SEC Filing | Simon Property Group, L.P.

- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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, 2000 SIMON PROPERTY GROUP, INC. SPG REALTY CONSULTANTS, INC. (Exact name of registrant as specified (Exact name of registrant as specified in its charter) in its charter) Delaware Delaware (State of incorporation or (State of incorporation or organization) organization) 001-14469 001-14469-01 (Commission File No.) (Commission File No.) 046268599 13-2838638 (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) National City Center National City Center 115 West Washington Street, Suite 15 115 West Washington Street, Suite 15 East East Indianapolis, Indiana 46204 Indianapolis, Indiana 46204 (Address of principal executive (Address of principal executive offices) offices) (317) 636-1600 (317) 636-1600 (Registrant's telephone number, (Registrant's telephone number, including area code) 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. YES [X] NO [_] As of November 7, 2000, 168,730,718 shares of common stock, par value $0.0001 per share, 3,200,000 shares of Class B common stock, par value $0.0001 per share, and 4,000 shares of Class C common stock, par value $0.0001 per share of Simon Property Group, Inc. were outstanding, and were paired with 1,719,347 shares of common stock, par value $0.0001 per share, of SPG Realty Consultants, Inc. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1

SIMON PROPERTY GROUP, INC. AND SPG REALTY CONSULTANTS, INC. FORM 10-Q INDEX Page ---- Part I--Financial Information Item 1: Financial Statements Simon Property Group, Inc. and SPG Realty Consultants, Inc.: Combined Condensed Balance Sheets as of September 30, 2000 and December 31, 1999.............................................................. 3 Combined Condensed Statements of Operations for the three-month and nine-month periods ended September 30, 2000 and 1999.................. 4 Combined Condensed Statements of Cash Flows for the nine-month periods ended September 30, 2000 and 1999..................................... 5 Simon Property Group, Inc.: Consolidated Condensed Balance Sheets as of September 30, 2000 and December 31, 1999..................................................... 6 Consolidated Condensed Statements of Operations for the three-month and nine-month periods ended September 30, 2000 and 1999.................. 7 Consolidated Condensed Statements of Cash Flows for the nine-month periods ended September 30, 2000 and 1999............................. 8 SPG Realty Consultants, Inc.: Consolidated Condensed Balance Sheets as of September 30, 2000 and December 31, 1999..................................................... 9 Consolidated Condensed Statements of Operations for the three-month and nine-month periods ended September 30, 2000 and 1999.................. 10 Consolidated Condensed Statements of Cash Flows for the nine-month periods ended September 30, 2000 and 1999............................. 11 Notes to Unaudited Condensed Financial Statements........................ 12 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 20 Item 3: Qualitative and Quantitative Disclosure About Market Risk........ 26 Part II--Other Information Items 1 through 6........................................................ 27 Signature.................................................................. 28 2

SIMON PROPERTY GROUP, INC. AND SPG REALTY CONSULTANTS, INC. COMBINED CONDENSED BALANCE SHEETS (Unaudited and dollars in thousands, except per share amounts) September December 30, 2000 31, 1999 ----------- ----------- ASSETS: Investment properties, at cost..................... $12,952,970 $12,802,052 Less--accumulated depreciation..................... 1,371,935 1,098,881 ----------- ----------- 11,581,035 11,703,171 Cash and cash equivalents.......................... 114,420 157,632 Tenant receivables and accrued revenue, net........ 237,873 289,152 Notes and advances receivable from Management Company and affiliate............................. 167,866 162,082 Investments in unconsolidated entities, at equity.. 1,448,317 1,528,857 Other investments.................................. 3,000 44,902 Goodwill, net...................................... 38,677 39,556 Deferred costs and other assets, net............... 274,107 262,958 Minority interest, net............................. 41,570 34,933 ----------- ----------- $13,906,865 $14,223,243 =========== =========== LIABILITIES: Mortgages and other indebtedness................... $ 8,792,597 $ 8,768,951 Accounts payable and accrued expenses.............. 444,600 479,783 Cash distributions and losses in partnerships and joint ventures, at equity......................... 45,034 32,995 Other liabilities.................................. 144,137 213,909 ----------- ----------- Total liabilities................................ 9,426,368 9,495,638 ----------- ----------- COMMITMENTS AND CONTINGENCIES (Note 11) LIMITED PARTNERS' INTEREST IN THE OPERATING PARTNERSHIPS........................................ 918,084 984,465 LIMITED PARTNERS' PREFERRED INTEREST IN THE SPG OPERATING PARTNERSHIP............................... 149,885 149,885 PREFERRED STOCK OF SUBSIDIARY........................ 339,799 339,597 SHAREHOLDERS' EQUITY: CAPITAL STOCK OF SIMON PROPERTY GROUP, INC.: All series of preferred stock.................... 538,684 542,838 Common stock, $.0001 par value, 400,000,000 shares authorized, 170,829,273 and 170,272,210 issued and outstanding, respectively............ 17 17 Class B common stock, $.0001 par value, 12,000,000 shares authorized, 3,200,000 issued and outstanding................................. 1 1 Class C common stock, $.0001 par value, 4,000 shares authorized, issued and outstanding....... -- -- CAPITAL STOCK OF SPG REALTY CONSULTANTS, INC.: Common stock, $.0001 par value, 7,500,000 shares authorized, 1,740,333 and 1,734,762 issued and outstanding, respectively....................... -- -- Capital in excess of par value..................... 3,312,976 3,298,025 Accumulated deficit................................ (703,444) (551,251) Unrealized loss on long-term investment............ -- (5,852) Unamortized restricted stock award................. (22,987) (22,139) Less common stock held in treasury at cost, 2,098,555 and 310,955 Paired Shares, respectively. (52,518) (7,981) ----------- ----------- Total shareholders' equity....................... 3,072,729 3,253,658 ----------- ----------- $13,906,865 $14,223,243 =========== =========== The accompanying notes are an integral part of these statements. 3

SIMON PROPERTY GROUP, INC. AND SPG REALTY CONSULTANTS, INC. COMBINED CONDENSED STATEMENTS OF OPERATIONS (Unaudited and dollars in thousands, except per share amounts) For the Three Months Ended For the Nine Months September 30, Ended September 30, ------------------ ---------------------- 2000 1999 2000 1999 -------- -------- ---------- ---------- REVENUE: Minimum rent..................... $299,708 $280,920 $ 890,435 $ 831,163 Overage rent..................... 9,700 12,307 28,456 40,333 Tenant reimbursements............ 145,237 156,514 444,384 433,352 Other income..................... 39,281 21,430 96,161 66,422 -------- -------- ---------- ---------- Total revenue.................. 493,926 471,171 1,459,436 1,371,270 -------- -------- ---------- ---------- EXPENSES: Property operating............... 78,779 76,172 235,220 216,679 Depreciation and amortization.... 106,983 93,402 304,611 272,927 Real estate taxes................ 49,032 48,151 147,183 139,194 Repairs and maintenance.......... 15,930 15,365 51,690 52,253 Advertising and promotion........ 11,473 15,883 42,728 45,435 Provision for credit losses...... 3,326 2,043 7,671 6,837 Other............................ 8,990 5,373 27,474 19,622 -------- -------- ---------- ---------- Total operating expenses....... 274,513 256,389 816,577 752,947 -------- -------- ---------- ---------- OPERATING INCOME.................. 219,413 214,782 642,859 618,323 INTEREST EXPENSE.................. 160,668 144,015 474,534 427,871 -------- -------- ---------- ---------- INCOME BEFORE MINORITY INTEREST... 58,745 70,767 168,325 190,452 MINORITY INTEREST................. (2,382) (2,236) (7,099) (7,739) GAIN (LOSS) ON SALES OF ASSETS, NET OF ASSET WRITE DOWNS OF $0, $0, $10,572, AND $0 RESPECTIVELY. 151 -- 8,809 (9,308) INCOME TAX BENEFIT OF SRC......... -- -- -- 3,374 -------- -------- ---------- ---------- INCOME BEFORE UNCONSOLIDATED ENTITIES......................... 56,514 68,531 170,035 176,779 INCOME FROM UNCONSOLIDATED ENTITIES......................... 20,920 18,594 54,447 45,072 -------- -------- ---------- ---------- INCOME BEFORE EXTRAORDINARY ITEMS, CUMULATIVE EFFECT OF ACCOUNTING CHANGE AND UNUSUAL ITEM.......... 77,434 87,125 224,482 221,851 UNUSUAL ITEM (Note 11)............ -- (12,000) -- (12,000) EXTRAORDINARY ITEMS--DEBT RELATED TRANSACTIONS..................... -- (410) (440) (2,227) CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 6).................. -- -- (12,342) -- -------- -------- ---------- ---------- INCOME BEFORE ALLOCATION TO LIMITED PARTNERS................. 77,434 74,715 211,700 207,624 LESS: LIMITED PARTNERS' INTEREST IN THE OPERATING PARTNERSHIPS...... 16,075 15,590 42,346 41,255 PREFERRED DISTRIBUTIONS OF THE SPG OPERATING PARTNERSHIP....... 2,816 612 8,450 612 PREFERRED DIVIDENDS OF SUBSIDIARY...................... 7,333 7,333 22,001 22,001 -------- -------- ---------- ---------- PREFERRED DIVIDENDS............... (9,185) (8,745) (27,623) (27,905) -------- -------- ---------- ---------- NET INCOME........................ 51,210 51,180 138,903 143,756 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS..................... $ 42,025 $ 42,435 $ 111,280 $ 115,851 ======== ======== ========== ========== BASIC EARNINGS PER COMMON PAIRED SHARE: Income before extraordinary items and cumulative effect of accounting change............... $ 0.24 $ 0.25 $ 0.69 $ 0.68 Extraordinary items.............. -- (0.01) -- (0.01) Cumulative effect of accounting change.......................... -- -- (0.05) -- -------- -------- ---------- ---------- Net income....................... $ 0.24 $ 0.24 $ 0.64 $ 0.67 ======== ======== ========== ========== DILUTED EARNINGS PER COMMON PAIRED SHARE: Income before extraordinary items and cumulative effect of accounting change............... $ 0.24 $ 0.25 $ 0.69 $ 0.68 Extraordinary items.............. -- (0.01) -- (0.01) Cumulative effect of accounting change.......................... -- -- (0.05) -- -------- -------- ---------- ---------- Net income....................... $ 0.24 $ 0.24 $ 0.64 $ 0.67 ======== ======== ========== ========== The accompanying notes are an integral part of these statements. 4

