SIMON PROPERTY GROUP INC /DE/ - Quarter Report: 2010 March (Form 10-Q)

Table of Contents

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

FORM 10-Q

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

For the quarterly period ended March 31, 2010

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

Delaware
(State of incorporation or organization)

001-14469
(Commission File No.)

046-268599
(I.R.S. Employer Identification No.)

225 West Washington Street
Indianapolis, Indiana 46204
(Address of principal executive offices)

(317) 636-1600
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one):


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No ý

As of March 31, 2010, Simon Property Group, Inc. had 289,067,874 shares of common stock, par value $0.0001 per share and 8,000 shares of Class B common stock, par value $0.0001 per share outstanding.

Table of Contents

Simon Property Group, Inc. and Subsidiaries

Form 10-Q

INDEX



Part I — Financial Information
	Item 1.	Consolidated Financial Statements (Unaudited)
		Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009	3
		Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2010 and 2009	4
		Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009	5
		Condensed Notes to Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Qualitative and Quantitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	28
Part II — Other Information
	Item 1.	Legal Proceedings	29
	Item 1A.	Risk Factors	29
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 5.	Other Information	29
	Item 6.	Exhibits	30
Signatures			31

Table of Contents

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

				March 31, 2010			December 31, 2009

ASSETS:
	Investment properties, at cost			$	25,111,988		$	25,336,189
	Less — accumulated depreciation				7,026,845			7,004,534

					18,085,143			18,331,655
	Cash and cash equivalents				3,326,642			3,957,718
	Tenant receivables and accrued revenue, net				355,469			402,729
	Investment in unconsolidated entities, at equity				1,418,987			1,468,577
	Deferred costs and other assets				1,159,035			1,155,587
	Note receivable from related party				632,000			632,000

		Total assets		$	24,977,276		$	25,948,266

LIABILITIES:
	Mortgages and other indebtedness			$	17,883,189		$	18,630,302
	Accounts payable, accrued expenses, intangibles, and deferred revenues				952,526			987,530
	Cash distributions and losses in partnerships and joint ventures, at equity				469,453			457,754
	Other liabilities and accrued dividends				182,488			159,345

		Total liabilities			19,487,656			20,234,931

Commitments and contingencies
Limited partners' preferred interest in the Operating Partnership and noncontrolling redeemable interests in properties					123,859			125,815
Series I 6% convertible perpetual preferred stock, 19,000,000 shares authorized, 4,484,683 and 8,091,155 issued and outstanding, respectively, at liquidation value					224,234			404,558
EQUITY:
Stockholders' equity
	Capital stock (850,000,000 total shares authorized, $.0001 par value, 238,000,000 shares of excess common stock, 100,000,000 authorized shares of preferred stock):
		Series J 8³/8% cumulative redeemable preferred stock, 1,000,000 shares authorized, 796,948 issued and outstanding, with a liquidation value of $39,847			45,622			45,704
		Common stock, $.0001 par value, 511,990,000 shares authorized, 293,080,911 and 289,866,711 issued and outstanding, respectively			29			29
		Class B common stock, $.0001 par value, 10,000 shares authorized, 8,000 issued and outstanding			—			—
	Capital in excess of par value				7,704,856			7,547,959
	Accumulated deficit				(3,119,320	)		(2,955,671	)
	Accumulated other comprehensive loss				(27,517	)		(3,088	)
	Common stock held in treasury at cost, 4,013,037 and 4,126,440 shares, respectively				(167,250	)		(176,796	)

			Total stockholders' equity		4,436,420			4,458,137
Noncontrolling interests					705,107			724,825

			Total equity		5,141,527			5,182,962

			Total liabilities and equity	$	24,977,276		$	25,948,266

The accompanying notes are an integral part of these statements.

Table of Contents

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

			For the Three Months Ended March 31,

			2010			2009
REVENUE:
	Minimum rent		$	571,610		$	571,414
	Overage rent			13,211			12,500
	Tenant reimbursements			255,928			258,762
	Management fees and other revenues			28,568			30,651
	Other income			55,754			45,165

		Total revenue		925,071			918,492

EXPENSES:
	Property operating			98,768			106,147
	Depreciation and amortization			228,909			256,337
	Real estate taxes			89,729			88,243
	Repairs and maintenance			23,745			22,588
	Advertising and promotion			18,836			18,506
	(Recovery of) provision for credit losses			(3,451	)		13,015
	Home and regional office costs			17,315			26,163
	General and administrative			5,112			4,048
	Transaction expenses			3,700			—
	Other			15,492			19,229

