2014 ANNUAL REPORT FASHION. DISCOVERY. COMMUNITY. FOUNDATSIMON. CONTENTS i From the Chairman & CEO v Financial Highlights viii Investment Highlights x Sustainability Highlights xii Board of Directors & Management 1 10-K 43 Management’s Discussion & Analysis 62 Financial Statements Simon Property Group, Inc. (NYSE: SPG) is an S&P100 company and a leader in the global retail real estate industry. FROM THE CHAIRMAN & CEO Dear Fellow Stockholders, Let me begin by thanking all of the Simon associates for delivering another record breaking year. Regardless of the metric (funds from operations (“FFO”) per share, stock price, dividends per share, occupancy, sales…) we reached all-time highs, and having just finished our management conference, I am pleased to report the entire Simon team is energized and ready to deliver another strong year in 2015. As with any industry, we face focus on the 2P’s (Product and challenges but with our people and Profitability). Last year we properties we are poised to produce delivered a 31% total shareholder strong results once again. The return and the accompanying overarching theme of our confer- chart demonstrates our historical ence was “We are Simon” and after leadership in this area. recent visits to our properties in California, Florida, Massachusetts No guarantees for the future, but and Texas, I can’t think of a better we are energized! Many have felt mantra to describe what we are all that our size would be a hindrance about. We are united for success. in terms of our ability to grow but, We work together across all of our in fact, I believe it has actually platforms (Malls, Premium Outlets® accelerated our growth, and if you and The Mills®) to deliver a better compare it to our peer group you product to our consumers and can see this for yourself. Our FFO retailers, and are ready to engage per share and resulting dividend with our consumer to generate more per share growth have, without and extended visits to our properties. question, led our industry. My role as Chairman and CEO is to PROFITABILITY find the right balance between our Our FFO increased to $8.90 per product (the asset) and profitability. share, a record for both our Our product focus encompasses company and the REIT industry. We many areas including the appropriate increased our dividend by 10.8% to tenant mix, ambiance, customer a total of $5.15 per common share, service and our connection with the and, with the recent increase in consumer to name just a few and I the first quarter of 2015 to $1.40 per have never been more excited with share, we are now on track to pay our mission to improve our prod- at least $5.60 per share this year. uct including its brand, look and We achieved these results even feel, and retailer line-up. I expect with the spin-off of our community this enhanced product focus will Above: St. Johns centers and small enclosed mall continue to deliver industry-leading Town Center, assets into Washington Prime Group profitability. Our people understand Jacksonville, (“WPG”). On a comparable basis, Florida that these efforts have resulted in adjusted for the WPG spin-off and Simon becoming an S&P 100 industry the debt extinguishment charge leader with an equity market TOTAL SHAREHOLDER RETURNS we took in 2014 to extend our debt capitalization of approximately 1-YEAR 3-YEAR 5-YEAR 10-YEAR 20-YEAR maturities, we achieved FFO per $69 billion, similar to such stalwarts share growth of 13.9% over 2013. as eBay, Starbucks, UPS and SPG 31% 64% 181% 326% 2,156% Walgreens. That’s who we hang out RMS 30% 57% 120% 122% 755% Our core strengths of capital with and in my opinion, that’s very (REIT Index) allocation, balance sheet man- fine company. Our returns have agement and operating expertise S&P 500 14% 75% 105% 109% 555% been generated by our relentless continue to fuel our growth. While i growing cash flow is a critical success measure for us, we also pay particular attention to profit- ability measures including return on equity (“ROE”) and return on investment (“ROI”). ROE speaks to how well and efficiently we are running the company for you, our stockholders. I am pleased to say that ROE is yet another measure where we lead the industry increasing ROE an average of more than 20% per year over the last three years. This increasing profitability provides us with both the flexi- bility and the resources to make investments in both external and redevelopment opportunities to fuel growth and in return, increased dividends to you, our stockholders. These are enviable attributes that few, if any, of our U.S. REIT peers possess. It’s a virtuous cycle that will continue to produce superb shareholder returns. I believe this speaks to our sustained success as well as our optimism and belief that we will continue growing and creating value over the long term. Now let’s turn to 2014 highlights. 