SIMON PROPERTY GROUP, INC. AND SPG REALTY CONSULTANTS, INC. COMBINED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited and dollars in thousands) For the Nine Months Ended September 30, ------------------------ 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income........................................... $ 138,903 $ 143,756 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization.................... 312,211 281,361 Extraordinary items--debt related transactions... 440 2,227 Unusual item..................................... -- 12,000 (Gain) loss on sales of assets, net of asset write downs of $10,572 and $0, respectively..... (8,809) 9,308 Cumulative effect of accounting change........... 12,342 -- Limited partners' interest in the Operating Partnerships.................................... 42,346 41,255 Preferred dividends of Subsidiary................ 22,001 22,001 Preferred distributions of the SPG Operating Partnership..................................... 8,450 612 Straight-line rent............................... (12,207) (13,390) Minority interest................................ 7,099 7,739 Income tax benefit of SRC........................ -- (3,374) Equity in income of unconsolidated entities...... (54,447) (45,072) Changes in assets and liabilities-- Tenant receivables and accrued revenue........... 52,460 (25,118) Deferred costs and other assets.................. (8,183) (25,802) Accounts payable, accrued expenses and other liabilities..................................... (87,960) 36,039 ----------- ----------- Net cash provided by operating activities........ 424,646 443,542 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions....................................... -- (265,715) Capital expenditures............................... (312,189) (349,644) Cash from acquisitions and consolidation of joint ventures, net..................................... -- 10,812 Net proceeds from sale of assets................... 114,284 53,953 Net proceeds from sale of investment............... 49,998 -- Investments in unconsolidated entities............. (105,751) (55,991) Distributions from unconsolidated entities......... 235,075 191,561 Advances to the Management Company and affiliates.. (5,784) (24,360) ----------- ----------- Net cash used in investing activities............ (24,367) (439,384) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sales of common stock, net........... 406 2,012 Purchase of treasury stock and limited partner units............................................. (50,972) -- Minority interest distributions, net............... (13,287) (11,617) Preferred dividends of Subsidiary.................. (22,001) (22,001) Preferred distributions of the SPG Operating Partnership....................................... (8,450) (612) Preferred dividends and distributions to shareholders...................................... (272,925) (289,972) Distributions to limited partners.................. (99,115) (97,230) Mortgage and other note proceeds, net of transaction costs................................. 1,341,735 1,658,633 Mortgage and other note principal payments......... (1,318,882) (1,273,650) ----------- ----------- Net cash used in financing activities............ (443,491) (34,437) ----------- ----------- CASH AND CASH EQUIVALENTS, beginning of period....... 157,632 129,195 ----------- ----------- DECREASE IN CASH AND CASH EQUIVALENTS................ (43,212) (30,279) CASH AND CASH EQUIVALENTS, end of period............. $ 114,420 $ 98,916 =========== =========== The accompanying notes are an integral part of these statements. 5

SIMON PROPERTY GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited and dollars in thousands, except per share amounts) September 30, December 31, 2000 1999 ------------- ------------ ASSETS: Investment properties, at cost.................... $12,945,397 $12,794,484 Less--accumulated depreciation.................... 1,370,618 1,097,629 ----------- ----------- 11,574,779 11,696,855 Cash and cash equivalents......................... 107,198 154,924 Tenant receivables and accrued revenue, net....... 234,753 288,506 Notes and advances receivable from Management Company and affiliate............................ 167,866 162,082 Note receivable from the SRC Operating Partnership (Interest at 8%, due 2009)....................... 24,498 9,848 Investments in unconsolidated entities, at equity. 1,439,929 1,519,504 Other investment.................................. -- 41,902 Goodwill, net..................................... 38,677 39,556 Deferred costs and other assets, net.............. 250,398 250,210 Minority interest, net............................ 42,221 35,931 ----------- ----------- $13,880,319 $14,199,318 =========== =========== LIABILITIES: Mortgages and other indebtedness.................. $ 8,792,597 $ 8,768,841 Accounts payable and accrued expenses............. 436,319 478,633 Cash distributions and losses in partnerships and joint ventures, at equity........................ 45,034 32,995 Other liabilities................................. 144,159 213,506 ----------- ----------- Total liabilities............................... 9,418,109 9,493,975 =========== =========== COMMITMENTS AND CONTINGENCIES (Note 11) LIMITED PARTNERS' INTEREST IN THE SPG OPERATING PARTNERSHIP........................................ 913,033 978,316 LIMITED PARTNERS' PREFERRED INTEREST IN THE SPG OPERATING PARTNERSHIP.............................. 149,885 149,885 PREFERRED STOCK OF SUBSIDIARY....................... 339,799 339,597 SHAREHOLDERS' EQUITY: All series of preferred stock..................... 538,684 542,838 Common stock, $.0001 par value, 400,000,000 shares authorized, 170,829,273 and 170,272,210 issued and outstanding, respectively.................... 17 17 Class B common stock, $.0001 par value, 12,000,000 shares authorized, 3,200,000 issued and outstanding...................................... 1 1 Class C common stock, $.0001 par value, 4,000 shares authorized, issued and outstanding........ -- -- Capital in excess of par value.................... 3,298,437 3,283,566 Accumulated deficit............................... (702,330) (552,933) Unrealized loss on long-term investment........... -- (5,852) Unamortized restricted stock award................ (22,987) (22,139) Less common stock held in treasury at cost, 2,098,555 and 310,955 shares, respectively....... (52,329) (7,953) ----------- ----------- Total shareholders' equity...................... 3,059,493 3,237,545 ----------- ----------- $13,880,319 $14,199,318 =========== =========== The accompanying notes are an integral part of these statements. 6

SIMON PROPERTY GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited and dollars in thousands, except per share amounts) For the Three Months For the Nine Months Ended September 30, Ended September 30, ---------------------- -------------------- 2000 1999 2000 1999 ---------- ---------- --------- --------- Revenue: Minimum rent.................... $ 299,728 $ 280,931 $ 890,491 $ 830,590 Overage rent.................... 9,700 12,307 28,456 40,333 Tenant reimbursements........... 145,237 156,514 444,384 433,354 Other income.................... 38,243 21,243 93,168 69,537 ---------- ---------- --------- --------- Total revenue................. 492,908 470,995 1,456,499 1,373,814 ---------- ---------- --------- --------- Expenses: Property operating.............. 77,771 76,171 231,864 216,351 Depreciation and amortization... 106,958 93,379 304,537 272,596 Real estate taxes............... 49,061 48,189 147,182 139,076 Repairs and maintenance......... 15,931 15,365 51,689 52,244 Advertising and promotion....... 11,271 15,883 42,531 45,435 Provision for credit losses..... 3,326 2,043 7,671 6,822 Other........................... 7,106 5,290 22,094 19,719 ---------- ---------- --------- --------- Total operating expenses...... 271,424 256,320 807,568 752,243 ---------- ---------- --------- --------- Operating income................. 221,484 214,675 648,931 621,571 Interest expense................. 161,049 144,090 475,563 428,148 ---------- ---------- --------- --------- Income before minority interest.. 60,435 70,585 173,368 193,423 Minority interest................ (2,659) (2,236) (7,446) (7,739) Gain (Loss) on sales of assets, net of asset write downs of $0, $0, $10,572, and $0 respectively.................... 151 -- 8,809 (4,188) ---------- ---------- --------- --------- Income before unconsolidated entities........................ 57,927 68,349 174,731 181,496 Income from unconsolidated entities........................ 20,400 17,613 53,613 42,538 ---------- ---------- --------- --------- Income before extraordinary items, cumulative effect of accounting change and unusual item............................ 78,327 85,962 228,344 224,034 Unusual item (Note 11)........... -- (12,000) -- (12,000) Extraordinary items--debt related transactions.................... -- (410) (440) (2,227) Cumulative effect of accounting change (note 6)................. -- -- (12,342) -- ---------- ---------- --------- --------- Income before allocation to limited partners................ 78,327 73,552 215,562 209,807 Less: Limited partners' interest in the SPG operating partnership.................... 16,322 15,262 43,412 42,802 Preferred distributions of the SPG operating partnership...... 2,816 612 8,450 612 Preferred dividends of subsidiary..................... 7,333 7,333 22,001 22,001 ---------- ---------- --------- --------- Net income....................... 51,856 50,345 141,699 144,392 Preferred dividends.............. (9,185) (8,745) (27,623) (27,905) ---------- ---------- --------- --------- Net income available to common shareholders.................... $ 42,671 $ 41,600 $ 114,076 $ 116,487 ========== ========== ========= ========= Basic earnings per common share: Income before extraordinary items and cumulative effect of accounting change.............. $ 0.25 $ 0.24 $ 0.71 $ 0.69 Extraordinary items............. -- -- -- (0.01) Cumulative effect of accounting change......................... -- -- (0.05) -- ---------- ---------- --------- --------- Net income...................... $ 0.25 $ 0.24 $ 0.66 $ 0.68 ========== ========== ========= ========= Diluted earnings per common share: Income before extraordinary items and cumulative effect of accounting change.............. $ 0.25 $ 0.24 $ 0.71 $ 0.69 Extraordinary items............. -- -- -- (0.01) Cumulative effect of accounting change......................... -- -- (0.05) -- ---------- ---------- --------- --------- Net income...................... $ 0.25 $ 0.24 $ 0.66 $ 0.68 ========== ========== ========= ========= The accompanying notes are an integral part of these statements. 7