		Total operating expenses		498,155			554,276

OPERATING INCOME				426,916			364,216
Interest expense				(263,959	)		(226,036	)
Loss on extinguishment of debt				(165,625	)		—
Income tax (expense) benefit of taxable REIT subsidiaries				(202	)		2,523
Income from unconsolidated entities				17,582			5,545
Gain on sale or disposal of assets				6,042			—

CONSOLIDATED NET INCOME				20,754			146,248
Net income attributable to noncontrolling interests				5,771			32,951
Preferred dividends				5,610			6,529

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS			$	9,373		$	106,768

BASIC EARNINGS PER COMMON SHARE:
		Net income attributable to common stockholders	$	0.03		$	0.45

DILUTED EARNINGS PER COMMON SHARE:
		Net income attributable to common stockholders	$	0.03		$	0.45

	Consolidated Net Income		$	20,754		$	146,248
	Unrealized gain (loss) on interest rate hedge agreements			4,612			(24,427	)
	Net loss on derivative instruments reclassified from accumulated other comprehensive loss into interest expense			(3,840	)		(3,510	)
	Currency translation adjustments			(8,900	)		(12,823	)
	Changes in available-for-sale securities and other			(21,190	)		(23,427	)

	Comprehensive (loss) income			(8,564	)		82,061
	Comprehensive income attributable to noncontrolling interests			882			22,177

	Comprehensive (loss) income attributable to common stockholders		$	(9,446	)	$	59,884

The accompanying notes are an integral part of these statements.

Table of Contents

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

					For the Three Months Ended March 31,

					2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
	Consolidated Net Income				$	20,754		$	146,248
		Adjustments to reconcile consolidated net income to net cash provided by operating activities —
			Depreciation and amortization			233,856			257,605
			Loss on debt extinguishment			165,625			—
			Gain on sale or disposal of assets			(6,042	)		—
			Straight-line rent			(2,824	)		(8,694	)
			Equity in income of unconsolidated entities			(17,582	)		(5,545	)
			Distributions of income from unconsolidated entities			26,978			28,945
		Changes in assets and liabilities —
			Tenant receivables and accrued revenue, net			49,756			59,419
			Deferred costs and other assets			(26,669	)		(40,591	)
			Accounts payable, accrued expenses, intangibles, deferred revenues and other liabilities			4,537			(2,569	)

				Net cash provided by operating activities		448,389			434,818

CASH FLOWS FROM INVESTING ACTIVITIES:
	Funding of loans to related parties					—			(20,000	)
	Repayments on loans to related parties					—			4,700
	Capital expenditures, net					(62,780	)		(137,094	)
	Net proceeds from sale of assets					5,811			—
	Investments in unconsolidated entities					(4,410	)		(8,095	)
	Purchase of marketable and non-marketable securities					(6,676	)		(42,602	)
		Distributions of capital from unconsolidated entities and other				28,730			37,880

				Net cash used in investing activities		(39,325	)		(165,211	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from sales of common stock and other					235			525,657
	Distributions to noncontrolling interest holders in properties					(6,872	)		(6,749	)
	Contributions from noncontrolling interest holders in properties					—			2,355
	Preferred distributions of the Operating Partnership					(1,218	)		(4,177	)
	Preferred dividends and distributions to stockholders					(177,130	)		(27,380	)
	Distributions to limited partners					(34,618	)		(5,077	)
	Loss on debt extinguishment					(165,625	)		—
	Mortgage and other indebtedness proceeds, net of transaction costs					2,224,215			1,427,701
	Mortgage and other indebtedness principal payments					(2,879,127	)		(2,057,153	)

				Net cash used in financing activities		(1,040,140	)		(144,823	)

(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS						(631,076	)		124,784
CASH AND CASH EQUIVALENTS, beginning of period						3,957,718			773,544

CASH AND CASH EQUIVALENTS, end of period					$	3,326,642		$	898,328

The accompanying notes are an integral part of these statements.

Table of Contents

Simon Property Group, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

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

1. Organization

Simon Property Group, Inc. is a Delaware corporation that operates as a self-administered and self-managed real estate investment trust, or REIT, under the Internal Revenue Code. Simon Property Group, L.P., or the Operating Partnership, is our majority-owned partnership subsidiary that owns all of our real estate properties. In these condensed notes to the unaudited consolidated financial statements, the terms "we", "us" and "our" refer to Simon Property Group, Inc., the Operating Partnership, and their subsidiaries.

