is included in other income in the accompanying consolidated statements of operations and comprehensive income. At September 30, 2018, our noncontrolling equity method interests in the operations venture of Aéropostale and in ABG were 44.95% and 5.78%, respectively.

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 properties in the United States, Canada, Europe and Asia.

Our share of the costs of all new development, redevelopment and expansion projects currently under construction is approximately ~~$0.7~~$1.4 billion. 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.

~~New Domestic Developments, Redevelopments and Expansions.~~

On September 25, 2018, we opened Denver Premium Outlets, a 330,000 square foot center in Thornton, (Denver) Colorado. We own a 100% interest in this project. The cost of this project was $128.6 million.

On September 11, 2018, we announced a joint venture with Macerich to co-develop, co-own, and jointly lease the approximately 400,000 square foot Los Angeles Premium Outlets, followed by a proposed phase II of an additional 166,000 square feet. As of September 30, 2018, we had contributed $13.1 million to the venture. We own a 50% noncontrolling interest in this project, which is scheduled to open in the fall of 2021.

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 international development costs for ~~2018 will~~2019 to be approximately ~~$217~~$179 million, primarily funded through reinvested joint venture cash flow and construction loans.

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The following table describes these new development and expansion projects as well as our share of the estimated total cost as of ~~September 30, 2018~~March 31, 2019 (in millions):


		Gross	Our	Our Share of		Our Share of			Projected		Gross	Our	Our Share of		Our Share of		Projected
		Leasable	Ownership	Projected Net Cost		Projected Net Cost			Opening		Leasable	Ownership	Projected Net Cost		Projected Net Cost		Opening
Property	Location	Area (sqft)	Percentage	(in Local Currency)		(in USD)			Date	Location	Area (sqft)	Percentage	(in Local Currency)		(in USD) (1)		Date
New Development Projects:
Premium Outlet Collection - Edmonton International Airport	Edmonton (Alberta), Canada	424,000	50%	CAD	108.2		$	83.8	Opened May - 2018
Querétaro Premium Outlets	Querétaro, Mexico	294,000	50%	MXN	441.7		$	23.6	Mar. - 2019	Querétaro, Mexico	294,000	50%	MXN	441.7	$	22.7	May. - 2019
Málaga Designer Outlet	Málaga, Spain	191,000	46%	EUR	41.4		$	48.1	Jun. - 2019	Málaga, Spain	191,000	46%	EUR	42.0	$	47.1	Sep. - 2019
Cannock Designer Outlet	Cannock (West Midlands), U.K.	197,000	20%	GBP			$	34.5	May - 2020
Siam Premium Outlets Bangkok										Bangkok, Thailand	251,000	50%	THB	1,607.0	$	50.6	Feb. - 2020
West Midlands Designer Outlet										Cannock (West Midlands), England	197,000	20%	GBP	26.5	$	34.5	Oct. - 2020
Expansions:
Shisui Premium Outlets Phase 3	Shisui (Chiba), Japan	68,000	40%	JPY	1,541		$	13.6	Opened Sep. - 2018
Toronto Premium Outlets Phase 2	Toronto (Ontario), Canada	145,000	50%	CAD	66.4		$	51.5	Nov. - 2018
Johor Premium Outlets Phase 3	Kulai, Malaysia	45,000	50%	MYR	14.4		$	3.5	Dec. - 2018
Vancouver Designer Outlet Phase 2	Richmond (British Columbia), Canada	84,000	46%	CAD	26.9		$	20.9	Jul - 2019	Richmond (British Columbia), Canada	84,000	46%	CAD	26.9	$	20.2	Aug. - 2019
Paju Premium Outlets Phase 3	Gyeonggi Province, South Korea	116,000	50%	KRW	26,905		$	24.2	Aug. - 2019	Gyeonggi Province, South Korea	116,000	50%	KRW	26,905	$	23.7	Aug. - 2019
Ashford Designer Outlet Phase 2	Ashford, U.K	98,000	46%	GBP	43.0		$	56.1	Oct. - 2019	Ashford, England	98,000	46%	GBP	43.0	$	56.1	Oct. - 2019
Noventa di Piave Designer Outlet Phase 5										Noventa di Piave (Venice), Italy	29,000	92%	EUR	21.4	$	24.0	Oct. - 2019
Tosu Premium Outlets Phase 4	Tosu City, Japan	38,000	40%	JPY	964		$	8.5	Nov. - 2019	Tosu City, Japan	38,000	40%	JPY	964	$	8.7	Nov. - 2019
Gotemba Premium Outlets Phase 4										Gotemba, Japan	178,000	40%	JPY	7,476	$	67.4	Apr. - 2020

