2012 Annual Report 11

Transcription

1 2012 Annual Report 2012 Annual Report 11

2 10 Simon Property Group, In.

3 Simon Property Group Simon Property Group, In. (NYSE: SPG) is an S&P 100 ompany and the largest real estate ompany in the world. Our portfolio inludes more than 320 retail real estate properties in North Ameria and Asia enompassing the entire retail spetrum Malls, Premium Outlets, The Mills and Community/Lifestyle Centers. Additional Simon Property Group information is available at Finanial Highlights (in millions, exept per share figures) Consolidated Revenue $ 4,880 $ 4,306 Funds from Operations (FFO) $ 2,885 $ 2,439 FFO Per Share (Diluted) $ 7.98 $ 6.89 Net Inome Per Share (Diluted) $ 4.72 $ 3.48 Dividends Per Share $ 4.10 $ 3.50 Common Stok Prie at Deember 31 $ $ Total Equity Capitalization $ 57,287 $ 45,815 Total Market Capitalization (1) $ 85,622 $ 70,492 (1) Inludes our share of onsolidated and joint venture debt. Consolidated Revenue $ in billions FFO Per Diluted Share Dividends Per Share Equity Market Capitalization $ in billions $4.88 $7.98 $4.10 $57.3 $4.31 $6.89 $3.96 $3.78 $5.50 $5.03 $3.50 $2.70 $2.60 $35.2 $28.1 $ Table of Contents Finanial Highlights 1 From the Chairman & CEO 2 Seleted Finanial Data 9 Management s Disussion and Analysis 10 Consolidated Finanial Statements 31 Notes to Consolidated Finanial Statements 36 Total Return Performane 64 Properties 65 Board of Diretors 68 Exeutive Offiers and Senior Management 70 Investor Information 71 This Annual Report ontains a number of forwardlooking statements. For more information, please see page 25. It also inludes the non-gaap finanial measures of funds from operations, or FFO, and net operating inome, or NOI. These finanial measures are ommonly used in the real estate industry and we believe provide useful information to investors. Please refer to pages 25 through 27 for a definition of FFO and reoniliations of eah of the non-gaap measures used in this report to the most-diretly omparable GAAP measure Annual Report 1

4 From the Chairman & CEO Dear Fellow Stokholders, 2012 was an exellent year for our Company. We delivered strong results, inluding several reord highs for our Company. We generated funds from operations (FFO) of $7.98 per share, an inrease of 15.8% over the prior year. As a referene point, our 2012 FFO per share was 23.7% higher than our pre-reession high reported in We paid dividends to our stokholders of $4.10 per share in 2012, an inrease of 17.1% from In the first quarter of 2013, our Board announed another inrease in the quarterly dividend, to $1.15 per share. We are now on trak to pay $4.60 per share in 2013, 27.8% higher than our pre-reession dividend of $3.60 paid in even with a sluggish eonomy over the last four years, we were able to outgrow our expensive early 2009 apital raising ativities. There are very few real estate ompanies, and for that matter publi ompanies, that have ahieved suh strong growth in earnings and dividends over the ourse of the past four years. This was a goal for us to ahieve, and I am very proud of these aomplishments. our ore strengths of apital alloation, balane sheet management, and operating expertise have fueled our growth. our primary objetive, as it has been every year sine our 1993 IPO, is to manage eah asset as if it is our only asset. This is not a new strategy for us. While we have not always been as suessful as we wanted to be, and we ontinue to refine our approah to ahieve this objetive, rest assured that it is our number one priority. this operating philosophy has served us well, resulting in industry-leading performane sine our IPO nearly 20 years ago. We are stewards of the business, but we are more than professional managers. We at as owners! i love ash flow, and growing ash flow is how we measure our suess. Our share of net operating inome (NOI) in 2012 was $4.4 billion. By omparison, our share of NOI in 1993 was $296 million. As evidened by the following hart, our ative management, smart aquisitions, and ontinued investment in our properties have reated the SPG retail real estate portfolio that is unparalleled in quality and sale. SPG Properties (1) Top Top Top Sales Per Square Foot $ 1,108 $ 932 $ 735 % of NOI (SPG s Share) 33% 46% 68% Oupany 98% 98% 98% our ommon stok again outperformed in 2012, generating a total return to our stokholders of 26% in 2012, as ompared to the MSCI U.S. REIT Index (RMS) return of 18% and the S&P 500 Index return of 16%. SPG has outperformed the RMS and the S&P 500 in 11 of the last 12 years. Cumulative Total Returns and SPG Outperformane as of Deember 31, 2012 SPG vs. SPG vs. S&P S&P Time Period SPG RMS RMS Year 26% 18% 8% 16% 10% 5 Year 119% 31% 88% 9% 110% 10 Year 594% 199% 395% 99% 495% 15 Year 942% 252% 690% 93% 849% From our IPO in Deember of 1993 through year-end 2012, SPG provided a ompound annual return to stokholders of 17.2%. Now let s turn to 2012 highlights Finanial and Operational Highlights All-time highs were ahieved in 2012 for onsolidated revenue, the Company s share of NOI, and FFO: Consolidated revenue inreased 13.3% to $4.9 billion. The Company s share of NOI inreased 15.4% to $4.4 billion. FFO inreased $446 million to $2.9 billion. our U.S. Malls and Premium Outlets one again delivered strong finanial and operational results: Comparable property NOI growth was 4.8%. Total sales on a rolling 12 month basis inreased by 6.6% to $568 per square foot. Oupany improved by 70 basis points to 95.3%. The releasing spread for the rolling 12 months was $5.21 per square foot rent for spaes leased in 2012 was 10.8% higher than prior rent paid for the same spaes. (1) As of Deember 31, 2012 for U.S. properties 2 Simon Property Group, In.

5 Our Five Platforms 2012 Annual Report 3

6 2012 Investments Top left: Silver Sands Premium Outlets in Destin, FL Top right: Woodfield Mall in Shaumburg (Chiago), IL Middle right: Livermore Premium Outlets in Livermore (San Franiso), CA Bottom: Sawgrass Mills in Sunrise (Miami), FL 4 Simon Property Group, In.

7 A Snapshot in Time Consolidated Revenue $424 million $4.9 billion Our Share of NOI $296 million $4.4 billion FFO $150 million $2.9 billion Sales Per Square Feet $ 279 $ 568 Oupany 85.6% 95.3% Imagine that from the beginning of the reession in 2009 through 2012, our omparable property NOI growth averaged 3.1% per annum, even with all the obstales that we onfronted over the last four years inluding department store turmoil, internet sales growth (aided by the fat that internet retailers don t harge sales tax that is owed), slow job and wage growth, gridlok in Washington, et. We delivered! No exuses allowed here Investments We have an enviable investment trak reord with the suessful and profitable ompletion of more than $33 billion of aquisitions sine In 2012 we invested approximately $4 billion in strategi aquisitions, enhaning our domesti and international footprints. Klépierre In Marh 2012, at a ost of approximately $2 billion, we aquired a 29% interest in the publily-traded European ompany, Klépierre. The ompany is headquartered in Paris and is foused on the ownership, management and development of high-quality shopping enters aross Continental Europe. The Klépierre portfolio is loated in 13 ountries with approximately 49% of its properties in Frane and Belgium, 25% in Sandinavia, and the balane in Central and Southern Europe. this investment expands our global footprint as our ustomer base (retailers) grows internationally. This pan- European platform provides our retailers aess to an irreplaeable portfolio of high-quality retail assets in high barrier-to-entry markets. Even with all of the problems in Europe, what I saw in Klépierre was a relatively stable business. This has so far proven to be orret as evidened by their 2012 results. This was also an investment at a disount to net asset value where we have the opportunity and ability to add value over time. in onnetion with the transation, I beame Chairman of Klépierre s nine-member Supervisory Board and have been working losely with management to reate value for all shareholders. I am helping to realign Klépierre s strategi fous leveraging our skills in apital alloation, balane sheet management, and operating expertise. i have been very pleased with progress to date. Klépierre reported solid results for 2012 and is performing ahead of our expetations. Klépierre is also making substantial progress in the divestiture of their offie and sale leasebak businesses as well as the disposition of small retail assets. A redediation to operations is a priority and I expet better performane to take hold as soon as the European eonomy is growing again. We bought our Klépierre shares at per share and the stok losed at on Marh 14th, the one year anniversary of our aquisition. This inrease of 11.6%, plus a dividend of 1.45 per share paid in 2012, results in a first year total return on our investment of 16.8%. The 2012 dividend of 1.50 per share, or 86.4 million, is to be paid this year for a urrent yield of 5.3%. Mills In Marh, we aquired our joint venture partner s stake in 26 high-quality assets omprised of 13 Mills, 10 Malls and 3 Community/Lifestyle Centers for $1.5 billion. We already managed and had an existing ownership in these assets through our 50/50 partnership with Farallon Capital. these properties are well-loated in key metropolitan areas, have onsiderable onsumer brand equity and large trade areas, and generate signifiant ash flow and total sales volumes. When we aquired our initial interests in these assets in 2007, they generated total annual NOI of nearly $500 million. In 2012, they generated total NOI in exess of $600 million. Impressive growth, I might add during a tough eonomi period. As a result of this transation, we inreased our ownership in highly-produtive properties inluding Arundel Mills (Baltimore), Sawgrass Mills (Miami), and Stoneridge Shopping Center (San Franiso). We ontinue to strengthen this portfolio of produtive assets through redevelopment and remerhandising. Premium Outlets and Woodfield Mall We expanded our high quality Premium Outlet portfolio with the aquisition of interests in three upsale outlet enters: Silver Sands Premium Outlets a 451,000 square foot enter in Destin, Florida. We own 50% of this enter whih generates sales in exess of $500 per square foot. Grand Prairie Premium Outlets a 417,000 square foot enter in Grand Prairie (Dallas), Texas. We now own 100% of this enter whih opened in August of Livermore Premium Outlets a 512,000 square foot enter in Livermore (San Franiso), California. We now own 100% of this enter whih opened in November of in Deember, we formed a joint venture with CalPERS and Miller Capital Advisory to jointly own The Shops at Mission Viejo and Woodfield Mall. Prior to the transation we owned 100% of Mission Viejo and CalPERS owned 100% of Woodfield. We were very pleased to add Woodfield, a preeminent mall in the northwest suburbs of Chiago, to our portfolio and to expand our already strong relationship with CalPERS and Miller Capital. We will provide operating management for Woodfield and expet to inrease this mall s ash flow Annual Report 5

8 2012 Openings 2012 Openings New Development In Marh, we re-opened the fully restored Opry Mills in Nashville, Tennessee. The enter had been losed for nearly two years after the May 2010 histori flood in Nashville. Opry Mills is 94% oupied, generating sales of approximately $500 per square foot, and performing well ahead of our underwriting. We also opened two new upsale outlet enters with terrifi brands: Merrimak Premium Outlets in Merrimak, New Hampshire a 409,000 square foot enter serving the greater Boston and Nashua markets. We own 100% of this enter whih is 98% oupied and generates sales of $450 per square foot. Tanger Outlets Galveston/Houston a 353,000 square foot enter in Texas City, Texas owned in a 50/50 joint venture with Tanger Fatory Outlet Centers, In. our total investment in these three new projets was approximately $300 million. Redevelopment Several signifiant redevelopments were ompleted in Our Company has been very suessful retenanting department store and big box spae with more produtive retailers. During 2012, 56 new anhor and big box tenants opened in the Company s U.S. portfolio and more than 30 are urrently sheduled to open in Retailers opened in 2012 inlude Arhaus Furniture, Belk, Container Store, Dik s Sporting Goods, DSW, Forever 21, H&M, Legoland Disovery Center, Lord & Taylor, May s, Nordstrom Rak, Sports Authority, and Ulta. our total investment in redevelopment projets in 2012 was approximately $540 million. As these investments taken together mature, expet earnings aretion to aelerate. If you happen to be in the viinity of any of these assets, please visit and let me know what you think Balane Sheet Ativity We have the strongest balane sheet in the industry. We have finanial flexibility and aess to apital, enabling us to grow our business. Prudent balane sheet management is one of our ore ompetenies. We have the highest investment grade ratings among U.S. retail real estate ompanies, and we are one of only two U.S. REITs with A ratings from all three major agenies. We ontinued to demonstrate balane sheet leadership in 2012 with the issuane of a total of $3 billion in senior unseured notes at a weighted average rate of 2.81% and a weighted average term of 11.6 years. We were also ative in 6 Simon Property Group, In.

9 2012 Openings Opposite page: Merrimak Premium Outlets in Merrimak, NH Above: Opry Mills in Nashville, TN the seured debt markets as we losed or loked rates on 30 new mortgages totaling approximately $3.7 billion, of whih our share is $2.3 billion. The weighted average interest rate on these new loans is 3.88%, and the weighted average term is 8.0 years. two revolving redit failities, inluding a $2 billion faility added in 2012, provide us $6 billion of borrowing apaity. We have redued the weighted average interest rate of our debt from 5.46% at the end of 2009 to 5.01% at the end of Over this same period of time, the weighted average years to maturity was extended from 4.2 years to 5.9 years. Our refinaning plans will ontinue to be aggressive, allowing us to ontinue to lower our ost of apital. The markets are open and we are taking advantage of it Fous As I stated at the beginning of this letter, our primary operating objetive is to manage eah asset as if it is our only asset. Maximizing the results of our existing portfolio over the short and long term is our number one priority. We will never waiver from this. Redevelopment With this objetive in mind, we are very exited about our redevelopment opportunities. Redevelopment ativity spans aross all of our platforms (Malls, Premium Outlets, The Mills and Community/Lifestyle Centers) in the U.S. and abroad. Suessful exeution of this pipeline is ritial. Redevelopment and expansion projets are urrently underway at more than 20 properties in the U.S. The sope of these projets ranges from the addition of department stores, restaurants and speialty shops to omplete asset redevelopment. our total pipeline for potential future redevelopment is more than $5 billion. Investment returns from this ativity are expeted to be meaningfully aretive to our earnings growth as these projets ome online. Our annual investment will approximate $1 billion per year for the next few years. This will be funded with our retained ash flow. New Development In addition to our redevelopment pipeline, we ontinue to build high-quality ground-up projets. Our fous for new development is the Premium Outlet produt. We will be opening five new projets in 2013, our most in quite some time: Phoenix Premium Outlets in Chandler, Arizona a 360,000 square foot enter opening April 4th Shisui Premium Outlets in Chiba, Japan a 230,000 square foot enter opening April 19th Toronto Premium Outlets in Halton Hills, Canada a 360,000 square foot enter opening August 1st St. Louis Premium Outlets in Chesterfield, Missouri a 350,000 square foot enter opening August 22nd and Busan Premium Outlets in Busan, Korea a 340,000 square foot enter opening in September. From the Midwest to halfway around the globe, not bad for a ompany that started a little over 50 years ago. I hope your travels allow you to visit one of these enters, and please shop while you are there. there are also a few new Premium Outlet ground-up projets that ould begin onstrution in We have suessfully opened 19 Premium Outlets and 5 Mills sine 1996, either on our own or in joint ventures (whih are ommon in our business). These are high-quality assets delivering superior returns, and learly demonstrating our expertise in the development of destination outlet and value-oriented enters. These projets have been great for the eonomy. They have added employment, generated sales and real estate taxes for the ommunities they serve, and reated environments where our retailers an operate profitably. Sometimes it is easy to lose sight of the good work we do, but I am very proud of what we do in our ommunities and what we have done to grow the overall eonomy Annual Report 7

10 All Things Digital More than ever before, we are onneting diretly with our onsumer. Our integrated, omni-hannel marketing approah engages onsumers aross hannel, time and plae providing aess where they want it (at home, on the go, in the mall or at work) and how they want it (web, mobile, or soial networks). To support this strategy, we have signifiantly expanded our online presene. Today, our onsumer an interat with us through a variety of digital hannels that were not available just a few years ago. in just three years, we have inreased six-fold our ability to diretly ommuniate with our onsumer and expet to see signifiant ontinued growth moving forward. Our websites generated a reord 127 million unique visits last year, benefiting from our mobile optimization efforts and a redesigned website. Currently, we have lose to 2 million Faebook likes, whih is more than any other domesti mall ompany and ompares favorably to major retailers. The same is true with our Twitter presene. our Retailer Showase is a unique online tool we developed that allows retailers to post offers and promotions whih are then aggregated by mall and seamlessly uploaded to our website, mobile app and Faebook pages. The urrent level of retail engagement is unpreedented. Last year, we had over 43,000 posts from retailers, up 50% from the year before. While we are pleased with the growth in online onsumer reah and engagement, we will ontinue to evolve our digital marketing strategy to take advantage of new and emerging tehnologies and to adapt to hanging onsumer behaviors. Don t believe the headlines. The mall will ontinue to be a plae where signifiant ommere is done and it will evolve to meet the hanging marketplae. Just look at our results I believe they prove my point. Dividends Our dividend poliy in 2012 was to pay dividends to our stokholders equal to taxable inome. This will be our poliy for Given expeted growth in taxable inome, we would expet to grow our dividends on a going-forward basis. As I mentioned before, dividends paid in 2012 were $4.10 per share, an inrease of 17.1% from 2011, and we are on trak to pay $4.60 per share this year, an inrease of 12.2% from Our Strategy Early on, we developed a long-term strategy whih ontinues to serve us and our stokholders well: Fous on the ownership of high-quality retail real estate Inrease our presene in major metropolitan markets Own assets all along the prie spetrum of retail real estate Lead the industry in suessful and profitable aquisitions Lead the industry in promoting the Mall as a Marketing Medium Export our know how internationally Aomplish all of this while maintaining an investment grade rating and aess to apital in multiple markets We invested approximately $540 million in redevelopment projets in Projets ompleted inlude Above: the redevelopment of Plaza Carolina in Carolina (San Juan), PR Through the suessful exeution of our strategy we built a world lass Company, as evidened by the 2012 addition of Simon Property Group to the S&P 100 Index. This prestigious index is omprised of 100 major, blue hip ompanies aross multiple industry groups, and SPG is the only real estate ompany inluded. As of Deember 31, 2012, SPG ranked #50 in terms of equity market apitalization among ompanies in the S&P 100. Fortune Magazine reently named us the Most Admired Company in the real estate industry this was the fifth time we have reeived this reognition. We are not hanging our ourse in We expet to generate growth in NOI from our existing portfolio, from our new development and redevelopment ativities, and from our reent investments, and we ontinue to seek opportunisti transations. We will use our free ash flow after dividends expeted to be $1.3 billion in 2013 to fuel internal growth. We have a strong and well-respeted management team, and we have deepened our management ranks over the ourse of the past ouple of years with the addition of highly motivated and qualified professionals throughout our organization. We have an infrastruture that enables us to exeute at onsistently high levels aross all aspets of the business. i believe that we are positioned for another strong year in 2013, but the hard work ontinues. I would like to thank all of my olleagues at Simon Property Group and our Board of Diretors for their ontributions in I am immensely proud of our organization and the loyalty and dediation that they have shown year after year. i also thank you, our stokholders, for your ontinued support and enouragement. Your omments and thoughts are always welome. David Simon Chairman and Chief Exeutive Offier Marh 26, Simon Property Group, In.

