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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

SIMON PROPERTY GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization)		   001-14469
(Commission File No.)		   04-6268599
(I.R.S. Employer
Identification No.)

115 West Washington Street, Suite 15 East
Indianapolis, Indiana 46204
(Address of principal executive offices) (ZIP Code)
 (317) 636-1600
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class
   Name of each exchange
on which registered
Common stock, $0.0001 par value   New York Stock Exchange
8.75% Series F Cumulative Redeemable Preferred Stock, $.0001 par value   New York Stock Exchange
7.89% Series G Cumulative Step-Up Premium Rate Preferred Stock, $.0001 par value   New York Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None

            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 ý NO o

            Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

            Indicate by check mark whether Registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934). YES ý NO o

            The aggregate market value of shares of common stock held by non-affiliates of the Registrant was approximately $7,163 million based on the closing sale price on the New York Stock Exchange for such stock on June 30, 2003.

            As of February 12, 2004, Simon Property Group, Inc. had 200,985,130; 3,200,000 and 4,000 shares of common stock, Class B common stock and Class C common stock outstanding, respectively.

Documents Incorporated By Reference

            Portions of the Registrant's Annual Report to Shareholders are incorporated by reference into Parts I, II and IV and portions of the Registrant's Proxy Statement in connection with its 2004 Annual Meeting of Shareholders are incorporated by reference in Part III.

SIMON PROPERTY GROUP, INC.
Annual Report on Form 10-K
December 31, 2003

TABLE OF CONTENTS


Item No.
 
 
 
Page No.
Part I

1.
 
Business
 
3
2.   Properties   12
3.   Legal Proceedings   36
4.   Submission of Matters to a Vote of Security Holders   36

Part II

5.
 
Market for the Registrant's Common Equity and Related Stockholder Matters
 
37
6.   Selected Financial Data   37
7.   Management's Discussion and Analysis of Financial Condition
and Results of Operations		    
38
7A.   Quantitative and Qualitative Disclosure About Market Risk   38
8.   Financial Statements and Supplementary Data   38
9.   Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure		     
38
9a.   Controls and Procedures   38

Part III

10.
 
Directors and Executive Officers of the Registrant
 
39
11.   Executive Compensation   39
12.   Security Ownership of Certain Beneficial Owners and Management   39
13.   Certain Relationships and Related Transactions   39
14.   Principal Accounting Fees and Services   39

Part IV

15.
 
Exhibits, Financial Statements, Schedules and Reports on Form 8-K
 
40

Signatures
 
41

2


Part I

Item 1. Business

            Simon Property Group, Inc. ("Simon Property") is a Delaware corporation that operates as a self-administered and self-managed real estate investment trust ("REIT"). Simon Property Group, L.P. (the "Operating Partnership") is a majority-owned partnership subsidiary of Simon Property that owns all but one of our real estate properties. In this report, the terms "we", "us" and "our" refer to Simon Property, the Operating Partnership and their subsidiaries.

            We are engaged primarily in the ownership, operation, leasing, management, acquisition, expansion and development of real estate properties. Our real estate properties consist primarily of regional malls and community shopping centers. As of December 31, 2003, we owned or held an interest in 246 income-producing properties in North America, which consisted of 175 regional malls, 67 community shopping centers, and four office and mixed-use properties in 37 states and Canada (collectively, the "Properties", and individually, a "Property"). Mixed-use properties are properties that include a combination of retail space, office space, and/or hotel components. In addition, we also own interests in three parcels of land held for future development (together with the Properties, the "Portfolio"). Finally, we have ownership interests in 47 assets in Europe (France, Italy, Poland and Portugal).

            Mergers and acquisitions have been a significant component of the growth and development of our business. In 2003, we completed a series of acquisitions that added to our overall portfolio:

            On October 8, 2003, we and Westfield America, Inc. ("Westfield"), the U.S. subsidiary of Westfield America Trust, withdrew our tender offer for all of the outstanding common shares of Taubman Centers, Inc. The withdrawal of the tender offer followed the enactment of a law amending the Michigan Control Share Acquisitions Act and which allowed the Taubman family group to effectively block our ability to conclude the tender offer. As a result we expensed deferred acquisition costs of $10.6 million, net, related to this acquisition during 2003.

            On January 1, 2003, the Operating Partnership acquired all of the remaining equity interests of M.S. Management Associates, Inc. (the "Management Company"). The interests acquired consist of 95% of the voting common stock and 1.25% of the non-voting stock of the Management Company and approximately 2% of the economic interests of the Management Company. The interests were acquired from Melvin Simon, Herbert Simon, and David Simon (the "Simons"), for a total purchase price of $425,000, which was equal to the appraised value of the interests as determined by an independent third party. The acquisition was unanimously approved by our independent directors. As a result, the Management Company is now a wholly owned consolidated taxable REIT subsidiary ("TRS") of the Operating Partnership.

3

            As part of our strategic plan to own quality retail real estate, we continually evaluate our properties and sell those which no longer meet our strategic criteria. We may use the capital generated from these dispositions to invest in higher-quality, higher-growth properties. We believe that the sale of these non-core Properties will not have a material impact on our future results of operations or cash flows nor will their sale materially affect our ongoing operations. In addition, we expect any earnings dilution from the sales on our results of operations from these dispositions will be offset by the positive impact of our acquisitions and development and redevelopment activities.

            During 2003, we sold 13 non-core Properties, consisting of seven regional malls, five community centers and one mixed-use property. The Properties and their dates of sale were:

  •   Richmond Square, Mounds Mall, Mounds Mall   •   Eastern Hills Mall on July 1, 2003
    Cinema and Memorial Mall on January 9, 2003   •   New Orleans Center on October 1, 2003
  •   Forest Village Park Mall on April 29, 2003   •   Mainland Crossing on October 28, 2003
  •   North Riverside Park Plaza on May 8, 2003   •   SouthPark Mall on November 3, 2003
  •   Memorial Plaza on May 21, 2003   •   Bergen Mall on December 12, 2003
  •   Fox River Plaza on May 22, 2003        

Operating Policies and Strategies

            The following is a discussion of our investment policies, financing policies, conflict of interest policies and policies with respect to certain other activities. Our Board of Directors may amend or rescind these policies from time to time at its discretion without a stockholder vote.

            We conduct our investment activities, except for one Property that we own directly, through the Operating Partnership and its subsidiaries. Our primary business objectives are to increase Funds From Operations ("FFO") per share, operating results and the value of our Properties while maintaining a stable balance sheet consistent with our financing policies. We intend to achieve these objectives by:

            We cannot assure you, however, that we will achieve our business objectives.

            We develop and acquire properties to generate both current income and long-term appreciation in value. We do not have a policy limiting the amount or percentage of assets that may be invested in any particular property or type of property or in any geographic area. We may purchase or lease properties for long-term investment or develop, redevelop, and/or sell our Properties, in whole or in part, when circumstances warrant. We participate with other entities in property ownership, through joint ventures or other types of co-ownership. These equity investments may be subject to existing mortgage financing and other indebtedness that have priority over our equity interest.

            While we emphasize equity real estate investments, we may, in our discretion, invest in mortgages and other real estate interests consistent with our qualification as a REIT under the Internal Revenue Code ("Code"). Mortgages in which we invest may or may not be insured by a governmental agency. We do not intend to invest to a significant extent in mortgages or deeds of trust, however, we hold an interest in one Property through a mortgage note which results in us receiving 100% of the economics of the Property. We may invest in participating or convertible mortgages, however, if we conclude that we may benefit from the cash flow or any appreciation in the value of the property.

4


            We may also invest in securities of other entities engaged in real estate activities or securities of other issuers. However, any of these investments would be subject to the percentage ownership limitations and gross income tests necessary for REIT qualification under the Code. These REIT limitations mean that we cannot make an investment that would cause our real estate assets to be less than 75% of our total assets. In addition, we must derive at least 75% of our gross income from "rents from real estate" and at least 95% must be derived from rents from real estate, interest, dividends and gains from the sale or disposition of stock or securities.

            Subject to these REIT limitations, we may invest in the securities of other issuers in connection with acquisitions of indirect interests in real estate. Such an investment would normally be in the form of general or limited partnership or membership interests in special purpose partnerships and limited liability companies that own one or more properties. We may, in the future, acquire all or substantially all of the securities or assets of other REITs, management companies or similar entities where such investments would be consistent with our investment policies. We do not intend to invest in securities of other issuers for the purpose of exercising control other than the Operating Partnership and certain wholly-owned subsidiaries and to acquire interests in real estate. We do not intend that our investments in securities will require us to register as an "investment company" under the Investment Company Act of 1940, as amended. We intend to divest securities before any such registration would be required.

            We must comply with the covenant restrictions of debt agreements of the Operating Partnership that limit our ratio of debt to total market valuation. For example, the Operating Partnership's lines of credit and the indentures for the Operating Partnership's debt securities contain covenants that restrict the total amount of debt of the Operating Partnership to 60% of adjusted total assets, as defined, and secured debt to 55% of adjusted total assets. In addition, these agreements contain other covenants requiring compliance with financial ratios. Furthermore, the amount of debt that we may incur is limited as a practical matter by our desire to maintain acceptable ratings for our equity securities and the debt securities of the Operating Partnership.

            If the Board of Directors determines to seek additional capital, we may raise such capital through additional equity offerings, debt financing, creation of joint ventures with existing ownership interests in Properties, retention of cash flows or a combination of these methods. Our ability to retain cash flows is subject to Internal Revenue Code provisions requiring REITs to distribute a certain percentage of their taxable income. We must also take into account taxes that would be imposed on undistributed taxable income. If the Board of Directors determines to raise additional equity capital, it may, without stockholder approval, issue additional shares of common stock or other capital stock. The Board of Directors may issue a number of shares up to the amount of our authorized capital in any manner and on such terms and for such consideration as it deems appropriate. This may include issuing stock in exchange for property. Such securities may be senior to the outstanding classes of common stock. Such securities also may include additional classes of preferred stock which may be convertible into common stock. Existing stockholders will have no preemptive right to purchase shares in any subsequent offering of our securities. Any such offering could dilute a stockholder's investment in us.

            We anticipate that any additional borrowings would be made through the Operating Partnership or its subsidiaries. We might, however, incur borrowings that would be reloaned to the Operating Partnership. Borrowings may be in the form of bank borrowings, publicly and privately placed debt instruments, or purchase money obligations to the sellers of properties. Any of such indebtedness may be unsecured or may be secured by any or all of our assets, the Operating Partnership or any existing or new property-owning partnership. Any such indebtedness may also have full or limited recourse to all or any portion of the assets of any of the foregoing. Although we may borrow to fund the payment of dividends, we currently have no expectation that we will regularly be required to do so.

5

            We may obtain unsecured or secured lines of credit. We also may determine to issue debt securities. Any such debt securities may be convertible into capital stock or be accompanied by warrants to purchase capital stock. We also may sell or securitize our lease receivables. The proceeds from any borrowings or financings may be used for the following:

            We also may determine to finance acquisitions through the following:

            The ability to offer units of limited partnership interest to transferors may result in beneficial tax treatment for the transferors. This is because the exchange of units for properties may defer the recognition of gain for tax purposes by the transferor. It may also be an advantage for us since certain investors may be limited in the number of shares of our capital stock that they may purchase.

            If the Board of Directors determines to obtain additional debt financing, we intend to do so generally through mortgages on Properties, drawings against revolving lines of credit or term loan facilities, or the issuance of unsecured debt through the Operating Partnership. We may do this directly or through an entity owned or controlled by us. The mortgages may be non-recourse, recourse, or cross-collateralized. We do not have a policy limiting the number or amount of mortgages that may be placed on any particular property. Mortgage financing instruments, however, usually limit additional indebtedness on such properties.

            We only invest in or form special purpose entities to obtain permanent financing for properties on attractive terms. Permanent financing for properties is typically structured as a mortgage loan on one or a group of properties in favor of an institutional third party or as a joint venture with a third party or as a securitized financing. For securitized financings, we are required to create special purpose entities to own the properties. These special purpose entities are structured so that they would not be consolidated with us in the event we would ever become subject to a bankruptcy proceeding. We decide upon the structure of the financing based upon the best terms then available to us and whether the proposed financing is consistent with our other business objectives. For accounting purposes, we include the outstanding securitized debt of special purpose entities owning consolidated properties as part of our consolidated indebtedness.

            We maintain policies and have entered into agreements designed to reduce or eliminate potential conflicts of interest. In 2003, we adopted governance principles governing our affairs and the Board of Directors, as well as written charters for each of the standing Committees of the Board of Directors. In addition, in 2003, the Board adopted a Code of Business Conduct and Ethics which apply to all of our officers, directors, and employees. At least a majority of the members of our Board of Directors must qualify as independent under the listing standards for New York Stock Exchange companies and cannot be affiliated with the Simon and DeBartolo families. Any transaction between us and the Simons or the DeBartolos, including property acquisitions, service and property management agreements and retail space leases, must be approved by a majority of non-affiliated directors.

            The sale by the Operating Partnership of any property that it owns may have an adverse tax impact on the Simons or the DeBartolos and the other limited partners of the Operating Partnership. In order to avoid any conflict of interest between Simon Property and the limited partners of the Operating Partnership, our charter requires that at least six of our independent directors must authorize and require the Operating Partnership to sell any property it owns. Any such sale is subject to applicable agreements with third parties. Noncompetition agreements executed by

6


each of the Simons contain covenants limiting the ability of the Simons to participate in certain shopping center activities in North America.

            We do not intend to make investments other than as previously described. We intend to make investments which are consistent with the REIT requirements of the Code, unless the Board of Directors determines that it is no longer in our best interests to qualify as a REIT. The Board of Directors may make such a determination because of changing circumstances or changes in the REIT requirements. We have authority to offer shares of our capital stock or other securities in exchange for property. We also have authority to repurchase or otherwise reacquire our shares or any other securities. We may engage in such activities in the future. We may in the future issue shares of our common stock to holders of units of limited partnership interest in the Operating Partnership upon exercise of such holders' rights under the Operating Partnership agreement. We have not made loans to other entities or persons, including our officers and directors. It is now our policy to not make any loans to our directors and executive officers for any purpose and all loans previously made to current executive officers have been repaid in full. We may in the future make loans to the Management Company and to joint ventures in which we participate. We do not intend to engage in the following:

            We plan to achieve our primary business objectives through a variety of methods discussed below, although we cannot assure you that we will achieve such objectives.

            Leasing.    We pursue a leasing strategy that includes:

            Management.    We draw upon our expertise gained through management of a geographically diverse Portfolio, nationally recognized as comprising high quality retail and mixed-use Properties. In doing so, we seek to maximize cash flow through a combination of:

            We believe that if we are successful in our efforts to increase sales while controlling operating expenses we will be able to continue to increase base rents at the Properties.

            We manage substantially all our Properties held as joint venture Properties and as a result we derive revenues from management fees and other fee revenues.

            Other Revenues.    Due to our size, tenant and vendor relationships, we also generate revenues from other sources, including:

7

            We also generate other revenues through the sale of land adjacent to our Properties commonly referred to as "outlots" or "outparcels." We create value in these outparcels through the operating performance of our Properties and replenish the inventory of these parcels by the development of new Properties and the redevelopment of existing or acquired Properties.

            International Expansion.    Our investments in Europe are currently conducted through two joint ventures, GCI and European Retail Enterprises, B.V. ("ERE"). We do not derive any significant consolidated revenues from European activities since our investments are held through joint ventures and therefore are accounted for under the equity method as defined by accounting policies generally accepted in the United States.

            We believe that the expertise we have gained through the development, leasing, management, and marketing of our domestic Properties can be utilized in retail properties abroad. We may pursue additional international opportunities to enhance shareholder value under the right circumstances. There are risks inherent in international operations that may be beyond our control. These include the following risks that may have a negative impact on our results of operations:

            We consider our principal competitors to be seven other major United States or internationally publicly-held, companies that own or operate regional malls in the United States. We also compete with many commercial developers, real estate companies and other owners of retail real estate that operate in our trade areas. Some of our Properties are of the same type and are within the same market area as other competitive properties. The existence of competitive properties could have a material adverse effect on our ability to lease space and on the level of rents we can obtain. This results in competition for both the acquisition of prime sites (including land for development and operating properties) and for tenants to occupy the space that we and our competitors develop and manage. In addition, our malls compete against non-physical based forms of retailing such as catalog companies and e-commerce websites that offer similar retail products.

            We believe that our Portfolio is the largest, as measured by gross leasable area ("GLA"), of any publicly-traded retail REIT. In addition, we own more regional malls than any other publicly-traded REIT. We believe that we have a competitive advantage in the retail real estate business as a result of:

            Our size has allowed us to reduce dependence upon individual retail tenants. More than 3,800 different retailers occupy more than 20,800 stores in our Properties and no retail tenant represents more than 4.6% of our Properties' total minimum rents.

8


            General Compliance.    We believe that the Portfolio is in compliance, in all material respects, with all Federal, state and local environmental laws, ordinances and regulations regarding hazardous or toxic substances. Nearly all of the Portfolio has been subjected to Phase I or similar environmental audits (which generally involve only a review of records and visual inspection of the property without soil sampling or ground water analysis) by independent environmental consultants. Phase I environmental audits are intended to discover information regarding, and to evaluate the environmental condition of, the surveyed properties and surrounding properties. These environmental audits have not revealed, nor are we aware of, any environmental liability that we believe will have a material adverse effect on our results of operations. We cannot assure you that:


            Asbestos-Containing Materials.    Asbestos-containing materials are present in most of the Properties, primarily in the form of vinyl asbestos tile, mastics and roofing materials, which we believe are generally in good condition. Fireproofing and insulation containing asbestos is also present in certain Properties in limited concentrations or in limited areas. The presence of such asbestos-containing materials does not violate currently applicable laws. Generally, we remove asbestos-containing materials as required in the ordinary course of any renovation, reconstruction, or expansion, and in connection with the retenanting of space.

            Underground Storage Tanks.    Several of the Properties contain, or at one time contained, underground storage tanks used to store waste oils or other petroleum products primarily related to auto service center establishments or emergency electrical generation equipment. We believe that regulated tanks have been removed, upgraded or abandoned in accordance with applicable environmental laws. Site assessments have revealed certain soil and groundwater contamination associated with such tanks at some of these Properties. Subsurface investigations (Phase II assessments) and remediation activities are either completed, ongoing, or scheduled to be conducted at such Properties. The costs of remediation with respect to such matters has not been material and we do not expect these costs will have a material adverse effect on our results of operations.

            Properties to be Developed or Acquired.    Land held for mall development or that may be acquired for development may contain residues or debris associated with the use of the land by prior owners or third parties. In certain instances, such residues or debris could be or contain hazardous wastes or hazardous substances. Prior to exercising any option to acquire properties, we typically conduct environmental due diligence consistent with acceptable industry standards.

Certain Activities

            During the past three years, we have:

9

            At February 9, 2004 we and our affiliates employed approximately 4,040 persons at various properties and offices throughout the United States, of which approximately 1,600 were part-time. Approximately 860 of these employees were located at our corporate headquarters.

            Our corporate headquarters are located at National City Center, 115 West Washington Street, Indianapolis, Indiana 46204, and our telephone number is (317) 636-1600.

            Our Internet website address is www.simon.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available or may be accessed free of charge through the About Simon//Investor Relations section of our Internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

            The following corporate governance documents are also available through the About Simon/Investor Relations/Corporate Governance section of our Internet website or may be obtained in print form by request of our Investor Relations Department: Governance Principles, Code of Business Conduct and Ethics, Audit Committee Charter, Compensation Committee Charter, Nominating Committee Charter, and Governance Committee Charter.

10

            The following table sets forth certain information with respect to the executive officers of Simon Property as of December 31, 2003.

Name
   Age
   Position
Melvin Simon (1)   77   Co-Chairman
Herbert Simon (1)   69   Co-Chairman
David Simon (1)   42   Chief Executive Officer
Richard S. Sokolov   54   President and Chief Operating Officer
Hans C. Mautner   66   Chairman, Simon Global Limited and President, International Division
Gary L. Lewis   45   Executive Vice President — Leasing
Stephen E. Sterrett   48   Executive Vice President and Chief Financial Officer
J. Scott Mumphrey   52   Executive Vice President — Property Management
John Rulli   47   Executive Vice President — Chief Operating Officer — Operating Properties
James M. Barkley   52   General Counsel; Secretary
Andrew A. Juster   51   Senior Vice President and Treasurer
(1)
Melvin Simon is the brother of Herbert Simon and the father of David Simon.

            Set forth below is a summary of the business experience of the executive officers of Simon Property. The executive officers of Simon Property serve at the pleasure of the Board of Directors. For biographical information of Melvin Simon, Herbert Simon, David Simon, Hans C. Mautner, and Richard S. Sokolov, see Item 10 of this report.

            Mr. Lewis is the Executive Vice President — Leasing of Simon Property. Mr. Lewis joined MSA in 1986 and held various positions with MSA and Simon Property prior to becoming Executive Vice President in charge of Leasing of Simon Property in 2002.

            Mr. Sterrett serves as Simon Property's Executive Vice President and Chief Financial Officer. He joined MSA in 1989 and held various positions with MSA until 1993 when he became Simon Property's Senior Vice President and Treasurer. He became Simon Property's Chief Financial Officer in 2001.

            Mr. Mumphrey serves as Simon Property's Executive Vice President — Property Management. He joined MSA in 1974 and also held various positions with MSA before becoming Senior Vice President of property management in 1993. In 2000, he became the President of Simon Business Network. Mr. Mumphrey became Executive Vice President — Property Management in 2002.

            Mr. Rulli serves as Simon Property's Executive Vice President — Chief Operating Officer — Operating Properties and served as Executive Vice President and Chief Administrative Officer for the majority of 2003. He joined MSA in 1988 and held various positions with MSA before becoming Simon Property's Executive Vice President in 1993 and Chief Administrative Officer in 2000. In December 2003, he was appointed to Executive Vice President — Chief Operating Officer — Operating Properties.

            Mr. Barkley serves as Simon Property's General Counsel and Secretary. Mr. Barkley holds the same position for MSA. He joined MSA in 1978 as Assistant General Counsel for Development Activity.

            Mr. Juster serves as Simon Property's Senior Vice President and Treasurer. He joined MSA in 1989 and held various financial positions with MSA until 1993 and thereafter has held various positions with Simon Property. Mr. Juster became Treasurer in 2001.

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Item 2. Properties

            Our Properties primarily consist of regional malls and community shopping centers. Our Properties contain an aggregate of approximately 190.3 million square feet of GLA, of which we own 108.4 million square feet ("Owned GLA"). Total estimated retail sales at the Properties in 2003 were approximately $40 billion.

            Regional malls generally contain two or more anchors and a wide variety of smaller stores ("Mall" stores) located in enclosed malls connecting the anchors. Additional stores ("Freestanding" stores) are usually located along the perimeter of the parking area. Our 175 regional malls range in size from approximately 200,000 to 2.9 million square feet of GLA, with all but four regional malls over 400,000 square feet. Our regional malls contain in the aggregate more than 18,500 occupied stores, including over 700 anchors, which are mostly national retailers.

            Community shopping centers are generally unenclosed and smaller than regional malls. Our 67 community shopping centers generally range in size from approximately 50,000 to 950,000 square feet of GLA. Community shopping centers generally are of three types. First, we own "power centers" that are designed to serve a larger trade area and contain at least two anchors, and usually as many as 5 to 7, that are usually national retailers among the leaders in their markets and occupy more than 70% of the GLA in the center. Second, we own traditional community centers that focus primarily on value-oriented and convenience goods and services. These centers are usually anchored by a supermarket, discount retailer, or drugstore and are designed to service a neighborhood area. Finally, we also own open air centers adjacent to our regional malls designed to take advantage of the drawing power of the mall.

            We also own lifestyle centers that are included in regional malls, community centers, and properties under development. These centers are typically open air centers and contain at least 50,000 square feet of GLA of specialty retail regional mall type tenants as well as restaurants.

            We also have interests in four office and mixed-use Properties. The four office and mixed-use Properties range in size from approximately 496,000 to 1,214,000 square feet of GLA. Two of these Properties are regional malls with connected office buildings, and two are located in mixed-use developments and contain primarily office space.

            The following table provides data as of December 31, 2003:

 
   Regional
Malls
   Community
Centers
   Office and
Other
  
    % of total annualized base rent   91.3 % 5.6 % 3.1 %
    % of total GLA   89.0 % 9.4 % 1.6 %
    % of Owned GLA   85.5 % 11.7 % 2.8 %

            As of December 31, 2003, approximately 92.4% of the Mall and Freestanding Owned GLA in regional malls and the retail space in the mixed-use Properties was leased, and approximately 90.2% of Owned GLA in the community shopping centers was leased.

            We own 100% of 156 of our 246 Properties, control 14 Properties in which we have a joint venture interest, and hold the remaining 76 Properties through unconsolidated joint venture interests. We are the managing or co-managing general partner or member of 235 of our Properties. Substantially all of our joint venture Properties are subject to rights of first refusal, buy-sell provisions, or other sale rights for all partners which are customary in real estate partnership agreements and the industry. Our partners in our joint ventures may initiate these provisions at any time, which will result in either the use of available cash or borrowings to acquire their partnership interest or the disposal of our partnership interest.

12


SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
    UNITED STATES
REGIONAL MALLS		                            

1.
 
Alton Square
 
IL
 
Alton (St. Louis)
 
Fee
 
100.0
%
Acquired 1993
 
79.2
%
426,315
 
212,746
 
639,061
 
Sears, JCPenney, Famous Barr
2.   Anderson Mall   SC   Anderson   Fee   100.0 % Built 1972   94.7 % 404,394   212,337   616,731   Belk, Belk Mens & Home Store, JCPenney, Sears, Goody's
3.   Apple Blossom Mall   VA   Winchester   Fee   49.1 %  (4) Acquired 1999   90.8 % 229,011   214,414   443,425   Belk, JCPenney, Sears
4.   Arsenal Mall   MA   Watertown (Boston)   Fee   100.0 % Acquired 1999   77.3 % 191,395   310,476   501,871   (20) Marshalls, Home Depot, Linens-N-Things, Filene's Basement, Old Navy
5.   Atrium Mall   MA   Chestnut Hill (Boston)   Fee   49.1 %  (4) Acquired 1999   97.7 %     205,477   205,477   Border Books & Music, Cheesecake Factory, Tiffany
6.   Auburn Mall   MA   Auburn (Boston)   Fee   49.1 %  (4) Acquired 1999   95.8 % 417,620   174,632   592,252   Filene's, Filene's Home Store, Sears
7.   Aurora Mall   CO   Aurora (Denver)   Fee   100.0 % Acquired 1998   76.2 % 566,015   448,381   1,014,396   JCPenney, Foley's, Foley's Mens & Home, Sears
8.   Aventura Mall (5)   FL   Miami Beach   Fee   33.3 %  (4) Built 1983   96.8 % 1,242,098   661,951   1,904,049   Macy's, Sears, Bloomingdales, JCPenney, Lord & Taylor (17), Burdines-Macy's
9.   Avenues, The   FL   Jacksonville   Fee   25.0 %  (14)  (4) Built 1990   95.7 % 754,956   362,343   1,117,299   Belk, Dillard's, JCPenney, Parisian, Sears
10.   Bangor Mall   ME   Bangor   Fee   32.6 %  (4) Acquired 2003   86.4 % 417,757   236,125   653,882   Filene's, JCPenney, Porteous, Sears
11.   Barton Creek Square   TX   Austin   Fee   100.0 % Built 1981   97.5 % 922,266   507,248   1,429,514   Dillard's Womens & Home, Dillard's Mens & Children, Foley's, Sears, Nordstrom, JCPenney
12.   Battlefield Mall   MO   Springfield   Fee and Ground Lease (2056)   100.0 % Built 1970   96.9 % 770,111   405,857   1,175,968   Dillard's Women, Dillard's Mens, Children & Home, Famous Barr, Sears, JCPenney
13.   Bay Park Square   WI   Green Bay   Fee   100.0 % Built 1980   99.5 % 447,508   268,282   715,790   Younkers, Elder-Beerman, Kohl's, Shopko
14.   Biltmore Square   NC   Asheville   Fee   100.0 % Built 1989   83.0 % 242,576   251,372   493,948   Belk, Dillard's, Proffitt's, Goody's
15.   Bowie Town Center   MD   Bowie (Washington, D.C.)   Fee   100.0 % Built 2001   100.0 % 338,567   325,684   664,251   Hecht's, Sears, Safeway, Barnes & Noble, Bed, Bath & Beyond, Old Navy
16.   Boynton Beach Mall   FL   Boynton Beach   Fee   100.0 % Built 1985   97.6 % 883,720   300,005   1,183,725   Macy's, Burdines-Macy's, Sears, Dillard's Mens & Home, Dillard's Women, JCPenney
17.   Brea Mall   CA   Brea   Fee   100.0 % Acquired 1998   98.4 % 874,802   441,126   1,315,928   Macy's, JCPenney, Robinsons-May, Nordstrom, Sears

13

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
18.   Broadway Square   TX   Tyler   Fee   100.0 % Acquired 1994   97.0 % 427,730   191,011   618,741   Dillard's, JCPenney, Sears
19.   Brunswick Square   NJ   East Brunswick (New York)   Fee   100.0 % Built 1973   93.9 % 467,626   305,355   772,981   Macy's, JCPenney, Barnes & Noble
20.   Burlington Mall   MA   Burlington (Boston)   Ground Lease
(2048)		   100.0 % Acquired 1998   99.8 % 836,236   417,847   1,254,083   Macy's, Lord & Taylor, Filene's, Sears
21.   Cape Cod Mall   MA   Hyannis   Ground Leases (7)
(2009-2073)		   49.1 %  (4) Acquired 1999   100.0 % 420,199   303,574   723,773   Macy's, Filene's, Marshalls, Sears, Best Buy, Barnes & Noble
22.   Castleton Square   IN   Indianapolis   Fee   100.0 % Built 1972   97.2 % 1,105,913   366,272   1,472,185   Galyan's, L.S. Ayres, Lazarus-Macy's, JCPenney, Sears, Von Maur
23.   Century III Mall   PA   West Mifflin (Pittsburgh)   Fee   100.0 % Built 1979   88.2 % 773,439   507,556   1,280,995   JCPenney, Sears, Kaufmann's, Kaufmann's Home Store, Wickes Furniture, Steve & Barry's
24.   Charlottesville Fashion Square   VA   Charlottesville   Ground Lease
(2076)		   100.0 % Acquired 1997   98.5 % 381,153   191,288   572,441   Belk Womens & Children, Belk Mens & Home, JCPenney, Sears
25.   Chautauqua Mall   NY   Lakewood   Fee   100.0 % Built 1971   95.0 % 213,320   219,014   432,334   Sears, JCPenney, Office Max, The Bon Ton
26.   Cheltenham Square   PA   Philadelphia   Fee   100.0 % Built 1981   97.0 % 368,266   270,987   639,253   Burlington Coat Factory, Home Depot, Value City, Seaman's Furniture, Shop Rite
27.   Chesapeake Square   VA   Chesapeake   Fee and Ground Lease (2062)   75.0 %  (13) Built 1989   96.9 % 537,279   272,040   809,319   Dillard's Women, Dillard's Mens, Children & Home, JCPenney, Sears, Hecht's, Target
28.   Cielo Vista Mall   TX   El Paso   Fee and Ground Lease (7) (2005)   100.0 % Built 1974   97.7 % 793,716   399,062   1,192,778   Dillard's Womens & Furniture, Dillard's Mens, Children & Home, JCPenney, Foley's, Sears
29.   Circle Centre   IN   Indianapolis   Property Lease
(2097)		   14.7 %  (4) Built 1995   96.7 % 350,000   441,116   791,116   Nordstrom, Parisian, Gameworks
30.   College Mall   IN   Bloomington   Fee and Ground Lease (7) (2048)   100.0 % Built 1965   83.5 % 439,766   266,006   705,772   Sears, L.S. Ayres, Target, (8)
31.   Columbia Center   WA   Kennewick   Fee   100.0 % Built 1987   97.8 % 408,052   333,553   741,605   Sears, JCPenney, Barnes & Noble, Bon-Macy's, Bon-Macy's Mens & Children
32.   Coral Square   FL   Coral Springs (Miami-Ft. Lauderdale)   Fee   97.2 % Built 1984   97.4 % 648,144   296,619   944,763   Dillard's, JCPenney, Sears, Burdines-Macy'sMens, Children & Home, Burdines-Macy's Women
33.   Cordova Mall   FL   Pensecola   Fee   100.0 % Acquired 1998   89.8 % 488,263   345,563   833,826   Parisian, Dillard's Men, Dillard's Women, Best Buy, Bed, Bath & Beyond, Cost Plus World Market (6)

14

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
34.   Cottonwood Mall   NM   Albuquerque   Fee   100.0 % Built 1996   84.8 % 631,556   409,743   1,041,299   Dillard's, Foley's, JCPenney, Mervyn's, Sears
35.   Crossroads Mall   NE   Omaha   Fee   100.0 % Acquired 1994   94.6 % 609,669   248,914   858,583   Dillard's, Sears, Younkers, Barnes & Noble
36.   Crystal Mall   CT   Waterford   Fee   74.6 %  (4) Acquired 1998   97.8 % 442,311   351,425   793,736   Macy's, Filene's, JC Penney, Sears
37.   Crystal River Mall   FL   Crystal River   Fee   100.0 % Built 1990   96.7 % 302,495   121,798   424,293   JCPenney, Sears, Belk, Kmart
38.   Dadeland Mall   FL   North Miami Beach   Fee   50.0 %  (4) Acquired 1997   97.9 % 1,062,072   334,404   1,396,476   Saks Fifth Avenue, JCPenney, Burdines-Macy's, Burdines-Macy's Home Gallery, The Limited, Nordstrom (6)
39.   DeSoto Square   FL   Bradenton   Fee   100.0 % Built 1973   92.1 % 435,467   255,776   691,243   JCPenney, Sears, Dillard's, Burdines-Macy's
40.   Eastland Mall   IN   Evansville   Fee   50.0 %  (4) Acquired 1998   90.5 % 532,955   365,646   898,601   JCPenney, Famous Barr, Lazarus-Macy's, (8)
41.   Eastland Mall   OK   Tulsa   Fee   100.0 % Built 1986   69.3 % 305,732   177,166   482,898   Dillard's, Mervyn's, Mickey's, (8)
42.   Edison Mall   FL   Fort Meyers   Fee   100.0 % Acquired 1997   98.1 % 742,667   299,405   1,042,072   Dillard's, JCPenney, Sears, Burdines-Macy's Mens, Children & Home, Burdines-Macy's Women
43.   Emerald Square   MA   North Attleboro   Fee   49.1 %  (4) Acquired 1999   98.5 % 647,372   375,149   1,022,521   Filene's, JCPenney, Lord & Taylor, Sears
44.   Empire Mall (5)   SD   Sioux Falls   Fee and Ground Lease (7) (2013)   50.0 %  (4) Acquired 1998   92.4 % 497,341   549,942   1,047,283   JCPenney, Younkers, Sears, Richman Gordman, Marshall Field's
45.   Fashion Mall at Keystone at the Crossing, The   IN   Indianapolis   Ground Lease
(2067)		   100.0 % Acquired 1997   91.4 % 249,721   408,678   658,399   (20) Parisian, Saks Fifth Avenue
46.   Fashion Valley Mall   CA   San Diego   Fee   50.0 %  (4) Acquired 2001   99.4 % 1,053,305   653,913   1,707,218   JCPenney, Macy's, Neiman-Marcus, Nordstrom, Robinson-May, Saks Fifth Avenue
47.   Florida Mall, The   FL   Orlando   Fee   50.0 %  (4) Built 1986   97.4 % 1,232,416   615,247   1,847,663   Dillard's, JCPenney, Lord & Taylor (17), Saks Fifth Avenue, Sears, Burdines-Macy's, Nordstrom
48.   Forest Mall   WI   Fond Du Lac   Fee   100.0 % Built 1973   93.6 % 327,260   173,994   501,254   JCPenney, Kohl's, Younkers, Sears, Staples
49.   Forum Shops at Caesars, The   NV   Las Vegas   Ground Lease (2050)   100.0 % Built 1992   97.3 %     483,838   483,838    
50.   Granite Run Mall   PA   Media (Philadelphia)   Fee   50.0 %  (4) Acquired 1998   94.9 % 500,809   546,358   1,047,167   JCPenney, Sears, Boscovs
51.   Great Lakes Mall   OH   Mentor (Cleveland)   Fee   100.0 % Built 1961   92.5 % 879,300   422,040   1,301,340   Dillard's Men, Dillard's Women, Kaufmann's, JCPenney, Sears
52.   Greendale Mall   MA   Worcester (Boston)   Fee and Ground Lease (7) (2009)   49.1 %  (4) Acquired 1999   98.8 % 132,634   298,662   431,296   (20) Best Buy, Marshalls, T.J. Maxx & More, Family Fitness, DSW Shoe Warehouse
53.   Greenwood Park Mall   IN   Greenwood   Fee   100.0 % Acquired 1979   98.2 % 898,928   412,711   1,311,639   JCPenney, JCPenney Home Store, Lazarus-Macy's, L.S. Ayres, Sears, Von Maur, Dick's Sporting Goods (6)

15

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
54.   Gulf View Square   FL   Port Richey (Tampa-St. Pete)   Fee   100.0 % Built 1980   97.1 % 461,852   234,012   695,864   Sears, Dillard's, JCPenney, Burdines-Macy's, Linens N Things (6), Best Buy (6)
55.   Gwinnett Place   GA   Duluth (Atlanta)   Fee   50.0 %  (4) Acquired 1998   90.7 % 843,609   433,571   1,277,180   Parisian, Rich's-Macy's, JCPenney, Sears, (8)
56.   Haywood Mall   SC   Greenville   Fee and Ground Lease (7) (2017)   100.0 % Acquired 1998   96.9 % 913,633   329,971   1,243,604   Rich's-Macy's, Sears, Dillard's, JCPenney, Belk
57.   Heritage Park Mall   OK   Midwest City   Fee   100.0 % Built 1978   59.4 % 382,700   223,639   606,339   Dillard's, Sears, (8)
58.   Highland Mall (5)   TX   Austin   Fee and Ground Lease (2070)   50.0 %  (4) Acquired 1998   94.9 % 732,000   358,685   1,090,685   Dillard's Women & Home, Dillard's Mens & Children, Foley's, JCPenney
59.   Hutchinson Mall   KS   Hutchinson   Fee   100.0 % Built 1985   90.1 % 277,665   247,703   525,368   Dillard's, JCPenney, Sears, Hobby Lobby
60.   Independence Center   MO   Independence (Kansas City)   Fee   100.0 % Acquired 1994   96.5 % 499,284   522,772   1,022,056   Dillard's, Sears, The Jones Store Co.
61.   Indian River Mall   FL   Vero Beach   Fee   50.0 %  (4) Built 1996   88.3 % 445,552   302,456   748,008   Sears, JCPenney, Dillard's, Burdines-Macy's
62.   Ingram Park Mall   TX   San Antonio   Fee   100.0 % Built 1979   95.5 % 751,704   377,536   1,129,240   Dillard's, Dillard's Home Center, Foley's, JCPenney, Sears, Beall's
63.   Irving Mall   TX   Irving (Dallas-Ft. Worth)   Fee   100.0 % Built 1971   95.9 % 726,574   376,567   1,103,141   Foley's, Dillard's, Mervyn's, Sears, Barnes & Noble, FYE, Circuit City (6)
64.   Jefferson Valley Mall   NY   Yorktown Heights (New York)   Fee   100.0 % Built 1983   97.1 % 310,095   277,055   587,150   Macy's, Sears, H&M
65.   King of Prussia Mall   PA   King of Prussia   Fee   12.9 %  (4) Acquired 2003   98.0 % 1,775,871   1,074,756   2,850,627   (20) JCPenney, Lord & Taylor, Neiman Marcus, Nordstrom, Sears, Strawbridge's, Bloomingdale's, Macy's
66.   Knoxville Center   TN   Knoxville   Fee   100.0 % Built 1984   91.9 % 597,028   381,539   978,567   Dillard's, JCPenney, Proffitt's, Sears, The Rush
67.   La Plaza Mall   TX   McAllen   Fee and Ground Lease (7) (2040)   100.0 % Built 1976   99.6 % 778,768   426,751   1,205,519   Dillard's, JCPenney, Foley's, Foley's Home Store, Sears, Beall's, Joe Brand-Lady Brand
68.   Lafayette Square   IN   Indianapolis   Fee   100.0 % Built 1968   97.5 % 937,223   272,091   1,209,314   JCPenney, L.S. Ayres, Sears, Burlington Coat Factory, Steve & Barry's, Kittles Rooms Express, (8)
69.   Laguna Hills Mall   CA   Laguna Hills (Orange County)   Fee   100.0 % Acquired 1997   95.8 % 536,500   331,133   867,633   Macy's, JCPenney, Sears
70.   Lake Square Mall   FL   Leesburg   Fee   50.0 %  (4) Acquired 1998   91.8 % 296,037   264,930   560,967   JCPenney, Sears, Belk, Target
71.   Lakeline Mall   TX   Austin   Fee   100.0 % Built 1995   94.3 % 745,179   355,192   1,100,371   Dillard's, Foley's, Sears, JCPenney, Mervyn's
72.   Las Vegas Premium Outlets (5)   NV   Las Vegas   Fee   50.0 %  (4) Built 2003   96.3 %     432,478   432,478    

16

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
73.   Lehigh Valley Mall   PA   Whitehall   (15)   (15)   Acquired 2003   91.2 % 564,353   502,908   1,067,261   (20) JCPenney, Macy's, Strawbridge's
74.   Lenox Square   GA   Atlanta   Fee   100.0 % Acquired 1998   89.6 % 821,356   662,867   1,484,223   Neiman Marcus, Rich's-Macy's, Bloomingdale's
75.   Liberty Tree Mall   MA   Danvers (Boston)   Fee   49.1 %  (4) Acquired 1999   97.6 % 498,000   359,018   857,018   Marshalls, Sports Authority, Target, Old Navy, Stop and Shop, Best Buy, Staples, Bed, Bath & Beyond, Kohl's
76.   Lima Mall   OH   Lima   Fee   100.0 % Built 1965   98.3 % 541,861   203,238   745,099   Elder-Beerman, Sears, Lazarus-Macy's, JCPenney
77.   Lincolnwood Town Center   IL   Lincolnwood (Chicago)   Fee   100.0 % Built 1990   98.1 % 220,830   201,045   421,875   Kohl's, Carson Pirie Scott
78.   Lindale Mall (5)   IA   Cedar Rapids   Fee   50.0 %  (4) Acquired 1998   89.5 % 305,563   385,392   690,955   Von Maur, Sears, Younkers
79.   Livingston Mall   NJ   Livingston (New York)   Fee   100.0 % Acquired 1998   99.6 % 616,128   369,449   985,577   Macy's, Sears, Lord & Taylor
80.   Longview Mall   TX   Longview   Fee   100.0 % Built 1978   90.3 % 402,843   210,112   612,955   Dillard's, Dillard's Men, JCPenney, Sears, Beall's, (8)
81.   Mall at Chestnut Hill   MA   Newton (Boston)   Lease (2039) (9)   47.2 %  (4) Acquired 2002   96.5 % 297,253   180,932   478,185   Bloomingdale's, Filene's
82.   Mall at Rockingham Park   NH   Salem (Boston)   Fee   24.6 %  (4) Acquired 1999   100.0 % 638,111   382,110   1,020,221   Macy's, Filene's, JCPenney, Sears
83.   Mall of America   MN   Bloomington (Minneapolis-St. Paul)   Fee   27.5 %  (4)  (12) Acquired 1999   92.7 % 1,220,305   1,558,937   2,779,242   Macy's, Bloomingdales, Nordstrom, Sears, Knott's Camp Snoopy, Barnes & Noble, Old Navy, DSW Shoe Warehouse, Marshalls, Sportmart, Nordstrom Rack
84.   Mall of Georgia   GA   Mill Creek (Atlanta)   Fee   50.0 %  (13)  (4) Built 1999   94.2 % 989,590   795,581   1,785,171   Lord & Taylor (17), Rich's-Macy's, Dillard's, Galyan's, Haverty's, JCPenney, Nordstrom, Bed, Bath & Beyond
85.   Mall of New Hampshire   NH   Manchester (Boston)   Fee   49.1 %  (4) Acquired 1999   97.8 % 444,889   361,605   806,494   Filene's, JCPenney, Sears, Best Buy
86.   Maplewood Mall   MN   Minneapolis   Fee   100.0 % Acquired 2002   88.5 % 578,060   330,337   908,397   Sears, Marshall Field's, Kohl's, Mervyn's
87.   Markland Mall   IN   Kokomo   Ground Lease
(2041)		   100.0 % Built 1968   98.7 % 273,094   140,070   413,164   Lazarus-Macy's, Sears, Target
88.   McCain Mall   AR   N. Little Rock   Fee and Ground Lease (10) (2032)   100.0 % Built 1973   99.7 % 554,156   222,306   776,462   Sears, Dillard's, JCPenney, M.M. Cohn
89.   Melbourne Square   FL   Melbourne   Fee   100.0 % Built 1982   92.0 % 471,173   258,236   729,409   Belk, Dillard's Mens, Children & Home, Dillard's Women, JCPenney, Burdines-Macy's, Office Max
90.   Menlo Park Mall   NJ   Edison (New York)   Fee   100.0 % Acquired 1997   92.1 % 527,591   756,111   1,283,702   (20) Macy's Women, Macy's Men, Macy's Children & Home, Nordstrom, Barnes & Noble
91.   Mesa Mall (5)   CO   Grand Junction   Fee   50.0 %  (4) Acquired 1998   92.4 % 425,817   435,741   861,558   Sears, Herberger's, JCPenney, Target, Mervyn's, Gant Sports