(1)

USD equivalent based upon March 31, 2019 foreign currency exchange rates.

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Dividends, Distributions and Stock Repurchase Program

Simon paid a common stock dividend of ~~$2.00~~$2.05 per share in the ~~third~~first quarter of ~~2018~~2019 and ~~$5.90~~$1.95 per share ~~for~~in the ~~nine months ended September 30,~~first quarter of 2018. ~~The Operating Partnership paid distributions per unit for the same amounts. Simon paid dividends of $1.80 and $5.30 per share for the three and nine months ended September 30, 2017, respectively.~~ The Operating Partnership paid distributions per unit for the same amounts. Simon’s Board of Directors declared a quarterly cash dividend for the ~~fourth~~second quarter of ~~2018~~2019 of ~~$2.00~~$2.05 per share of common stock payable on ~~November 30, 2018~~May 31, 2019 to stockholders of record on ~~November 16, 2018.~~May 17, 2019. The distribution rate on units is equal to the dividend rate on common stock. In order to maintain its status as a REIT, Simon must pay a minimum amount of dividends. Simon’s future dividends and the Operating Partnership’s future distributions will be determined by Simon’s Board of Directors, in its sole discretion, based on actual and projected financial condition, liquidity and results of operations, cash available for dividends and limited partner distributions, cash reserves as deemed necessary for capital and operating expenditures, financing covenants, if any, and the amount required to maintain Simon’s status as a REIT.

On February 13, 2017, Simon’s Board of Directors authorized a two-year extension of the previously authorized $2.0 billion common stock repurchase plan through March 31, 2019. On February 11, 2019, Simon's Board of Directors authorized a new common stock repurchase plan. Under the new program, Simon may repurchase up to $2.0 billion of its common stock during the ~~shares~~two-year period ending February 11, 2021 in the open market or in privately negotiated transactions as market conditions warrant. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, Simon repurchased ~~1,988,247~~46,377 shares at an average price of ~~$154.56~~$164.49 per share of its common stock as part of ~~this~~the previous program. As Simon repurchases shares under ~~this program,~~these programs, the Operating Partnership repurchases an equal number of units from Simon.

Forward‑Looking Statements

Certain statements made in this section or elsewhere in this Quarterly Report on Form 10-Q may be deemed "forward‑looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and it is possible that our actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors. Such factors include, but are not limited to: changes in economic and market conditions that may adversely affect the general retail environment; the potential loss of anchor stores or major tenants; the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; decreases in market rental rates; the intensely competitive market environment in the retail industry; the inability to lease newly developed properties and renew leases and relet space at existing properties on favorable terms; risks related to international activities, including, without limitation, the impact, if any, of the United Kingdom’s exit from the European Union; changes to applicable laws or regulations or the interpretation thereof; risks associated with the acquisition, development, redevelopment, expansion, leasing and management of properties; general risks related to real estate investments, including the illiquidity of real estate investments; the impact of our substantial indebtedness on our future operations; any disruption in the financial markets that may adversely affect our ability to

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access capital for growth and satisfy our ongoing debt service requirements; any change in our credit rating; changes in market rates of interest and foreign exchange rates for foreign currencies; changes in the value of our investments in foreign entities; our ability to hedge interest rate and currency risk; our continued ability to maintain our status as a REIT; changes in tax laws or regulations that result in adverse tax consequences; risks relating to our joint venture properties; environmental liabilities; changes in insurance costs, the availability of comprehensive insurance coverage; security breaches that could compromise our information technology or infrastructure; natural disasters; the potential for terrorist activities; and the loss of key management personnel. We discussed these and other risks and uncertainties under the heading "Risk Factors" in the combined ~~2017~~2018 Annual Report on Form 10-K of Simon and the Operating Partnership. We may update that discussion in subsequent other periodic reports, but, except as required by law, we undertake no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