11 Seleted Finanial Data The following tables set forth seleted finanial data. The seleted finanial data should be read in onjuntion with the finanial statements and notes thereto and with Management s Disussion and Analysis of Finanial Condition and Results of Operations. Other data we believe is important in understanding trends in our business is also inluded in the tables. As of or for the Year Ended Deember 31, (1) (In thousands, exept per share data) Operating Data: Total onsolidated revenue $ 4,880,084 $ 4,306,432 $ 3,957,630 $ 3,775,216 $ 3,783,155 onsolidated net inome 1,719,632 1,245, , , ,560 net inome attributable to ommon stokholders $ 1,431,159 $ 1,021,462 $ 610,424 $ 283,098 $ 422,517 Basi Earnings Per Share: net inome attributable to ommon stokholders $ 4.72 $ 3.48 $ 2.10 $ 1.06 $ 1.88 Weighted average shares outstanding 303, , , , ,333 Diluted Earnings Per Share: net inome attributable to ommon stokholders $ 4.72 $ 3.48 $ 2.10 $ 1.05 $ 1.87 Diluted weighted average shares outstanding 303, , , , ,884 Dividends per share (2) $ 4.10 $ 3.50 $ 2.60 $ 2.70 $ 3.60 Balane Sheet Data: Cash and ash equivalents $ 1,184,518 $ 798,650 $ 796,718 $ 3,957,718 $ 773,544 total assets 32,586,606 26,216,925 24,857,429 25,948,266 23,422,749 mortgages and other indebtedness 23,113,007 18,446,440 17,473,760 18,630,302 18,042,532 total equity $ 6,893,089 $ 5,544,288 $ 5,633,752 $ 5,182,962 $ 3,101,967 Other Data: Cash flow provided by (used in): operating ativities $ 2,513,072 $ 2,005,887 $ 1,755,210 $ 1,720,520 $ 1,635,887 investing ativities (3,580,671) (994,042) (1,246,695) (418,991) (1,022,275) Finaning ativities 1,453,467 (1,009,913) (3,669,515) 1,882,645 (342,050) ratio of Earnings to Fixed Charges and Preferred Stok Dividends (3) 2.49x 2.10x 1.55x 1.39x 1.58x Funds from Operations (FFO) (4) $ 2,884,915 $ 2,438,765 $ 1,770,491 $ 1,812,227 $ 1,862,851 Dilutive FFO alloable to Simon Property $ 2,420,348 $ 2,021,932 $ 1,477,497 $ 1,523,533 $ 1,537,297 FFO per diluted share $ 7.98 $ 6.89 $ 5.03 $ 5.50 $ 6.45 Notes (1) During the year ended Deember 31, 2010, we reorded a $350.7 million loss on extinguishment of debt assoiated with two unseured notes tender offers, reduing diluted FFO and diluted earnings per share by $1.00. We also reorded transation expenses of $69.0 million, reduing diluted FFO and diluted earnings per share by $0.20 and $0.19, respetively. (2) Represents dividends delared per period. (3) Ratio alulations for years prior to the year ended Deember 31, 2012 have been revised to onform to the most reent presentation. (4) FFO is a non-gaap finanial measure that we believe provides useful information to investors. Please refer to Management s Disussion and Analysis of Finanial Condition and Results of Operations for a definition and reoniliation of FFO to onsolidated net inome and FFO per share to net inome per share Annual Report 9

12 Management s Disussion and Analysis of Finanial Condition and Results of Operations The following disussion should be read in onjuntion with the onsolidated finanial statements and notes thereto that are inluded in this Annual Report to Stokholders. Overview Simon Property Group, In., or Simon Property, is a Delaware orporation that operates as a self-administered and selfmanaged real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. REITs will generally not be liable for federal orporate inome taxes as long as they ontinue to distribute in exess of 100% of their taxable inome. Simon Property Group, L.P., or the Operating Partnership, is our majority-owned partnership subsidiary that owns all of our real estate properties and other assets. In this disussion, the terms we, us and our refer to Simon Property, the Operating Partnership, and its subsidiaries. We own, develop and manage retail real estate properties, whih onsist primarily of malls, Premium Outlets, The Mills, and ommunity/lifestyle enters. As of Deember 31, 2012, we owned or held an interest in 317 inome-produing properties in the United States, whih onsisted of 160 malls, 63 Premium Outlets, 68 ommunity/lifestyle enters, 13 Mills, and 13 other shopping enters or outlet enters in 38 states and Puerto Rio. We also have reinstituted redevelopment and expansion initiatives with renovation and expansion projets urrently underway at 24 properties in the U.S. with 56 new anhor and big box tenants having opened in 2012 and an additional 30 sheduled to open in Internationally, as of Deember 31, 2012, we had ownership interests in eight Premium Outlets in Japan, two Premium Outlets in South Korea, one Premium Outlet in Mexio, and one Premium Outlet in Malaysia. Additionally, as of Deember 31, 2012, we owned a 28.9% equity stake in Klépierre SA, or Klépierre, a publily traded, Paris-based real estate ompany, whih owns, or has an interest in, more than 260 shopping enters loated in 13 ountries in Europe. We generate the majority of our revenues from leases with retail tenants inluding: base minimum rents, overage and perentage rents based on tenants sales volume, and reoverable expenditures suh as property operating, real estate taxes, repair and maintenane, and advertising and promotional expenditures. revenues of our management ompany, after interompany eliminations, onsist primarily of management fees that are typially based upon the revenues of the property being managed. We invest in real estate properties to maximize total finanial return whih inludes both operating ash flows and apital appreiation. We seek growth in earnings, funds from operations, or FFO, and ash flows by enhaning the profitability and operation of our properties and investments. We seek to aomplish this growth through the following: attrating and retaining high quality tenants and utilizing eonomies of sale to redue operating expenses, expanding and re-tenanting existing highly produtive loations at ompetitive rental rates, seletively aquiring or inreasing our interests in high quality real estate assets or portfolios of assets, generating onsumer traffi in our retail properties through marketing initiatives and strategi orporate allianes, and selling seletive non-ore assets. We also grow by generating supplemental revenue from the following ativities: establishing our malls as leading market resoure providers for retailers and other businesses and onsumer-foused orporate allianes, inluding: payment systems (suh as handling fees relating to the sales of bank-issued prepaid ards), national marketing allianes, stati and digital media initiatives, business development, sponsorship, and events, offering property operating servies to our tenants and others, inluding waste handling and faility servies, and the provision of energy servies, selling or leasing land adjaent to our shopping enter properties, ommonly referred to as outlots or outparels, and generating interest inome on ash deposits and investments in loans, inluding those made to related entities. 10 Simon Property Group, In.

13 We fous on high quality real estate aross the retail real estate spetrum. We expand or renovate properties to enhane profitability and market share of existing assets when we believe the investment of our apital meets our risk-reward riteria. We seletively develop new properties in markets we believe are not adequately served by existing retail outlets. We routinely review and evaluate aquisition opportunities based on their ability to enhane our portfolio. Our international strategy inludes partnering with established real estate ompanies and finaning international investments with loal urreny to minimize foreign exhange risk. to support our growth, we employ a three-fold apital strategy: provide the apital neessary to fund growth, maintain suffiient flexibility to aess apital in many forms, both publi and private, and manage our overall finanial struture in a fashion that preserves our investment grade redit ratings. We onsider FFO, net operating inome, or NOI, and omparable property NOI (NOI for properties owned and operating in both periods under omparison) to be key measures of operating performane that are not speifially defined by aounting priniples generally aepted in the United States, or GAAP. We use these measures internally to evaluate the operating performane of our portfolio and provide a basis for omparison with other real estate ompanies. Reoniliations of these measures to the most omparable GAAP measure are inluded below in this disussion. Results Overview Diluted earnings per ommon share inreased $1.24 during 2012 to $4.72 from $3.48 for The inrease in diluted earnings per share was primarily attributable to: improved operating performane and ore business fundamentals in 2012 and the impat of our aquisition and expansion ativity, in 2012, a gain due to the aquisition of a ontrolling interest, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net of $510.0 million, or $1.41 per diluted share, primarily driven by a non-ash gain of $488.7 million resulting from the remeasurement of our previously held interest to fair value for those properties in whih we now have a ontrolling interest, in 2011, a gain due to aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, net of $216.6 million, or $0.61 per diluted share, primarily driven by non-ash gains totaling $251.2 million related to the aquisition of a ontrolling interest in a previously unonsolidated mall and the distribution of a joint venture s properties to us and our venture partner whih resulted in a non-ash gain on the distribution, partially offset by inreased interest expense in 2012 as desribed below. ore business fundamentals improved during 2012 primarily driven by higher tenant sales and strong leasing ativity. Our share of portfolio NOI grew by 15.4% in 2012 as ompared to Comparable property NOI also grew 4.8% in 2012 for our U.S. portfolio of malls and Premium Outlets. Total sales per square-foot, or psf, inreased 6.6% from $533 psf at Deember 31, 2011 to $568 psf at Deember 31, 2012, for our portfolio of U.S. malls and Premium Outlets. Average base minimum rent for U.S. Malls and Premium Outlets inreased 3.4% to $40.73 psf as of Deember 31, 2012, from $39.40 psf as of Deember 31, Releasing spreads remained positive in the U.S. malls and Premium Outlets as we were able to lease available square feet at higher rents than the expiring rental rates on the same spae, resulting in a releasing spread (based on total tenant payments base minimum rent plus ommon area maintenane) of $5.21 psf ($53.24 openings ompared to $48.03 losings) as of Deember 31, 2012, representing a 10.8% inrease over expiring payments as of Deember 31, Ending oupany for the U.S. malls and Premium Outlets was 95.3% as of Deember 31, 2012, as ompared to 94.6% as of Deember 31, 2011, an inrease of 70 basis points. our effetive overall borrowing rate at Deember 31, 2012 dereased 36 basis points to 4.99% as ompared to 5.35% at Deember 31, This derease was primarily due to a derease in the effetive overall borrowing rate on fixed rate debt of 50 basis points (5.33% at Deember 31, 2012 as ompared to 5.83% at Deember 31, 2011) ombined with a derease in the effetive overall borrowing rate on variable rate debt of five basis points (1.40% at Deember 31, 2012 as ompared to 1.45% at Deember 31, 2011). At Deember 31, 2012, the weighted average years to maturity of our onsolidated indebtedness was 2012 Annual Report 11

14 Management s Disussion and Analysis of Finanial Condition and Results of Operations 5.9 years as ompared to 5.7 years at Deember 31, Our finaning ativities for the year ended Deember 31, 2012, inluded the repayment of $536.2 million in mortgage loans with a weighted average interest rate of 3.95% (thereby unenumbering 19 properties), the redemption of $231.0 million of senior unseured notes with fixed rates ranging from 5.75% to 6.88% and the repayment of a $735.0 million seured term loan. In 2012, we also had $1.2 billion (U.S. dollar equivalent) of Euro-denominated borrowings and $520.0 million in repayments on our $4.0 billion unseured revolving redit faility, or Credit Faility. in addition, during the 2012 period, we issued: $600.0 million of senior unseured notes at a fixed interest rate of 2.15% with a maturity date of September 2017, $600.0 million of senior unseured notes at a fixed interest rate of 3.375% with a maturity date of Marh 2022, $550.0 million of senior unseured notes at a fixed interest rate of 4.75% with a maturity date of Marh 2042, $750.0 million of senior unseured notes at a fixed interest rate of 1.50% with a maturity date of February 2018, and $500.0 million of senior unseured notes at a fixed interest rate of 2.75% with a maturity date of February United States Portfolio Data the portfolio data disussed in this overview inludes the following key operating statistis: ending oupany; average base minimum rent per square foot; and total sales per square foot for our domesti assets. We inlude aquired properties in this data beginning in the year of aquisition and remove properties sold in the year disposed. For omparative purposes, we separate the information related to ommunity/lifestyle enters and The Mills from our other U.S. operations. We also do not inlude any properties loated outside of the United States. the following table sets forth these key operating statistis for: properties that are onsolidated in our onsolidated finanial statements, properties we aount for under the equity method of aounting as joint ventures, and the foregoing two ategories of properties on a total portfolio basis. %/Basis Points %/Basis Points 2012 Change (1) 2011 Change (1) 2010 U.S. Malls and Premium Outlets: Ending Oupany Consolidated 95.4% +50 bps 94.9% 20 bps 95.1% Unonsolidated 95.1% +150 bps 93.6% +120 bps 92.4% Total Portfolio 95.3% +70 bps 94.6% +10 bps 94.5% Average Base Minimum Rent per Square Foot Consolidated $ % $ % $ Unonsolidated $ % $ % $ Total Portfolio $ % $ % $ Total Sales per Square Foot Consolidated $ % $ % $ 475 Unonsolidated $ % $ % $ 524 Total Portfolio $ % $ % $ 484 The Mills : Ending Oupany 97.2% +20 bps 97.0% +330 bps 93.7% Average Base Minimum Rent per Square Foot $ % $ % $ Total Sales per Square Foot $ % $ % $ 408 Community/Lifestyle Centers: Ending Oupany 94.7% +120 bps 93.5% +190 bps 91.6% Average Base Minimum Rent per Square Foot $ % $ % $ (1) Perentages may not realulate due to rounding. Perentage and basis point hanges are representative of the hange from the omparable prior period. 12 Simon Property Group, In.

15 Ending Oupany Levels and Average Base Minimum Rent per Square Foot. Ending oupany is the perentage of gross leasable area, or GLA, whih is leased as of the last day of the reporting period. We inlude all ompany owned spae exept for mall anhors and mall majors in the alulation. Base minimum rent per square foot is the average base minimum rent harge in effet for the reporting period for all tenants that would qualify to be inluded in ending oupany. Total Sales per Square Foot. Total sales inlude total reported retail tenant sales on a trailing 12-month basis at owned GLA (for mall stores with less than 10,000 square feet) in the malls and all reporting tenants at the Premium Outlets and The Mills. Retail sales at owned GLA affet revenue and profitability levels beause sales determine the amount of minimum rent that an be harged, the perentage rent realized, and the reoverable expenses (ommon area maintenane, real estate taxes, et.) that tenants an afford to pay. Current Leasing Ativities During 2012, we signed 1,217 new leases and 2,074 renewal leases with a fixed minimum rent (exluding mall anhors and majors, new development, redevelopment, expansion, downsizing, and reloation) aross our U.S. malls and Premium Outlets portfolio, omprising over 10.3 million square feet of whih 7.7 million square feet related to onsolidated properties. During 2011, we signed 1,165 new leases and 1,714 renewal leases, omprising approximately 8.8 million square feet of whih 6.7 million square feet related to onsolidated properties. The average annual initial base minimum rent for new leases was $40.46 psf in 2012 and $40.65 psf in 2011 with an average tenant allowane on new leases of $36.45 psf and $33.31 psf, respetively. International Property Data the following are seleted key operating statistis for our Premium Outlets in Japan. The information used to prepare these statistis has been supplied by the managing venture partner. Deember 31, % /Basis Point Deember 31, %/Basis Point Deember 31, 2012 Change 2011 Change 2010 Oupany 99.5% 50 bps 100% +20 bps 99.8% Comparable Sales per Square Foot (1) 91, % 85, % 89,139 Average Base Minimum Rent per Square Foot 4, % 4, % 4,766 (1) Does not inlude Sendai-Izumi Premium Outlets in Japan as the property was losed for repair due to damages from the earthquake in Japan in Marh The enter re-opened on June 17, Critial Aounting Poliies the preparation of finanial statements in onformity with GAAP requires management to use judgment in the appliation of aounting poliies, inluding making estimates and assumptions. We base our estimates on historial experiene and on various other assumptions believed to be reasonable under the irumstanes. These judgments affet the reported amounts of assets and liabilities, dislosure of ontingent assets and liabilities at the dates of the finanial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the fats and irumstanes relating to various transations had been different, it is possible that different aounting poliies would have been applied resulting in a different presentation of our finanial statements. From time to time, we reevaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from atual results, adjustments are made in subsequent periods to reflet more urrent information. Below is a disussion of aounting poliies that we onsider ritial in that they may require omplex judgment in their appliation or require estimates about matters that are inherently unertain. For a summary of our signifiant aounting poliies, see Note 3 of the Notes to Consolidated Finanial Statements. We, as a lessor, retain substantially all of the risks and benefits of ownership of the investment properties and aount for our leases as operating leases. We arue minimum rents on a straight-line basis over the terms of their respetive 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 reognize overage rents only when eah tenant s sales exeed its sales threshold Annual Report 13

16 Management s Disussion and Analysis of Finanial Condition and Results of Operations We review investment properties for impairment on a property-by-property basis whenever events or hanges in irumstanes indiate that the arrying value of investment properties may not be reoverable. These irumstanes inlude, but are not limited to, a deline in a property s ash flows, oupany or omparable sales per square foot. We measure any impairment of investment property when the estimated undisounted operating inome before depreiation and amortization plus its residual value is less than the arrying value of the property. To the extent impairment has ourred, we harge to inome the exess of arrying value of the property over its estimated fair value. We may deide to sell properties that are held for use and the sale pries of these properties may differ from their arrying values. We also review our investments, inluding investments in unonsolidated entities, if events or irumstanes hange indiating that the arrying amount of our investments may not be reoverable. We will reord an impairment harge if we determine that a deline in the fair value of the investments below arrying value is other-than-temporary. Changes in eonomi and operating onditions that our subsequent to our review of reoverability of investment property and other investments ould impat the assumptions used in that assessment and ould result in future harges to earnings if assumptions regarding those investments differ from atual results. To maintain our status as a REIT, we must distribute at least 90% of our taxable inome in any given year and meet ertain asset and inome tests. We monitor our business and transations that may potentially impat our REIT status. In the unlikely event that we fail to maintain our REIT status, and available relief provisions do not apply, then we would be required to pay federal inome taxes at regular orporate inome tax rates during the period we did not qualify as a REIT. If we lost our REIT status, we ould not elet to be taxed as a REIT for four years unless our failure was due to reasonable ause and ertain other onditions were met. As a result, failing to maintain REIT status would result in a signifiant inrease in the inome tax expense reorded and paid during those periods. We make estimates as part of our alloation of the purhase prie of aquisitions to the various omponents of the aquisition based upon the fair value of eah omponent. The most signifiant omponents of our alloations are typially the alloation of fair value to the buildings as-if-vaant, land and market value of in-plae leases. In the ase of the fair value of buildings and the alloation of value to land and other intangibles, our estimates of the values of these omponents will affet the amount of depreiation we reord over the estimated useful life of the property aquired or the remaining lease term. In the ase of the market value of in-plae leases, we make our best estimates of the tenants ability to pay rents based upon the tenants operating performane at the property, inluding the ompetitive position of the property in its market as well as sales psf, rents psf, and overall oupany ost for the tenants in plae at the aquisition date. Our assumptions affet the amount of future revenue that we will reognize over the remaining lease term for the aquired in-plae leases. A variety of osts are inurred in the development and leasing of properties. After determination is made to apitalize a ost, it is alloated to the speifi omponent of a projet that is benefited. Determination of when a development projet is substantially omplete and apitalization must ease involves a degree of judgment. The osts of land and buildings under development inlude speifially identifiable osts. The apitalized osts inlude pre-onstrution osts essential to the development of the property, development osts, onstrution osts, interest osts, real estate taxes, salaries and related osts and other osts inurred during the period of development. We onsider a onstrution projet as substantially ompleted and held available for oupany and ease apitalization of osts upon opening. 14 Simon Property Group, In.