17

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
92.   Metrocenter   AZ   Phoenix   Fee   50.0 %  (4) Acquired 1998   94.0 % 876,027   515,828   1,391,855   Macy's, Dillard's, Robinsons-May, JCPenney, Sears, ZeroG Sports & Entertainment
93.   Miami International Mall   FL   South Miami   Fee   47.8 %  (4) Built 1982   95.8 % 783,308   290,791   1,074,099   Sears, Dillard's, JCPenney, Burdines-Macy's Mens & Home, Burdines-Macy's Women & Children
94.   Midland Park Mall   TX   Midland   Fee   100.0 % Built 1980   94.3 % 339,113   278,980   618,093   Dillard's, Dillard's Mens & Juniors, JCPenney, Sears, Beall's, Ross Dress for Less
95.   Miller Hill Mall   MN   Duluth   Ground Lease
(2008)		   100.0 % Built 1973   98.7 % 429,508   375,911   805,419   JCPenney, Sears, Younkers, Barnes & Noble
96.   Montgomery Mall   PA   Montgomeryville   Fee   23.1 %  (4) Acquired 2003   91.9 % 684,855   435,540   1,120,395   JCPenney, Macy's, Sears, Strawbridge's
97.   Muncie Mall   IN   Muncie   Fee   100.0 % Built 1970   97.3 % 435,756   218,986   654,742   JCPenney, L.S. Ayres, Sears, Elder Beerman
98.   Nanuet Mall   NY   Nanuet (New York)   Fee   100.0 % Acquired 1998   90.7 % 583,711   331,915   915,626   Macy's, Boscov, Sears
99.   North East Mall   TX   Hurst (Dallas-Ft. Worth)   Fee   100.0 % Built 1971   97.9 % 1,194,589   357,283   1,551,872   Saks Fifth Avenue, Nordstrom, Dillard's, JCPenney, Sears, Foley's, (8)
100.   Northfield Square Mall   IL   Bourbonnais (Chicago)   Fee   31.6 %  (13)  (4) Built 1990   83.7 % 310,994   247,375   558,369   Sears, JCPenney, Carson Pirie Scott Womens, Carson Pirie Scott Mens, Children & Home
101.   Northgate Mall   WA   Seattle   Fee   100.0 % Built 1987   99.2 % 688,391   308,873   997,264   Nordstrom, JCPenney, Gottschalk, Bon-Macy's, Toys "R" Us
102.   Northlake Mall   GA   Atlanta   Fee   100.0 % Acquired 1998   94.9 % 665,745   296,402   962,147   Parisian, Rich's-Macy's, Sears, JCPenney
103.   Northpark Mall   IA   Davenport   Fee   50.0 %  (4) Acquired 1998   92.5 % 651,533   426,420   1,077,953   Von Maur, Younkers, Dillard's, JCPenney, Sears, Barnes & Noble
104.   Northshore Mall   MA   Peabody (Boston)   Fee   49.1 %  (4) Acquired 1999   97.7 % 989,277   695,441   1,684,718   Macy's, Filene's, JCPenney, Lord & Taylor, Sears, Filene's Basement, Bally Total Fitness
105.   Northwoods Mall   IL   Peoria   Fee   100.0 % Built 1983   98.7 % 472,969   222,415   695,384   Famous Barr, JCPenney, Sears
106.   Oak Court Mall   TN   Memphis   Fee   100.0 % Acquired 1997   86.6 % 535,000   318,375   853,375   (20) Dillard's Women, Dillard's Mens, Children & Home, Goldsmith's-Macy's
107.   Ocean County Mall   NJ   Toms River (New York)   Fee   100.0 % Acquired 1998   96.6 % 620,755   276,246   897,001   Macy's, Boscov's, JCPenney, Sears
108.   Orange Park Mall   FL   Orange Park   Fee   100.0 % Acquired 1994   97.2 % 534,180   390,175   924,355   Dillard's, JCPenney, Sears, Belk
109.   Orland Square   IL   Orland Park (Chicago)   Fee   100.0 % Acquired 1997   96.6 % 773,295   433,648   1,206,943   JCPenney, Marshall Field's, Sears, Carson Pirie Scott
110.   Oxford Valley Mall   PA   Langhorne   Fee   65.8 % Acquired 2003   94.3 % 762,558   509,674   1,272,232   (20) JCPenney, Macy's, Sears, Strawbridge's

18

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
111.   Paddock Mall   FL   Ocala   Fee   100.0 % Built 1980   95.3 % 387,378   172,786   560,164   JCPenney, Sears, Belk, Burdines-Macy's
112.   Palm Beach Mall   FL   West Palm Beach   Fee   100.0 % Built 1967   96.9 % 749,288   335,941   1,085,229   Dillard's, JCPenney, Sears, Burdines-Macy's, Borders Books & Music, DSW Shoe Warehouse, Old Navy
113.   Penn Square   OK   Oklahoma City   Ground Lease (2060)   94.5 % Acquired 2002   97.4 % 588,137   425,255   1,013,392   Foley's, JCPenney, Dillard's Womens, Dillard's Mens, Children & Home
114.   Pheasant Lane Mall   NH   Nashua (Boston)   (16)   (16 )    (4) Acquired 2002   98.5 % 675,759   313,135   988,894   Macy's, Filene's, JC Penney, Sears, Target
115.   Phipps Plaza   GA   Atlanta   Fee   100.0 % Acquired 1998   96.9 % 472,385   348,931   821,316   Lord & Taylor (17), Parisian, Saks Fifth Avenue
116.   Port Charlotte Town Center   FL   Port Charlotte   Ground Lease
(2064)		   80.0 %  (13) Built 1989   88.9 % 458,554   321,928   780,482   Dillard's, JCPenney, Beall's, Sears, Burdines-Macy's, DSW Shoe Warehouse
117.   Prien Lake Mall   LA   Lake Charles   Fee and Ground Lease (7) (2025)   100.0 % Built 1972   97.9 % 631,762   178,931   810,693   Dillard's, JCPenney, Foley's (19), Sears
118.   Quaker Bridge Mall   NJ   Lawrenceville   Fee   39.6 %  (4) Acquired 2003   95.9 % 686,760   423,047   1,109,807   JCPenney, Lord & Taylor, Macy's, Sears
119.   Raleigh Springs Mall   TN   Memphis   Fee and Ground Lease (7) (2018)   100.0 % Built 1971   45.0 % 691,230   226,369   917,599   Sears, (8)
120.   Richardson Square   TX   Richardson (Dallas-Ft. Worth)   Fee   100.0 % Built 1977   73.4 % 471,436   283,900   755,336   Dillard's, Sears, Target, Ross Dress for Less, Barnes & Noble, Oshman's
121.   Richmond Town Square   OH   Richmond Heights (Cleveland)   Fee   100.0 % Built 1966   99.5 % 685,251   331,526   1,016,777   Sears, JCPenney, Kaufmann's, Barnes & Noble
122.   River Oaks Center   IL   Calumet City (Chicago)   Fee   100.0 % Acquired 1997   90.0 % 834,588   544,223   1,378,811   (20) Sears, JCPenney, Carson Pirie Scott, Marshall Field's
123.   Rockaway Townsquare   NJ   Rockaway (New York)   Fee   100.0 % Acquired 1998   95.3 % 786,626   461,697   1,248,323   Macy's, Lord & Taylor, JCPenney, Sears
124.   Rolling Oaks Mall   TX   San Antonio   Fee   100.0 % Built 1988   68.3 % 460,857   276,312   737,169   Sears, Dillard's, Foley's, Tony Hawk's Skate Park, JC Penney (6)
125.   Roosevelt Field Mall   NY   Garden City (New York)   Fee and Ground Lease (7) (2090)   100.0 % Acquired 1998   98.2 % 1,430,425   750,101   2,180,526   Macy's, Bloomingdale's, JCPenney, Nordstrom, Gaylans, Bloomingdale's Furniture (6)
126.   Ross Park Mall   PA   Pittsburgh   Fee   100.0 % Built 1986   97.5 % 827,015   407,583   1,234,598   Lazarus-Macy's, JCPenney, Sears, Kaufmann's, Media Play, DSW Shoe Warehouse
127.   Rushmore Mall (5)   SD   Rapid City   Fee   50.0 %  (4) Acquired 1998   98.1 % 470,660   364,948   835,608   JCPenney, Sears, Herberger's, Hobby Lobby, Target, Scheel's Sports
128.   Santa Rosa Plaza   CA   Santa Rosa   Fee   100.0 % Acquired 1998   93.6 % 428,258   270,487   698,745   Macy's, Mervyn's, Sears
129.   Seminole Towne Center   FL   Sanford   Fee   45.0 %  (14)  (4) Built 1995   93.8 % 768,798   384,802   1,153,600   Dillard's, JCPenney, Parisian, Sears, Burdines-Macy's
130.   Shops at Mission Viejo Mall, The   CA   Mission Viejo (Orange County)   Fee   100.0 % Built 1979   98.6 % 677,215   472,699   1,149,914   Macy's, Saks Fifth Avenue, Robinsons-May, Nordstrom

19

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
131.   Shops at Sunset Place, The   FL   Miami   Fee   37.5 %  (4) Built 1999   88.7 %     500,143   500,143   Niketown, Barnes & Noble, Gameworks, Virgin Megastore, Z Gallerie
132.   Smith Haven Mall   NY   Lake Grove (New York)   Fee   25.0 %  (4) Acquired 1995   96.7 % 902,595   455,400   1,357,995   Macy's, Sears, JCPenney, H&M, Stern's
133.   Solomon Pond Mall   MA   Marlborough (Boston)   Fee   49.1 %  (4) Acquired 1999   100.0 % 538,843   373,754   912,597   Filene's, Sears, JCPenney, Linens-N-Things
134.   Source, The   NY   Westbury (New York)   Fee   25.5 %  (4) Built 1997   93.5 % 210,798   518,354   729,152   Off 5th-Saks Fifth Avenue, Fortunoff, Nordstrom Rack, Old Navy, Circuit City, Virgin Megastore, Rosewood Home Furnishings, H&M
135.   South Hills Village   PA   Pittsburgh   Fee   100.0 % Acquired 1997   96.5 % 655,987   454,033   1,110,020   Sears, Kaufmann's, Lazarus-Macy's
136.   South Shore Plaza   MA   Braintree (Boston)   Fee   100.0 % Acquired 1998   98.3 % 847,603   614,037   1,461,640   Macy's, Filene's, Lord & Taylor, Sears, Filene's Basement
137.   Southern Hills Mall (5)   IA   Sioux City   Fee   50.0 %  (4) Acquired 1998   71.0 % 372,937   428,619   801,556   Younkers, Sears, Sheel's Sporting Goods, Barnes & Noble (6), (8)
138.   Southern Park Mall   OH   Boardman   Fee   100.0 % Built 1970   97.5 % 811,858   385,922   1,197,780   Dillard's, JCPenney, Sears, Kaufmann's
139.   Southgate Mall   AZ   Yuma   Fee   100.0 % Acquired 1988   99.7 % 252,264   69,310   321,574   Sears, Dillard's, JCPenney, Albertson's
140.   SouthPark   NC   Charlotte   Fee & Ground Lease (11) (2040)   100.0 % Acquired 2002   87.9 % 857,254   332,104   1,189,358   Nordstrom (6), Hecht's, Belk, Dillard's, Gaylans (6)
141.   Southpark Mall   IL   Moline   Fee   50.0 %  (4) Acquired 1998   93.5 % 578,056   447,997   1,026,053   JCPenney, Younkers, Sears, Von Maur
142.   SouthRidge Mall (5)   IA   Des Moines   Fee   50.0 %  (4) Acquired 1998   71.2 % 497,806   504,732   1,002,538   Sears, Younkers, JCPenney, Target, (8)
143.   Square One Mall   MA   Saugus (Boston)   Fee   49.1 %  (4) Acquired 1999   99.4 % 540,101   324,593   864,694   Filene's, Sears, Best Buy, T.J. Maxx N More, Filene's Basement
144.   St. Charles Towne Center   MD   Waldorf (Washington, D.C.)   Fee   100.0 % Built 1990   96.0 % 631,602   354,007   985,609   Sears, JCPenney, Kohl's, Hecht's, Hecht's Home Store
145.   Stanford Shopping Center   CA   Palo Alto (San Francisco)   Ground Lease
(2054)		   100.0 % Acquried 2003   97.8 % 849,153   522,459   1,371,612   Macy's, Neiman Marcus, Nortstrom, Bloomingdales
146.   Summit Mall   OH   Akron (Cleveland)   Fee   100.0 % Built 1965   94.1 % 432,936   331,297   764,233   Dillard's Women & Children, Dillard's Mens & Home, Kaufmann's
147.   Sunland Park Mall   TX   El Paso   Fee   100.0 % Built 1988   89.9 % 575,837   342,131   917,968   JCPenney, Mervyn's, Sears, Dillard's Women & Children, Dillard's Mens & Home
148.   Tacoma Mall   WA   Tacoma   Fee   100.0 % Built 1987   98.7 % 924,045   370,419   1,294,464   Nordstrom, Sears, JCPenney, Bon-Macy's, Mervyn's
149.   The Galleria   TX   Houston   Fee   31.5 %  (4) Acquired 2002   88.3 % 1,300,466   1,104,346   2,404,812   Macy's, Saks Fifth Avenue, Neiman Marcus, Lord & Taylor (17), Nordstrom, Foley's, University Club
150.   Tippecanoe Mall   IN   Lafayette   Fee   100.0 % Built 1973   98.5 % 568,373   291,153   859,526   L.S. Ayres, JCPenney, Sears, Kohl's, (8)

20

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
151.   Town Center at Boca Raton   FL   Boca Raton   Fee   100.0 % Acquired 1998   99.4 % 1,061,076   494,247   1,555,323   Lord & Taylor (17), Saks Fifth Avenue, Bloomingdale's, Sears, Burdines-Macy's, Nordstrom
152.   Town Center at Cobb   GA   Kennesaw (Atlanta)   Fee   50.0 %  (4) Acquired 1998   97.9 % 851,346   421,107   1,272,453   Rich's-Macy's, Parisian, Sears, JCPenney, Rich's-Macy's Furniture
153.   Towne East Square   KS   Wichita   Fee   100.0 % Built 1975   95.9 % 779,490   399,619   1,179,109   Dillard's, JCPenney, Sears, Von Maur
154.   Towne West Square   KS   Wichita   Fee   100.0 % Built 1980   89.4 % 619,269   336,062   955,331   Dillard's Women & Home, Dillard's Mens & Children, Sears, JCPenney, Dick's Sporting Goods
155.   Treasure Coast Square   FL   Jensen Beach   Fee   100.0 % Built 1987   91.7 % 511,372   358,197   869,569   Dillard's, Sears, Borders, JCPenney, Burdines-Macy's
156.   Trolley Square   UT   Salt Lake City   Fee   90.0 % Acquired 1986   81.2 %     221,863   221,863   —
157.   Tyrone Square   FL   St. Petersburg (Tampa-St. Pete)   Fee   100.0 % Built 1972   99.1 % 748,269   380,012   1,128,281   Dillard's, JCPenney, Sears, Borders, Burdines-Macy's
158.   University Mall   AR   Little Rock   Ground Lease
(2026)		   100.0 % Built 1967   89.8 % 412,761   153,192   565,953   JCPenney, M.M. Cohn
159.   University Mall   FL   Pensacola   Fee   100.0 % Acquired 1994   82.8 % 478,449   228,579   707,028   JCPenney, Sears, McRae's
160.   University Park Mall   IN   Mishawaka   Fee   60.0 % Built 1979   98.4 % 622,508   320,315   942,823   L.S. Ayres, JCPenney, Sears, Marshall Field's
161.   Upper Valley Mall   OH   Springfield   Fee   100.0 % Built 1971   93.3 % 479,418   271,132   750,550   Lazarus-Macy's, JCPenney, Sears, Elder-Beerman
162.   Valle Vista Mall   TX   Harlingen   Fee   100.0 % Built 1983   97.5 % 389,781   266,579   656,360   Dillard's, Mervyn's, Sears, JCPenney, Marshalls, Beall's, Office Max
163.   Valley Mall   VA   Harrisonburg   Fee   50.0 %  (4) Acquired 1998   99.2 % 307,798   179,631   487,429   JCPenney, Belk, Wal-Mart, Peebles
164.   Virginia Center Commons   VA   Glen Allen   Fee   100.0 % Built 1991   96.5 % 506,639   280,855   787,494   Dillard's Women, Dillard's Mens, Children & Home, Hecht's, JCPenney, Sears
165.   Walt Whitman Mall   NY   Huntington Station (New York)   Ground Rent
(2012)		   100.0 % Acquired 1998   95.7 % 742,214   292,533   1,034,747   Macy's, Lord & Taylor, Bloomingdale's, Saks Fifth Avenue, Organized Living
166.   Washington Square   IN   Indianapolis   Fee   100.0 % Built 1974   87.0 % 706,174   308,064   1,014,238   L.S. Ayres, Target, Sears, Burlington Coat Factory (6), (8)
167.   West Ridge Mall   KS   Topeka   Fee   100.0 % Built 1988   66.1 % 716,811   310,002   1,026,813   Dillard's, JCPenney, The Jones Store, Sears, (8)
168.   West Town Mall   TN   Knoxville   Ground Lease
(2042)		   50.0 % Acquired 1991   96.7 % 878,311   450,691   1,329,002   Parisian, Dillard's, JCPenney, Proffitt's, Sears
169.   Westchester, The   NY   White Plains (New York)   Fee   40.0 % Acquired 1997   99.5 % 349,393   475,026   824,419   Neiman Marcus, Nordstrom
170.   Westminster Mall   CA   Westminster (Orange County)   Fee   100.0 % Acquired 1998   86.5 % 716,939   503,533   1,220,472   Sears, JCPenney, Robinsons-May, Macy's
171.   White Oaks Mall   IL   Springfield   Fee   77.5 % Built 1977   95.1 % 601,708   347,497   949,205   Famous Barr, Sears, Bergner's, Dick's Sporting Goods (6)
172.   Wolfchase Galleria   TN   Memphis   Fee   94.5 % Acquired 2002   96.9 % 761,648   506,453   1,268,101   Goldsmith's-Macy's, JC Penney, Sears, Dillard's
173.   Woodland Hills Mall   OK   Tulsa   Fee   47.2 %  (4) Acquired 2002   96.8 % 709,447   382,848   1,092,295   Foley's, JCPenney, Sears, Dillard's
174.   Woodville Mall   OH   Northwood   Fee   100.0 % Built 1969   79.6 % 518,792   254,613   773,405   Sears, Elder-Beerman, Andersons, Woodville Skate Park

21

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
    COMMUNITY SHOPPING CENTERS                            

1.
 
Arboretum, The
 
TX
 
Austin
 
Fee
 
100.0
%
Acquired 1998
 
94.9
%
35,773
 
170,738
 
206,511
 
Barnes & Noble, Cheescake Factory
2.   Bloomingdale Court   IL   Bloomingdale   Fee   100.0 % Built 1987   94.1 % 436,255   168,256   604,511   Best Buy, T.J. Maxx N More, Frank's Nursery, Office Max, Old Navy, Linens-N-Things, Wal-Mart, Cicuit City, Dress Barn, JoAnn Etc (6)
3.   Boardman Plaza   OH   Youngstown   Fee   100.0 % Built 1951   72.4 % 375,502   265,273   640,775   Burlington Coat Factory, Giant Eagle, Michael's, Linens-N-Things, T.J. Maxx, Steinmart, Sav-A-Lot, (8)
4.   Bridgeview Court   IL   Bridgeview   Fee   100.0 % Built 1988   86.9 % 216,491   57,187   273,678   Northwestern Business College, (8)
5.   Brightwood Plaza   IN   Indianapolis   Fee   100.0 % Built 1965   100.0 % 0   38,493   38,493   Preston Safeway
6.   Celina Plaza   TX   El Paso   Fee and Ground Lease (11)
(2005)		   100.0 % Built 1978   26.7 % 23,927   8,695   32,622   (8)
7.   Charles Towne Square   SC   Charleston   Fee   100.0 % Built 1976   100.0 % 199,693   0   199,693   Regal Cinema, (8)
8.   Chesapeake Center   VA   Chesapeake   Fee   100.0 % Built 1989   70.4 % 213,670   85,934   299,604   K-Mart, Petsmart, Michael's, Movies 10, (8)
9.   Cobblestone Court   NY   Victor   Fee and Ground Lease (7)
(2038)		   35.0 %  (14)  (4) Built 1993   98.8 % 206,680   58,819   265,499   Dick's Sporting Goods, Kmart, Office Max
10.   Countryside Plaza   IL   Countryside   Fee and Ground Lease (7)
(2058)		   100.0 % Built 1977   80.4 % 290,216   145,392   435,608   Best Buy, Old Country Buffet, Burlington Coat, Home Depot, (8)
11.   Crystal Court   IL   Crystal Lake   Fee   35.0 %  (14)  (4) Built 1989   86.1 % 201,993   76,978   278,971   Cub Foods, Wal-Mart
12.   Dekalb Plaza   PA   King of Prussia   Fee   52.4 % Acquired 2003   46.4 % 81,368   20,345   101,713   ACME
13.   Eastland Convenience Center   IN   Evansville   Ground Lease (2075)   50.0 %  (4) Acquired 1998   96.2 % 60,000   115,639   175,639   Marshalls, Kids "R" Us (17), Toys "R" Us, Bed, Bath & Beyond
14.   Eastland Plaza   OK   Tulsa   Fee   100.0 % Built 1986   84.7 % 152,451   33,698   186,149   Marshalls, Target, Toys "R" Us
15.   Empire East (5)   SD   Sioux Falls   Fee   50.0 %  (4) Acquired 1998   97.9 % 253,388   44,875   298,263   Kohl's, Target
16.   Fairfax Court   VA   Fairfax   Fee   26.3 %  (14)  (4) Built 1992   89.2 % 168,743   80,614   249,357   Burlington Coat Factory, Circuit City Superstore, (8)
17.   Forest Plaza   IL   Rockford   Fee   100.0 % Built 1985   98.0 % 325,170   100,588   425,758   Kohl's, Marshalls, Media Play, Michael's, Factory Card Outlet, Office Max, T.J. Maxx, Bed, Bath & Beyond, Petco
18.   Gaitway Plaza   FL   Ocala   Fee   23.3 %  (14)  (4) Built 1989   89.1 % 123,027   93,328   216,355   Books-A-Million, Office Depot, T.J. Maxx, Ross Dress for Less, Bed, Bath & Beyond
19.   Great Lakes Plaza   OH   Mentor (Cleveland)   Fee   100.0 % Built 1976   100.0 % 142,229   21,875   164,104   Circuit City, Best Buy, Michael's, Cost Plus World Market
20.   Great Northeast Plaza   PA   Philadelphia   Fee   50.0 %  (4) Acquired 1989   100.0 % 238,158   57,600   295,758   Sears
21.   Greenwood Plus   IN   Greenwood   Fee   100.0 % Built 1979   100.0 % 134,141   25,790   159,931   Best Buy, Kohl's
22.   Griffith Park Plaza   IN   Griffith   Ground Lease (2060)   100.0 % Built 1979   34.5 % 175,595   98,640   274,235   K-mart, (8)
23.   Grove at Lakeland Square, The   FL   Lakeland   Fee   100.0 % Built 1988   91.9 % 142,317   73,274   215,591   Sports Authority
24.   Henderson Square   PA   King of Prussia   Fee   79.1 % Acquired 2003   97.2 % 72,683   34,661   107,344   ACME, Staples

22

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
25.   Highland Lakes Center   FL   Orlando   Fee   100.0 % Built 1991   77.3 % 372,316   105,764   478,080   Marshalls, Bed, Bath & Beyond, American Signature Home, Save-Rite, Ross Dress for Less, Office Max, Burlington Coat Factory, (8)
26.   Indian River Commons   FL   Vero Beach   Fee   50.0 %  (4) Built 1997   90.8 % 233,358   27,510   260,868   Lowe's, Best Buy, Ross Dress for Less, Bed, Bath & Beyond, Michael's
27.   Ingram Plaza   TX   San Antonio   Fee   100.0 % Built 1980   100.0 % 0   111,518   111,518   —
28.   Keystone Shoppes   IN   Indianapolis   Ground Lease
(2067)		   100.0 % Acquired 1997   88.7 % 0   29,140   29,140   —
29.   Knoxville Commons   TN   Knoxville   Fee   100.0 % Built 1987   100.0 % 91,483   88,980   180,463   Office Max, Circuit City
30.   Lake Plaza   IL   Waukegan   Fee   100.0 % Built 1986   98.7 % 170,789   44,673   215,462   Pic 'N Save, Home Owners Bargain Outlet
31.   Lake View Plaza   IL   Orland Park (Chicago)   Fee   100.0 % Built 1986   91.7 % 270,628   100,852   371,480   Best Buy, Marshalls, Ulta Cosmetics, Factory Card Outlet, Golf Galaxy, Linens-N-Things, Petco Supplies & Fish, Value City Furniture, (8)
32.   Lakeline Plaza   TX   Austin   Fee   100.0 % Built 1998   98.4 % 306,317   79,431   385,748   Old Navy, Best Buy, Cost Plus World Market, Linens-N-Things, Office Max, Petsmart, Ross Dress for Less, T.J. Maxx, Party City, Ulta Cosmetics, Ultimate Electronics
33.   Lima Center   OH   Lima   Fee   100.0 % Built 1978   94.2 % 159,584   47,294   206,878   Kohl's, Hobby Lobby
34.   Lincoln Crossing   IL   O'Fallon   Fee   100.0 % Built 1990   100.0 % 134,935   13,446   148,381   Wal-Mart, PetsMart
35.   Lincoln Plaza   PA   King of Prussia   Fee   65.8 % Acquired 2003   100.0 % 143,649   123,582   267,231   Burlington Coat Factory, Circuit City
36.   Mall of Georgia Crossing   GA   Mill Creek (Atlanta)   Fee   50.0 %  (4) Built 1999   97.8 % 341,503   99,109   440,612   Target, Nordstrom Rack, Best Buy, Staples, T.J. Maxx N More, American Signature Home
37.   Markland Plaza   IN   Kokomo   Fee   100.0 % Built 1974   90.0 % 49,552   41,675   91,227   Best Buy, Bed, Bath & Beyond
38.   Martinsville Plaza   VA   Martinsville   Space Lease
(2046)		   100.0 % Built 1967   97.1 % 60,000   42,105   102,105   Rose's
39.   Matteson Plaza   IL   Matteson   Fee   100.0 % Built 1988   43.5 % 230,885   44,570   275,455   Dominick's, Michael's Arts & Crafts, Value City, (8)
40.   Muncie Plaza   IN   Muncie   Fee   100.0 % Built 1998   100.0 % 271,656   27,195   298,851   Kohl's, Office Max, Shoe Carnival, T.J. Maxx, Target
41.   New Castle Plaza   IN   New Castle   Fee   100.0 % Built 1966   97.3 % 24,912   66,736   91,648   Goody's
42.   North Ridge Plaza   IL   Joliet   Fee   100.0 % Built 1985   74.3 % 190,323   114,747   305,070   Minnesota Fabrics, Hobby Lobby, Office Max, (8)
43.   Northland Plaza   OH   Columbus   Fee and Ground Lease (7)
(2085)		   100.0 % Built 1988   62.7 % 118,304   91,230   209,534   Marshalls, Hobby Lobby, (8)
44.   Northwood Plaza   IN   Fort Wayne   Fee   100.0 % Built 1974   92.0 % 99,028   71,841   170,869   Target, Cinema Grill
45.   Park Plaza   KY   Hopkinsville   Fee and Ground Lease (7)
(2039)		   100.0 % Built 1968   95.2 % 82,398   32,626   115,024   Big Lots, Wal-Mart (18)
46.   Plaza at Buckland Hills, The   CT   Manchester   Fee   35.0 %  (14)  (4) Built 1993   84.6 % 252,179   82,308   334,487   Toys "R" Us, Jo-Ann Etc., Kids "R" Us (17), Comp USA, Linens-N-Things, Party City, Petsmart, (8)

23

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
47.   Regency Plaza   MO   St. Charles   Fee   100.0 % Built 1988   100.0 % 210,627   76,899   287,526   Wal-Mart, Sam's Wholesale, Petsmart
48.   Ridgewood Court   MS   Jackson   Fee   35.0 %  (14)  (4) Built 1993   100.0 % 185,939   54,723   240,662   T.J. Maxx, Bed, Bath & Beyond, Best Buy, Marshalls, Lifeway Christian Stores, Michael's
49.   Rockaway Convenience Center   NJ   Rockaway (New York)   Fee   100.0 % Acquired 1998   100.0 % 131,438   100,184   231,622   Kids "R" Us (17), AMCE Grocery, Best Buy, Borders Books & Music, Linens N Things, Michael's
50.   Royal Eagle Plaza   FL   Coral Springs (Miami-Ft. Lauderale)   Fee   35.0 %  (14)  (4) Built 1989   100.0 % 124,479   74,643   199,122   Kmart, Stein Mart
51.   St. Charles Towne Plaza   MD   Waldorf (Washington, D.C.)   Fee   100.0 % Built 1987   68.7 % 292,752   113,202   405,954   Value City Furniture, T.J. Maxx, Jo Ann Fabrics, CVS, Shoppers Food Warehouse, Dollar Tree, (8)
52.   Shops at Northeast Mall, The   TX   Hurst   Fee   100.0 % Built 1999   98.9 % 265,595   98,989   364,584   Old Navy, Nordstrom Rack, Bed, Bath & Beyond, Office Max, Michael's, Petsmart, T.J. Maxx, Ulta Cosmetics, Best Buy, Pier 1 Imports
53.   Teal Plaza   IN   Lafayette   Fee   100.0 % Built 1962   100.0 % 98,337   2,750   101,087   Circuit City, Hobby-Lobby, The Pep Boys
54.   Terrace at the Florida Mall   FL   Orlando   Fee   100.0 % Built 1989   73.8 % 281,446   47,531   328,977   Marshalls, Target, American Signature Home, Bed, Bath & Beyond
55.   Tippecanoe Plaza   IN   Lafayette   Fee   100.0 % Built 1974   95.5 % 85,811   8,787   94,598   Best Buy, Barnes & Noble
56.   University Center   IN   Mishawaka   Fee   60.0 % Built 1980   87.1 % 104,359   46,177   150,536   Best Buy, Michaels
57.   Village Park Plaza   IN   Carmel (Indianapolis)   Fee   35.0 %  (14)  (4) Built 1990   98.3 % 431,018   112,430   543,448   Wal-Mart, Galyan's, Frank's Nursery, Kohl's, Marsh, Bed, Bath & Beyond, Regal Cinema
58.   Wabash Village   IN   West Lafayette   Ground Lease
(2063)		   100.0 % Built 1970   12.2 % 109,388   15,148   124,536   (8)
59.   Washington Plaza   IN   Indianapolis   Fee   100.0 % Built 1976   57.1 % 21,500   28,607   50,107   (8)
60.   Waterford Lakes Town Center   FL   Orlando   Fee   100.0 % Built 1999   100.0 % 622,244   329,559   951,803   L.A. Fitness, T.J. Maxx, Barnes & Noble, Ross Dress for Less, Petsmart, Bed, Bath & Beyond, Old Navy, Best Buy, Office Max, Ashley Furniture, Jo-Ann Fabrics, Target
61.   West Ridge Plaza   KS   Topeka   Fee   100.0 % Built 1988   100.0 % 182,161   55,622   237,783   Target, T.J. Maxx, Toys "R" Us, Famous Footwear
62.   West Town Corners   FL   Altamonte Springs   Fee   23.3 %  (14)  (4) Built 1989   99.1 % 263,782   121,285   385,067   Wal-Mart, Sports Authority, PetsMart, Winn Dixie, American Signature Furniture
63.   Westland Park Plaza   FL   Orange Park   Fee   23.3 %  (14)  (4) Built 1989   96.3 % 123,548   39,606   163,154   Burlington Coat Factory, PetsMart, Sports Authority, Sound Advice
64.   Whitehall Mall   PA   Whitehall   Fee   39.6 %  (4) Acquired 2003   99.0 % 378,642   175,079   553,721   Kohl's, Sears, Bed, Bath and Beyond
65.   White Oaks Plaza   IL   Springfield   Fee   100.0 % Built 1986   98.3 % 275,703   115,723   391,426   Kohl's, Kids "R" Us (17), Office Max, T.J. Maxx, Toys "R" Us, Cub Foods
66.   Willow Knolls Court   IL   Peoria   Fee   35.0 %  (14)  (4) Built 1990   100.0 % 309,440   72,937   382,377   Kohl's, Sam's Wholesale Club, Willow Knolls Cinema, Burlington Coat Factory
67.   Yards Plaza, The   IL   Chicago   Fee   35.0 %  (14)  (4) Built 1990   100.0 % 228,813   36,607   265,420   Burlington Coat Factory, Value City, Ralphs Food for Less

24

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 North American Properties

 
    
    
    
    
    
    
    
   Gross Leasable Area
    
 
   Property Name
   State
   City (Metropolitan area)
   Ownership Interest (Expiration if Lease) (1)
   Our Percentage Interest (2)
   Year Built or Acquired
   Occupancy (3)
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
    OFFICE CENTERS                            

1.
 
O'Hare International Center
 
IL
 
Rosemont
 
Fee
 
100.0
%
Built 1988
 
85.2
%
0
 
495,546
 
495,546
  (20)
—
2.   Riverway   IL   Rosemont   Fee   100.0 % Acquired 1991   84.5 % 0   819,201   819,201   (20) —

 
 
MIXED-USE CENTERS
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1.
 
Copley Place
 
MA
 
Boston
 
Fee
 
98.1
%
Acquired 2002
 
91.4
%
104,332
 
1,109,880
 
1,214,212
  (20)
Neiman Marcus
2.   Fashion Centre at Pentagon City, The   VA   Arlington   Fee   42.5 %  (4) Built 1989   99.8 % 472,729   514,979   987,708   (20) Macy's, Nordstrom
                               
 
 
   
        Total U.S. Portfolio               117,183,895   72,830,417   190,014,312    
                               
 
 
   

 
 
CANADA REGIONAL MALLS
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1.
 
Forum Entertainment Centre (5)
 
 
 
Montreal
 
Fee
 
35.6
%  (4)
Built 2001
 
88.7
%
246,972
 
—
 
246,972
 
AMC Entertainment
                               
 
 
   
        Total North American Portfolio               117,430,867   72,830,417   190,261,284    
                               
 
 
   

 
 
 
 
 
 
 
 
 
 
 
 
Expected Opening
 
 
 
 
 
 
 
 
 
 
    PROPERTIES UNDER CONSTRUCTION                            

1.
 
Chicago Premium Outlets
 
IL
 
Aurora (Chicago)
 
 
 
50.0
%  (4)
2nd Quarter 2004
 
 
 
 
 
 
 
 
 
—

2.
 
Clay Terrace
 
IN
 
Carmel (Indianapolis)
 
 
 
50.0
%  (4)
4th Quarter 2004
 
 
 
 
 
 
 
 
 
Dicks Sporting Goods, DSW Shoe Warehouse, Circuit City, Wild Oats
3.   St. Johns Town Center   FL   Jacksonville       50.0 %  (13) 1st Quarter 2005                   Target, JoAnn Fabribcs, PetsMart
4.   Firewheel Town Center   TX   Garland       100.0 % 4th Quarter 2005                   Foley's, Dillard's, Barnes & Noble, Circuit City, Sports Authoridy, Linens N Things
5.   WolfRanch   TX   Georgetown (Austin)       100.0 % 3rd Quarter 2005                   Target, Kohl's, Linens N Things, Office Depot, Petsmart

(Footnotes on following page)

25

(Footnotes for preceding pages)

(1)
The date listed is the expiration date of the last renewal option available to the operating entity under the ground lease. In a majority of the ground leases, we have a right of first refusal or the right to purchase the lessor's interest. Unless otherwise indicated, each ground lease listed in this column covers at least 50% of its respective Property.

(2)
The Operating Partnership's direct and indirect interests in some of the Properties held as joint venture interests are subject to preferences on distributions in favor of other partners or the Operating Partnership.

(3)
Regional Malls—Executed leases for all company-owned GLA in mall and freestanding stores, excluding majors. Also includes company owned retail space at specialty centers and mixed-use properties. Community Centers—Executed leases for all company-owned GLA including majors, mall stores and freestanding stores.

(4)
Joint Venture Properties accounted for under the equity method.

(5)
This Property is managed by a third party.

(6)
Indicates anchor is currently under construction or in predevelopment.

(7)
Indicates ground lease covers less than 50% of the acreage of this Property.

(8)
Indicates vacant anchor space(s).

(9)
The lease at the Mall at Chestnut Hill includes the entire premises including land and building.

(10)
Indicates ground lease covers all of the Property except for parcels owned in fee by anchors.

(11)
Indicates ground lease covers outparcel only.

(12)
This interest is currently subject to a constructive trust imposed by an order issued by the Federal District Court for the State of Minnesota. We have appealed that order. See footnote 11 of the accompanying financial statements for further discussion regarding Mall of America

(13)
The Operating Partnership receives substantially all the economic benefit of the property due to a partner preference or advances.

(14)
Outside partner receives substantially all of the economic benefit due to a partner preference.

(15)
The ownership of the property is evidenced by the Operating Partnership's note secured by an equity interest in the property.

(16)
The Operating Partnership owns a mortgage note that encumbers Pheasant Lane Mall that entitles it to 100% of the economics of this property.

(17)
Indicates anchor has announced its intent to close this location.

(18)
Indicates anchor has closed, but the Operating Partnership still collects rents and/or fees under an agreement.

(19)
This retailer operates multiple stores at this Property.

(20)
Mall & Freestanding GLA consists of a combination of Office and Retail space.

Mall
   Retail GLA
   Office GLA
   Total Mall &
Freestanding GLA
Arsenal Mall   204,669   105,807   310,476
Fashion Mall at Keystone at the Crossing, The   378,636   30,042   408,678
Greendale Mall   178,802   119,860   298,662
King of Prussia Mall   1,061,060   13,696   1,074,756
Lehigh Valley Mall   491,154   11,754   502,908
Menlo Park Mall   705,679   50,432   756,111
Oak Court Mall   188,434   129,941   318,375
O'Hare International Center   12,838   482,708   495,546
Oxford Valley Mall   399,116   110,558   509,674
River Oaks Center   426,168   118,055   544,223
Riverway   24,809   794,392   819,201
Copley Place   263,058   846,822   1,109,880
Fashion Centre at Pentagon City, The   345,890   169,089   514,979

26

            

            The following summarizes our investments in Europe and the countries of real estate ownership and operation as of December 31, 2003:

Investment
   Ownership
Interest
   Properties
open and
operating
   Countries
Gallerie Commerciali Italia, S.p.A.   49.0 % 38   Italy
European Retail Enterprises ("ERE"), B.V.   35.2 % 9   France, Poland, Portugal

            In addition, we jointly hold with a third party an interest in one parcel of land for development near Paris, France outside of these two joint ventures. ERE also operates through a wholly-owned subsidiary Groupe BEG, S.A. ("BEG"). ERE and BEG are fully integrated European retail real estate developers, lessors and managers.

            Our properties in Europe consist primarily of hypermarket anchored shopping centers. Substantially all of our European properties are anchored by either the hypermarket retailer Auchan, primarily in Italy, who is affiliated with our partner in GCI, The Rinascente Group, or are anchored by the hypermarket Carrefour in France, Poland, and Portugal. Certain of these properties are subject to leaseholds that entitle the lessor to receive substantially all the economic benefits of the portion of the property subject to the leasehold.

            As of December 31, 2003, our European properties were approximately 99.3% occupied. These properties contain an aggregate of approximately 8.9 million square feet of GLA, of which approximately 3.8 million square feet is Owned GLA.