Non‑GAAP Financial Measures

Industry practice is to evaluate real estate properties in part based on performance measures such as FFO, diluted FFO per share, NOI, portfolio NOI and comparable property 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 onupon the definition set forth by the National Association of Real Estate Investment Trusts ~~or NAREIT, as~~(“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. Gain and losses of assets incidental to our main business are included in FFO. We determine FFO to be our share of consolidated net income computed in accordance with GAAP:

excluding real estate related depreciation and amortization,

excluding gains and losses from extraordinary items, ~~and cumulative effects of accounting changes,~~

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

~~excluding impairment charges of depreciable real estate,~~

plus the allocable portion of FFO of unconsolidated ~~entities accounted for under the equity method of accounting~~joint ventures based upon economic ownership interest, and

all determined on a consistent basis in accordance with GAAP.

We have adopted NAREIT’s clarification of the definition of FFO that requires us to include the effects of nonrecurring items not classified as extraordinary, cumulative effect of accounting changes, or a gain or loss resulting from the sale, disposal or property insurance recoveries of, or any impairment related to, previously depreciated retail operating properties.

We include in FFO gains and losses realized from the sale of land, outlot buildings, equity instruments, and investment holdings of non‑retail real estate. We also include in FFO the impact of foreign currency exchange gains and losses, legal expenses, transaction expenses and other items required by GAAP.

You should understand that our computations of these non‑GAAP measures might not be comparable to similar measures reported by other REITs and that these non‑GAAP measures:

do not represent cash flow from operations as defined by GAAP,

should not be considered as ~~alternatives~~an alternative to ~~consolidated~~ net income determined in accordance with GAAP as a measure of operating performance, and

~~are~~is not ~~alternatives~~an alternative to cash flows as a measure of liquidity.

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


	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended
	September 30,						September 30,						March 31,
	2018			2017			2018			2017			2019			2018
	(in thousands)												(in thousands)
Funds from Operations ~~(A)~~	$	1,086,292		$	1,035,459		$	3,173,194		$	2,905,214		$	1,081,920		$	1,026,338
Change in FFO from prior period		4.9	%		6.1	%		9.2	%		0.9	%		5.4	%		4.2	%
Consolidated Net Income	$	642,212		$	592,635		$	1,989,150		$	1,585,082		$	631,947		$	715,524
Adjustments to Arrive at FFO:
Depreciation and amortization from consolidated properties		313,245			313,194			944,615			939,468			325,938			314,006
Our share of depreciation and amortization from unconsolidated entities, including Klépierre and HBS		131,573			134,998			403,777			401,692			134,630			134,925
Gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net		—			—			(144,949)			(4,989)
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net														—			(135,277)
Unrealized change in fair value of equity instruments		5,452			—			(1,212)			—			(5,317)			3,029
Net (income) loss attributable to noncontrolling interest holders in properties		(497)			550			(684)			721
Net loss attributable to noncontrolling interest holders in properties														917			92
Noncontrolling interests portion of depreciation and amortization		(4,380)			(4,605)			(13,564)			(12,821)			(4,882)			(4,648)
Preferred distributions and dividends		(1,313)			(1,313)			(3,939)			(3,939)			(1,313)			(1,313)
FFO of the Operating Partnership ~~(A)~~	$	1,086,292		$	1,035,459		$	3,173,194		$	2,905,214		$	1,081,920		$	1,026,338
FFO allocable to limited partners		142,710			136,632			416,694			382,660			142,319			134,559
Dilutive FFO allocable to common stockholders ~~(A)~~	$	943,582		$	898,827		$	2,756,500		$	2,522,554		$	939,601		$	891,779
Diluted net income per share to diluted FFO per share reconciliation:
Diluted net income per share	$	1.80		$	1.65		$	5.57		$	4.41		$	1.78		$	2.00
Depreciation and amortization from consolidated properties and our share of depreciation and amortization from unconsolidated entities, including Klépierre and HBS, net of noncontrolling interests portion of depreciation and amortization		1.23			1.24			3.74			3.69			1.27			1.24
Gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net		—			—			(0.41)			(0.01)
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net														—			(0.38)
Unrealized change in fair value of equity instruments		0.02			—			—			—			(0.01)			0.01
Diluted FFO per share ~~(A)~~	$	3.05		$	2.89		$	8.90		$	8.09		$	3.04		$	2.87
Basic and Diluted weighted average shares outstanding		309,294			310,853			309,740			311,740			308,978			310,584
Weighted average limited partnership units outstanding		46,779			47,263			46,822			47,290			46,800			46,863
Basic and Diluted weighted average shares and units outstanding		356,073			358,116			356,562			359,030			355,778			357,447

