## MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

## Non-GAAP Financial Measure — Funds from Operations 

Industry practice is to evaluate real estate properties in part based on funds from operations, or FFO. We consider FFO to be a key measure of our operating performance that is not specifically defined by accounting principles generally accepted in the United States, or GAAP. We believe that FFO is helpful to investors because it is a widely recognized measure of the performance of REITs and provides a relevant basis for comparison among REITs. We also use this measure internally to measure the operating performance of our portfolio. 

We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts, or NAREIT, as 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, 

● excluding gains and losses from the sales of previously depreciated 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 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 sales of, or any impairment charges related to, previously depreciated operating properties. We include in FFO gains and losses realized from the sale of land, outlot buildings, marketable and non-marketable securities, and investment holdings of non-retail real estate. However, you should understand that our computation of FFO might not be comparable to FFO reported by other REITs and that FFO: 

● does not represent cash flow from operations as defined by GAAP, 

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

● is not an alternative to cash flows as a measure of liquidity. 