27

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 European Properties

 
    
    
    
    
    
   Gross Leasable Area (1)
    
 
   Property Name
   City (Metropolitan area)
   Ownership Interest
   Our Percentage Interest
   Year Built
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
    FRANCE                        
1.   Bay 2   Torcy (Paris)   Freehold   35.2 % 2003   132,396   408,910   541,306   Carrefour, Leroy Merlin
2.   Bel'Est   Bagnolet (Paris)   Freehold   12.3 % 1992   150,695   62,980   213,675   Auchan
3.   Villabé A6   Villabé (Paris)   Freehold   5.3 % 1992   102,257   104,507   206,764   Carrefour
                       
 
 
   
        Subtotal France           385,348   576,397   961,745    

 
 
ITALY
 
 
 
 
 
 
 
 
 
 
 
 
1.   Ancona — Senigallia   Senigallia (Ancona)   Freehold   49.0 % 1995   41,193   41,581   82,774   Cityper
2.   Ascoli Piceno — Grottammare   Grottammare (Ascoli Piceno)   Freehold   49.0 % 1995   38,901   55,929   94,830   Cityper
3.   Ascoli Piceno — Porto Sant'Elpidio   Porto Sant'Elpidio (Ascoli Piceno)   Freehold   49.0 % 1999   47,986   114,259   162,245   Cityper
4.   Bari — Casamassima   Casamassima (Bari)   Freehold   49.0 % 1995   159,015   388,825   547,840   Auchan, Coin, Upim, Leroy Merlin, Decathlon
5.   Brescia — Mazzano   Mazzano (Brescia)   Freehold/Leasehold (2)   49.0 % 1994   103,290   127,359   230,649   Auchan, Bricocenter, Upim
6.   Cagliari — Santa Gilla   Cagliari   Freehold/Leasehold (2)   49.0 % 1992   75,939   114,754   190,693   Auchan, Bricocenter
7.   Catania — La Rena   Catania   Freehold   49.0 % 1998   124,065   22,077   146,142   Auchan
8.   Milano — Rescaldina   Rescaldina (Milano)   Freehold   49.0 % 2000   165,108   212,017   377,125   Auchan, Bricocenter, Decathlon, Upim
9.   Milano — Vimodrone   Vimodrone (Milano)   Freehold   49.0 % 1989   110,384   80,202   190,586   Auchan, Bricocenter
10.   Napoli — Pompei   Pompei (Napoli)   Freehold   49.0 % 1990   74,314   17,147   91,461   Auchan
11.   Padova   Padova   Freehold   49.0 % 1989   73,324   32,485   105,809   Auchan
12.   Palermo   Palermo   Freehold   49.0 % 1990   73,065   9,849   82,914   Auchan
13.   Pesaro — Fano   Fano (Pesaro)   Freehold   49.0 % 1994   56,274   55,951   112,225   Auchan
14.   Pescara   Pescara   Freehold   49.0 % 1998   96,337   65,186   161,523   Auchan, Upim
15.   Pescara — Cepagatti   Cepagatti (Pescara)   Freehold   49.0 % 2001   80,213   189,617   269,830   Auchan
16.   Piacenza — San Rocco al Porto   San Rocco al Porto (Piacenza)   Freehold   49.0 % 1992   104,485   20,419   124,904   Auchan, Flunch
17.   Roma — Collatina   Collatina (Roma)   Freehold   49.0 % 1999   59,524   4,101   63,625   Auchan
18.   Sassari — Predda Niedda   Predda Niedda (Sassari)   Freehold/Leasehold (2)   49.0 % 1990   56,263   107,779   164,042   Auchan, Bricocenter, Upim
19.   Taranto   Taranto   Freehold   49.0 % 1997   75,240   126,508   201,748   Auchan, Bricocenter, Upim
20.   Torino   Torino   Freehold   49.0 % 1989   105,056   66,682   171,738   Auchan, Upim
21.   Torino — Venaria   Venaria (Torino)   Freehold   49.0 % 1982   101,557   64,045   165,602   Auchan, Bricocenter
22.   Venezia — Mestre   Mestre (Venezia)   Freehold   49.0 % 1995   114,076   132,644   246,720   Auchan
23.   Vicenza   Vicenza   Freehold   49.0 % 1995   78,415   20,064   98,479   Auchan
24.   Brindisi — Mesagne   Mesagne (Brindisi)   Freehold   49.0 % 2003   88,049   140,598   228,647   Auchan
25.   Ancona   Ancona   Leasehold (3)   49.0 % 1993   82,947   82,333   165,280   Auchan, Upim
26.   Bergamo   Bergamo   Leasehold (3)   49.0 % 1976   103,011   16,921   119,932   Auchan
27.   Brescia — Concesio   Concesio (Brescia)   Leasehold (3)   49.0 % 1972   89,932   27,566   117,498   Auchan
28.   Cagliari — Marconi   Cagliari   Leasehold (3)   49.0 % 1994   83,549   109,943   193,492   Auchan, Bricocenter
29.   Catania — Misterbianco   Misterbianco (Catania)   Leasehold (3)   49.0 % 1989   83,259   15,984   99,243   Auchan
30.   Merate — Lecco   Merate (Lecco)   Leasehold (3)   49.0 % 1976   73,496   88,501   161,997   Auchan, Bricocenter
31.   Milano — Cinisello — Balsamo   Cinisello — Balsamo (Milano)   Leasehold (3)   49.0 % 1993   68,426   18,589   87,015   Auchan
32.   Milano — Nerviano   Nerviano (Milano)   Leasehold (3)   49.0 % 1991   83,840   27,782   111,622   Auchan
33.   Napoli — Mugnano di Napoli   Mugnano di Napoli   Leasehold (3)   49.0 % 1992   97,952   94,852   192,804   Auchan, Bricocenter, Upim
34.   Olbia   Olbia   Leasehold (3)   49.0 % 1993   48,976   48,814   97,790   Auchan
35.   Roma — Casalbertone   Roma   Leasehold (3)   49.0 % 1998   62,667   84,927   147,594   Auchan, Upim
36.   Sassari — Centro Azuni   Sassari   Leasehold (3)   49.0 % 1995   —   35,564   35,564    
37.   Torino — Rivoli   Rivoli (Torino)   Leasehold (3)   49.0 % 1986   61,785   32,346   94,131   Auchan
38.   Verona — Bussolengo   Bussolengo (Verona)   Leasehold (3)   49.0 % 1975   89,319   75,326   164,645   Auchan, Bricocenter
                       
 
 
   
        Subtotal Italy           3,131,232   2,969,526   6,100,758    

28

SIMON PROPERTY GROUP, INC.
PROPERTY TABLE
 European Properties

 
    
    
    
    
    
   Gross Leasable Area (1)
    
 
   Property Name
   City (Metropolitan area)
   Ownership Interest
   Our Percentage Interest
   Year Built
   Anchor
   Mall & Freestanding
   Total
   Retail Anchors and Major Tenants
    POLAND                        
1.   Borek Shopping Center   Wroclaw   Freehold   35.2 % 1999   119,942   129,393   249,335   Carrefour
2.   Dabrowka Shopping Center   Katowice   Freehold   35.2 % 1999   120,986   172,868   293,854   Carrefour, Castorama
3.   Turzyn Shopping Center   Szczecin   Freehold   35.2 % 2001   87,188   120,943   208,131   Carrefour
4.   Wilenska Station Shopping Center   Warsaw   Freehold   35.2 % 2002   92,688   215,935   308,623   Carrefour
5.   Zakopianka Shopping Center   Krakow   Freehold   35.2 % 1998   120,190   432,688   552,878   Carrefour, Castorama
                       
 
 
   
        Subtotal Poland           540,994   1,071,827   1,612,821    

 
 
PORTUGAL
 
 
 
 
 
 
 
 
 
 
 
 
1.   Minho center   Braga (Porto)   Leasehold (3)   35.2 % 1997   120,018   101,622   221,640   Carrefour
                       
 
 
   
        TOTAL EUROPEAN ASSETS           4,177,592   4,719,372   8,896,964    
                       
 
 
   

FOOTNOTES:

(1)
All gross leasable area listed in square feet.

(2)
This property is held partially in fee and partially encumbered by a leasehold on the premise which entitles the lessor to the majority of the economics of the portion of the property subject to the leasehold.

(3)
This property is encumbered by a leasehold on the entire premises which entitles the lessor the majority of the economics of the property.

29

            We have direct or indirect ownership interests in three parcels of land held for future development, containing an aggregate of approximately 275 acres located in three states.

            The following table sets forth certain information regarding the mortgages and other debt encumbering the Properties. Substantially all of the mortgage and property related debt is nonrecourse to us.

30


MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES
As of December 31, 2003
(Dollars in thousands)

Property Name
   Interest Rate
   Face Amount
   Annual Debt Service
   Maturity Date
  
Consolidated Indebtedness:                      

Secured Indebtedness:
 
 
 
 
 
 
 
 
 
 
 
Simon Property Group, LP:                      
Anderson Mall   6.20 % $ 29,763   $ 2,216   10/10/12  
Arsenal Mall — 1   6.75 %   32,977     2,724   09/28/08  
Arsenal Mall — 2   8.20 %   1,796     286   05/05/16  
Battlefield Mall   4.60 %   100,000     4,603   (2) 07/01/13  
Biltmore Square   7.95 %   26,000     2,067   (2) 12/11/10   (30)
Bloomingdale Court   7.78 %   28,695   (4)   2,578   11/01/09  
Bowie Mall   2.62 %  (1)   52,700     1,381   (2) 12/14/05   (3)
Brunswick Square   2.62 %  (1)   45,000     1,179   (2) 06/12/05   (3)
Century III Mall   6.20 %   87,859   (10)   6,541   10/10/12  
Chesapeake Center   8.44 %   6,563   (32)   554   (2) 06/15/05   (30)
Chesapeake Square   3.87 %  (13)   47,000     1,819   (2) 07/01/06   (3)
Cielo Vista Mall — 1   9.38 %   51,033   (5)   5,828   05/01/07  
Cielo Vista Mall — 2   8.13 %   675     376   11/01/05  
Cielo Vista Mall — 3   6.76 %   36,614   (5)   3,039   05/01/07  
CMBS Loan — Fixed (encumbers 7 Properties)   7.31 %   172,290   (6)   14,065   12/15/04   (30)
CMBS Loan — Variable (encumbers 7 Properties)   6.20 %  (7)   48,157   (6)   1,722   12/15/04   (30)
College Mall — 1   7.00 %   37,013   (8)   3,908   01/01/09  
College Mall — 2   6.76 %   11,281   (8)   935   01/01/09  
Copley Place   7.44 %   180,836     16,266   08/01/07  
Coral Square   8.00 %   88,946     8,065   10/01/10  
Crossroads Mall   6.20 %   44,127     3,285   10/10/12  
Crystal River   7.63 %   15,867     1,385   11/11/10   (30)
DeKalb Mall   9.35 %   2,711     699   10/01/04  
Forest Mall   6.20 %   17,671   (11)   1,316   10/10/12  
Forest Plaza   7.78 %   15,738   (4)   1,414   11/01/09  
Forum Shops at Caesars, The   4.78 %   550,000     26,312   (2) 12/01/10  
Greenwood Park Mall — 1   7.00 %   31,000   (8)   3,273   01/01/09  
Greenwood Park Mall — 2   6.76 %   58,284   (8)   4,831   01/01/09  
Grove at Lakeland Square, The   8.44 %   3,750   (32)   317   (2) 06/15/05   (30)
Gulf View Square   8.25 %   34,260     3,652   10/01/06  
Henderson Square   6.94 %   15,625     1,270   07/01/11  
Highland Lakes Center   6.20 %   16,288   (10)   1,213   10/10/12  
Ingram Park Mall   6.99 %   82,423   (24)   6,724   08/11/11  
Jefferson Valley Mall   2.37 %  (1)   60,000     1,422   (2) 01/11/04  
Keystone at the Crossing   7.85 %   60,518     5,642   07/01/27  
Knoxville Center   6.99 %   62,415   (24)   5,092   08/11/11  
Lake View Plaza   7.78 %   20,921   (4)   1,880   11/01/09  
Lakeline Mall   7.65 %   68,549     6,300   05/01/07  
Lakeline Plaza   7.78 %   22,937   (4)   2,061   11/01/09  
Lincoln Crossing   7.78 %   3,167   (4)   285   11/01/09  
Longview Mall   6.20 %   33,070   (10)   2,462   10/10/12  
Markland Mall   6.20 %   23,397   (11)   1,742   10/10/12  
Matteson Plaza   7.78 %   9,213   (4)   828   11/01/09  
McCain Mall — 1   9.38 %   23,829   (5)   2,721   05/01/07  
McCain Mall — 2   6.76 %   16,900   (5)   1,402   05/01/07  
Melbourne Square   7.42 %   36,595     3,374   02/01/05  
Midland Park Mall   6.20 %   34,157   (11)   2,543   10/10/12  
Muncie Plaza   7.78 %   7,965   (4)   716   11/01/09  
North East Mall   2.50 %  (1)   140,000     3,493   (2) 05/21/04  
Northlake Mall   6.99 %   72,003   (24)   5,874   08/11/11  
Oxford Valley Mall   6.76 %   86,418     7,801   01/10/11  
Paddock Mall   8.25 %   27,248     2,905   10/01/06  
Palm Beach Mall   6.20 %   54,641     4,068   10/10/12  
Penn Square Mall   7.03 %   71,319     6,003   03/01/09   (30)
Port Charlotte Town Center   7.98 %   53,250     4,249   (2) 12/11/10   (30)
Raleigh Springs Mall   3.80 %  (31)   11,000     418   (2) 12/09/05  
Regency Plaza   7.78 %   4,318   (4)   388   11/01/09  
                       

31

Richmond Towne Square   6.20 %   47,977   (11)   3,572   10/10/12  
Riverway   2.27 %  (18)   110,000     2,497   (2) 10/01/06   (3)
St. Charles Towne Plaza   7.78 %   27,639   (4)   2,483   11/01/09  
St. Johns Town Center   2.37 %  (1)   37,500     889   (2) 03/02/04  
Stanford Shopping Center   3.60 %  (34)   220,000     7,920   (2) 09/11/08  
Sunland Park Mall   8.63 %  (14)   37,229     3,773   01/01/26  
Tacoma Mall   7.00 %   131,903     10,778   10/01/11  
Terrace at Florida Mall, The   8.44 %   4,688   (32)   396   (2) 06/15/05   (30)
Tippecanoe Mall — 1   8.45 %   41,676     4,647   01/01/05  
Tippecanoe Mall — 2   6.81 %   15,049     1,253   01/01/05  
Towne East Square — 1   7.00 %   48,935   (8)   5,167   01/01/09  
Towne East Square — 2   6.81 %   23,513   (8)   1,958   01/01/09  
Towne West Square   6.99 %   53,952   (24)   4,402   08/11/11  
Treasure Coast Square — 1   7.42 %   50,254     3,729   (2) 01/01/06  
Treasure Coast Square — 2   8.06 %   11,736     946   (2) 01/01/06  
Trolley Square   9.03 %   29,133     2,880   08/01/10   (30)
University Park Mall   7.43 %   58,799     4,958   10/01/07  
Valle Vista Mall — 1   9.38 %   31,561   (5)   3,604   05/01/07  
Valle Vista Mall — 2   6.81 %   7,515   (5)   626   05/01/07  
Waterford Lakes   2.42 %  (1)   68,000     1,646   (2) 08/16/04  
West Ridge Plaza   7.78 %   5,567   (4)   500   11/01/09  
White Oaks Mall   2.22 %  (1)   48,563     1,078   (2) 02/25/08   (3)
White Oaks Plaza   7.78 %   16,987   (4)   1,526   11/01/09  
Wolfchase Galleria   7.80 %   74,437     6,911   06/30/07  
       
           
  Total Consolidated Secured Indebtedness       $ 4,179,385            

Unsecured Indebtedness:
 
 
 
 
 
 
 
 
 
 
 
Simon Property Group, LP:                      
Unsecured Revolving Credit Facility   1.77 %  (16) $ 327,901   $ 5,804   (2) 04/16/06   (3)
Medium Term Notes — 1   7.13 %   100,000     7,125   (15) 06/24/05  
Medium Term Notes — 2   7.13 %   180,000     12,825   (15) 09/20/07  
SPG, L.P. Unsecured Term Loan — 1   1.92 %  (1)   65,000     1,248   (2) 03/15/04  
SPG, L.P. Unsecured Term Loan — 2   1.77 %  (1)   150,000     2,655   (2) 02/28/04  
SPG, L.P. Unsecured Euro Term Loan   2.70 %  (9)   204,679     5,527   (2) 12/16/06   (3)
Unsecured Notes — 1   6.88 %   250,000     17,188   (15) 11/15/06  
Unsecured Notes — 2A   6.75 %   100,000     6,750   (15) 07/15/04  
Unsecured Notes — 2B   7.00 %   150,000     10,500   (15) 07/15/09  
Unsecured Notes — 3   6.88 %   150,000     10,313   (15) 10/27/05  
Unsecured Notes — 4B   6.75 %   300,000     20,250   (15) 06/15/05  
Unsecured Notes — 4C   7.38 %   200,000     14,750   (15) 06/15/18  
Unsecured Notes — 5A   6.75 %   300,000     20,250   (15) 02/09/04  
Unsecured Notes — 5B   7.13 %   300,000     21,375   (15) 02/09/09  
Unsecured Notes — 6A   7.38 %   300,000     22,125   (15) 01/20/06  
Unsecured Notes — 6B   7.75 %   200,000     15,500   (15) 01/20/11  
Unsecured Notes — 7   6.38 %   750,000     47,813   (15) 11/15/07  
Unsecured Notes — 8A   6.35 %   350,000     22,225   (15) 08/28/12  
Unsecured Notes — 8B   5.38 %   150,000     8,063   (15) 08/28/08  
Unsecured Notes — 9A   4.88 %   300,000     14,625   (15) 03/18/10  
Unsecured Notes — 9B   5.45 %   200,000     10,900   (15) 03/15/13  
Mandatory Par Put Remarketed Securities   7.00 %   200,000     14,000   (15) 06/15/08   (17)
Floating Rate Mandatory Extension Notes   1.92 %  (12)   113,100     2,172   (2) 11/15/14  
       
           
          5,340,680            

Shopping Center Associates, subsidiary:
 
 
 
 
 
 
 
 
 
 
 
Unsecured Notes — SCA 1   6.75 %   150,000     10,125   (15) 01/15/04  
Unsecured Notes — SCA 2   7.63 %   110,000     8,388   (15) 05/15/05  
       
           
          260,000            
                       

32


The Retail Property Trust, subsidiary:
 
 
 
 
 
 
 
 
 
 
 
Unsecured Notes — CPI 3   7.75 %   150,000     11,625   (15) 08/15/04  
Unsecured Notes — CPI 4   7.18 %   75,000     5,385   (15) 09/01/13  
Unsecured Notes — CPI 5   7.88 %   250,000     19,688   (15) 03/15/16  
       
           
          475,000            
       
           
  Total Consolidated Unsecured Indebtedness       $ 6,075,680            
       
           
  Total Consolidated Indebtedness at Face Amounts       $ 10,255,065            
  Fair Value Interest Rate Swaps         1,195   (28)          
  Net Premium on Indebtedness         36,591            
  Net Discount on Indebtedness         (26,463 )          
       
           
  Total Consolidated Indebtedness       $ 10,266,388   (23)          
       
           

Joint Venture Indebtedness:
 
 
 
 
 
 
 
 
 
 
 

Secured Indebtedness:
 
 
 
 
 
 
 
 
 
 
 
Simon Property Group, LP:                      
Apple Blossom Mall   7.99 % $ 39,567   $ 3,607   09/10/09  
Atrium at Chestnut Hill   6.89 %   47,812     3,880   03/11/11   (30)
Auburn Mall   7.99 %   46,322     4,222   09/10/09  
Aventura Mall — A   6.55 %   141,000     9,231   (2) 04/06/08  
Aventura Mall — B   6.60 %   25,400     1,675   (2) 04/06/08  
Aventura Mall — C   6.89 %   33,600     2,314   (2) 04/06/08  
Avenues, The   5.29 %   79,260     5,325   04/01/13  
Bangor Mall   7.06 %   24,051     2,302   12/01/07  
Cape Cod Mall   6.80 %   97,222     7,821   03/11/11  
Circle Centre Mall   5.02 %   79,268     5,165   04/11/13  
Clay Terrace Partners   2.87 %  (1)   22,847     656   (2) 02/15/04  
CMBS Loan — Fixed (encumbers 13 Properties)   7.52 %   357,100   (19)   26,871   (2) 05/15/06  
CMBS Loan — 1 Floating (encumbers 13 Properties)   1.53 %  (1)   186,500   (19)   2,853   (2) 05/15/06  
CMBS Loan — 2 Floating (encumbers 13 Properties)   1.49 %  (1)   81,400   (19)   1,212   (2) 05/15/06  
Cobblestone Court   7.64 %   6,178   (20)   472   (2) 01/01/06  
Crystal Court   7.64 %   4,044   (20)   309   (2) 01/01/06  
Crystal Mall   5.62 %   104,344     7,319   09/11/12   (30)
Dadeland Mall   6.75 %   196,290     15,566   02/11/12   (30)
Emerald Square Mall   5.13 %   143,548     9,479   03/01/13  
European Retail Enterprises — Fixed Components   6.49 %   72,363     10,821   01/17/13  
European Retail Enterprises — Variable Components   4.27 %  (29)   188,834     11,428   09/05/13  
Fairfax Court   7.64 %   10,318   (20)   788   (2) 01/01/06  
Fashion Centre Pentagon Retail   6.63 %   163,085     12,838   09/11/11   (30)
Fashion Centre Pentagon Office   2.62 %  (1)   33,000     865   (2) 09/10/04  
Fashion Valley Mall — 1   6.49 %   166,263     13,255   10/11/08   (30)
Fashion Valley Mall — 2   6.58 %   29,124     1,915   (2) 10/11/08   (30)
Florida Mall, The   7.55 %   262,948     22,766   12/10/10  
Galleria Commerciali Italia   3.30 %  (33)   618,294     20,405   (2) 06/22/05   (3)
Gaitway Plaza   7.64 %   7,348   (20)   561   (2) 01/01/06  
Great Northeast Plaza   9.04 %   16,751     1,744   06/01/06  
Greendale Mall   8.23 %   40,713     3,779   12/10/06  
Gwinnett Place — 1   7.54 %   37,454     3,412   04/01/07  
Gwinnett Place — 2   7.25 %   82,568     7,070   04/01/07  
Highland Mall   6.83 %   69,297     5,571   07/11/11  
Houston Galleria — 1   7.93 %   217,595     19,684   12/01/05   (30)
Houston Galleria — 2   2.62 %  (1)   83,558     2,189   (2) 06/25/07   (3)
Indian River Commons   7.58 %   8,136     710   11/01/04  
Indian River Mall   7.58 %   45,145     3,941   11/01/04  
King of Prussia — 1   7.49 %   192,940     23,183   01/01/17  
King of Prussia — 2   8.53 %   13,259     1,685   01/01/17  
Liberty Tree Mall   5.22 %   35,000     1,827   (2) 10/11/13  
Mall at Rockingham   7.88 %   96,938     8,705   09/01/07  
Mall at Chestnut Hill   8.45 %   14,696     1,396   02/02/10  
                       

33

Mall of America   1.65 %  (21)   278,429     4,608   (2) 03/10/05   (3)
MOA Entertainment   1.65 %  (21)   33,571     556   (2) 03/10/05   (3)
Mall of Georgia   7.09 %   200,000     14,180   (2) 07/01/10  
Mall of Georgia Crossing   3.12 %  (1)   33,214     2,824   06/09/06  
Mall of New Hampshire — 1   6.96 %   100,395     8,345   10/01/08   (30)
Mall of New Hampshire — 2   8.53 %   8,239     786   10/01/08  
Metrocenter   8.45 %   28,777     3,031   02/28/08  
Miami International Mall   5.35 %   97,500     5,216   (2) 10/01/13  
Montgomery Mall   7.48 %   27,000     2,020   (2) 08/10/06  
Montreal Forum — Canada   5.76 %  (22)   43,159     2,486   (2) 08/08/06   (3)
Northfield Square   3.62 %  (25)   34,670     1,255   (2) 04/01/04  
Northshore Mall   9.05 %   161,000     14,571   (2) 05/14/04  
Quaker Bridge Mall   7.03 %   24,077     2,407   04/01/16  
Plaza at Buckland Hills, The   7.64 %   17,678   (20)   1,351   (2) 01/01/06  
Ridgewood Court   7.64 %   7,978   (20)   610   (2) 01/01/06  
Royal Eagle Plaza   7.64 %   7,920   (20)   605   (2) 01/01/06  
Seminole Towne Center   3.62 %  (26)   69,355     3,445   07/01/05   (3)
Shops at Sunset Place, The   4.12 %  (1)   95,315     3,927   (2) 10/15/04  
Smith Haven Mall   7.86 %   115,000     9,039   (2) 06/01/06  
Solomon Pond   3.97 %   114,000     6,505   08/01/13  
Source, The   6.65 %   124,000     8,246   (2) 03/11/09  
Square One   6.73 %   93,363     7,380   03/11/12  
Town Center at Cobb — 1   7.54 %   47,718     4,347   04/01/07  
Town Center at Cobb — 2   7.25 %   62,837     5,381   04/01/07  
Village Park Plaza   7.64 %   8,482   (20)   648   (2) 01/01/06  
West Town Corners   7.64 %   10,328   (20)   789   (2) 01/01/06  
West Town Mall   6.90 %   76,000     5,244   (2) 05/01/08   (30)
Westchester, The — 1   8.74 %   144,712     14,478   09/01/05  
Westchester, The — 2   7.20 %   51,178     4,399   09/01/05  
Westin Hotel — NYC   3.87 %  (1)   182,500     7,063   (2) 06/05/06  
Westland Park Plaza   7.64 %   4,950   (20)   378   (2) 01/01/06  
Whitehall Mall   6.77 %   14,149     1,282   11/01/08  
Willow Knolls Court   7.64 %   6,488   (20)   496   (2) 01/01/06  
Woodland Hills Mall   7.00 %   85,244     7,185   01/01/09   (30)
Yards Plaza, The   7.64 %   8,270   (20)   632   (2) 01/01/06  
       
           
  Total Joint Venture Secured Indebtedness at Face Amounts       $ 6,638,876            
  Net Premium on Indebtedness       $ 4,176            
       
           
  Total Joint Venture Indebtedness       $ 6,643,052   (27)          
       
           

(Footnotes on following page)

34

(Footnotes for preceding pages)

(1)
Variable rate loans based on LIBOR plus interest rate spreads ranging from 37 bps to 300 bps. LIBOR as of December 31, 2003 was 1.12%.

(2)
Requires monthly payment of interest only.

(3)
Includes applicable extension available at the Operating Partnership's option.

(4)
Loans secured by these eleven Properties are cross-collateralized and cross-defaulted.

(5)
Loans secured by these three Properties are cross-collateralized and cross-defaulted.

(6)
Secured by cross-collateralized and cross-defaulted mortgages encumbering seven of the Properties (Bay Park Square, Boardman Plaza, Cheltenham Square, De Soto Square, Upper Valley Mall, Washington Square, and West Ridge Mall).

(7)
LIBOR + 0.405%, through an interest rate protection agreement is effectively fixed at an all-in-one rate of 6.200%.

(8)
Loans secured by these three Properties are cross-collateralized and cross-defaulted.

(9)
Euribor + 0.600%. Euros 200 million term loan. As of December 31, 2003, Euros 37 million available after outstanding borrowings.

(10)
Loans secured by these three Properties are cross-collateralized.

(11)
Loans secured by these four Properties are cross-collateralized.

(12)
LIBOR + .8000% through November 15, 2004 at which time callable at our option or remarketed and resold via a competitive bid proces.

(13)
LIBOR + 2.750%, with LIBOR capped at 6.500%.

(14)
Lender also participates in a percentage of certain gross receipts above a specified base.

(15)
Requires semi-annual payments of interest only.

(16)
$1,250,000 Credit Facility. Currently, bears interest at LIBOR + 0.650% and provides for different pricing based upon the Operating Partnership's investment grade rating. Two interest rate caps currently limit LIBOR on $90,000 and $49,023 of this indebtedness to 11.530% and 12.664% respectively. As of December 31, 2003, $898,018 was available after outstanding borrowings and letters of credit. As of December 31, 2003, Euros 48.5 million was drawn on the EURO sub-tranche.

(17)
The MOPPRS have an actual maturity of June 15, 2028, but are subject to mandatory tender on June 15, 2008.

(18)
LIBOR + 1.150% with LIBOR capped at 8.100%.

(19)
These Commercial Mortgage Notes are secured by cross-collateralized mortgages encumbering thirteen Properties (Eastland Mall, Empire East, Empire Mall, Granite Run Mall, Mesa Mall, Lake Square, Lindale Mall, Northpark Mall, Southern Hills Mall, Southpark Mall, Southridge Mall, Rushmore Mall, and Valley Mall). A weighted average rate is used for each component. The floating components have interest protection agreements which caps LIBOR at 10.630% and 11.830% respectively.

(20)
Loans secured by these twelve Properties are cross-collateralized and cross-defaulted.

(21)
LIBOR + 0.5348%, with LIBOR capped at 8.716%.

(22)
Canadian Prime + 3.000%.

(23)
Our share of consolidated indebtedness was $10,141,126.

(24)
Loans secured by these four Properties are cross-collateralized and cross-defaulted.

(25)
LIBOR + 2.500%, with LIBOR capped at 8.500%.

(26)
LIBOR + 2.500%, with LIBOR capped at 8.000%.

(27)
Our share of joint venture indebtedness was $2,739,630.

(28)
Represents the fair market value of interest rate swaps entered into by the Operating Partnership.

(29)
EURIBOR + 2.169%

(30)
The maturity date shown represents the Anticipated Maturity Date of the loan which is typically 10-20 years earlier than the stated Maturity Date of the loan. Should the loan not be repaid at the Anticipated Repayment Date the applicable interest rate shall increase as specified in each loan agreement.

(31)
LIBOR + 2.000%, with LIBOR floor at 1.800%.

(32)
Loans secured by these three Properties are cross-collateralized and cross-defaulted.

(33)
Debt is denominated in Euros and bears interest at Euribor + 1.200%. Debt consists of a Euros 400 million tranche which is fully drawn and a Euros 100 million tranche facility of which Euros 32.4 million is drawn.

(34)
Simultaneous with the issuance of this loan, the Operating Partnership entered into a $70 million notional amount variable rate swap agreement which is designated as a hedge against this loan. As of December 31, 2003, after including the impacts of this swap, the terms of the loan are effectively $150 million fixed at 3.60% and $70 million variable rate at 1.16%.

35


Item 3.    Legal Proceedings

            Triple Five of Minnesota, Inc., a Minnesota corporation, v. Melvin Simon, et. al. On or about November 9, 1999, Triple Five of Minnesota, Inc. 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 us. The action was later removed to federal court. 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 Operating Partnership and related entities; and (ii) a financing transaction involving a loan in the amount of $312.0 million obtained from The Chase Manhattan Bank that is secured by a mortgage placed on Mall of America's assets. The complaint, which contains twelve counts, seeks remedies of unspecified damages, rescission, constructive trust, accounting, and specific performance. Although the complaint names all defendants in several counts, we are specifically identified as a defendant in connection with the sale by Teachers. On August 12, 2002, the court granted in part and denied in part motions for partial summary judgment filed by the parties.

            Trial on all of the equitable claims in this matter began June 2, 2003. On September 10, 2003, the court issued its decision in a Memorandum and Order (the "Order"). In the Order, the court found that certain entities and individuals, breached their fiduciary duties to Triple Five. The court did not award Triple Five damages but instead awarded Triple Five equitable and other relief and imposed a constructive trust on that portion of the Mall of America owned by us. Specifically, as it relates to us, the court ordered that Triple Five was entitled to purchase from us the one-half partnership interest that we purchased from Teachers in October 1999, provided Triple Five remits to us the sum of $81.38 million within nine months of the Order. The court further held that we must disgorge all net profits that we received as a result of our ownership interest in the Mall from October 1999 to the present. The court has appointed a Special Master to determine net profits. The court also held that the current day-to-day management of the Mall remains unchanged unless and until Triple Five purchases our interest in the Mall.

            We disagree with many aspects of the Order and have appealed the Order to the United States Court of Appeals for the Eighth Circuit. We are currently working with the Special Master appointed by the court. It is not possible to provide an assurance of the ultimate outcome of the litigation.

            As a result of the Order, we recorded a $6.0 million loss that is included in "Gain (loss) on sales of assets and other, net" in the accompanying statements of operations and comprehensive income, reflecting our estimate of the financial impact to us from complying with the Order and we have ceased recording any contribution to either net income or Funds from Operations ("FFO") from Mall of America.

            We are currently not subject to any other material litigation other than routine litigation, claims and administrative proceedings arising in the ordinary course of business. We believe that such routine litigation, claims and administrative proceedings will not have a material adverse impact on our financial position or our results of operations.


Item 4.    Submission of Matters to a Vote of Security Holders

            None.

36


Part II

Item 5.    Market for the Registrant's Common Equity and Related Stockholder Matters

            Our common stock trades on the New York Stock Exchange under the symbol "SPG". The quarterly price range on the NYSE for the shares and the distributions declared per share for each quarter in the last two fiscal years are shown below:

 
   High
   Low
   Close
   Declared
Distribution
2003                  
1st Quarter   37.18   31.70   35.83   $ 0.60
2nd Quarter   40.04   35.85   39.03   $ 0.60
3rd Quarter   43.96   38.59   43.58   $ 0.60
4th Quarter   48.59   43.58   46.34   $ 0.60

2002
 
 
 
 
 
 
 
 
 
1st Quarter   33.07   28.80   32.63   $ 0.525
2nd Quarter   36.95   32.52   36.84   $ 0.550
3rd Quarter   36.84   29.40   35.73   $ 0.550
4th Quarter   35.81   31.00   34.07   $ 0.550

            There is no established public trading market for Simon Property's Class B common stock or Class C common stock. Distributions per share of the Class B and Class C common stock are identical to the common stock.

            The number of holders of record of common stock outstanding was 2,239 as of February 12, 2004. The Class B common stock is held entirely by a voting trust to which Melvin Simon, Herbert Simon, David Simon and certain of their affiliates are parties and is exchangeable on a one-for-one basis into shares of common stock, and the Class C common stock is held entirely by NID Corporation, the successor corporation of Edward J. DeBartolo Corporation, and is also exchangeable on a one-for-one basis into shares of common stock.

            Simon Property qualifies as a REIT under the Code. To maintain our status as a REIT, we are required each year to distribute to our shareholders at least 90% of our taxable income after certain adjustments. Future distributions are determined in the discretion of the Board of Directors and will depend on our actual cash flow, financial condition, capital requirements, the annual REIT distribution requirements and such other factors as our Board of Directors deem relevant.

            Simon Property offers an Automatic Dividend Reinvestment Plan for its common shares that allows shareholders, at their election, to acquire additional shares by automatically reinvesting cash dividends. Shares are acquired pursuant to the plan at a price equal to the prevailing market price of such shares, without payment of any brokerage commission or service charge.

            We issued 3,328,540 shares of Series H Variable Rate Preferred Stock on December 15, 2003 to a single institutional investor for cash proceeds in the amount of $83.2 million. We used a portion of the proceeds to fund the redemption of our 6.5% Series B Convertible Preferred Stock which were called for redemption on December 15, 2003. The Series H Preferred Stock was not registered under the Securities Act of 1933, as amended, in reliance upon the exemption contained in Section 4(2) regarding private transactions.


Item 6.    Selected Financial Data

            The information required by this item is incorporated herein by reference to the Selected Financial Data section of the 2003 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K.

37



Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

            The information required by this item is incorporated herein by reference to the Management's Discussion and Analysis of Financial Condition and Results of Operations section of the 2003 Annual Report to Shareholders filed as Exhibit 13.1 to this Form 10-K.


Item 7A.    Qualitative and Quantitative Disclosure About Market Risk

            The information required by this item is incorporated herein by reference to the Management's Discussion and Analysis of Financial Condition and Results of Operations section of the 2003 Annual Report to Shareholders under the caption "Liquidity and Capital Resources—Market Risk", filed as Exhibit 13.1 to this Form 10-K.


Item 8.    Financial Statements and Supplementary Data

            Reference is made to the Index to Financial Statements contained in Item 15.


Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

            None


Item 9A.    Controls and Procedures

            Evaluation of Disclosure Controls and Procedures.    We carried out an evaluation under the supervision and with participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our management, including the chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective as that date.

            Changes in Internal Control Over Financial Reporting.    There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the fourth quarter of 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

38


Part III

Item 10.    Directors and Executive Officers of the Registrant

            The information required by this item is incorporated herein by reference to Simon Property's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A and the information included under the caption "Executive Officers of the Registrants" in Part I hereof.


Item 11.    Executive Compensation

            The information required by this item is incorporated herein by reference to Simon Property's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A.


Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

            The information required by this item is incorporated herein by reference to Simon Property's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A.


Item 13.    Certain Relationships and Related Transactions

            The information required by this item is incorporated herein by reference to Simon Property's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A.


Item 14.    Principal Accounting Fees and Services

            The information required by this item is incorporated herein by reference to Simon Property's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A.

39


PART IV

Item 15.    Exhibits, Financial Statements, Schedules and Reports on Form 8-K

(a)
(1)    Financial Statements

            Simon Property Group, Inc.'s financial statements and independent auditors' reports are incorporated herein by reference to the financial statements and independent auditors' reports in the 2003 Annual Report to Shareholders, filed as Exhibit 13.1 to this Form 10-K.

 
    
    
   Page No.
    (2)   Financial Statement Schedules    

 
 
 
 
Report of Independent Public Accountants
 
43

 
 
 
 
Simon Property Group, Inc. Schedule III — Schedule of Real Estate and Accumulated Depreciation
 
44

 
 
 
 
Notes to Combined Schedule III
 
49

 
 
(3)
 
Exhibits
 
 

 
 
 
 
The Exhibit Index attached hereto is hereby incorporated by reference to this Item.
 
50

(b)
 
Reports on Form 8-K
 
 

 
 
 
 
Two Form 8-Ks were filed or furnished during the fourth quarter ended December 31, 2003.
 
 

 
 
 
 
On October 8, 2003 under Item 5 — Other Events and Regulation FD Disclosure, Simon Property issued a press release announcing that its joint tender offer with Westfield America, Inc. for all outstanding common shares of Taubman Centers, Inc was being withdrawn. A copy of Simon Property's press release was attached as an exhibit.
 
 

 
 
 
 
On October 31, 2003 under Item 9 — Regulation FD Disclosure, Simon Property reported that it made available additional ownership and operational information concerning Simon Property, the Operating Partnership, and the properties owned or managed as of September 30, 2003, 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, under Item 12 — Results of Operation and Financial Condition, Simon Property reported that, on October 30, 2003, it issued a press release containing information on earnings as of September 30, 2003 and other matters. A copy of the press release was included as an exhibit.
 
 

40


SIGNATURES

            Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
SIMON PROPERTY GROUP, INC.

 
By
/s/ David Simon
David Simon
Chief Executive Officer

March 12, 2004

            Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature
   Capacity
   Date

 
 
 
 
 
/s/ David Simon
David Simon		   Chief Executive Officer
And Director (Principal Executive Officer)		   March 12, 2004

/s/ Herbert Simon
Herbert Simon
 
Co-Chairman of the Board of Directors
 
March 12, 2004

/s/ Melvin Simon
Melvin Simon
 
Co-Chairman of the Board of Directors
 
March 12, 2004

/s/ Richard S. Sokolov
Richard S. Sokolov
 
President, Chief Operating Officer and Director
 
March 12, 2004

/s/ Birch Bayh
Birch Bayh
 
Director
 
March 12, 2004

/s/ Melvyn E. Bergstein
Melvyn E. Bergstein
 
Director
 
March 12, 2004

/s/ Linda Walker Bynoe
Linda Walker Bynoe
 
Director
 
March 12, 2004

/s/ Pieter S. van den Berg
Pieter S. van den Berg
 
Director
 
March 12, 2004
         

41


/s/ G. William Miller
G. William Miller
 
Director
 
March 12, 2004

/s/ Fredrick W. Petri
Fredrick W. Petri
 
Director
 
March 12, 2004

/s/ J. Albert Smith, Jr.
J. Albert Smith, Jr.
 
Director
 
March 12, 2004

/s/ Philip J. Ward
Philip J. Ward
 
Director
 
March 12, 2004

/s/ M. Denise DeBartolo York
M. Denise DeBartolo York
 
Director
 
March 12, 2004

/s/ Stephen E. Sterrett
Stephen E. Sterrett
 
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
 
March 12, 2004

/s/ John Dahl
John Dahl
 
Senior Vice President (Principal Accounting Officer)
 
March 12, 2004

42


REPORT OF INDEPENDENT AUDITORS ON SCHEDULE

To the Board of Directors of
Simon Property Group, Inc.:

            We have audited the consolidated financial statements of Simon Property Group, Inc. and subsidiaries as of December 31, 2003, and for the year then ended, and have issued our report thereon dated February 5, 2004 (included elsewhere in this Form 10-K). Our audit also included the accompanying "Schedule III: Real Estate and Accumulated Depreciation" as of December 31, 2003, for Simon Property Group, Inc. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit.