17 Results of Operations in addition to the ativity disussed above in Results Overview setion, the following aquisitions, openings, and dispositions of onsolidated properties affeted our onsolidated results in the omparative periods: During 2012, we disposed of one mall, two ommunity enters and six of our non-ore retail properties. On Deember 4, 2012, we aquired the remaining 50% nonontrolling interest in two previously onsolidated outlet properties loated in Livermore, California, and Grand Prairie, Texas, whih opened on November 8, 2012 and August 16, 2012, respetively. On June 14, 2012, we opened Merrimak Premium Outlets, a 410,000 square foot outlet enter loated in Hillsborough County, serving the Greater Boston and Nashua markets. On Marh 29, 2012, Opry Mills re-opened after ompletion of the restoration of the property following the signifiant flood damage whih ourred in May On Marh 22, 2012, we aquired additional interests in 26 joint venture properties previously owned by the Mills Limited Partnership, or TMLP, or the Mills transation. Nine of these properties beame onsolidated properties at the aquisition date. During 2011, we disposed of four of our non-ore retail properties and one of our malls. On Deember 31, 2011, a 50% joint venture distributed a portfolio of properties to us and our joint venture partner. We now onsolidate those properties we reeived in the distribution. On August 25, 2011, we aquired additional interests in The Plaza at King of Prussia and The Court at King of Prussia, or, olletively, King of Prussia, a 2.4 million square foot mall in the Philadelphia market, whih had previously been aounted for under the equity method. We now have a ontrolling interest in this property and its results are onsolidated as of the aquisition date. On July 19, 2011, we aquired a 100% ownership interest in a 222,000 square foot lifestyle enter loated in Albuquerque, New Mexio. During 2010, we disposed of one mall, one ommunity enter, and one non-ore retail property and aquired a ontrolling interest in a mall. On August 30, 2010, we ompleted the aquisition of Prime Outlets Aquisition Company, or the Prime aquisition, aquiring 21 outlet enters, inluding a enter loated in Puerto Rio, whih was aquired on May 13, in addition to the ativities disussed above and in Results Overview, the following aquisitions, dispositions, and openings of joint venture properties affeted our inome from unonsolidated entities in the omparative periods: During 2012, we disposed of our interests in three non-ore retail properties and one mall. On Deember 31, 2012, we ontributed The Shops at Mission Viejo, a wholly-owned property, to a newly formed joint venture in exhange for an interest in Woodfield Mall, a property ontributed to the same joint venture by our joint venture partner. On Otober 19, 2012, we opened Tanger Outlets in Texas City, a 350,000 square foot upsale outlet enter loated in Texas City, Texas. This new enter is a joint venture with Tanger Fatory Outlet Centers, In. in whih we have a 50% nonontrolling interest. On June 4, 2012, we aquired a 50% interest in a 465,000 square foot outlet enter loated in Destin, Florida. As disussed above, on Marh 22, 2012, we aquired additional interests in 26 joint venture properties in the Mills transation. Of these 26 properties, 16 remain unonsolidated. On Marh 14, 2012, we aquired a 28.7% equity stake in Klépierre. On May 21, 2012, Klépierre paid a dividend, whih we eleted to reeive in additional shares, inreasing our ownership to approximately 28.9%. On January 9, 2012, we sold our entire ownership interest in Gallerie Commeriali Italia, S.p.A, or GCI, a joint venture whih at the time owned 45 properties loated in Italy to our venture partner, Auhan S.A. On January 6, 2012, we aquired an additional 25% interest in Del Amo Fashion Center. During 2011, we disposed of one of our malls. On Deember 2, 2011, we and our partner, Genting Berhad, opened Johor Premium Outlets, a 173,000 square foot outlet enter in Johor, Malaysia Annual Report 15

18 Management s Disussion and Analysis of Finanial Condition and Results of Operations During the third quarter of 2011, we ontributed a wholly-owned property to a joint venture whih holds our interests in nine unonsolidated properties. The transation effetively exhanged a portion of our interest in this previously whollyowned property for inreased ownership interests in the nine unonsolidated properties. On Marh 17, 2011, we and our partner, Shinsegae International Co., opened Paju Premium Outlets, a 328,000 square foot outlet enter in Paju, South Korea. During 2010, we disposed of one of our non-ore retail properties. On July 15, 2010, we and our partner sold our olletive interests in a joint venture whih owned seven shopping enters loated in Frane and Poland. On May 28, 2010, we aquired an additional nonontrolling interest of approximately 19% in Houston Galleria, loated in Houston, Texas, thereby inreasing our interest from 31.5% to 50.4%. For the purposes of the following omparisons between the years ended Deember 31, 2012 and 2011 and the years ended Deember 31, 2011 and 2010, the above transations are referred to as the property transations. In the following disussions of our results of operations, omparable refers to properties open and operating throughout both years in the year-to-year omparisons. Year Ended Deember 31, 2012 vs. Year Ended Deember 31, 2011 minimum rents inreased $351.1 million during 2012, of whih the property transations aounted for $280.4 million of the inrease. Comparable rents inreased $70.7 million, or 2.7%, primarily attributable to a $76.0 million inrease in base minimum rents. Overage rents inreased $54.9 million, or 39.0%, as a result of the property transations and an inrease in tenant sales in 2012 ompared to 2011 at the omparable properties of $31.3 million. tenant reimbursements inreased $163.0 million, due to a $141.8 million inrease attributable to the property transations and a $21.2 million, or 1.9%, inrease in the omparable properties primarily due to annual inreases related to ommon area maintenane and real estate tax reimbursements, offset partially by a derease in utility reoveries due to lower eletriity osts. total other inome inreased $4.2 million, prinipally as a result of the following: a $12.4 million inrease from a gain on the sale of our investments in two multi-family residential failities, an $11.7 million inrease in land sale ativity, and a $9.7 million inrease in finaning and other fee revenue earned from joint ventures net of eliminations, partially offset by a derease in interest inome of $24.8 million related to the repayment of related party loans and loans held for investment, and $4.8 million of net other ativity. Property operating expense inreased $33.2 million primarily related to a $49.1 million inrease attributable to the property transations partially offset by a $15.9 million derease in omparable property ativity due primarily to our ontinued ost savings efforts. Depreiation and amortization expense inreased $191.6 million primarily due to the additional depreiable assets related to the property transations. real estate tax expense inreased $49.5 million primarily due to a $44.3 million inrease related to the property transations. During 2012, we reorded a provision for redit losses of $12.8 million whereas in the prior year the provision was $6.5 million. Both amounts reflet the overall strong eonomi health of our tenants. General and administrative expense inreased $10.8 million primarily as a result of inreased long-term performane based inentive ompensation osts inluding amortization of the CEO retention award whih ommened mid-year marketable and non-marketable seurities harges and realized gains, net, of $6.4 million in 2012 was the result of the sale of all of our investments in Capital Shopping Centres Group PLC, or CSCG, and Capital & Counties Properties PLC, or CAPC, for a gain of $82.7 million, partially offset by other-than-temporary non-ash impairment harges related to ertain non-marketable investments in seurities of $76.3 million. 16 Simon Property Group, In.

19 Interest expense inreased $143.5 million primarily due to an inrease of $113.3 million related to the property transations. The remainder of the inrease resulted from borrowings on the Euro tranhe of the Credit Faility, and the issuane of unseured notes in the first and fourth quarters of 2012 and the fourth quarter of These inreases were partially offset by a lower effetive overall borrowing rate, dereased interest expense related to the repayment of $536.2 million of mortgages at 19 properties, the payoff of a $735.0 million seured term loan, and our payoff of $542.5 million of unseured notes in 2011 and $231.0 million of unseured notes in inome and other taxes inreased $4.3 million due to inome-based and withholding taxes on dividends from ertain of our international investments. inome from unonsolidated properties inreased $50.7 million as result of the property transations, primarily due to the inrease in ownership in the joint venture properties aquired as part of the Mills transation, and favorable results of operations from the portfolio of joint venture properties. During 2012, we disposed of our interest in GCI, four unonsolidated properties, and eight onsolidated retail properties for a net gain of $43.7 million and aquired a ontrolling interest in nine properties previously aounted for under the equity method in the Mills transation whih resulted in the reognition of a non-ash gain of $488.7 million. In addition, we reorded an otherthan-temporary impairment harge of $22.4 million on our remaining investment in SPG-FCM Ventures, LLC, or SPG-FCM, whih holds our investment in TMLP, representing the exess of arrying value over the estimated fair value. During 2011, we disposed of our interest in an unonsolidated mall, one onsolidated mall, and four non-ore retail properties, and aquired a ontrolling interest in a mall previously aounted for under the equity method. In addition, on Deember 31, 2011, a joint venture in whih we had a 50% interest was dissolved and, as a result, distributed a portfolio of properties to us and our joint venture partner. We now onsolidate the six properties we reeived in the distribution and reorded a non-ash gain representing the fair value of the net assets reeived in exess of the arrying value of our interest in the joint venture portfolio. These transations resulted in an aggregate net gain in 2011 of $216.6 million. net inome attributable to nonontrolling interests inreased $64.0 million primarily due to an inrease in the inome of the Operating Partnership. Year Ended Deember 31, 2011 vs. Year Ended Deember 31, 2010 minimum rents inreased $235.2 million during 2011, of whih the property transations aounted for $170.2 million of the inrease. Comparable rents inreased $65.0 million, or 2.8%. The inrease in omparable rents was primarily attributable to a $64.7 million inrease in base minimum rents. Overage rents inreased $30.2 million, or 27.3%, as a result of an inrease related to the property transations of $14.1 million and an inrease in tenant sales during tenant reimbursements inreased $93.5 million, due to a $63.9 million inrease attributable to the property transations and a $29.6 million, or 2.9%, inrease in the omparable properties primarily due to inreases to the fixed reimbursement related to ommon area maintenane. total other inome dereased $16.9 million, prinipally as a result of the following: a derease in lease settlement inome of $38.1 million due to a higher number of terminated leases in 2010, partially offset by an inrease in interest inome of $8.7 million primarily related to loans held for investment, a $2.0 million inrease in land sale ativity, and a $10.5 million inrease in net other ativity. Depreiation and amortization expense inreased $83.1 million primarily due to additional depreiable assets aquired in the King of Prussia and Prime aquisitions. real estate tax expense inreased $23.8 million primarily due to an $18.1 million inrease related to the property transations. Repairs and maintenane expense inreased $11.1 million of whih the property transations aounted for $6.9 million. Repairs and maintenane expense at the omparable properties inreased $4.2 million primarily due to inreased general repairs at the properties Annual Report 17

20 Management s Disussion and Analysis of Finanial Condition and Results of Operations During 2011, we reorded a provision for redit losses of $6.5 million whereas in the prior year the provision was $3.1 million. Our bad debt provision in both 2011 and 2010 was lower than our historial experiene. Home and regional offie expense inreased $19.3 million primarily due to inreased long-term inentive ompensation and marginally higher personnel osts. General and administrative expense inreased $25.1 million primarily as a result of inreased performane ompensation osts. other expenses inreased $23.6 million of whih the property transations aounted for $10.2 million and the omparable properties and orporate osts aounted for $13.4 million primarily related to an inrease in legal and professional fees and unfavorable hanges in foreign urreny exhange rates. interest expense dereased $43.6 million primarily related to the repayment of five unseured notes in 2011, repayment of mortgages at six properties and purhases of senior unseured notes in the January 2010 and August 2010 tender offers, offset by inreased borrowings under our Credit Faility, new or refinaned debt at several properties, inluding debt assoiated with the Prime aquisition, and new unseured debt and the issuane of two series of unseured notes in During 2011, we disposed of our interest in an unonsolidated mall, one onsolidated mall, and four non-ore retail properties, and aquired a ontrolling interest in a mall previously aounted for under the equity method. In addition, on Deember 31, 2011, a joint venture in whih we had a 50% interest was dissolved and, as a result, distributed a portfolio of properties to us and our joint venture partner. We now onsolidate the six properties we reeived in the distribution and reorded a non-ash gain representing the fair value of the net assets reeived in exess of the arrying value of our interest in the joint venture portfolio. These transations resulted in an aggregate net gain in 2011 of $216.6 million. During 2010, we reorded a gain of $321.0 million primarily due to our share of the gain on the sale of our interest in Simon Ivanhoe S.á.r.l., the gain on the aquisition of a ontrolling interest in a mall previously aounted for under the equity method and the gain on the sale of Porta di Roma by GCI. net inome attributable to nonontrolling interests inreased $84.6 million primarily due to an inrease in the inome of the Operating Partnership. Preferred dividends dereased $3.3 million as a result of the onversion and redemption of the remaining Series I 6% Convertible Perpetual Preferred Stok, or Series I preferred stok, in the seond quarter of Liquidity and Capital Resoures Beause we own primarily long-lived inome-produing assets, our finaning strategy relies primarily on long-term fixed rate debt. We minimize the use of floating rate debt and enter into floating rate to fixed rate interest rate swaps. Floating rate debt urrently omprises only 8.8% of our total onsolidated debt at Deember 31, We also enter into interest rate protetion agreements to manage our interest rate risk. We derive most of our liquidity from leases that generate positive net ash flow from operations and distributions of apital from unonsolidated entities that totaled $2.7 billion during In addition, the Credit Faility and the $2.0 billion supplemental unseured revolving redit faility, or Supplemental Faility, provide alternative soures of liquidity as our ash needs vary from time to time. Borrowing apaity under eah of these failities an be inreased at our sole option as disussed further below. our balane of ash and ash equivalents inreased $385.9 million during 2012 to $1.2 billion as of Deember 31, 2012 as further disussed in Cash Flows below. on Deember 31, 2012, we had an aggregate available borrowing apaity of $4.4 billion under the Credit Faility and the Supplemental Faility, net of outstanding borrowings of $1.6 billion and letters of redit of $45.2 million. For the year ended Deember 31, 2012, the maximum amount outstanding under the Credit Faility and Supplemental Faility was $3.1 billion and the weighted average amount outstanding was approximately $1.9 billion. The weighted average interest rate was 1.19% for the year ended Deember 31, We and the Operating Partnership have historially had aess to publi equity and long-term unseured debt markets and aess to seured debt and private equity from institutional investors at the property level. 18 Simon Property Group, In.

21 Our business model and status as a REIT requires us to regularly aess the debt markets to raise funds for aquisition, development and redevelopment ativity, and to refinane maturing debt. We may also, from time to time, aess the equity apital markets to aomplish our business objetives. We believe we have suffiient ash on hand and availability under the Credit Faility and the Supplemental Faility to address our debt maturities and apital needs through loan to SPG-FCM As disussed in Note 7 to the notes to the onsolidated finanial statements, the loan to SPG-FCM was extinguished in the Mills transation. During 2012, 2011 and 2010, we reorded approximately $2.0 million, $9.8 million and $9.9 million in interest inome (net of inter-entity eliminations) related to this loan, respetively. Cash Flows our net ash flow from operating ativities and distributions of apital from unonsolidated entities totaled $2.7 billion during In addition, we reeived net proeeds from our debt finaning and repayment ativities in 2012 of $2.2 billion. These ativities are further disussed below in Finaning and Debt. During 2012, we or the Operating Partnership also: issued 9,137,500 shares of ommon stok in a publi offering for $1.2 billion, net of issue osts, redeemed 2,000,000 units for $248.0 million, funded the aquisition of an additional interest in a property, the equity stake in Klépierre, additional interests in 26 joint venture properties in the Mills transation, land previously leased under a ground lease at one of our malls and a 50% interest in an outlet enter for $3.7 billion, reeived proeeds of $375.8 million from the sale of our interest in GCI, reeived repayments of loans held for investment and loans from related parties of $256.5 million, paid stokholder dividends and unitholder distributions totaling $1.5 billion, paid preferred stok dividends and preferred unit distributions totaling $5.3 million, funded onsolidated apital expenditures of $802.4 million (inludes development and other osts of $217.3 million, renovation and expansion osts of $354.3 million, and tenant osts and other operational apital expenditures of $230.8 million), funded investments in marketable seurities held to defease mortgage debt and other investments in non-marketable seurities of $184.8 million, funded the ash portion of the purhase of the remaining nonontrolling interest in two onsolidated outlet properties for $229.6 million, reeived proeeds from the sale of our investments in CSCG and CAPC, and the redemption of marketable seurities to defease mortgage debt of $415.8 million, and funded investments in unonsolidated entities of $201.3 million. in general, we antiipate that ash generated from operations will be suffiient to meet operating expenses, monthly debt servie, reurring apital expenditures, and dividends to stokholders neessary to maintain our REIT qualifiation on a long-term basis. In addition, we expet to be able to generate or obtain apital for nonreurring apital expenditures, suh as aquisitions, major building renovations and expansions, as well as for sheduled prinipal maturities on outstanding indebtedness, from: exess ash generated from operating performane and working apital reserves, borrowings on our redit failities, additional seured or unseured debt finaning, or additional equity raised in the publi or private markets. We expet to generate positive ash flow from operations in 2013, and we onsider these projeted ash flows in our soures and uses of ash. These ash flows are prinipally derived from rents paid by our retail tenants. A signifiant deterioration in projeted ash flows from operations ould ause us to inrease our reliane on available funds from our redit failities, urtail planned apital expenditures, or seek other additional soures of finaning as disussed above Annual Report 19

22 Management s Disussion and Analysis of Finanial Condition and Results of Operations Finaning and Debt Unseured Debt At Deember 31, 2012, our unseured debt onsisted of $13.4 billion of senior unseured notes of the Operating Partnership, $1.3 billion outstanding under our Credit Faility and $259.2 million outstanding under our Supplemental Faility. The Deember 31, 2012 balane on the Credit Faility inluded $1.2 billion (U.S. dollar equivalent) of Euro-denominated borrowings and the entire balane on the Supplemental Faility on suh date onsisted of Yen-denominated borrowings, both of whih are designated as net investment hedges of a portion of our international investments. on Deember 31, 2012, we had an aggregate available borrowing apaity of $4.4 billion under the two redit failities. The maximum outstanding balane of the redit failities during the year ended Deember 31, 2012 was $3.1 billion and the weighted average outstanding balane was $1.9 billion. Letters of redit of $45.2 million were outstanding under the Credit Faility as of Deember 31, the Credit Faility s initial borrowing apaity of $4.0 billion an be inreased at our sole option to $5.0 billion during its term. The Credit Faility will initially mature on Otober 30, 2015 and an be extended for an additional year at our sole option. The base interest rate on the Credit Faility is LIBOR plus 100 basis points with an additional faility fee of 15 basis points. In addition, the Credit Faility provides for a money market ompetitive bid option program that allows us to hold autions to ahieve lower priing for short-term borrowings. The Credit Faility also inludes a $2.0 billion multi-urreny tranhe. on June 1, 2012, we entered into the Supplemental Faility with an initial borrowing apaity of $2.0 billion whih an be inreased at our sole option to $2.5 billion during its term. The Supplemental Faility will initially mature on June 30, 2016 and an be extended for an additional year at our sole option. The base interest rate on the Supplemental Faility is LIBOR plus 100 basis points with an additional faility fee of 15 basis points. Like the Credit Faility, the Supplemental Faility provides for a money market ompetitive bid option program and allows for multi-urreny borrowings. During the seond quarter of 2012, we moved $285.0 million (U.S. dollar equivalent) of Yen-denominated borrowings from the Credit Faility to the Supplemental Faility. on Marh 13, 2012, the Operating Partnership issued $600.0 million of senior unseured notes at a fixed interest rate of 2.15% with a maturity date of September 2017, $600.0 million of senior unseured notes at a fixed interest rate of 3.375% with a maturity date of Marh 2022, and $550.0 million of senior unseured notes at a fixed interest rate of 4.75% with a maturity date of Marh Proeeds from the unseured notes offerings were used to fund a portion of the ost of the aquisition of our equity stake in Klépierre and the Mills transation. on Deember 17, 2012, the Operating Partnership issued $750.0 million of senior unseured notes at a fixed interest rate of 1.50% with a maturity date of February 2018 and $500.0 million of senior unseured notes at a fixed interest rate of 2.75% with a maturity date of February Proeeds from the unseured notes offerings were used to pay down borrowings on the Credit Faility and fund general working apital requirements. During 2012, we redeemed at par $231.0 million of senior unseured notes with fixed rates ranging from 5.75% to 6.88%. on November 1, 2011, we entered into a $900.0 million unseured term loan. We drew $160.0 million on the term loan in the first quarter of In the seond quarter of 2012, we repaid the outstanding balane in full and terminated the term loan. Seured Debt total seured indebtedness was $8.0 billion and $6.8 billion at Deember 31, 2012 and 2011, respetively. During 2012, we repaid $536.2 million in mortgage loans with a weighted average interest rate of 3.95%, unenumbering 19 properties, and repaid the outstanding balane of a $735.0 million seured term loan in full. As a result of the aquisition of additional interests in properties in the Mills transation in Marh 2012, as further disussed in Note 7, we onsolidated nine properties enumbered by property-level mortgage debt totaling $2.6 billion. This property-level mortgage debt was previously presented as debt of our unonsolidated entities. We and our joint venture partner had equal ownership in these properties prior to the transation. 20 Simon Property Group, In.

