NOTE 5 UNCONSOLIDATED REAL ESTATE AFFILIATES

Following is summarized financial information for all of our Unconsolidated Real Estate Affiliates, including our investment in Aliansce Shopping Centers, S.A. (“Aliansce”).

	March 31,			December 31,
	2013			2012
	(Dollars in thousands)
Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates
Assets:
Land	$	1,012,137		$	960,335
Buildings and equipment	8,297,631			7,658,965
Less accumulated depreciation	(2,149,603		)	(2,080,361		)
Construction in progress	193,139			173,419
Net property and equipment	7,353,304			6,712,358
Investments in unconsolidated joint ventures	711,200			1,201,044
Net investment in real estate	8,064,504			7,913,402
Cash and cash equivalents	363,581			485,387
Accounts and notes receivable, net	153,056			167,548
Deferred expenses, net	239,742			298,050
Prepaid expenses and other assets	149,610			140,229
Total assets	$	8,970,493		$	9,004,616

Liabilities and Owners’ Equity:
Mortgages, notes and loans payable	$	6,557,943		$	6,463,377
Accounts payable, accrued expenses and other liabilities	411,219			509,064
Cumulative effect of foreign currency translation (“CFCT”)	(122,779		)	(158,195		)
Owners’ equity, excluding CFCT	2,124,110			2,190,370
Total liabilities and owners’ equity	$	8,970,493		$	9,004,616

Investment In and Loans To/From Unconsolidated Real Estate Affiliates, Net:
Owners’ equity	$	2,001,331		$	2,032,175
Less: joint venture partners’ equity	(1,130,393		)	(1,105,457		)
Plus: excess investment/basis differences*	1,984,100			1,939,153
Investment in and loans to/from Unconsolidated Real Estate Affiliates, net	$	2,855,038		$	2,865,871

Reconciliation - Investment In and Loans To/From Unconsolidated Real Estate Affiliates:
Asset - Investment in and loans to/from Unconsolidated Real Estate Affiliates	$	2,870,477		$	2,865,871
Liability - Investment in and loans to/from Unconsolidated Real Estate Affiliates	(15,439		)	—
Investment in and loans to/from Unconsolidated Real Estate Affiliates, net	$	2,855,038		$	2,865,871

*Includes gain on investment in Aliansce of $3.4 million.

	Three Months Ended March 31,
	2013			2012
	(Dollars in thousands)
Condensed Combined Statements of Income - Unconsolidated Real Estate Affiliates
Revenues:
Minimum rents	$	199,518		$	194,234
Tenant recoveries	76,129			76,928
Overage rents	7,842			6,327
Management and other fees(1)	4,916			4,858
Other	21,282			22,819
Total revenues	309,687			305,166

Expenses:
Real estate taxes	25,515			24,285
Property maintenance costs	8,623			10,099
Marketing	3,141			3,386
Other property operating costs	43,438			46,886
Provision for doubtful accounts	1,533			687
Property management and other costs(2)	12,438			12,690
General and administrative(1)	10,267			10,596
Depreciation and amortization	73,185			72,137
Total expenses	178,140			180,766
Operating income	131,547			124,400

Interest income	3,763			2,224
Interest expense	(88,865		)	(81,432		)
Provision for income taxes	(156		)	(219		)
Equity in income of unconsolidated joint ventures	14,356			6,794
Income from continuing operations	60,645			51,767
Discontinued operations	—			(927		)
Allocation to noncontrolling interests	1,265			108
Net income attributable to the ventures	$	61,910		$	50,948

Equity In Income of Unconsolidated Real Estate Affiliates:
Net income attributable to the ventures	$	61,910		$	50,948
Joint venture partners’ share of income	(34,659		)	(31,157		)
Amortization of capital or basis differences	(14,057		)	(13,839		)
Equity in income of Unconsolidated Real Estate Affiliates	$	13,194		$	5,952

(1) Primarily includes activity from Aliansce (defined below).

(2) Includes management fees charged to the unconsolidated joint ventures by GGMI and GGSI.

The amounts described as Unconsolidated Real Estate Affiliates represents our investments in real estate joint ventures that are not consolidated. We hold interests in 19 domestic joint ventures, comprising 31 U.S. regional malls, and two international joint ventures, comprising 18 regional malls in Brazil. Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the domestic properties owned by these joint ventures. As we have joint control of these ventures with our venture partners, we account for these joint ventures under the equity method.

On March 28, 2013, we acquired an additional 15% interest in one joint venture. This transaction brings our ownership interest in the joint venture to 55%. Certain provisions in the operating agreement require unanimous member consent related to activities that most significantly impact the economic performance of the joint venture. As such, we are not considered to have a controlling interest in the joint venture and we continue to account for the joint venture as an Unconsolidated Real Estate Affiliate as of March 31, 2013.

Aliansce Shopping Centers S.A.

On December 13, 2012, as a result of a secondary public offering of Aliansce’s common shares in Brazil, our ownership interest was reduced from 45.5% to 40.5%. As a result of the reduction, we recorded a gain of $23.4 million on our investment in Aliansce during the year ended December 31, 2012. The underwriters were provided an over-allotment option to the secondary offering, which allowed for the purchase of an additional 15% of shares within 30 days. The additional 15% of over-allotted shares were issued on January 14, 2013, and our ownership interest was further reduced to 40.0%. As a result of the reduction from the over-allotment, we recorded a gain of $3.4 million on our investment in Aliansce for the three months ended March 31, 2013.

As of March 31, 2013, we held a 40.0% non-controlling ownership interest in Aliansce, as well as, a 35% non-controlling interest in a large regional mall, Shopping Leblon, in Rio de Janeiro (Brazil). The ownership interests in Aliansce and Shopping Leblon are accounted for under the equity method. Our investment in Aliansce is an ownership interest in approximately 63,000,000 shares of the public real estate operating company.

Unconsolidated Mortgages, Notes and Loans Payable and Retained Debt

Our proportionate share of the mortgages, notes and loans payable of the unconsolidated joint ventures was $3.2 billion as of March 31, 2013 and $3.1 billion as of December 31, 2012, including Retained Debt (as defined below). There can be no assurance that the Unconsolidated Properties will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.

We have debt obligations in excess of our proportionate share of the debt of our Unconsolidated Real Estate Affiliates (“Retained Debt”). This Retained Debt represents distributed debt proceeds of the Unconsolidated Real Estate Affiliates in excess of our proportionate share of the non-recourse mortgage indebtedness. The proceeds of the Retained Debt which were distributed to us are included as a reduction in our investment in Unconsolidated Real Estate Affiliates. We had retained debt of $91.4 million at one property as of March 31, 2013, and $91.8 million as of December 31, 2012. We are obligated to contribute funds on an ongoing basis to our Unconsolidated Real Estate Affiliates in amounts sufficient to pay debt service on such Retained Debt. If we do not contribute such funds, our distributions from such Unconsolidated Real Estate Affiliates, or our interest in, could be reduced to the extent of such deficiencies. As of March 31, 2013, we do not anticipate an inability to perform on our obligations with respect to Retained Debt.