            In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Indianapolis, Indiana
February 5, 2004

43


SCHEDULE III

SIMON PROPERTY GROUP, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
(Dollars in thousands)

 
    
   Initial Cost (Note 3)
   Cost Capitalized Subsequent to Acquisition (Note 3)
   Gross Amounts At Which
Carried At Close of Period
    
    
Name, Location
   Encumbrances
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Total (1)
   Accumulated Depreciation (2)
   Date of Construction
Regional Malls                                                        
Alton Square, Alton, IL   $ 0   $ 154   $ 7,641   $ 0   $ 10,556   $ 154   $ 18,197   $ 18,351   5,660   1993 (Note 4)
Anderson Mall, Anderson, SC     29,763     1,712     15,227     1,363     8,176     3,075     23,403     26,478   7,385   1972
Arsenal Mall, Watertown, MA     34,773     15,505     47,680     0     813     15,505     48,493     63,998   5,824   1999 (Note 4)
Aurora Mall, Aurora, CO     0     11,400     55,692     6     5,831     11,406     61,523     72,929   12,080   1998 (Note 4)
Barton Creek Square, Austin, TX     0     2,903     20,699     7,983     51,409     10,886     72,108     82,994   20,707   1981
Battlefield Mall, Springfield, MO     100,000     3,919     27,310     3,225     40,990     7,144     68,300     75,444   27,477   1970
Bay Park Square, Green Bay, WI     24,345     6,358     25,623     4,133     22,357     10,491     47,980     58,471   7,507   1980
Biltmore Square, Asheville, NC     26,000     6,641     23,582     0     1,475     6,641     25,057     31,698   5,971   1989
Bowie Town Center, Bowie, MD     52,700     2,710     65,044     235     5,619     2,945     70,663     73,608   6,627   2001
Boynton Beach Mall, Boynton Beach, FL     0     22,240     79,226     0     14,410     22,240     93,636     115,876   18,008   1985
Brea Mall, Brea, CA     0     39,500     209,202     0     8,348     39,500     217,550     257,050   33,238   1998 (Note 4)
Broadway Square, Tyler, TX     0     11,470     32,439     0     6,541     11,470     38,980     50,450   11,469   1994 (Note 4)
Brunswick Square, Brunswick, NJ     45,000     8,436     55,838     0     22,868     8,436     78,706     87,142   16,912   1973
Burlington Mall, Burlington, MA     0     46,600     303,618     0     6,255     46,600     309,873     356,473   46,610   1998 (Note 4)
Castleton Square, Indianapolis, IN     0     26,250     98,287     2,500     30,476     28,750     128,763     157,513   26,286   1972
Century III Mall, Pittsburgh, PA     87,859     17,380     102,364     10     4,123     17,390     106,487     123,877   31,917   1979
Charlottesville Fashion Square, Charlottesville, VA     0     0     54,738     0     11,399     0     66,137     66,137   11,493   1997 (Note 4)
Chautauqua Mall, Lakewood, NY     0     3,257     9,641     0     14,816     3,257     24,457     27,714   6,569   1971
Cheltenham Square, Philadelphia, PA     33,533     14,227     43,699     0     4,681     14,227     48,380     62,607   11,123   1981
Chesapeake Square, Chesapeake, VA     47,000     11,534     70,461     0     5,137     11,534     75,598     87,132   18,198   1989
Cielo Vista Mall, El Paso, TX     88,322     1,307     18,512     608     22,812     1,915     41,324     43,239   20,484   1974
College Mall, Bloomington, IN     48,294     1,003     16,245     722     21,541     1,725     37,786     39,511   15,974   1965
Columbia Center, Kennewick, WA     0     18,285     66,580     0     8,136     18,285     74,716     93,001   15,408   1987
Coral Square, Coral Springs, FL     88,946     13,556     93,720     0     1,247     13,556     94,967     108,523   22,207   1984
Cordova Mall, Pensacola, FL     0     18,633     75,880     0     3,419     18,633     79,299     97,932   14,069   1998 (Note 4)
Cottonwood Mall, Albuquerque, NM     0     11,585     68,958     0     441     11,585     69,399     80,984   19,131   1996
Crossroads Mall, Omaha, NE     44,127     881     37,263     409     30,269     1,290     67,532     68,822   18,546   1994 (Note 4)
Crystal River Mall, Crystal River, FL     15,867     5,661     20,241     0     4,463     5,661     24,704     30,365   4,913   1990
DeSoto Square, Bradenton, FL     38,094     9,380     52,716     0     6,655     9,380     59,371     68,751   13,493   1973
Eastland Mall, Tulsa, OK     0     3,124     24,035     518     7,023     3,642     31,058     34,700   12,512   1986
Edison Mall, Fort Myers, FL     0     11,529     107,381     0     6,056     11,529     113,437     124,966   20,756   1997 (Note 4)
Fashion Mall at Keystone at the Crossing, Indianapolis, IN     60,518     0     120,579     0     14,379     0     134,958     134,958   23,223   1997 (Note 4)
Forest Mall, Fond Du Lac, WI     17,671     728     4,498     0     7,415     728     11,913     12,641   4,884   1973
The Forum Shops at Caesars, Las Vegas, NV     550,000     0     276,378     0     132,332     0     408,710     408,710   28,513   1992
Great Lakes Mall, Mentor, OH     0     12,304     100,362     432     7,685     12,736     108,047     120,783   23,636   1961
Greenwood Park Mall, Greenwood, IN     89,284     2,559     23,445     5,277     70,029     7,836     93,474     101,310   27,713   1979
Gulf View Square, Port Richey, FL     34,260     13,690     39,997     2,023     14,761     15,713     54,758     70,471   11,567   1980
Haywood Mall, Greenville, SC     0     11,604     133,893     6     1,603     11,610     135,496     147,106   30,029   1998 (Note 4)
Heritage Park, Midwest City, OK     0     598     6,213     0     1,726     598     7,939     8,537   4,331   1978
Hutchinson Mall, Hutchinson, KS     0     1,412     18,411     0     3,017     1,412     21,428     22,840   8,451   1985

44


SCHEDULE III

SIMON PROPERTY GROUP, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
(Dollars in thousands)

 
    
   Initial Cost (Note 3)
   Cost Capitalized Subsequent to Acquisition (Note 3)
   Gross Amounts At Which
Carried At Close of Period
    
    
Name, Location
   Encumbrances
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Total (1)
   Accumulated Depreciation (2)
   Date of Construction
Independence Center, Independence, MO   0   5,042   45,822   2   20,461   5,044   66,283   71,327   17,273   1994 (Note 4)
Ingram Park Mall, San Antonio, TX   82,423   764   17,163   169   16,001   933   33,164   34,097   14,277   1979
Irving Mall, Irving, TX   0   6,737   17,479   2,533   29,935   9,270   47,414   56,684   21,435   1971
Jefferson Valley Mall, Yorktown Heights, NY   60,000   4,868   30,304   0   19,475   4,868   49,779   54,647   15,730   1983
Knoxville Center, Knoxville, TN   62,415   5,006   21,965   3,712   33,986   8,718   55,951   64,669   17,869   1984
La Plaza, McAllen, TX   0   1,375   9,828   6,569   30,868   7,944   40,696   48,640   11,065   1976
Lafayette Square, Indianapolis, IN   0   14,251   54,589   50   12,600   14,301   67,189   81,490   15,800   1968
Laguna Hills Mall, Laguna Hills, CA   0   28,074   55,689   0   4,944   28,074   60,633   88,707   11,522   1997 (Note 4)
Lakeline Mall, N. Austin, TX   68,549   10,383   81,568   14   1,202   10,397   82,770   93,167   18,825   1995
Lenox Square, Atlanta, GA   0   38,213   492,411   0   6,382   38,213   498,793   537,006   75,030   1998 (Note 4)
Lima Mall, Lima, OH   0   7,910   35,495   0   7,923   7,910   43,418   51,328   10,413   1965
Lincolnwood Town Center, Lincolnwood, IL   0   7,907   63,480   28   6,485   7,935   69,965   77,900   22,201   1990
Livingston Mall, Livingston, NJ   0   30,200   105,250   0   7,068   30,200   112,318   142,518   17,282   1998 (Note 4)
Longview Mall, Longview, TX   33,070   270   3,602   124   7,283   394   10,885   11,279   4,426   1978
Maplewood Mall, Minneapolis, MN   0   17,119   83,477   0   726   17,119   84,203   101,322   4,712   2002 (Note 4)
Markland Mall, Kokomo, IN   23,397   0   7,568   0   7,133   0   14,701   14,701   4,884   1968
Mc Cain Mall, N. Little Rock, AR   40,729   0   9,515   0   9,221   0   18,736   18,736   10,732   1973
Melbourne Square, Melbourne, FL   36,595   15,762   55,891   0   12,357   15,762   68,248   84,010   13,136   1982
Menlo Park Mall, Edison, NJ   0   65,684   223,252   0   18,295   65,684   241,547   307,231   43,009   1997 (Note 4)
Midland Park Mall, Midland, TX   34,157   687   9,213   0   9,300   687   18,513   19,200   7,761   1980
Miller Hill Mall, Duluth, MN   0   2,537   18,092   0   21,141   2,537   39,233   41,770   14,564   1973
Muncie Mall, Muncie, IN   0   172   5,849   52   23,258   224   29,107   29,331   8,648   1970
Nanuet Mall, Nanuet, NY   0   27,548   162,993   0   2,119   27,548   165,112   192,660   24,889   1998 (Note 4)
North East Mall, Hurst, TX   140,000   912   13,340   19,010   141,380   19,922   154,720   174,642   30,563   1971
Northgate Mall, Seattle, WA   0   28,626   115,992   0   28,729   28,626   144,721   173,347   22,968   1987
Northlake Mall, Atlanta, GA   72,003   33,400   98,035   0   3,338   33,400   101,373   134,773   16,075   1998 (Note 4)
Northwoods Mall, Peoria, IL   0   1,200   12,779   1,449   29,071   2,649   41,850   44,499   17,335   1983
Oak Court Mall, Memphis, TN   0   15,673   57,304   0   3,998   15,673   61,302   76,975   11,569   1997 (Note 4)
Ocean County Mall, Toms River, NJ   0   20,404   124,945   0   15,540   20,404   140,485   160,889   19,725   1998 (Note 4)
Orange Park Mall, Jacksonville, FL   0   13,345   65,121   0   18,062   13,345   83,183   96,528   21,991   1994 (Note 4)
Orland Square, Orland Park, IL   0   35,514   129,906   0   11,905   35,514   141,811   177,325   25,445   1997 (Note 4)
Oxford Valley Mall, Langhorne, PA   86,418   25,391   112,312   0   35   25,391   112,347   137,738   16,789   2003 (Note 4)
Paddock Mall, Ocala, FL   27,248   11,198   39,727   0   7,146   11,198   46,873   58,071   9,138   1980
Palm Beach Mall, West Palm Beach, FL   54,641   11,962   112,741   0   37,095   11,962   149,836   161,798   38,185   1967
Penn Square Mall, Oklahoma City, OK   71,319   2,043   156,808   0   14,607   2,043   171,415   173,458   13,642   2002 (Note 4)
Phipps Plaza, Atlanta, GA   0   19,200   210,610   0   7,728   19,200   218,338   237,538   33,227   1998 (Note 4)
Port Charlotte Town Center, Port Charlotte, FL   53,250   5,561   59,387   0   10,741   5,561   70,128   75,689   16,215   1989
Prien Lake Mall, Lake Charles, LA   0   1,842   2,813   3,091   35,602   4,933   38,415   43,348   11,938   1972
Raleigh Springs Mall, Memphis, TN   11,000   9,137   28,604   0   12,166   9,137   40,770   49,907   9,799   1971

45


SCHEDULE III

SIMON PROPERTY GROUP, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
(Dollars in thousands)

 
    
   Initial Cost (Note 3)
   Cost Capitalized Subsequent to Acquisition (Note 3)
   Gross Amounts At Which
Carried At Close of Period
    
    
Name, Location
   Encumbrances
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Total (1)
   Accumulated Depreciation (2)
   Date of Construction
Richardson Square, Dallas, TX   0   4,532   6,329   1,268   11,567   5,800   17,896   23,696   5,097   1977
Richmond Town Square, Richmond Heights, OH   47,977   2,600   12,112   0   60,793   2,600   72,905   75,505   18,393   1966
River Oaks Center, Calumet City, IL   0   30,884   101,224   0   6,362   30,884   107,586   138,470   18,955   1997 (Note 4)
Rockaway Townsquare, Rockaway, NJ   0   46,742   212,257   0   6,784   46,742   219,041   265,783   32,734   1998 (Note 4)
Rolling Oaks Mall, San Antonio, TX   0   2,577   38,609   0   2,223   2,577   40,832   43,409   17,817   1988
Roosevelt Field, Garden City, NY   0   165,006   702,008   2,117   12,194   167,123   714,202   881,325   107,564   1998 (Note 4)
Ross Park Mall, Pittsburgh, PA   0   23,350   90,394   0   23,830   23,350   114,224   137,574   30,172   1986
Santa Rosa Plaza, Santa Rosa, CA   0   10,400   87,864   0   3,831   10,400   91,695   102,095   14,330   1998 (Note 4)
Shops at Mission Viejo Mall, Mission Viejo, CA   0   9,139   54,445   7,491   144,399   16,630   198,844   215,474   38,533   1979
South Hills Village, Pittsburgh, PA   0   23,453   125,840   0   6,786   23,453   132,626   156,079   23,165   1997 (Note 4)
South Shore Plaza, Braintree, MA   0   101,200   301,495   0   8,280   101,200   309,775   410,975   46,814   1998 (Note 4)
Southern Park Mall, Youngstown, OH   0   16,982   77,767   97   18,906   17,079   96,673   113,752   22,191   1970
Southgate Mall, Yuma, AZ   0   1,817   7,974   0   3,577   1,817   11,551   13,368   4,730   1988
SouthPark Mall, Charlotte, NC   0   32,141   193,686   100   63,446   32,241   257,132   289,373   12,469   2002 (Note 4)
St Charles Towne Center Waldorf, MD   0   7,710   52,974   1,180   12,489   8,890   65,463   74,353   24,756   1990
Standford Shopping Center, Palo Alto, CA   220,000   0   359,666   0   13   0   359,679   359,679   4,046   2003 (Note 4)
Summit Mall, Akron, OH   0   15,374   51,137   0   17,006   15,374   68,143   83,517   14,732   1965
Sunland Park Mall, El Paso, TX   37,229   2,896   28,900   0   3,997   2,896   32,897   35,793   14,150   1988
Tacoma Mall, Tacoma, WA   131,903   38,662   125,826   0   20,300   38,662   146,126   184,788   30,866   1987
Tippecanoe Mall, Lafayette, IN   56,725   2,897   8,474   5,517   35,703   8,414   44,177   52,591   20,731   1973
Town Center at Boca Raton
Boca Raton, FL		   0   64,200   307,511   0   62,510   64,200   370,021   434,221   55,230   1998 (Note 4)
Towne East Square, Wichita, KS   72,448   9,113   18,479   2,042   21,968   11,155   40,447   51,602   17,840   1975
Towne West Square, Wichita, KS   53,952   972   21,203   76   7,185   1,048   28,388   29,436   12,477   1980
Treasure Coast Square, Jensen Beach, FL   61,990   11,124   73,108   3,067   17,181   14,191   90,289   104,480   19,353   1987
Trolley Square, Salt Lake City, UT   29,133   4,827   27,512   435   10,931   5,262   38,443   43,705   13,347   1986
Tyrone Square, St. Petersburg, FL   0   15,638   120,962   0   15,227   15,638   136,189   151,827   28,888   1972
University Mall, Little Rock, AR   0   123   17,411   0   760   123   18,171   18,294   7,753   1967
University Mall, Pensacola, FL   0   4,706   26,657   0   4,136   4,706   30,793   35,499   8,926   1994
University Park Mall, Mishawaka, IN   58,799   15,105   61,283   0   14,036   15,105   75,319   90,424   66,375   1996 (Note 4)
Upper Valley Mall, Springfield, OH   30,314   8,421   38,745   0   3,353   8,421   42,098   50,519   9,901   1979
Valle Vista Mall, Harlingen, TX   39,076   1,398   17,159   372   10,977   1,770   28,136   29,906   11,003   1983
Virginia Center Commons, Richmond, VA   0   9,764   50,547   4,149   6,516   13,913   57,063   70,976   13,638   1991
Walt Whitman Mall,
Huntington Station, NY		   0   51,700   111,258   3,789   33,804   55,489   145,062   200,551   29,942   1998 (Note 4)
Washington Square, Indianapolis, IN   32,862   17,201   41,248   100   14,501   17,301   55,749   73,050   13,055   1974
West Ridge Mall, Topeka, KS   43,392   5,514   34,132   197   6,175   5,711   40,307   46,018   14,251   1988
Westminster Mall, Westminster, CA   0   43,464   84,709   0   12,316   43,464   97,025   140,489   14,706   1998 (Note 4)
White Oaks Mall, Springfield, IL   48,563   3,024   35,692   2,413   23,640   5,437   59,332   64,769   15,895   1977
Wolfchase Galleria, Memphis, TN   74,437   16,470   128,909   0   8,375   16,470   137,284   153,754   17,730   2002 (Note 4)
Woodville Mall, Northwood, OH   0   1,818   4,244   0   1,592   1,818   5,836   7,654   2,241   1969

46


SCHEDULE III

SIMON PROPERTY GROUP, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
(Dollars in thousands)

 
    
   Initial Cost (Note 3)
   Cost Capitalized Subsequent to Acquisition (Note 3)
   Gross Amounts At Which
Carried At Close of Period
    
    
Name, Location
   Encumbrances
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Total (1)
   Accumulated Depreciation (2)
   Date of Construction

Community Shopping Centers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Arboretum, The, Austin, TX   0   7,640   36,778   71   6,230   7,711   43,008   50,719   6,442   1998 (Note 4)
Bloomingdale Court, Bloomingdale, IL   28,695   8,748   26,184   0   3,832   8,748   30,016   38,764   8,689   1987
Boardman Plaza, Youngstown, OH   17,907   8,189   26,355   0   6,173   8,189   32,528   40,717   7,398   1951
Bridgeview Court, Bridgeview, IL   0   245   3,638   0   836   245   4,474   4,719   1,835   1988
Brightwood Plaza, Indianapolis, IN   0   65   128   0   283   65   411   476   216   1965
Celina Plaza, El Paso, TX   0   138   815   0   103   138   918   1,056   387   1978
Charles Towne Square, Charleston, SC   0   2   1,768   425   10,636   427   12,404   12,831   2,743   1976
Chesapeake Center, Chesapeake, VA   6,563   5,352   12,279   0   262   5,352   12,541   17,893   2,653   1989
Countryside Plaza, Countryside, IL   0   1,243   8,507   0   1,266   1,243   9,773   11,016   4,031   1977
DeKalb Plaza, King of Prussia, PA   2,711   1,975   3,484   0   0   1,975   3,484   5,459   547   2003 (Note 4)
Eastland Plaza, Tulsa, OK   0   651   3,680   0   52   651   3,732   4,383   1,262   1986
Forest Plaza, Rockford, IL   15,738   4,132   16,818   453   1,569   4,585   18,387   22,972   5,220   1985
Great Lakes Plaza, Mentor, OH   0   1,028   2,025   0   3,616   1,028   5,641   6,669   1,656   1976
Greenwood Plus, Greenwood, IN   0   1,131   1,792   0   3,718   1,131   5,510   6,641   1,753   1979
Griffith Park Plaza, Griffith, IN   0   0   2,412   0   317   0   2,729   2,729   1,666   1979
Grove at Lakeland Square, The, Lakeland, FL   3,750   5,237   6,016   0   1,042   5,237   7,058   12,295   1,904   1988
Henderson Square, King of Prussia, PA   15,625   4,252   16,227   0   0   4,252   16,227   20,479   557   2003 (Note 4)
Highland Lakes Center, Orlando, FL   16,288   7,138   25,284   0   646   7,138   25,930   33,068   5,664   1991
Ingram Plaza, San Antonio, TX   0   421   1,802   4   21   425   1,823   2,248   924   1980
Keystone Shoppes, Indianapolis, IN   0   0   4,232   0   888   0   5,120   5,120   858   1997 (Note 4)
Knoxville Commons, Knoxville, TN   0   3,731   5,345   0   1,728   3,731   7,073   10,804   2,535   1987
Lake Plaza, Waukegan, IL   0   2,577   6,420   0   744   2,577   7,164   9,741   2,003   1986
Lake View Plaza, Orland Park, IL   20,921   4,775   17,543   0   8,362   4,775   25,905   30,680   6,260   1986
Lakeline Plaza, Austin, TX   22,937   5,822   30,875   0   6,659   5,822   37,534   43,356   6,549   1998
Lima Center, Lima, OH   0   1,808   5,151   0   4,499   1,808   9,650   11,458   1,574   1978
Lincoln Crossing, O'Fallon, IL   3,167   658   2,208   0   360   658   2,568   3,226   702   1990
Lincoln Plaza, Langhorne, PA   0   0   23,868   0   37   0   23,905   23,905   3,848   2003 (Note 4)
Markland Plaza, Kokomo, IN   0   206   738   0   5,657   206   6,395   6,601   883   1974
Martinsville Plaza, Martinsville, VA   0   0   584   0   116   0   700   700   614   1967
Matteson Plaza, Matteson, IL   9,213   1,830   9,737   0   2,264   1,830   12,001   13,831   3,823   1988
Muncie Plaza, Muncie, IN   7,965   341   10,509   87   190   428   10,699   11,127   2,116   1998
New Castle Plaza, New Castle, IN   0   128   1,621   0   1,414   128   3,035   3,163   1,305   1966
North Ridge Plaza, Joliet, IL   0   2,831   7,699   0   785   2,831   8,484   11,315   2,623   1985
Northland Plaza, Columbus, OH   0   4,490   8,893   0   1,276   4,490   10,169   14,659   3,222   1988
Northwood Plaza, Fort Wayne, IN   0   148   1,414   0   1,046   148   2,460   2,608   1,092   1974
Park Plaza, Hopkinsville, KY   0   300   1,572   0   225   300   1,797   2,097   1,296   1968
Regency Plaza, St. Charles, MO   4,318   616   4,963   0   248   616   5,211   5,827   1,376   1988
Rockaway Convenience Center Rockaway, NJ   0   5,149   26,435   0   3,429   5,149   29,864   35,013   2,104   1998 (Note 4)
St. Charles Towne Plaza, Waldorf, MD   27,639   8,779   18,993   0   411   8,779   19,404   28,183   6,107   1987
Shops at North East Mall, The, Hurst, TX   0   12,541   28,177   402   8,685   12,943   36,862   49,805   6,731   1999

47


SCHEDULE III

SIMON PROPERTY GROUP, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
(Dollars in thousands)

 
    
   Initial Cost (Note 3)
   Cost Capitalized Subsequent to Acquisition (Note 3)
   Gross Amounts At Which
Carried At Close of Period
    
    
Name, Location
   Encumbrances
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Land
   Buildings and Improvements
   Total (1)
   Accumulated Depreciation (2)
   Date of Construction

Community Shopping Centers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Teal Plaza, Lafayette, IN     0     99     878     0     2,928     99     3,806     3,905     1,185   1962
Terrace at The Florida Mall, Orlando, FL     4,688     2,150     7,623     0     1,780     2,150     9,403     11,553     1,532   1989
Tippecanoe Plaza, Lafayette, IN     0     246     440     305     4,965     551     5,405     5,956     1,994   1974
University Center, Mishawaka, IN     0     2,388     5,214     0     887     2,388     6,101     8,489     6,005   1980
Wabash Village, West Lafayette, IN     0     0     976     0     272     0     1,248     1,248     623   1970
Washington Plaza, Indianapolis, IN     0     941     1,697     0     177     941     1,874     2,815     2,024   1976
Waterford Lakes, Orlando, FL     68,000     8,679     72,836     0     11,963     8,679     84,799     93,478     13,896   1999
West Ridge Plaza, Topeka, KS     5,567     1,376     4,560     0     1,269     1,376     5,829     7,205     1,661   1988
White Oaks Plaza, Springfield, IL     16,987     3,169     14,267     0     795     3,169     15,062     18,231     4,267   1986

Office, Mixed-Use Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Copley Place, Boston, MA     180,836     147     378,876     0     2,900     147     381,776     381,923     14,534   2002 (Note 4)
O Hare International Center, Rosemont, IL     0     125     47,482     0     13,015     125     60,497     60,622     17,353   1988
Riverway, Rosemont, IL     110,000     8,739     106,462     16     14,268     8,755     120,730     129,485     36,962   1991 (Note 4)

Development Projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wolf Ranch, Georgetown, TX     0     25,415     4,130     0     0     25,415     4,130     29,545     0    
St. Johns Town Center, Jacksonville, FL     37,500     22,617     17,505     0     0     22,617     17,505     40,122     0    
Firewheel Town Center, Garland, TX     0     12,150     3,948     0     0     12,150     3,948     16,098     0    
Other pre-development costs     0     16,188     4,483     0     0     16,188     4,483     20,671     0    
Other     0     7,917     7,808     279     930     8,196     8,738     16,934     1,967    
   
 
 
 
 
 
 
 
 
   
    $ 4,179,385   $ 1,965,559   $ 10,556,141   $ 102,705   $ 2,210,038   $ 2,068,264   $ 12,766,179   $ 14,834,443   $ 2,482,955    
   
 
 
 
 
 
 
 
 
   

48

SIMON PROPERTY GROUP, INC.
NOTES TO SCHEDULE III AS OF DECEMBER 31, 2003
(Dollars in thousands)

(1)    Reconciliation of Real Estate Properties:

            The changes in real estate assets for the years ended December 31, 2003, 2002, and 2001 are as follows:

 
   2003
   2002
   2001
  
Balance, beginning of year   $ 14,129,739   $ 13,095,005   $ 12,955,080  
  Acquisitions and consolidations     761,179     1,107,581     —  
  Improvements     377,548     208,257     245,660  
  Disposals and abandonments     (434,023 )   (281,104 )   (58,735 )
  Impairment Write-Down     —     —     (47,000 )
   
 
 
 
Balance, close of year   $ 14,834,443   $ 14,129,739   $ 13,095,005  
   
 
 
 

            The unaudited aggregate cost of real estate assets for federal income tax purposes as of December 31, 2003 was $10,740,729.

(2)    Reconciliation of Accumulated Depreciation:

            The changes in accumulated depreciation and amortization for the years ended December 31, 2003, 2002, and 2001 are as follows:

 
   2003
   2002
   2001
  
Balance, beginning of year   $ 2,168,281   $ 1,827,140   $ 1,443,127  
  Acquisitions and consolidations     21,111     16,491     —  
  Depreciation expense     461,546     417,064     419,841  
  Disposals and abandonments     (167,983 )   (92,414 )   (35,828 )
   
 
 
 
Balance, close of year   $ 2,482,955   $ 2,168,281   $ 1,827,140  
   
 
 
 

            Depreciation of Simon Property's investment in buildings and improvements reflected in the statements of operations is calculated over the estimated original lives of the assets as follows:

(3)
Initial cost generally represents net book value at December 20, 1993 except for acquired properties and new developments after December 20, 1993. Cost capitalized subsequent to acquisition are generally net of related disposals.

(4)
Not developed/constructed by Simon Property or its predecessors. The date of construction represents acquisition date.

49


INDEX TO EXHIBITS

Exhibits
    
   Page
3.1   Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Form 8-K filed by the Registrant on October 9, 1998).    
3.2   Restated By-laws of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).    
3.3   Certificate of Powers, Designations, Preferences and Rights of the 7.00% Series C Cumulative Convertible Preferred Stock, $0.0001 Par Value (incorporated by reference to Exhibit 3.1 of the Registrant's Form 10-Q filed on November 15, 1999).    
3.3a   Certificate of Correction Filed to Correct Certain Errors in Certificate of Powers, Designations, Preferences and Rights of the 7.00% Series C Cumulative Convertible Preferred Stock, $0.0001 Par Value (incorporated by reference to Exhibit 3.1a of the Registrant's Form 10-Q filed on November 15, 1999).    
3.4   Certificate of Powers, Designations, Preferences and Rights of the 8.00% Series D Cumulative Redeemable Preferred Stock, $0.0001 Par Value (incorporated by reference to Exhibit 3.2 of the Registrant's Form 10-Q filed on November 15, 1999).    
3.4a   Certificate of Correction Filed to Correct Certain Errors in Certificate of Powers, Designations, Preferences and Rights of the 8.00% Series D Cumulative Redeemable Preferred Stock, $0.0001 Par Value (incorporated by reference to Exhibit 3.2a of the Registrant's Form 10-Q filed on November 15, 1999).    
3.5   Certificate of Powers, Designations, Preferences and Rights of the 8.00% Series E Cumulative Redeemable Preferred Stock, $0.0001 Par Value (incorporated by reference to Exhibit 3.3 of the Registrant's Form 10-Q filed on November 15, 1999).    
3.6   Certificate of Powers, Designations, Preferences and Rights of the 83/4% Series F Cumulative Redeemable Preferred Stock, $.0001 Par Value (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 filed by the Registrant on May 9, 2001 (Reg. No. 333-60526)).    
3.7   Certificate of Powers, Designations, Preferences and Rights of the 7.89% Series G Cumulative Step-Up Premium Rate Preferred Stock, $.0001 Par Value (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-4 filed by the Registrant on May 9, 2001 (Reg. No. 333-60526)).    
3.8   Certificate of Powers, Designations, Preferences and Rights of the Series H Variable Rate Preferred Stock, $0.0001 Par Value.    
3.8a   Certificate of Correction Filed to Correct a Certain Error in Certificate of Powers, Designations, Preferences and Rights of the Series H Variable Rate Preferred Stock, $0.0001 Par Value.    
9.1   Amended and Restated Voting Trust Agreement, Voting Agreement and Proxy between MSA, on the one hand, and Melvin Simon, Herbert Simon and David Simon, on the other hand (incorporated by reference to Exhibit 9.1 of the Registrant's Annual Report on Form 10-K for 2000).    
10.1   Credit Agreement, dated as of April 16, 2002, among Simon Property Group, L.P., the Lenders named therein, the Co-Agents named therein (incorporated by reference to Exhibit 10.1 of the Form 8-K filed by the Operating Partnership on December 5, 2002).    
10.2   Form of the Indemnity Agreement between the Registrant and its directors and officers. (incorporated by reference to Exhibit 10.7 of the Form S-4 filed by the Registrant on August 13, 1998 (Reg. No. 333-61399)).    
10.3   Registration Rights Agreement, dated as of September 24, 1998, by and among the Registrant and the persons named therein. (incorporated by reference to Exhibit 4.4 of the Form 8-K filed by the Registrant on October 9, 1998).    
10.4(a)   Simon Property Group, L.P. 1998 Stock Incentive Plan (incorporated by reference to Appendix G to the Registrants' Definitive Proxy Statement on Schedule 14A dated April 7, 2003).    
10.5(a)   Form of Employment Agreement between Hans C. Mautner and the Companies (incorporated by reference to Exhibit 10.63 of the Form S-4 filed by CPI on August 13, 1998 (Reg. No. 333-61399) ).    
10.6(a)   Form of Incentive Stock Option Agreement between the Companies and Hans C. Mautner pursuant to the Operating Partnership 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.59 of the Form S-4 filed by CPI on August 13, 1998 (Reg. No. 333-61399)).    
10.7(a)   Form of Nonqualified Stock Option Agreement between the Registrant and Hans C. Mautner pursuant to the Operating Partnership 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.61 of the Form S-4 filed by CPI on August 13, 1998 (Reg. No. 333-61399)).    
10.8(a)   Employment Agreement between Hans C. Mautner and Simon Global Limited (incorporated by reference to Exhibit 10.10 of the 2000 Form 10-K filed by the Registrant).    
10.9(a)   First Amendment to Employment Agreement Dated September 23, 1998 between Hans C. Mautner and the Registrant (incorporated by reference to Exhibit 10.11 of the 2000 Form 10-K filed by the Registrant).    
10.10(a)   Employment Agreement between Richard S. Sokolov, the Registrant, and Simon Property Group Administrative Services Partnership, L.P. Dated March 26, 1996 (incorporated by reference to Exhibit 10.12 of the 2000 Form 10-K filed by the Registrant).    
12.1          Statement regarding computation of ratios.    

50

13.1          Selected Financial Data, Management's Discussion and Analysis of Financial Condition and Results of Operations and Financial Statements of the Registrant as contained in the Registrant's 2003 Annual Report to Shareholders.    
21.1          List of Subsidiaries of the Company.    
23.1          Consent of Arthur Andersen LLP (omitted pursuant to Rule 437a of the Securities Act)    
23.2          Consent of Ernst & Young LLP.    
31.1          Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
31.2          Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
32           Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    
(a)
Represents a management contract, or compensatory plan, contract or arrangement required to be filed pursuant to Regulation S-K.

51



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TABLE OF CONTENTS
Part I
Item 1. Business
MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES As of December 31, 2003 (Dollars in thousands)
Part II
Part III
PART IV
SIGNATURES
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE
INDEX TO EXHIBITS

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Exhibit 3.8


SIMON PROPERTY GROUP, INC.

CERTIFICATE OF THE POWERS, DESIGNATIONS,

PREFERENCES AND RIGHTS OF THE

SERIES H VARIABLE RATE PREFERRED STOCK

$.0001 PAR VALUE

Pursuant to Section 151 of the General Corporation Law
of the State of Delaware

        The following resolution was duly adopted by the Board of Directors (the "Board of Directors") of Simon Property Group, Inc., a Delaware corporation (the "Corporation"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware:

        WHEREAS, the Board of Directors of the Corporation is authorized, within the limitations and restrictions stated in the Restated Certificate of Incorporation of the Corporation (the "Charter") to provide by resolution or resolutions for the issuance of shares of preferred stock of the Corporation, in one or more series with such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution providing for the issue of such series of preferred stock as may be adopted from time to time by the Board of Directors;

        WHEREAS, the Board of Directors of the Corporation has determined by unanimous written consent that it is in the best interests of the Corporation and its stockholders to designate a new series of preferred stock of the Corporation; and

        WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of preferred stock and the number of shares constituting such series;

        NOW, THEREFORE, BE IT RESOLVED:

        SECTION 1.    Designation and Number.    The designation of the series of preferred stock of the Corporation created by this Certificate of Designation shall be "Series H Variable Rate Preferred Stock" (the "Series H Preferred Stock"). The authorized number of shares of Series H Preferred Stock shall be 453,000 par value $.0001 per share.

        SECTION 2.    Status of Reacquired Shares.    All shares of Series H Preferred Stock redeemed, purchased, exchanged, unissued (after the initial issuance) or otherwise acquired by the Corporation shall be restored to the status of authorized but unissued shares of Series H Preferred Stock and thereafter may be reclassified and issued, but not as Series H Preferred Stock.

        SECTION 3.    Ranking.    The Series H Preferred Stock shall, with respect to the payment of dividends and the distribution of assets upon any voluntary or involuntary liquidation, winding up or dissolution of the Corporation and redemption rights, rank (A) junior to any other class or series of capital stock or other equity interests of the Corporation hereafter duly established by the Board of Directors of the Corporation, the terms of which shall specifically provide that such class or series shall rank prior to the Series H Preferred Stock as to the payment of dividends, distribution of assets upon any voluntary or involuntary liquidation, winding up or dissolution of the Corporation and redemption rights (the "Senior Stock"), (B) pari passu with the 6.50% Series A Convertible Preferred Stock, 6.50% Series B Convertible Preferred Stock, 6.50% Series A Excess Preferred Stock, 6.50% Series B Excess Preferred Stock, 7% Series C Cumulative Convertible Preferred Stock, 8% Series D Cumulative Redeemable Preferred Stock, 8% Series E Cumulative Redeemable Preferred Stock, 83/4% Series F Cumulative Redeemable Preferred Stock of the Corporation, and 7.89% Series G Cumulative Step-Up Premium Rate Preferred Stock and any other class or series of capital stock or other equity interests of


the Corporation hereafter duly established by the Board of Directors of the Corporation, the terms of which shall specifically provide that such class or series shall rank pari passu with the Series H Preferred Stock as to the payment of dividends, distribution of assets upon any voluntary or involuntary liquidation, winding up or dissolution of the Corporation and redemption rights (the "Parity Stock") and (C) prior to the Common Stock, the Class B Common Stock and the Class C Common Stock (as such terms are defined in the Charter) or any other class or series of capital stock of or other equity interests in the Corporation, as to the payment of dividends, distribution of assets upon any voluntary or involuntary liquidation, winding up or dissolution of the Corporation and redemption rights (the "Junior Stock"). The term "capital stock" shall include convertible debt securities.

        SECTION 4.    Dividends.    

        (A)  Subject to the preferential rights of the holders of any class or series of Senior Stock which may from time to time come into existence, from the date of original issuance of the Series H Preferred Stock (the "Issue Date") holders of the then outstanding Series H Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors (the "Board"), out of funds legally available for the payment of dividends, cumulative quarterly preferential cash dividends computed by multiplying the liquidation preference of $25.00 per share by the applicable dividend rate for the time period indicated:

Time Period
   Dividend Rate
December 15, 2003 to January 15, 2004   LIBOR + 100 basis points
January 16, 2004 to February 15, 2004   LIBOR + 200 basis points
February 16, 2004 to March 15, 2004   LIBOR + 400 basis points
March 16, 2004 (the "Reset Date") and thereafter   LIBOR + 500 basis points

"LIBOR" means the rate for deposits in U.S. dollars for each day within the designated time period, which appears on display page 3750 of Moneyline's Telerate Service (or such other page as may replace that page on that service).

        (B)  Dividends on Series H Preferred Stock will begin to accrue and be fully cumulative from the Issue Date whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are earned, declared or authorized. Dividends shall be payable quarterly in each amounts of per share of Series H Preferred Stock when, as and if authorized by the Board, in equal amounts in arrears on the fifteenth day of each March, June, September and December (each, a "Dividend Payment Date"); provided that if any such Dividend Payment Date is not a Business Day (as defined herein), then the dividend which would otherwise have been payable on such Dividend Payment Date shall be paid on the next succeeding Business Day with the same force and effect as if paid on such Dividend Payment Date, and no interest or additional dividends or other sums shall accrue on the amount so payable from the Dividend Payment Date to such next succeeding Business Day. The first dividend on the Series H Preferred Stock shall be paid on March 16, 2004, will be for more than a full quarter and will reflect dividends accumulated and accrued from the Issue Date through and excluding March 16, 2004. Any dividend (including the initial dividend) payable on the Series H Preferred Stock for any partial dividend period shall be prorated and computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends shall be payable to holders of record as they appear in the stock transfer records of the Corporation at the close of business on the applicable record date, which shall be the first day of the calendar month in which the applicable Dividend Payment Date falls or such other date designated by the Board for the payment of dividends that is not more than 30 nor less than ten days prior to such Dividend Payment Date (each, a "Dividend Record Date"). As used herein, the term "dividend period" for the Series H Preferred Stock shall mean the period from the Issue Date and ending on and excluding the next Dividend Payment Date, and each subsequent period from but including such Dividend Payment Date and ending on and excluding the next following Dividend Payment Date. No

2


interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series H Preferred Stock which may be in arrears. Dividends paid on the Series H Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a per share basis among all such shares at the time outstanding.

        (C)  If, for any taxable year, the Corporation elects to designate as "capital gain distributions" (as defined in Section 857 of the Internal Revenue Code of 1986, as amended, or any successor revenue code or section (the "Code")) any portion (the "Capital Gains Amount") of the total distributions (as determined for federal income tax purposes) paid or made available for the year to holders of all classes of capital stock (the "Total Distributions"), then the portion of the Capital Gains Amount that shall be allocable to holders of Series H Preferred Stock shall be in the same percentage that the total distributions paid or made available to the holders of Series H Preferred Stock for the year bears to the Total Distributions.

        (D)  Except as provided in Section 4(D) hereof, if any shares of Series H Preferred Stock are outstanding, no distributions (other than in shares of common stock or other capital stock ranking junior to Series H Preferred Stock as to distributions and upon liquidation) shall be authorized, declared, paid or set apart for payment on, nor shall there be any redemption, purchase or other acquisition for any consideration (or monies to be paid to or made available for a sinking fund for the redemption) by the Corporation (except by conversion into or exchange for other capital stock of the Corporation ranking junior to Series H Preferred Stock as to distributions and amounts upon liquidation) of, any shares of any other class or series of stock of the Corporation ranking, as to the payment of dividends and the distribution of assets upon any voluntary or involuntary liquidation, winding up or dissolution of the Corporation, on a parity with or junior to Series H Preferred Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or authorized declared and a sum sufficient for the payment thereof set apart for such payments on shares of Series H Preferred Stock for all past dividend periods and the then current dividend period. When dividends are not paid in full (or a sum sufficient for such full payment is not set apart) upon the shares of Series H Preferred Stock and the shares of any other class or series of capital stock ranking on a parity as to the payment of shares of dividends and the distribution of assets upon any voluntary or involuntary liquidation, winding up or dissolution of the Corporation with shares of Series H Preferred Stock, all dividends authorized and declared upon shares of Series H Preferred Stock and any other class or series of capital stock ranking on a parity as to the payment of shares of dividends and the distribution of assets upon any voluntary or involuntary liquidation, winding up or dissolution of the Corporation with Series H Preferred Stock shall be declared pro rata so that the amount of dividends authorized and declared per share on Series H Preferred Stock and such other class or series of capital stock shall in all cases bear to each other the same ratio that accrued and accumulated dividends per share on Series H Preferred Stock and such other class or series of capital stock (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such class or series of capital stock does not have a cumulative dividend) bear to each other.

        (E)  Any dividend payment made on shares of Series H Preferred Stock shall first be credited against the earliest accrued and accumulated but unpaid dividends due with respect to shares of Series H Preferred Stock which remain payable.

        (F)  No distributions on the Series H Preferred Stock shall be authorized by the Board of Directors of the Corporation or be paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder if such authorization or payment shall be restricted or prohibited by law.

3


        (G)  Except as provided in this Section 4, the Series H Preferred Stock shall not be entitled to participate in the earnings or assets of the Corporation.

        SECTION 5.    Liquidation.    

        (A)  Subject to the rights of any class or series of capital stock which may from time to time come into existence, upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, then, before any distribution or payment shall be made to the holders of any Junior Stock, the holders of shares of Series H Preferred Stock shall be entitled to receive out of assets of the Corporation legally available for distribution to stockholders, liquidation distributions in the amount of the liquidation preference of $25.00 per share in cash, plus an amount equal to all distributions (whether or not earned or authorized) accumulated, accrued and unpaid at the date of such liquidating payment. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of shares of Series H Preferred Stock will have no right or claim to any of the remaining assets of the Corporation. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the available assets of the Corporation are insufficient to pay the amount of the liquidation distributions on all outstanding shares of Series H Preferred Stock and the corresponding amounts payable on all shares of Parity Stock, then the holders of shares of Series H Preferred Stock and Parity Stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.

        (B)  A consolidation or merger of the Corporation with or into any other entity or entities, or a sale, lease, transfer, conveyance or disposition of all or substantially all of the assets of the Corporation or a statutory share exchange in which stockholders of the Corporation may participate, shall not be deemed to be a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 5.

        (C)  Written notice of any such liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 or more than 60 days prior to the payment date stated therein, to each record holder of the Series H Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation.

        SECTION 6.    Redemption by Holders.    Shares of Series H Preferred Stock are not redeemable at any time at the option of the holders thereof.

        SECTION 7.    Redemption by the Corporation.    

        (A)  The Series H Preferred Stock shall not be subject to any sinking fund or mandatory redemption.

        (B)  Shares of Series H Preferred Stock are redeemable in whole or in part from the Issue Date through March 15, 2004 at the Corporation's option upon not less than ten nor more than 30 days' written notice to the holders thereof, at any time or from time to time unless waived by the holders of the Shares of Series H Preferred Stock, for cash at a redemption price of $25.00 per share, plus an amount equal to all dividends accumulated, accrued and unpaid (whether or not earned or authorized) thereon to the date fixed for redemption, without interest to the extent the Corporation will have funds legally available therefor. Holders of shares of Series H Preferred Stock to be redeemed pursuant to this Section 7(B) shall surrender such shares of Series H Preferred Stock at the place designated in such notice and shall be entitled to the redemption price and any accumulated, accrued and unpaid dividends payable upon such redemption following such surrender.

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        (C)  On and after May 15, 2009, the Corporation, at its option, upon giving notice as provided below, may redeem the Series H Preferred Stock, in whole or from time to time in part, at a redemption price per share in cash equal to $25.00 plus all dividends accumulated, accrued and unpaid (whether or not earned or authorized) on such Series H Preferred Stock to the date of such redemption. Any date fixed for redemption pursuant to this Section 7(C) is referred to herein as a "Redemption Date."

        (D)  If fewer than all of the outstanding shares of Series H Preferred Stock are to be redeemed at the option of the Corporation pursuant to Section 7(C) above, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed will be selected by the Board pro rata from the holders of record of such shares in proportion to the number of such shares held by such holders or by lot or by any other equitable manner as prescribed by the Board. If such redemption is to be by lot and, as a result of such redemption, any holder of shares of Series H Preferred Stock would own, or be deemed by virtue of the attribution provisions of the Code to own, in excess of 8% of the issued and outstanding shares of all outstanding series of preferred stock or 50% in value of all outstanding capital stock of the Corporation, as the case may be, because such holder's shares of Series H Preferred Stock were not redeemed, or were only redeemed in part, then, except as otherwise provided in the Charter, the Corporation will redeem the requisite number of shares of Series H Preferred Stock from such holder such that he will not hold in excess of the Ownership Limit (as defined in the Charter) subsequent to such redemption.

        (E)  Notwithstanding anything to the contrary contained herein, unless full cumulative dividends on all shares of Series H Preferred Stock and Parity Stock shall have been or contemporaneously are authorized, declared and paid or authorized, declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, no shares of Series H Preferred Stock, Parity Stock or Junior Stock shall be redeemed unless all outstanding shares of Series H Preferred Stock, Parity Stock and Junior Stock are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of Series H Preferred Stock, Parity Stock or Junior Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series H Preferred Stock, Parity Stock or Junior Stock, as the case may be. Furthermore, unless full cumulative dividends on all outstanding shares of Series H Preferred Stock, Parity Stock and Junior Stock have been or contemporaneously are authorized, declared and paid or authorized, declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series H Preferred Stock, Parity Stock or Junior Stock (except by conversion into or exchange for shares of capital stock of the Corporation ranking junior to Series H Preferred Stock and Parity Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, winding up or dissolution of the Corporation).

        (F)  In the event shares of Series H Preferred Stock are to be redeemed pursuant to Section 7(C), notice of redemption will be (a) given by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the Redemption Date; and (b) mailed by, not less than 30 nor more than 60 days prior to the Redemption Date, to each holder of record of shares of Series H Preferred Stock to be redeemed, notifying such holder of the Corporation's election to redeem such shares; provided that if the Corporation shall have reasonably concluded, based upon the advice of independent tax counsel experienced in such matters, that any redemption and pursuant to this Section 7(F) must be made on a date (the "Subject Date") which is earlier than 30 days after the date of such mailing in order to preserve the status of the Corporation as a real estate investment trust for federal income tax purposes or to comply with federal tax laws relating to the Corporation's qualification as a real estate investment trust, then the Corporation may give such shorter notice as is

5


necessary to effect such redemption on the Subject Date. A similar notice will be mailed, by First Class Mail, at least 30 days but not more than 60 days before the Redemption Date, to each holder of record of shares of Series H Preferred Stock at the address shown on the share transfer books of the Corporation. Each notice shall state: (i) the Redemption Date; (ii) the number of shares of Series H Preferred Stock to be redeemed; (iii) the redemption price per share; (iv) the place or places where certificates for shares of Series H Preferred Stock are to be surrendered for payment of the redemption price; and (v) that distributions on shares of Series H Preferred Stock will cease to accrue and accumulate on such redemption date. No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceeding for the redemption of any Series H Preferred Stock except as to the holder to whom notice was defective or not given. If fewer than all shares of Series H Preferred Stock are to be redeemed, the notice mailed to each such holder thereof shall also specify the number of shares of Series H Preferred Stock to be redeemed from each such holder. If notice of redemption of any shares of Series H Preferred Stock has been given in accordance with this Section 7(F) and if the funds necessary for such redemption have been set aside by the Corporation in trust for the benefit of the holders of shares of Series H Preferred Stock so called for redemption, then from and after the redemption date (unless the Corporation defaults in the payment of the purchase price), distributions will cease to accrue on the shares of Series H Preferred Stock designated for redemption, such shares of Series H Preferred Stock shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price (including all accumulated and unpaid dividends up to the Redemption Date).

        (G)  The holders of shares of Series H Preferred Stock at the close of business on a Distribution Record Date will be entitled to receive the distribution payable with respect to such shares of Series H Preferred Stock on the corresponding Distribution Payment Date notwithstanding the redemption thereof between such Distribution Record Date and the corresponding Distribution Payment Date or the Corporation's default in the payment of the distribution due. Except as provided above, the Corporation will make no payment or allowance for unpaid distributions, whether or not in arrears, on shares of Series H Preferred Stock which have been called for redemption pursuant to Section 7(C).