23 Covenants our unseured debt agreements ontain finanial ovenants and other non-finanial ovenants. If we were to fail to omply with these ovenants, after the expiration of the appliable ure periods, the debt maturity ould be aelerated or other remedies ould be sought by the lender inluding adjustments to the appliable interest rate. As of Deember 31, 2012, we are in ompliane with all ovenants of our unseured debt. At Deember 31, 2012, we or our subsidiaries were the borrowers under 78 non-reourse mortgage notes seured by mortgages on 78 properties, inluding seven separate pools of ross-defaulted and ross-ollateralized mortgages enumbering a total of 27 properties. Under these ross-default provisions, a default under any mortgage inluded in the ross-defaulted pool may onstitute a default under all mortgages within that pool and may lead to aeleration of the indebtedness due on eah property within the pool. Certain of our seured debt ontain finanial and other non-finanial ovenants whih are speifi to the properties whih serve as ollateral for that debt. If the borrower fails to omply with these ovenants, the lender ould aelerate the debt and enfore its right against their ollateral. At Deember 31, 2012, the appliable borrowers under these non-reourse mortgage notes were in ompliane with all ovenants where non-ompliane ould individually, or giving effet to appliable ross-default provisions in the aggregate, have a material adverse effet on our finanial ondition, results of operations or ash flows. summary of Finaning our onsolidated debt, adjusted to reflet outstanding derivative instruments, and the effetive weighted average interest rates as of Deember 31, 2012 and 2011, onsisted of the following (dollars in thousands): E effetive E effetive Adjusted Weighted Adjusted Weighted Balane Average Balane Average as of interest as of interest Debt Subjet to Deember 31, 2012 Rate Deember 31, 2011 Rate Fixed Rate $ 21,077, % $16,407, % Variable Rate 2,035, % 2,039, % $ 23,113, % $18,446, % As of Deember 31, 2012, we had $483.7 million of notional amount fixed rate swap agreements that have a weighted average fixed pay rate of 2.52% and a weighted average variable reeive rate of 0.58% whih effetively onvert variable rate debt to fixed rate debt. Contratual Obligations and Off-balane Sheet Arrangements in regards to long-term debt arrangements, the following table summarizes the material aspets of these future obligations on our onsolidated indebtedness as of Deember 31, 2012, and subsequent years thereafter (dollars in thousands) assuming the obligations remain outstanding through initial maturities: 2014 and 2016 and After 2017 Total Long-Term Debt (1) $ 821,637 $ 4,436,003 $ 8,923,831 $ 8,869,279 $ 23,050,750 interest Payments (2) 1,126,185 1,938,927 1,232,649 2,446,364 6,744,125 onsolidated Capital Expenditure Commitments (3) 187, ,089 Lease Commitments (4) 26,950 57,117 58, ,307 1,031,577 (1) Represents prinipal maturities only and therefore, exludes net premiums of $62,257. (2) Variable rate interest payments are estimated based on the LIBOR rate at Deember 31, (3) Represents ontratual ommitments for apital projets and servies at Deember 31, Our share of estimated 2013 development, redevelopment and expansion ativity is further disussed below in the Development Ativity setion. (4) Represents only the minimum non-anellable lease period, exluding appliable lease extension and renewal options Annual Report 21

24 Management s Disussion and Analysis of Finanial Condition and Results of Operations Certain of our onsolidated properties have redemption features whereby the remaining interest in a property or portfolio of properties an be redeemed at the option of the holder or in irumstanes that may be outside our ontrol. These amounts are aounted for as temporary equity within limited partners preferred interest in the Operating Partnership and nonontrolling redeemable interests in properties in the aompanying onsolidated balane sheets and totaled $152.5 million at Deember 31, our off-balane sheet arrangements onsist primarily of our investments in joint ventures whih are ommon in the real estate industry and are desribed in Note 7 to the Notes to Consolidated Finanial Statements. Our joint ventures typially fund their ash needs through seured debt finanings obtained by and in the name of the joint venture entity. The joint venture debt is seured by a first mortgage, is without reourse to the joint venture partners, and does not represent a liability of the partners, exept to the extent the partners or their affiliates expressly guarantee the joint venture debt. As of Deember 31, 2012, the Operating Partnership had guaranteed $84.9 million of the total joint venture related mortgage or other indebtedness. We may elet to fund ash needs of a joint venture through equity ontributions (generally on a basis proportionate to our ownership interests), advanes or partner loans, although suh fundings are not required ontratually or otherwise. Aquisitions and Dispositions Buy-sell, marketing rights, and other exit mehanisms are ommon in real estate partnership agreements. Most of our partners are institutional investors who have a history of diret investment in retail real estate. We and our partners in our joint venture properties may initiate these provisions (subjet to any appliable lok up or similar restritions). If we determine it is in our stokholders best interests for us to purhase the joint venture interest and we believe we have adequate liquidity to exeute the purhase without hindering our ash flows, then we may initiate these provisions or elet to buy. If we deide to sell any of our joint venture interests, we expet to use the net proeeds to redue outstanding indebtedness or to reinvest in development, redevelopment, or expansion opportunities. Aquisitions. On Deember 31, 2012, we formed a joint venture with Institutional Mall Investors, or IMI, to own and operate The Shops at Mission Viejo in the Los Angeles suburb of Mission Viejo, California, and Woodfield Mall in the Chiago suburb of Shaumburg, Illinois. As of Deember 31, 2012, we and IMI eah own a nonontrolling 50% interest in Woodfield Mall and we own a nonontrolling 51% interest in The Shops at Mission Viejo and IMI owns the remaining 49%. Prior to the formation of the joint venture, we owned 100% of The Shops at Mission Viejo and IMI owned 100% of Woodfield Mall. No gain was reorded as the transation was reorded based on the arryover basis of our previous investment. Woodfield Mall is enumbered by a $425 million mortgage loan whih matures in Marh of 2024 and bears interest at 4.5%. In January 2013, the joint venture losed a $295 million mortgage on the Shops at Mission Viejo whih bears interest at 3.61% and matures in February of on Deember 4, 2012, we aquired the remaining 50% nonontrolling equity interest in two previously onsolidated outlet properties loated in Grand Prairie, Texas, and Livermore, California, and, aordingly, we now own 100% of these properties. We paid onsideration of $260.9 million for the additional interest in the properties, 90% of whih was paid in ash and 10% of whih was satisfied through the issuane of units of the Operating Partnership. In addition, the onstrution loans we had provided to the properties totaling $162.5 million were extinguished on a non-ash basis. The transation was aounted for as an equity transation, as the properties had been previously onsolidated. on June 4, 2012, we aquired a 50% interest in a 465,000 square foot outlet enter loated in Destin, Florida for $70.5 million. on Marh 22, 2012, we aquired, through an aquisition of substantially all of the assets of TMLP, additional interests in 26 properties. The transation resulted in additional interests in 16 of the properties whih remain unonsolidated, the onsolidation of nine previously unonsolidated properties and the purhase of the remaining nonontrolling interest in a previously onsolidated property. The transation was valued at $1.5 billion, whih inluded repayment of the remaining $562.1 million balane on TMLP s senior loan faility and retirement of $100.0 million of TMLP s trust preferred seurities. In onnetion with the transation, our $558.4 million loan to SPG-FCM was extinguished on a non-ash basis. We onsolidated $2.6 billion in additional propertylevel mortgage debt in onnetion with this transation. The transation resulted in a remeasurement of our previously held interest in eah of these nine newly onsolidated properties to fair value and the reognition of a orresponding non-ash gain of approximately $488.7 million. 22 Simon Property Group, In.

25 On Marh 14, 2012, we aquired a 28.7% equity stake in Klépierre for approximately $2.0 billion. On May 21, 2012 Klépierre paid a dividend, whih we eleted to reeive in additional shares, inreasing our ownership to approximately 28.9%. on January 6, 2012, we paid $50.0 million to aquire an additional interest in Del Amo Fashion Center, thereby inreasing our interest to 50%. Dispositions. We ontinue to pursue the disposition of properties that no longer meet our strategi riteria or that are not a primary retail venue within their trade area. During 2012, we disposed of our interest in eight onsolidated retail properties that had an aggregate arrying value of $49.3 million and debt obligations of $62.4 million for aggregate sales proeeds of $8.0 million resulting in a net gain of $21.1 million. We also disposed of our interest in four unonsolidated retail properties resulting in a net loss of $5.6 million. During the first quarter of 2012, we sold one of our onsolidated non-ore retail properties with a arrying value of $115.0 million for nominal onsideration and the assumption of the related mortgage debt of $115.0 million by the aquirer. on May 3, 2012, we sold our investment in two residential apartment buildings loated at The Domain in Austin, Texas. Our share of the gain from the sale was $12.4 million, whih is inluded in other inome in the onsolidated statements of operations and omprehensive inome. on January 9, 2012, we sold our entire ownership in GCI to our venture partner, Auhan S.A. The aggregate ash we reeived was $375.8 million and we reognized a gain on the sale of $28.8 million. Development Ativity New Domesti Development. On November 8, 2012, a 512,000 square foot outlet enter loated in Livermore, California, opened, and on August 16, 2012, a 415,000 square foot outlet enter loated in Grand Prairie, Texas, opened. As disussed above, on Deember 4, 2012, we aquired the remaining 50% nonontrolling interest in these properties and, aordingly, we now own 100% of these properties. on Otober 19, 2012, Tanger Outlets in Texas City, a 350,000 square foot upsale outlet enter, opened. This new enter, in whih we have a 50% nonontrolling interest, is a joint venture with Tanger Fatory Outlets Centers, In. Our share of the ost of this projet is $33.0 million. on June 14, 2012, we opened Merrimak Premium Outlets, a 410,000 square foot upsale outlet shopping enter loated on a 170-are site in Merrimak, New Hampshire, that serve the Greater Boston and Nashua markets. The total ost of this projet was approximately $138.4 million, whih was funded with available ash from operations. in addition to our reently opened new development projets, we also have new development projets under onstrution as noted below. The following desribes these new development projets and our share of the estimated total ost (dollars in millions): Gross Our Share of L leasable estimated Property loation Area Ownership % Total Cost Phoenix Premium Outlets handler (Phoenix), AZ 360, % $70.7 St. Louis Premium Outlets hesterfield (St. Louis), MO 350,000 60% 50.2 Domesti Expansions and Renovations. We routinely inur osts related to onstrution for signifiant renovation and expansion projets at our properties. We also have reinstituted redevelopment and expansion initiatives whih we had previously redued given the downturn in the eonomy. Renovation and expansion projets are urrently underway at 24 properties in the U.S. with 56 new anhor and big box tenants having opened in 2012 and an additional 30 sheduled to open in We expet our share of development osts for 2013 related to renovation or expansion initiatives to be approximately $1.0 billion. We expet to fund these apital projets with ash flows from operations. Our estimated stabilized return on invested apital typially ranges between 10-12% for all of our new development, expansion and renovation projets Annual Report 23

26 Management s Disussion and Analysis of Finanial Condition and Results of Operations Capital Expenditures on Consolidated Properties. the following table summarizes total apital expenditures on onsolidated properties on a ash basis (in millions): New Developments and Other $ 217 $ 68 $ 39 Renovations and Expansions Tenant Allowanes Operational Capital Expenditures Total $ 802 $ 445 $ 256 International Development Ativity. We typially reinvest net ash flow from our international joint ventures to fund future international development ativity. We believe this strategy mitigates some of the risk of our initial investment and our exposure to hanges in foreign urrenies. We have also funded most of our foreign investments with loal urreny-denominated borrowings that at as a natural hedge against flutuations in exhange rates. Currently, our onsolidated net inome exposure to hanges in the volatility of the Euro, Yen, Won, and other foreign urrenies is not material. We expet our share of international development osts for 2013 will be approximately $120 million at the appliable exhange rates, primarily funded through reinvested joint venture ash flow and onstrution loans. rinku Premium Outlets Phase IV, a 103,000 square foot expansion to the Rinku Premium Outlets loated in Osaka, Japan, was ompleted and opened in July Kobe-Sanda Premium Outlets Phase III, a 78,000 square foot expansion to the Kobe-Sanda Premium Outlets in Osaka, Japan, was ompleted and opened in Deember in addition to our reently opened expansion projets, we also have a number of new development and expansion projets under onstrution. The following table desribes these new development and expansion projets as well as our share of the estimated total ost as of Deember 31, 2012 (in millions): Company s share of Company s Gross Projeted Net Share leasable Company s Cost of Projeted Area Ownership (in Loal Net Cost Projeted Property loation (sqft) Perentage Curreny) (in USD) Opening Date New Development Projets: Shisui Premium Outlets Shisui (Chiba), Japan 230,000 40% JPY 3,631 $ 42.3 April 2013 Toronto Premium Outlets Halton Hills (Ontario), Canada 360,000 50% CAD 79.8 $ 80.0 Aug Busan Premium Outlets Busan, South Korea 340,000 50% KRW 83,919 $ 78.9 Sept Montreal Premium Outlets Montreal (Quebe), Canada 390,000 50% CAD 73.9 $ 73.9 July 2014 Expansions: Paju Premium Outlets Phase 2 Gyeonggi Provine, South Korea 100,000 50% KRW 19,631 $ 18.5 May 2013 Johor Premium Outlets Phase 2 Johor, Malaysia 110,000 50% MYR 28.8 $ 9.2 Nov Market Risk our exposure to market risk due to hanges 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 ombination of interest rate protetion agreements to effetively fix or ap a portion of variable rate debt. We are also exposed to foreign urreny risk on finanings of ertain foreign operations. Our intent is to offset gains and losses that our on the underlying exposures, with gains and losses on the derivative ontrats hedging these exposures. We do not enter into either interest rate protetion or foreign urreny rate protetion agreements for speulative purposes. We may enter into treasury lok agreements as part of an antiipated debt issuane. Upon ompletion of the debt issuane, the ost of these instruments is reorded as part of aumulated other omprehensive inome (loss) and is amortized to interest expense over the life of the debt agreement. 24 Simon Property Group, In.

27 Our future earnings, ash flows and fair values relating to finanial instruments are dependent upon prevalent market rates of interest, primarily LIBOR, whih was at historially low levels during Based upon onsolidated indebtedness and interest rates at Deember 31, 2012, a 50 basis point inrease in the market rates of interest would derease future earnings and ash flows by approximately $10.2 million, and would derease the fair value of debt by approximately $483.7 million. Dividends and Stok Repurhase Program ommon stok dividends during 2012 aggregated $4.10 per share. Common stok dividends during 2011 aggregated $3.50 per share, inluding a speial Deember ommon stok dividend of $0.20 per share. On February 1, 2013, our Board of Diretors delared a ash dividend of $1.15 per share of ommon stok payable on February 28, 2013 to stokholders of reord on February 14, We must pay a minimum amount of dividends to maintain our status as a REIT. Our dividends typially exeed our net inome generated in any given year primarily beause of depreiation, whih is a non-ash expense. Our future dividends and future distributions of the Operating Partnership will be determined by the Board of Diretors based on atual results of operations, ash available for dividends and limited partner distributions, ash reserves as deemed neessary for apital and operating expenditures, and the amount required to maintain our status as a REIT. Forward-Looking Statements ertain statements made in this setion or elsewhere in this report may be deemed forward-looking statements within the meaning of the Private Seurities Litigation Reform At of Although we believe the expetations refleted in any forwardlooking statements are based on reasonable assumptions, we an give no assurane that its expetations will be attained, and it is possible that our atual results may differ materially from those indiated by these forward-looking statements due to a variety of risks and unertainties. Suh fators inlude, but are not limited to: our ability to meet debt servie requirements, the availability of finaning, hanges in our redit rating, hanges in market rates of interest and foreign exhange rates for foreign urrenies, the ability to hedge interest rate risk, risks assoiated with the aquisition, development and expansion of properties, general risks related to retail real estate, the liquidity of real estate investments, environmental liabilities, international, national, regional and loal eonomi limates, hanges in market rental rates, trends in the retail industry, relationships with anhor tenants, the inability to ollet rent due to the bankrupty or insolveny of tenants or otherwise, risks relating to joint venture properties, intensely ompetitive market environment in the retail industry, osts of ommon area maintenane, risks related to our international investments and ativities, insurane osts and overage, terrorist ativities, hanges in eonomi and market onditions and maintenane of our status as a real estate investment trust. We disussed these and other risks and unertainties under the heading Risk Fators in our most reent Annual Report on Form 10-K. We may update that disussion in subsequent Quarterly Reports on Form 10-Q, but otherwise 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. Non-GAAP Finanial Measures industry pratie is to evaluate real estate properties in part based on FFO, diluted FFO per share, NOI and omparable property NOI. We believe that these non-gaap measures are helpful to investors beause they are widely reognized measures of the performane of REITs and provide a relevant basis for our omparison among REITs. We also use these measures internally to measure the operating performane of our portfolio. We determine FFO based on the definition set forth by the National Assoiation of Real Estate Investment Trusts, or NAREIT, as onsolidated net inome omputed in aordane with GAAP: exluding real estate related depreiation and amortization, exluding gains and losses from extraordinary items and umulative effets of aounting hanges, exluding gains and losses from the sales or disposals of previously depreiated retail operating properties, exluding impairment harges of depreiable real estate, plus the alloable portion of FFO of unonsolidated entities aounted for under the equity method of aounting based upon eonomi ownership interest, and all determined on a onsistent basis in aordane with GAAP Annual Report 25

28 Management s Disussion and Analysis of Finanial Condition and Results of Operations We have adopted NAREIT s larifiation of the definition of FFO that requires us to inlude the effets of nonreurring items not lassified as extraordinary, umulative effet of aounting hanges, or a gain or loss resulting from the sale or disposal of, or any impairment harges related to, previously depreiated operating properties. We inlude in FFO gains and losses realized from the sale of land, outlot buildings, marketable and non-marketable seurities, and investment holdings of non-retail real estate. you should understand that our omputation of these non-gaap measures might not be omparable to similar measures reported by other REITs and that these non-gaap measures: do not represent ash flow from operations as defined by GAAP, should not be onsidered as alternatives to onsolidated net inome determined in aordane with GAAP as a measure of operating performane, and are not alternatives to ash flows as a measure of liquidity. the following shedule reoniles total FFO to onsolidated net inome and diluted net inome per share to diluted FFO per share. for the Year Ended Deember 31, (in thousands) Funds from Operations $ 2,884,915 $ 2,438,765 $ 1,770,491 Inrease/(Derease) in FFO from prior period 18.3% 37.7% (2.3)% Consolidated Net Inome $ 1,719,632 $ 1,245,900 $ 753,514 Adjustments to Arrive at FFO: Depreiation and amortization from onsolidated properties 1,242,741 1,047, ,695 our share of depreiation and amortization from unonsolidated entities, inluding Klépierre 456, , ,565 Gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net (510,030) (216,629) (312,867) net inome attributable to nonontrolling interest holders in properties (8,520) (8,559) (10,640) nonontrolling interests portion of depreiation and amortization (9,667) (8,633) (7,847) Preferred distributions and dividends (5,252) (5,252) (8,929) Funds from Operations $ 2,884,915 $ 2,438,765 $ 1,770,491 Dilutive FFO Alloable to Simon Property $ 2,420,348 $ 2,021,932 $ 1,477,497 Diluted net inome per share to diluted FFO per share reoniliation: Diluted net inome per share $ 4.72 $ 3.48 $ 2.10 Depreiation and amortization from onsolidated properties and our share of depreiation and amortization from unonsolidated entities, inluding Klépierre, net of nonontrolling interests portion of depreiation and amortization Gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net (1.41) (0.61) (0.90) impat of additional dilutive seurities for FFO per share (0.03) Diluted FFO per share $ 7.98 $ 6.89 $ 5.03 Basi weighted average shares outstanding 303, , ,076 Adjustments for dilution alulation: Effet of stok options Impat of Series I preferred stok 1,749 Impat of Series I preferred units 238 Diluted weighted average shares outstanding 303, , ,337 Weighted average limited partnership units outstanding 58,186 60,522 58,900 Diluted weighted average shares and units outstanding 361, , , Simon Property Group, In.