We own, develop and manage retail real estate properties, which consist primarily of regional malls, Premium Outlets®, The Mills®, and community/lifestyle centers. As of March 31, 2010, we owned or held an interest in 318 income-producing properties in the United States, which consisted of 161 regional malls, 41 Premium Outlets, 66 community/lifestyle centers, 36 properties acquired in the 2007 acquisition of The Mills Corporation, or the Mills acquisition, and 14 other shopping centers or outlet centers in 41 states and Puerto Rico. Of the 36 properties acquired in the Mills portfolio, 16 of these properties are The Mills, 16 are regional malls, and four are community centers. Internationally, as of March 31, 2010, we had ownership interests in 53 European shopping centers (France, Italy and Poland), eight Premium Outlets in Japan, one Premium Outlet in Mexico, and one Premium Outlet in South Korea. On February 4, 2010, we and our joint venture partner entered into a definitive agreement to sell all of the interests in Simon Ivanhoe S.à.r.l, or Simon Ivanhoe, which owns seven shopping centers located in France and Poland. The transaction is expected to close in the second quarter of 2010. We also entered into a definitive agreement to acquire a portfolio of 22 outlet shopping centers which is expected to close in the summer of 2010.

2. Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of all majority-owned subsidiaries, and all significant intercompany amounts have been eliminated. Due to the seasonal nature of certain operational activities, the results for the interim period ended March 31, 2010 are not necessarily indicative of the results to be expected for the full year.

These consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by accounting principles generally accepted in the United States (GAAP) for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring accruals) have been included. The consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes contained in our 2009 Annual Report on Form 10-K.

As of March 31, 2010, we consolidated 197 wholly-owned properties and 18 additional properties that are less than wholly-owned, but which we control or for which we are the primary beneficiary. We account for the remaining 166 properties, or the joint venture properties, using the equity method of accounting. We manage the day-to-day operations of 93 of the 166 joint venture properties, but have determined that our partner or partners have substantive participating rights with respect to the assets and operations of these joint venture properties. Our investments in joint ventures in Europe, Japan, Mexico, and Korea comprise 63 of the remaining 73 properties. The international properties are managed locally by joint ventures in which we share oversight responsibility with our partner. Additionally, we account for our investment in SPG-FCM Ventures, LLC, or SPG-FCM, which acquired The Mills Corporation and its wholly-owned subsidiary, The Mills Limited Partnership, collectively Mills, in April 2007, using the equity method of accounting. We have determined that SPG-FCM is not a variable interest entity (VIE) and that Farallon Capital Management, L.L.C., or Farallon, our joint venture partner, has substantive participating rights with respect to the assets and operations of SPG-FCM pursuant to the applicable partnership agreements.

We allocate net operating results of the Operating Partnership after preferred distributions to third parties and to us based on the partners' respective weighted average ownership interests in the Operating Partnership. Net operating results of the Operating Partnership attributed to third parties are reflected in net income attributable to

Table of Contents

noncontrolling interests. Our weighted average ownership interest in the Operating Partnership was 83.2% and 80.6% for the three months ended March 31, 2010 and 2009, respectively. As of March 31, 2010 and December 31, 2009, our ownership interest in the Operating Partnership was 83.4% and 83.2%, respectively. We adjust the limited partners' interests at the end of each period to reflect their interest in the Operating Partnership.

Preferred distributions of the Operating Partnership represent distributions on outstanding preferred units at the time of declaration of partnership interests held by limited partners, or preferred units, and are included in net income attributable to noncontrolling interests.

Reclassifications

We made certain reclassifications of prior period amounts in the consolidated financial statements to conform to the 2010 presentation. These reclassifications had no impact on previously reported net income available to common stockholders or earnings per share.

3. Significant Accounting Policies

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents. Cash equivalents are carried at cost, which approximates fair value. Cash equivalents generally consist of commercial paper, bankers acceptances, Eurodollars, repurchase agreements, and money markets. Our gift card programs are administered by banks. We collect gift card funds at the point of sale and then remit those funds to the banks for further processing. As a result, cash and cash equivalents, as of March 31, 2010, include a balance of $39.8 million related to these gift card programs which we do not consider available for general working capital purposes. Financial instruments that potentially subject us to concentrations of credit risk include our cash and cash equivalents and our trade accounts receivable. We place our cash and cash equivalents with institutions with high credit quality. However, at certain times, such cash and cash equivalents may be in excess of FDIC and SIPC insurance limits.