        (H)  Series H Preferred Stock have no stated maturity and will not be subject to any sinking fund or mandatory redemption, except as provided in Article NINTH of the Charter of the Corporation.

        (I)   On or after the Redemption Date, each holder of shares of Series H Preferred Stock to be redeemed shall present and surrender the certificates representing his shares of Series H Preferred Stock to the Corporation at the place designated in the notice of redemption and thereupon the cash redemption price of such shares shall be paid to or on the order of the person whose name appears on such certificate representing shares of Series H Preferred Stock as the owner thereof and each surrendered certificate shall be canceled. If fewer than all the shares represented by any such certificate representing shares of Series H Preferred Stock are to be redeemed, a new certificate shall be issued representing the unredeemed shares.

        SECTION 8.    Voting.    

        (A)  Except as provided in this Section 8 or by law, shares of Series H Preferred Stock shall have no voting rights.

        (B)  If six quarterly distributions (whether or not consecutive) payable on shares of Series H Preferred Stock are in arrears, whether or not earned or declared (a "Preferred Dividend Default"), the number of directors then constituting the Board of Directors of the Corporation will be increased by two (except as provided in the proviso to paragraph (c) to Article FIFTH of the Charter), and the holders of shares of Series H Preferred Stock, voting together as a class with the holders of shares of any other class or series of capital stock ranking on a parity with the Series H Preferred Stock as to the payment of dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation upon which like voting rights have been conferred and

6


are exercisable (any such class or series, the "Voting Stock"), will have the right to elect two directors (the "Preferred Stock Directors") to serve on the Corporation's Board of Directors at any annual meeting of stockholders or a special meeting of the holders of Series H Preferred Stock and such other Voting Stock called by the holders of record of at least 10% of any class or series of Voting Stock so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders), until all such distributions have been authorized, declared and paid or set aside for payment. The procedures in this Section 8(B) for the calling of meetings and the election of directors will, to the extent permitted by law, supercede anything inconsistent contained in the Charter or Bylaws of the Corporation. Notwithstanding any provisions of the Bylaws of the Corporation, subject to the limitations on the number of directors set forth in the Charter, the number of directors constituting the entire Board will be automatically increased to include the directors to be elected pursuant to this Section 8(B).

        (C)  On any matter on which the holders of Series H Preferred Stock are entitled to vote (as expressly provided herein or as may be required by law), including any action by written consent, each share of Series H Preferred Stock shall have one vote per share, except that when shares of Voting Stock shall have the right to vote with the Series H Preferred Stock as a single class on any matter, then the Series H Preferred Stock and such other series shall have with respect to such matters one vote per $25.00 of stated liquidation preference. With respect to each matter on which the holders of Series H Preferred Stock are entitled to vote, the holder of each share of Series H Preferred Stock may designate a number of proxies equal to the number of votes to which the share is entitled, with each such proxy having the right to vote a whole number of votes on behalf of such holder.

        (D)  If and when all accumulated dividends and the dividend for the current dividend period on the Series H Preferred Stock shall have been paid in full or set aside for payment in full, the holders of shares of Series H Preferred Stock shall be divested of the voting rights set forth in Section 8(D) herein (subject to revesting in the event of each and every Preferred Dividend Default) and, if all accumulated dividends and the dividend for the current dividend period have been paid in full or set aside for payment in full on all other series of Parity Stock upon which like voting rights have been conferred and are exercisable, the term of office of each Preferred Stock Director so elected shall terminate. So long as a Preferred Dividend Default shall continue, any vacancy in the office of a Preferred Stock Director may be filled by written consent of the Preferred Stock Director remaining in office, or if there is no such remaining director, by vote of holders of a majority of the outstanding shares of Series H Preferred Stock and any other such other series of Parity Stock voting as a single class. Any Preferred Stock Director may be removed at any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding shares of Series H Preferred Stock when they have the voting rights set forth in Section 8(B) (voting separately as a class with all other series of Parity Stock upon which like voting rights have been conferred and are exercisable). The Preferred Stock Directors shall each be entitled to one vote per director on any matter presented to the Board.

        (E)  So long as any shares of Series H Preferred Stock remain outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least two-thirds of the shares of Series H Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (such Series H Preferred Stock voting separately as a class), (i) authorize, create or issue, or increase the authorized or issued amount of, any class or series of capital stock ranking senior to Series H Preferred Stock with respect to the payment of dividends or the distribution of assets upon any liquidation, dissolution or winding up of the Corporation or reclassify any authorized capital stock of the Corporation into any such class or series of capital stock, or create, authorize or issue any obligation or security convertible or exchangeable into or evidencing the right to purchase any such class or series of capital stock; or (ii) amend, alter or repeal the provisions of the Charter or this Certificate of Designations, whether by merger or consolidation or otherwise (an "Event"), so as to

7


materially and adversely affect any right, preference, privilege or voting power of the Series H Preferred Stock or the holders thereof; provided, however, with respect to the occurrence of any of the Events set forth in (ii) above, so long as shares of Series H Preferred Stock remain outstanding or are converted into like securities of the surviving or resulting entity, in each case with like preference, privilege or voting power and terms thereof materially unchanged, taking into account that, upon the occurrence of an Event, the Corporation may not be the surviving entity and such surviving entity may be a non-corporate entity, the occurrence of any such Event shall not be deemed to materially adversely affect such rights, preferences, privileges or voting powers of holders of Series H Preferred Stock; and provided further that (x) any increase in the amount of the authorized shares of Preferred Stock or the creation or issuance of any other series of Preferred Stock, or (y) the creation, issuance or increase in the amount of authorized shares of any other class or series of capital stock of the Corporation, or (z) any increase in the amount of authorized shares of Series H Preferred Stock, in each case ranking on a parity with or junior to the Series H Preferred Stock with respect to the payment of dividends and the distribution of assets upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. For the purposes of this Section 8(E), the filing in accordance with applicable law of a certificate of designation or any similar document setting forth or changing the designation, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or other terms of any class or series of capital stock of the Corporation will be deemed an amendment to the Charter.

        (F)  The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series H Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.

        SECTION 9.    Conversion.    The shares of Series H Preferred Stock are not convertible into or exchangeable for any other property or securities of the Corporation, except that each share of Series H Preferred Stock is convertible into Excess Stock as provided in Article NINTH of the Charter of the Corporation.

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        IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in its name and on its behalf by its Secretary on December 12, 2003.


 
SIMON PROPERTY GROUP, INC.

 
By:
/s/ James M. Barkley
James M. Barkley

9



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SIMON PROPERTY GROUP, INC. CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES H VARIABLE RATE PREFERRED STOCK $.0001 PAR VALUE

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Exhibit 3.8a


CERTIFICATE OF CORRECTION

FILED TO CORRECT A CERTAIN ERROR IN
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES H VARIABLE RATE PREFERRED STOCK,
$.0001 PAR VALUE
   
OF
   
SIMON PROPERTY GROUP, INC.
   
FILED IN THE OFFICE OF
THE SECRETARY OF STATE OF DELAWARE
ON DECEMBER 12, 2003

        SIMON PROPERTY GROUP, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,

        DOES HEREBY CERTIFY:

        1.     The name of the corporation is SIMON PROPERTY GROUP, INC. (the "Corporation").

        2.     That a Certificate of the Powers, Designations, Preferences and Rights for the Series H Variable Rate Preferred Stock of the Corporation (the "Designation Certificate") was filed by the Secretary of State of Delaware on December 12, 2003 and that said Designation Certificate requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.

        3.     The inaccuracies or defects of the Designation Certificate to be corrected are as follows:

        4.     The portion of the Designation Certificate in corrected form is as follows:

        IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by James M. Barkley, its Secretary, this 15th day of March, 2004.

    SIMON PROPERTY GROUP, INC.

 
 
By:
 
/s/  JAMES M. BARKLEY      
James M. Barkley


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CERTIFICATE OF CORRECTION

EXHIBIT 12.1

 


SIMON PROPERTY GROUP, INC.
Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends

(in thousands)

 

 

For the year ended December 31,

 

 

2003

 

2002

 

2001

 

2000

 

1999

 

Earnings:

 

 

 

 

 

 

 

 

 

 

 

Pre-tax income from continuing operations

 

$

459,497

 

$

545,148

 

$

282,460

 

$

346,770

 

$

294,021

 

Add:

 

 

 

 

 

 

 

 

 

 

 

Pre-tax income from 50% or greater than 50% owned unconsolidated entities

 

59,165

 

47,939

 

62,448

 

50,377

 

60,940

 

Minority interest in income of majority owned subsidiaries

 

7,277

 

10,498

 

10,593

 

10,370

 

10,719

 

Distributed income from less than 50% owned unconsolidated entities

 

42,939

 

37,811

 

51,740

 

45,948

 

30,169

 

Amortization of capitalized interest

 

1,850

 

1,876

 

1,706

 

1,323

 

724

 

Fixed Charges

 

703,948

 

695,209

 

726,007

 

776,347

 

692,984

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Income from unconsolidated entities

 

(99,645

)

(78,695

)

(67,116

)

(56,773

)

(51,140

)

Interest capitalization

 

(11,059

)

(5,507

)

(10,325

)

(20,108

)

(24,377

)

Preferred distributions of consolidated subsidiaries

 

(12,044

)

(11,340

)

(26,085

)

(40,602

)

(32,252

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings

 

$

1,151,928

 

$

1,242,939

 

$

1,031,428

 

$

1,113,652

 

$

981,788

 

Fixed Charges:

 

 

 

 

 

 

 

 

 

 

 

Portion of rents representative of the interest factor

 

5,620

 

4,298

 

4,977

 

5,078

 

4,913

 

Interest on indebtedness (including amortization of debt expense)

 

675,225

 

674,064

 

684,620

 

710,559

 

631,442

 

Interest capitalized

 

11,059

 

5,507

 

10,325

 

20,108

 

24,377

 

Preferred distributions of consolidated subsidiaries

 

12,044

 

11,340

 

26,085

 

40,602

 

32,252

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Charges

 

$

703,948

 

$

695,209

 

$

726,007

 

$

776,347

 

$

692,984

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock Dividends

 

55,138

 

64,201

 

51,360

 

36,808

 

37,071

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Charges and Preferred Stock Dividends

 

$

759,086

 

$

759,410

 

$

777,367

 

$

813,155

 

$

730,055

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of Earnings to Fixed Charges and Preferred Stock Dividends

 

1.52x

 

1.64x

 

1.33x

 

1.37x

 

1.34x

 

 

 

 

 

 

 

 

 

 

 

 

 

For purposes of calculating the ratio of earnings to fixed charges, “earnings” have been computed by adding fixed charges, excluding capitalized interest, to income (loss) from continuing operations including income from minority interests and our share of income (loss) from 50%-owned affiliates which have fixed charges, and including distributed operating income from unconsolidated joint ventures instead of income from unconsolidated joint ventures. There are generally no restrictions on our ability to receive distributions from our joint ventures where no preference in favor of the other owners of the joint venture exists. “Fixed charges” consist of interest costs, whether expensed or capitalized, the interest component of rental expenses and amortization of debt issue costs.

The computation of ratio of earnings to fixed charges has been restated to adopt SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections.” Among other items, SFAS No. 145 rescinds SFAS No. 4, “Reporting of Gains and Losses from Extinguishment of Debt” and “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” As a result, gains and losses from extinguishment of debt should be classified as extraordinary items only if they meet the criteria of APB Opinion No. 30. Debt extinguishments as part of a company’s risk management strategy would not meet the criteria for classification as extraordinary items. Therefore, we are required to reclassify all of the extraordinary items related to debt transactions recorded in prior periods, including those recorded in the current period, to income from continuing operations.



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EXHIBIT 13.1

Selected Financial Data

            The following tables set forth selected financial data. The selected financial data should be read in conjunction with the financial statements and notes thereto and with Management's Discussion and Analysis of Financial Condition and Results of Operations. Amounts represent the combined amounts for Simon Property and SPG Realty for all periods as of or for the years ended December 31, 1999 to December 31, 2002 and Simon Property thereafter. SPG Realty merged into Simon Property on December 31, 2002. Other data we believe is important in understanding trends in Simon Property's business is also included in the tables.

 
   As of or for the Year Ended December 31,
  
 
   2003
   2002(1)
   2001(1)
   2000(1)
   1999(1)
  
 
   (in thousands, except per share data)

  
OPERATING DATA:                                
  Total consolidated revenue   $ 2,313,653   $ 2,124,152   $ 2,048,835   $ 2,020,751   $ 1,892,703  
  Income from continuing operations     451,900     545,148     282,460     346,770     297,395  
  Net income available to common shareholders   $ 313,577   $ 358,387   $ 147,789   $ 186,528   $ 167,314  

BASIC EARNINGS PER SHARE:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Income from continuing operations   $ 1.53   $ 1.92   $ 0.87   $ 1.13   $ 0.97  
  Discontinued operations     0.12     0.07     —     —     —  
  Cumulative effect of accounting change     —     —     (0.01 )   (0.05 )   —  
   
 
 
 
 
 
  Net income   $ 1.65   $ 1.99   $ 0.86   $ 1.08   $ 0.97  
   
 
 
 
 
 
  Weighted average shares outstanding     189,475     179,910     172,669     172,895     172,089  

DILUTED EARNINGS PER SHARE:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Income from continuing operations   $ 1.53   $ 1.92   $ 0.86   $ 1.13   $ 0.97  
  Discontinued operations     0.12     0.07     —     —     —  
  Cumulative effect of accounting change     —     —     (0.01 )   (0.05 )   —  
   
 
 
 
 
 
  Net income   $ 1.65   $ 1.99   $ 0.85   $ 1.08   $ 0.97  
   
 
 
 
 
 
  Diluted weighted average shares outstanding     190,299     181,501     173,028     172,994     172,226  
  Distributions per share (2)   $ 2.40   $ 2.18   $ 2.08   $ 2.02   $ 2.02  

BALANCE SHEET DATA:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Cash and cash equivalents   $ 535,623   $ 397,129   $ 259,760   $ 223,111   $ 157,632  
  Total assets     15,684,721     14,904,502     13,810,954     13,937,945     14,223,243  
  Mortgages and other notes payable     10,266,388     9,546,081     8,841,378     8,728,582     8,768,951  
  Shareholders' equity   $ 3,338,627   $ 3,467,733   $ 3,214,691   $ 3,064,471   $ 3,253,658  

OTHER DATA:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow provided by (used in): (5)                                
  Operating activities   $ 951,967   $ 882,990   $ 859,062   $ 743,519   $ 660,307  
    Investing activities     (761,663 )   (785,730 )   (351,310 )   (134,237 )   (661,051 )
    Financing activities   $ (51,810 ) $ 40,109   $ (471,103 ) $ (543,803 ) $ 29,181  
    Ratio of Earnings to Fixed Charges (3)     1.52x     1.64x     1.33x     1.37x     1.34x  
   
 
 
 
 
 
  Funds from Operations (FFO) (4)   $ 1,041,105   $ 936,356   $ 786,635   $ 781,937   $ 703,518  
   
 
 
 
 
 
  FFO allocable to Simon Property   $ 787,467   $ 691,004   $ 571,974   $ 567,532   $ 511,830  
   
 
 
 
 
 

Notes

(1)
On May 3, 2002, Simon Property jointly acquired Rodamco North America N.V. In 1999, Simon Property acquired the assets of New England Development Company. In the accompanying financial statements, Note 2 describes the basis of presentation and Note 4 describes acquisitions and disposals.

(2)
Represents distributions declared per period.

(3)
The ratio for 2002 has been restated for the reclassification of discontinued operations described in Note 3. In 2002, includes $162.0 million of gains on sales of assets, net, and excluding these gains the ratio would have been 1.42x in 2002. In 2001, includes a $47,000 impairment charge (see Note 4 to the accompanying financial statements). Excluding this charge the ratio would have been 1.39x in 2001. In 1999, includes a $12,000 unusual loss (see Note 11 to the accompanying financial statements) and a total of $12,290 of asset write-downs. Excluding these items, the ratio would have been 1.39x in 1999.

(4)
FFO is a non-GAAP financial measure that we believe provides useful information to investors. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for a definition and reconciliation of FFO.

(5)
Certain reclassifications have been made to prior period cash flow information to conform to the current year presentation.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

SIMON PROPERTY GROUP, INC.

            You should read the following discussion in conjunction with the financial statements and notes thereto that are included in this Annual Report to Shareholders. Certain statements made in this section or elsewhere in this report may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and it is possible that our actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Those risks and uncertainties incidental to the ownership and operation of commercial real estate include, but are not limited to: national, international, regional and local economic climates, competitive market forces, changes in market rental rates, trends in the retail industry, the inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise, risks associated with acquisitions, the impact of terrorist activities, environmental liabilities, maintenance of REIT status, the availability of financing, and changes in market rates of interest and fluctuations in exchange rates of foreign currencies. We undertake no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.

Overview

            Simon Property Group, Inc. ("Simon Property") is a Delaware corporation that operates as a self-administered and self-managed real estate investment trust ("REIT"). A REIT is a company that owns and, in most cases, operates income-producing real estate such as regional malls, community shopping centers, offices, apartments, and hotels. To qualify as a REIT, a company must distribute at least 90 percent of its taxable income to its shareholders annually. Taxes are paid by shareholders on the dividends received and any capital gains. Most states also follow this federal treatment and do not require REITs to pay state income tax. Simon Property Group, L.P. (the "Operating Partnership") is a majority-owned partnership subsidiary of Simon Property that owns all but one of our real estate properties. In this discussion, the terms "we", "us" and "our" refer to Simon Property, the Operating Partnership, and their subsidiaries.

            We are engaged primarily in the ownership, operation, leasing, management, acquisition, expansion and development of real estate properties. Our real estate properties consist primarily of regional malls and community shopping centers. As of December 31, 2003, we owned or held an interest in 246 income-producing properties in North America, which consisted of 175 regional malls, 67 community shopping centers, and four office and mixed-use properties in 37 states and Canada (collectively, the "Properties", and individually, a "Property"). Mixed-use properties are properties that include a combination of retail space, office space, and/or hotel components. In addition, we also own interests in three parcels of land held for future development (together with the Properties, the "Portfolio"). Finally, we have ownership interests in 47 assets in Europe (France, Italy, Poland and Portugal).

            We seek growth in our earnings, funds from operations ("FFO"), and cash flow through:

            To support this growth, our capital strategy is three-fold:


            We own and operate long-term properties which generate revenues primarily from long-term leases; therefore, as part of our financing strategy we believe that our properties should be financed primarily with long-term fixed rate

53

debt. As a result, we manage our effective amount of floating rate debt to be approximately 15-20% of total outstanding indebtedness and enter into interest rate swap agreements. We believe this strategy is the most appropriate for the long term health of our company. Our $1.25 billion credit facility ("Credit Facility") provides a source of liquidity and flexibility in our capital strategy as our cash needs vary from time to time.

            Finally, we derive our liquidity primarily from our leases that generate positive net cash flow from operations and distributions from unconsolidated entities that totaled $1.1 billion in 2003. In addition, we generate the majority of our revenues from leases with retail tenants including:

            Revenues of M.S. Management Associates, Inc. (the "Management Company"), after intercompany eliminations, consist primarily of management fees that are typically based upon the revenues of the property being managed. We generate revenues from outlot land sales and, due to our size and tenant relationships, from the following:

            Our core business fundamentals remained stable during 2003. Regional mall comparable sales per square foot ("psf") strengthened in 2003, increasing 2.8% to $402 psf from $391 in 2002, as the overall economy begins to show signs of recovery and as a result of our dispositions of lower quality Properties. Our regional mall average base rents increased 5.1% to $32.26 psf from $30.70 psf. In addition, we maintained strong regional mall leasing spreads of $8.29 psf in 2003 increasing from $7.77 psf in 2002. The regional mall leasing spread for 2003 includes new store leases signed at an average of $41.28 psf initial base rents as compared to $32.99 psf for store leases terminating or expiring in the same period. Our same store leasing spread for 2003 was $7.29 or a 19.2% growth rate and is calculated by comparing leasing activity completed in 2003 with the prior tenants rents for those exact same spaces. Finally, our regional mall occupancy was down by 30 basis points to 92.4% as of December 31, 2003 from 92.7% as of December 31, 2002 primarily due to retailer bankruptcy-related closings during the last four months of the year.

            During 2003, we completed acquisitions or increases in ownership of core Properties through the following transactions:

            In addition, during 2003, we realized the full year benefits of the acquisitions we made during 2002 consisting primarily of the Rodamco North America, N.V. acquisition (the "Rodamco acquisition"). These acquisitions increased consolidated total revenues in 2003 by $74.3 million and consolidated operating income by $22.1 million compared to the year ended December 31, 2002.

            On October 8, 2003, we and Westfield America, Inc. ("Westfield"), the U.S. subsidiary of Westfield America Trust, withdrew our tender offer for the outstanding common shares of Taubman Centers, Inc. The withdrawal of the tender offer followed the enactment of a law, which amended the Michigan Control Share Acquisitions Act and which

54


allowed the Taubman family group to effectively block our ability to conclude the tender offer. As a result we expensed deferred acquisition costs of $10.6 million, net, related to this acquisition during 2003.

            We invested approximately $292 million in development and redevelopment/expansion opportunities in 2003. Our openings in 2003 were highlighted by the opening of Las Vegas Premium Outlets in Las Vegas, NV consisting of 435,000 square feet of GLA and the expansion of the Galleria in Houston, TX consisting of 696,000 square feet of GLA. We expect to invest in excess of $450 million in 2004 on development and redevelopment/expansion opportunities, highlighted by the opening of the phase three expansion of Forum Shops.

            We lowered our overall borrowing rates by 27 basis points during the year as a result of our financing activities related to indebtedness. Our financing activities were highlighted by three significant transactions:

            Finally, we increased our presence in Europe and expanded our relationships with Europe's leading retailers through our partnership with The Rinascente Group, an Italian retailer company. We jointly formed the joint venture Gallerie Commerciali Italia S.p.A ("GCI"), which owns a geographically diverse portfolio in Italy of 38 shopping centers as of December 31, 2003 and all but one of which are anchored by hypermarkets. The Rinascente Group contributed these 38 existing shopping centers as well as development opportunities to GCI and then sold 49% of GCI to us. The initial gross value of GCI was approximately €860 million and our initial equity investment was approximately €187 million, or $232 million.

            Based upon current business and market conditions, we expect to maintain similar operating trends in 2004.

            The Portfolio data discussed in this overview includes the following key operating statistics: occupancy; average base rent per square foot; and comparable sales per square foot. We include acquired Properties in this data beginning in the year of acquisition and we do not include any Properties located outside of North America. The following table sets forth these key operating statistics for:

•
Properties that we control and which are consolidated in our consolidated financial statements,

•
Properties which we do not control that we account for under the equity method as unconsolidated joint ventures, and

•
the foregoing two categories of Properties on a total Portfolio basis.

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            We believe the total Portfolio data provides you with information helpful in evaluating not only the quality and growth potential of the Portfolio, but also the effectiveness of our management.

 
   2003
   %
Change
   2002
   %
Change
   2001
   %
Change
Regional Malls                              
Occupancy                              
Consolidated     92.2%         92.3%         91.2%    
Unconsolidated     92.7%         93.5%         93.3%    
Total Portfolio     92.4%         92.7%         91.9%    
Average Base Rent per Square Foot                              
Consolidated   $ 31.28   5.5%   $ 29.66   4.5%   $ 28.39   4.2%
Unconsolidated   $ 33.73   3.8%   $ 32.50   5.3%   $ 30.87   1.8%
Total Portfolio   $ 32.26   5.1%   $ 30.70   4.8%   $ 29.28   3.4%
Comparable Sales Per Square Foot                              
Consolidated   $ 388   3.8%   $ 374   1.6%   $ 368   (0.7%)
Unconsolidated   $ 427   0.5%   $ 425   2.4%   $ 415   0.3%
Total Portfolio   $ 402   2.9%   $ 391   2.0%   $ 383   (0.2%)

Community Shopping Centers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy                              
Consolidated     87.1%         84.9%         89.8%    
Unconsolidated     96.3%         91.2%         90.4%    
Total Portfolio     90.2%         86.9%         89.3%    
Average Base Rent per Square Foot                              
Consolidated   $ 11.01   7.5%   $ 10.24   4.6%   $ 9.79   6.6%
Unconsolidated   $ 9.77   (0.9%)   $ 9.86   (0.6%)   $ 9.92   1.6%
Total Portfolio   $ 10.59   4.6%   $ 10.12   2.5%   $ 9.87   5.4%
Comparable Sales Per Square Foot                              
Consolidated   $ 210   6.6%   $ 197   2.0%   $ 193   6.8%
Unconsolidated   $ 206   1.6%   $ 203   (6.6%)   $ 217   6.0%
Total Portfolio   $ 209   4.8%   $ 199   (1.1%)   $ 201   6.7%

            Occupancy Levels and Average Base Rents.    Occupancy and average base rent is based on mall and freestanding GLA owned by us ("Owned GLA") at mall and freestanding stores in the regional malls and all tenants at community shopping centers. We believe the continued stability in regional mall occupancy is primarily the result of the overall quality of our Portfolio. The result of the stability in occupancy is a direct or indirect increase in nearly every category of revenue. Our portfolio has maintained stable occupancy and increased average base rents, in the current economic climate.

            Comparable Sales per Square Foot.    Sales volume includes total reported retail sales at Owned GLA in the regional malls and all reporting tenants at community shopping centers. Retail sales at Owned GLA affect revenue and profitability levels because sales 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.) that tenants can afford to pay.

Significant Accounting Policies

            Our significant accounting policies are described in detail in Note 3 of the Notes to Financial Statements. The following briefly describes those accounting policies we believe are most critical to understanding our business:

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Results of Operations

            The following acquisitions, dispositions, and openings affected our consolidated results from continuing operations in the comparative periods:

            The following acquisitions, dispositions, and openings affected our income from unconsolidated entities in the comparative periods:

            For the purposes of the following comparison between the years ended December 31, 2003 and December 31, 2002, the above transactions are referred to as the Property Transactions. In the following discussions of our results of operations, "comparable" refers to Properties open and operating throughout both the current and prior year.

            Our discontinued operations resulted from the sale of the following Properties as of December 31, 2003 (date of sale):

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            In addition to the Property Transactions, on March 14, 2003, we purchased the remaining ownership interest in Forum Shops which impacted our minority interest expense, depreciation expense, and interest expense. On January 1, 2003, the Operating Partnership acquired all of the remaining equity interests of the Management Company that resulted in the consolidation of the Management Company at that point. The Management Company was previously accounted for using the equity method during 2002 and 2001.

            Minimum rents, excluding rents from our consolidated Simon Brand and Simon Business initiatives, increased $75.6 million during the period. The net effect of the Property Transactions increased minimum rents $45.1 million and the purchase accounting estimation of the fair market value of in-place leases as part of our acquisitions, increased rents by $6.2 million. Comparable rents increased $24.3 million. This was primarily due to the leasing of space at higher rents that resulted in an increase in base rents of $23.9 million. In addition, increased rents from carts, kiosks, and renting unoccupied in-line space increased comparable rents from temporary tenant income by $4.4 million. These increases were offset by a $4.1 million decrease in straight-line rent revenue.

            The Management Company recorded fee revenues of $58.5 million and insurance premium revenues of $19.8 million.

            Total other income, excluding consolidated Simon Brand and Simon Business initiatives, decreased $16.2 million. The impact of the consolidation of the Management Company included the addition of $7.0 million of investment income primarily from the insurance subsidiaries and the elimination of consolidated intercompany interest and dividend income that totaled $13.6 million in 2002 received from the Management Company previously recorded in other income in 2002. In addition, outlot land sales decreased by $2.0 million due to higher than normal activity in 2002 and lease settlement income decreased $2.2 million. In addition, other income in 2002 included the impact of our hedges of the Rodamco acquisition in 2002, of which $7.8 million was included in other income and $0.7 million of expense is included in other expenses.

            Consolidated revenues from Simon Brand and Simon Business initiatives increased $19.3 million to $100.2 million from $80.9 million. This included a net $6.9 million increase from the Property Transactions primarily due to acquired parking services. The increase in revenues is primarily due to:

            These increases were offset by revenues in 2002 that resulted from our settlement with Enron Corporation that totaled $8.6 million, net. The increased revenues from Simon Brand and Simon Business were offset by a $6.9 million increase in Simon Brand expenses that primarily resulted from increased gift card and other operating expenses included in property operating expenses.

            Tenant reimbursements increased $31.8 million of which the Property Transactions accounted for $17.3 million of the increase. The remaining portion of the increase was primarily due to increases in comparable recoverable expenditures. Depreciation and amortization expenses increased $30.7 million primarily due to the net effect of the Property Transactions, the consolidation of the Management Company, and the Forum Shops acquisition. The costs related to the withdrawn tender offer of $10.6 million relate to the write off of our deferred acquisition costs. Other expenses decreased $2.3 million due to the $4.0 million of expense related to a litigation settlement in 2002. This was offset by increased ground rent expense of $4.0 million primarily due to the acquisition of Stanford Shopping Center. The increase in home office and regional office costs and general and administrative expenses was due to the consolidation of the Management Company that added $52.9 million of total operating expenses in 2003.

            Interest expense increased $3.2 million. Our average borrowings increased as a result of the full year impact of the financing of the Rodamco acquisition, the unsecured note offering in March of 2003, and financing of acquisition activities in 2003. This increase was offset by an overall decrease in weighted average interest rates as a result of refinancing activity, an increase in capitalized imputed interest due to increased development, renovation and expansion activity, and slightly lower variable interest rate levels.

            In 2003, we recorded a $5.1 million net loss on the sale of assets, which primarily consisted of the $6.0 million loss we recorded in connection with the Mall of America litigation. In 2002, gains on sales of assets and other, net, were $162.0 million as we sold several Properties and partnership interests that resulted in net proceeds of

58


$432.7 million. We sold our interest in the specialty retail center, Orlando Premium Outlets, during 2002 to our partner in the joint venture. We sold our interests in five value oriented regional malls to our partner, the Mills Corporation, and sold two of the acquired Rodamco partnership interests and one existing partnership interest to Teachers Insurance and Annuity Association of America to fund a portion of the Rodamco acquisition. We sold one community center, two regional malls and two jointly held assets acquired in the Rodamco acquisition. In addition, as part of our disposition strategy we disposed of seven of the nine assets held for sale as of December 31, 2001. Finally, we made the decision to no longer pursue certain development projects and wrote-off the carrying amount of our predevelopment costs and land acquisition costs associated with these projects that totaled $17.1 million.

            During 2002, we also recognized $16.1 million in gains on the forgiveness of debt related to the disposition of two regional malls. Net cash proceeds from these dispositions were $3.6 million. In addition, we recognized $1.5 million of expenses related to the early extinguishment of debt that consisted of prepayment penalties and the write-off of unamortized mortgage costs. Our income tax expense of taxable REIT subsidiaries of $7.6 million is due to the consolidation of the Management Company.

            Income from unconsolidated entities increased $6.8 million in 2003 as compared to 2002. during the comparative periods. In 2002, income from unconsolidated entities included income from Management Company operations, excluding MerchantWired LLC, of approximately $14.1 million. This included our share of the gain of $8.4 million, net of tax, associated with the sale of land partnership interests previously discussed. In 2003, income from unconsolidated entities owned by the Management Company in 2003 totaled $3.7 million. In addition, income from unconsolidated partnerships and joint ventures, excluding the Management Company, increased $17.2 million resulting from:

            These increases were offset by the loss of income due to the sale of our interests in the Mills Properties and Orlando Premium Outlets, and due to our cessation of recording any contribution to net income from Mall of America (see Note 11).

            Losses from MerchantWired LLC in 2002 included our indirect share of operating losses of $10.2 million, after a tax benefit of $6.2 million. These operating losses included our share of an impairment charge of $4.2 million, after tax, on certain technology assets. The Management Company recorded a net write-off of $22.5 million, after a tax benefit of $9.4 million, of its investment in MerchantWired LLC in September 2002. The total technology write-off related to MerchantWired LLC was $38.8 million before tax.

            Net income from the results of operations of the Management Company, excluding the losses of MerchantWired LLC, was flat during the period. Increased management fees as a result of the Rodamco acquisition and increased income from insurance subsidiaries were offset by the partnership interests sold in 2002 resulting in our share of a gain of $8.4 million, net of tax.

            We continued our disposition activities in 2003 with the sale of 13 non-core Properties consisting of seven regional malls, five community centers, and one mixed-use Property. These non-core Properties were sold for a total of $275.1 million that resulted in a net gain of $22.4 million. As a result of these transactions, we reclassified the results of operations from these consolidated Properties to discontinued operations. These dispositions will not have a material effect on our results of operations or liquidity.

            Finally, preferred dividend expense decreased $9.1 million due to the conversion of shares of 6.5% Series B Preferred Stock into common stock.

            The following acquisitions, dispositions, and openings affected our consolidated results of operations for the periods ended December 31, 2002 versus December 31, 2001:

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            The following acquisitions, dispositions, and openings affected our income from unconsolidated entities in the comparative periods:

            For the purposes of the following comparison between the years ended December 31, 2002 and December 31, 2001, the above transactions are referred to as the Property Transactions. In the following discussions of our results of operations, "comparable" refers to Properties open and operating throughout both the current and prior year.

            Our discontinued operations resulted from the sale of the following Properties as of December 31, 2003 (date of sale):

            Total minimum rents, excluding rents from our consolidated Simon Brand and Simon Business initiatives, increased $24.9 million. The net effect of the Property Transactions increased these rents $4.1 million. Comparable rents increased $20.8 million during the period including a $21.1 million increase in base rents due to increased occupancy and leasing space at higher rents. In addition, increased rents from carts, kiosks, and renting unoccupied in-line space increased comparable rents from temporary tenant income by $6.7 million. The change in comparable rents was net of a decrease in straight-line rent income of $6.0 million.

            Total other income, excluding consolidated Simon Brand and Simon Business initiatives, increased $9.0 million. This included the net $3.2 million decrease in other income from the Property Transactions and a $19.9 million increase in outlot land parcel sales at comparable Properties. In addition, the increase included the impact of our hedges of the Rodamco acquisition, which positively impacted operating income by $7.1 million in 2002 as compared to 2001 ($7.8 million is included in other income and $0.7 million of expense is included in other expenses). These increases were offset by $5.7 million in fee income recorded in 2001 associated with services provided to the Management Company in connection with the right to designate persons or entities to whom the Montgomery Ward LLC real estate assets were to be sold (the "Kimsward transaction"). Also offsetting these increases was a $2.7 million decrease in lease settlements and a $3.8 million decrease in interest income due to the lower interest rate environment.

            Consolidated revenues from Simon Brand and Simon Business initiatives increased $6.1 million to $80.9 million from $74.8 million. The increase included the $8.6 million of revenue, net, resulting from the settlement with Enron Corporation that was partially offset by a $5.6 million contract cash termination payment recognized in 2001. The contract cash termination payment was received to terminate a provision within the overall Enron contract that eliminated our right to invest in and participate in savings from the contractor's installation of energy efficient capital equipment.

            The increase in our recovery revenues of $36.5 million resulted from the Property Transactions and increased recoverable expenditures including increased insurance costs and utility expenditures. The increased insurance costs were due to increased premiums for terrorism and general liability insurance. Utility expenses increased primarily due

60


to the loss of our energy contract with Enron. These expense increases were partially offset by decreased repairs and maintenance and advertising and promotional expenditures.

            Depreciation and amortization expense increased $13.8 million primarily from the increase in depreciation expense from the Property Transactions. In 2001, we recorded an impairment charge of $47.0 million to adjust the nine assets held for sale to their estimated fair value. Other expenses decreased $3.7 million, including a $5.5 million net decrease from the Property Transactions. These expenses include $4.0 million of expense in 2002 related to litigation settlements and $2.7 million from the write-off of our last remaining technology investment. In 2001, we wrote down an investment by $3.0 million and we wrote off $2.7 million of miscellaneous technology investments.

            Interest expense during 2002 decreased $8.4 million compared to the same period in 2001. This decrease resulted from lower variable interest rate levels offset by $29.0 million of interest expense on borrowings used to fund the Rodamco acquisition, the purchase of the remaining ownership interest in Copley Place and the assumption of consolidated property level debt resulting from these acquisitions.

            Income from unconsolidated entities increased $10.3 million in 2002, resulting from an $11.5 million increase in income from unconsolidated partnerships and joint ventures, and a $1.2 million decrease in income from the Management Company before losses from MerchantWired LLC. The increase in joint venture income resulted from the Rodamco acquisition, lower variable interest rate levels, and our acquisition of Fashion Valley Mall in October 2001. These increases were offset by the loss of income due to the sale of our interests in the Mills Properties and Orlando Premium Outlets.

            The decrease in income from the Management Company before losses from MerchantWired LLC included our $8.4 million share of the gain, net of tax, associated with the sale of land partnership interests to the Mills Corporation in 2002. This was offset by our $12.0 million share of income, before tax, recorded in 2001 from the Kimsward transaction, net of fees charged by the Operating Partnership. In addition, in 2001, we recorded our net $13.9 million share from the write-off of technology investments, primarily clixnmortar. The Management Company also had increased income tax expense, increased dividend expenses due to the issuance of two new series of preferred stock to us, and decreased income from land sale gains totaling $11.1 million. Finally, the Management Company's core fee businesses were flat in 2002 versus 2001.

            Losses from MerchantWired LLC increased $14.6 million, net. This included our share of a $4.2 million net impairment charge in 2002 on certain technology assets and the $22.5 million net write-off of our investment in MerchantWired, LLC recorded in 2002. The write-off and the impairment charge have been added back as part of our funds from operations reconciliation. The total technology write-off related to MerchantWired LLC was $38.8 million before tax. Offsetting these charges were reduced operating losses from MerchantWired LLC due to its ceasing operations in 2002.

            As previously discussed, we sold several Properties and partnership interests in 2002 that resulted in a net gain of $162.0 million and net proceeds of $432.7 million. In 2001, we recognized a net gain of $2.6 million on the sale of one regional mall, one community center, and one office building from net proceeds of approximately $19.6 million.

            During 2002, we recognized $16.1 million in gains on the forgiveness of debt related to the disposition of two regional malls. Net cash proceeds from these disposals were $3.6 million. In addition, we incurred $1.5 million of expense during 2002 from the early extinguishment of debt that consisted of prepayment penalties and the write-off of unamortized mortgage costs.

            In 2001, we recorded a $1.7 million expense as a cumulative effect of an accounting change, which includes our $1.5 million share from unconsolidated entities, due to the adoption of SFAS 133 "Accounting for Derivative Instruments and Hedging Activities," as amended.

Liquidity and Capital Resources

            Our balance of cash and cash equivalents increased $138.5 million during 2003 to $535.6 million as of December 31, 2003, including a balance of $175.0 million related to our gift card program, which we do not consider available for general working capital purposes.

            On December 31, 2003, the Credit Facility had available borrowing capacity of $898.0 million net of outstanding borrowings of $327.9 million, including borrowings of €48.5 million, and letters of credit of $24.1 million. The Credit Facility bears interest at LIBOR plus 65 basis points with an additional 15 basis point facility fee on the entire

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$1.25 billion facility and provides for variable grid pricing based upon our corporate credit rating. The Credit Facility has an initial maturity of April 2005, with an additional one-year extension available at our option. During 2003, the maximum amount outstanding under the Credit Facility was $667.1 million and the weighted average amount outstanding was $396.3 million. The weighted average interest rate was 1.86% for the year ended December 31, 2003.

            On June 27, 2003, we retired our existing €90 million EURO-denominated unsecured credit agreement (the "EURO Facility"), which had an initial maturity date of July 31, 2003, with available working capital of $28.2 million and €34.7 million borrowed from a new EURO sub-tranche of our Credit Facility. We restructured our Credit Facility to establish a $100 million EURO sub-tranche which provides availability for Euros at EURIBOR plus 65 basis points and dollars at LIBOR plus 65 basis points, at our option, and has the same maturity date as the overall Credit Facility. The amount available under the $100 million EURO sub-tranche will vary with changes in the exchange rate, however, we may also borrow the amount available under this EURO sub-tranche in dollars, if necessary.

            We and the Operating Partnership also have access to public equity and long term unsecured debt markets and we have access to private equity from institutional investors at the Property level. Our current senior unsecured debt ratings are Baa2 by Moody's Investors Service and BBB by Standard & Poor's and our current corporate rating is BBB+ by Standard & Poor's.

            Our net cash flow from operating activities and distributions of capital from unconsolidated entities totaled $1.1 billion. This cash flow includes $37.8 million of excess proceeds from refinancing activities primarily from two unconsolidated joint ventures. In addition, we consolidated $48.9 million of cash from the acquisition of the remaining ownership interests in the Management Company. We also received $278.1 million primarily from the sale of thirteen non-core Properties. Finally, we had net proceeds from all of our debt financing and repayment activities of $609.5 million, as discussed below in "Financing and Debt". In addition, we used part of these proceeds to fund $814.6 million in cash needs for our acquisitions which are detailed under the "Acquisitions" section of this discussion. We met our maturing debt obligations in 2003 primarily through refinancings and borrowings on our Credit Facility. We also:

            In general, we anticipate that cash generated from operations will be sufficient, to meet operating expenses, monthly debt service, recurring capital expenditures, and distributions to shareholders necessary to maintain our REIT qualification for 2004 and on a long-term basis. In addition, we expect to be able to obtain capital for nonrecurring capital expenditures, such as acquisitions, major building renovations and expansions, as well as for scheduled principal maturities on outstanding indebtedness, from:

            As previously discussed, on March 18, 2003 we issued two tranches of senior unsecured notes to institutional investors pursuant to Rule 144A totaling $500.0 million at a weighted average fixed interest rate of 5.11%. Subsequently, we exchanged notes that had been registered under the Securities Act of 1933 for the Rule 144A notes. The exchange notes and the Rule 144A notes have the same economic terms and conditions. The first tranche is $300.0 million at a fixed interest rate of 4.875% due March 18, 2010 and the second tranche is $200.0 million at a fixed interest rate of 5.45% due March 15, 2013.

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            On June 15, 2003, we paid off $375.0 million of 6.625% senior unsecured notes that matured on that date with borrowings from our Credit Facility. The variable rate swap agreements designated as hedges against these unsecured notes also matured on the same date.

            On November 15, 2003, we exchanged with the holders of our $100.0 million of 6.75% Putable Asset Trust Securities (PATS), which had a call option settlement feature on that date, for $113.1 million Floating Rate Mandatory Extension Notes (MAXES) due November 15, 2014. The MAXES bear interest during the first year at LIBOR plus 80 basis points. On January 20, 2004, the holders of the MAXES exchanged the MAXES for an equal principal amount of notes as part of the unsecured notes offering discussed below. The exchange of the PATS for the MAXES did not result in a significant modification of the terms in the debt arrangement.

            On December 17, 2003, we obtained a €200 million capacity EURO-denominated one-year unsecured term loan with two one-year extensions available at our option. The loan bears interest at EURIBOR plus 60 basis points. The initial borrowing of €163 million was used to fund a portion of the acquisition of GCI.

            On January 20, 2004, we issued two tranches of senior unsecured notes to institutional investors pursuant to Rule 144A totaling $500.0 million at a weighted average fixed interest rate of 4.21%. The first tranche is $300.0 million at a fixed interest rate of 3.75% due January 30, 2009 and the second tranche is $200.0 million at a fixed interest rate of 4.90% due January 30, 2014. We received cash and we exchanged, with the holder, the MAXES discussed above for a portion of the second tranche of the notes. We agreed to file a registration statement under the Securities Act of 1933 relating to an offer to exchange the notes of each series for registered notes with substantially identical economic terms. If we do not complete the exchange offer within 180 days after the issuance of the notes, the interest rates on the notes will be increased by 0.50% per year. We expect to complete the registration within the allotted time frame. The exchange of the MAXES for the notes instruments did not result in a significant modification of the terms in the debt arrangement.