SIMON PROPERTY GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited and dollars in thousands) For the Nine Months Ended September 30, -------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income......................................... $ 141,699 $ 144,392 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization.................. 312,137 281,030 Extraordinary items--debt related transactions. 440 2,227 Unusual item................................... -- 12,000 (Gain) loss on sales of assets, net of asset write downs of $10,572 and $0, respectively... (8,809) 4,188 Cumulative effect of accounting change......... 12,342 -- Limited partners' interest in the SPG Operating Partnership................................... 43,412 42,802 Preferred dividends of Subsidiary.............. 22,001 22,001 Preferred distributions of the SPG Operating Partnership................................... 8,450 612 Straight-line rent............................. (12,207) (13,392) Minority interest.............................. 7,446 7,739 Equity in income of unconsolidated entities.... (53,613) (42,538) Changes in assets and liabilities-- Tenant receivables and accrued revenue......... 54,933 (25,239) Deferred costs and other assets................ (7,210) (22,670) Accounts payable, accrued expenses and other liabilities................................... (95,354) 33,853 ------------ ------------ Net cash provided by operating activities...... 425,667 447,005 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions..................................... -- (265,715) Capital expenditures............................. (301,499) (347,358) Cash from acquisitions and consolidation of joint ventures, net................................... -- 10,812 Net proceeds from sales of assets................ 114,284 42,000 Net proceeds from sales of investment............ 49,998 -- Investments in unconsolidated entities........... (105,751) (55,991) Distributions from unconsolidated entities....... 233,276 191,442 Note payment from the SRC Operating Partnership.. -- 20,565 Loan to the SRC Operating Partnership............ (14,650) -- Advances to the Management Company and affiliates...................................... (5,784) (24,360) ------------ ------------ Net cash used in investing activities.......... (30,126) (428,605) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sales of common, net............... 375 1,407 Purchase of treasury stock and limited partner units........................................... (50,828) Minority interest distributions, net............. (13,287) (12,188) Preferred dividends of Subsidiary................ (22,001) (22,001) Preferred distributions of the SPG Operating Partnership..................................... (8,450) (612) Preferred dividends and distributions to shareholders.................................... (272,925) (289,972) Distributions to limited partners................ (99,115) (97,230) Note payment to the SRC Operating Partnership.... -- (15,164) Mortgage and other note proceeds, net of transaction costs............................... 1,341,735 1,658,633 Mortgage and other note principal payments....... (1,318,771) (1,272,842) ------------ ------------ Net cash used in financing activities.......... (443,267) (49,969) ------------ ------------ DECREASE IN CASH AND CASH EQUIVALENTS.............. (47,726) (31,569) CASH AND CASH EQUIVALENTS, beginning of period..... 154,924 127,626 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period........... $ 107,198 $ 96,057 ============ ============ The accompanying notes are an integral part of these statements. 8

SPG REALTY CONSULTANTS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited and dollars in thousands, except per share amounts) September 30, December 31, 2000 1999 ------------- ------------ ASSETS: Cash and cash equivalents......................... $ 7,222 $ 2,708 Accounts receivable............................... 3,120 646 -------- -------- Total current assets............................ 10,342 3,354 Investment properties, at cost, less accumulated depreciation of $1,317 and $1,252, respectively.. 6,256 6,316 Investments in unconsolidated entities, at equity. 8,388 9,353 Investments in technology initiatives............. 26,250 15,708 Other noncurrent assets, net...................... 717 298 -------- -------- $ 51,953 $ 35,029 ======== ======== LIABILITIES: Accounts payable and accrued expenses............. $ 8,517 $ 1,811 -------- -------- Total current liabilities....................... 8,517 1,811 Mortgages and other indebtedness.................. -- 110 Note payable to the SPG Operating Partnership (Interest at 8%, due 2009)....................... 24,498 9,848 Minority interest................................. 651 998 -------- -------- Total liabilities............................... 33,666 12,767 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 11) LIMITED PARTNERS' INTEREST IN THE SRC OPERATING PARTNERSHIP........................................ 5,051 6,149 SHAREHOLDERS' EQUITY: Common stock, $.0001 par value, 7,500,000 shares authorized, 1,740,333 and 1,734,762 issued and outstanding, respectively........................ -- -- Capital in excess of par value.................... 29,645 29,565 Accumulated deficit............................... (16,220) (13,424) Less common stock held in treasury at cost, 20,986 and 3,110 shares respectively.................... (189) (28) -------- -------- Total shareholders' equity...................... 13,236 16,113 -------- -------- $ 51,953 $ 35,029 ======== ======== The accompanying notes are an integral part of these statements. 9

SPG REALTY CONSULTANTS, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited and dollars in thousands, except per share amounts) For the Three Months Ended For the Nine Months September 30, Ended September 30, -------------------- -------------------- 2000 1999 2000 1999 --------- --------- --------- --------- REVENUE: Rental income.................... $ 77 $ 74 $ 234 $ 1,311 Tenant reimbursements............ -- -- -- 210 Marketing and fee income......... 2,604 -- 6,842 -- Other income..................... 171 149 247 599 --------- --------- --------- --------- Total revenue.................. 2,852 223 7,323 2,120 --------- --------- --------- --------- EXPENSES: Property operating............... -- -- -- 706 Technology initiatives startup costs........................... 1,886 -- 5,024 -- Depreciation and amortization.... 25 23 74 331 General and administrative expenses........................ 2,581 -- 6,978 213 --------- --------- --------- --------- Total operating expenses....... 4,492 23 12,076 1,250 --------- --------- --------- --------- OPERATING INCOME (LOSS)............ (1,640) 200 (4,753) 870 INTEREST EXPENSE................... (10) (17) (290) (3,841) MINORITY INTEREST.................. 277 -- 347 -- LOSS ON SALES OF ASSETS, NET....... -- -- -- (5,120) INCOME TAX BENEFIT................. -- -- -- 3,374 --------- --------- --------- --------- INCOME (LOSS) BEFORE UNCONSOLIDATED ENTITIES.......................... (1,373) 183 (4,696) (4,717) INCOME FROM UNCONSOLIDATED ENTITIES.......................... 520 981 834 2,534 --------- --------- --------- --------- INCOME (LOSS) BEFORE ALLOCATION TO LIMITED PARTNERS.................. (853) 1,164 (3,862) (2,183) LESS--LIMITED PARTNERS' INTEREST IN THE SRC OPERATING PARTNERSHIP..... (247) 328 (1,066) (1,547) --------- --------- --------- --------- NET INCOME (LOSS).................. $ (606) $ 836 $ (2,796) $ (636) ========= ========= ========= ========= BASIC NET INCOME (LOSS) PER COMMON SHARE............................. $ (0.35) $ 0.48 $ (1.61) $ (0.37) ========= ========= ========= ========= DILUTED NET INCOME (LOSS) PER COMMON SHARE...................... $ (0.35) $ 0.48 $ (1.61) $ (0.37) ========= ========= ========= ========= BASIC WEIGHTED AVERAGE SHARES OUTSTANDING....................... 1,727,594 1,734,714 1,732,165 1,719,499 ========= ========= ========= ========= DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING....................... 1,727,594 1,735,422 1,732,165 1,719,499 ========= ========= ========= ========= The accompanying notes are an integral part of these statements. 10

SPG REALTY CONSULTANTS, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited and dollars in thousands) For the Nine Months Ended September 30, -------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................... $ (2,796) $ (636) Adjustments to reconcile net loss to net cash provided by operating activities-- Depreciation and amortization.................. 74 331 Loss on sales of assets, net................... -- 5,120 Limited partners' interest in the SRC Operating Partnership................................... (1,066) (1,547) Straight-line rent............................. -- 2 Minority interest.............................. (347) -- Equity in income of unconsolidated entities.... (834) (2,534) Income tax benefit............................. -- (3,374) Changes in assets and liabilities-- Accounts receivable and other assets........... (3,446) (3,487) Accounts payable and accrued expenses.......... 7,393 891 ------------ ------------ Net cash used in operating activities.......... (1,022) (5,234) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Investment in technology initiatives and other capital expenditures............................ (10,690) (515) Net proceeds from sales of assets................ -- 11,953 Note payment from the SPG Operating Partnership.. -- 15,164 Distributions from unconsolidated entities....... 1,799 119 ------------ ------------ Net cash provided by (used in) investing activities.................................... (8,891) 26,721 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sales of common stock.............. 31 605 Purchase of treasury stock....................... (144) Minority interest contributions.................. -- 571 Loan from the SPG Operating Partnership.......... 14,650 -- Mortgage and other note principal payments....... (110) (21,373) ------------ ------------ Net cash provided by (used in) financing activities.................................... 14,427 (20,197) ------------ ------------ INCREASE IN CASH AND CASH EQUIVALENTS.............. 4,514 1,290 CASH AND CASH EQUIVALENTS, beginning of period..... 2,708 1,569 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period........... $ 7,222 $ 2,859 ============ ============ The accompanying notes are an integral part of these statements. 11