29 During the year ended Deember 31, 2010, FFO inludes a $350.7 million loss on extinguishment of debt assoiated with two unseured notes tender offers, reduing diluted FFO per share by $1.00 per share. During the year ended Deember 31, 2010, we reorded transation expenses of $69.0 million, reduing diluted FFO per share by $0.20. the following shedule reoniles net operating inome to onsolidated net inome and sets forth the omputations of omparable property NOI. for the Twelve Months ended Deember 31, (in thousands) Reoniliation of NOI of onsolidated properties: Consolidated Net Inome $ 1,719,632 $1,245,900 Inome and other taxes 15,880 11,595 Interest expense 1,127, ,526 Inome from unonsolidated entities (131,907) (81,238) Gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net (510,030) (216,629) Operating Inome 2,220,600 1,943,154 Depreiation and amortization 1,257,569 1,065,946 NOI of onsolidated properties $ 3,478,169 $3,009,100 Reoniliation of NOI of unonsolidated entities: Net Inome $ 445,528 $ 690,004 Interest expense 599, ,408 Loss from unonsolidated entities 1,263 1,263 Loss from operations of disontinued joint venture interests 20,311 57,961 Loss (Gain) on disposal of disontinued operations, net 5,354 (347,640) Operating Inome 1,071, ,996 Depreiation and amortization 506, ,794 NOI of unonsolidated entities $ 1,578,676 $1,480,790 Total onsolidated and unonsolidated NOI from ontinuing operations $ 5,056,845 $4,489,890 Adjustments to NOI: NOI of disontinued unonsolidated properties 63, ,210 Total NOI of the Simon Property Portfolio $ 5,120,416 $4,990,100 Change in NOI from prior period 2.6% 5.2% Add: Simon Property share of NOI from Klépierre 173,310 Less: Joint venture partner s share of NOI 919,897 1,201,070 Simon Property Share of NOI $ 4,373,829 $3,789,030 Inrease in Simon Property Share of NOI from prior period 15.4% 8.3% Total NOI of the Simon Property Portfolio $ 5,120,416 $4,990,100 NOI from non omparable properties (1) 1,070,152 1,123,599 Total NOI of omparable properties (2) $ 4,050,264 $3,866,501 Inrease in NOI of U.S. malls and Premium Outlets that are omparable properties 4.8% (1) NOI exluded from omparable property NOI relates to ommunity/lifestyle enters, The Mills, other retail properties, international properties, any of our non-retail holdings and results of our orporate and management ompany operations and NOI of U.S. malls and Premium Outlets not owned and operated in both periods under omparison. (2) Comparable properties are U.S. malls and Premium Outlets that were owned in both of the periods under omparison. Exludes lease termination inome, interest inome, land sale gains and the impat of signifiant redevelopment ativities Annual Report 27

30 Management s Report on Internal Control Over Finanial Reporting We are responsible for establishing and maintaining adequate internal ontrol over finanial reporting. Internal ontrol over finanial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Seurities Exhange At of 1934 as a proess designed by, or under the supervision of, our prinipal exeutive and prinipal finanial offiers and effeted by our Board of Diretors, management and other personnel, to provide reasonable assurane regarding the reliability of finanial reporting and the preparation of finanial statements for external purposes in aordane with U.S. generally aepted aounting priniples and inludes those poliies and proedures that: Pertain to the maintenane of reords that in reasonable detail aurately and fairly reflet our transations and disposition of assets; Provide reasonable assurane that transations are reorded as neessary to permit preparation of finanial statements in aordane with U.S. generally aepted aounting priniples, and that our reeipts and expenditures are being made only in aordane with authorizations of our management and diretors; and Provide reasonable assurane regarding prevention or timely detetion of unauthorized aquisition, use or disposition of our assets that ould have a material effet on the finanial statements. Beause of its inherent limitations, internal ontrol over finanial reporting may not prevent or detet misstatements. Projetions of any evaluation of effetiveness to future periods are subjet to the risk that ontrols may beome inadequate beause of hanges in onditions, or that the degree of ompliane with the poliies or proedures may deteriorate. We assessed the effetiveness of our internal ontrol over finanial reporting as of Deember 31, In making this assessment, we used the riteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, we believe that, as of Deember 31, 2012, our internal ontrol over finanial reporting is effetive based on those riteria. our independent registered publi aounting firm has issued an audit report on their assessment of our internal ontrol over finanial reporting. Their report appears on page 29 of this Annual Report. 28 Simon Property Group, In.

31 Report of Independent Registered Publi Aounting Firm The Board of Diretors and Stokholders of Simon Property Group, In.: We have audited Simon Property Group, In. and Subsidiaries internal ontrol over finanial reporting as of Deember 31, 2012 based on riteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO riteria). Simon Property Group, In. and Subsidiaries management is responsible for maintaining effetive internal ontrol over finanial reporting, and for its assessment of the effetiveness of internal ontrol over finanial reporting inluded in the aompanying Management s Report on Internal Control over Finanial Reporting. Our responsibility is to express an opinion on the Company s internal ontrol over finanial reporting based on our audit. We onduted our audit in aordane with the standards of the Publi Company Aounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurane about whether effetive internal ontrol over finanial reporting was maintained in all material respets. Our audit inluded obtaining an understanding of internal ontrol over finanial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effetiveness of internal ontrol based on the assessed risk, and performing suh other proedures as we onsidered neessary in the irumstanes. We believe that our audit provides a reasonable basis for our opinion. A ompany s internal ontrol over finanial reporting is a proess designed to provide reasonable assurane regarding the reliability of finanial reporting and the preparation of finanial statements for external purposes in aordane with generally aepted aounting priniples. A ompany s internal ontrol over finanial reporting inludes those poliies and proedures that (1) pertain to the maintenane of reords that, in reasonable detail, aurately and fairly reflet the transations and dispositions of the assets of the ompany; (2) provide reasonable assurane that transations are reorded as neessary to permit preparation of finanial statements in aordane with generally aepted aounting priniples, and that reeipts and expenditures of the ompany are being made only in aordane with authorizations of management and diretors of the ompany; and (3) provide reasonable assurane regarding prevention or timely detetion of unauthorized aquisition, use, or disposition of the ompany s assets that ould have a material effet on the finanial statements. Beause of its inherent limitations, internal ontrol over finanial reporting may not prevent or detet misstatements. Also, projetions of any evaluation of effetiveness to future periods are subjet to the risk that ontrols may beome inadequate beause of hanges in onditions, or that the degree of ompliane with the poliies or proedures may deteriorate. in our opinion, Simon Property Group, In. and Subsidiaries maintained, in all material respets, effetive internal ontrol over finanial reporting as of Deember 31, 2012, based on the COSO riteria. We also have audited, in aordane with the standards of the Publi Company Aounting Oversight Board (United States), the onsolidated balane sheets of Simon Property Group, In. and Subsidiaries as of Deember 31, 2012 and 2011, and the related onsolidated statements of operations and omprehensive inome, equity and ash flows for eah of the three years in the period ended Deember 31, 2012 of Simon Property Group, In. and Subsidiaries, and our report dated February 28, 2013 expressed an unqualified opinion thereon. ERNST & YOUNG LLP Indianapolis, Indiana February 28, Annual Report 29

32 Report of Independent Registered Publi Aounting Firm The Board of Diretors and Stokholders of Simon Property Group, In.: We have audited the aompanying onsolidated balane sheets of Simon Property Group, In. and Subsidiaries as of Deember 31, 2012 and 2011, and the related onsolidated statements of operations and omprehensive inome, equity and ash flows for eah of the three years in the period ended Deember 31, These finanial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these finanial statements based on our audits. We onduted our audits in aordane with the standards of the Publi Company Aounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurane about whether the finanial statements are free of material misstatement. An audit inludes examining, on a test basis, evidene supporting the amounts and dislosures in the finanial statements. An audit also inludes assessing the aounting priniples used and signifiant estimates made by management, as well as evaluating the overall finanial statement presentation. We believe that our audits provide a reasonable basis for our opinion. in our opinion, the finanial statements referred to above present fairly, in all material respets, the onsolidated finanial position of Simon Property Group, In. and Subsidiaries at Deember 31, 2012 and 2011, and the onsolidated results of their operations and their ash flows for eah of the three years in the period ended Deember 31, 2012, in onformity with U.S. generally aepted aounting priniples. We also have audited, in aordane with the standards of the Publi Company Aounting Oversight Board (United States), Simon Property Group, In. and Subsidiaries internal ontrol over finanial reporting as of Deember 31, 2012, based on riteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2013, expressed an unqualified opinion thereon. ERNST & YOUNG LLP Indianapolis, Indiana February 28, Simon Property Group, In.

33 Consolidated Balane Sheets (Dollars in thousands, exept share amounts) Deember 31, Deember 31, ASSETS: investment properties at ost $ 34,252,521 $ 29,657,046 Less aumulated depreiation 9,068,388 8,388,130 25,184,133 21,268,916 ash and ash equivalents 1,184, ,650 tenant reeivables and arued revenue, net 521, ,731 investment in unonsolidated entities, at equity 2,108,966 1,378,084 investment in Klépierre, at equity 2,016,954 Deferred osts and other assets 1,570,734 1,633,544 notes reeivable from related party 651,000 Total assets $ 32,586,606 $ 26,216,925 LIABILITIES: Mortgages and other indebtedness $ 23,113,007 $ 18,446,440 Aounts payable, arued expenses, intangibles, and deferred revenues 1,374,172 1,091,712 ash distributions and losses in partnerships and joint ventures, at equity 724, ,569 other liabilities 303, ,971 Total liabilities 25,515,511 20,404,692 Commitments and ontingenies Limited partners preferred interest in the Operating Partnership and nonontrolling redeemable interests in properties 178, ,945 EQUITY: Stokholders Equity apital stok (850,000,000 total shares authorized, $ par value, 238,000,000 shares of exess ommon stok, 100,000,000 authorized shares of preferred stok): Series J 8% umulative redeemable preferred stok, 1,000,000 shares authorized, 796,948 issued and outstanding with a liquidation value of $39,847 44,719 45,047 ommon stok, $ par value, 511,990,000 shares authorized, 313,658,419 and 297,725,698 issued and outstanding, respetively lass B ommon stok, $ par value, 10,000 shares authorized, 8,000 issued and outstanding apital in exess of par value 9,175,724 8,103,133 Aumulated defiit (3,083,190) (3,251,740) Aumulated other omprehensive loss (90,900) (94,263) ommon stok held in treasury at ost, 3,762,595 and 3,877,448 shares, respetively (135,781) (152,541) total stokholders equity 5,910,603 4,649,666 Nonontrolling interests 982, ,622 Total equity 6,893,089 5,544,288 Total liabilities and equity $ 32,586,606 $ 26,216,925 The aompanying notes are an integral part of these statements Annual Report 31

34 Consolidated Statements of Operations and Comprehensive Inome (Dollars in thousands, exept per share amounts) For the Twelve Months Ended Deember 31, REVENUE: minimum rent $ 3,015,866 $ 2,664,724 $ 2,429,519 overage rent 195, , ,621 tenant reimbursements 1,340,307 1,177,269 1,083,780 management fees and other revenues 128, , ,207 other inome 199, , ,503 Total revenue 4,880,084 4,306,432 3,957,630 EXPENSES: Property operating 469, , ,264 Depreiation and amortization 1,257,569 1,065, ,820 real estate taxes 419, , ,960 repairs and maintenane 116, , ,425 Advertising and promotion 118, ,002 97,194 Provision for redit losses 12,809 6,505 3,130 Home and regional offie osts 123, , ,314 General and administrative 57,144 46,319 21,267 transation expenses 68,972 marketable and non-marketable seurities harges and realized gains, net (6,426) Other 90,482 89,066 65,448 Total operating expenses 2,659,484 2,363,278 2,210,794 OPERATING INCOME 2,220,600 1,943,154 1,746,836 Interest expense (1,127,025) (983,526) (1,027,091) Loss on extinguishment of debt (350,688) Inome and other taxes (15,880) (11,595) (4,331) Inome from unonsolidated entities 131,907 81,238 75,921 Gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net 510, , ,867 CONSOLIDATED NET INCOME 1,719,632 1,245, ,514 Net inome attributable to nonontrolling interests 285, , ,476 Preferred dividends 3,337 3,337 6,614 NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 1,431,159 $ 1,021,462 $ 610,424 BASIC EARNINGS PER COMMON SHARE: Net inome attributable to ommon stokholders $ 4.72 $ 3.48 $ 2.10 DILUTED EARNINGS PER COMMON SHARE: Net inome attributable to ommon stokholders $ 4.72 $ 3.48 $ 2.10 Consolidated Net Inome $ 1,719,632 $ 1,245,900 $ 753,514 unrealized gain (loss) on derivative hedge agreements 16,652 (91,933) (3,493) net loss on derivative instruments relassified from aumulated other omprehensive inome into interest expense 21,042 16,169 15,769 urreny translation adjustments 9,200 (8,462) (20,590) hanges in available-for- sale seurities and other (39,248) (37,431) 19,934 omprehensive inome 1,727,278 1,124, ,134 omprehensive inome attributable to nonontrolling interests 289, , ,478 Comprehensive inome attributable to ommon stokholders $ 1,437,859 $ 924,007 $ 626,656 The aompanying notes are an integral part of these statements. 32 Simon Property Group, In.

35 Consolidated Statements of Cash Flows (Dollars in thousands) For the Twelve Months Ended Deember 31, CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated Net Inome $1,719,632 $ 1,245,900 $ 753,514 Adjustments to reonile onsolidated net inome to net ash provided by operating ativities Depreiation and amortization 1,301,304 1,112,438 1,016,027 Loss on debt extinguishment 350,688 Gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net (510,030) (216,629) (312,867) marketable and non-marketable seurities harges and realized gains, net (6,426) Straight-line rent (37,998) (30,308) (24,487) equity in inome of unonsolidated entities (131,907) (81,238) (75,921) Distributions of inome from unonsolidated entities 151, , ,050 Changes in assets and liabilities tenant reeivables and arued revenue, net (4,815) (19,370) 2,144 Deferred osts and other assets (133,765) (58,924) (40,388) Aounts payable, arued expenses, intangibles, deferred revenues and other liabilities 165,679 (58,959) (22,550) Net ash provided by operating ativities 2,513,072 2,005,887 1,755,210 CASH FLOWS FROM INVESTING ACTIVITIES: Aquisitions (3,735,718) (1,259,623) (976,276) Funding of loans to related parties (25,364) (29,500) repayments of loans to related parties 92,600 10,500 apital expenditures, net (802,427) (445,495) (256,312) ash from aquisitions and ash impat from the onsolidation and deonsolidation of properties 91,163 19,302 27,015 net proeeds from sale of assets 383, , ,425 investments in unonsolidated entities (201,330) (20,807) (193,925) Purhase of marketable and non- marketable seurities (184,804) (42,015) (16,157) Proeeds from sale of marketable and non- marketable seurities 415,848 6,866 26,175 Purhase of loans held for investment (433,033) repayments of loans held for investment 163, ,124 37,574 Distributions of apital from unonsolidated entities and other 221, , ,819 Net ash used in investing ativities (3,580,671) (994,042) (1,246,695) CASH FLOWS FROM FINANCING ACTIVITIES: Proeeds from sales of ommon stok and other, net of transation osts 1,213,840 5,313 4,166 redemption of limited partner units (248,000) Preferred stok redemptions (10,994) Purhase of nonontrolling interest in onsolidated properties (229,595) Distributions to nonontrolling interest holders in properties (13,623) (28,793) (24,615) ontributions from nonontrolling interest holders in properties 4,204 1,217 1,058 Preferred distributions of the Operating Partnership (1,915) (1,915) (2,315) Preferred dividends and distributions to stokholders (1,244,553) (1,030,744) (763,881) Distributions to limited partners (238,772) (211,497) (153,247) Loss on debt extinguishment (350,688) Proeeds from issuane of debt, net of transation osts 6,772,443 1,655,203 3,858,815 repayments of debt (4,560,562) (1,398,697) (6,227,814) Net ash provided by (used in) finaning ativities 1,453,467 (1,009,913) (3,669,515) INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 385,868 1,932 (3,161,000) CASH AND CASH EQUIVALENTS, beginning of period 798, ,718 3,957,718 CASH AND CASH EQUIVALENTS, end of period $ 1,184,518 $ 798,650 $ 796,718 The aompanying notes are an integral part of these statements Annual Report 33

36 Consolidated Statements of Equity (Dollars in thousands) Preferred Stok Common Stok Balane at Deember 31, 2009 $ 45,704 $ 29 Exhange of limited partner units (247,640 ommon shares, Note 10) Issuane of limited partner units Stok options exerised (178,683 ommon shares) Series I preferred unit onversion to limited partner units Series I preferred stok onversion to ommon stok (7,871,276 preferred shares to 6,670,589 ommon shares) 1 Series J preferred stok premium amortization (329 ) Stok inentive program (116,726 ommon shares, net) Amortization of stok inentive Issuane of unit equivalents and other Adjustment to limited partners interest from inreased ownership in the Operating Partnership Distributions to ommon stokholders and limited partners, exluding Operating Partnership preferred interests Distributions to other nonontrolling interest partners Other omprehensive inome (loss) Net inome, exluding $2,315 attributable to preferred interests in the Operating Partnership Balane at Deember 31, 2010 $ 45,375 $ 30 Exhange of limited partner units (584,432 ommon shares, Note 10) Issuane of limited partner units Stok options exerised (324,720 options exerised net of 76,969 shares used to fund required witholding tax) Common Stok Retired (61,584 ommon shares) Series J preferred stok premium amortization (328) Stok inentive program (116,885 ommon shares, net) Amortization of stok inentive Issuane of unit equivalents and other (6,857 treasury shares) Adjustment to limited partners interest from inreased ownership in the Operating Partnership Distributions to ommon stokholders and limited partners, exluding Operating Partnership preferred interests Distribution to other nonontrolling interest partners Other omprehensive inome Net inome, exluding $1,915 attributable to preferred interests in the Operating Partnership and $8,946 attributable to nonontrolling redeemable interests in properties in temporary equity Balane at Deember 31, 2011 $ 45,047 $ 30 Exhange of limited partner units (7,447,921 units for 6,795,296 ommon shares, Note 10) Publi offering of ommon stok (9,137,500 ommon shares) 1 Issuane of limited partner units Stok options exerised (712 ommon shares) Redemption of limited partner units Series J preferred stok premium amortization (328) Stok inentive program (114,066 ommon shares, net) Amortization of stok inentive Purhase of nonontrolling interests Other Adjustment to limited partners interest from inreased ownership in the Operating Partnership Distributions to ommon stokholders and limited partners, exluding Operating Partnership preferred interests Distribution to other nonontrolling interest partners Other omprehensive inome Net inome, exluding $1,915 attributable to preferred interests in the Operating Partnership and $8,520 attributable to nonontrolling redeemable interests in properties in temporary equity Balane at Deember 31, 2012 $ 44,719 $ 31 The aompanying notes are an integral part of these statements. 34 Simon Property Group, In.