~~(A)~~

Includes a loss on extinguishment of debt of $128.6 million for the nine months ended September 30, 2017. Includes Diluted FFO per share/unit related to a loss on extinguishment of debt of $0.36 for the nine months ended September 30, 2017. Includes Diluted FFO allocable to common stockholders of $111.7 million for the nine months ended September 30, 2017.

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The following schedule reconciles consolidated net income to NOI and sets forth the computations of portfolio NOI and comparable property NOI.


	For the Three Months Ended					For the Nine Months Ended					For the Three Months Ended
	September 30,					September 30,					March 31,
	2018			2017		2018			2017		2019			2018
	(in thousands)					(in thousands)					(in thousands)
Reconciliation of NOI of consolidated entities:
Consolidated Net Income	$	642,212		$	592,635	$	1,989,150		$	1,585,082	$	631,947		$	715,524
Income and other tax expense		10,118			14,511		26,475			16,981
Income and other taxes												10,102			6,220
Interest expense		199,469			199,032		611,585			604,408		198,733			205,492
Income from unconsolidated entities		(134,408)			(116,110)		(325,263)			(277,212)		(90,444)			(90,026)
Loss on extinguishment of debt		—			—		—			128,618
Gain upon acquisition of controlling interests, sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net		—			—		(144,949)			(4,989)
Operating Income		717,391			690,068		2,156,998			2,052,888
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities and impairment, net												—			(135,277)
Operating Income Before Other Items												750,338			701,933
Depreciation and amortization		316,175			317,037		953,309			950,265		328,643			316,936
Home and regional office costs		32,714			31,451		106,093			110,906		52,560			41,064
General and administrative		12,172			13,014		35,713			40,089		9,136			12,628
NOI of consolidated entities	$	1,078,452		$	1,051,570	$	3,252,113		$	3,154,148	$	1,140,677		$	1,072,561
Reconciliation of NOI of unconsolidated entities:
Net Income	$	207,599		$	217,874	$	616,211		$	619,668	$	220,758		$	211,234
Interest expense		163,855			149,746		505,540			438,393		156,016			150,932
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities		—			—		(25,792)			—
Operating Income		371,454			367,620		1,095,959			1,058,061
Gain on sale or disposal of, or recovery on, assets and interests in unconsolidated entities, net												(21,587)			—
Operating Income Before Other Items												355,187			362,166
Depreciation and amortization		161,964			156,682		488,098			469,884		170,258			159,836
NOI of unconsolidated entities	$	533,418		$	524,302	$	1,584,057		$	1,527,945	$	525,445		$	522,002
Add: Our share of NOI from Klépierre, HBS, and other corporate investments		94,781			83,657		233,799			192,604		54,675			60,057
Combined NOI	$	1,706,651		$	1,659,529	$	5,069,969		$	4,874,697	$	1,720,797		$	1,654,620
Less: Corporate and Other NOI Sources (1)		88,583			94,837		308,163			300,935		163,811			123,884
Portfolio NOI	$	1,618,068		$	1,564,692	$	4,761,806		$	4,573,762	$	1,556,986		$	1,530,736
Portfolio NOI Growth		3.4	%				4.1	%				1.7	%
Less: Our share of NOI from Klépierre, HBS, and other corporate investments		94,781			83,658		233,799			192,604		54,675			52,447
Less: International Properties (2)		124,512			110,217		370,185			307,798		114,496			111,082
Less: NOI from New Development, Redevelopment, Expansion and Acquisitions (3)		15,732			19,882		52,448			60,364		48,727			49,166
Comparable Property NOI (4)	$	1,383,043		$	1,350,935	$	4,105,374		$	4,012,996	$	1,339,088		$	1,318,041
Comparable Property NOI Growth		2.4	%				2.3	%				1.6	%