SIMON PROPERTY GROUP, INC. AND SPG REALTY CONSULTANTS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) Note 1--Organization Simon Property Group, Inc. ("SPG"), a Delaware corporation, is a self- administered and self-managed real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). Each share of common stock of SPG is paired ("Paired Shares") with a beneficial interest in 1/100th of a share of common stock of SPG Realty Consultants, Inc., also a Delaware corporation ("SRC" and together with SPG, the "Companies"). Simon Property Group, L.P. (the "SPG Operating Partnership") is the primary subsidiary of SPG. Units of ownership interest ("Units") in the SPG Operating Partnership are paired ("Paired Units") with a Unit in SPG Realty Consultants, L.P. (the "SRC Operating Partnership" and together with the SPG Operating Partnership, the "Operating Partnerships"). The SRC Operating Partnership is the primary subsidiary of SRC. At both September 30, 2000 and December 31, 1999, the Companies' direct and indirect ownership interests in the Operating Partnerships was 72.4%. The Companies together with the Operating Partnerships are hereafter referred to as "Simon Group". SPG, primarily through the SPG Operating Partnership, is engaged in the ownership, operation, management, leasing, acquisition, expansion and development of real estate properties, primarily regional malls and community shopping centers. As of September 30, 2000, SPG and the SPG Operating Partnership owned or held an interest in 252 income-producing properties, which consisted of 166 regional malls, 73 community shopping centers, five specialty retail centers, four mixed-use properties and four value-oriented super-regional malls in 36 states (the "Properties") and five additional retail real estate properties operating in Europe. The SPG Operating Partnership also owned an interest in two properties under construction and 10 parcels of land held for future development, which together with the Properties are hereafter referred to as the "Portfolio Properties". The SPG Operating Partnership also holds substantially all of the economic interest in M.S. Management Associates, Inc. (the "Management Company"). SRC, primarily through the SRC Operating Partnership, engages primarily in activities that capitalize on the resources, customer base and operating activities of SPG, which could not be engaged in by SPG without potentially impacting its status as a REIT. These activities include a program launched in 1999 designed to take advantage of new retail opportunities of the digital age. Elements of the program include incubating concepts that leverage the physical and virtual worlds through a venture creation subsidiary called clixnmortar.com. The SRC Operating Partnership's investment in this program was approximately $23,250 and $12,700, as of September 30, 2000 and December 31, 1999, respectively, which is included in investments in technology initiatives on SRC's balance sheets. To date, the majority of such investment is comprised of internally developed software costs. Minority interest on the SRC balance sheets represents an 8.5% outside ownership interest in clixnmortar.com. In addition, on January 1, 2000, SRC formed Simon Brand Ventures, LLC, to continue and expand upon certain mall marketing initiatives established by Simon Group to take advantage of Simon Group's size and tenant relationships, primarily through strategic corporate alliances. SRC also has noncontrolling interests in two joint ventures which each own land held for sale, which are located adjacent to Properties. Note 2--Basis of Presentation The accompanying financial statements are unaudited; however, they have been prepared in accordance with generally accepted accounting principles for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for fair presentation, consisting of only normal recurring adjustments, 12

have been included. The results for the interim period ended September 30, 2000 are not necessarily indicative of the results to be obtained for the full fiscal year. These unaudited financial statements have been prepared in accordance with the accounting policies described in the Companies' combined annual report on Form 10-K for the year ended December 31, 1999 and should be read in conjunction therewith. The accompanying combined financial statements include SPG and SRC and their subsidiaries. The accompanying consolidated financial statements for SPG and SRC include SPG and its subsidiaries and SRC and its subsidiaries, respectively. All significant intercompany amounts have been eliminated. Net operating results of the Operating Partnerships are allocated to the Companies based first on the Companies' preferred unit preference, if applicable, and then on their remaining ownership interests in the Operating Partnerships during the period. The Companies' remaining weighted average ownership interests in the Operating Partnerships for the three-month periods ended September 30, 2000 and September 30, 1999 were 72.3%. The Companies' remaining weighted average ownership interests in the Operating Partnerships for the nine-month periods ended September 30, 2000 and September 30, 1999 were 72.4% and 72.2%, respectively. Note 3--Reclassifications Certain reclassifications of prior period amounts have been made in the financial statements to conform to the 2000 presentation. These reclassifications have no impact on the net operating results previously reported. Note 4--Per Share Data Basic earnings per share is based on the weighted average number of shares of common stock outstanding during the period and diluted earnings per share is based on the weighted average number of shares of common stock outstanding combined with the incremental weighted average shares that would have been outstanding if all dilutive potential common shares would have been converted into shares at the earliest date possible. Neither series of convertible preferred stock issued and outstanding during the comparative periods had a dilutive effect on earnings per share. Paired Units held by limited partners in the Operating Partnerships may be exchanged for Paired Shares, on a one- for-one basis in certain circumstances. If exchanged, the Paired Units would not have a dilutive effect. The increase in weighted average shares outstanding under the diluted method over the basic method in every period presented for the Companies is due entirely to the effect of outstanding stock options. Basic earnings and diluted earnings were the same for all periods presented. The following table presents weighted average and diluted weighted average shares outstanding: For the Three Months For the Nine Months Ended Ended ----------------------- ----------------------- September September September September 30, 2000 30, 1999 30, 2000 30, 1999 ----------- ----------- ----------- ----------- Weighted Average Shares Outstanding................ 172,759,374 173,471,352 173,216,460 171,949,877 Diluted Weighted Average Shares Outstanding......... 172,862,078 173,542,183 173,312,901 172,088,607 Note 5--Cash Flow Information Cash paid for interest, net of amounts capitalized, during the nine months ended September 30, 2000 was $480,819 as compared to $411,510 for the same period in 1999. Accrued and unpaid distributions were $19,044 and $876 at September 30, 2000 and December 31, 1999, respectively. See Note 10 for information about non-cash transactions during the nine months ended September 30, 2000. Note 6--Cumulative Effect of Accounting Change On December 3, 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), which addressed certain revenue recognition policies, including the accounting for overage rent by a landlord. SAB 101 requires overage rent to be recognized as revenue only when each tenant's sales exceed 13

its sales threshold. Simon Group previously recognized overage rent based on reported and estimated sales through the end of the period, less the applicable prorated base sales amount. Simon Group adopted SAB 101 effective January 1, 2000 and recorded a loss from the cumulative effect of an accounting change of $12,342, which includes Simon Group's $1,765 share from unconsolidated entities. In addition, SAB 101 will impact the timing in which overage rent is recognized throughout each year, but will not have a material impact on the total overage rent recognized in each full year. Simon Group estimates the pro forma negative impact of adopting SAB 101 on combined net income for the three-month and nine-month periods ended September 30, 2000 to be approximately $2,100 and $10,500, respectively. The negative impact on earnings per share for the three-month and nine-month periods ended September 30, 2000 was approximately $0.01 and $0.06, respectively. Note 7--Gain on Sales of Assets, net of Asset Write Downs During the first nine months of 2000, Simon Group sold its interests in two regional malls, four community shopping centers and an office building for a total of approximately $142,575, including the buyer's assumption of approximately $25,900 of mortgage debt, which resulted in a net gain of $19,381. The net proceeds of $114,284, were used to reduce the outstanding borrowings on its $1,250,000 unsecured revolving credit facility (the "Credit Facility"), to repurchase Paired Shares, and for general corporate purposes. In addition, during the second quarter of 2000, Simon Group recognized a total asset write down of $10,572 on two Properties. Both of the Properties are under contract for sale. The estimated sale price, net of estimated closing costs, for each of the Properties was the basis for determining the fair values of the Properties and the related asset write downs. Note 8--Investments in Unconsolidated Entities Summary financial information of Simon Group's investment in partnerships and joint ventures accounted for using the equity method of accounting and a summary of Simon Group's investment in and share of income from such partnerships and joint ventures follow: September 30, December 31, 2000 1999 ------------- ------------ BALANCE SHEETS Assets: Investment properties at cost, net............ $6,526,346 $6,487,200 Other assets.................................. 505,440 493,551 ---------- ---------- Total assets.............................. $7,031,786 $6,980,751 ========== ========== Liabilities and Partners' Equity: Mortgages and other notes payable............. $4,722,728 $4,484,598 Accounts payable, accrued expenses and other liabilities.................................. 262,493 291,457 ---------- ---------- Total liabilities......................... $4,985,221 4,776,055 Partners' equity.............................. 2,046,565 2,204,696 ---------- ---------- Total liabilities and partners' equity.... $7,031,786 $6,980,751 ========== ========== Simon Group's Share of: Total assets.................................. $2,857,716 $2,843,025 ========== ========== Simon Group's net Investment in Joint Ventures..................................... $1,380,709 $1,489,029 ========== ========== 14

