a decade of excellence 2009 Annual Report 2009 Annual Report 11 CORPORATE PROFILE Simon Property Group, Inc. (NYSE: SPG), headquartered in Indianapolis, Indiana, is the largest real estate company in the United States. As of December 31, 2009, we owned or had an interest in 382 properties comprising 261 million square feet of gross leasable area in North America, Europe and Asia. Simon Property Group is an S&P 500 company. Regional Malls Premium Outlets® The Mills® Community/Lifestyle Centers International Properties TabLE OF CONTENTS Financial Highlights 1 Notes to Consolidated Financial Statements 36 From the Chairman & CEO 2 Properties 65 Selected Financial Data 9 Board of Directors 68 Management’s Discussion and Analysis 10 Executive Officers and Senior Management 70 Consolidated Financial Statements 31 Investor Information 71 Additional Simon Property Group information is available at www.simon.com. 12Simon SimonProperty Property Group, Group,Inc. Inc. FINANCIAL HIGHLIGHTS 2009 2008 Operating Data (in millions) Consolidated Revenue $ 3,775 $ 3,783 Funds from Operations (FFO) 1,748 1,852 Per Common Share Data FFO (1) (Diluted) $ 5.33 $ 6.42 FFO as Adjusted (2) (Diluted) 6.01 6.56 Net Income (Diluted) 1.05 1.87 Dividends (3) 2.70 3.60 Common Stock Price at December 31 79.80 53.13 Stock and Limited Partner Units at Year End Shares of Common Stock Outstanding (in thousands) 285,748 231,320 Limited Partner Units in the Operating Partnership Outstanding (in thousands) 57,805 56,368 Market Value of Common Stock and Limited Partner Units (in millions) $ 27,416 $ 15,285 Total Market Capitalization (4) (in millions) $ 52,998 $ 40,273 Other Data Total Number of Properties in the U.S. 321 324 U.S. Gross Leasable Area (in thousands of square feet) 244,897 246,039 Total Number of International Properties 61 62 International Gross Leasable Area (in thousands of square feet) 16,359 16,462 (1) FFO is a non-GAAP financial measure commonly used in the real estate industry that we believe provides useful information to investors. Please refer to Management’s Discussion & Analysis of Financial Condition and Results of Operations for a definition of FFO, and to pages 26-27 for a reconciliation of net income to FFO and of diluted net income per share to diluted FFO per share. (2) FFO as Adjusted excludes the impact of non-cash impairment charges and debt related charges. Please refer to page 72 for a reconciliation of diluted net income per share to diluted FFO per share to diluted FFO per share as adjusted. (3) 2009 Dividends were paid in a combination of $0.45 per share in cash and $2.25 per share in additional shares of common stock. (4) Includes our share of consolidated and joint venture debt. Consolidated Revenue Funds from Operations FFO as Adjusted per Share Total Market Capitalization ($ In billions) ($ In billions) (Diluted) ($ In billions) $4.0 $3.78 $3.78 $2.0 $1.85 $7.00 $6.56 $60.0 $3.65 $53.00 $6.02 $6.01 $49.27 1.8 $1.75 6.00 50.0 $48.78 3.5 $1.69 $5.39 $3.33 $3.17 $4.96 1.6 5.00 $40.15 $40.27 $1.54 40.0 3.0 $1.41 4.00 1.4 3.00 2.5 30.0 1.2 2.00 2.0 1.0 1.00 20.0 ’05 ’06 ’07 ’08 ’09 ’05 ’06 ’07 ’08 ’09 ’05 ’06 ’07 ’08 ’09 ’05 ’06 ’07 ’08 ’09 This Annual Report contains a number of forward-looking statements. For more information, please see page 26. 2009 Annual Report 131 From the Chairman and CEO n my 2009 letter to stockholders, I c Raised $1.75 billion through the sale One of our core principles is to manage expressed our confidence that we of unsecured notes in March, May and our leverage appropriately. Certainly could pull through one of the most August leverage can boost equity returns; however, difficult economic crises on record. there is a price to be paid for too much of c Paid a significant portion of our quarterly We had the people, the vision, the a good thing. We have seen this time and dividends for 2009 in stock, resulting in Iproperties, the balance sheet and the work again in the real estate industry, and we the retention of $721 million of cash ethic to navigate our way through turbulent won’t let it happen here. times. Importantly, last year we understood c Completed $1.7 billion of mortgage the task at hand and took the necessary financings, of which SPG’s share was Scaled Back Development actions not to just maintain the Company $1.1 billion We significantly reduced development as a strong and safe investment, but to activities in anticipation of an economic c Completed 19 mortgage loan extensions also propel it to an even greater level. I am slowdown. In 2008 we spent $1 billion of totaling $1.8 billion pleased to report to you that using the road development capital