(1)

Includes income components excluded from portfolio NOI and comparable property NOI (domestic lease termination income, interest income, land sale gains, straight line rent, above/below market lease adjustments), gains on sale of equity instruments, unrealized gains and losses on equity instruments, Simon management company revenues, and other assets.

(2)

Includes International Premium Outlets (except for Canadian International Premium Outlets included in comparable property NOI), and International Designer ~~Outlets and distributions from other international investments.~~Outlets.

(3)

Includes total property NOI for properties undergoing redevelopment as well as incremental NOI for expansion properties not yet included in comparable properties.

(4)

Includes Malls, Premium Outlets, The Mills and Lifestyle Centers opened and operating as comparable for the period.

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Item 3. Qualitative and Quantitative Disclosures About Market Risk

Sensitivity ~~Analysis.~~Analysis

We disclosed a qualitative and quantitative analysis regarding market risk in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the combined ~~2017~~2018 Annual Report on Form 10‑K of Simon and the Operating Partnership. There have been no material changes in the assumptions used or results obtained regarding market risk since December 31, ~~2017.~~2018.

Item 4. Controls and Procedures

Simon

Management’s Evaluation of Disclosure Controls and ~~Procedures.~~Procedures

Simon maintains disclosure controls and procedures (as defined in Rule 13a‑15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that ~~Simon files~~we file or ~~submits~~submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s, or the SEC’s, rules and forms, and that such information is accumulated and communicated to ~~our~~Simon’s management, including ~~our~~its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

Our management, with the participation of ~~our~~Simon’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of Simon’s disclosure controls and procedures as of ~~September 30, 2018.~~March 31, 2019. Based on that evaluation, ~~our~~Simon’s Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2018,~~March 31, 2019, Simon’s disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial ~~Reporting.~~Reporting

There have not been any changes in Simon’s internal control over financial reporting (as defined in Rule 13a‑15(f) under the Exchange Act) that occurred during the quarter ended ~~September 30, 2018~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, Simon’s internal control over financial reporting.

The Operating Partnership

Management’s Evaluation of Disclosure Controls and ~~Procedures.~~Procedures

The Operating Partnership maintains disclosure controls and procedures (as defined in Rule 13a‑15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports that ~~the Operating Partnership files~~we file or ~~submits~~submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including ~~our~~Simon’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

Our management, with the participation of ~~our~~Simon’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures as of ~~September 30, 2018.~~March 31, 2019. Based on that evaluation, ~~our~~Simon’s Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2018,~~March 31, 2019, the Operating Partnership’s disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial ~~Reporting.~~Reporting

There have not been any changes in the Operating Partnership’s internal control over financial reporting (as defined in Rule 13a‑15(f) under the Exchange Act) that occurred during the quarter ended ~~September 30, 2018~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

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Part II — Other Information

Item 1. Legal Proceedings

We are involved from time-to-time in various legal and regulatory proceedings that arise in the ordinary course of our business, including, but not limited to, commercial disputes, environmental matters, and litigation in connection with transactions such as acquisitions and divestitures. We believe that our current proceedings will not have a material adverse effect on our financial condition, liquidity or results of operations. We record a liability when a loss is considered probable, and the amount can be reasonably estimated.