Marketable and Non-Marketable Securities

Marketable securities consist primarily of the investments of our captive insurance subsidiaries, our investment in shares of common stock of Liberty International PLC, or Liberty, our deferred compensation plan investments, and certain investments held to fund the debt service requirements of debt previously secured by investment properties that have been sold.

The types of securities included in the investment portfolio of our captive insurance subsidiaries typically include U.S. Treasury or other U.S. government securities as well as corporate debt securities with maturities ranging from less than 1 to 10 years. These securities are classified as available-for-sale and are valued based upon quoted market prices or other observable inputs when quoted market prices are not available. The amortized cost of debt securities, which approximates fair value, held by our captive insurance subsidiaries is adjusted for amortization of premiums and accretion of discounts to maturity. Our investment in Liberty is also accounted for as an available-for-sale security. Liberty operates regional shopping centers and is the owner of other retail assets throughout the United Kingdom, as well as certain real estate assets in the U.S. Our interest in Liberty is adjusted to their quoted market price, including a related foreign exchange component. Changes in the values of these securities are recognized in accumulated other comprehensive loss until the gain or loss is realized or until any unrealized loss is deemed to be other-than-temporary. We review any declines in value of these securities for other-than-temporary impairment and consider the severity and duration of any decline in value. To the extent an other-than-temporary impairment is deemed to have occurred, an impairment charge is recorded and a new cost basis is established. Subsequent changes are then recognized through other comprehensive income (loss) unless another other-than-temporary impairment is deemed to have occurred.

At March 31, 2010, we owned 35.4 million shares of Liberty at a carrying cost of £3.97. The mark-to-market adjustment for the quarterly period ended March 31, 2010 was a decrease in the value of our investment in Liberty of $21.2 million with a corresponding adjustment in other comprehensive income (loss). The carrying value of our investment in Liberty was $268.8 million and $290.0 million as of March 31, 2010 and December 31, 2009, respectively.

Our insurance subsidiaries are required to maintain statutory minimum capital and surplus as well as maintain a minimum liquidity ratio. Therefore, our access to these securities may be limited. Our deferred compensation plan investments are classified as trading securities and are valued based upon quoted market prices. The investments have

Table of Contents

a matching liability recorded as the amounts are fully payable to the employees that earned the compensation. Changes in value of these securities and changes to the matching liability to employees are both recognized in earnings and, as a result, there is no impact to consolidated net income. As of March 31, 2010 and December 31, 2009, we had investments of $51.5 million and $51.7 million, respectively, which must be used to fund the debt service requirements of debt related to investment properties that previously collateralized the debt. These investments are classified as held-to-maturity and are recorded at amortized cost as we have the ability and intent to hold these investments to maturity.

We have an investment of $70 million in a non-marketable security that we account for under the cost method. To the extent an other-than-temporary decline in fair value is deemed to have occurred, we would adjust this investment to its estimated fair value.

Net unrealized gains as of March 31, 2010 and December 31, 2009 were approximately $38.2 million and $59.4 million, respectively, and represented the valuation and related currency adjustments for our marketable securities. As of March 31, 2010, we do not consider the decline in value of any of our marketable and non-marketable securities to be an other-than-temporary impairment, as these market value declines, if any, have existed for a short period of time, and, in the case of debt securities, we have the ability and intent to hold these securities to maturity.

Fair Value Measurements

We hold marketable securities that total $447.1 million and $464.1 million at March 31, 2010 and December 31, 2009, respectively, and are considered to have Level 1 fair value inputs. In addition, we have derivative instruments which are classified as having Level 2 inputs which consist primarily of interest rate swap agreements and foreign currency forward contracts with a gross liability balance of $17.3 million and $13.0 million at March 31, 2010 and December 31, 2009, respectively, and a gross asset balance of $6.1 million and $0.3 million, respectively. We also have interest rate cap agreements with a minimal asset value. Level 1 fair value inputs are quoted prices for identical items in active, liquid and visible markets such as stock exchanges. Level 2 fair value inputs are observable information for similar items in active or inactive markets, and appropriately consider counterparty creditworthiness in the valuations. Level 3 fair value inputs reflect our best estimate of inputs and assumptions market participants would use in pricing an asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation estimate. Note 6 includes a discussion of the fair value of debt.