            Concurrently with the pricing of the notes, we entered into a five year variable rate $300.0 million notional amount swap agreement to effectively convert the $300.0 million tranche to floating rate debt at an effective rate of six-month LIBOR. We completed this swap agreement as our percentage of variable rate indebtedness was lower than our desired range.

            On April 1, 2003, using available cash flow, we paid off a $34.0 million variable rate mortgage, at LIBOR plus 150 basis points, that encumbered one consolidated Property. In addition, we refinanced another consolidated mortgaged Property with a $100.0 million 4.60% fixed rate mortgage maturing on July 1, 2013. The refinanced mortgage had a balance of $85.5 million at a weighted average fixed rate of 7.16% and was to mature on December 31, 2003.

            On August 20, 2003, we secured a $220.0 million, 3.60% fixed rate, interest only, five year mortgage to fund a portion of the acquisition of our leasehold interest in Stanford Shopping Center. Including the effects of a hedging transaction concurrently entered into, the initial blended interest rate is 2.81%.

            On November 14, 2003, we secured a $550.0 million leasehold financing for Forum Shops at a fixed-rate of 4.78% due December 1, 2010. This replaced a $175.0 million mortgage that had an initial maturity of May 2004 and was effectively fixed at an average interest rate of 6.67%, including interest rate protection agreements. The financing generated excess proceeds of $370.8 million that we used to unencumber one asset, to reduce borrowings on our Credit Facility and for general corporate purposes.

            Overall, our fixed rate or effectively fixed rate indebtedness that matured or was refinanced in 2003 totaled $863.7 million and had a weighted average interest rate 6.79% and a weighted average initial term of 6.4 years. Our fixed rate or effectively fixed rate indebtedness that we issued in 2003, including the $200.0 million fixed rate portion of the unsecured notes issued on January 20, 2004, totaled $1.5 billion and had a weighted average interest rate of 4.78% and a weighted average initial term of 7.8 years.

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            Our consolidated debt adjusted to reflect outstanding derivative instruments consisted of the following (dollars in thousands):

Debt Subject to          
   Adjusted Balance
as of
Deceember 31, 2003
   Effective
Weighted
Average
Interest Rate
   Adjusted Balance
as of
December 31, 2002
   Effective
Weighted
Average
Interest Rate
Fixed Rate   $ 8,499,750   6.71%   $ 7,941,122   6.81%
Variable Rate     1,766,638   2.61%     1,604,959   3.58%
   
 
 
 
    $ 10,266,388   6.00%   $ 9,546,081   6.27%
   
     
   

            As of December 31, 2003, we had interest rate cap protection agreements on $296.0 million of consolidated variable rate debt. We had interest rate protection agreements effectively converting variable rate debt to fixed rate debt on $48.1 million of consolidated variable rate debt. In addition, we hold a $85.0 million of notional amount fixed rate swap agreement that has a pay rate of 5.89% and a weighted average receive rate of 1.18% at December 31, 2003. We also hold $370.0 million of notional amount variable rate swap agreements that have a weighted average pay rate of 1.20% and a weighted average receive rate of 3.52% at December 31, 2003. As of December 31, 2003, the net effect of these agreements effectively converted $237.0 million of fixed rate debt to variable rate debt. As of December 31, 2002, the net effect of these agreements effectively converted $112.7 million of fixed rate debt to variable rate debt.

            Contractual Obligations and Off-balance Sheet arrangements:    The following table summarizes the material aspects of our future obligations as of December 31, 2003 (dollars in thousands):

 
   2004
   2005 - 2006
   2007 - 2009
   After 2009
   Total
Long Term Debt                              
Consolidated (1)   $ 1,480,850   $ 2,321,085   $ 3,058,613   $ 3,394,517   $ 10,255,065
   
 
 
 
 
Pro rata share of Long Term Debt:                              
  Consolidated (2)   $ 1,459,433   $ 2,306,513   $ 3,014,232   $ 3,351,893   $ 10,132,071
  Joint Ventures (2)     197,615     1,055,214     596,817     887,865     2,737,511
   
 
 
 
 
Total Pro Rata Share of Long Term Debt     1,657,048     3,361,727     3,611,049     4,239,758     12,869,582
Consolidated Capital expenditure commitments (3)     388,442     153,985     1,398     —     543,825
Joint Venture Capital expenditure commitments (3)     63,737     1,822     —     —     65,559
Consolidated Ground Lease commitments     11,180     27,127     41,763     594,886     674,956
   
 
 
 
 
Total   $ 2,120,407   $ 3,544,661   $ 3,654,210   $ 4,834,644   $ 14,153,922
   
 
 
 
 
(1)
Represents principal maturities only and therefore, excludes net premiums and discounts and fair value swaps of $11,323.

(2)
Represents our pro rata share of principal maturities and excludes net premiums and discounts.

(3)
Represents our pro rata share of capital expenditure commitments

            Capital expenditure commitments presented in the table above represent new developments, redevelopments or renovation/expansions that we have committed to the completion of construction. The timing of these expenditures may vary due to delays in construction or acceleration the opening date of a particular project. In addition, the amount includes our share of joint venture developments.

            We expect to meet our 2004 debt maturities through refinancings, the issuance of new debt securities or borrowings on the Credit Facility. We expect to have the ability and financial resources to meet all future long term obligations. Specific financing decisions will be made based upon market rates, property values, and our desired capital structure at the maturity date of each transaction. We incurred interest expense during 2003 of $602.5 million net of capitalized interest of $10.7 million.

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            Our off-balance sheet arrangements consist primarily of our investments in real estate joint ventures which are common in the real estate industry and are described in Note 7 of the notes to the accompanying financial statements. Joint venture debt is the liability of the joint venture, is typically secured by the joint venture Property, and is non-recourse to us. As of December 31, 2003, we have guaranteed or have provided letters of credit to support $93.8 million of our total $2.7 billion share of joint venture mortgage and other indebtedness presented in the table above.

            On November 13, 2003, we gave notice of redemption of the remaining 4,316,329 shares of our 6.5% Series B Convertible Preferred Stock on December 15, 2003 at a redemption price of 105% of the liquidated value plus accrued and unpaid distributions to the redemption date or $106.34 per share. As previously discussed, the holders of all but 18,340 shares of the preferred stock exercised their right to convert each share of preferred stock into our common stock prior to the redemption. We issued 11,114,672 million shares of common stock to the holders who exercised their conversion rights. We issued a new series of preferred stock, the proceeds from which were used to pay the redemption price of the remaining shares of our 6.5% Series B Convertible Preferred Stock.

            In addition, earlier in 2003 prior to the redemption, the holders of 513,728 shares of the preferred stock converted their preferred stock and we issued 1,328,523 shares of common stock to them.

            Acquisitions.    We acquired our additional interests in Kravco from certain private investors, The Rouse Company ("Rouse") and Westfield America Trust ("Westfield"). We obtained our initial interest jointly with Rouse and Westfield in connection with the Rodamco acquisition in 2002. The total consideration paid in 2003 for these transactions was approximately $293.4 million and consisted of:

            We purchased our interest in Forum Shops for $174.0 million in cash and assumed the minority limited partner's $74.2 million share of debt, and other partnership liabilities. In addition, we purchased our 100% stake in Stanford Shopping Center for $333.0 million funded initially with borrowings from our Credit Facility and the proceeds from a $220.0 million leasehold mortgage previously discussed.

            Buy/sell provisions are common in real estate partnership agreements. Most of our partners are institutional investors who have a history of direct investment in regional mall properties. Our partners in our joint ventures may initiate these provisions at any time and if we determine it is in our shareholders' best interests for us to purchase the joint venture interest, we believe we have adequate liquidity to execute the purchases of the interests without hindering our cash flows or liquidity. Should we decide to sell any of our joint venture interests, we would expect to use the net proceeds from any such sale to reduce outstanding indebtedness.

            Dispositions.    As part of our strategic plan to own quality retail real estate we continue to pursue the sale of Properties, under the right circumstances, that no longer meet our strategic criteria. In 2003, we disposed of thirteen non-core Properties that no longer met our strategic criteria. These consisted of seven regional malls, five community centers, and one mixed-use property. We do not believe the sale of these Properties will have a material impact on our future results of operations or cash flows and their removal from service and sale will not materially affect our ongoing operations. We believe the disposition of these Properties will enhance the average overall quality of our Portfolio.

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            New Developments.    The following describes our current new development projects, the estimated total cost, our share of the estimated total cost and the construction in progress balance as of December 31, 2003 (dollars in millions):

Property
   Location
   Gross
Leasable
Area
   Estimated
Total
Cost(b)
   Our Share of
Estimated
Total Cost
   Our Share of
Construction in
Progress(a)
   Actual/Estimated
Opening
Date
Under construction                          
Chicago Premium Outlets   Chicago, IL   438,000   $ 67   $ 33   $ 29.6   2nd Quarter 2004
Clay Terrace   Carmel, IN   570,000     100     50     17.8   Fall 2004
St. Johns Town Center   Jacksonville, FL   1,500,000     126     107 (c)   34.8 (c) 1st Quarter 2005
Wolf Ranch   Georgetown, TX   670,000     62     62     29.5   3rd Quarter 2005
Firewheel Center   Garland, TX   785,000     96     96     16.2   Fall 2005
(a)
Amounts include the portion of the project placed in service as of December 31, 2003, if any.

(b)
Represents the project costs net of land sales, tenant reimbursements for construction, and other items (where applicable).

(c)
Due to our preference in the joint venture partnership, we are contributing 85% of the project costs.

            We expect to fund these capital projects with either available cash flow from operations, borrowings from our Credit Facility, or project specific construction loans. We expect total 2004 new development costs during the year to be approximately $200 million.

            Strategic Expansions and Renovations.    The following describes our significant renovation and/or expansion projects currently under construction, the estimated total cost, our share of the estimated total cost and our share of the construction in progress balance as of December 31, 2003 (dollars in millions):

Property
   Location
   Gross
Leasable
Area
   Estimated
Total
Cost(b)
   Our Share of
Estimated
Total Cost
   Our Share of
Construction in
Progress(a)
   Actual/Estimated
Opening
Date
Under Construction                              
Forum Shops at Caesars   Las Vegas, NV   175,000   $ 139   $ 139   $ 71.4   October 2004
Southpark Mall   Charlotte, NC   309,000   $ 125   $ 125     85.5   Spring 2004
(a)
Amounts include the portion of the project placed in service as of December 31, 2003, if any.

(b)
Represents the project costs net of land sales, tenant reimbursements for construction, and other items (where applicable).

            We have renovation and/or expansion projects currently under construction or in preconstruction development and expect to invest a total of approximately $250 million on redevelopment projects in 2004.

            The following table summarizes total capital expenditures on consolidated Properties on a cash basis:

 
   2003
   2002
   2001
New Developments   $ 105   $ 11   $ 68
Renovations and Expansions     187     95     124
Tenant Allowances     54     60     57
Operational Capital Expenditures     8     48     33
   
 
 
Total   $ 354   $ 214   $ 282
   
 
 

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            International.    As previously mentioned, we significantly increased our presence in Europe through our joint venture with the Rinascente Group, Gallerie Commerciali Italia. Our strategy is to invest capital internationally not only to acquire existing properties but also to use the net cash flow from the existing properties to fund other future developments. We believe reinvesting the cash flow derived in Euros in other Euro denominated development and redevelopment projects helps minimize our exposure to our initial investment and to the changes in the Euro on future investments that might otherwise significantly increase our cost and reduce our returns on these new projects and developments. In addition, to date we have funded the majority of our investments in Europe, with Euro-denominated borrowings that act as a natural hedge on our investments.

            Currently, our net income exposure to changes in the volatility of the Euro is not material. In addition, since cash flow from operations is currently being reinvested in other development projects, we do not expect to repatriate Euros for the next few years. Therefore, we also do not currently have a significant cash flow from operations exposure due to fluctuations in the value of the Euro.

            The agreements for the Operating Partnership's 35.2% interest in European Retail Enterprises, B.V. ("ERE") are structured to allow us to acquire an additional 26.1% ownership interest over time. The future commitments to purchase shares from three of the existing shareholders of ERE are based upon a multiple of adjusted results of operations in the year prior to the purchase of the shares. Therefore, the actual amount of these additional commitments may vary. The current estimated additional commitment is approximately $60 million to purchase shares of stock of ERE, assuming that the three existing shareholders exercise their rights under put options. We expect these purchases to be made from 2006-2008.

            The carrying amount of our total investments as of December 31, 2003 in European subsidiaries net of the related cumulative translation adjustment was $311.1 million, including subordinated debt in ERE, and both investments are accounted for using the equity method of accounting. Currently a total of 8 developments are under construction which will add approximately 5.6 million square feet of GLA for a total net cost of approximately €356 million, of which our share is approximately €150 million.

            Distributions

            On February 5, 2004, our Board of Directors approved an increase in the annual distribution rate to $2.60 per share. Dividends during 2003 aggregated $2.40 per share and dividends during 2002 aggregated $2.175 per share. We are required to pay a minimum level of dividends to maintain our status as a REIT. Our dividends and limited partner distributions typically exceed our net income generated in any given year primarily because of depreciation, which is a "non-cash" expense. Our future dividends and the distributions of the Operating Partnership will be determined by the Board of Directors based on actual results of operations, cash available for dividends and limited partner distributions, and what may be required to maintain our status as a REIT.

Non-GAAP Financial Measure — Funds from Operations

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

            As defined by the National Association of Real Estate Investment Trusts ("NAREIT"), FFO is consolidated net income computed in accordance with GAAP:

            We have adopted NAREIT's clarification of the definition of FFO that requires us to include the effects of nonrecurring items not classified as extraordinary, cumulative effect of accounting change or resulting from the sale of depreciable real estate. However, you should understand that FFO:

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            The following schedule sets forth total FFO before allocation to the limited partners of the Operating Partnership and FFO allocable to Simon Property. This schedule also reconciles net income, which we believe is the most directly comparable GAAP financial measure, to FFO for the periods presented.

 
   For the Year Ended December 31,
  
 
   2003
   2002
   2001
  
 
   (in thousands)

  
Funds From Operations   $ 1,041,105   $ 936,356   $ 786,635  
   
 
 
 
Increase in FFO from prior period     11.2 %   19.0 %   0.6 %
   
 
 
 
Reconciliation:                    
  Net Income   $ 368,715   $ 422,588   $ 199,149  
  Plus:                    
  Limited partners' interest in the Operating Partnership, Preferred distributions of the Operating Partnership, and preferred dividends of subsidiary     113,000     139,067     81,611  
  Cumulative effect of accounting change     —     —     1,700  
  Depreciation and amortization from consolidated properties and discontinued operations     499,737     478,379     452,428  
  Our share of depreciation and amortization and other items from unconsolidated affiliates     147,629     150,217     138,814  
  Gain on sales of real estate and discontinued operations     (17,248 )   (162,011 )   (2,610 )
  Less:                    
  Management Company gain on sale of real estate, net     —     (8,400 )   —  
  Minority interest portion of depreciation and amortization     (3,546 )   (7,943 )   (7,012 )
  Preferred distributions and dividends(Including those of subsidiaries)     (67,182 )   (75,541 )   (77,445 )
   
 
 
 
Funds From Operations   $ 1,041,105   $ 936,356   $ 786,635  
   
 
 
 
FFO allocable to Simon Property   $ 787,467   $ 691,004   $ 571,974  
   
 
 
 

Market Risk

            Our exposure to market risk due to changes in interest rates primarily relates to our long-term debt obligations. We manage our exposure to interest rate risk by a combination of interest rate protection agreements to effectively fix or cap a portion of our variable rate debt, or in the case of a fair value hedge, effectively convert fixed rate debt to variable rate debt. In addition, we manage this exposure by refinancing fixed rate debt at times when rates and terms are appropriate.

            We are also exposed to foreign currency risk on financings of foreign operations. Our intent is to offset gains and losses that occur on the underlying exposures, with gains and losses on the derivative contracts hedging these exposures. We do not enter into either interest rate protection or foreign currency rate protection agreements for speculative purposes.

            Our future earnings, cash flows and fair values relating to financial instruments are dependent upon prevalent market rates of interest, primarily LIBOR. Based upon consolidated indebtedness and interest rates at December 31, 2003, a 0.50% increase in the market rates of interest would decrease future earnings and cash flows by approximately $8.8 million, and would decrease the fair value of debt by approximately $196.2 million. A 0.50% decrease in the market rates of interest would increase future earnings and cash flows by approximately $8.8 million, and would increase the fair value of debt by approximately $203.1 million.

Retail Climate and Tenant Bankruptcies

            Bankruptcy filings by retailers are normal in the course of our operations. We are continually releasing vacant spaces resulting from tenant terminations. Pressures that affect consumer confidence, job growth, energy costs and income gains can affect retail sales growth, and a continuing soft economic cycle may impact our ability to retenant property vacancies resulting from store closings or bankruptcies. We lost approximately 566,000 square feet of mall shop tenants in 2003. Our 2003 experience was less than historical levels and we expect to lose a greater amount of square feet to bankruptcies in 2004.

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            The geographical diversity of our Portfolio mitigates some of the risk of an economic downturn. In addition, the diversity of our tenant mix also is important because no single retailer represents either more than 2.0% of total GLA or more than 4.6% of our annualized base minimum rent. Bankruptcies and store closings may, in some circumstances, create opportunities for us to release spaces at higher rents to tenants with enhanced sales performance. We have demonstrated an ability to successfully retenant anchor and in line store locations during soft economic cycles. While these factors reflect some of the inherent strengths of our portfolio in a difficult retail environment, we cannot assure you that we will successfully execute our releasing strategy.

Insurance

            We maintain commercial general liability, fire, flood, extended coverage and rental loss insurance on our Properties. Rosewood Indemnity, Ltd, a wholly-owned subsidiary of the Management Company, has agreed to indemnify our general liability carrier for a specific layer of losses. The carrier has, in turn, agreed to provide evidence of coverage for this layer of losses under the terms and conditions of the carrier's policy. A similar policy written through Rosewood Indemnity, Ltd. also provides a portion of our initial coverage for property insurance and certain windstorm risks at the Properties located in Florida.

            The events of September 11, 2001 affected our insurance programs. Although insurance rates remain high, since the President signed into Law the Terrorism Risk Insurance Act (TRIA) in November of 2002, the price of terrorism insurance has steadily decreased, while the available capacity has been substantially increased. As a result, we have purchased two separate terrorism insurance programs, one for an individual Property and a second covering all other Properties. Each program provides limits up to $600 million per occurrence and covers both Certified (Foreign) and Non-Certified (Domestic) acts of terrorism. The coverage is written on an "all risk" policy form that eliminates the policy aggregates associated with our previous terrorism policies. These policies are in place throughout the remainder of 2004.

Inflation

            Inflation has remained relatively low in recent years and has had minimal impact on the operating performance of the Properties. Nonetheless, substantially all of the tenants' leases contain provisions designed to lessen our exposure to the impact of inflation. These provisions include clauses enabling us 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 us 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 our exposure to increases in costs and operating expenses resulting from inflation.

            However, inflation may have a negative impact on some of our 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, our earnings are generally highest in the fourth quarter of each year.

            In addition, given the number of Properties in warm summer climates our utility expenses are typically higher in the months of June through September due to higher electricity costs to supply air conditioning to our Properties. As a result some seasonality results in increased property operating expenses during these months; however, the majority of these costs are recoverable from tenants.

Environmental Matters

            Nearly all of the Properties have been subjected to Phase I or similar environmental audits. Such audits have not revealed nor is management aware of any environmental liability that we believe would have a material adverse impact on our financial position or results of operations. We are unaware of any instances in which we would incur significant environmental costs if any or all Properties were sold, disposed of or abandoned.

69

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
Simon Property Group, Inc.:

            We have audited the accompanying consolidated balance sheets of Simon Property Group, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations and comprehensive income, shareholders' equity and cash flows for each of the two years then ended. These financial statements are the responsibility of Simon Property Group, Inc.'s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Simon Property Group, Inc. and subsidiaries and SPG Realty Consultants, Inc. and subsidiaries (the "Companies") for the year ended December 31, 2001, were audited by other auditors who have ceased operations and whose report dated March 28, 2002, expressed an unqualified opinion on those statements and included an explanatory paragraph that disclosed the adoption of SFAS No. 133 as discussed in Note 3 to the financial statements.

            We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

            In our opinion, the 2003 and 2002 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Simon Property Group, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

            As discussed above, the accompanying financial statements for the year ended December 31, 2001 were audited by other auditors who have ceased operations. As described in Note 3, certain reclassification adjustments have been made in the 2001 statement of cash flows to conform to the 2003 and 2002 presentation. These reclassification adjustments have no impact on the net income previously reported. We audited the reclassification adjustments that were applied to the 2001 statement of cash flows. Our procedures included (a) obtaining analyses prepared by management of total distributions received from joint venture properties and total distributions paid to minority investors in consolidated properties, (b) comparing said amounts to the sections of the statement of cash flows, as previously reported, without exception, and (c) testing that the portion of the distributions received from joint venture properties, which represented a return on investment, and distributions paid to minority investors in consolidated properties were appropriately reclassified as cash generated by operating activities, consistent with their presentation in the 2003 and 2002 statements of cash flows. In our opinion, such reclassification adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the accompanying 2001 financial statements of the Company other than with respect to such reclassification adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2001 financial statements taken as a whole.

Indianapolis, Indiana
February 5, 2004

70

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Simon Property Group, Inc. and SPG Realty Consultants, Inc.:

            We have audited the accompanying combined balance sheets of Simon Property Group, Inc. and subsidiaries and its paired share affiliate, SPG Realty Consultants, Inc. and subsidiaries (see Note 2), as of December 31, 2001 and 2000, and the related combined statements of operations and comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. We have audited the accompanying consolidated balance sheets of Simon Property Group, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related statements of operations and comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. We have also audited the accompanying consolidated balance sheets of SPG Realty Consultants, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related statements of operations and comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audits.

            We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

            In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Simon Property Group, Inc. and subsidiaries and its paired share affiliate, SPG Realty Consultants, Inc. and subsidiaries, as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, the consolidated financial position of Simon Property Group, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, and the consolidated financial position of SPG Realty Consultants, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

            As explained in Note 13 to the financial statements, effective January 1, 2001, the Companies adopted SFAS 133 "Accounting for Derivative Instruments and Hedging Activities," as amended in June of 2000 by SFAS 138, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments. As explained in Note 13 to the financial statements, effective January 1, 2000, the Companies adopted Staff Accounting Bulletin No. 101, which addressed certain revenue recognition policies, including the accounting for overage rent by a landlord.

Indianapolis, Indiana
March 28, 2002.

THIS REPORT IS A COPY OF THE PREVIOUSLY ISSUED ARTHUR ANDERSEN LLP (ANDERSEN)
AUDITOR'S REPORT. THIS REPORT HAS NOT BEEN REISSUED BY ANDERSEN.

71

Simon Property Group, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except share amounts)

 
   December 31, 2003
   December 31, 2002
  
ASSETS:              
  Investment properties, at cost   $ 14,971,823   $ 14,249,615  
    Less — accumulated depreciation     2,556,578     2,222,242  
   
 
 
      12,415,245     12,027,373  
  Cash and cash equivalents     535,623     397,129  
  Tenant receivables and accrued revenue, net     305,200     311,361  
  Notes and advances receivable from Management Company and affiliates     —     75,105  
  Investment in unconsolidated entities, at equity     1,811,773     1,665,654  
  Deferred costs, other assets, and minority interest, net     616,880     427,880  
   
 
 
    Total assets   $ 15,684,721   $ 14,904,502  
   
 
 

LIABILITIES:
 
 
 
 
 
 
 
  Mortgages and other indebtedness   $ 10,266,388   $ 9,546,081  
  Accounts payable, accrued expenses, and deferred revenues     667,610     624,505  
  Cash distributions and losses in partnerships and joint ventures, at equity     14,412     13,898  
  Other liabilities, minority interest and accrued dividends     280,414     228,508  
   
 
 
    Total liabilities     11,228,824     10,412,992  
   
 
 

COMMITMENTS AND CONTINGENCIES (Note 11)
 
 
 
 
 
 
 

LIMITED PARTNERS' INTEREST IN THE OPERATING PARTNERSHIP
 
 
859,050
 
 
872,925
 

LIMITED PARTNERS' PREFERRED INTEREST IN THE OPERATING PARTNERSHIP
 
 
258,220
 
 
150,852
 

SHAREHOLDERS' EQUITY:
 
 
 
 
 
 
 
  CAPITAL STOCK (750,000,000 total shares authorized, $.0001 par value, 237,996,000 shares of excess common stock (Note 10)):              
      All series of preferred stock, 100,000,000 shares authorized, 12,078,012 and 16,830,057 issued and outstanding, respectively. Liquidation values $376,950 and $858,006, respectively.     367,483     814,254  
      Common stock, $.0001 par value, 400,000,000 shares authorized, 200,876,552 and 184,438,095 issued and outstanding, respectively     20     18  
      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     4,121,332     3,686,161  
  Accumulated deficit     (1,097,317 )   (961,338 )
  Accumulated other comprehensive income     12,586     (8,109 )
  Unamortized restricted stock award     (12,960 )   (10,736 )
  Common stock held in treasury at cost, 2,098,555 shares     (52,518 )   (52,518 )
   
 
 
      Total shareholders' equity     3,338,627     3,467,733  
   
 
 
    $ 15,684,721   $ 14,904,502  
   
 
 

The accompanying notes are an integral part of these statements.

72

Simon Property Group, Inc.
Consolidated Statements of Operations and Comprehensive Income
(Dollars in thousands, except per share amounts)

 
   For the Twelve Months Ended December 31,
  
 
   2003
   2002
   2001
  
 
    
   (Note 2)

   (Note 2)

  
REVENUE:                    
  Minimum rent   $ 1,375,407   $ 1,297,047   $ 1,271,142  
  Overage rent     47,991     47,314     48,534  
  Tenant reimbursements     674,854     643,049     606,516  
  Management fees and other revenues (Note 3)     78,292     —     —  
  Other income     137,109     136,742     122,643  
   
 
 
 
    Total revenue     2,313,653     2,124,152     2,048,835  
   
 
 
 

EXPENSES:
 
 
 
 
 
 
 
 
 
 
  Property operating     327,819     307,411     285,955  
  Depreciation and amortization     498,136     467,395     453,557  
  Real estate taxes     219,274     210,181     198,190  
  Repairs and maintenance     84,623     74,098     77,940  
  Advertising and promotion     61,765     59,857     63,258  
  Provision for credit losses     14,253     9,014     8,415  
  Home and regional office costs (Note 3)     80,105     45,159     44,758  
  General and administrative (Note 3)     15,083     3,233     3,054  
  Costs related to withdrawn tender offer (Note 11)     10,581     —     —  
  Other     27,229     29,548     33,290  
  Impairment on investment properties     —     —     47,000  
   
 
 
 
    Total operating expenses     1,338,868     1,205,896     1,215,417  
   
 
 
 

OPERATING INCOME
 
 
974,785
 
 
918,256
 
 
833,418
 
Interest expense     602,510     599,266     607,625  
   
 
 
 
Income before minority interest     372,275     318,990     225,793  
Minority interest     (7,277 )   (10,498 )   (10,593 )
Gain (loss) on sales of assets and other, net (Note 4)     (5,146 )   162,011     2,610  
Gain from debt related transactions, net (Note 3)     —     14,576     273  
Income tax expense of taxable REIT subsidiaries     (7,597 )   —     —  
   
 
 
 
Income before unconsolidated entities     352,255     485,079     218,083  
Loss from MerchantWired, LLC, net (Note 7)     —     (32,742 )   (18,104 )
Income from other unconsolidated entities     99,645     92,811     82,481  
   
 
 
 
Income from continuing operations     451,900     545,148     282,460  
Results of operations from discontinued operations     7,421     16,507     —  
Gain on disposal or sale of discontinued operations, net     22,394     —     —  
Cumulative effect of accounting change     —     —     (1,700 )
   
 
 
 
Income before allocation to limited partners     481,715     561,655     280,760  

LESS:
 
 
 
 
 
 
 
 
 
 
  Limited partners' interest in the Operating Partnership     100,956     127,727     55,526  
  Preferred distributions of the Operating Partnership     12,044     11,340     11,417  
  Preferred dividends of subsidiary     —     —     14,668  
   
 
 
 

NET INCOME
 
 
368,715
 
 
422,588
 
 
199,149
 
Preferred dividends     (55,138 )   (64,201 )   (51,360 )
   
 
 
 

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
 
$
313,577
 
$
358,387
 
$
147,789
 
   
 
 
 

BASIC EARNINGS PER COMMON SHARE:
 
 
 
 
 
 
 
 
 
 
    Income from continuing operations   $ 1.53   $ 1.92   $ 0.87  
   
 
 
 
    Net income   $ 1.65   $ 1.99   $ 0.86  
   
 
 
 

DILUTED EARNINGS PER COMMON SHARE:
 
 
 
 
 
 
 
 
 
 
    Income from continuing operations   $ 1.53   $ 1.92   $ 0.86  
   
 
 
 
    Net income   $ 1.65   $ 1.99   $ 0.85  
   
 
 
 
 
Net Income
 
$
368,715
 
$
422,588
 
$
199,149
 
  Cumulative effect of accounting change     —     —     (1,995 )
  Unrealized gain (loss) on interest rate hedge agreements     21,135     4,431     (12,041 )
  Net (income) loss on derivative instruments reclassified from accumulated other comprehensive income (loss) into interest expense     (4,442 )   (982 )   4,071  
  Currency translation adjustment     2,993     (1,665 )   72  
  Other     1,009     —     —  
   
 
 
 
  Comprehensive Income   $ 389,410   $ 424,372   $ 189,256  
   
 
 
 

             The accompanying notes are an integral part of these statements.

73

Simon Property Group, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)

 
   For the Twelve Months Ended December 31,
  
 
   2003
   2002
   2001
  
 
    
   (Note 2)

   (Note 2)

  
CASH FLOWS FROM OPERATING ACTIVITIES:                    
  Net income   $ 368,715   $ 422,588   $ 199,149  
    Adjustments to reconcile net income to net cash provided by operating activities —                    
      Depreciation and amortization     518,560     491,306     464,892  
      Impairment on investment properties     —     —     47,000  
      Gain from debt related transactions, net     —     (14,307 )   (273 )
      Cumulative effect of accounting change     —     —     1,700  
      (Gain) Loss on sales of assets and other, net     5,146     (162,011 )   (2,610 )
      Gain on disposal or sale of discontinued operations, net     (22,394 )   —     —  
      Limited partners' interest in the Operating Partnership     100,956     127,727     55,526  
      Preferred dividends of Subsidiary     —     —     14,668  
      Preferred distributions of the Operating Partnership     12,044     11,340     11,417  
      Straight-line rent     (3,630 )   (6,785 )   (11,014 )
      Minority interest     7,277     10,498     10,593  
      Minority interest distributions     (5,466 )   (13,214 )   (16,629 )
      Equity in income of unconsolidated entities     (99,645 )   (60,069 )   (64,377 )
      Distributions of income from unconsolidated entities     87,453     80,141     71,878  
    Changes in assets and liabilities —                    
      Tenant receivables and accrued revenue     34,277     14,237     2,335  
      Deferred costs and other assets     (26,396 )   (15,778 )   (37,932 )
      Accounts payable, accrued expenses, deferred revenues and other liabilities     (24,930 )   (2,683 )   112,739  
   
 
 
 
        Net cash provided by operating activities     951,967     882,990     859,062  
   
 
 
 

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
    Acquisitions     (814,629 )   (1,129,139 )   (164,295 )
    Capital expenditures, net     (353,903 )   (213,990 )   (282,545 )
    Cash from acquisitions     2,267     8,516     8,004  
    Cash from consolidation of the Management Company     48,910     —     —  
    Net proceeds from sale of assets, partnership interests, and discontinued operations     278,066     436,350     19,550  
    Investments in unconsolidated entities     (81,480 )   (90,113 )   (147,933 )
    Distributions of capital from unconsolidated entities and other     159,106     191,314     217,082  
    Notes and advances to Management Company and affiliate     —     11,332     (1,173 )
   
 
 
 
        Net cash used in investing activities     (761,663 )   (785,730 )   (351,310 )
   
 
 
 

CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
    Proceeds from sales of common and preferred stock     99,725     341,445     8,085  
    Purchase of preferred stock and limited partner units     (93,954 )   —     —  
    Minority interest contributions     —     779     2,647  
    Preferred dividends of Subsidiary     —     —     (14,668 )
    Preferred distributions of the Operating Partnership     (12,044 )   (11,340 )   (11,417 )
    Preferred dividends and distributions to shareholders     (507,569 )   (457,085 )   (428,968 )
    Distributions to limited partners     (147,492 )   (138,789 )   (134,711 )
    Mortgage and other note proceeds, net of transaction costs     2,536,498     2,408,685     2,454,994  
    Mortgage and other note principal payments     (1,926,974 )   (2,103,586 )   (2,347,065 )
   
 
 
 
        Net cash provided by (used in) financing activities     (51,810 )   40,109     (471,103 )
   
 
 
 

INCREASE IN CASH AND CASH EQUIVALENTS
 
 
138,494
 
 
137,369
 
 
36,649
 

CASH AND CASH EQUIVALENTS, beginning of period
 
 
397,129
 
 
259,760
 
 
223,111
 
   
 
 
 

CASH AND CASH EQUIVALENTS, end of period
 
$
535,623
 
$
397,129
 
$
259,760
 
   
 
 
 

The accompanying notes are an integral part of these statements.

74

Simon Property Group, Inc.
Consolidated Statements of Shareholders' Equity
(Dollars in thousands, Note 2)

 
   Preferred Stock
   Common Stock
   Accumulated Other Comprehensive Income
   Capital in Excess of Par Value
   Accumulated Deficit
   Unamortized Restricted Stock Award
   Common Stock Held in Treasury
   Total Shareholders' Equity
  
Balance at December 31, 2000   $ 538,684   $ 18   $ —   $ 3,313,557   $ (715,288 ) $ (19,982 ) $ (52,518 ) $ 3,064,471  
   
 
 
 
 
 
 
 
 
Series A Preferred stock conversion (46,355 Common Shares)     (1,558 )               1,558                       —  
Common stock issued as dividend (442 Common Shares)                       12                       12  
Conversion of preferred stock of subsidiary (Note 10)     340,000                                         340,000  
Conversion of Limited Partner Units (958,997 Common Shares, Note 10)                       10,880                       10,880  
Stock options exercised (400,026 Common Shares)                       8,831                       8,831  
Series E and Series G Preferred stock accretion     342                                         342  
Stock incentive program (454,726 Common Shares, net)                       11,827           (11,827 )         —  
Amortization of stock incentive                                   11,512           11,512  
Other                       (259 )                     (259 )
Adjustment to limited partners' interest from increased ownership in the Operating Partnership                       1,262                       1,262  
Distributions                       (101 )   (411,515 )               (411,616 )
Other comprehensive income                 (9,893 )                           (9,893 )
Net income                             199,149                 199,149  
   
 
 
 
 
 
 
 
 
Balance at December 31, 2001   $ 877,468   $ 18   $ (9,893 ) $ 3,347,567   $ (927,654 ) $ (20,297 ) $ (52,518 ) $ 3,214,691  
   
 
 
 
 
 
 
 
 
Series A Preferred stock conversion (1,893,651 Common Shares)     (63,688 )               63,688                       —  
Common stock issued as dividend (19,375 Common Shares)                       653                       653  
Conversion of Limited Partner Units (173,442 Common Shares, Note 10)                       5,709                       5,709  
Common stock issued (9,000,000 Common Shares)           1           322,199                       322,200  
Stock options exercised (671,836 Common Shares)                       15,740                       15,740  
Series E and Series G Preferred stock accretion     474                                         474  
Stock incentive program (-21,070 Forfeited Common Shares)                       (604 )         604           —  
Amortization of stock incentive                                   8,957           8,957  
Other                       399                       399  
Adjustment to limited partners' interest from increased ownership in the Operating Partnership                       (69,190 )                     (69,190 )
Distributions                             (456,272 )               (456,272 )
Other comprehensive income                 1,784                             1,784  
Net income                             422,588                 422,588  
   
 
 
 
 
 
 
 
 
Balance at December 31, 2002   $ 814,254   $ 19   $ (8,109 ) $ 3,686,161   $ (961,338 ) $ (10,736 ) $ (52,518 ) $ 3,467,733  
   
 
 
 
 
 
 
 
 
Conversion of Limited Partner Units (2,880,810 Common Shares, Note 10)           1           39,704                       39,705  
Series B Preferred stock conversion (12,443,195 Common Shares)     (447,485 )   1           447,484                       —  
Series B Preferred stock redemption for cash (18,340 Preferred Shares)     (1,711 )                                       (1,711 )
Series H Variable Rate Preferred stock issuance (3,328,540 preferred shares)     83,213                                         83,213  
Series H Variable Rate Preferred stock repurchase (3,250,528 net preferred shares)     (81,263 )                                       (81,263 )
Stock options exercised (733,617 Common Shares)                       17,451                       17,451  
Series E and Series G Preferred stock accretion     475                                         475  
Stock incentive program (380,835 Common Shares, Net)                       12,579           (12,579 )         —  
Amortization of stock incentive                                   10,355           10,355  
Acquisition of minority interest in Management Company                       (2,334 )                     (2,334 )
Other                       173                       173  
Adjustment to limited partners' interest from increased ownership in the Operating Partnership                       (79,886 )                     (79,886 )
Distributions                             (504,694 )               (504,694 )
Other comprehensive income                 20,695                             20,695  
Net income                             368,715                 368,715  
   
 
 
 
 
 
 
 
 
Balance at December 31, 2003   $ 367,483   $ 21   $ 12,586   $ 4,121,332   $ (1,097,317 ) $ (12,960 ) $ (52,518 ) $ 3,338,627  
   
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these statements.

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SIMON PROPERTY GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and where indicated as in millions or billions)

1.    Organization

            Simon Property Group, Inc. ("Simon Property") is a Delaware corporation that operates as a self-administered and self-managed real estate investment trust ("REIT"). Simon Property Group, L.P. (the "Operating Partnership") is a majority-owned partnership subsidiary of Simon Property that owns all but one of our real estate properties. In these notes, the terms "we", "us" and "our" refer to Simon Property, the Operating Partnership, and their subsidiaries.

            We are engaged primarily in the ownership, operation, leasing, management, acquisition, expansion and development of real estate properties. Our real estate properties consist primarily of regional malls and community shopping centers. As of December 31, 2003, we owned or held an interest in 246 income-producing properties in North America, which consisted of 175 regional malls, 67 community shopping centers, and four office and mixed-use properties in 37 states and Canada (collectively, the "Properties", and individually, a "Property"). Mixed-use properties are properties that include a combination of retail space, office space, and/or hotel components. In addition, we also own interests in three parcels of land held for future development (together with the Properties, the "Portfolio"). Finally, we have ownership interests in 47 assets in Europe (France, Italy, Poland and Portugal).

            We generate the majority of our revenues from leases with retail tenants including:

            We also generate revenues due to our size and tenant relationships from:

            M.S. Management Associates, Inc. (the "Management Company") is a wholly-owned subsidiary that provides leasing, management, and development services to most of the Properties. In addition, insurance subsidiaries of the Management Company insure the self-insured retention portion of our general liability program and the deductible associated with our workers' compensation programs. In addition, they provide reinsurance for the primary layer of general liability coverage to our third party maintenance providers while performing services under contract with us. Third party providers provide coverage above the insurance subsidiaries' limits.

            We are subject to risks incidental to the ownership and operation of commercial real estate. These risks include, among others, the risks normally associated with changes in the general economic climate, trends in the retail industry, creditworthiness of tenants, competition for tenants and customers, changes in tax laws, interest rate and foreign currency levels, the availability of financing, and potential liability under environmental and other laws. Our regional malls and community shopping centers rely heavily upon anchor tenants like most retail properties. Three retailers' anchor stores occupied 337 of the approximately 958 anchor stores in the Properties as of December 31, 2003. An affiliate of one of these retailers is a limited partner in the Operating Partnership.

            On December 31, 2002, we continued to simplify our organizational structure by merging SPG Realty Consultants, Inc. ("SPG Realty") into Simon Property, ending our "paired share" REIT structure resulting from our combination with Corporate Property Investors, Inc. All of the outstanding stock of SPG Realty was previously held in trust for the benefit of the holders of common stock of Simon Property. As a result of the merger, our stockholders who were previously the beneficial owners of the SPG Realty stock are now, by virtue of their ownership of our common stock, the owners of the assets and operations formerly owned or conducted by SPG Realty. Note 2 describes the basis of presentation of the merger in the accompanying financial statements.

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            On January 1, 2003, the Operating Partnership acquired all of the remaining equity interests of the Management Company from three Simon family members for a total purchase price of $425, which was equal to the appraised value of the interests as determined by an independent third party. The acquisition was approved by our independent directors. As a result, the Management Company is now a wholly owned consolidated taxable REIT subsidiary ("TRS") of the Operating Partnership. See Note 7 for further discussion of the operations of the Management Company for the years ended December 31, 2002 and 2001.

2.    Basis of Presentation and Consolidation

            The accompanying consolidated financial statements of Simon Property include Simon Property and its subsidiaries. We eliminated all significant intercompany amounts.

            Simon Property and SPG Realty were entities under common control and the merger of SPG Realty into Simon Property on December 31, 2002 was accounted for similar to a pooling of interests. The accompanying statements of operations and comprehensive income, cash flows, shareholders' equity and related disclosures in these notes to financial statements represent the combined results of Simon Property and SPG Realty for the years ended December 31, 2002 and December 31, 2001.

            We consolidate Properties that are wholly owned or Properties that we own less than 100% but we control. Control of a Property is demonstrated by our ability to:

            The deficit minority interest balances in the accompanying balance sheets represent outside partners' interests in the net equity of certain properties. We record deficit minority interests when a joint venture agreement provides for the settlement of deficit capital accounts before distributing the proceeds from the sale of joint venture assets, the joint venture partner is obligated to make additional contributions to the extent of any capital account deficits or the joint venture partner has the ability to fund such additional contributions.

            Investments in partnerships and joint ventures represent noncontrolling ownership interests in Properties and prior to 2003 our investment in the Management Company. We account for these investments using the equity method of accounting. We initially record these investments at cost and we subsequently adjust for net equity in income or loss, which we allocate in accordance with the provisions of the applicable partnership or joint venture agreement, and cash contributions and distributions. The allocation provisions in the partnership or joint venture agreements are not always consistent with the legal ownership interests held by each general or limited partner or joint venturer primarily due to partner preferences.

            As of December 31, 2003, of our 246 Properties we consolidated 156 wholly-owned Properties, consolidated 14 additional Properties that are less than wholly owned which we control, and accounted for 76 Properties using the equity method. We manage the day-to-day operations of 65 of the 76 equity method Properties.

            We allocate net operating results of the Operating Partnership after preferred distributions based on the partners' respective weighted average ownership interests and after preferred distributions of the Operating Partnership and preferred dividends. Our weighted average ownership interest in the Operating Partnership was as follows:

 
   For the Year Ended December 31,
  
 
   2003
   2002
   2001
  
Weighted average ownership interest   75.4 % 73.6 % 72.5 %

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            Simon Property's ownership interest in the Operating Partnership as of December 31, 2003 was 76.8% and at December 31, 2002 was 74.3%. We adjust the limited partners' interest in the Operating Partnership at the end of each period to reflect their interest in the Operating Partnership. The adjustment is reflected in the accompanying statements of shareholders' equity.

3.    Summary of Significant Accounting Policies

            We record investment properties at cost. Investment properties include costs of acquisitions; development, predevelopment, and construction (including salaries and related benefits); tenant allowances and improvements; and interest and real estate taxes incurred related to construction. We capitalize improvements and replacements from repair and maintenance when the repairs and maintenance extend the useful life, increase capacity, or improve the efficiency of the asset. All other repair and maintenance items are expensed as incurred. We record depreciation on buildings and improvements utilizing the straight-line method over an estimated original useful life, which is generally 10 to 35 years. We review depreciable lives of investment properties periodically and we make adjustments when necessary to reflect a shorter economic life. We record depreciation on tenant allowances, tenant inducements and tenant improvements utilizing the straight-line method over the term of the related lease. We record depreciation on equipment and fixtures utilizing the straight-line method over seven to ten years.