Item 1A. Risk Factors

Through the period covered by this report, there were no material changes to the Risk Factors disclosed under Item 1A. Risk Factors in Part I of the combined ~~2017~~2018 Annual Report on Form 10‑K of Simon and the Operating Partnership.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Simon

Unregistered Sales of Equity Securities

During the quarter ended ~~September 30, 2018,~~March 31, 2019, Simon issued ~~86,732~~24,000 shares of common stock on ~~July 12, 2018~~March 7, 2019 to a limited partner of the Operating Partnership in exchange for an equal number of units pursuant to the partnership agreement of the Operating Partnership. The issuance of shares of common stock was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Issuer Purchases of Equity Securities


					Total number	Approximate
					of shares	value of shares
					purchased as	that may yet
	Total number		Average		part of publicly	be purchased
	of shares		price paid		announced	under
Period	purchased		per share		plans	plans (2)
January 1, 2019 - January 31, 2019	47,860	(1)	$	164.60	46,377	$	632,987,810
February 1, 2019 - February 28, 2019	—		$	—	—	$	2,000,000,000
March 1, 2019 - March 31, 2019	—		$	—	—	$	2,000,000,000
	47,860		$	164.60	46,377

~~There were no purchases~~(1)Total number of ~~equity securities made~~shares purchased includes shares withheld by us and transferred to treasury shares in connection with employee payroll tax withholding upon the vesting of certain restricted stock awards.

(2)On February 13, 2017, Simon’s Board of Directors authorized a two-year extension of the previously authorized $2.0 billion common stock repurchase plan through March 31, 2019 and on February 11, 2019, Simon's Board of Directors authorized a new common stock repurchase plan. Under the new plan, Simon may repurchase up to $2.0 billion of its common stock during the ~~quarter ended September 30, 2018.~~two-year period ending February 11, 2021 in the open market or in privately negotiated transactions. As Simon repurchases shares under these plans, the Operating Partnership repurchases an equal number of units from Simon.

The Operating Partnership

Unregistered Sales of Equity Securities

During the quarter ended September 30, 2018, the Operating Partnership issued 475,183 units of partnership interests as consideration to acquire the remaining 50% interest in The Outlets at Orange. The issuance of the units was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

~~Issuer Purchases of Equity Securities~~

There were no ~~purchases~~unregistered sales of equity securities made by the Operating Partnership during the quarter ended ~~September 30, 2018.~~March 31, 2019.

Issuer Purchases of Equity Securities

During the quarter ended March 31, 2019, the Operating Partnership redeemed 774 units from three limited partners for $0.1 million in cash.

Item 3. Defaults Upon Senior Securities

Not applicable.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the quarter covered by this report, the Audit Committee of Simon’s Board of Directors approved certain audit, audit‑related, and non‑audit tax compliance and tax consulting services to be provided by Ernst & Young LLP, our independent registered public accounting firm. This disclosure is made pursuant to Section 10A(i)(2) of the Exchange Act as added by Section 202 of the Sarbanes‑Oxley Act of 2002.

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Item 6. Exhibits

Exhibit Number		Exhibit Descriptions
31.1		Simon Property Group, Inc. — Certification by the Chief Executive Officer pursuant to Rule 13a‑14(a)/15d‑14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.2		Simon Property Group, Inc. — Certification by the Chief Financial Officer pursuant to Rule 13a‑14(a)/15d‑14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.3		Simon Property Group, L.P. — Certification by the Chief Executive Officer pursuant to Rule 13a‑14(a)/15d‑14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.4		Simon Property Group, L.P. — Certification by the Chief Financial Officer pursuant to Rule 13a‑14(a)/15d‑14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
32.1		Simon Property Group, Inc. — Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
32.2		Simon Property Group, L.P. — Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SIMON PROPERTY GROUP, INC.

	/s/ Brian J. McDade
	Brian J. McDade
	Executive Vice President, ~~and~~Chief Financial
	~~Chief Financial~~ Officer and Treasurer
	Date: ~~November 2, 2018~~May 8, 2019

	SIMON PROPERTY GROUP, L.P.

	/s/ Brian J. McDade
	Brian J. McDade
	Executive Vice President, ~~and~~ Chief Financial Officer ofand
	Treasurer of Simon Property Group, Inc., General Partner
	Date: ~~November 2, 2018~~May 8, 2019

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