MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ● We review investment properties for impairment on a property-by-property basis whenever events or changes in  circumstances indicate that the carrying value of investment properties may not be recoverable. These circumstances  include, but are not limited to, a decline in a property’s cash flows, occupancy or comparable sales per square foot. We  measure any impairment of investment property when the estimated undiscounted operating income before depreciation  and amortization plus its residual value is less than the carrying value of the property. To the extent impairment has  occurred, we charge to income the excess of carrying value of the property over its estimated fair value. We may decide  to sell properties that are held for use and the sale prices of these properties may differ from their carrying values. We  also review our investments including investments in unconsolidated entities if events or circumstances change indicating  that the carrying amount of our investments may not be recoverable. We will record an impairment charge if we determine  that a decline in the fair value of the investments below carrying value is other-than-temporary. Changes in economic and  operating conditions that occur subsequent to our review of recoverability of investment property and other assets could  impact the assumptions used in that assessment and could result in future charges to earnings if assumptions regarding  those investments differ from actual results. ● To maintain our status as a REIT, we must distribute at least 90% of our taxable income in any given year and meet  certain asset and income tests. We monitor our business and transactions that may potentially impact our REIT status. In  the unlikely event that we fail to maintain our REIT status, and available relief provisions do not apply, then we would be  required to pay federal income taxes at regular corporate income tax rates during the period we did not qualify as a REIT.  If we lost our REIT status, we could not elect to be taxed as a REIT for four years unless our failure was due to reasonable  cause and certain other conditions were met. As a result, failing to maintain REIT status would result in a significant  increase in the income tax expense recorded during those periods. ● We make estimates as part of our allocation of the purchase price of acquisitions to the various components of the  acquisition based upon the fair value of each component. The most significant components of our allocations are typically  the allocation of fair value to the buildings as-if-vacant, land and market value of in-place leases. In the case of the  fair value of buildings and the allocation of value to land and other intangibles, our estimates of the values of these  components will affect the amount of depreciation we record over the estimated useful life of the property acquired or  the remaining lease term. In the case of the market value of in-place leases, we make our best estimates of the tenants’  ability to pay rents based upon the tenants’ operating performance at the property, including the competitive position  of the property in its market as well as sales psf, rents psf, and overall occupancy cost for the tenants in place at the  acquisition date. Our assumptions affect the amount of future revenue that we will recognize over the remaining lease  term for the acquired in-place leases. ● A variety of costs are incurred in the development and leasing of properties. After determination is made to capitalize a  cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project  is substantially complete and capitalization must cease involves a degree of judgment. The costs of land and buildings  under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential  to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries  and related costs and other costs incurred during the period of development. We consider a construction project as  substantially completed and held available for occupancy and cease capitalization of costs upon opening. 14 Simon Property Group, Inc.