For the Three Months For the Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2000 1999 2000 1999 -------- -------- -------- -------- STATEMENTS OF OPERATIONS Revenue: Minimum rent...................... $191,268 $133,510 $555,719 $386,002 Overage rent...................... 5,476 5,715 14,504 14,236 Tenant reimbursements............. 94,082 64,196 278,192 183,882 Other income...................... 22,218 12,476 44,477 30,233 -------- -------- -------- -------- Total revenue................... 313,044 215,897 892,892 614,353 Operating Expenses: Operating expenses and other...... 112,790 75,330 334,248 217,943 Depreciation and amortization..... 62,487 38,076 174,258 109,141 -------- -------- -------- -------- Total operating expenses........ 175,277 113,406 508,506 327,084 -------- -------- -------- -------- Operating Income.................... 137,767 102,491 384,386 287,269 Interest Expense.................... 91,170 58,646 262,282 155,862 -------- -------- -------- -------- Net Income.......................... 46,597 43,845 122,104 131,407 Third Party Investors' Share of Net Income............................. 27,301 26,225 71,981 79,740 -------- -------- -------- -------- Simon Group's Share of Net Income... 19,296 17,620 50,123 51,667 Amortization of Excess Investment (See below)........................ (5,467) (5,347) (16,050) (17,010) -------- -------- -------- -------- Income from Unconsolidated Entities. $ 13,829 $ 12,273 $ 34,073 $ 34,657 ======== ======== ======== ======== As of September 30, 2000 and December 31, 1999, the unamortized excess of Simon Group's investment over its share of the equity in the underlying net assets of the partnerships and joint ventures ("Excess Investment") was $560,646 and $592,457, respectively, which is amortized over the life of the related Properties. Simon Group's share of consolidated net income of the Management Company, after intercompany profit eliminations, was $7,091 and $6,321 for the three- month periods ended September 30, 2000 and 1999, respectively, and $20,374 and $10,415 for the nine-month periods ended September 30, 2000 and 1999, respectively. Simon Group's investment in the Management Company was $22,574 and $6,833 as of September 30, 2000 and December 31, 1999, respectively. Note 9--Debt At September 30, 2000, Simon Group had combined consolidated debt of $8,792,597, of which $6,132,692 was fixed-rate debt and $2,659,905 was variable-rate debt. Simon Group's pro rata share of indebtedness of the unconsolidated joint venture Properties as of September 30, 2000 was $1,993,834. As of September 30, 2000, Simon Group had interest-rate protection agreements related to $404,200 of its combined consolidated variable-rate debt. The agreements are generally in effect until the related variable-rate debt matures. Simon Group's hedging activity did not materially impact interest expense in the comparative periods. On March 24, 2000, Simon Group refinanced $450,000 of unsecured debt, which became due and bore interest at LIBOR plus 65 basis points. The new facility matures March 2001 and also bears interest at LIBOR plus 65 basis points. In addition, during September 2000, Simon Group refinanced $500,000 of unsecured debt, which became due and bore interest at LIBOR plus 65 basis points, with a new $475,000 facility and borrowings from the Credit Facility. The new $475,000 facility matures September 2001 and bears interest at LIBOR plus 65 basis points. 15

Note 10--Shareholders' Equity The following table summarizes the changes in the Companies' shareholders' equity since December 31, 1999. Unrealized Common SPG SPG SRC Loss on Capital in Unamortized Stock Total Preferred Common Common Investment Excess of Accumulated Restricted Held in Shareholders' Stock Stock Stock (1) Par Value Deficit Stock Award Treasury Equity --------- ------ ------ ---------- ---------- ----------- ----------- -------- ------------- Balance at December 31, 1999................... $542,838 $18 $-- $(5,852) $3,298,025 $(551,251) $(22,139) $ (7,981) $3,253,658 Preferred Stock conversion (84,046 Paired Shares) (2)..... (2,827) -- 2,827 -- Common stock issued as dividend (1,242 Paired Shares) (2)............ -- 31 31 Preferred Stock conversion (36,913 Paired Shares) (3)..... (1,327) -- 1,327 -- Stock purchased by subsidiary (191,500 Paired Shares) (4)..... (4,539) (4,539) Treasury stock purchase (1,596,100 Paired Shares)................ -- (39,998) (39,998) Stock incentive program (421,502 Paired Shares, net of forfeitures).... -- 9,703 (9,703) -- Amortization of stock incentive.............. 8,855 8,855 Other common stock issued (13,360 Paired Shares)................ -- 386 386 Adjustment to the limited partners' interests in the Operating Partnerships. 677 677 Distributions........... (291,096) (291,096) -------- --- ---- ------- ---------- --------- -------- -------- ---------- Subtotal................ 538,684 18 -- (5,852) 3,312,976 (842,347) (22,987) (52,518) 2,927,974 Comprehensive Income: Unrealized gain on investment (1)......... 5,852 5,852 Net income.............. 138,903 138,903 -------- --- ---- ------- ---------- --------- -------- -------- ---------- Total Comprehensive Income.............. -- -- -- 5,852 -- 138,903 -- -- 144,755 -------- --- ---- ------- ---------- --------- -------- -------- ---------- Balance at September 30, 2000................... $538,684 $18 $-- $ -- $3,312,976 $(703,444) $(22,987) $(52,518) $3,072,729 ======== === ==== ======= ========== ========= ======== ======== ========== - ------- (1) Amounts consist of the Companies' pro rata share of the unrealized gain/(loss) resulting from the change in market value of 1,408,450 shares of common stock of Chelsea GCA Realty, Inc. ("Chelsea"), a publicly traded REIT. On July 31, 2000, Simon Group sold these shares for $50,000, which equaled Simon Group's original investment. No gain or loss was recognized on the transaction. The net proceeds were used for general corporate purposes. (2) Effective June 16, 2000, 2,212 shares of SPG's Series A Convertible Preferred Stock were converted into 84,046 Paired Shares. In addition, Simon Group issued 1,242 Paired Shares to the holders of the converted shares in lieu of the cash dividends allocable to those preferred shares. At September 30, 2000, 51,059 shares of Series A Convertible Preferred Stock remained outstanding. (3) On March 1, 2000, 14,274 shares of SPG's Series B Convertible Preferred Stock were converted into 36,913 Paired Shares. At September 30, 2000, 4,830,057 shares of Series B Convertible Preferred Stock remained outstanding. (4) On September 18, 2000, Rosewood Indemnity Ltd., a captive insurance company owned by the Management Company, purchased 191,500 Paired Shares for $23.6403 each, totaling $4,539 including commissions. 16

The Simon Property Group 1998 Stock Incentive Plan At the time of the CPI Merger, Simon Group adopted The Simon Property Group 1998 Stock Incentive Plan (the "1998 Plan"). The 1998 Plan provides for the grant of equity-based awards during the ten-year period following its adoption in the form of options to purchase Paired Shares ("Options"), stock appreciation rights ("SARs"), restricted stock grants and performance unit awards (collectively, "Awards"). Options may be granted which are qualified as "incentive stock options" within the meaning of Section 422 of the Code and Options which are not so qualified. During 2000, 421,502 Paired Shares of restricted stock were awarded, net of forfeitures, to executives related to 1999 performance. As of September 30, 2000, 2,246,588 Paired Shares of restricted stock, net of forfeitures, were deemed earned and awarded under the 1998 Plan. Approximately $2,895 and $2,604 relating to these programs were amortized in the three-month periods ended September 30, 2000 and 1999, respectively. Approximately $8,855 and $7,971 relating to these programs were amortized in the nine-month periods ended September 30, 2000 and 1999, respectively. The cost of restricted stock grants, which is based upon the stock's fair market value at the time such stock is earned, awarded and issued, is charged to shareholders' equity and subsequently amortized against earnings of Simon Group over the vesting period. Note 11--Commitments and Contingencies Litigation Triple Five of Minnesota, Inc., a Minnesota corporation, v. Melvin Simon, et. al. On or about November 9, 1999, Triple Five of Minnesota, Inc. ("Triple Five") commenced an action in the District Court for the State of Minnesota, Fourth Judicial District, against, among others, Mall of America, certain members of the Simon family and entities allegedly controlled by such individuals, and Simon Group. Two transactions form the basis of the complaint: (i) the sale by Teachers Insurance and Annuity Association of America of one-half of its partnership interest in Mall of America Company and Minntertainment Company to the SPG Operating Partnership and related entities (the "Teachers Sale"); and (ii) a financing transaction involving a loan in the amount of $312,000 obtained from The Chase Manhattan Bank ("Chase") that is secured by a mortgage placed on Mall of America's assets (the "Chase Mortgage"). The complaint, which contains twelve counts, seeks remedies of damages, rescission, constructive trust, accounting, and specific performance. Although the complaint names all defendants in several counts, Simon Group is specifically identified as a defendant in connection with the Teachers Sale. The SPG Operating Partnership has agreed to indemnify Chase and other nonparties to the litigation that are related to the offering of certificates secured by the Chase Mortgage against, among other things, (i) any and all litigation expenses arising as a result of litigation or threatened litigation brought by Triple Five, or any of its owners or affiliates, against any person regarding the Chase Mortgage, the Teachers Sale, any securitization of the Chase Mortgage or any transaction related to the foregoing and (ii) any and all damages, awards, penalties or expenses payable to or on behalf of Triple Five (or payable to a third party as a result of such party's obligation to pay Triple Five) arising out of such litigation. These indemnity obligations do not extend to liabilities covered by title insurance. Simon Group believes that the Triple Five litigation is without merit and intends to defend the action vigorously. Simon Group believes that neither the Triple Five litigation nor any potential payments under the indemnity, if any, will have a material adverse effect on Simon Group. Given the early stage of the litigation it is not possible to provide an assurance of the ultimate outcome of the litigation or an estimate of the amount or range of potential loss, if any. Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October 16, 1996, a complaint was filed in the Court of Common Pleas of Mahoning County, Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The named defendants are SD Property Group, Inc., an indirect 99%-owned subsidiary of SPG, and 17