37 Aumulated Other Common Stok Comprehensive Capital in Exess Aumulated Held in Nonontrolling Total Inome (Loss) of Par Value Defiit Treasury Interests Equity $ (3,088 ) $ 7,547,959 $ (2,955,671 ) $ (176,796 ) $ 724,825 $ 5,182,962 3,866 (3,866) 162, ,987 5,006 5,006 50,874 50, , ,564 (329) (10,360) 10,360 16,839 16,839 (749) (12,057) 13, ,728 (103,728) (763,881) (153,247) (917,128) (24,835) (24,835) 9,618 2,002 11, , , ,199 $ 6,530 $ 8,059,852 $ (3,114,571) $ (166,436) $ 802,972 $ 5,633,752 9,465 (9,465) 9,084 9,084 2,095 2,095 (6,385) (6,385) (328) (13,000) 13,000 14,018 14,018 1,056 (131,224) ,213 21,940 36,032 (36,032) (1,030,744) (211,497) (1,242,241) (1,029) (1,029) (100,793) (20,864) (121,657) 1,024, ,240 1,235,039 $ (94,263) $ 8,103,133 $ (3,251,740) $ (152,541) $ 894,622 $ 5,544, ,197 (144,197) 1,213,740 1,213,741 31,324 31, (209,096) (38,904) (248,000) (328) (16,760) 16,760 14,001 14,001 25,917 58,559 84, (21,393) 41,471 20,463 (99,834) 99,834 (1,244,553) (238,772) (1,483,325) (435) (435) 3,363 4,283 7,646 1,434, ,701 1,709,197 $ (90,900) $ 9,175,724 $ (3,083,190) $ (135,781) $ 982,486 $ 6,893, Annual Report 35

38 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) 1. Organization Simon Property Group, In., or Simon Property, is a Delaware orporation that operates as a self-administered and selfmanaged real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. REITs will generally not be liable for federal orporate inome taxes as long as they ontinue to distribute in exess of 100% of their taxable inome. Simon Property Group, L.P., or the Operating Partnership, is our majority-owned partnership subsidiary that owns all of our real estate properties and other assets. The terms we, us and our refer to Simon Property, the Operating Partnership, and its subsidiaries. We own, develop and manage retail real estate properties, whih onsist primarily of malls, Premium Outlets, The Mills, and ommunity/lifestyle enters. As of Deember 31, 2012, we owned or held an interest in 317 inome-produing properties in the United States, whih onsisted of 160 malls, 63 Premium Outlets, 68 ommunity/lifestyle enters, 13 Mills and 13 other shopping enters or outlet enters in 38 states and Puerto Rio. Internationally, as of Deember 31, 2012, we had ownership interests in eight Premium Outlets in Japan, two Premium Outlets in South Korea, one Premium Outlet in Mexio, and one Premium Outlet in Malaysia. Additionally, as of Deember 31, 2012, we owned a 28.9% equity stake in Klépierre SA, or Klépierre, a publily traded, Paris-based real estate ompany, whih owns, or has an interest in, more than 260 shopping enters loated in 13 ountries in Europe. We generate the majority of our revenues from leases with retail tenants inluding: base minimum rents, overage and perentage rents based on tenants sales volume, and reoverable expenditures suh as property operating, real estate taxes, repair and maintenane, and advertising and promotional expenditures. revenues of our management ompany, after interompany eliminations, onsist primarily of management fees that are typially based upon the revenues of the property being managed. We also generate supplemental revenues from the following ativities: establishing our malls as leading market resoure providers for retailers and other businesses and onsumer-foused orporate allianes, inluding: payment systems (suh as handling fees relating to the sales of bank-issued prepaid ards), national marketing allianes, stati and digital media initiatives, business development, sponsorship, and events, offering property operating servies to our tenants and others, inluding waste handling and faility servies, and the provision of energy servies, selling or leasing land adjaent to our shopping enter properties, ommonly referred to as outlots or outparels, and generating interest inome on ash deposits and investments in loans, inluding those made to related entities. 2. Basis of Presentation and Consolidation the aompanying onsolidated finanial statements inlude the aounts of all ontrolled subsidiaries, and all signifiant interompany amounts have been eliminated. We onsolidate properties that are wholly-owned or properties where we own less than 100% but we ontrol. Control of a property is demonstrated by, among other fators, our ability to refinane debt and sell the property without the onsent of any other partner or owner and the inability of any other partner or owner to replae us. We also onsolidate a variable interest entity, or VIE, when we are determined to be the primary benefiiary. Determination of the primary benefiiary of a VIE is based on whether an entity has (1) the power to diret ativities that most signifiantly impat the eonomi performane of the VIE and (2) the obligation to absorb losses or the right to reeive benefits of the VIE that ould potentially be signifiant to the VIE. Our determination of the primary benefiiary of a VIE onsiders all relationships between us and the VIE, inluding management agreements and other ontratual arrangements. As desribed in Note 4, we aquired the remaining 50% nonontrolling interest in two previously onsolidated outlet properties. We determined these properties were VIEs 36 Simon Property Group, In.

39 and we were the primary benefiiary. The nonontrolling interest was redeemable and was refleted in limited partners interest in the Operating Partnership and nonontrolling redeemable interests in properties at Deember 31, There have been no other hanges during 2012 in previous onlusions about whether an entity qualifies as a VIE or whether we are the primary benefiiary of any previously identified VIE. During 2012, we did not provide finanial or other support to a previously identified VIE that we were not previously ontratually obligated to provide. investments in partnerships and joint ventures represent our nonontrolling ownership interests in properties. We aount for these investments using the equity method of aounting. We initially reord these investments at ost and we subsequently adjust for net equity in inome or loss, whih we alloate in aordane with the provisions of the appliable partnership or joint venture agreement, ash ontributions and distributions, and foreign urreny flutuations, if appliable. The alloation provisions in the partnership or joint venture agreements are not always onsistent with the legal ownership interests held by eah general or limited partner or joint venture investee primarily due to partner preferenes. We separately report investments in joint ventures for whih aumulated distributions have exeeded investments in and our share of net inome of the joint ventures within ash distributions and losses in partnerships and joint ventures, at equity in the onsolidated balane sheets. The net equity of ertain joint ventures is less than zero beause of finaning or operating distributions that are usually greater than net inome, as net inome inludes non-ash harges for depreiation and amortization. As of Deember 31, 2012, we onsolidated 221 wholly-owned properties and 18 additional properties that are less than wholly-owned, but whih we ontrol or for whih we are the primary benefiiary. We aount for the remaining 90 properties, or the joint venture properties, as well as our investment in Klépierre, using the equity method of aounting, as we have determined we have signifiant influene over their operations. We manage the day-to-day operations of 74 of the 90 joint venture properties, but have determined that our partner or partners have substantive partiipating rights with respet to the assets and operations of these joint venture properties. Our investments in joint ventures in Japan, South Korea, Malaysia, and Mexio omprise 12 of the remaining 16 properties. The international properties are managed loally by joint ventures in whih we share oversight responsibility with our partner. Preferred distributions of the Operating Partnership are arued at delaration and represent distributions on outstanding preferred units of partnership interests held by limited partners, or preferred units, and are inluded in net inome attributable to nonontrolling interests. We alloate net operating results of the Operating Partnership after preferred distributions to third parties and to us based on the partners respetive weighted average ownership interests in the Operating Partnership. Net operating results of the Operating Partnership attributable to third parties are refleted in net inome attributable to nonontrolling interests. our weighted average ownership interest in the Operating Partnership was as follows: for the Year Ended Deember 31, Weighted average ownership interest 83.9% 82.9% 83.2% As of Deember 31, 2012 and 2011, our ownership interest in the Operating Partnership was 85.6% and 82.8%, respetively. We adjust the nonontrolling limited partners interest at the end of eah period to reflet their interest in the Operating Partnership. Relassifiations We made ertain relassifiations of prior period amounts in the onsolidated finanial statements to onform to the 2012 presentation. These relassifiations had no impat on previously reported net inome attributable to ommon stokholders or earnings per share Annual Report 37

40 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) 3. Summary of Signifiant Aounting Poliies Investment Properties We reord investment properties at ost. Investment properties inlude osts of aquisitions; development, predevelopment, and onstrution (inluding alloable salaries and related benefits); tenant allowanes and improvements; and interest and real estate taxes inurred during onstrution. We apitalize improvements and replaements from repair and maintenane when the repair and maintenane extends the useful life, inreases apaity, or improves the effiieny of the asset. All other repair and maintenane items are expensed as inurred. We apitalize interest on projets during periods of onstrution until the projets are ready for their intended purpose based on interest rates in plae during the onstrution period. The amount of interest apitalized during eah year is as follows: For the Year Ended Deember 31, Capitalized interest $ 21,145 $ 5,815 $ 3,715 We reord depreiation on buildings and improvements utilizing the straight-line method over an estimated original useful life, whih is generally 10 to 40 years. We review depreiable lives of investment properties periodially and we make adjustments when neessary to reflet a shorter eonomi life. We amortize tenant allowanes and tenant improvements utilizing the straight-line method over the term of the related lease or oupany term of the tenant, if shorter. We reord depreiation 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 hanges in irumstanes indiate that the arrying value of investment properties may not be reoverable. These irumstanes inlude, but are not limited to, delines in a property s ash flows, ending oupany or total sales per square foot. We measure any impairment of investment property when the estimated undisounted operating inome before depreiation and amortization plus its residual value is less than the arrying value of the property. To the extent impairment has ourred, we harge to inome the exess of arrying value of the property over its estimated fair value. We estimate fair value using unobservable data suh as operating inome, estimated apitalization rates, or multiples, leasing prospets and loal market information. We may deide to sell properties that are held for use and the sale pries of these properties may differ from their arrying values. We also review our investments, inluding investments in unonsolidated entities, if events or irumstanes hange indiating that the arrying amount of our investments may not be reoverable. We will reord an impairment harge if we determine that a deline in the fair value of the investments is other-than-temporary. Changes in eonomi and operating onditions that our subsequent to our review of reoverability of investment property and other investments ould impat the assumptions used in that assessment and ould result in future harges to earnings if assumptions regarding those investments differ from atual results. Purhase Aounting Alloation We alloate the purhase prie of aquisitions and any exess investment in unonsolidated entities to the various omponents of the aquisition based upon the fair value of eah omponent whih may be derived from various observable or unobservable inputs and assumptions. Also, we may utilize third party valuation speialists. These omponents typially inlude buildings, land and intangibles related to in- plae leases and we estimate: the fair value of land and related improvements and buildings on an as-if-vaant basis, the market value of in-plae leases based upon our best estimate of urrent market rents and amortize the resulting market rent adjustment into revenues, the value of osts to obtain tenants, inluding tenant allowanes and improvements and leasing ommissions, and the value of revenue and reovery of osts foregone during a reasonable lease-up period, as if the spae was vaant. Amounts alloated to building are depreiated over the estimated remaining life of the aquired building or related improvements. We amortize amounts alloated to tenant improvements, in-plae lease assets and other lease-related intangibles over the remaining life of the underlying leases. We also estimate the value of other aquired intangible assets, if any, whih are amortized over the remaining life of the underlying related intangibles. 38 Simon Property Group, In.

41 Disontinued Operations We relassify any material operations and gains or losses on disposal related to onsolidated properties disposed of during the period to disontinued operations. During 2012, we reported a net gain of approximately $21.1 million, or $.06 per diluted share, on our onsolidated property disposition ativity. During 2011, we reported a net loss of approximately $42.4 million, or $0.12 per diluted share, on our onsolidated property disposition ativity. During 2010, we reported a net gain of approximately $5.7 million upon the disposal of four retail properties. These gains and losses are reported in gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net in the onsolidated statements of operations and omprehensive inome. The gains and losses on the disposition of these assets and the operating results were not signifiant to our onsolidated results of operations during eah of the three years ended Deember 31, Cash and Cash Equivalents We onsider all highly liquid investments purhased with an original maturity of 90 days or less to be ash and ash equivalents. Cash equivalents are arried at ost, whih approximates fair value. Cash equivalents generally onsist of ommerial paper, bankers aeptanes, Eurodollars, repurhase agreements, and money market deposits or seurities. Finanial instruments that potentially subjet us to onentrations of redit risk inlude our ash and ash equivalents and our trade aounts reeivable. We plae our ash and ash equivalents with institutions with high redit quality. However, at ertain times, suh ash and ash equivalents may be in exess of FDIC and SIPC insurane limits. See Notes 4, 8, and 10 for dislosures about non-ash investing and finaning transations. Marketable and Non-Marketable Seurities marketable seurities onsist primarily of the investments of our aptive insurane subsidiaries, available-for-sale seurities, our deferred ompensation plan investments, and ertain investments held to fund the debt servie requirements of debt previously seured by investment properties that have been sold. the types of seurities inluded in the investment portfolio of our aptive insurane subsidiaries typially inlude U.S. Treasury or other U.S. government seurities as well as orporate debt seurities with maturities ranging from less than 1 to 10 years. These seurities are lassified as available-for-sale and are valued based upon quoted market pries. The amortized ost of debt seurities, whih approximates fair value, held by our aptive insurane subsidiaries is adjusted for amortization of premiums and aretion of disounts to maturity. Changes in the values of these seurities are reognized in aumulated other omprehensive inome (loss) until the gain or loss is realized or until any unrealized loss is deemed to be other-than-temporary. We review any delines in value of these seurities for other-than-temporary impairment and onsider the severity and duration of any deline in value. To the extent an other-than-temporary impairment is deemed to have ourred, an impairment harge is reorded and a new ost basis is established. Subsequent hanges are then reognized through other omprehensive inome (loss) unless another other-than-temporary impairment is deemed to have ourred. Net unrealized gains reorded in other omprehensive inome (loss) as of Deember 31, 2012 and 2011 were approximately $2.6 million and $41.9 million, respetively, and represent the valuation and related urreny adjustments for our marketable seurities. on Otober 23, 2012 we ompleted the sale of all of our investments in Capital Shopping Centres Group PLC, or CSCG, and Capital & Counties Properties PLC, or CAPC. These investments were aounted for as available-for-sale seurities and their value was adjusted to their quoted market prie, inluding a related foreign exhange omponent, through other omprehensive inome (loss). At the date of sale, we owned 35.4 million shares of CSCG and 38.9 million shares of CAPC. The aggregate proeeds reeived from the sale were $327.1 million, and we reognized a gain on the sale of $82.7 million, whih is inluded in marketable and non-marketable seurities harges and realized gains, net in the aompanying onsolidated statements of operations and omprehensive inome. An other-than-temporary impairment harge was previously reognized in operating inome in The gain inludes $79.4 million that was relassified from aumulated other omprehensive inome (loss). At Deember 31, 2011 we owned 35.4 million shares eah of CSCG and of CAPC, and these investments had a market value of $170.7 million and $100.9 million, respetively, with an aggregate net unrealized gain of approximately $39.7 million Annual Report 39

42 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) Our insurane subsidiaries are required to maintain statutory minimum apital and surplus as well as maintain a minimum liquidity ratio. Therefore, our aess to these seurities may be limited. Our deferred ompensation plan investments are lassified as trading seurities and are valued based upon quoted market pries. The investments have a mathing liability as the amounts are fully payable to the employees that earned the ompensation. Changes in value of these seurities and hanges to the mathing liability to employees are both reognized in earnings and, as a result, there is no impat to onsolidated net inome. As of Deember 31, 2012 and 2011, we also had investments of $24.9 million whih must be used to fund the debt servie requirements of mortgage debt related to investment properties sold that previously ollateralized the debt. These investments are lassified as held-to-maturity and are reorded at amortized ost as we have the ability and intent to hold these investments to maturity. At Deember 31, 2012 and 2011, we had investments of $98.9 million and $105.1 million, respetively, in non-marketable seurities that we aount for under the ost method. We regularly evaluate these investments for any other-than-temporary impairment in their estimated fair value in order to determine whether an adjustment in the arrying value is required as of Deember 31, 2012 and During the fourth quarter of 2012, as a result of the signifiane and duration of impairment, represented by the exess of the arrying value over the estimated fair value of ertain ost method investments, we reognized other-than-temporary non-ash harges of $71.0 million, whih is inluded in marketable and non-marketable seurities harges and realized gains, net in the aompanying onsolidated statements of operations and omprehensive inome. The fair value of the remaining investment for these seurities that were impaired is not material and was based on Level 2 fair value inputs. Fair Value Measurements Level 1 fair value inputs are quoted pries for idential items in ative, liquid and visible markets suh as stok exhanges. Level 2 fair value inputs are observable information for similar items in ative or inative markets, and appropriately onsider ounterparty reditworthiness in the valuations. Level 3 fair value inputs reflet our best estimate of inputs and assumptions market partiipants would use in priing an asset or liability at the measurement date. The inputs are unobservable in the market and signifiant to the valuation estimate. We have no investments for whih fair value is measured on a reurring basis using Level 3 inputs. We hold marketable seurities that totaled $170.2 million and $417.0 million at Deember 31, 2012 and 2011, respetively, and are primarily onsidered to have Level 1 fair value inputs. In addition, we have derivative instruments whih are lassified as having Level 2 inputs whih onsist primarily of interest rate swap agreements and foreign urreny forward ontrats with a gross liability balane of $1.5 million and $12.2 million at Deember 31, 2012 and 2011, respetively, and a gross asset value of $3.0 million and $14.9 million at Deember 31, 2012 and 2011, respetively. We also have interest rate ap agreements with nominal values. note 8 inludes a disussion of the fair value of debt measured using Level 2 inputs. Notes 3 and 4 inlude a disussion of the fair values reorded in purhase aounting and impairment, using Level 2 and Level 3 inputs. Level 3 inputs to our purhase aounting and impairment inlude our estimations of net operating results of the property, apitalization rates and disount rates. Use of Estimates We prepared the aompanying onsolidated finanial statements in aordane with aounting priniples generally aepted in the United States, or GAAP. GAAP requires us to make estimates and assumptions that affet the reported amounts of assets and liabilities, dislosure of ontingent assets and liabilities at the date of the finanial statements, and revenues and expenses during the reported period. Our atual results ould differ from these estimates. Segment Dislosure our primary business is the ownership, development, and management of retail real estate. We have aggregated our retail operations, inluding malls, Premium Outlets, The Mills, ommunity/lifestyle enters, and our international investments into one reportable segment beause they have similar eonomi harateristis and we provide similar produts and servies to similar types of, and in many ases, the same tenants. 40 Simon Property Group, In.

43 Deferred Costs and Other Assets Deferred osts and other assets inlude the following as of Deember 31: Deferred finaning and lease osts, net $ 334,337 $ 308,380 In-plae lease intangibles, net 358, ,098 Aquired above market lease intangibles, net 128,893 75,950 Marketable seurities of our aptive insurane ompanies 119, ,721 Goodwill 20,098 20,098 Other marketable and non-marketable seurities 150, ,529 Loans held for investment 162,832 Prepaids, notes reeivable and other assets, net 459, ,936 $ 1,570,734 $ 1,633,544 Deferred Finaning and Lease Costs our deferred osts onsist primarily of finaning fees we inurred in order to obtain long-term finaning and internal and external leasing ommissions and related osts. We reord amortization of deferred finaning osts on a straight-line basis over the terms of the respetive loans or agreements. Our deferred leasing osts onsist primarily of apitalized salaries and related benefits in onnetion with lease originations. We reord amortization of deferred leasing osts on a straight-line basis over the terms of the related leases. Details of these deferred osts as of Deember 31 are as follows: Deferred finaning and lease osts $ 576,821 $ 528,273 Aumulated amortization (242,484) (219,893) Deferred finaning and lease osts, net $ 334,337 $ 308,380 We report amortization of deferred finaning osts, amortization of premiums, and aretion of disounts as part of interest expense. Amortization of deferred leasing osts is a omponent of depreiation and amortization expense. We amortize debt premiums and disounts, whih are inluded in mortgages and other indebtedness, over the remaining terms of the related debt instruments. These debt premiums or disounts arise either at the debt issuane or as part of the purhase prie alloation of the fair value of debt assumed in aquisitions. The aompanying onsolidated statements of operations and omprehensive inome inlude amortization as follows: for the Year Ended Deember 31, Amortization of deferred finaning osts $ 27,163 $ 28,697 $ 27,806 Amortization of debt premiums, net of disounts (33,504) (8,439) (9,066) Amortization of deferred leasing osts 43,176 43,110 34,801 Loans Held for Investment From time to time, we may make investments in mortgage loans or mezzanine loans of third parties that own and operate ommerial real estate assets loated in the United States. Mortgage loans are seured, in part, by mortgages reorded against the underlying properties whih are not owned by us. Mezzanine loans are seured, in part, by pledges of ownership interests of the entities that own the underlying real estate. Loans held for investment are arried at ost, net of any premiums or disounts whih are areted or amortized over the life of the related loan reeivable utilizing the effetive interest method. We evaluate the olletability of both interest and prinipal of eah of these loans quarterly to determine whether the value has been impaired. A loan is deemed to be impaired when, based on urrent information and events, it is probable that we will be unable to ollet all amounts due aording to the existing ontratual terms. When a loan is impaired, the amount of the loss arual is alulated by omparing the arrying amount of the loan held for investment to its estimated realizable value Annual Report 41

44 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) At Deember 31, 2011, we had investments in three mortgage and mezzanine loans with an aggregate arrying value of $162.8 million. In the seond and third quarters of 2012, these loans were repaid in their entirety. During 2012, 2011, and 2010, we reorded $6.8 million, $24.3 million and $4.6 million, respetively, in interest inome earned from these loans. Intangibles the average life of in-plae lease intangibles is approximately 4.7 years, is amortized over the remaining life of the leases of the related property on the straight-line basis and is inluded with depreiation and amortization in the onsolidated statements of operations and omprehensive inome. The amount of in-plae lease intangibles and aquired above-market lease intangibles inreased during 2012 primarily as a result of the aquisition of a ontrolling interest in nine properties as further disussed in Note 7. The fair market value of above and below market leases is amortized into revenue over the remaining lease life as a omponent of reported minimum rents. The weighted average remaining life of these intangibles is approximately 5.9 years. The unamortized amount of below market leases is inluded in aounts payable, arued expenses, intangibles and deferred revenues in the onsolidated balane sheets and was $199.2 million and $134.4 million as of Deember 31, 2012 and 2011, respetively. The amount of amortization of above and below market leases, net for the years ended Deember 31, 2012, 2011, and 2010 was $16.5 million, $17.6 million, and $15.2 million, respetively. If a lease is terminated prior to the original lease termination, any remaining unamortized intangible is written off to earnings. Details of intangible assets as of Deember 31 are as follows: In-plae lease intangibles $ 480,517 $ 245,844 Aumulated amortization (122,376) (45,746) In-plae lease intangibles, net $ 358,141 $ 200,098 Aquired above market lease intangibles $ 248,357 $ 178,564 Aumulated amortization (119,464) (102,614) Aquired above market lease intangibles, net $ 128,893 $ 75,950 Estimated future amortization and the inreasing (dereasing) effet on minimum rents for our above and below market leases as of Deember 31, 2012 are as follows: Below above impat to market Market Minimum leases leases rent, Net 2013 $ 43,664 $ (24,899) $ 18, ,343 (22,492) 13, ,233 (19,837) 11, ,279 (17,903) 9, ,000 (14,022) 5,978 Thereafter 40,720 (29,740) 10,980 $ 199,239 $ (128,893) $ 70,346 Derivative Finanial Instruments We reord all derivatives on the balane sheet at fair value. The aounting for hanges in the fair value of derivatives depends on the intended use of the derivative, whether we have eleted to designate a derivative in a hedging relationship and apply hedge aounting and whether the hedging relationship has satisfied the riteria neessary to apply hedge aounting. We use a variety of derivative finanial instruments in the normal ourse of business to seletively manage or hedge a portion of the risks assoiated with our indebtedness and interest payments. Our objetives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To aomplish this objetive, we primarily use interest rate swaps and aps. We require that hedging derivative instruments be highly effetive in reduing the risk exposure that they are designated to hedge. As a result, there was no signifiant ineffetiveness from any of our derivative ativities during the period. We formally designate any instrument that meets these hedging riteria as a hedge at the ineption of the derivative ontrat. We have no redit-risk-related hedging or derivative ativities. 42 Simon Property Group, In.