            We review investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable. These circumstances include, but are not limited to, declines in cash flows, occupancy and comparable sales per square foot at the property. We recognize an impairment of investment property when the estimated undiscounted operating income before depreciation and amortization is less than the carrying value of the property. To the extent impairment has occurred, we charge to income the excess of carrying value of the property over its estimated fair value. We may decide to sell properties that are held for use and the sale prices of these properties may differ from their carrying values.

            Goodwill resulted from our merger with Corporate Property Investors, Inc. in 1998. We adopted SFAS No. 142 "Goodwill and Other Intangibles" on January 1, 2002 and as a result we ceased amortizing goodwill in accordance with SFAS No. 142 which was approximately $1.2 million annually. The impact of adopting SFAS No. 142 resulted in no impairment of our goodwill. We review goodwill for impairment at the reporting unit level on an annual basis or more frequently if an event occurs that would change the fair value of the reporting unit below its carrying amount. If we determine the reporting unit is impaired, the loss would be recognized as an impairment loss in income. Goodwill is reflected in "deferred costs, other assets, and minority interest, net" in the accompanying balance sheets.

            We consider all highly liquid investments purchased with an original maturity of 90 days or less cash and cash equivalents. Cash equivalents are carried at cost, which approximates market value. Cash equivalents generally consist of commercial paper, bankers acceptances, Eurodollars, repurchase agreements, and money markets. Our balance of cash and cash equivalents includes a balance of $175.0 million related to our gift card program which we do not consider available for general working capital purposes. See Notes 4, 8 and 10 for disclosures about non-cash investing and financing transactions.

            Marketable securities consist primarily of the assets of the insurance subsidiaries of the Management Company and are included in deferred costs, other assets, and minority interest, net. The types of securities typically include U.S Treasury or other U.S. government securities as well as corporate debt securities. These securities are classified as available-for-sale and are valued based upon quoted market prices or using discounted cash flows when quoted market

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prices are not available. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Changes in the values of these securities are recognized in accumulated other comprehensive income until the gain or loss is realized and recorded in other income. However, if we determine a decline in value is other than temporary, then we recognize the unrealized loss in income to write down the investments to their net realizable value.

            The insurance subsidiaries of the Management Company are required to maintain statutory minimum capital and surplus as well as maintain a minimum liquidity ratio. Therefore, our access to these securities may be restricted.

            We prepared the accompanying financial statements in accordance with accounting principles generally accepted in the United States ("GAAP"). GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reported period. Our actual results could differ from these estimates.

            We capitalize interest on projects during periods of construction until the projects are ready for their intended purpose. The amount of interest capitalized during each year is as follows:

 
 For the Year Ended December 31,
 
 2003
   2002
   2001
  $ 10,705   $ 4,249   $ 9,807

            Our interests in our regional malls, community centers and other assets represent one segment because we base our resource allocation and other operating decisions on the evaluation of the entire Portfolio.

            Our deferred costs consist primarily of financing fees we incurred in order to obtain long-term financing and internal and external leasing commissions and related costs. We record amortization of deferred financing costs on a straight-line basis over the terms of the respective loans or agreements. Our deferred leasing costs consist primarily of capitalized salaries and related benefits in connection with lease originations. We record amortization of deferred leasing costs on a straight-line basis over the terms of the related leases. We amortize debt premiums and discounts over the remaining terms of the related debt instruments. These debt premiums or discounts arise either at the debt issuance or as part of the purchase price allocation of the fair value of debt assumed in acquisitions. Net deferred costs of $129,710 as of December 31, 2003 are net of accumulated amortization of $179,021 and net deferred costs of $149,748 as of December 31, 2002 are net of accumulated amortization of $194,893.

            The accompanying statements of operations and comprehensive income includes amortization as follows:

 
   For the year ended December 31,
  
 
   2003
   2002
   2001
  
Amortization of deferred financing costs   $ 15,710   $ 17,079   $ 16,513  
Amortization of debt premiums net of discounts   $ (5,723 ) $ (2,269 ) $ (5,178 )
Amortization of deferred leasing costs   $ 18,684   $ 17,255   $ 15,167  

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            We record amortization of deferred financing costs, amortization of premiums, and accretion of discounts as part of interest expense.

            On January 1, 2001 we adopted SFAS 133 "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 138, "Accounting for Derivative Instruments and Hedging Activities." On adoption, we recorded $2.0 million of unrecognized losses in other comprehensive income as a cumulative effect of accounting change. We also recorded an expense of $1.7 million as a cumulative effect of accounting change in the statement of operations, which includes our $1.5 million share of joint venture cumulative effect of accounting change.

            We use a variety of derivative financial instruments in the normal course of business to manage or hedge the risks described in Note 8 and record all derivatives on our balance sheets at fair value. We require that hedging derivative instruments are effective in reducing the risk exposure that they are designated to hedge. We formally designate any instrument that meets these hedging criteria as a hedge at the inception of the derivative contract.

            We adjust our balance sheets on an ongoing basis to reflect the current fair market value of our derivatives. We record changes in the fair value of these derivatives each period in earnings or comprehensive income, as appropriate. The ineffective portion of the hedge is immediately recognized in earnings to the extent that the change in value of a derivative does not perfectly offset the change in value of the instrument being hedged. The unrealized gains and losses held in accumulated other comprehensive income will be reclassified to earnings over time as the hedged items are recognized in earnings. We have a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors.

            We use standard market conventions to determine the fair values of derivative instruments and techniques such as discounted cash flow analysis, option pricing models, and termination cost are used to determine fair value at each balance sheet date. All methods of assessing fair value result in a general approximation of value and such value may never actually be realized.

            The components of our accumulated comprehensive income consisted of the following as of December 31:

 
   2003
   2002
  
Cumulative translation adjustment   $ 1,401   $ (1,592 )
Accumulated derivative gains and (losses), net     10,176     (6,517 )
Net unrealized gains on marketable securities     1,009     —  
   
 
 
Total accumulated comprehensive income (loss)   $ 12,586   $ (8,109 )
   
 
 

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            We allocate the purchase price of acquisitions to the various components of the acquisition based upon the relative value of each component in accordance with SFAS No. 141 "Business Combinations." These components typically include buildings, land and intangibles related to in-place leases and we estimate:

            We amortize all of these amounts over the remaining average term of the acquired in place leases. We also estimate the value of tenant or other customer relationships acquired, if any, which are amortized over the term of the related leases and any expected renewals. Any remaining amount of value will be allocated to in-place leases, as deemed appropriate under the circumstances.

            We, as a lessor, retain substantially all of the risks and benefits of ownership of the investment properties and account for our leases as operating leases. We accrue minimum rents on a straight-line basis over the terms of their respective leases. Substantially all of our retail tenants are also required to pay overage rents based on sales over a stated base amount during the lease year. We recognize overage rents only when each tenant's sales exceeds its sales threshold.

            We structure our leases to allow us to recover a significant portion of our property operating, real estate taxes, repairs and maintenance, and advertising and promotion expenses from our tenants. Property operating expenses typically include utility, insurance, security, janitorial, landscaping, food court and other administrative expenses. Our advertising and promotional costs are expensed as incurred. We accrue reimbursements from tenants for recoverable portions of all these expenses as revenue in the period the applicable expenditures are incurred. We also receive escrow payments for these reimbursements from substantially all our tenants throughout the year. We do this to reduce the risk of loss on uncollectible accounts once we perform the final year end billings for recoverable expenditures. We recognize differences between estimated recoveries and the final billed amounts in the subsequent year and we believe these differences were not material in any period presented. We recognize revenues from our gift card program when fees are earned according to the provisions of the card arrangements and respective terms and conditions.

            Management fees and other revenues are generally received from our unconsolidated joint ventures Properties as well as third parties. Management fee revenue is recognized based on a contractual percentage of joint venture property revenue. Development fee revenue is recognized on a contractual percentage of hard costs to develop a property. Leasing fee revenue is recognized on a contractual per square foot charge based on the square footage of current year leasing activity.

            Insurance premiums written and ceded are recognized on a pro-rata basis over the terms of the policies. Insurance losses are reflected in property operating expenses in the accompanying statements of operations and comprehensive income and include estimates for losses incurred but not reported as well as losses pending settlement. Estimates for losses are based on evaluations by actuaries and management's best estimates.

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            We record a provision for credit losses based on our judgment of a tenant's creditworthiness, ability to pay and probability of collection. In addition, we also consider the retail sector in which the tenant operates and our historical collection experience in cases of bankruptcy, if applicable. Presented below is the activity in the allowance for credit losses and includes the activities related to discontinued operations during the following years ended:

 
   For the year ended December 31,
  
 
   2003
   2002
   2001
  
Balance at Beginning of Year   $ 20,490   $ 24,682   $ 20,108  
Consolidation of Management Company     1,700     —     —  
Provision for Credit Losses     14,630     8,972     8,415  
Accounts Written Off     (5,347 )   (13,164 )   (3,841 )
   
 
 
 
Balance at End of Year   $ 31,473   $ 20,490   $ 24,682  
   
 
 
 

            Simon Property and a subsidiary of the Operating Partnership are taxed as REITs under Sections 856 through 860 of the Code and applicable Treasury regulations relating to REIT qualification. These regulations require us to distribute at least 90% of our taxable income to shareholders and meet certain other asset and income tests as well as other requirements. We intend to continue to adhere to these requirements and maintain the REIT status of Simon Property and the REIT subsidiary. As REITs, these entities will generally not be liable for federal corporate income taxes. Thus, we made no provision for federal income taxes for these entities in the accompanying financial statements. If either of these entities fails to qualify as a REIT in any taxable year, that entity will be subject to federal income taxes on its taxable income at regular corporate tax rates for a four year period following the year the entities fail to qualify as a REIT. That entity may reapply for REIT status at that point. State income, franchise or other taxes were not significant in any of the periods presented.

            We have also elected taxable REIT subsidiary ("TRS") status for some of our subsidiaries. This enables us to receive income and provide services that would otherwise be impermissible for REITs. For these entities, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred tax assets is provided if we believe all or some portion of the deferred tax asset may not be realized. An increase or decrease in the valuation allowance that results from the change in circumstances that causes a change in our judgment about the realizability of the related deferred tax asset is included in income.

            As a result of the consolidation of the Management Company, the deferred tax assets and liabilities and income tax expense of the Management Company are included in the accompanying consolidated financial statements as of and for the year ended December 31, 2003. A net deferred tax asset of $22.0 million related to our TRS subsidiaries is included in deferred costs, other assets, and minority interest, net in the accompanying balance sheet. The net deferred tax asset consists primarily of operating loss and other carryforwards for Federal income tax purposes as well as the timing of the deductibility of losses from insurance subsidiaries.

            We determine basic earnings per share based on the weighted average number of shares of common stock outstanding during the period. We determine diluted earnings per share based on the weighted average number of shares of common stock outstanding combined with the incremental weighted average shares that would have been outstanding assuming all dilutive potential common shares were converted into shares at the earliest date possible. The

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following table sets forth the computation of our basic and diluted earnings per share. The effect of dilutive securities amounts presented in the reconciliation below represents the common shareholders' pro rata share of the respective line items in the statements of operations and is after considering the effect of preferred dividends.

 
   For the Year Ended December 31,
  
 
   2003
   2002
   2001
  
Common Shareholders' share of:                    
Income from continuing operations   $ 291,083   $ 346,231   $ 149,022  
Discontinued operations     22,494     12,156     —  
Cumulative effect of accounting change     —     —     (1,233 )
   
 
 
 
Net Income available to Common Shareholders — Basic   $ 313,577   $ 358,387   $ 147,789  
   
 
 
 

Effect of Dilutive Securities:
 
 
 
 
 
 
 
 
 
 
Impact to General Partner's interest in Operating Partnership from all dilutive securities and options   $ 333   $ 1,919     —  
   
 
 
 
Net Income available to Common Shareholders — Diluted   $ 313,910   $ 360,306   $ 147,789  
   
 
 
 

Weighted Average Shares Outstanding — Basic
 
 
189,475,124
 
 
179,910,355
 
 
172,669,133
 
Effect of stock options     823,532     671,972     358,414  
Effect of convertible preferred stock     —     918,615     —  
   
 
 
 
Weighted Average Shares Outstanding — Diluted     190,298,656     181,500,942     173,027,547  
   
 
 
 

Basic per share amounts:
 
 
 
 
 
 
 
 
 
 
Income from continuing operations   $ 1.53   $ 1.92   $ 0.87  
Discontinued operations     0.12     .07     —  
Cumulative effect of accounting change     —     —     (0.01 )
   
 
 
 
Net income available to Common Shareholders — Basic   $ 1.65   $ 1.99   $ 0.86  
   
 
 
 

Diluted per share amounts:
 
 
 
 
 
 
 
 
 
 
Income from continuing operations   $ 1.53   $ 1.92   $ 0.86  
Discontinued operations     0.12     .07     —  
Cumulative effect of accounting change     —     —     (0.01 )
   
 
 
 
Net income available to Common Shareholders — Dilutive   $ 1.65   $ 1.99   $ 0.85  
   
 
 
 

            For the year ending December 31, 2003, potentially dilutive securities include stock options, certain preferred units of limited partnership interest of the Operating Partnership, Series B 6.5% Convertible Preferred Stock, and the units of limited partnership interest ("Units") in the Operating Partnership which are exchangeable for common stock.

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            We accrue distributions when they are declared. The taxable nature of the dividends declared for each of the years ended as indicated is summarized as follows:

 
   For the Year Ended December 31,
  
 
   2003
   2002
   2001
  
Total dividends paid per share   $ 2.40   $ 2.175   $ 2.08  
Percent taxable as ordinary income     95.1 %   58.0 %   71.0 %
Percent taxable as long-term capital gains     0.9 %   36.6 %   3.1 %
Percent taxable as unrecaptured Section 1250 gains     0.0 %   5.4 %   0.9 %
Percent non-taxable as return of capital     4.0 %   0.0 %   25.0 %
   
 
 
 
      100.0 %   100.0 %   100.0 %
   
 
 
 

            In 2002, we adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144") that supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS No. 144 supersedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for the disposal of a segment of a business. SFAS No. 144 provides a framework for the evaluation of impairment of long-lived assets, the treatment of assets held for sale or to be otherwise disposed of, and the reporting of discontinued operations. SFAS No. 144 requires us to reclassify any material operations related to consolidated properties sold during the period that were not classified as held for sale as of December 31, 2001 to discontinued operations. We have reclassified the results of operations of the 13 properties sold during 2003 described in Note 4 to discontinued operations in the accompanying statements of operations and comprehensive income for 2003 and 2002. Their results of operations were not material to 2001. Revenues included in discontinued operations were $38.0 million for the year ended December 31, 2003 and $61.6 million for the year ended December 31, 2002.

            We made certain reclassifications of prior period amounts in the financial statements to conform to the 2003 presentation. These reclassifications have no impact on net income previously reported. These include reclassifying certain home office and regional office costs, and general and administrative expenses; the adoption of SFAS No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections" ("SFAS No. 145"); and reclassifications in the statements of cash flows in 2001.

            As a result of the consolidation of the Management Company, we have elected to present "home and regional office costs" and "general and administrative" expenses as separate expense captions. In 2002 and 2001, "home and regional office costs" and "general and administrative" expenses incurred related to consolidated Properties were included in "Property operating" expense. These expenses have been reclassified to conform with the current year presentation. In 2002, we reclassified $44.8 million from property operating expenses, $0.3 million from advertising and promotion, and $3.2 million from other expenses to the "home and regional office costs" and "general and administrative" categories. In 2001, we reclassified $43.1 million from property operating expenses, $1.7 million from advertising and promotion, and $3.1 million from other expenses to the "home and regional office costs" and "general and administrative" categories. "Home and regional office costs" include salary and benefits, office rent, office expenses and information services expenses incurred in our home office and regional offices. "General and administrative" expenses represent the costs of operating as a public company and include such items as stock

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exchange fees, public and investor relations expenses, certain executive officers' compensation expenses, audit fees, and legal fees.

            Effective January 1, 2003, we adopted SFAS No. 145 and therefore we have reclassified for all periods presented in the accompanying statements of operations and comprehensive income those items which no longer qualify as extraordinary items to income from continuing operations. In 2002, we reclassified $14.3 million, or $0.06 per share, of gains from debt extinguishments of consolidated Properties to "Gains from debt related transactions, net."

            We reclassified distributions from unconsolidated entities that represent return on investments in the statements of cash flows to "net cash provided by operating activities" from "net cash used in investing activities" for all periods presented. "Distributions of capital from unconsolidated entities" represent cash distributions from operations in excess of net income and financing activities. In addition, we reclassified distributions to minority interest owners of consolidated properties in the statements of cash flows to "net cash provided by operating activities" from "net cash provided by (used in) financing activities" for all periods presented.

4.    Real Estate Acquisitions, Disposals, and Impairment

            On March 14, 2003, we purchased the remaining interest in The Forum Shops at Caesars in Las Vegas, NV from the minority limited partner who initiated the buy/sell provision of the partnership agreement. We purchased this interest for $174.0 million in cash and assumed the minority limited partner's $74.2 million share of debt, and other partnership liabilities. We funded this purchase with borrowings from our Credit Facility (Note 8). We recorded minority interest expense relating to the minority limited partner's share of the results of operations of The Forum Shops at Caesars through March 14, 2003.

            On August 20, 2003, we purchased a 100% leasehold stake in Stanford Shopping Center in Palo Alto, California for $333.0 million from Stanford University. Stanford University holds, as lessor, a long-term ground lease underlying the asset. We funded this purchase with the mortgage discussed in Note 8, with borrowings from our Credit Facility, and with available working capital.

            In the fourth quarter 2003, through a series of transactions we increased our ownership interest in Kravco Investments L.P. ("Kravco"), a Philadelphia, PA based owner of regional malls, from approximately 18% to approximately 80% and in its affiliated management company from approximately 15% to 50%. The portfolio consists of six regional malls, five of which are in the Philadelphia metropolitan area, and four community centers. We acquired our interest in Kravco from certain private investors, The Rouse Company ("Rouse") and Westfield America Trust ("Westfield"). We acquired our initial interest jointly with Rouse and Westfield in connection with the Rodamco acquisition in 2002. As a result of this acquisition, we consolidated four new partnerships and account for six new partnerships as joint ventures. The purchase accounting for this acquisition is still preliminary. The total consideration paid in these transactions was approximately $293.4 million and consisted of:


            On December 22, 2003, we jointly formed with The Rinascente Group the joint venture Gallerie Commerciali Italia S.p.A ("GCI"), which owns a geographically diverse portfolio in Italy of 38 existing shopping centers as of December 31, 2003. The Rinascente Group contributed these 38 existing shopping centers as well as development opportunities to GCI and then sold 49% of GCI to one of our affiliates. The initial gross value of GCI was

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approximately €860 million, or approximately $1.1 billion, and our initial equity investment was approximately €187 million, or $232 million. We account for our interest in GCI under the equity method of accounting. The purchase accounting for this acquisition is still preliminary.

            We recorded intangible assets and liabilities that net to $55.5 million as part of our purchase accounting allocations in 2003.

            On May 3, 2002, we purchased, jointly with Westfield and Rouse, the partnership interests of Rodamco North America N.V. ("Rodamco") and its affiliates through the acquisition of Rodamco stock. Our portion of the acquisition includes the purchase of the remaining partnership interests in four of our existing joint venture Properties, new partnership interests in nine additional Properties, and other partnership interests and assets. We acquired these partnership interests as part of our acquisition strategy to acquire and own quality retail real estate thereby enhancing our overall Portfolio. The results of operations for the partnership interests acquired have been included in our results of operations since May 3, 2002.

            The purchase price was €2.5 billion for the 45.1 million outstanding shares of Rodamco stock, or €55 per share, and the assumption of certain Rodamco obligations. Our share of the total purchase price was approximately $1.6 billion, including €795.0 million or $720.7 million to acquire Rodamco shares, the assumption of $579 million of debt and preferred units, and cash of $268.8 million to pay off our share of corporate level debt and unwind interest rate swap agreements.

            We, and the Management Company, hold the other Rodamco partnership interests and assets jointly with Rouse and Westfield. We account for these assets under the equity method. These included our initial interest in Kravco, two notes receivable, an interest in a hotel, and three other retail properties. Some of these assets were considered held for sale and amounted to approximately $8 million. We sold two of the other retail properties in 2002 for no gain or loss for approximately $4.4 million and we sold the remaining asset held for sale in 2003 for $2.9 million and recognized a nominal gain.

            In connection with the Rodamco acquisition we entered into a series of hedging transactions to manage our €795 million exposure to fluctuations in the Euro currency, all of which were closed out at the completion of the acquisition. Our total net gains were $7.1 million on the hedging activities.

            We financed a portion of the Rodamco acquisition through the sale of two partnership interests acquired as part of the Rodamco acquisition and an existing partnership interest to Teacher's Insurance and Annuity Association ("Teachers"). We sold these partnership interests for approximately $391.7 million, including approximately $198.0 million of cash and approximately $193.7 million of debt assumed. Our sale of the existing partnership interest resulted in a net gain of $25.7 million.

            As a result of the Rodamco acquisition and the Teachers transaction, we consolidated five new partnerships and account for six new partnerships as joint ventures.

            On July 19, 2002, we purchased the remaining two-thirds interest in Copley Place (we had acquired our initial interest in the Rodamco acquisition) for $241.4 million, including $118.3 million in cash and the assumption of $123.1 million of debt. We funded the acquisition with borrowings from our existing Credit Facility. As a result of this transaction, we have consolidated the results of operations of Copley Place since July 19, 2002.

            We recorded intangible assets and liabilities that net to $53.6 million as part of our purchase accounting allocations in 2002.

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            On February 5, 2004, we purchased a 95% interest in Gateway Shopping Center in Austin, Texas, for approximately $107 million. We funded this transaction with borrowings on our Credit Facility and with the issuance of 120,671 units of the Operating Partnership valued at approximately $6 million.

            During 2003, we sold 13 non-core Properties, consisting of seven regional malls, five community centers and one mixed-use property. In total, we received net proceeds from these sales of $275.1 million. As a result of these transactions, we recorded a net gain of $22.4 million during the twelve months ended December 31, 2003. The Properties and their dates of sale consisted of:

            As of December 31, 2002, the carrying value of the sold properties at cost, net of accumulated depreciation was $259.1 million.

            On April 1, 2002, we sold our interest in Orlando Premium Outlets, one of our joint venture Properties, for a gross sales price of $76.3 million, including cash of $46.6 million and the assumption of our 50% share of $59.1 million of joint venture debt, resulting in a net gain of $39.0 million.

            In addition, on May 31, 2002, we sold our interests in the five joint venture value-oriented super-regional malls to the Mills Corporation, who was our partner in these Properties and who managed these joint ventures. We disposed of these joint venture interests in order to fund a portion of the Rodamco acquisition. We sold these joint venture interests for approximately $424.3 million including $150.9 million of cash and the assumption of approximately $273.4 million of joint venture debt. The transaction resulted in a gain of $123.3 million. We were also relieved of all guarantees of the indebtedness related to these five Properties. In connection with this transaction, the Management Company also sold its land partnership interests for $24.1 million that resulted in our $8.4 million share of gains, net of tax, recorded in income from unconsolidated entities. Also during 2002, we made the decision to no longer pursue certain development projects. As a result, we wrote-off the carrying amount of our predevelopment costs and land acquisition costs associated with these projects in the amount of $17.1 million, which is included in "gain (loss) on sales of assets and other, net" in the accompanying statements of operations and comprehensive income.

            During 2002, we disposed of seven of our nine assets held for sale as of December 31, 2001 as discussed below under impairment. The seven assets disposed included three community centers and four regional malls. The three community centers and two of the regional malls were sold for a net sales price of $28.1 million resulting in a net loss of $7.0 million. In addition, we negotiated with the lenders the sale of our interests in one regional mall to a third party resulting in net proceeds of $3.6 million and deeded one regional mall to the lender in satisfaction of the outstanding mortgage indebtedness. The two regional malls were encumbered with $52.2 million of indebtedness. The net impact of these two transactions resulted in a net gain on debt forgiveness of $16.1 million that is reflected in "gain from debt related transactions, net" in the accompanying statements of operations and comprehensive income.

            During 2001, we sold one community center, one regional mall, and one office building that resulted in net proceeds of $19.6 million and a net gain of $2.6 million.

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            The cash flows and results of operations of the Properties disposed of during the three years ended December 31, 2003 were not material to our cash flows and results of operations. These Properties' removal from service will not materially affect our ongoing operations.

            In 2001, in connection with our anticipated disposal of nine Properties identified as held for sale we recorded a $47.0 million expense for impairment. As discussed above, we disposed of seven of the nine assets held for sale in 2002 and one additional property in 2003. We placed the remaining asset held for sale back in service as held for use. In general, the overall decline in the economy has caused tenants to vacate space at certain non-core Properties decreasing occupancy rates and leading to declines in the fair values of these assets due to decreased profitability. In addition, we committed to a plan to dispose of these assets. We estimated the impairment of these assets using a combination of estimations of the fair value based upon a multiple of the net cash flow of the Properties and discounted cash flows from the individual Properties' operations as well as contract prices, if applicable. The nine properties' cash flows and results of operations were not material to our cash flows and results of operations and their removal from service will not materially affect our ongoing operations. We wrote off miscellaneous technology and other investments of $2.7 million in 2002 and $5.7 million in 2001, all of which were included in other expense in the accompanying statements of operations and comprehensive income. In addition, in 2001 the Management Company decided to postpone further development of clixnmortar, a technology investment. As a result, the Management Company wrote off its investment in clixnmortar of which our share was a net $13.9 million.

5.    Balance Sheet data

            The following summarized balance sheet represents the impact of the Rodamco acquisition in 2002 and the acquisition of the remaining two-thirds interest in Copley Place. The 2003 transactions were not material in the aggregate.

 
   2002
Investment properties, at cost   $ 1,110,120
Cash and cash equivalents     9,272
Tenant receivables     8,786
Investment in unconsolidated entities     518,390
Deferred costs, other assets, and minority interest     25,537
Notes and advances from the Management Company and affiliates     26,433
   
  Total assets   $ 1,698,538
   
Mortgages and other indebtedness   $ 458,897
Accounts payable, accrued expenses, accrued environmental, severance and other expenses     108,356
Other liabilities     8,326
   
  Total liabilities   $ 575,579
   

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6.    Investment Properties

            Investment properties consist of the following:

 
   As of December 31,
 
   2003
   2002
Land   $ 2,068,264   $ 2,028,285
Buildings and improvements     12,766,179     12,101,454
   
 
Total land, buildings and improvements     14,834,443     14,129,739
Furniture, fixtures and equipment     137,380     119,876
   
 
Investment properties at cost     14,971,823     14,249,615
Less — accumulated depreciation     2,556,578     2,222,242
   
 
Investment properties at cost, net   $ 12,415,245   $ 12,027,373
   
 
Construction in progress included in investment properties   $ 243,953   $ 137,785
   
 

7.    Investments in Unconsolidated Entities

            Joint ventures are common in the real estate industry. We use joint ventures to finance properties and diversify our risk in a particular property or trade area. We may also use joint ventures in the development of new properties. We held joint venture ownership interests in 76 Properties as of December 31, 2003 and 69 as of December 31, 2002, as well as joint venture interests in our investments in 47 European shopping centers as of December 31, 2003 and 8 European shopping centers as of December 31, 2002. Since we do not fully control these joint venture Properties, accounting principles generally accepted in the United States currently require that we account for these Properties on the equity method. See Note 13 for discussion of the impact of new accounting pronouncements on consolidation principles. Substantially all of our joint venture Properties are subject to rights of first refusal, buy-sell provisions, or other sale rights for partners which are customary in real estate partnership agreements and the industry. Our partners in these joint ventures may initiate these provisions at any time, which will result in either the sale of or the use of available cash or borrowings to acquire the partnership interest.

            Summary financial information of the joint ventures and a summary of our investment in and share of income from such joint ventures follow. This information includes Mall of America (see Note 11). We condensed into separate line items major captions of the statements of operations for joint venture interests sold or consolidated. Consolidation occurs when we acquire an additional interest in the joint venture and as a result, gain unilateral control of the

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Property. We reclassified these line items into "Discontinued Joint Venture Interests", so that we may present results of operations for those joint venture interests held as of December 31, 2003.

 
   December 31,
 
   2003
   2002
BALANCE SHEETS            
Assets:            
Investment properties, at cost   $ 10,239,929   $ 8,160,065
Less — accumulated depreciation     1,798,564     1,327,751
   
 
      8,441,365     6,832,314
Cash and cash equivalents     308,781     199,634
Tenant receivables     262,893     199,675
Investment in unconsolidated entities     94,853     6,966
Deferred costs & other assets     227,485     190,561
   
 
  Total assets   $ 9,335,377   $ 7,429,150
   
 

Liabilities and Partners' Equity:
 
 
 
 
 
 
Mortgages and other notes payable   $ 6,643,052   $ 5,306,465
Accounts payable, accrued expenses, and deferred revenue     310,190     289,793
Other liabilities     74,206     66,090
   
 
  Total liabilities     7,027,448     5,662,348
Preferred units     152,450     125,000
Partners' equity     2,155,479     1,641,802
   
 
  Total liabilities and partners' equity   $ 9,335,377   $ 7,429,150
   
 

Our Share of:
 
 
 
 
 
 
Total assets   $ 3,861,497   $ 3,123,011
   
 
Partners' equity   $ 885,149   $ 724,511
Add: Excess Investment     912,212     831,728
   
 
Our net Investment in Joint Ventures   $ 1,797,361   $ 1,556,239
   
 
Mortgages and other notes payable   $ 2,739,630   $ 2,279,609
   
 

            "Excess Investment" represents the unamortized difference of our investment over our share of the equity in the underlying net assets of the joint ventures acquired. We generally amortize excess investment over the life of the related Properties, typically 35 years, and the amortization is included in income from unconsolidated entities. We periodically review our ability to recover the carrying values of our investments in the joint venture Properties. If we conclude that any portion of our investment, including the excess investment, is not recoverable, we record an adjustment to write off the unrecoverable amounts.

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            As of December 31, 2003, scheduled principal repayments on joint venture indebtedness were as follows:

2004   $ 453,633
2005     1,458,047
2006     1,235,064
2007     472,850
2008     652,966
Thereafter     2,366,316
   
Total principal maturities     6,638,876
Net unamortized debt premiums     4,176
   
Total mortgages and other notes payable   $ 6,643,052
   

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            This debt becomes due in installments over various terms extending through 2017 with interest rates ranging from 1.49% to 9.05% and a weighted average rate of 5.83% at December 31, 2003.

 
   For the Year Ended December 31,
  
 
   2003
   2002
   2001
  
STATEMENTS OF OPERATIONS                    
Revenue:                    
  Minimum rent   $ 900,390   $ 805,537   $ 691,469  
  Overage rent     31,086     29,279     25,640  
  Tenant reimbursements     468,049     406,856     349,134  
  Other income     198,512     55,375     44,752  
   
 
 
 
    Total revenue     1,598,037     1,297,047     1,110,995  

Operating Expenses:
 
 
 
 
 
 
 
 
 
 
  Property operating     312,911     210,051     182,489  
  Depreciation and amortization     272,746     234,264     203,910  
  Real estate taxes     140,261     126,390     112,309  
  Repairs and maintenance     75,691     69,853     51,689  
  Advertising and promotion     45,435     38,656     36,405  
  Provision for credit losses     8,684     9,131     5,070  
  Other     70,008     34,466     20,583  
   
 
 
 
    Total operating expenses     925,736     722,811     612,455  
   
 
 
 
Operating Income     672,301     574,236     498,540  
Interest Expense     364,740     337,119     307,849  
   
 
 
 
Income Before Minority Interest and Unconsolidated Entities     307,561     237,117     190,691  
Loss from debt related transactions     —     —     (295 )
Minority interest     (654 )   (751 )   —  
Income from unconsolidated entities     8,393     3,062     —  
   
 
 
 
Income From Continuing Operations     315,300     239,428     190,396  
Income from Discontinued Joint Venture Interests     1,295     16,063     32,562  
   
 
 
 
Income Before Cumulative Effect of Accounting Change ("IBC")     316,595     255,491     222,958  
Cumulative Effect of Accounting Change     —     —     (3,011 )
   
 
 
 
Net Income   $ 316,595   $ 255,491   $ 219,947  
   
 
 
 
Third-Party Investors' Share of IBC   $ 190,535   $ 150,161   $ 134,563  
   
 
 
 
Simon Group's Share of IBC     126,060     105,330     88,395  
Amortization of Excess Investment     26,415     26,635     21,279  
   
 
 
 
Income from Joint Ventures   $ 99,645   $ 78,695   $ 67,116  
   
 
 
 

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            Our investments in the 47 shopping centers in Europe are dependent upon the relationship with two companies that operate the hypermarkets that anchor the shopping centers, including our partner in GCI, the Rinascente Group who operates the hypermarkets in Italy through its affiliates. Our total equity investment in our European properties, including subordinated debt, was approximately $311.1 million as of December 31, 2003.

            The Operating Partnership has a 35.2% ownership interest in European Retail Enterprises, B.V. ("ERE"), that is accounted for using the equity method of accounting. The agreements with ERE are structured to allow us to acquire an additional 26.1% ownership interest over time. The future commitments to purchase shares from three of the existing shareholders of ERE are based upon a multiple of adjusted results of operations in the year prior to the purchase of the shares. Therefore, the actual amount of these additional commitments may vary. The current estimated additional commitment is approximately $60 million to purchase shares of stock of ERE, assuming that the three existing shareholders exercise their rights under put options. We expect these purchases to be made from 2006-2008.

            On January 1, 2003, the Operating Partnership acquired all of the remaining equity interests of the Management Company, and as a result, the Management Company is now a consolidated subsidiary of the Operating Partnership. Prior to this, we owned voting and non-voting common stock and three classes of participating preferred stock of the Management Company; however, 95% of the voting common stock was owned by three Simon family members. As of December 31, 2002 we accounted for our investment in the Management Company using the equity method of accounting. At that time, we exercised significant influence but did not control the financial and operating policies of the Management Company. Our preferred and common interest and our note receivable from the Management Company entitled us to approximately 98% of the after-tax economic benefits of the Management Company's operations.

            As of December 31, 2002, amounts due from the Management Company for unpaid accrued interest and unpaid accrued preferred dividends were not material to the financial statements. Prior to the consolidation of the Management Company, common costs were allocated by the Management Company to us, based primarily on minimum and overage rent, using assumptions that we believe are reasonable. The following table summarizes interest income and preferred dividends from the Management Company, included in other income, and total costs incurred on consolidated properties related to services provided by the Management Company:

 
   For the Year Ended December 31,
 
   2002
   2001
Interest and preferred dividends   $ 13,620   $ 13,638
Total costs incurred on consolidated properties   $ 76,469   $ 86,488

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            Summarized consolidated financial information of the Management Company and a summary of our investment in and share of income from the Management Company follows. The summary excludes the effects of the Management Company's ownership of MerchantWired LLC.

 
   December 31, 2002
BALANCE SHEET DATA:      
Total assets   $ 210,367
Notes payable to the Operating Partnership at 7%, due 2008, and advances     75,105
Shareholders' equity   $ 54,562
   
Our share of total assets   $ 208,347
   
Our net investment in the Management Company   $ 95,517
   

 
 
For the Year Ended December 31,
 
 
   2002
   2001
  
OPERATING DATA:              
Total revenue   $ 130,988   $ 108,302  
Operating (loss) income     33,571     (5,526 )
   
 
 
Net income available for common shareholders excluding losses from MerchantWired LLC   $ 30,552   $ 14,474  
   
 
 
Our share of net income (loss) after intercompany profit elimination:              
Management Company income excluding losses from MerchantWired LLC   $ 14,116   $ 15,365  
Losses from MerchantWired LLC     (32,742 )   (18,104 )
   
 
 
Total net loss   $ (18,626 ) $ (2,739 )
   
 
 

            The losses from MerchantWired LLC presented above and in the accompanying statements of operations and comprehensive income include our indirect share of the operating losses of MerchantWired LLC of $10.2 million, after a tax benefit of $6.2 million. The operating losses include our share of an impairment charge of $4.2 million, after tax. Finally, the losses from MerchantWired LLC include our indirect share of the write-off of the technology investment in MerchantWired LLC of $22.5 million, after a tax benefit of $9.4 million.

            The members of MerchantWired LLC, including the Management Company, agreed to sell their interests in MerchantWired LLC under the terms of a definitive agreement with Transaction Network Services, Inc ("TNSI"). The transaction was expected to close in the second quarter of 2002, but in June 2002, TNSI unexpectedly informed the members of MerchantWired LLC that it would not complete the transaction. As a result, MerchantWired LLC shut down its operations and transitioned its customers to alternate service providers, which was completed by September 3, 2002. Accordingly, the Management Company wrote-off its investment in and advances to MerchantWired LLC. This resulted in our $38.8 million share of a write-off before tax, $22.5 million net of tax, which includes a $7.0 million write-down in the carrying amount of the infrastructure, consisting of broadband cable and the related connections and routers ("Cable"). We have not made any, nor do we expect to make, additional cash contributions to MerchantWired LLC.

            We and the other members of MerchantWired LLC paid $49.5 million directly to a MerchantWired LLC vendor to purchase the Cable in satisfaction of a lease guarantee obligation, of which our share was $26.3 million. As a

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result, we now own and control the Cable in our properties. The amount of the Cable acquired totaled $19.3 million. The Cable was installed in both consolidated and joint venture Properties and is being amortized over four years. We are currently using the Cable for connectivity to our mall management offices.

8.    Indebtedness and Derivative Financial Instruments

            Our mortgages and other notes payable consist of the following:

 
   December 31,
 
   2003
   2002
Fixed-Rate Debt            
Mortgages and other notes, including $21,742 and $29,683 net premiums, respectively. Weighted average interest and maturity of 6.57% and 6.5 years.   $ 3,360,917   $ 2,602,640
Unsecured notes, including $16,547 and $17,770 net discounts, respectively. Weighted average interest and maturity of 6.74% and 4.8 years.     4,998,453     4,972,230
63/4% Putable Asset Trust Securities, including $0 and $236 net premium, respectively, due November 2003     —     100,236
7% Mandatory Par Put Remarketed Securities, including $4,933 and $5,011 premiums, respectively, due June 2028 and subject to redemption June 2008.     204,933     205,011
Commercial mortgage pass-through certificates. Five classes bearing interest at weighted average rates and maturity of 7.31% and 1.0 year.     172,290     173,693
   
 
Total fixed-rate debt     8,736,593     8,053,810

Variable-Rate Debt
 
 
 
 
 
 
Mortgages and other notes, at face value, respectively. Weighted average interest and maturity of 2.55% and 1.5 years.   $ 619,763   $ 852,467
Floating Rate Mandatory Extension Notes, due November 15, 2014. Weighted average interest and maturity of 1.92% and 10.9 years.     113,100     —
Credit Facility (see below)     327,901     308,000
Euro Facility (see below)     —     59,078
Commercial mortgage pass-through certificates, interest at 6.2%, due December 2004.     48,157     49,112
Unsecured term loans. Weighted average rates and maturities of 2.25% and 1.5 years.     419,679     215,000
   
 
Total variable-rate debt     1,528,600     1,483,657
Fair value interest rate swaps     1,195     8,614
   
 
Total mortgages and other notes payable, net   $ 10,266,388   $ 9,546,081
   
 

            General.    We have pledged 76 Properties as collateral to secure related mortgage notes including 8 pools of cross-defaulted and cross-collateralized mortgages encumbering a total of 38 Properties. Under these cross-default provisions, a default under any mortgage included in the cross-defaulted package may constitute a default under all such mortgages and may lead to acceleration of the indebtedness due on each Property within the collateral package. Of our 76 encumbered Properties, indebtedness of 19 of these encumbered Properties and our unsecured notes are subject to various financial performance covenants relating to leverage ratios, annual real property appraisal requirements, debt service coverage ratios, minimum net worth ratios, debt-to-market capitalization, and/or minimum equity values. Our mortgages and notes payable may be prepaid but are generally subject to prepayment of a yield-maintenance premium or defeasance. As of December 31, 2003, we are in compliance with all our debt covenants.

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            Mortgages and Other Notes.    The net book value of our 76 encumbered Properties was $4.5 billion at December 31, 2003. The balance of fixed and variable rate mortgage notes was $4.2 billion as of December 31, 2003 and of this amount $4.0 billion is nonrecourse to us. The fixed-rate mortgages generally require monthly payments of principal and/or interest. The interest rates of variable-rate mortgages are typically based on LIBOR.

            Some of the limited partner Unitholders guarantee a portion of our consolidated debt through foreclosure guarantees. In total, 53 limited partner Unitholders provide guarantees of foreclosure of $354.8 million of our consolidated debt at 12 consolidated Properties. In each case, the loans were made by unrelated third party institutional lenders and the guarantees are for the benefit of each lender. In the event of foreclosure of the mortgaged property, the proceeds from the sale of the property are first applied against the amount of the guarantee and also reduce the amount payable under the guarantee. To the extent the sale proceeds from the disposal of the property do not cover the amount of the guarantee, then the Unitholder is liable to pay the difference between the sale proceeds and the amount of the guarantee so that the entire amount guaranteed to the lender is satisfied. The debt is non-recourse to us and our affiliates.

            On April 1, 2003, we paid off, using available cash flow, a $34.0 million variable rate mortgage, at LIBOR plus 150 basis points, that encumbered one consolidated Property. In addition, we refinanced another consolidated mortgaged Property with a $100.0 million 4.60% fixed rate mortgage that matures on July 1, 2013. The previous mortgage had a balance of $85.5 million at a weighted average fixed rate of 7.16% and was to mature on December 31, 2003.

            On August 20, 2003, in connection with our acquisition of Stanford Shopping Center, see Note 4, we secured a $220.0 million, 3.60% fixed rate, interest only, five year mortgage. We borrowed $110.0 million from our Credit Facility and used available working capital to fund the remainder of the acquisition.

            On November 14, 2003, we secured a $550.0 million leasehold financing encumbering Forum Shops at a fixed-rate of 4.78% due December 1, 2010. This replaced the existing $175.0 million mortgage that had an initial maturity of May 2004 and was effectively fixed at an average interest rate of 6.67% including interest rate protection agreements. The financing generated excess proceeds of $370.8 million that we used to unencumber one asset, to reduce borrowings on our Credit Facility and for general corporate purposes.

            Unsecured Notes.    We have $735.0 million of unsecured notes that are structurally senior in right of payment to holders of other unsecured notes to the extent of the assets and related cash flows of certain Properties. These unsecured notes have a weighted average interest rate of 7.51% and weighted average maturities of 5.5 years. Certain of the unsecured notes are guaranteed by the Operating Partnership.

            On March 18, 2003, we issued two tranches of senior unsecured notes to institutional investors pursuant to Rule 144A totaling $500.0 million at a weighted average fixed interest rate of 5.11%. Subsequently, we exchanged notes that had been registered under the Securities Act of 1933 for the Rule 144A notes. The exchange notes and the Rule 144A notes have the same economic terms and conditions. The first tranche is $300.0 million at a fixed interest rate of 4.875% due March 18, 2010 and the second tranche is $200.0 million at a fixed interest rate of 5.45% due March 15, 2013. The net proceeds from this offering were $498.7 million, of which $440.0 million was used to reduce borrowings on our $1.25 billion unsecured credit facility (the "Credit Facility").

            On April 1, 2003, we paid off $100.0 million of 7.05% unsecured notes that matured on that date with the remaining portion of the proceeds from the senior unsecured notes mentioned above and available working capital. On June 15, 2003, we paid off $375.0 million of 6.625% unsecured notes that matured on that date with borrowings from our Credit Facility.

            On November 15, 2003, we exchanged with the institutional holder of our $100.0 million of 6.75% Putable Asset Trust Securities (PATS), which had a call option settlement feature on that date, $113.1 million Floating Rate Mandatory Extension Notes (MAXES) due November 15, 2014. The MAXES bear interest during the first year at

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LIBOR plus 80 basis points. The exchange of the PATS for the MAXES did not result in a significant modification of the terms in the debt arrangement.

