Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Significant Accounting Policies

Cash and Cash Equivalents

• 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 with high credit quality. However, at certain times, such cash and cash equivalents are in excess of FDIC and SIPC insurance limits.

Marketable and Non-Marketable Securities

• Marketable and Non-Marketable Securities

        Marketable securities consist primarily of investments of our captive insurance subsidiaries, our deferred compensation plan investments, and certain other investments.

        The types of securities included in the investment portfolio of our captive insurance subsidiaries typically include U.S. Treasury or other U.S. government securities as well as corporate debt securities with maturities ranging from less than 1 to 10 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 subsidiaries 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 charge is recorded and a new cost basis is established. Subsequent changes are then recognized through other comprehensive income (loss) unless another other-than-temporary impairment is deemed to have occurred. Net unrealized gains recorded in accumulated other comprehensive income (loss) as of September 30, 2013 and December 31, 2012 were approximately $1.0 million and $2.6 million, respectively, which represent the valuation and related currency adjustments for our marketable securities. Our insurance subsidiaries are 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.

        Our deferred compensation plan investments are classified as trading securities and 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.

        At September 30, 2013 and December 31, 2012, we also had investments of $16.5 million and $24.9 million, respectively, which must be used to fund the debt service requirements of mortgage debt related to an investment property that we sold. These investments are classified as held-to-maturity and are recorded at amortized cost as we have the ability and intent to hold these investments to maturity.

        At September 30, 2013 and December 31, 2012, we had investments of $118.8 million and $98.9 million, respectively, in non-marketable securities that we account for under the cost method. We regularly evaluate these investments for any other-than-temporary impairment in their estimated fair value and determined that no adjustment in the carrying value was required.

Loans Held for Investment

• Loans Held for Investment

        From time to time, we may make investments in mortgage loans or mezzanine loans of third parties that own and operate commercial real estate assets located in the United States. Mortgage loans are secured, in part, by mortgages recorded against the underlying properties which are not owned by us. Mezzanine loans are secured, in part, by pledges of ownership interests of the entities that own the underlying real estate. Loans held for investment are carried at cost, net of any premiums or discounts which are accreted or amortized over the life of the related loan receivable utilizing the effective interest method. We evaluate the collectability of both interest and principal of each of these loans quarterly to determine whether the value has been impaired. A loan is deemed to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the loan held for investment to its estimated realizable value.

        We had investments in three mortgage and mezzanine loans that were repaid in their entirety during 2012. For the nine months ended September 30, 2012, we earned $6.8 million in interest income on these loans.

Fair Value Measurements

• 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.

        We held marketable securities that totaled $141.7 million and $170.2 million at September 30, 2013 and December 31, 2012, respectively, that were primarily classified as having Level 1 fair value inputs. In addition, we have derivative instruments which are classified as having Level 2 inputs which consist primarily of interest rate swap agreements and foreign currency forward contracts with a gross liability balance of $4.6 million and $1.5 million at September 30, 2013 and December 31, 2012, respectively, and a gross asset value of $4.1 million and $3.0 million at September 30, 2013 and December 31, 2012, respectively. We also have interest rate cap agreements with nominal values.

        Note 6 includes a discussion of the fair value of debt measured using Level 2 inputs. Notes 5 and 9 include discussion of the fair values recorded in purchase accounting and impairment, using Level 2 and Level 3 inputs. Level 3 inputs to our purchase accounting and impairment include our estimations of net operating results of the property, capitalization rates and discount rates.

Noncontrolling Interests and Temporary Equity

• Noncontrolling Interests and Temporary Equity

        In addition to noncontrolling redeemable interests in properties, we classify our 7.5% Cumulative Redeemable Preferred Units, or 7.5% preferred units, in temporary equity. Although we may redeem the 7.5% preferred units for cash or shares of Simon Property common stock, we could be required to redeem the securities for cash because the non-cash redemption alternative requires us to deliver fully registered shares of Simon Property common stock which we may not be able to deliver depending upon the circumstances that exist at the time of redemption. The previous and current carrying amounts are equal to the liquidation value, which is the amount payable upon the occurrence of any event that could potentially result in cash settlement.