Noncontrolling Interests and Temporary Equity

Details of the carrying amount of our noncontrolling interests are as follows:

	As of March 31, 2010			As of December 31, 2009

Limited partners' interests in the Operating Partnership	$	876,619		$	892,603
Nonredeemable noncontrolling deficit interests in properties, net		(171,512	)		(167,778	)

Total noncontrolling interests reflected in equity	$	705,107		$	724,825

Net income attributable to noncontrolling interests (which includes nonredeemable noncontrolling interests in consolidated properties, limited partners' interests in the Operating Partnership and preferred distributions of the Operating Partnership) is a component of consolidated net income. In addition, the individual components of other comprehensive income (loss) are presented in the aggregate for both controlling and noncontrolling interests, with the portion attributable to noncontrolling interests deducted to arrive at comprehensive income (loss) attributable to common stockholders.

Table of Contents

A rollforward of noncontrolling interests is as follows:

		For the Three Months Ended March 31,

		*2010*			*2009*
Noncontrolling interest, beginning of period		$	724,825		$	488,969
Net income attributable to noncontrolling interests after preferred distributions			4,553			28,774
Distributions to noncontrolling interestholders			(41,015	)		(57,925	)
Other comprehensive income (loss) allocable to noncontrolling interests:
	Unrealized gain (loss) on interest rate hedge agreements		1,203			(4,424	)
	Net (loss) on derivative instruments reclassified from accumulated other comprehensive income (loss) into interest expense		(644	)		(682	)
	Currency translation adjustments		(1,405	)		(2,470	)
	Changes in available-for-sale securities and other		(4,043	)		(3,198	)

			(4,889	)		(10,774	)
Adjustment to limited partners' interests from increased ownership in the Operating Partnership			20,606			32,310
Units issued to limited partners			3,295			47,591
Units converted to common shares			(2,268	)		(9,959	)
Other			—			2,288

Noncontrolling interest, end of period		$	705,107		$	521,274

Derivative Financial Instruments

We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. We use a variety of derivative financial instruments in the normal course of business primarily to manage or hedge the risks associated with our indebtedness and interest payments. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and caps. We require that hedging derivative instruments be highly effective in reducing the risk exposure that they are designated to hedge. As a result, there was no significant ineffectiveness from any of our derivative activities during the period. We formally designate any instrument that meets these hedging criteria as a hedge at the inception of the derivative contract. We have no credit-risk-related hedging or derivative activities.

As of March 31, 2010, we had the following outstanding interest rate derivatives related to interest rate risk:

*Interest Rate Derivative*	Number of Instruments	*Notional Amount*

Interest Rate Swaps	4	$693.8 million
Interest Rate Caps	3	$387.5 million

The carrying value of our interest rate swap agreements, at fair value, is included within other liabilities and was $17.3 million and $13.0 million at March 31, 2010 and December 31, 2009, respectively. At December 31, 2009, we also had interest rate swaps with a carrying value of $0.3 million within deferred costs and other assets. The interest rate cap agreements were of no net value at March 31, 2010 and December 31, 2009 and we generally do not apply hedge accounting to these arrangements. The total gross accumulated other comprehensive loss related to our derivative activities, including our share of the other comprehensive loss from joint venture properties, approximated $51.6 million and $52.3 million as of March 31, 2010 and December 31, 2009, respectively.

We are also exposed to fluctuations in foreign exchange rates on financial instruments which are denominated in foreign currencies, primarily in Japan and Europe. We use currency forward contracts to manage our exposure to changes in foreign exchange rates on certain Yen and Euro-denominated receivables and investments. Currency

Table of Contents

forward contracts involve fixing the USD-Yen or USD-Euro exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward contracts are typically cash settled in US dollars for their fair value at or close to their settlement date. We entered into USD-Yen forward contracts during 2009 for approximately ¥3 billion that we expect to receive through April 2011 at an average exchange rate of 97.1 USD:JPY. We entered into USD-Yen forward contracts during 2010 for an additional ¥1.7 billion that we expect to receive through October 2012 at an average exchange rate of 89.0 USD:JPY. Approximately ¥3.2 billion remains as of March 31, 2010 for both the 2009 and 2010 contracts. The March 31, 2010 asset balance related to these forwards was $0.2 million and is included in deferred costs and other assets. We have reflected the changes in fair value for these forward contracts in earnings. The underlying currency adjustments on the foreign-denominated receivables are also reflected in income and generally offset the amounts in earnings for these forward contracts. We entered into a USD-Euro forward contract during the first quarter of 2010 for approximately €95.0 million at an exchange rate of 1.41 EUR:USD as a net investment hedge. The changes in fair value of the net investment hedge, which matures on July 31, 2010, are recorded to other comprehensive income (loss), of which the total amount was $5.9 million as of March 31, 2010, and is included in deferred costs and other assets.