45 As of Deember 31, 2012, we had the following outstanding interest rate derivatives related to managing our interest rate risk: interest Rate Derivative number of Instruments notional Amount interest Rate Swaps 3 $483.7 million interest Rate Caps 6 $442.4 million The arrying value of our interest rate swap agreements, at fair value, is a net liability balane of $1.5 million and $10.0 million at Deember 31, 2012 and 2011, respetively, and is inluded in other liabilities. The interest rate ap agreements were of nominal value at Deember 31, 2012 and 2011 and we generally do not apply hedge aounting to these arrangements. We are also exposed to flutuations in foreign exhange rates on finanial instruments whih are denominated in foreign urrenies, primarily in Japan and Europe. We use urreny forward ontrats and foreign urreny denominated debt to manage our exposure to hanges in foreign exhange rates on ertain Yen and Euro-denominated reeivables and net investments. Curreny forward ontrats involve fixing the Yen: USD or Euro: USD exhange rate for delivery of a speified amount of foreign urreny on a speified date. The urreny forward ontrats are typially ash settled in US dollars for their fair value at or lose to their settlement date. Approximately 3.3 billion remains as of Deember 31, 2012 for all forward ontrats that we expet to settle through January 5, The Deember 31, 2012 asset balane related to these forward ontrats was $3.0 million and is inluded in deferred osts and other assets. We have reported the hanges in fair value for these forward ontrats in earnings. The underlying urreny adjustments on the foreign urreny denominated reeivables are also reported in inome and generally offset the amounts in earnings for these forward ontrats. in 2011, we entered into a Euro: USD forward ontrat with a million notional value whih was designated as a net investment hedge. The Deember 31, 2011 asset balane related to this forward was $14.9 million and is inluded in deferred osts and other assets. We applied hedge aounting to this Euro-forward ontrat and the hange in fair value was refleted in other omprehensive inome. Changes in the value of this hedge are offset by hanges in the underlying hedged Euro-denominated joint venture investment. In onnetion with our sale of Gallerie Commeriali Italia, S.p.A., or GCI, as further disussed in Note 7, this hedge was terminated in January the total gross aumulated other omprehensive loss related to our derivative ativities, inluding our share of the other omprehensive loss from joint venture properties, approximated $78.1 million and $115.8 million as of Deember 31, 2012 and 2011, respetively. Nonontrolling Interests and Temporary Equity Details of the arrying amount of our nonontrolling interests are as follows as of Deember 31: Limited partners interests in the Operating Partnership $ 983,363 $ 953,622 Nonredeemable nonontrolling defiit interests in properties, net (877) (59,000) Total nonontrolling interests refleted in equity $ 982,486 $ 894,622 Net inome attributable to nonontrolling interests (whih inludes nonredeemable nonontrolling interests in onsolidated properties, limited partners interests in the Operating Partnership, redeemable nonontrolling interests in onsolidated properties, and preferred distributions payable by the Operating Partnership) is a omponent of onsolidated net inome. In addition, the individual omponents of other omprehensive inome (loss) are presented in the aggregate for both ontrolling and nonontrolling interests, with the portion attributable to nonontrolling interests deduted from omprehensive inome attributable to ommon stokholders Annual Report 43

46 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) A rollforward of nonontrolling interests for the years ending Deember 31 is as follows: Nonontrolling interests, beginning of period $ 894,622 $ 802,972 $ 724,825 Net inome attributable to nonontrolling interests after preferred distributions and inome attributable to redeemable nonontrolling interests in onsolidated properties 274, , ,161 Distributions to nonontrolling interest holders (239,207) (212,526) (178,082) Other omprehensive inome (loss) alloable to nonontrolling interests: Unrealized gain (loss) on interest rate hedge agreements 5,634 (15,814) (309) Net loss on derivative instruments relassified from aumulated omprehensive inome (loss) into interest expense 3,021 2,774 2,689 Curreny translation adjustments 2,435 (1,484) (3,452) Changes in available-for-sale seurities and other (6,807) (6,340) 3,074 4,283 (20,864) 2,002 Adjustment to limited partners interest from inreased (dereased) ownership in the Operating Partnership 99,834 (36,032) (103,728) Units issued to limited partners 31,324 9, ,861 Units exhanged for ommon shares (144,197) (9,465) (3,866) Units redeemed (38,904) Purhase of nonontrolling interests, nonontrolling interests in newly onsolidated properties and other 100, ,213 13,799 Nonontrolling interests, end of period $ 982,486 $ 894,622 $ 802,972 Aumulated Other Comprehensive Inome (Loss) the omponents of our aumulated other omprehensive inome (loss) onsisted of the following as of Deember 31: Cumulative translation adjustments $ (30,620) $ (39,820) Aumulated derivative losses, net (78,139) (115,833) Net unrealized gains on marketable seurities, net 2,613 41,861 Total aumulated other omprehensive loss (106,146) (113,792) Less: Aumulated other omprehensive loss attributable to nonontrolling interests 15,246 19,529 Total aumulated other omprehensive loss net of nonontrolling interests $ (90,900) $ (94,263) Revenue Reognition We, as a lessor, retain substantially all of the risks and benefits of ownership of the investment properties and aount for our leases as operating leases. We arue minimum rents on a straight-line basis over the terms of their respetive 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 reognize overage rents only when eah tenant s sales exeed the appliable sales threshold. We amortize any tenant induements as a redution of revenue utilizing the straight-line method over the term of the related lease or oupany term of the tenant, if shorter. We struture our leases to allow us to reover a signifiant portion of our property operating, real estate taxes, repairs and maintenane, and advertising and promotion expenses from our tenants. A substantial portion of our leases, other than those for anhor stores, require the tenant to reimburse us for a substantial portion of our operating expenses, inluding ommon area maintenane, or CAM, real estate taxes and insurane. This signifiantly redues our exposure to inreases in osts and operating expenses resulting from inflation. Suh property operating expenses typially inlude utility, insurane, seurity, janitorial, landsaping, food ourt and other administrative expenses. We arue reimbursements from tenants for reoverable portions of all these expenses as revenue in the period the appliable expenditures are inurred. As of Deember 31, 2012 for approximately 93% of our leases in the U.S. mall portfolio, we reeive a fixed payment from the tenant for the CAM omponent. 44 Simon Property Group, In.

47 When not reimbursed by the fixed-cam omponent, CAM expense reimbursements are based on the tenant s proportionate share of the alloable operating expenses and CAM apital expenditures for the property. We also reeive esrow payments for these reimbursements from substantially all our non-fixed CAM tenants and monthly fixed CAM payments throughout the year. We reognize differenes between estimated reoveries and the final billed amounts in the subsequent year. These differenes were not material in any period presented. Our advertising and promotional osts are expensed as inurred. Management Fees and Other Revenues management fees and other revenues are generally reeived from our unonsolidated joint venture properties as well as third parties. Management fee revenue is earned based on a ontratual perentage of joint venture property revenue. Development fee revenue is earned on a ontratual perentage of hard osts to develop a property. Leasing fee revenue is earned on a ontratual per square foot harge based on the square footage of urrent year leasing ativity. We reognize revenue for these servies provided when earned based on the underlying ativity. insurane premiums written and eded are reognized on a pro-rata basis over the terms of the poliies. Insurane losses are refleted in property operating expenses in the aompanying onsolidated statements of operations and omprehensive inome and inlude estimates for losses inurred but not reported as well as losses pending settlement. Estimates for losses are based on evaluations by third-party atuaries and management s estimates. Total insurane reserves for our insurane subsidiaries and other self-insurane programs as of Deember 31, 2012 and 2011 approximated $112.8 million and $115.1 million, respetively, and are inluded in other liabilities in the onsolidated balane sheets. Information related to the seurities inluded in the investment portfolio of our aptive insurane subsidiaries is inluded within the Marketable and Non-Marketable Seurities setion above. We reognize fee revenues from our o-branded gift ard programs when the fees are earned under the related arrangements with the ard issuer. Generally, these revenues are reorded at the issuane of the gift ard for handling fees. Allowane for Credit Losses We reord a provision for redit losses based on our judgment of a tenant s reditworthiness, ability to pay and probability of olletion. In addition, we also onsider the retail setor in whih the tenant operates and our historial olletion experiene in ases of bankrupty, if appliable. Aounts are written off when they are deemed to be no longer olletible. Presented below is the ativity in the allowane for redit losses during the following years: for the Year Ended Deember 31, Balane, beginning of period $ 27,500 $ 31,650 $ 45,187 Consolidation of previously unonsolidated properties 2, Provision for redit losses 12,809 6,505 3,130 Aounts written off, net of reoveries (9,254) (11,515) (17,093) Balane, end of period $ 33,130 $ 27,500 $ 31,650 Inome Taxes We and ertain subsidiaries of the Operating Partnership have eleted to be taxed as REITs under Setions 856 through 860 of the Internal Revenue Code and appliable Treasury regulations relating to REIT qualifiation. In order to maintain this REIT status, the regulations require the entity to distribute at least 90% of taxable inome to its owners and meet ertain other asset and inome tests as well as other requirements. We intend to ontinue to adhere to these requirements and maintain our REIT status and that of the REIT subsidiaries. As REITs, these entities will generally not be liable for federal orporate inome taxes as long as they ontinue to distribute in exess of 100% of their taxable inome. Thus, we made no provision for federal inome taxes for these entities in the aompanying onsolidated finanial statements. If we or any of the REIT subsidiaries fail to qualify as a REIT, we or that entity will be subjet to tax at regular orporate rates for the years in whih it failed to qualify. If we lose our REIT status we ould not elet to be taxed as a REIT for four years unless our failure to qualify was due to reasonable ause and ertain other onditions were satisfied Annual Report 45

48 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) We have also eleted taxable REIT subsidiary, or TRS, status for some of our subsidiaries. This enables us to provide servies that would otherwise be onsidered impermissible for REITs and partiipate in ativities that do not qualify as rents from real property. For these entities, deferred tax assets and liabilities are established for temporary differenes between the finanial reporting basis and the tax basis of assets and liabilities at the enated tax rates expeted to be in effet when the temporary differenes reverse. A valuation allowane for deferred tax assets is provided if we believe all or some portion of the deferred tax asset may not be realized. An inrease or derease in the valuation allowane that results from the hange in irumstanes that auses a hange in our judgment about the realizability of the related deferred tax asset is inluded in inome. As of Deember 31, 2012 and 2011, we had a net deferred tax asset of $4.1 million and $5.6 million, respetively, related to our TRS subsidiaries. The net deferred tax asset is inluded in deferred osts and other assets in the aompanying onsolidated balane sheets and onsists primarily of operating losses and other arryforwards for federal inome tax purposes as well as the timing of the dedutibility of losses or reserves from insurane subsidiaries. No valuation allowane has been reorded as we believe these amounts will be realized. We are also subjet to ertain other taxes, inluding state and loal taxes, franhise taxes, as well as inome-based and withholding taxes on dividends from ertain of our international investments, whih are inluded in inome and other taxes in the onsolidated statement of operations and omprehensive inome. Corporate and Transation Related Expenses Home and regional offie osts primarily inlude ompensation and personnel related osts, travel, building and offie osts, and other expenses for our orporate home offie and regional offies. General and administrative expense primarily inludes exeutive ompensation, benefits and travel expenses as well as osts of being a publi ompany inluding ertain legal osts, audit fees, regulatory fees, and ertain other professional fees. We expense aquisition and potential aquisition osts related to business ombinations and disposition related osts as they are inurred. We inurred a minimal amount of transation expenses during the years ended Deember 31, 2012 and During the year ended Deember 31, 2010, we inurred osts in onnetion with the aquisition of Prime Outlets Aquisition Company, or the Prime aquisition, and other potential aquisitions, as further disussed in Note 4. In addition, during 2010, we settled, in ash, a transation-related dispute and reorded a harge to earnings. These expenses are inluded within transation expenses in the aompanying statements of operations and omprehensive inome and totaled $69.0 million during the year ended Deember 31, Real Estate Aquisitions and Dispositions We aquire properties to generate both urrent inome and long-term appreiation in value. We aquire individual properties or portfolios of other retail real estate ompanies that meet our investment riteria and sell properties whih no longer meet our strategi riteria. Unless otherwise noted below, gains and losses on these transations are inluded in gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net in the aompanying onsolidated statements of operations and omprehensive inome. our onsolidated and unonsolidated aquisition and disposition ativity for the periods presented are highlighted as follows: 2012 Aquisitions on Deember 31, 2012, as disussed in Note 7, we ontributed a wholly-owned property to a newly formed joint venture in exhange for an interest in a property ontributed to the same joint venture by our joint venture partner. on Deember 4, 2012, we aquired the remaining 50% nonontrolling equity interest in two previously onsolidated outlet properties loated in Grand Prairie, Texas, and Livermore, California, and, aordingly, we now own 100% of these properties. We paid onsideration of $260.9 million for the additional interest in the properties, 90% of whih was paid in ash and 10% of whih was satisfied through the issuane of units of the Operating Partnership. In addition, the onstrution loans we had provided to the properties totaling $162.5 million were extinguished on a non-ash basis. The transation was aounted for as an equity transation, as the properties had been previously onsolidated. 46 Simon Property Group, In.

49 On June 4, 2012, we aquired a 50% interest in a 465,000 square foot outlet enter loated in Destin, Florida for $70.5 million. on Marh 22, 2012, as disussed in Note 7, we aquired additional interests in 26 of our joint venture properties from SPG-FCM Ventures, LLC, or SPG-FCM, in a transation valued at approximately $1.5 billion, or the Mills transation. on Marh 14, 2012, as disussed in Note 7, we aquired a 28.7% equity stake in Klépierre for approximately $2.0 billion, inluding the apitalization of aquisition osts. on January 6, 2012, as disussed in Note 7, we purhased an additional 25% interest in Del Amo Fashion Center Aquisitions on Deember 31, 2011, we and our joint venture partner dissolved a venture in whih we had a 50% interest and distributed a portfolio of properties previously held within the venture to us and our joint venture partner. As a result, we have a 100% interest in and now onsolidate the six properties we reeived in the distribution. The distribution resulted in a remeasurement of the distributed assets to estimated fair value and a orresponding non-ash gain of $168.3 million in the fourth quarter of 2011 representing the estimated fair value of the net assets reeived in exess of the arrying value of our interest in the joint venture portfolio. The asset and liability alloations were reorded based on preliminary portfolio fair value estimates at the date of distribution and were finalized during the third quarter of 2012 resulting in an alloation to investment property of $585.0 million, lease related intangibles of $59.1 million and mortgage debt of $468.8 million, inluding debt premiums. We amortize these amounts over the estimated life of the related depreiable omponents of investment property, typially no greater than 40 years, the terms of the appliable leases and the appliable debt maturity, respetively. The adjusted alloations did not have a material impat on the results of operations for the year ended, or on our finanial position at, Deember 31, on August 25, 2011, we aquired additional ontrolling interests of approximately 83.75% in The Plaza at King of Prussia and The Court at King of Prussia, or olletively, King of Prussia, thereby inreasing our ownership interest to 96.1%. The property is subjet to a $160.1 million mortgage. The onsolidation of this previously unonsolidated property resulted in a remeasurement of our previously held interest to fair value and a orresponding non-ash gain of $82.9 million in the third quarter of on July 19, 2011, we aquired a 100% ownership interest in a lifestyle enter loated in Albuquerque, New Mexio. Also, during the seond quarter, we purhased an additional nonontrolling interest in an unonsolidated mall. During the third quarter of 2011 we ontributed a wholly-owned property to a joint venture whih holds our interests in nine unonsolidated properties. The transation effetively exhanged a portion of our interest in this previously wholly-owned property for inreased ownership interests in the nine unonsolidated properties. This transation had no material impat on the statement of operations Aquisitions During 2010, we aquired a ontrolling interest in a previously unonsolidated mall whih resulted in a remeasurement of our previously held equity interest to fair value and orresponding gain of approximately $13.0 million. This gain is inluded in gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net in the aompanying onsolidated statements of operations and omprehensive inome. on August 30, 2010, we ompleted the Prime aquisition, adding 21 outlet enters, inluding a enter loated in Puerto Rio, whih was aquired on May 13, The transation was valued at approximately $2.3 billion, inluding the assumption of existing mortgage indebtedness of $1.2 billion and the repayment of $310.7 million of preexisting mortgage loans at losing. We paid onsideration omprised of 80% ash and 20% in units of the Operating Partnership. We issued approximately 1.7 million units with an issuane date fair value of approximately $154.5 million. We funded the ash portion of this aquisition through draws on our unseured revolving redit faility. We reorded our aquisition of these 21 outlet enters using the aquisition method of aounting. Tangible and intangible assets and liabilities were established based on their estimated fair values at the date of aquisition. The results of operations of the aquired properties have been inluded in our onsolidated results from the date of aquisition. The purhase prie alloations were finalized during the seond quarter of Annual Report 47

50 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) On May 28, 2010, we aquired an additional interest of approximately 19% in Houston Galleria, loated in Houston, Texas thereby inreasing our nonontrolling interest from 31.5% to 50.4% Dispositions During 2012, we disposed of our interest in eight onsolidated retail properties and four unonsolidated retail properties. Our share of the net gain on these disposals was $15.5 million. In addition, during the first quarter of 2012, we sold one of our retail properties with a arrying value of $115.0 million for nominal onsideration and the assumption of the related mortgage debt of $115.0 million by the aquirer. on May 3, 2012, we sold our investment in two residential apartment buildings loated at The Domain in Austin, Texas. Our share of the gain from the sale was $12.4 million, whih is inluded in other inome in the onsolidated statements of operations and omprehensive inome. on January 9, 2012, as disussed in Note 7, we sold our entire ownership interest in GCI to our venture partner, Auhan S.A Dispositions During 2011, we agreed to dispose of onsolidated properties that had an aggregate arrying value of $355.4 million and debt obligations of $177.0 million for aggregate sales proeeds of $136.0 million resulting in a net loss of $42.4 million Dispositions During the year ended Deember 31, 2010, we disposed of three retail properties with an aggregate arrying value of $91.4 million and debt obligations of $91.3 million for whih we reeived aggregate sale proeeds of $5.8 million. The net gain on these disposals was $5.7 million. 48 Simon Property Group, In.