            On January 20, 2004, we issued two tranches of senior unsecured notes to institutional investors pursuant to Rule 144A totaling $500.0 million at a weighted average fixed interest rate of 4.21%. The first tranche is $300.0 million at a fixed interest rate of 3.75% due January 30, 2009 and the second tranche is $200.0 million at a fixed interest rate of 4.90% due January 30, 2014. We received cash and we exchanged, with the holder, the MAXES discussed above for a portion of the second tranche of the notes. We intend to file a registration statement under the Securities Act of 1933 relating to an offer to exchange the notes of each series for registered notes with substantially identical economic terms. If we do not complete the exchange offer within 180 days after the issuance of the notes, the interest rates on the notes will be increased by 0.50% per year. The exchange of the MAXES for the notes instruments did not result in a significant modification of the terms of the debt arrangement.

            Credit Facility.    The Credit Facility is a $1.25 billion unsecured revolving credit facility with a maturity date of April 16, 2005 and a one-year extension of the maturity date available at our option. The Credit Facility bears interest at LIBOR plus 65 basis points and provides for different pricing based upon our corporate credit rating, with an additional 15 basis point facility fee on the entire $1.25 billion. On June 23, 2003, we restructured our Credit Facility to establish a $100 million EURO sub-tranche which provides availability for Euros at EURIBOR plus 65 basis points and dollars at LIBOR plus 65 basis points, at our option, and has the same maturity date as the overall Credit Facility. The amount available under the $100 million EURO sub-tranche will vary with changes in the exchange rate, however, we may also borrow the amount available under this EURO sub-tranche in dollars, if necessary. We use the Credit Facility primarily for funding acquisition, renovation and expansion and predevelopment opportunities and general corporate purposes. The Credit Facility contains financial covenants relating to a capitalization value, minimum EBITDA and unencumbered EBITDA coverage ratio requirements and a minimum equity value.

 
   As of December 31,
  
 
   2003
   2002
  
Total Facility Amount   $ 1,250,000   $ 1,250,000  
Borrowings     (327,901 )   (308,000 )
Letters of credit     (24,081 )   (23,651 )
   
 
 
Remaining Availability   $ 898,018   $ 918,349  
   
 
 
Effective Interest rate     1.94%     2.03%  
   
 
 
Maximum borrowings during the period ended   $ 667,067   $ 743,000  
   
 
 
Average borrowings during the period ended   $ 396,250   $ 411,263  
   
 
 

            Euro Facility and Euro denominated indebtedness.    On June 27, 2003, we retired our existing €90 million EURO-denominated unsecured credit agreement (the "EURO Facility"), which had an initial maturity date of July 31, 2003, with available working capital of $28.2 million and €34.7 million borrowed from a new EURO sub-tranche of our Credit Facility.

            On December 17, 2003, we secured a €200 million EURO-denominated one-year unsecured term loan with two additional one-year extensions available at our option. The loan bears interest at EURIBOR plus 60 basis points. The initial borrowing of €163 million was used to fund a portion of the acquisition of Gallerie Commerciali Italia.

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            Our scheduled principal repayments on indebtedness as of December 31, 2003 were as follows:

2004   $ 1,480,850
2005     913,105
2006     1,407,980
2007     1,491,031
2008     691,417
Thereafter     4,270,682
   
Total principal maturities     10,255,065
Net unamortized debt discounts and other     11,323
   
Total mortgages and other notes payable   $ 10,266,388
   

            Our cash paid for interest in each period, net of any amounts capitalized, was as follows:

 
 For the year ended December 31,
 
 2003
   2002
   2001
  $ 596,274   $ 591,328   $ 588,889

            Our exposure to market risk due to changes in interest rates primarily relates to our long-term debt obligations. We manage exposure to interest rate market risk through our risk management strategy by a combination of interest rate protection agreements to effectively fix or cap a portion of variable rate debt, or in the case of a fair value hedge, effectively convert fixed rate debt to variable rate debt. We are also exposed to foreign currency risk on financings of certain foreign operations. Our intent is to offset gains and losses that occur on the underlying exposures, with gains and losses on the derivative contracts hedging these exposures. We do not enter into either interest rate protection or foreign currency rate protection agreements for speculative purposes.

            We may enter into treasury lock agreements as part of an anticipated debt issuance. If the anticipated transaction does not occur, the cost is charged to net income. Upon completion of the debt issuance, the cost of these instruments is recorded as part of accumulated other comprehensive income and is amortized to interest expense over the life of the debt agreement.

            As of December 31, 2003, we have reflected the fair value of outstanding consolidated derivatives in other assets for $1.2 million, and in other liabilities for $3.6 million. In addition, we recorded the benefits from our treasury lock agreements in accumulated comprehensive income and the unamortized balance of these agreements is $10.1 million as of December 31, 2003. As of December 31, 2003, our outstanding LIBOR based derivative contracts consist of:

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            Within the next twelve months, we expect to reclassify to earnings approximately our $1.8 million share of expense of the current balance held in accumulated other comprehensive income. The amount of ineffectiveness relating to fair value and cash flow hedges recognized in income during the periods presented was not material.

            The carrying value of our variable-rate mortgages and other loans approximates their fair values. We estimated the fair values of combined fixed-rate mortgages using cash flows discounted at current borrowing rates and other notes payable using cash flows discounted at current market rates. The fair values of financial instruments and our related discount rate assumptions used in the estimation of fair value for our consolidated fixed-rate mortgages and other notes payable are summarized as follows:

 
   December 31,
 
   2003
   2002
Fair value of fixed-rate mortgages and other notes payable   $ 9,189,538   $ 8,816,981
Discount rates assumed in calculation of fair value     4.81%     4.41%

9.    Rentals under Operating Leases

            Future minimum rentals to be received under noncancelable tenant operating leases for each of the next five years and thereafter, excluding tenant reimbursements of operating expenses and percentage rent based on tenant sales volume, as of December 31, 2003, are as follows:

2004   $ 1,131,455
2005     1,032,095
2006     922,152
2007     800,765
2008     676,384
Thereafter     2,188,490
   
    $ 6,751,341
   

            Approximately 0.87% of future minimum rents to be received are attributable to leases with an affiliate of a limited partner in the Operating Partnership.

10.    Capital Stock

            The Board of Directors is authorized to reclassify the excess common stock into one or more additional classes and series of capital stock, to establish the number of shares in each class or series and to fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, and qualifications and terms and conditions of redemption of such class or series, without any further vote or action by the shareholders. The issuance of additional classes or series of capital stock may have the effect of delaying, deferring or preventing a change in control of Simon Property without further action of the shareholders. The ability of the Board of Directors to issue additional classes or series of capital stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of the outstanding voting stock of Simon Property.

            The holders of common stock of Simon Property are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders, other than for the election of directors. The holders of Class B common stock are entitled to elect four of the thirteen members of the board. Shares of Class B common stock convert

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automatically into an equal number of shares of common stock upon the sale or transfer thereof to a person not affiliated with Melvin Simon, Herbert Simon or David Simon. The holder of the Class C common stock is entitled to elect two of the thirteen members of the board. Shares of Class C common stock convert automatically into an equal number of shares of common stock upon the sale or transfer thereof to a person not affiliated with the members of the DeBartolo family or entities controlled by them. The Class B and Class C shares can be converted into shares of common stock at the option of the holders. We have reserved 3,200,000 and 4,000 shares of common stock for the possible conversion of the outstanding Class B and Class C shares, respectively.

            At the time of the initial public offering of Simon Property's predecessor in 1993, the charter of the predecessor gave Melvin Simon, Herbert Simon, David Simon and certain of their affiliates (the "Simons") the right to elect four members of the Board of Directors, conditioned upon the Simons, or entities they control, maintaining specified levels of equity ownership in Simon Property's predecessor, the Operating Partnership and all of their subsidiaries. In addition, at that time, Melvin Simon & Associates, Inc. ("MSA"), acquired 3,200,000 shares of Class B common stock. MSA placed the Class B common stock into a voting trust under which the Simons were the sole trustees. These voting trustees had the authority to elect the four members of the Board of Directors. These same arrangements were incorporated into Simon Property's Charter in 1998 during the combination of its predecessor and Corporate Property Investors, Inc.

            On March 1, 2004, Simon Property and the Simons completed a restructuring transaction in which MSA exchanged 3,192,000 Class B common shares for an equal number of shares of common stock in accordance with our Charter. Those shares continue to be owned by MSA and remain subject to a voting trust under which the Simons are the sole voting trustees. MSA exchanged the remaining 8,000 Class B common shares with David Simon for 8,000 shares of common stock and David Simon's agreement to create a new voting trust under which the Simons as voting trustees, hold and vote the remaining 8,000 shares of Class B common stock acquired by David Simon. As a result, these voting trustees have the authority to elect four of the members of the Board of Directors contingent on the Simons maintaining specified levels of equity ownership in Simon Property, the Operating Partnership and their subsidiaries.

            On January 22, 2003, three limited partners exchanged 13,469 Units for 13,469 shares of common stock. On February 19, 2003, two limited partners exchanged 2,867,341 Units for 2,867,341 shares of common stock.

            We issued 733,617 shares of common stock related to employee stock options exercised during 2003. We used the net proceeds from the option exercises of approximately $17.5 million to acquire additional units of the Operating Partnership. The Operating Partnership used the net proceeds for general working capital purposes. We also issued 12,443,195 shares of common stock in connection with the conversions of the 6.5% Series B preferred stock.

            We issued 9,000,000 shares of common stock in a public offering on July 1, 2002. We used the net proceeds of $322.2 million to pay down a portion of the debt issued to finance the Rodamco acquisition.

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            The following table summarizes each of the authorized series of preferred stock of Simon Property:

 
   As of December 31,
 
   2003
   2002
Series B 6.5% Convertible Preferred Stock, 5,000,000 shares authorized, 0 and 4,830,057 issued and outstanding   $ —   $ 449,196
Series C 7.00% Cumulative Convertible Preferred Stock, 2,700,000 shares authorized, none issued or outstanding     —     —
Series D 8.00% Cumulative Redeemable Preferred Stock, 2,700,000 shares authorized, none issued or outstanding     —     —
Series E 8.00% Cumulative Redeemable Preferred Stock, 1,000,000 shares authorized, 1,000,000 issued and outstanding     24,863     24,656
Series F 8.75% Cumulative Redeemable Preferred Stock, 8,000,000 shares authorized, 8,000,000 issued and outstanding     192,989     192,989
Series G 7.89% Cumulative Step-Up Premium Rate Preferred Stock, 3,000,000 shares authorized, 3,000,000 issued and outstanding     147,681     147,413
Series H Variable Rate Preferred Stock, 4,530,000 shares authorized, 78,012 and 0 issued and outstanding     1,950     —
   
 
    $ 367,483   $ 814,254
   
 

            Dividends on all series of preferred stock are calculated based upon the preferred stock's preferred return multiplied by the preferred stock's corresponding liquidation value. The Operating Partnership pays preferred distributions to Simon Property equal to the dividends paid on the preferred stock issued. "Preferred dividends of subsidiary" in the accompanying statements of operations and comprehensive income prior to July 1, 2001 represented distributions on preferred stock of SPG Properties, Inc., a former subsidiary of Simon Property that was merged into Simon Property on that date.

            Series A Convertible Preferred Stock.    During 2002, the remaining 49,839 shares of Simon Property Series A 6.5% Convertible Preferred Stock were converted into 1,893,651 shares of common stock. In addition, another 19,375 shares of common stock were issued to the holders of the converted shares in lieu of the cash dividends allocable to those preferred shares.

            Series B Convertible Preferred Stock.    On November 13, 2003, we announced that we would redeem the remaining shares of our 6.5% Series B Convertible Preferred Stock on December 15, 2003 at a redemption price of 105% of the liquidation value plus accrued and unpaid distributions to the redemption date or $106.34 per share. The holders of 4,297,989 shares of the preferred stock elected to convert each of these shares into 2.58605 shares of common stock of Simon Property prior to the redemption. We issued 11,114,672 million shares of common stock to the holders who exercised their conversion rights. On December 15, 2003 the remaining 18,340 shares of Series B preferred stock were redeemed for cash at the terms listed above with proceeds from the issuance of the Series H Variable Rate Preferred Stock.

            In addition, earlier in 2003 prior to the redemption, the holders of 513,728 shares of the preferred stock converted their preferred stock and we issued 1,328,523 shares of common stock to them.

            Series C Cumulative Convertible Preferred Stock and Series D Cumulative Redeemable Preferred Stock.    On August 27, 1999, Simon Property authorized these two new series of preferred stock to be available for issuance upon

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conversion by the holders or redemption by the Operating Partnership of the 7.00% Preferred Units or the 8.00% Preferred Units, described below. Each of these new series of preferred stock has terms that are substantially identical to the respective series of Preferred Units.

            Series E Cumulative Redeemable Preferred Stock.    As part of the consideration for the purchase of ownership in Mall of America, Simon Property issued the Series E Cumulative Redeemable Preferred Stock for $24,242. The Series E Cumulative Redeemable Preferred Stock is redeemable beginning August 27, 2004 at the liquidation value of $25 per share. These preferred shares are being accreted to their liquidation value.

            Series F Cumulative Redeemable Preferred Stock and Series G Cumulative Step-Up Premium Rate Preferred Stock.    The 8.75% Series F Cumulative Redeemable Preferred Stock may be redeemed at any time on or after September 29, 2006 at a liquidation value of $25.00 per share (payable solely out of the sale proceeds of other capital stock of Simon Property, which may include other series of preferred shares), plus accrued and unpaid dividends. The 7.89% Series G Cumulative Step-Up Premium Rate Preferred Stock are being accreted to their liquidation value and may be redeemed at any time on or after September 30, 2007 at a liquidation value of $50.00 per share (payable solely out of the sale proceeds of other capital stock of Simon Property, which may include other series of preferred shares), plus accrued and unpaid dividends. Beginning October 1, 2012, the rate on this series of preferred stock increases to 9.89% per annum. We intend to redeem the Series G Preferred Shares prior to October 1, 2012. Neither of these series of preferred stock has a stated maturity or is convertible into any other securities of Simon Property. Neither series is subject to any mandatory redemption provisions, except as needed to maintain or bring the direct or indirect ownership of the capital stock of Simon Property into conformity with REIT requirements. The Operating Partnership pays a preferred distribution to Simon Property equal to the dividends paid on the preferred stock.

            Series H Variable Rate Preferred Stock.    To fund the redemption of the Series B Preferred Stock, we issued 3,328,540 shares of Series H Variable Rate Preferred Stock for $83.2 million. Series H Variable Rate Preferred Stock is not redeemable at the option of the holders, but was redeemable at any time prior to March 15, 2004 or after March 15, 2009 at specified prices. We repurchased 3,250,528 shares of the Series H Preferred Stock for $81.3 million on December 17, 2003. On January 7, 2004 we repurchased the remaining 78,012 shares for $1.9 million.

            The following table summarizes each of the authorized preferred units of the Operating Partnership:

 
   As of December 31,
 
   2003
   2002
7.75%/8.00% Cumulative Redeemable Preferred Units, 900,000 shares authorized, 822,588 and 0 issued and outstanding   $ 82,259   $ —
7.5% Cumulative Redeemable Preferred Units, 260,000 units authorized, 251,096 and 0 issued and outstanding     25,109     —
7% Cumulative Convertible Preferred Units, 2,700,000 units authorized, 2,600,895 issued and outstanding     72,825     72,825
8.00% Cumulative Redeemable Preferred Units, 2,700,000 units authorized, 2,600,895 issued and outstanding     78,027     78,027
   
 
    $ 258,220   $ 150,852
   
 

            7.75%/8.00% Cumulative Redeemable Preferred Units.    During 2003, in connection with the purchase of additional interest in Kravco, the Operating Partnership issued 7.75%/8.00% Cumulative Redeemable Preferred Units (the "7.75% Preferred Units") that accrue cumulative dividends at a rate of 7.75% of the liquidation value for the period

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beginning December 5, 2003 and ending December 31, 2004, 8.00% of the liquidation value for the period beginning January 1, 2005 and ending December 31, 2009, 10.00% of the liquidation value for the period beginning January 1, 2010 and ending December 31, 2010, and 12% of the liquidation value thereafter. These dividends are payable quarterly in arrears. A unitholder may require the Operating Partnership to repurchase the 7.75% Preferred Units on or after January 1, 2009 or any time the aggregate liquidation value of the outstanding units exceeds 10% of the book value of partners' equity of the Operating Partnership. The Operating Partnership may redeem the 7.75% Preferred on or after January 1, 2011 or earlier upon the occurrence of certain tax triggering events. Our intent is to redeem these units after January 1, 2009 after the occurrence of a tax triggering event. The redemption is liquidation value plus accrued and unpaid distributions, payable in cash or interest in one or more properties mutually agreed upon.

            7.5% Cumulative Redeemable Preferred Units.    The Operating Partnership issued 7.5% Cumulative Redeemable Preferred Units (the "7.5% Preferred Units") in connection with the purchase of additional interest in Kravco. The 7.5% Preferred Units accrue cumulative dividends at a rate of $7.50 annually, which is payable quarterly in arrears. The Operating Partnership may redeem the 7.5% Preferred Units on or after November 10, 2013 unless there is the occurrence of certain tax triggering events such as death of the initial unit holder, or the transfer of any units to any person or entity other than the persons or entities entitled to the benefits of the original holder. The 7.5% Preferred Units' redemption price is liquidation value plus accrued and unpaid distributions, payable either in cash or shares of common stock. In the event of the death of a holder of the 7.5% Preferred Units, the occurrence of certain tax triggering events applicable to the holder, or on or after November 10, 2006, the Preferred Unitholder may require the Operating Partnership to redeem the 7.5% Preferred Units payable at the option of the Operating Partnership in either cash or shares of common stock.

            7.00% Cumulative Convertible Preferred Units.    The 7.00% Cumulative Convertible Preferred Units (the "7.00% Preferred Units") accrue cumulative dividends at a rate of $1.96 annually, which is payable quarterly in arrears. The 7.00% Preferred Units are convertible at the holders' option on or after August 27, 2004, into either a like number of shares of 7.00% Cumulative Convertible Preferred Stock of Simon Property with terms substantially identical to the 7.00% Preferred Units or Units of the Operating Partnership at a ratio of 0.75676 to one provided that the closing stock price of Simon Property's common stock exceeds $37.00 for any three consecutive trading days prior to the conversion date. The Operating Partnership may redeem the 7.00% Preferred Units at their liquidation value plus accrued and unpaid distributions on or after August 27, 2009, payable in Units. In the event of the death of a holder of the 7.00% Preferred Units, or the occurrence of certain tax triggering events applicable to a holder, the Operating Partnership may be required to redeem the 7.00% Preferred Units at liquidation value payable at the option of the Operating Partnership in either cash (the payment of which may be made in four equal annual installments) or shares of common stock.

            8.00% Cumulative Redeemable Preferred Units.    The 8.00% Cumulative Redeemable Preferred Units (the "8.00% Preferred Units") accrue cumulative dividends at a rate of $2.40 annually, which is payable quarterly in arrears. The 8.00% Preferred Units are each paired with one 7.00% Preferred Unit or with the Units into which the 7.00% Preferred Units may be converted. The Operating Partnership may redeem the 8.00% Preferred Units at their liquidation value plus accrued and unpaid distributions on or after August 27, 2009, payable in either new preferred units of the Operating Partnership having the same terms as the 8.00% Preferred Units, except that the distribution coupon rate would be reset to a then determined market rate, or in Units. The 8.00% Preferred Units are convertible at the holders' option on or after August 27, 2004, into 8.00% Cumulative Redeemable Preferred Stock of Simon Property with terms substantially identical to the 8.00% Preferred Units. In the event of the death of a holder of the 8.00% Preferred Units, or the occurrence of certain tax triggering events applicable to a holder, the Operating Partnership may be required to redeem the 8.00% Preferred Units owned by such holder at their liquidation value payable at the option of the Operating Partnership in either cash (the payment of which may be made in four equal annual installments) or shares of common stock.

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            Notes receivable of $17,926 from former Corporate Property Investors, Inc. ("CPI") shareholders, which result from securities issued under CPI's executive compensation program and were assumed in our merger with CPI, are reflected as a deduction from capital in excess of par value in the statements of shareholders' equity in the accompanying financial statements. Certain of such notes totaling $277 bear interest at rates ranging from 6.00% to 7.50%. The remainder of the notes do not bear interest and become due at the time the underlying shares are sold.

            We have a stock incentive plan (the "1998 Plan"), which provides for the grant of equity-based awards during a ten-year period, in the form of options to purchase 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. Through 2001, the Company had reserved for issuance 6,300,000 shares under the 1998 Plan. In 2002, an additional 5,000,000 shares were reserved for issuance, increasing the total to 11,300,000. Additionally, the partnership agreement require us to sell shares to the Operating Partnership, at fair value, sufficient to satisfy the exercising of stock options, and for us to purchase Units for cash in an amount equal to the fair market value of such shares.

            Administration.    The 1998 Plan is administered by Simon Property's Compensation Committee (the "Committee"). The Committee, in its sole discretion, determines which eligible individuals may participate and the type, extent and terms of the Awards to be granted to them. In addition, the Committee interprets the 1998 Plan and makes all other determinations deemed advisable for the administration of the 1998 Plan. Options granted to employees ("Employee Options") become exercisable over the period determined by the Committee. The exercise price of an Employee Option may not be less than the fair market value of the shares on the date of grant. Employee Options generally vest over a three-year period and expire ten years from the date of grant.

            Automatic Awards For Eligible Directors.    Prior to May 7, 2003, the 1998 Plan provided for automatic grants of Options to directors ("Director Options") of Simon Property who are not also our employees or employees of our affiliates ("Eligible Directors"). Each Eligible Director was automatically granted Director Options to purchase 5,000 shares upon the director's initial election to the Board, and upon each re-election, an additional 3,000 Director Options multiplied by the number of calendar years that had elapsed since such person's last election to the Board. The exercise price of Director Options is equal to the fair market value of the shares on the date of grant. Director Options vest and become exercisable on the first anniversary of the date of grant or in the event of a "Change in Control" as defined in the 1998 Plan. The last year during which Eligible Directors received awards of Director Options was 2002.

            Pursuant to an amendment to the 1998 Plan approved by the stockholders effective May 7, 2003, Eligible Directors now receive annual grants of restricted stock in lieu of Director Options. Each Eligible Director receives on the first day of the first calendar month following his or her initial election as a director, a grant of 1,000 shares of restricted stock. Thereafter, as of the date of each annual meeting of the Company's stockholders, Eligible Directors who are re-elected as directors receive a grant of 1,000 shares of restricted stock. In addition, Eligible Directors who serve as chairpersons of the standing committees of the Board of Directors receive an additional annual grant in the amount of 500 shares of restricted stock (in the case of the Audit Committee) or 300 shares of restricted stock (in the case of all other standing committees).

            Each award of restricted stock vests in four equal annual installments on January 1 of each year, beginning in the year following the year in which the award occurred. If a director otherwise ceases to serve as a director before vesting, the unvested portion of the award terminates. Any unvested portion of a restricted stock award vests if the director dies or becomes disabled while in office or has served a minimum of five annual terms as a director, but only if

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the Compensation Committee or full Board of Directors determines that such vesting is appropriate. The restricted stock also vests in the event of a "Change in Control."

            Once vested, the delivery of any shares with respect to a restricted stock award (including reinvested dividends) is deferred under our Director Deferred Compensation Plan until the director retires, dies or becomes disabled or otherwise no longer serves as a director. The Eligible Directors may vote and are entitled to receive dividends on the shares underlying the restricted stock awards; however, any dividends on the shares underlying restricted stock awards must be reinvested in shares and held in the Director Deferred Compensation Plan until the shares underlying a restricted stock award are delivered to the former director.

            In addition to automatic awards, Eligible Directors may be granted discretionary awards under the 1998 Plan.

            Restricted Stock.    The 1998 Plan also provides for shares of restricted common stock of Simon Property to be granted to certain employees at no cost to those employees, subject to growth targets established by the Compensation Committee (the "Restricted Stock Program"). Restricted stock is issued on the grant date and vests annually in four installments of 25% each beginning on January 1 following the year in which the restricted stock is awarded. The cost of restricted stock grants, which is based upon the stock's fair market value on the grant date, is charged to shareholders' equity and subsequently amortized against our earnings over the vesting period. Through December 31, 2003 a total of 3,057,571 shares of restricted stock, net of forfeitures, have been awarded under the plan. Information regarding restricted stock awards are summarized in the following table for each of the years presented:

 
   For the Year Ended December 31,
 
   2003
   2002
   2001
Restricted stock shares awarded, net of forfeitures     380,835     (21,070 )   454,726
Weighted average grant price   $ 33.03   $ 0.00   $ 25.85
Amortization expense   $ 10,355   $ 8,957   $ 11,512

            The fair value of the options at the date of grant was estimated using the Black-Scholes option pricing model with the following assumptions:

 
   December 31,
  
 
   2002
   2001
  
Weighted Average Fair Value per Option   $ 2.78   $ 1.82  
Expected Volatility     18.7 %   20.45-20.58 %
Risk-Free Interest Rate     4.85 %   4.85-5.33 %
Dividend Yield     6.9 %   7.36-7.83 %
Expected Life     6 years     10 years  

            The weighted average remaining contract life for options outstanding as of December 31, 2003 was 5.89 years. In 2002, we changed our accounting for stock options to the fair value method. The impact on pro forma net income and earnings per share as a result of applying the fair value method, as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, which requires entities to measure compensation costs measured at the grant date based on the fair value of the award, was not material.

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            Information relating to Director Options and Employee Options from December 31, 2000 through December 31, 2003 is as follows:

 
   Director Options
   Employee Options
 
   Options
   Option Price per Share (1)
   Options
   Option Price per Share (1)
Shares under option at December 31, 2000   154,720   $ 25.67   2,513,066   $ 24.55
   
 
 
 
Granted   26,000     26.09   1,085,836     25.40
Exercised   (11,000 )   24.93   (372,226 )   22.99
Forfeited   —     N/A   (48,925 )   23.94
   
 
 
 
Shares under option at December 31, 2001   169,720   $ 25.86   3,177,751   $ 25.03
   
 
 
 
Granted   24,000     33.68   —     —
Exercised   (6,360 )   22.29   (665,476 )   23.44
Forfeited   (9,000 )   27.05   (7,225 )   24.25
   
 
 
 
Shares under option at December 31, 2002   178,360   $ 26.97   2,505,050   $ 25.46
   
 
 
 
Granted   —     N/A   —     N/A
Exercised   (86,000 )   26.43   (647,617 )   23.44
Forfeited   —     N/A   (5,400 )   25.54
   
 
 
 
Shares under option at December 31, 2003   92,360   $ 27.48   1,852,033   $ 26.16
   
 
 
 
Exercise price range       $ 22.25-$33.68       $ 22.25-$30.38
       
     
Options exercisable at December 31, 2001   143,720   $ 25.81   1,753,218   $ 25.11
   
 
 
 
Options exercisable at December 31, 2002   154,360   $ 25.93   1,695,750   $ 25.67
   
 
 
 
Options exercisable at December 31, 2003   92,360   $ 27.48   1,552,983   $ 26.28
   
 
 
 
(1)
Represents the weighted average price when multiple prices exist.

            We also maintain a tax-qualified retirement 401(k) savings plan and offer no other postretirement or post employment benefits to our employees.

            Limited partners in the Operating Partnership have the right to exchange all or any portion of their Units for shares of common stock on a one-for-one basis or cash, as selected by the Board of Directors. The amount of cash to be paid if the exchange right is exercised and the cash option is selected will be based on the trading price of Simon Property's common stock at that time. At December 31, 2003, we had reserved 60,591,896 shares for possible issuance upon the exchange of Units.

11.    Commitments and Contingencies

            Triple Five of Minnesota, Inc., a Minnesota corporation, v. Melvin Simon, et. al. On or about November 9, 1999, Triple Five of Minnesota, Inc. 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 us. The action was later removed to federal court. Two transactions form the basis of the

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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 Operating Partnership and related entities; and (ii) a financing transaction involving a loan in the amount of $312.0 million obtained from The Chase Manhattan Bank that is secured by a mortgage placed on Mall of America's assets. The complaint, which contains twelve counts, seeks remedies of unspecified damages, rescission, constructive trust, accounting, and specific performance. Although the complaint names all defendants in several counts, we are specifically identified as a defendant in connection with the sale by Teachers. On August 12, 2002, the court granted in part and denied in part motions for partial summary judgment filed by the parties.

            Trial on all of the equitable claims in this matter began June 2, 2003. On September 10, 2003, the court issued its decision in a Memorandum and Order (the "Order"). In the Order, the court found that certain entities and individuals, breached their fiduciary duties to Triple Five. The court did not award Triple Five damages but instead awarded Triple Five equitable and other relief and imposed a constructive trust on that portion of the Mall of America owned by us. Specifically, as it relates to us, the court ordered that Triple Five was entitled to purchase from us the one-half partnership interest that we purchased from Teachers in October 1999, provided Triple Five remits to us the sum of $81.38 million within nine months of the Order. The court further held that we must disgorge all net profits that we received as a result of our ownership interest in the Mall from October 1999 to the present. The court has appointed a Special Master to determine net profits. The court also held that the current day-to-day management of the Mall remains unchanged unless and until Triple Five purchases our interest in the Mall.

            We disagree with many aspects of the Order and have appealed the Order to the United States Court of Appeals for the Eighth Circuit. We are currently working with the Special Master appointed by the court. It is not possible to provide an assurance of the ultimate outcome of the litigation.

            As a result of the Order, we recorded a $6.0 million loss that is included in "Gain (loss) on sales of assets and other, net" in the accompanying statements of operations and comprehensive income, reflecting our estimate of the financial impact to us from complying with the Order and we have ceased recording any contribution to either net income or Funds from Operations ("FFO") from Mall of America.

            We are currently not subject to any other material litigation other than routine litigation, claims and administrative proceedings arising in the ordinary course of business. We believe that such routine litigation, claims and administrative proceedings will not have a material adverse impact on our financial position or our results of operations.

            As of December 31, 2003, a total of 30 of the consolidated Properties are subject to ground leases. The termination dates of these ground leases range from 2005 to 2090. These ground leases generally require us to make payments of a fixed annual rent, or a fixed annual rent plus a participating percentage over a base rate based upon the revenues or total sales of the property. Some of these leases also include escalation clauses and renewal options. We incurred ground lease expense included in other expense and discontinued operations as follows:

 
 For the year ended December 31,
 
 2003
   2002
   2001
  $ 17,028   $ 13,984   $ 13,786

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            Future minimum lease payments due under such ground leases for each of the next five years ending December 31 and thereafter are as follows:

2004   $ 11,180
2005     13,508
2006     13,619
2007     13,767
2008     14,004
Thereafter     608,878
   
    $ 674,956
   

            We maintain commercial general liability, fire, flood, extended coverage and rental loss insurance on our Properties. Rosewood Indemnity, Ltd, a wholly-owned subsidiary of the Management Company, has agreed to indemnify our general liability carrier for a specific layer of losses. The carrier has, in turn, agreed to provide evidence of coverage for this layer of losses under the terms and conditions of the carrier's policy. A similar policy written through Rosewood Indemnity, Ltd. also provides initial coverage for property insurance and certain windstorm risks at the Properties located in Florida.

            The events of September 11, 2001 affected our insurance programs. Although insurance rates remain high, since the President signed into Law the Terrorism Risk Insurance Act (TRIA) in November of 2002, the price of terrorism insurance has steadily decreased, while the available capacity has been substantially increased. As a result, we have purchased two separate terrorism insurance programs, one for one individual Property and a second covering all other properties. Each program provides limits up to $600 million per occurrence and covers both Certified (Foreign) and Non-Certified (Domestic) acts of terrorism. The coverage is written on an "all risk" policy form that eliminates the policy aggregates associated with our previous terrorism policies. These policies are in place throughout the remainder of 2004. We believe we are in compliance with all insurance provisions of our debt agreements regarding insurance coverage.

            Joint venture debt is the liability of the joint venture, is typically secured by the joint venture Property, and is non-recourse to us. As of December 31, 2003, we have guaranteed or have provided letters of credit to support $93.8 million of our total $2.7 billion share of joint venture mortgage and other indebtedness in the event the joint venture partnership defaults under the terms of the mortgage. The mortgages guaranteed are secured by the property of the joint venture partnership and could be sold in order to satisfy the outstanding obligation.

            Nearly all of the Properties have been subjected to Phase I or similar environmental audits. Such audits have not revealed nor is management aware of any environmental liability that we believe would have a material adverse impact on our financial position or results of operations. We are unaware of any instances in which we would incur significant environmental costs if we disposed of or abandoned any or all Properties.

            On September 30, 1999, the Operating Partnership entered into multi-year agreements with affiliates of Enron Corporation, for Enron Corporation to supply or manage all of the energy commodity requirements for the wholly-

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owned Properties and to provide certain services in connection with our tenant electricity redistribution program. Subsequently, many of our joint venture Properties entered into similar agreements. As a result of Enron Corporation's December 2001 bankruptcy filing and ensuing failure to perform under the agreements, we assumed control over the management of our energy assets throughout the Portfolio. On August 29, 2002, the United States Bankruptcy Court for the Southern District of New York entered an order approving the terms of a negotiated settlement of all claims existing between our wholly owned and joint venture Properties, and Enron Corporation. As a result, all parties have been legally relieved of performance under the agreements. After reaching a negotiated settlement for both our and Enron Corporation's pre and post petition claims, and recognizing the unamortized portion of deferred revenue from a rate restructure agreement in 2001, we recorded $8.6 million of revenue, net, in 2002 that is included in other income in the accompanying statement of operations and comprehensive income.

            On December 5, 2002, Simon Property Acquisitions, Inc., our wholly-owned subsidiary, commenced a tender offer to acquire all of the outstanding shares of Taubman Centers, Inc. ("Taubman") and on January 15, 2003, Westfield America, Inc., the U.S. subsidiary of Westfield America Trust, joined our tender offer. On October 8, 2003, we and Westfield America, Inc. withdrew our joint tender offer. As a result we expensed deferred acquisition costs of $10.6 million, net, related to this acquisition. These expenses are included in "Costs related to withdrawn tender offer" in the accompanying statement of operations and comprehensive income. The withdrawal of the tender offer followed the enactment of a law, which amended the Michigan Control Share Acquisitions Act and which allowed the Taubman family group to effectively block our ability to conclude the tender offer.

12.    Related Party Transactions

            The Management Company provides management, insurance, and other services to Melvin Simon & Associates, Inc. ("MSA"), a related party, and other non-owned properties. Amounts for services provided by the Management Company and its affiliates to our unconsolidated joint ventures and MSA were as follows:

 
   For the year ended December 31,
 
   2003
   2002
   2001
Amounts charged to unconsolidated joint ventures   $ 63,779   $ 55,199   $ 46,851
Amounts charged to properties owned by related parties   $ 3,491     3,146     3,120
Amounts charged to MSA   $ 1,250   $ 1,250   $ 1,250

            On December 28, 2000, Montgomery Ward LLC and certain of its related entities ("Ward") filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. On March 1, 2001, Kimco Realty Corporation led the formation of a limited liability company, Kimsward LLC ("Kimsward"). Kimsward acquired the right from the Bankruptcy Court to designate persons or entities to whom the Ward real estate assets were to be sold. The Management Company's interest in Kimsward was 18.5%. During 2001 the Management Company recorded $18.3 million of equity in income from Kimsward. In addition, in 2001 the Operating Partnership charged the Management Company a $5.7 million fee for services rendered to the Management Company in connection with the Kimsward transactions, which is included in other income in the accompanying statements of operations. The Management Company recorded $1.4 million of equity in income, before tax for the year ended December 31, 2002. The remaining investment in Kimsward at December 31, 2003 is not material.

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13.    New Accounting Pronouncements

            In November 2002, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 provides disclosure requirements to be made by a guarantor about its obligations under certain guarantees as well as clarifies when a guarantor is required to recognize, at the inception of a guarantee, a liability for undertaking the obligation. FIN 45 was effective for guarantees issued or modified after December 31, 2002. From time to time we may enter into guarantee arrangements on behalf of our unconsolidated joint venture entities, however, the relative amount of these guarantees to the overall amount of our share of joint venture indebtedness is not material. In addition, the impact of the adoption of FIN 45 was not material to our financial statements during the year ended December 31, 2003.

            In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This pronouncement initially affected our limited life consolidated partnerships that have a minority limited partner and that include a termination date in their respective partnership agreements at which point the partnership must redeem the outstanding equity interests for cash. However, on October 29, 2003, the FASB deferred recording the provisions of SFAS No. 150 that applied to limited life subsidiaries indefinitely. As a result, we do not have any instruments that qualify within the scope of SFAS No. 150 as of December 31, 2003. In ten of our partnerships the applicable partnership agreements provide for a contractual termination date based on specific dates or events. SFAS No. 150 requires disclosure of the estimated settlement value of these non-controlling interests. As of December 31, 2003 the estimated settlement value of these non-controlling interests was approximately $38.8 million.

            In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51" ("FIN 46"). On December 24, 2003, the FASB announced that it had delayed the effective date of this interpretation to periods ending after March 15, 2004 for certain variable interest entities, including the majority of our potentially affected entities. FIN 46 requires the consolidation of entities that meet the definition of a variable interest entity in which an enterprise absorbs the majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, we consolidate entities that we control, as defined in Note 2.

            Our joint venture interests in variable interest entities consist of real estate assets and are for the purpose of owning, operating and/or developing real estate. Our property partnerships rely primarily on financing from third party lenders, which is secured by first liens on the Property of the partnership and partner equity. Our maximum exposure to loss as a result of our involvement in these partnerships is represented by the carrying amount of our investments in unconsolidated entities as disclosed on the accompanying balance sheets plus our guarantees of joint venture debt as disclosed in Note 11. We are currently finalizing the evaluation of the full effects of the issuance of FIN 46 on the accounting for our ownership interests in each unconsolidated entity. However, we believe that we will consolidate at least two of our investments in unconsolidated entities as a result of the adoption of FIN 46. We will adopt the interpretation for the variable interest entities subject to the delayed effective date on March 31, 2004.

            We have consolidated one joint venture property that was created in 2003 for the purpose of developing one regional mall. The carrying amount of the property's investment property at cost was approximately $40 million as of December 31, 2003 and the property serves as collateral for the entity's debt obligation. The creditors of the VIE have recourse to the extent of our guarantee of $38 million as of December 31, 2003 that is included in the total amount of guarantees disclosed in Note 11.

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14.    Quarterly Financial Data (Unaudited)

            Summarized quarterly 2003 and 2002 data is summarized in the table below and the amounts have been restated from previously disclosed amounts due to the sale in the fourth quarter of 2003 of properties (see Note 4). The results of operations of these properties were reclassified to discontinued operations (see Note 3):

2003
   First Quarter
   Second Quarter
   Third Quarter
   Fourth Quarter
Total revenue   $ 534,863   $ 557,253   $ 561,676   $ 659,861
Operating income     218,563     227,900     220,570     307,752
Income from Continuing Operations     84,980     99,585     87,084     180,251
Net income available to common shareholders     55,140     50,292     42,721     165,424
Income from Continuing Operations per share — Basic   $ 0.26   $ 0.33   $ 0.28   $ 0.66
Net income per share — Basic   $ 0.29   $ 0.27   $ 0.23   $ 0.86
Income from Continuing Operations per share — Diluted   $ 0.26   $ 0.32   $ 0.27   $ 0.64
Net income per share — Diluted   $ 0.29   $ 0.26   $ 0.22   $ 0.83
Weighted average shares outstanding     187,070,456     189,037,143     189,165,175     192,532,892
Diluted weighted average shares outstanding     187,744,825     189,827,171     190,059,806     202,766,825

2002
 
 
 
 
 
 
 
 
 
 
 
 

Total revenue
 
$
480,169
 
$
501,578
 
$
536,302
 
$
606,103
Operating income     197,166     215,669     225,545     279,876
Income from Continuing Operations     57,393     251,860   (1)   93,980     141,915
Net income available to common shareholders     30,006     173,170     58,903     96,308
Income from Continuing Operations per share — Basic   $ 0.18   $ 0.97   $ 0.31   $ 0.50
Net income per share — Basic   $ 0.17   $ 0.99   $ 0.32   $ 0.52
Income before extraordinary items and cumulative effect of accounting change per share — Diluted   $ 0.18   $ 0.95   $ 0.31   $ 0.50
Net income per share — Diluted   $ 0.17   $ 0.97   $ 0.32   $ 0.52
Weighted average shares outstanding     173,946,083     174,434,562     185,532,407   (2)   185,539,192
Diluted weighted average shares outstanding     174,528,801     189,457,086     186,261,860     186,193,567
(1)
— Includes net gains on sales of assets of $170.3 million.

(2)
— Includes the issuance of 9,000,000 shares of stock on July 1, 2002.

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SIMON PROPERTY GROUP, INC. NOTES TO FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts and where indicated as in millions or billions)

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EXHIBIT 21.1


List of Subsidiaries of Simon Property

Subsidiary
   Jurisdiction
Simon Property Group, L.P.   Delaware
SPG Realty Consultants, L.P.   Delaware
The Retail Property Trust   Massachusetts
Simon Property Group (Illinois), L.P.   Illinois
Simon Property Group (Texas), L.P.   Texas
Shopping Center Associates   New York
DeBartolo Capital Partnership   Delaware
Simon Capital Limited Partnership   Delaware
SDG Macerich Properties, L.P.   Delaware
M.S. Management Associates, Inc.   Delaware
M.S. Management Associates (Indiana), Inc.   Indiana
Mayflower Realty LLC   Delaware
Rosewood Indemnity, Ltd.   Bermuda
Marigold Indemnity, Ltd.   Delaware
Simon Business Network, LLC   Delaware
Simon Brand Ventures, LLC   Delaware
Simon Global Limited   United Kingdom
Simon Services, Inc.   Delaware
Simon Property Group Administrative Services Partnership, L.P.   Delaware
SPGGC, Inc.   Maryland
Kravco Simon Investments, L.P.   Pennsylvania
Kravco Simon Company   Pennsylvania

            Omits names of subsidiaries that as of December 31, 2003 were not, in the aggregate, a "significant subsidiary".

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List of Subsidiaries of Simon Property

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EXHIBIT 23.2


CONSENT OF INDEPENDENT AUDITORS

            We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-101185, Form S-3 No. 333-99409, Form S-3 No. 333-68938, Form S-3 No. 333-93897, Form S-8 No. 333-82471, Form S-8 No. 333-64313, Form S-8 No. 333-63919) of our reports dated February 5, 2004, with respect to the consolidated financial statements and schedule of Simon Property Group, Inc. included in and/or incorporated by reference in the Company's Annual Report (Form 10-K) for the year ended December 31, 2003.

    ERNST & YOUNG LLP
Indianapolis, Indiana
March 9, 2004		    

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CONSENT OF INDEPENDENT AUDITORS

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Exhibit 31.1


Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

        I, David Simon, certify that:

        1.     I have reviewed this Annual Report on Form 10-K of Simon Property Group, Inc.;

        2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

        4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

        5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):


Date: March 12, 2004
 
/s/  David Simon      
David Simon,
Chief Executive Officer

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Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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Exhibit 31.2


Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

        I, Stephen E. Sterrett, certify that:

        1.    I have reviewed this Annual Report on Form 10-K of Simon Property Group, Inc.;

        2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

        3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

        4.    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

        5.    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):


Date: March 12, 2004
 
/s/  Stephen E. Sterrett      
Stephen E. Sterrett, Executive Vice President
and Chief Financial Officer

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Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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EXHIBIT 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

            In connection with the Annual Report of Simon Property Group, Inc. ("Simon Property"), on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:


/s/  David Simon      
David Simon
Chief Executive Officer
March 12, 2004		    

/s/  Stephen E. Sterrett      
Stephen E. Sterrett
Chief Financial Officer
March 12, 2004
 
 

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