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

        Limited partners have the right under our partnership agreement to exchange their units for shares of Simon Property common stock or cash as selected by the general partner. Accordingly, we classify units held by limited partners in permanent equity because Simon Property has the ability to issue shares of its common stock to limited partners exercising their exchange rights rather than using cash or other assets. Under our partnership agreement, we are required to redeem units held by Simon Property only when Simon Property has redeemed shares of its common stock. We classify units held by Simon Property in permanent equity because the decision to redeem those units would be made by Simon Property.

        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 our control, are accounted for as temporary equity within preferred units, at liquidation value, and noncontrolling redeemable interests in properties in the accompanying consolidated balance sheets. 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. There are no noncontrolling interests redeemable at amounts in excess of fair value.

        Net income attributable to noncontrolling interests (which includes nonredeemable and redeemable noncontrolling interests in consolidated properties) is a component of consolidated net income. During the three and nine months ended September 30, 2013 and 2012, no individual components of other comprehensive income (loss) were attributable to noncontrolling interests.

        A rollforward of noncontrolling interests reflected in equity is as follows:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
Noncontrolling nonredeemable deficit interests in properties, net — beginning of period	$	(1,029	)	$	(634	)	$	(877	)	$	(59,000	)
Net (loss) income attributable to noncontrolling nonredeemable interests		(8	)		(6	)		18			(8	)
Distributions to noncontrolling nonredeemable interestholders		(71	)		(79	)		(249	)		(270	)
Contributions from noncontrolling nonredeemable interestholders		5,300			—			5,300			—
Purchase of noncontrolling interests and other		(6	)		(1	)		(6	)		58,558
Noncontrolling nonredeemable interests in properties, net — end of period	$	4,186		$	(720	)	$	4,186		$	(720	)

Accumulated Other Comprehensive Income (Loss)

• Accumulated Other Comprehensive Income (Loss)

        The changes in accumulated other comprehensive income (loss) by component consisted of the following as of September 30, 2013:

	Currency translation adjustments			Accumulated derivative losses, net			Net unrealized gains on marketable securities			Total
Beginning balance	$	(30,620	)	$	(78,139	)	$	2,613		$	(106,146	)
Other comprehensive income (loss) before reclassifications		10,603			897			(1,588	)		9,912
Amounts reclassified from accumulated other comprehensive income (loss)		—			6,642			—			6,642
Net current-period other comprehensive income (loss)		10,603			7,539			(1,588	)		16,554
Ending balance	$	(20,017	)	$	(70,600	)	$	1,025		$	(89,592	)

        The reclassifications out of accumulated other comprehensive income (loss) consisted of the following as of September 30, 2013:

Details about accumulated other comprehensive income (loss) components:	Amount reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement where net income is presented
Accumulated derivative losses, net	$	(6,642	)	Interest expense
	$	(6,642	)

Derivative Financial Instruments

• Derivative Financial Instruments

        We record all derivatives on the balance sheet 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. As a result, there is no significant ineffectiveness from any of our derivative activities. 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, 2013, we had the following outstanding interest rate derivatives related to managing our interest rate risk:

Interest Rate Derivative		Number of Instruments		Notional Amount
	Interest Rate Swaps		2	$	492.2 million
	Interest Rate Caps		5	$	249.4 million

        The carrying value of our interest rate swaps, at fair value, was a liability balance of $4.6 million and $1.5 million at September 30, 2013 and December 31, 2012, respectively, and is included in other liabilities. The interest rate caps were of nominal value at September 30, 2013 and December 31, 2012 and we generally do not apply hedge accounting to these arrangements.

        We are also exposed to fluctuations in foreign exchange rates on financial instruments which are denominated in foreign currencies, primarily in Japan and Europe. We use currency forward 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 US dollars for their fair value at or close to their settlement date. Approximately ¥1.7 billion remains as of September 30, 2013 for all forward contracts that we expect to receive through January 5, 2015. The September 30, 2013 asset balance related to these forward contracts was $4.1 million and is included in deferred costs and other assets. We have reported the changes in fair value for these forward contracts in earnings. The underlying currency adjustments on the foreign currency denominated receivables are also reported in income and generally offset the amounts in earnings for these forward contracts.

        The total gross accumulated other comprehensive loss related to our derivative activities, including our share of the other comprehensive loss from joint venture properties, approximated $70.6 million and $78.1 million as of September 30, 2013 and December 31, 2012, respectively.