DeBartolo Properties Management, Inc., a subsidiary of the Management Company, and the plaintiffs are 27 former employees of the defendants. In the complaint, the plaintiffs alleged that they were recipients of deferred stock grants under the DeBartolo Realty Corporation ("DRC") Stock Incentive Plan (the "DRC Plan") and that these grants immediately vested under the DRC Plan's "change in control" provision as a result of the DRC Merger. Plaintiffs asserted that the defendants' refusal to issue them approximately 542,000 shares of DRC common stock, which is equivalent to approximately 370,000 Paired Shares computed at the 0.68 exchange ratio used in the DRC Merger, constituted a breach of contract and a breach of the implied covenant of good faith and fair dealing under Ohio law. Plaintiffs sought damages equal to such number of shares of DRC common stock, or cash in lieu thereof, equal to all deferred stock ever granted to them under the DRC Plan, dividends on such stock from the time of the grants, compensatory damages for breach of the implied covenant of good faith and fair dealing, and punitive damages. The plaintiffs and the defendants each filed motions for summary judgment. On October 31, 1997, the Court of Common Pleas entered a judgment in favor of the defendants granting their motion for summary judgment. The plaintiffs appealed this judgment to the Seventh District Court of Appeals in Ohio. On August 18, 1999, the District Court of Appeals reversed the summary judgement order in favor of the defendants entered by the Common Pleas Court and granted plaintiffs' cross motion for summary judgement, remanding the matter to the Common Pleas Court for the determination of plaintiffs' damages. The defendants petitioned the Ohio Supreme Court asking that they exercise their discretion to review and reverse the Appellate Court decision, but the Ohio Supreme court did not grant the petition for review. The case has been remanded to the Court of Common Pleas of Mahoning County, Ohio, to conduct discovery relevant to each plaintiff's damages and the counterclaims asserted by Simon Group. The Trial Court referred these matters to a Magistrate. Plaintiffs have filed a Supplemental Motion for Summary Judgement on the question of damages. That motion has been fully briefed and is pending before the Magistrate. The Magistrate has ruled on the counterclaims and found in Defendants' favor on one of them. This ruling would result in a set-off of approximately $2,000 against any damage award assessed in favor of two of the plaintiffs. As a result of the appellate court's decision, Simon Group recorded a $12,000 loss in the third quarter of 1999 related to this litigation as an unusual item. Roel Vento et al v. Tom Taylor et al. An affiliate of Simon Group is a defendant in litigation entitled Roel Vento et al v. Tom Taylor et al., in the District Court of Cameron County, Texas, in which a judgment in the amount of $7,800 was entered against all defendants. This judgment includes approximately $6,500 of punitive damages and is based upon a jury's findings on four separate theories of liability including fraud, intentional infliction of emotional distress, tortious interference with contract and civil conspiracy arising out of the sale of a business operating under a temporary license agreement at Valle Vista Mall in Harlingen, Texas. Simon Group appealed the verdict and on May 6, 1999, the Thirteenth Judicial District (Corpus Christi) of the Texas Court of Appeals issued an opinion reducing the trial court verdict to $3,364 plus interest. Simon Group filed a petition for a writ of certiorari to the Texas Supreme Court requesting that they review and reverse the determination of the Appellate Court. The Texas Supreme Court granted certiorari and heard oral arguments on October 4, 2000. A decision is expected to be rendered within the next few months. Management, based upon the advice of counsel, believes that the ultimate outcome of this action will not have a material adverse effect on Simon Group. Simon Group currently is not subject to any other material litigation other than routine litigation and administrative proceedings arising in the ordinary course of business. On the basis of consultation with counsel, management believes that such routine litigation and administrative proceedings will not have a material adverse impact on Simon Group's financial position or its results of operations. Note 12--Related Party Transactions Until April 15, 1999, when the Three Dag Hammarskjold building was sold, the SRC Operating Partnership received a substantial amount of its rental income from the SPG Operating Partnership for office space under lease. 18

Note 13--New Accounting Pronouncements On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS 133 will be effective for Simon Group beginning with the 2001 fiscal year and may not be applied retroactively. Management is currently evaluating the impact of SFAS 133, which it believes could increase volatility in earnings and other comprehensive income. 19

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations SIMON PROPERTY GROUP, INC. AND SPG REALTY CONSULTANTS, INC. COMBINED Certain statements made in this report may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Simon Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other companies and technology; risks of real estate development and acquisition; governmental actions and initiatives; substantial indebtedness; conflicts of interests; maintenance of REIT status; and environmental/safety requirements. Overview The following Property acquisitions, openings and dispositions (the "Property Transactions") impacted Simon Group's consolidated results of operations in the comparative periods. During 1999, Simon Group acquired the remaining ownership interests in five Properties for approximately $213.9 million, which resulted in the consolidation of each of those Properties. In November 1999, Simon Group opened the following wholly-owned Properties: The Shops at North East Mall and Waterford Lakes Town Center. During 2000, Simon Group sold its interests in seven Properties for approximately $142.6 million, including the buyer's assumption of $25.9 million of mortgage debt. Cumulative Effect of Accounting Change On December 3, 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), which addressed certain revenue recognition policies, including the accounting for overage rent by a landlord. SAB 101 requires overage rent to be recognized as revenue only when each tenant's sales exceeds its sales threshold. Simon Group previously recognized overage rent based on reported and estimated sales through the end of the period, less the applicable prorated base sales amount. Simon Group adopted SAB 101 effective January 1, 2000 and recorded a loss from the cumulative effect of an accounting change of $12.3 million in the first quarter of 2000. In addition, SAB 101 will impact the timing in which overage rent is recognized throughout each year, but will not have a material impact on the total overage rent recognized in each full year. Results of Operations Three Months ended September 30, 2000 vs. Three Months Ended September 30, 1999 Operating income increased $4.6 million or 2.2% for the three months ended September 30, 2000, as compared to the same period in 1999. This increase includes the net result of the Property Transactions ($6.2 million). Excluding these transactions, operating income decreased approximately $1.6 million, primarily resulting from a $13.3 million increase in minimum rents, a $8.1 million increase in consolidated revenues realized from marketing initiatives throughout the Portfolio, including the revenues of Simon Group's wholly-owned strategic marketing subsidiary, Simon Brand Ventures, LLC ("SBV"), an $8.4 million increase in lease settlements, offset by an $11.5 million decrease in net tenant reimbursements, a $3.0 million increase in other expenses, $13.1 million increase in depreciation and amortization, and a $2.7 million decrease in overage rents. The increase in minimum rent primarily results from increased occupancy levels, the replacement of expiring tenant leases with renewal leases at higher minimum base rents, and an increase in rents from tenants operating under license agreements. The decrease in net tenant reimbursements was the result of billing finalizations during 1999 for acquired Properties and lower expenditure levels. The increase in depreciation and amortization is primarily due to an increase in depreciable real estate realized through renovation and expansion activities. The decrease in overage rent was primarily the result of Simon Group's adoption of SAB 101 effective January 1, 2000, which changed the timing in which overage rents were recognized throughout the year. 20

Interest expense increased $16.7 million, or 11.6% for the three months ended September 30, 2000, as compared to the same period in 1999. This increase is primarily a result of overall increases in interest rates during the comparative periods of approximately $6.1 million, the Property Transactions ($0.9 million) and incremental interest on borrowings under the Credit Facility to complete the 1999 acquisition of ownership interests in 14 regional malls from New England Development Company (the "NED Acquisition") ($3.1 million) and acquire an ownership interest in Mall of America ($1.0 million), with the remainder being primarily from borrowings for Property redevelopments that opened in the comparative periods. Income from unconsolidated entities increased from $18.6 million in 1999 to $20.9 million in 2000, resulting from a $0.8 million increase in income from the Management Company and a $1.5 million increase in income from unconsolidated partnerships and joint ventures. The increase in Management Company income is primarily the result of a $2.6 million increase in management fees offset by decreased construction management and architectural and engineering fees ($1.8 million). Income before allocation to limited partners was $77.4 million for the three months ended September 30, 2000, which reflects an increase of $2.7 million over the same period in 1999, primarily for the reasons discussed above. Income before allocation to limited partners was allocated to the Companies based on SPG's direct ownership of Ocean County Mall and certain net lease assets, and the Companies' preferred Unit preferences and weighted average ownership interests in the Operating Partnerships during the period. Preferred distributions of the SPG Operating Partnership represent distributions on preferred Units issued in connection with the NED Acquisition. Preferred dividends of subsidiary represent distributions on preferred stock of SPG Properties, Inc., a 99.999% owned subsidiary of SPG. Nine Months Ended September 30, 2000 vs. Nine Months Ended September 30, 1999 Operating income increased $24.5 million or 4.0% for the nine months ended September 30, 2000, as compared to the same period in 1999. This increase includes the net result of the Property Transactions ($13.6 million). Excluding these transactions, operating income increased approximately $11 million, primarily resulting from a $38.2 million increase in minimum rents, a $14.9 million increase in consolidated revenues realized from marketing initiatives throughout the Portfolio, including the revenues of SBV, an $8.8 million increase in miscellaneous income, and a $9.5 million increase in lease settlements, partially offset by a $25.6 million increase in depreciation and amortization, a $12.7 million decrease in net tenant reimbursements, a $7.3 million increase in other expenses, and an $11.7 million decrease in overage rents. The increase in minimum rent primarily results from increased occupancy levels, the replacement of expiring tenant leases with renewal leases at higher minimum base rents, and a $4.5 million increase in rents from tenants operating under license agreements. The increase in miscellaneous income results from gift certificate sales and incidental fee revenues. The increase in depreciation and amortization is primarily due to an increase in depreciable real estate realized through renovation and expansion activities. The decrease in net tenant reimbursements was the result of billing finalizations during 1999 for acquired properties and lower expenditure levels. The increase in other expenses primarily results from technology initiative start up costs. The decrease in overage rent was primarily the result of Simon Group's adoption SAB 101 effective January 1, 2000, which changed the timing in which overage rents were recognized throughout the year. Interest expense increased $46.7 million, or 10.9% for the nine months ended September 30, 2000, as compared to the same period in 1999. This increase is primarily the result of overall increases in interest rates during the comparative periods ($14.0 million), the Property Transactions ($6.3 million) and incremental interest on borrowings under the Credit Facility to complete the NED Acquisition ($9.3 million) and acquire an ownership interest in Mall of America ($2.9 million), with the remainder being primarily from borrowings for Property redevelopments that opened in the comparative periods. The $3.4 million income tax benefit in 1999 represents SRC's pro rata share of the SRC Operating Partnership's prior year losses and the realization of tax carryforward benefits for which a valuation allowance was previously provided. 21

