2006 Form 10-K

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, 2006 SIMON PROPERTY GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 001-14469 04-6268599 (State or other jurisdiction of (Commission File No.) (I.R.S. Employer incorporation or organization) Identification No.) 225 West Washington Street 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: Name of each exchange Title of each class on which registered Common stock, $0.0001 par value New York Stock Exchange 7.89% Series G Cumulative Step-Up Premium Rate Preferred Stock, $0.0001 par value New York Stock Exchange 6% Series I Convertible Perpetual Preferred Stock, $0.0001 par value New York Stock Exchange 83⁄8% Series J Cumulative Redeemable Preferred Stock, $0.0001 par value New York Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). YES ፤ NO អ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES អ NO ፤ 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 ፤ NO អ 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. ፤ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. Large accelerated filer ፤ Accelerated filer អ Non-accelerated filer អ Indicate by checkmark whether the Registrant is a shell company (as defined in rule 12-b of the Act). YES អ NO ፤ The aggregate market value of shares of common stock held by non-affiliates of the Registrant was approximately $17,885 million based on the closing sale price on the New York Stock Exchange for such stock on June 30, 2006. As of January 31, 2007, Simon Property Group, Inc. had 221,575,842, 8,000 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 Stockholders are incorporated by reference into Parts I, II and IV; and portions of the Registrant’s Proxy Statement in connection with its 2007 Annual Meeting of Stockholders are incorporated by reference in Part III. Simon Property Group, Inc. and Subsidiaries Annual Report on Form 10-K December 31, 2006 TABLE OF CONTENTS Item No. Page No. Part I 1. Business ...................................................... 3 1A. Risk Factors .................................................... 10 1B. Unresolved Staff Comments ......................................... 15 2. Properties ..................................................... 15 3. Legal Proceedings ................................................ 45 4. Submission of Matters to a Vote of Security Holders ........................ 45 Part II 5. Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities ................................ 46 6. Selected Financial Data ............................................ 47 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ..................................................... 47 7A. Quantitative and Qualitative Disclosure About Market Risk ................... 47 8. Financial Statements and Supplementary Data ............................ 47 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........................................... 47 9A. Controls and Procedures ........................................... 47 9B. Other Information ................................................ 47 Part III 10. Directors, Executive Officers and Corporate Governance ..................... 48 11. Executive Compensation ........................................... 48 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............................................. 48 13. Certain Relationships and Related Transactions, and Director Independence ........ 48 14. Principal Accountant Fees and Services ................................. 48 Part IV 15. Exhibits, and Financial Statement Schedules .............................. 49 Signatures ............................................................. 50 2 Part I Item 1. Business Background 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 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, development, and management of retail real estate, primarily regional malls, Premium Outlet centers and community/lifestyle centers. As of December 31, 2006, we owned or held an interest in 286 income-producing properties in the United States, which consisted of 171 regional malls, 36 Premium Outlet centers, 69 community/lifestyle centers, and 10 other shopping centers or outlet centers in 38 states and Puerto Rico (collectively, the ‘‘Properties’’, and individually, a ‘‘Property’’). We also own interests in five parcels of land held for future development (together with the Properties, the ‘‘Portfolio’’). In the United States, we have five new properties currently under development aggregating approximately 3.5 million square feet which will open during 2007 or early 2008. Internationally, we have ownership interests in 53 European shopping centers (in France, Italy and Poland), five Premium Outlet centers in Japan, and one Premium Outlet center in Mexico. We also have begun construction on a Premium Outlet center in which we will hold a 50% interest located in South Korea and, through a joint venture arrangement, we will have a 32.5% interest in five shopping centers (four of which are under construction) in China. 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. One or more of these policies may be amended or rescinded from time to time without a stockholder vote. Investment Policies We conduct our investment activities 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 strong, stable balance sheet consistent with our financing policies. We intend to achieve these objectives by: • developing new shopping centers which meet our economic criteria; • renovating and/or expanding our Properties where appropriate; • acquiring additional shopping centers and portfolios of other retail real estate companies that meet our investment criteria; • pursuing a leasing strategy that capitalizes on the desirable location of our Properties; • generating additional revenues through merchandising, marketing and promotional activities; • adding mixed-use elements to our Portfolio through our asset intensification initiatives, such as multifamily, condominiums, hotel and self-storage elements at selected locations; and • improving the performance of our Properties by using the economies of scale that result from our size to help control operating costs. We cannot assure you 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 limit 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, at our discretion, invest in mortgages and other real estate interests consistent with our qualification as a REIT under the Internal Revenue Code (‘‘Code’’). We do not currently intend to invest to a significant extent in mortgages or deeds of trust; however, we hold an interest in one 3 Property through a mortgage note which results in us receiving 100% of the economics of the Property. We

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