2014 Financial and Operational Highlights We achieved record results in 2014, including: square foot — rent for spaces companies and we remain one of • Consolidated revenue increased leased in 2014 was 16.6% higher only two U.S. REITs with “A” ratings 7.2% to $4.871 billion (Record) than prior rent paid for the same from Moody’s Investors Service and • Net income was $1.405 billion spaces. Average base rents of Standard & Poor’s. Our formidable SIMON PROPERTY GROUP, INC. GROUP, PROPERTY SIMON (Record) $47.00 per square foot (Record) balance sheet metrics, including • FFO increased to $3.235 billion, • As a result of the strong perfor- debt to total market capitalization of or $8.90 per diluted share (Record) mance of our properties, compar- 29% and interest coverage ratio of Keep in mind, our reported FFO per able property net operating 3.8 times, continue to differentiate diluted share was impacted by income (“NOI”) grew 5.1% for our our balance sheet compared to approximately $1.00 from the loss U.S. Malls, Premium Outlets and others. By the way, all records. of FFO from the WPG spin-off and The Mills. Over the last five years our comparable NOI has increased We continued to actively manage the associated transaction expenses, our liabilities in 2014 with the as well as a one-time loss on the on average 4.3% in an economy whose average GDP growth was retirement of $2.9 billion of senior extinguishment of debt incurred notes at a weighted average coupon in connection with tender offers 2.2%, so 2x. A testament to our people and our properties rate of 5.76% and the issuance of and an early notes redemption two senior note offerings totaling during the year. Despite the loss 2014 Balance Sheet $2.5 billion, with a weighted of earnings from the spin-off and Of course, the ability to improve average coupon rate of 3.32% and the debt extinguishment charge, our product and profitability a weighted average term of 12.0 we still had our best results in the could not happen without a strong years. Our two new note offerings history of the company. balance sheet. Balance sheet during the year were 244 basis Our U.S. Malls and Premium Outlets management is a fundamental points lower in rate than the notes once again delivered superior strength of our company and we we retired during the year and operational results: continue to have the strongest allowed us to extend our maturities. balance sheet in the industry. We We were also active in the secured • Retailer sales on a rolling have the financial flexibility and debt markets throughout the year 12-month basis of $619 per access to multiple sources of capital and closed 16 new mortgages square foot (Record) that, when coupled with our free totaling approximately $2.8 billion, of • Occupancy improved by 20 cash flow, enables us to pursue which our share was $1.6 billion. The basis points to 97.1% (Record) growth opportunities. We have the weighted average interest rate on • The releasing spread for the highest investment grade ratings these new loans is 3.29%, and the rolling 12 months was $9.59 per among U.S. retail real estate weighted average term is 8.4 years. ii Top Right: Fashion Valley, San Diego, California Left: The Fashion Centre at Pentagon City, Arlington, (Washington, DC), Virginia Bottom Right: The Galleria in Houston, Texas and Vogue hosted a fashion show as part of LOOKBOOK Live. In addition, we became the first U.S. as a tremendous development site Klépierre REIT to establish a global commercial located in Oyster Bay, New York, Our 2012 investment in Klépierre paper note program which further where we have plans to develop continues to grow in value as the REPORT ANNUAL 2014 diversifies our funding sources and a unique lifestyle and mixed-use company executes on its well- increases our financial flexibility. center that will be a wonderful articulated strategy. The market addition to the Syosset community. has responded positively to Over the last four years, we have We also acquired the remaining Klépierre’s new direction and reduced the weighted average interests in a portfolio of ten proper- execution since we made our interest rate of our debt portfolio ties that included King of Prussia, investment. We purchased our by over 100 basis points, from resulting in a 100% ownership of stake at €28.00 per share and the 5.43% at the end of 2010 to this renowned property, and also Klépierre stock is trading near 4.39% at the end of 2014.