The $8.8 million net gain on the sales of assets in 2000 results from the sale of Simon Group's interests in an office building, two regional malls and four community shopping centers for approximately $142.6 million, partially offset by a $10.6 million asset write-down on two Properties recognized in the second quarter of 2000. In 1999 Simon Group recognized a net loss of $9.3 million on the sale of three Properties. Income from unconsolidated entities increased from $45.1 million in 1999 to $54.4 million in 2000, resulting from a $9.9 million increase in income from the Management Company, partially offset by a $0.6 million decrease in income from unconsolidated partnerships and joint ventures. The increase in Management Company income is primarily the result of a $8.5 million increase in management fees due to property acquisitions and increased minimum rents, as well as a $3.4 million decrease in the income tax provision, which is primarily due to a $2.0 million tax refund receivable recognized in 2000. During the first quarter of 2000, Simon Group recorded a $12.3 million expense resulting from the cumulative effect of an accounting change as described above. Income before allocation to limited partners was $211.7 million for the nine months ended September 30, 2000, which reflects an increase of $4.1 million over the same period in 1999, primarily for the reasons discussed above. Income before allocation to limited partners was allocated to the Companies based on SPG's direct ownership of Ocean County Mall and certain net lease assets, and the Companies' preferred Unit preferences and weighted average ownership interests in the Operating Partnerships during the period. Preferred distributions of the SPG Operating Partnership represent distributions on preferred Units issued in connection with the NED Acquisition. Preferred dividends of subsidiary represent distributions on preferred stock of SPG Properties, Inc., a 99.999% owned subsidiary of SPG. Liquidity and Capital Resources As of September 30, 2000, Simon Group's balance of unrestricted cash and cash equivalents was $114.4 million, including $30 million related to Simon Group's gift certificate program, which management does not consider available for general working capital purposes. Simon Group's Credit Facility had available credit of $600.5 million at September 30, 2000. The Credit Facility bears interest at LIBOR plus 65 basis points and has an initial maturity of August 2002, with an additional one-year extension available at Simon Group's option. SPG and the SPG Operating Partnership also have access to public equity and debt markets. Management anticipates that cash generated from operating performance will provide the necessary funds on a short- and long-term basis for its operating expenses, interest expense on outstanding indebtedness, recurring capital expenditures, and distributions to shareholders in accordance with REIT requirements. Sources of capital for nonrecurring capital expenditures, such as major building renovations and expansions, as well as for scheduled principal payments, including balloon payments, on outstanding indebtedness are expected to be obtained from: (i) excess cash generated from operating performance; (ii) working capital reserves; (iii) additional debt financing; and (iv) additional equity raised in the public markets. Financing and Debt At September 30, 2000, Simon Group had combined consolidated debt of $8,793 million, of which $6,133 million is fixed-rate debt bearing interest at a weighted average rate of 7.28% and $2,660 million is variable-rate debt bearing interest at a weighted average rate of 7.42%. As of September 30, 2000, Simon Group had interest rate protection agreements related to $404 million of combined consolidated variable-rate debt. Simon Group's interest rate protection agreements did not materially impact interest expense or weighted average borrowing rates during the comparative periods. Simon Group's share of total scheduled principal payments of mortgage and other indebtedness, including unconsolidated joint venture indebtedness, over the next five years is $6,110 million, with $4,509 million thereafter. Simon Group's combined ratio of consolidated debt-to-market capitalization was 57.6% and 58.1% at September 30, 2000 and December 31, 1999, respectively. 22

On March 24, 2000, Simon Group refinanced $450 million of unsecured debt, which became due and bore interest at LIBOR plus 65 basis points. The new facility matures March 2001 and also bears interest at LIBOR plus 65 basis points. In addition, during September 2000, Simon Group refinanced $500 million of unsecured debt, which became due and bore interest at LIBOR plus 65 basis points, with a new $475 million facility and borrowings from the Credit Facility. The new $475 million facility matures September 2001 and bears interest at LIBOR plus 65 basis points. Acquisitions Management continues to review and evaluate a limited number of individual property and portfolio acquisition opportunities. Management believes, however, that due to the rapid consolidation of the regional mall business, coupled with the current status of the capital markets, that acquisition activity in the near term will be a less significant component of Simon Group's growth strategy. Management believes that funds on hand and amounts available under the Credit Facility provide the means to finance certain acquisitions. No assurance can be given that Simon Group will not be required to, or will not elect to, even if not required to, obtain funds from outside sources, including through the sale of debt or equity securities, to finance significant acquisitions, if any. Dispositions During the first nine months of 2000, Simon Group sold its interests in two regional malls, four community shopping centers and an office building for a total of approximately $142.6 million, including the buyer's assumption of approximately $25.9 million of mortgage debt, which resulted in a net gain of $19.4 million. The net proceeds of $114.3 million were used to reduce the outstanding borrowings on the Credit Facility, to repurchase Paired Shares, and for general corporate purposes. In addition to the Property sales described above, as a continuing part of Simon Group's long-term strategy, management continues to pursue the sale of its remaining non-retail holdings and a number of retail assets that are no longer aligned with Simon Group's strategic criteria, including seven Properties currently under contract for sale. Management expects the sale prices of its non-core assets, if sold, will not differ materially from the carrying value of the related assets. Development Activity New Developments. Development activities are an ongoing part of Simon Group's business. Simon Group opened Orlando Premium Outlets in Orlando, Florida in May 2000. In addition, Arundel Mills is scheduled to open this year in Anne Arundel, Maryland and Bowie Town Center is scheduled to open in the fall of 2001 in Bowie, Maryland. Simon Group invested approximately $138 million on new developments during the first nine months of 2000 and expects to invest a total of approximately $198 million on new developments in 2000. Strategic Expansions and Renovations. A key objective of Simon Group is to increase the profitability and market share of the Properties through the completion of strategic renovations and expansions. Simon Group has a number of renovation and/or expansion projects currently under construction, or in preconstruction development. Simon Group invested approximately $165 million on renovations and expansions during the first nine months of 2000 and expects to invest a total of approximately $210 million on renovations and expansions in 2000. Technology Initiatives. Simon Group continues to evolve its technology initiatives through its association with several third party participants. Through its clixnmortar subsidiary, Simon Group formed an alliance with Found Inc. to build an infrastructure for retailers where shoppers can identify merchandise on line that is actually in inventory at a store and initiate a transaction either at the store or online. Through Merchant Wired LLC, Simon Group is creating a full service retail infrastructure company that provides retailers across the country access to a high speed, highly reliable and secure broadband network. The SPG Operating Partnership owns approximately 53% interest in MerchantWired LLC and accounts for it using the equity method of accounting. 23

In addition, Simon Group recently announced it has joined with leading real estate companies across a broad range of property sectors to form Constellation Real Technologies, which is designed to form, incubate and sponsor real estate-related Internet, e-commerce and technology enterprises; acquire interests in existing "best of breed" companies; and act as a consolidator of real estate technology across property sectors. In September, Constellation announced its initial investment of $25 million in FacilityPro.com, a business-to-business electronic marketplace designed for the efficient procurement of facilities' products and services. Simon Group's share of this investment is $2.5 million. These new activities may generate losses in the initial years of operation, while programs are being developed and customer bases are being established. Simon Group has investments totaling approximately $44 million related to such programs through September 30, 2000. Simon Group expects to continue to invest in these programs over the next two years, and has guaranteed MerchantWired equipment lease payments up to $46 million. The other MerchantWired members have committed to a pro rata share of the $46 million lease guarantee equal to their respective ownership percentages, which aggregates approximately $22 million. Distributions. The Companies declared a distribution of $0.505 per Paired Share in the third quarter of 2000. The current annual distribution rate is $2.02 per Paired Share. Future distributions will be determined based on actual results of operations and cash available for distribution. In addition, preferred distributions of $32.765 per share of SPG's Series A preferred stock and $3.25 per share of SPG's Series B preferred stock were paid during 2000. Investing and Financing Activities On July 31, 2000, Simon Group sold its 1,408,450 shares of common stock of Chelsea for $50 million, which equaled Simon Group's original investment. No gain or loss was recognized on the transaction. The net proceeds were used for general corporate purposes. Pursuant to a stock repurchase program authorized by the Board of Directors of SPG, on August 8, 2000, the Simon Group purchased 1,596,100 Paired Shares at an average price of $25.00 per Paired Share. The purchase is part of a plan announced by management earlier in the year to make opportunistic repurchases of Paired Shares during 2000 funded solely by a portion of the net proceeds realized from the sales of its non-core assets. Cash used in investing activities of $24 million for the nine months ended September 30, 2000 includes capital expenditures of $312 million; investments in unconsolidated joint ventures of $106 million, which includes $45 million related to a financing transaction with the remainder consisting primarily of development funding; and a $6 million advance to the Management Company. These cash uses are partially offset by net proceeds of $114 million from the sale of Simon Group's interest in seven Properties, proceeds from the sale of investment of $50 million, and distributions from unconsolidated entities of $235 million. Distributions from unconsolidated entities includes approximately $68 million related to financing transactions, with the remainder resulting primarily from operating activities. Cash used in financing activities for the nine months ended September 30, 2000 was $443 million and includes net distributions of $415 million, purchase of Paired Shares of $40 million and conversion of Units to cash of $11 million, partially offset by net borrowings of $23 million. EBITDA--Earnings from Operating Results before Interest, Taxes, Depreciation and Amortization Management believes that there are several important factors that contribute to the ability of Simon Group to increase rent and improve profitability of its shopping centers, including aggregate tenant sales volume, sales per square foot, occupancy levels and tenant costs. Each of these factors has a significant effect on EBITDA. Management believes that EBITDA is an effective measure of shopping center operating performance because: (i) it is industry practice to evaluate real estate properties based on operating income before interest, taxes, depreciation and amortization, which is generally equivalent to EBITDA; and (ii) EBITDA is unaffected by the 24