and decreased that map I described last March and the inherent c Completed a new $3.565 billion revolving level to $411 million in 2009, as we finished strength of this Company, its people and its corporate credit facility that matures in certain projects in 2009 that were started assets, we had a successful year. March of 2013; the facility includes an in prior years. Currently we anticipate de- One year ago, the world was in an accordion feature which allows borrowing velopment spending of only approximately economic meltdown. U.S. stocks plunged to capacity to increase to as much as $4.0 $100 million in 2010. new bear-market lows following financial billion, and c We opened two new projects in 2009 – market fears that brought the Dow down c Completed concurrent senior unsecured Ami Premium Outlets near Tokyo, Japan to levels not seen since 1997. SPG common notes transactions in January of 2010 and Cincinnati Premium Outlets near stock was trading below $30 per share. We comprised of a tender offer for $2.285 Cincinnati, Ohio. were in the midst of a national credit crisis billion and a $2.25 billion sale, signifi- and the debt markets were dysfunctional. c Phase II of The Domain in Austin, Texas cantly extending the maturities of our Unemployment was on the rise. Retailers and the expansion of South Shore Plaza senior unsecured notes portfolio with no were experiencing continued declining sales are the only major openings in 2010. overall increase in our weighted average and bankruptcies were increasing. interest rate. c No new ground-up development is As I discussed and contemplated in planned and our land inventory is very last year’s report, we expected, and in fact While we already had one of the small, at approximately $90 million, or experienced, a very difficult year. Despite the industry’s strongest balance sheets, we $0.25 per share. This is a remarkable negative external factors, from the economy believed that these transactions were feat when you consider that our market to the consumer, the landscape provided us prudent given the volatility in the world’s capitalization today is over $50 billion. with the opportunity to demonstrate our capital markets, and they reinforced my Historically, many real estate companies position as a leader in the real estate industry. commitment to you that the Company will suffered significant land impairment Our people rose to the challenge and we remain safe and strong. Though raising this when they were on the wrong side of accomplished what we set out to do. More capital was at times expensive, I feel that we an economic retrenchment. Again, that specifically, here is how we responded: will be able to utilize it for investments that won’t happen here. will add to the Company’s value over time. Strengthened the Balance Sheet Today, we have over $4 billion of cash on Reduced Overhead, Increased We were diligent in our efforts to further hand, including our share of joint venture Operational Efficiency and Grew NOI strengthen our balance sheet, leading the cash, and availability on our corporate credit Our focus on cost control in the home office recapitalization of the real estate investment facility of more than $3 billion, for a total and the field resulted in the highest operating trust (“REIT”) industry and increasing our liquidity position in excess of $7 billion. margin in our retail real estate peer group liquidity position by $4 billion. Over the This capital will keep us well-positioned to in 2009. In addition, we consolidated certain course of the past year we: pursue new opportunities in our efforts to back office operations generating additional c Raised $1.69 billion through equity profitably grow the Company. We will also cost savings. offerings in March and May use this capital to continue our efforts to As a result of the quality of our portfolio, deleverage the Company. stability of the regional mall business, strong 2 Simon Property Group, Inc. operating results in our Premium Outlets, Cambridge, to Unibail-Rodamco (“Unibail”). significant portion of our dividend in stock to and cost control measures, we were able to Simon Ivanhoe owns two assets in Poland and retain capital as we worked our way through grow comparable property net operating five in France. We expect to receive cash and the capital crisis of 2009. income (“NOI”) for our regional malls and record a gain of approximately $300 million Based on our 2009 success, we have Premium Outlets by 1%. I was really proud upon completion of the transaction in the reinstated our all-cash dividend that will of this fact given that many in our industry second quarter of 2010.