4. Per Share Data

We determine basic earnings per share based on the weighted average number of shares of common stock outstanding during the period and we consider any participating securities for purposes of applying the two-class method. 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 potentially dilutive common shares were converted into shares at the earliest date possible. The following table sets forth the computation of our basic and diluted earnings per share.

	For the Three Months Ended March 31,

	*2010*		*2009*
Net Income attributable to Common Stockholders — Basic	$	9,373	$	106,768
Effect of dilutive securities:
Impact to General Partner's interest in Operating Partnership from all dilutive securities and options		1		20

Net Income attributable to Common Stockholders — Diluted	$	9,374	$	106,788

Weighted Average Shares Outstanding — Basic		286,124,631		235,908,551
Effect of stock options		313,742		219,910

Weighted Average Shares Outstanding — Diluted		286,438,373		236,128,461

For the three months ended March 31, 2010, potentially dilutive securities include stock options, convertible preferred stock, units that are exchangeable for common stock, units granted under our long-term incentive performance programs and preferred units that are convertible into common units or exchangeable for our preferred stock. The only securities that had a dilutive effect for the three months ended March 31, 2010 and 2009 were stock options. We accrue dividends when they are declared.

5. Investment in Unconsolidated Entities

Real Estate Joint Ventures

Joint ventures are common in the real estate industry. We use joint ventures to finance properties, develop new properties, and diversify our risk in a particular property or portfolio. We held joint venture ownership interests in 103 properties in the United States as of March 31, 2010 and December 31, 2009. We also held interests in two joint ventures which owned 53 European shopping centers as of March 31, 2010 and 51 as of December 31, 2009. At March 31, 2010, we also held interests in eight joint venture properties in Japan, one joint venture property in Mexico, and one joint venture property in South Korea. We account for these joint venture properties using the equity method of accounting.

Substantially all of our joint venture properties are subject to rights of first refusal, buy-sell provisions, or other sale or marketing rights for partners which are customary in real estate joint venture agreements and the industry. Our

Table of Contents

partners in these joint ventures may initiate these provisions at any time (subject to any applicable lock up or similar restrictions), which could result in either the sale of our interest or the use of available cash or borrowings to acquire a joint venture interest from our partner.

Loans to SPG-FCM

As part of the Mills acquisition, the Operating Partnership made loans to SPG-FCM and Mills primarily at rates of LIBOR plus 270-275 basis points. These funds were used by SPG-FCM and Mills to repay loans and other obligations of Mills, including the redemption of preferred stock, during 2007. As of March 31, 2010 and December 31, 2009, the outstanding balance of our remaining loan to SPG-FCM was $632.0 million. During the quarters ended March 31, 2010 and 2009, we recorded approximately $3.0 million and $2.2 million in interest income (net of inter-entity eliminations), related to this loan, respectively. The loan facility bears interest primarily at a rate of LIBOR plus 275 basis points and matures on June 7, 2010, with two available one-year extensions.

International Joint Venture Investments

European Joint Ventures. We conduct our international operations in Europe through two European joint ventures: Simon Ivanhoe and Gallerie Commerciali Italia, or GCI. The carrying amount of our total combined investment in these two joint venture investments was $279.9 million and $298.8 million as of March 31, 2010 and December 31, 2009, respectively, including all related components of accumulated other comprehensive income (loss). We have a 50% ownership interest in Simon Ivanhoe and a 49% ownership interest in GCI.

On February 4, 2010, we and our joint venture partner in Simon Ivanhoe, Ivanhoe Cambridge Inc., or Ivanhoe Cambridge, entered into a definitive agreement to sell all of the interests in Simon Ivanhoe which owns seven shopping centers located in France and Poland to Unibail-Rodamco. The joint venture partners will receive consideration of €715 million for their interests, subject to certain post-closing adjustments. We expect our share of the gain on sale of our interests in Simon Ivanhoe to be approximately $300 million. The transaction is scheduled to close during the second quarter of 2010, subject to customary closing conditions and regulatory approvals.

Asian Joint Ventures. We conduct our international Premium Outlet operations in Japan through a joint venture with Mitsubishi Estate Co., Ltd. The carrying amount of our investment in this Premium Outlet joint venture in Japan was $301.5 million and $302.2 million as of March 31, 2010 and December 31, 2009, respectively, including all related components of accumulated other comprehensive income (loss). We have a 40% ownership in these Japan Premium Outlets. As of March 31, 2010 and December 31, 2009, respectively, our investment in our Premium Outlet in Korea, for which we hold a 50% ownership interest, approximated $27.0 million and $26.1 million including all related components of accumulated other comprehensive income (loss).