debt and equity structure of the property owner. EBITDA: (i) does not represent cash flow from operations as defined by generally accepted accounting principles; (ii) should not be considered as an alternative to net income as a measure of operating performance; (iii) is not indicative of cash flows from operating, investing and financing activities; and (iv) is not an alternative to cash flows as a measure of liquidity. Total EBITDA for the Properties increased from $1,287.7 million for the nine months ended September 30, 1999 to $1,506.1 million for the same period in 2000, representing a 17% increase. This increase is primarily attributable to the NED Acquisition ($109.1 million) and the Properties opened or acquired during 1999 ($64.3 million), partially offset by the impact of adopting SAB 101 in accounting for overage rents ($13.8 million), a decrease from Properties sold in the comparative periods ($5.2 million) and technology initiatives startup costs ($5 million). Excluding these items, EBITDA increased $69.0 million, or 5.4%. During this period operating profit margin decreased from 64.8% to 64.0%, which is partially due to the adoption of SAB 101. FFO-Funds from Operations FFO is an important and widely used measure of the operating performance of REITs, which provides a relevant basis for comparison among REITs. FFO, as defined by NAREIT, means consolidated net income without giving effect to real estate related depreciation and amortization, gains or losses from extraordinary items, gains or losses on sales of real estate, or the cumulative effects of changes in accounting principles, plus the allocable portion, based on economic ownership interest, of funds from operations of unconsolidated joint ventures, all determined on a consistent basis in accordance with generally accepted accounting principles. Effective January 1, 2000, Simon Group adopted NAREIT's clarification in the definition of FFO, which required the inclusion of the effects of nonrecurring items not classified as extraordinary or resulting from the sales of depreciable real estate or the cumulative effects of accounting changes. The prior period FFO amounts have been restated to conform to this 2000 presentation. Simon Group's method of calculating FFO may be different from the methods used by other REITs. FFO: (i) does not represent cash flow from operations as defined by generally accepted accounting principles; (ii) should not be considered as an alternative to net income as a measure of operating performance; and (iii) is not an alternative to cash flows as a measure of liquidity. The following summarizes FFO of Simon Group and reconciles combined income before extraordinary items and cumulative effect of accounting change to FFO for the periods presented: For the Three For the Nine Months Ended Months Ended September 30, September 30, ------------------ ------------------ 2000 1999 2000 1999 -------- -------- -------- -------- (In thousands) FFO of Simon Group.................... $192,453 $168,001 $543,146 $496,529 ======== ======== ======== ======== Reconciliation: Income Before Extraordinary Items and Cumulative Effect of Accounting Change and Unusual Item.............. $ 77,434 $ 87,125 $224,482 $221,851 Plus: Depreciation and amortization from combined consolidated Properties... 105,600 93,182 302,742 272,263 Simon Group's share of depreciation and amortization from unconsolidated affiliates.......... 30,395 17,900 87,251 59,191 Less: Unusual Item........................ -- (12,000) -- (12,000) Loss (gain) on sales of assets, net. (151) -- (8,809) 9,308 Minority interest portion of depreciation and amortization...... (1,491) (1,516) (4,446) (3,566) Preferred distributions (including preferred distributions of a subsidiary and to preferred unitholders)....................... (19,334) (16,690) (58,074) (50,518) -------- -------- -------- -------- FFO of Simon Group.................... $192,453 $168,001 $543,146 $496,529 ======== ======== ======== ======== FFO Allocable to the Companies........ $139,472 $122,205 $394,021 $361,564 ======== ======== ======== ======== 25

Portfolio Data Operating statistics do not include those Properties located outside of the United States. Aggregate Tenant Sales Volume. For the nine months ended September 30, 2000 compared to the same period in 1999, total reported retail sales at mall and freestanding GLA owned by Simon Group ("Owned GLA") in the regional malls increased $1,218 million or 12.7% from $9,624 million to $10,842 million, primarily as a result of the NED Acquisition ($869 million), increased productivity of our existing tenant base and an overall increase in occupancy. Retail sales at Owned GLA affect revenue and profitability levels because they 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.) the tenants can afford to pay. Occupancy Levels. Occupancy levels for Owned GLA at mall and freestanding stores in the regional malls increased from 88.5% at September 30, 1999, to 90.5% at September 30, 2000. Owned GLA has increased 4.3 million square feet from September 30, 1999, to September 30, 2000, primarily as a result of the NED Acquisition. Average Base Rents. Average base rents per square foot of mall and freestanding Owned GLA at regional malls increased 4.6%, from $26.75 at September 30, 1999 to $27.97 at September 30, 2000. Inflation Inflation has remained relatively low and has had a minimal impact on the operating performance of the Properties. Nonetheless, substantially all of the tenants' leases contain provisions designed to lessen the impact of inflation. Such provisions include clauses enabling Simon Group to receive percentage rentals based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases are for terms of less than ten years, which may enable Simon Group to replace existing leases with new leases at higher base and/or percentage rentals if rents of the existing leases are below the then-existing market rate. Substantially all of the leases, other than those for anchors, require the tenants to pay a proportionate share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing Simon Group's exposure to increases in costs and operating expenses resulting from inflation. However, inflation may have a negative impact on some of Simon Group's other operating items. Interest and general and administrative expenses may be adversely affected by inflation as these specified costs could increase at a rate higher than rents. Also, for tenant leases with stated rent increases, inflation may have a negative effect as the stated rent increases in these leases could be lower than the increase in inflation at any given time. Seasonality The shopping center industry is seasonal in nature, particularly in the fourth quarter during the holiday season, when tenant occupancy and retail sales are typically at their highest levels. In addition, shopping malls achieve most of their temporary tenant rents during the holiday season. As a result of the above, earnings are generally highest in the fourth quarter of each year. Item 3. Qualitative and Quantitative Disclosure About Market Risk Sensitivity Analysis. Simon Group's combined future earnings, cash flows and fair values relating to financial instruments are primarily dependent upon prevalent market rates of interest, primarily LIBOR. Based upon combined consolidated indebtedness and interest rates at September 30, 2000, a 0.25% increase in the market rates of interest would decrease future earnings and cash flows by approximately $6.1 million, and would decrease the fair value of debt by approximately $157 million. A 0.25% decrease in the market rates of interest would increase future earnings and cash flows by approximately $6.1 million, and would increase the fair value of debt by approximately $167 million. 26

PART II--OTHER INFORMATION Item 1: Legal Proceedings Please refer to Note 11 of the combined financial statements for a summary of material pending litigation and routine litigation and administrative proceedings arising in the ordinary course of business. Item 6: Exhibits and Reports on Form 8-K (a) Exhibits 4.1 Credit Agreement dated March 24, 2000 in the amount of $450 million. This is unsecured debt that bears interest at LIBOR plus 65 basis points and matures March 24, 2001. (incorporated by reference to Exhibit 4.1 of the Form 10-Q filed by Simon Property Group, L.P. on November 14, 2000) 4.2 Credit Agreement dated September 22, 2000 in the amount of $475 million. This is unsecured debt that bears interest at LIBOR plus 65 basis points and matures September 24, 2001. (incorporated by reference to Exhibit 4.2 of the Form 10-Q filed by Simon Property Group, L.P. on November 14, 2000) (b) Reports on Form 8-K One report on Form 8-K was filed during the current period. On November 13, 2000 under Item 5--Other Events, SPG reported that it made available additional ownership and operational information concerning the Companies, the Operating Partnerships, and the properties owned or managed as of September 30, 2000, in the form of a Supplemental Information Package. A copy of the package was included as an exhibit to the 8-K filing. In addition, SPG reported that, on November 8, 2000, it issued a press release containing information on earnings as of September 30, 2000 and other matters. A copy of the press release was included as an exhibit to the filing. 27

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001063761 SIMON PROPERTY GROUP, INC. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 7,222 0 3,120 0 0 10,342 7,573 1,317 51,953 8,517 0 0 0 0 13,236 51,953 0 7,323 0 12,076 0 0 290 (3,862) 0 (3,862) 0 0 0 (2,796) (1.61) (1.61) Receivables are stated net of allowances. Includes limited partners' interest in the SRC Operating Partnership of $5,051.

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001067173 SPG REALTY CONSULTANTS, INC. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 107,198 0 234,753 0 0 0 12,945,397 1,370,618 13,880,319 0 8,792,597 0 538,684 18 2,520,791 13,880,319 0 1,456,499 0 799,897 0 7,671 475,563 228,344 0 228,344 0 (440) (12,342) 141,699 0.66 0.66 Receivables are stated net of allowances. The Registrant does not report using a classified balance sheet. Includes Limited Partners' interest in the SPG Operating Partnership of $913,033; limited partners' preferred interest of $149,885; and preferred stock of subsidiary of $339,799.