We account for all of our international joint venture investments using the equity method of accounting.

Table of Contents

Summary Financial Information

A summary of our investments in joint ventures and share of income from such joint ventures follows. 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 control of the property or become the primary beneficiary of a VIE. Balance sheet information for the joint ventures is as follows:

		March 31, 2010		December 31, 2009

BALANCE SHEETS
Assets:
Investment properties, at cost		$	21,465,829	$	21,555,729
Less — accumulated depreciation			4,696,319		4,580,679

			16,769,510		16,975,050
Cash and cash equivalents			709,288		771,045
Tenant receivables and accrued revenue, net			333,366		364,968
Investment in unconsolidated entities, at equity			225,025		235,173
Deferred costs and other assets			487,179		477,223

	Total assets	$	18,524,368	$	18,823,459

Liabilities and Partners' Equity:
Mortgages and other indebtedness		$	16,441,332	$	16,549,276
Accounts payable, accrued expenses, intangibles, and deferred revenue			762,940		834,668
Other liabilities			924,990		920,596

	Total liabilities		18,129,262		18,304,540
Preferred units			67,450		67,450
Partners' equity			327,656		451,469

	Total liabilities and partners' equity	$	18,524,368	$	18,823,459

Our Share of:
Partners' equity		$	313,906	$	316,800
Add: Excess Investment			635,628		694,023

Our net Investment in Joint Ventures		$	949,534	$	1,010,823

Table of Contents

For the Three Months
Ended March 31,

2010

2009

STATEMENTS OF OPERATIONS

Revenue:

Minimum rent

493,814

466,677

Overage rent

31,178

20,579

Tenant reimbursements

234,576

237,442

Other income

46,040

38,244

Total revenue

805,608

762,942

Operating Expenses:

Property operating

154,461

148,940

Depreciation and amortization

199,037

187,463

Real estate taxes

70,113

69,389

Repairs and maintenance

27,709

25,723

Advertising and promotion

16,610

14,295

Provision for credit losses

874

10,427

Other

45,089

36,315

Total operating expenses

513,893

492,552

Operating Income

291,715

270,390

Interest expense

(217,163

)

(219,151

)

Loss from unconsolidated entities

(439

)

(768

)

Net Income

74,113

50,471

Third-Party Investors' Share of Net Income

45,036

31,179

Our Share of Net Income

29,077

19,292

Amortization of Excess Investment

(11,495

)

(13,747

)

Income from Unconsolidated Entities

17,582

5,545

March 31,
2010

December 31,
2009

Fair value of fixed-rate mortgages and other indebtedness

15,545

16,580

Weighted average discount rates assumed in calculation of fair value for fixed-rate mortgages

5.66%

6.11%

Preferred
Stock

Common
Stock

Accumulated
Other
Comprehensive
Income (Loss)

Capital in
Excess of
Par Value

Accumulated
Deficit

Common
Stock
Held in
Treasury

Noncontrolling
interests

Total
Equity

January 1, 2010

45,704

(3,088

)

7,547,959

(2,955,671

)

(176,796

)

724,825

5,182,962

Conversion of limited partner units

2,268

(2,268

)

—

Series I preferred unit conversion to limited partner units

3,295

3,295

Series I preferred stock conversion to common stock

180,323

Other

(82

)

(5,088

)

(1,502

)

9,546

2,874

Adjustment to limited partners' interest from increased ownership in the Operating Partnership

(20,606

)

20,606

—

Distributions to common shareholders and limited partners, excluding Operating Partnership preferred interests

(177,130

)

(34,618

)

(211,748

)

Distributions to other noncontrolling interest partners

(6,397

)

(6,397

)

Comprehensive income, excluding preferred distributions on temporary equity preferred units of $1,218

(24,429

)

14,983

(336

)

(9,782

)

March 31, 2010

45,622

(27,517

)

7,704,856

(3,119,320

)

(167,250

)

705,107

5,141,527

March 31,
2010

March 31,
2009

%/basis point
Change(1)

U.S. Regional Malls and Premium Outlets:

Occupancy

Consolidated

92.8%

92.5%

+30 bps

Unconsolidated

90.7%

91.0%

-30 bps

Total Portfolio

92.2%

92.1%

+10 bps

Average Base Rent per Square Foot

Consolidated

37.15

35.59

4.4%

Unconsolidated

43.44

43.32

0.3%

Total Portfolio

38.72

37.51

3.2%

Comparable Sales Per Square Foot

Consolidated

458

458

No Change

Unconsolidated

496

495

0.2%

Total Portfolio

467

467

No Change

The Mills®:

Occupancy

93.3%

89.7%

+360 bps

Average Base Rent per Square Foot

19.79

19.78

0.0%

Comparable Sales per Square Foot

372

373

-0.3%

Mills Regional Malls:

Occupancy

88.6%

87.4%

+120 bps

Average Base Rent per Square Foot

35.42

37.14

-4.6%

Comparable Sales per Square Foot

389

410

-5.1%

Community/Lifestyle Centers:

Occupancy

90.3%

87.4%

+290 bps

Average Base Rent per Square Foot

13.44

13.37

0.5%

March 31,
2010

March 31,
2009

%/basis point
Change

European Shopping Centers:

Occupancy

95.4%

98.5%

-310 bps

Comparable Sales per Square Foot

€

407

€

409

-0.5%

Average Base Rent per Square Foot

€

31.13

€

30.86

0.9%

International Premium Outlets(1)

Occupancy

99.6%

99.9%

-30 bps

Comparable Sales per Square Foot

90,993

91,492

-0.5%

Average Base Rent per Square Foot

4,731

4,705

0.6%

Debt Subject to

Adjusted Balance
as of
March 31, 2010

Effective
Weighted Average
Interest Rate

Adjusted Balance
as of
December 31, 2009

Effective
Weighted Average
Interest Rate

Fixed Rate

16,178,221

6.10

16,814,240

6.10

Variable Rate

1,704,968

1.64

1,816,062

1.19

17,883,189

5.67

18,630,302

5.62

2010

2011-2012

2013-2015

After 2015

Total

Long-Term Debt

Consolidated(1)

1,715,786

2,749,703

6,654,688

6,768,999

17,889,176

Pro rata share of Long-Term Debt:

Consolidated(2)

1,697,664

2,619,832

6,585,764

6,710,735

17,613,995

Joint Ventures(2)

752,840

1,904,485

2,333,888

1,643,698

6,634,911

Total Pro Rata Share of Long-Term Debt

2,450,504

4,524,317

8,919,652

8,354,433

24,248,906

For the Three Months
Ended March 31,

2010

2009

(in thousands)

Funds from Operations

325,558

476,832

Change in FFO from prior period

-31.7

13.5

Reconciliation:

Consolidated Net Income

20,754

146,248

Depreciation and amortization from consolidated properties

225,430

252,913

Simon's share of depreciation and amortization from unconsolidated entities

96,879

93,378

Gain on sale or disposal of assets

(6,042

)

—

Net income attributable to noncontrolling interest holders in properties

(2,663

)

(3,039

)

Noncontrolling interests portion of depreciation and amortization

(1,972

)

(1,962

)

Preferred distributions and dividends

(6,828

)

(10,706

)

Funds from Operations

325,558

476,832

FFO Allocable to Simon Property

270,925

384,220

Diluted net income per share to diluted FFO per share reconciliation:

Diluted net income per share

0.03

0.45

Depreciation and amortization from consolidated Properties and our share of depreciation and amortization from unconsolidated affiliates, net of noncontrolling interests portion of depreciation and amortization

0.94

1.18

Gain on sale or disposal of assets

(0.02

)

—

Impact of additional dilutive securities for FFO per share

(0.01

)

(0.02

)

Diluted FFO per share

0.94

1.61

Exhibit Number

Exhibit Descriptions

10.1*

Form of Simon Property Group Series 2010 LTIP Unit (Three Year Program) Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed March 19, 2010).

10.2*

Form of Simon Property Group Series 2010 LTIP Unit (Two Year Program) Award Agreement (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed March 19, 2010).

10.3*

Form of Simon Property Group Series 2010 LTIP Unit (One Year Program) Award Agreement (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed March 19, 2010).

10.4*

Certificate of Designation of Series 2010 LTIP Units of Simon Property Group, L.P. (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed March 19, 2010).

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.

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.

101

The following materials from Simon Property Group, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Operations and Comprehensive Income, (3) the Consolidated Statements of Cash Flows, and (4) Notes to Consolidated Financial Statements, tagged as blocks of text.


		SIMON PROPERTY GROUP, INC.
		/s/ STEPHEN E. STERRETT Stephen E. Sterrett Executive Vice President and Chief Financial Officer
		Date: May 10, 2010