51 5. Per Share Data We determine basi earnings per share based on the weighted average number of shares of ommon stok outstanding during the period and we onsider any partiipating seurities for purposes of applying the two-lass method. We determine diluted earnings per share based on the weighted average number of shares of ommon stok outstanding ombined with the inremental weighted average shares that would have been outstanding assuming all dilutive potential ommon shares were onverted into shares at the earliest date possible. The following table sets forth the omputation of our basi and diluted earnings per share. For the Year Ended Deember 31, Net Inome available to Common Stokholders Basi $ 1,431,159 $ 1,021,462 $ 610,424 Effet of dilutive seurities: Impat to General Partner s interest in Operating Partnership from all dilutive seurities and options Net Inome available to Common Stokholders Diluted $ 1,431,159 $ 1,021,501 $ 610,521 Weighted Average Shares Outstanding Basi 303,137, ,504, ,076,008 Effet of stok options 1,072 69, ,460 Weighted Average Shares Outstanding Diluted 303,138, ,573, ,350,468 For the year ended Deember 31, 2012, potentially dilutive seurities inlude stok options, units that are exhangeable for ommon stok and long-term inentive performane, or LTIP, units granted under our long-term inentive performane programs that are onvertible into units and exhangeable for ommon stok. The only seurities that had a dilutive effet for the years ended Deember 31, 2012, 2011, and 2010 were stok options. We arue dividends when they are delared. The taxable nature of the dividends delared for eah of the years ended as indiated is summarized as follows: for the Year Ended Deember 31, Total dividends paid per ommon share $ 4.10 $ 3.50 $ 2.60 Perent taxable as ordinary inome 99.50% 98.30% 53.82% Perent taxable as long-term apital gains 0.50% 1.70% 39.68% Perent nontaxable as return of apital 6.50% 100.0% 100.0% 100.0% On February 1, 2013, our Board of Diretors delared a ash dividend of $1.15 per share of ommon stok payable on February 28, 2013 to stokholders of reord on February 14, Investment Properties investment properties onsist of the following as of Deember 31: Land $ 3,736,882 $ 3,136,981 Buildings and improvements 30,187,495 26,196,349 Total land, buildings and improvements 33,924,377 29,333,330 Furniture, fixtures and equipment 328, ,716 Investment properties at ost 34,252,521 29,657,046 Less aumulated depreiation 9,068,388 8,388,130 Investment properties at ost, net $25,184,133 $ 21,268,916 Constrution in progress inluded above $ 329,663 $ 464, Annual Report 49

52 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) 7. Investments in Unonsolidated Entities Joint ventures are ommon in the real estate industry. We use joint ventures to finane properties, develop new properties, and diversify our risk in a partiular property or portfolio of properties. We held joint venture ownership interests in 78 properties in the United States as of Deember 31, 2012 and 87 properties as of Deember 31, At Deember 31, 2012 and 2011, we also held interests in eight joint venture properties in Japan, two joint venture properties in South Korea, one joint venture property in Mexio, and one joint venture property in Malaysia. We aount for these joint venture properties using the equity method of aounting. As disussed below, on January 9, 2012, we sold our interest in GCI whih at the time owned 45 properties in Italy. Additionally, on Marh 14, 2012, we purhased a 28.7% equity stake in Klépierre. On May 21, 2012, Klépierre paid a dividend, whih we eleted to reeive in additional shares, resulting in an inrease in our ownership to approximately 28.9%. ertain of our joint venture properties are subjet to various rights of first refusal, buy-sell provisions, put and all rights, or other sale or marketing rights for partners whih are ustomary in real estate joint venture agreements and the industry. We and our partners in these joint ventures may initiate these provisions (subjet to any appliable lok up or similar restritions), whih may result in either the sale of our interest or the use of available ash or borrowings, or the use of limited partnership interests in the Operating Partnership, to aquire the joint venture interest from our partner. on Deember 31, 2012, we formed a joint venture with Institutional Mall Investors, or IMI, to own and operate The Shops at Mission Viejo in the Los Angeles suburb of Mission Viejo, California, and Woodfield Mall in the Chiago suburb of Shaumburg, Illinois. As of Deember 31, 2012, we and IMI eah own a nonontrolling 50% interest in Woodfield Mall and we own a nonontrolling 51% interest in The Shops at Mission Viejo and IMI owns the remaining 49%. Prior to the formation of the joint venture, we owned 100% of The Shops at Mission Viejo and IMI owned 100% of Woodfield Mall. No gain was reorded as the transation was reorded based on the arryover basis of our previous investment. Woodfield Mall is enumbered by a $425 million mortgage loan whih matures in Marh of 2024 and bears interest at 4.5%. In January 2013, the joint venture losed a $295 million mortgage on the Shops at Mission Viejo whih bears interest at 3.61% and matures in February of on Marh 22, 2012, we aquired, through an aquisition of substantially all of the assets of The Mills Limited Partnership, or TMLP, additional interests in 26 properties. The transation resulted in additional interests in 16 of the properties whih remain unonsolidated, the onsolidation of nine previously unonsolidated properties and the purhase of the remaining nonontrolling interest in a previously onsolidated property. The transation was valued at $1.5 billion, whih inluded repayment of the remaining $562.1 million balane on TMLP s senior loan faility, and retirement of $100.0 million of TMLP s trust preferred seurities. In onnetion with the transation, our $558.4 million loan to SPG-FCM was extinguished on a non-ash basis. We onsolidated $2.6 billion in additional property-level mortgage debt in onnetion with this transation. This property-level mortgage debt was previously presented as debt of our unonsolidated entities. We and our joint venture partner had equal ownership in these properties prior to the transation. the onsolidation of the previously unonsolidated properties resulted in a remeasurement of our previously held interest in eah of these nine newly onsolidated properties to fair value and reognition of a orresponding non-ash gain of $488.7 million. In addition, we reorded an other-than-temporary impairment harge of $22.4 million for the exess of arrying value of our remaining investment in SPG-FCM over its estimated fair value. The gain on the transation and impairment harge are inluded in gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net in the aompanying onsolidated statements of operations and omprehensive inome. The assets and liabilities of the newly onsolidated properties aquired in the Mills transation have been refleted at their estimated fair value at the aquisition date. We reorded our aquisition of the interest in the nine newly onsolidated properties using the aquisition method of aounting. Tangible and intangible assets and liabilities were established based on their fair values at the date of aquisition. The results of operations of the newly onsolidated properties have been inluded in our onsolidated results from the date of aquisition. The purhase prie alloations are preliminary and subjet to revision within the measurement period, not to exeed one year from the date of aquisition. the table below summarizes the amounts of assets aquired and liabilities assumed at the aquisition date as well as purhase aounting adjustments made from the original alloations at the date of aquisition for the nine newly onsolidated properties. We amortize these amounts over the estimated life of the related depreiable omponents of investment property, typially no greater than 40 years, the terms of the appliable leases and the appliable debt maturity. The adjusted alloations did not have a material 50 Simon Property Group, In.

53 impat on the quarterly or annual results of operations or on our finanial position at Deember 31, In addition to the below, we have reorded approximately $1 billion of investment in the 16 properties whih remained unonsolidated at the aquisition date. A Preliminary alloations (in millions) Investment properties $ 4,228 Cash and ash equivalents 91 Tenant Reeivables and arued revenue, net 1 Deferred osts and other assets (inluding intangibles) 264 Total Assets $ 4,584 Mortgages and other indebtedness, inluding premiums $ 2,672 Aounts payable, arued expenses, intangibles and other 164 Other Liabilities 6 Total Liabilities $ 2,842 On January 6, 2012, we paid $50.0 million to aquire an additional interest in Del Amo Fashion Center, thereby inreasing our interest to 50%. on Deember 31, 2011, as further disussed in Note 4, we and our joint venture partner dissolved a venture in whih we had a 50% interest and distributed a portfolio of properties previously held within the venture to us and our joint venture partner. The results of operations of these properties are now presented as loss from operations of disontinued joint venture interests and the non-ash gain of $168.3 million reorded upon distribution to the partners is presented within (loss) gain on sale or disposal of disontinued operations, net in the Summary Finanial Information below. Loan to SPG-FCM As disussed above, our loan to SPG-FCM was extinguished in the Mills transation. During 2012, 2011 and 2010, we reorded approximately $2.0 million, $9.8 million and $9.9 million in interest inome (net of inter-entity eliminations) related to this loan, respetively. International Investments We ondut our international operations through joint venture arrangements and aount for all of our international joint venture investments using the equity method of aounting. European Investments. At Deember 31, 2012, we owned 57,634,148 shares, or approximately 28.9%, of Klépierre, whih had a quoted market prie of $39.67 per share. At the date of purhase on Marh 14, 2012, our exess investment in Klépierre was approximately $1.2 billion, of whih substantially all has been alloated to the underlying investment property based on estimated fair value. The alloation is subjet to revision within the measurement period, not to exeed one year from the date of aquisition. Our share of net inome, net of amortization of our exess investment, was $0.5 million from the aquisition date through Deember 31, Based on appliable Euro: USD exhange rates and after our onversion of Klépierre s results to GAAP, Klépierre s total assets, total liabilities, and nonontrolling interests as of Deember 31, 2012 were $17.2 billion, $12.4 billion, and $1.9 billion, respetively, and Klépierre s total revenues, operating inome and onsolidated net inome were approximately $1.1 billion, $394.7 million and $323.6 million, respetively, for the period of our ownership in At Deember 31, 2011, we had a 49% ownership interest in GCI. On January 9, 2012, we sold our entire ownership interest in GCI to our venture partner, Auhan S.A. The aggregate ash we reeived was $375.8 million and we reognized a gain on the sale of $28.8 million. Our investment arrying value inluded $39.5 million of aumulated losses related to urreny translation and net investment hedge aumulated balanes whih had been reorded in aumulated other omprehensive inome (loss) Annual Report 51

54 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) Asian Joint Ventures. We ondut our international Premium Outlet operations in Japan through a joint venture with Mitsubishi Estate Co., Ltd. We have a 40% ownership interest in this joint venture. The arrying amount of our investment in this joint venture was $314.2 million and $349.5 million as of Deember 31, 2012 and 2011, respetively, inluding all related omponents of aumulated other omprehensive inome (loss). We ondut our international Premium Outlet operations in South Korea through a joint venture with Shinsegae International Co. We have a 50% ownership interest in this joint venture. The arrying amount of our investment in this joint venture was $62.9 million and $43.8 million as of Deember 31, 2012 and 2011, respetively, inluding all related omponents of aumulated other omprehensive inome (loss). Summary Finanial Information A summary of our investments in joint ventures and share of inome from suh joint ventures, exluding Klépierre, follows. The aompanying joint venture statements of operations inlude amounts related to our investments in Simon Ivanhoe S.á.r.l. whih was sold on July 15, 2010 and GCI whih was sold on January 9, In addition, we aquired additional ontrolling interests in King of Prussia on August 25, 2011, and nine properties in the Mills transation on Marh 22, These previously unonsolidated properties beame onsolidated properties as of their respetive aquisition dates. Additionally, on Deember 31, 2011, we and our joint venture partner dissolved a venture in whih we had a 50% interest and distributed a portfolio of properties previously held within the venture to us and our joint venture partner. Finally, during 2012, we disposed of our interests in one mall and three non-ore retail properties. The results of operations of the properties for all of these transations are lassified as loss from operations of disontinued joint venture interests in the aompanying joint venture statements of operations. Balane sheet information for the joint ventures is as follows: deember 31, deember 31, BALANCE SHEETS Assets: investment properties, at ost $ 14,607,291 $ 20,481,657 Less aumulated depreiation 4,926,511 5,264,565 9,680,780 15,217,092 Cash and ash equivalents 619, ,895 Tenant reeivables and arued revenue, net 252, ,208 Investment in unonsolidated entities, at equity 39, ,576 Deferred osts and other assets 438, ,101 Total assets $ 11,031,088 $ 17,042,872 Liabilities and Partners Defiit: Mortgages and other indebtedness $ 11,584,863 $ 15,582,321 Aounts payable, arued expenses, intangibles, and deferred revenue 672, ,733 Other liabilities 447, ,711 Total liabilities 12,704,478 17,339,765 Preferred units 67,450 67,450 Partners defiit (1,740,840) (364,343) Total liabilities and partners defiit $ 11,031,088 $ 17,042,872 Our Share of: Partners defiit $ (799,911) $ (32,000) Add: Exess Investment 2,184, ,515 Our net Investment in unonsolidated entities, at equity $ 1,384,222 $ 682,515 Exess Investment represents the unamortized differene of our investment over our share of the equity in the underlying net assets of the joint ventures or other investments aquired and is alloated on a fair value basis primarily to investment property, lease related intangibles, and debt premiums and disounts. We amortize exess investment over the life of the related depreiable omponents of investment property, typially no greater than 40 years, the terms of the appliable leases and the appliable debt maturity, respetively. The amortization is inluded in the reported amount of inome from unonsolidated entities. 52 Simon Property Group, In.

55 As of Deember 31, 2012, sheduled prinipal repayments on joint venture properties mortgages and other indebtedness are as follows: 2013 $ 1,286, ,095, ,029, ,106, ,367,851 thereafter 4,693,145 total prinipal maturities 11,579,307 net unamortized debt premiums and disounts 5,556 total mortgages and other indebtedness $ 11,584,863 This debt beomes due in installments over various terms extending through 2034 with interest rates ranging from 0.48% to 9.35% and a weighted average rate of 5.06% at Deember 31, For the Year Ended Deember 31, STATEMENTS OF OPERATIONS Revenue: minimum rent $ 1,487,554 $1,424,038 $ 1,365,466 overage rent 176, , ,239 tenant reimbursements 691, , ,144 other inome 171, , ,210 total revenue 2,527,425 2,376,163 2,327,059 Operating Expenses: Property operating 477, , ,358 Depreiation and amortization 506, , ,836 real estate taxes 178, , ,617 repairs and maintenane 65,163 64,271 63,185 Advertising and promotion 55,175 50,653 48,205 Provision for (reovery of) redit losses 1,824 4,496 (85) other 170, , ,195 total operating expenses 1,455,569 1,381,167 1,345,311 Operating Inome 1,071, , ,748 Interest expense (599,400) (593,408) (589,769) Loss from unonsolidated entities (1,263) (1,263) Inome from Continuing Operations 471, , ,979 Loss from operations of disontinued joint venture interests (20,311) (57,961) (60,470) (Loss) Gain on disposal of disontinued operations, net (5,354) 347,640 39,676 Net Inome $ 445,528 $ 690,004 $ 371,185 Third-Party Investors Share of Net Inome $ 239,931 $ 384,384 $ 234,799 Our Share of Net Inome 205, , ,386 Amortization of Exess Investment (83,400) (50,562) (48,329) Our Share of Loss (Gain) on Sale or Disposal of Assets and interests in Unonsolidated Entities, net 9,245 (173,820) (20,305) Our Share of Impairment Charge from Investments in unonsolidated Entities, net 8,169 Inome from Unonsolidated Entities $ 131,442 $ 81,238 $ 75, Annual Report 53

56 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) Our share of inome from unonsolidated entities in the above table, aggregated with our share of results of Klépierre, is presented in Inome from unonsolidated entities in the aompanying onsolidated statements of operations and omprehensive inome. Our share of the loss (gain) on sale or disposal of assets and interests in unonsolidated entities, net is refleted within gain upon aquisition of ontrolling interests, sale or disposal of assets and interests in unonsolidated entities, and impairment harge on investment in unonsolidated entities, net in the aompanying onsolidated statements of operations and omprehensive inome Dispositions in July 2012, we disposed of our interest in an unonsolidated mall, and in August 2012 we disposed of our interest in three other non-ore unonsolidated properties. Our share of the net loss on disposition was $9.2 million Dispositions in April 2011, we disposed of our interest in an unonsolidated mall, resulting in a gain of $7.8 million Impairment in Deember 2010, we reognized an $8.2 million non-ash impairment harge representing our share of impairment on a joint venture investment in a property in Italy for whih the deline in value below our arrying amount was deemed other-than-temporary. 8. Indebtedness and Derivative Finanial Instruments our mortgages and other indebtedness, exluding the impat of derivative instruments, onsist of the following as of Deember 31: Fixed-Rate Debt: Mortgages and other notes, inluding $101,104 and $54,250 net premiums, respetively. Weighted average interest and maturity of 5.85% and 4.4 years at Deember 31, $ 7,677,204 $ 5,566,600 Unseured notes, inluding $38,847 and $29,178 net disounts, respetively. Weighted average interest and maturity of 5.09% and 7.1 years at Deember 31, ,400,154 10,640,775 Total Fixed-Rate Debt 21,077,358 16,207,375 Variable-Rate Debt: Mortgages and other notes, at fae value. Weighted average interest and maturity of 2.57% and 1.5 years at Deember 31, ,152 1,286,401 Credit Faility (see below) 1,593, ,664 Total Variable-Rate Debt 2,035,649 2,239,065 Total Mortgages and Other Indebtedness $ 23,113,007 $ 18,446,440 General. Our unseured debt agreements ontain finanial ovenants and other non-finanial ovenants. If we were to fail to omply with these ovenants, after the expiration of the appliable ure periods, the debt maturity ould be aelerated or other remedies ould be sought by the lender inluding adjustments to the appliable interest rate. As of Deember 31, 2012, we are in ompliane with all ovenants of our unseured debt. At Deember 31, 2012, we or our subsidiaries were the borrowers under 78 non-reourse mortgage notes seured by mortgages on 78 properties, inluding seven separate pools of ross-defaulted and ross-ollateralized mortgages enumbering a total of 27 properties. Under these ross-default provisions, a default under any mortgage inluded in the ross-defaulted pool may onstitute a default under all mortgages within that pool and may lead to aeleration of the indebtedness due on eah property within the pool. Certain of our seured debt instruments ontain finanial and other non-finanial ovenants whih are speifi to the properties whih serve as ollateral for that debt. If the borrower fails to omply with these ovenants, the lender ould aelerate the debt and enfore its right against their ollateral. At Deember 31, 2012, the appliable borrowers under these non-reourse mortgage notes were in ompliane with all ovenants where non-ompliane ould individually, or giving effet to appliable ross-default provisions in the aggregate, have a material adverse effet on our finanial ondition, results of operations or ash flows. 54 Simon Property Group, In.

57 Unseured Debt At Deember 31, 2012, our unseured debt onsisted of $13.4 billion of senior unseured notes of the Operating Partnership, $1.3 billion outstanding under our $4.0 billion unseured revolving redit faility, or Credit Faility, and $259.2 million outstanding under our $2.0 billion supplemental unseured revolving redit faility, or Supplemental Faility. The Deember 31, 2012 balane on the Credit Faility inluded $1.2 billion (U.S. dollar equivalent) of Euro-denominated borrowings and the entire balane on the Supplemental Faility on suh date onsisted of Yen-denominated borrowings, both of whih are designated as net investment hedges of a portion of our international investments. on Deember 31, 2012, we had an aggregate available borrowing apaity of $4.4 billion under the two redit failities. The maximum outstanding balane of the redit failities during the year ended Deember 31, 2012 was $3.1 billion and the weighted average outstanding balane was $1.9 billion. Letters of redit of $45.2 million were outstanding under the Credit Faility as of Deember 31, the Credit Faility s initial borrowing apaity of $4.0 billion an be inreased at our sole option to $5.0 billion during its term. The Credit Faility will initially mature on Otober 30, 2015 and an be extended for an additional year at our sole option. The base interest rate on the Credit Faility is LIBOR plus 100 basis points with an additional faility fee of 15 basis points. In addition, the Credit Faility provides for a money market ompetitive bid option program that allows us to hold autions to ahieve lower priing for short-term borrowings. The Credit Faility also inludes a $2.0 billion multi-urreny tranhe. on June 1, 2012, we entered into the Supplemental Faility with an initial borrowing apaity of $2.0 billion whih an be inreased at our sole option to $2.5 billion during its term. The Supplemental Faility will initially mature on June 30, 2016 and an be extended for an additional year at our sole option. The base interest rate on the Supplemental Faility is LIBOR plus 100 basis points with an additional faility fee of 15 basis points. Like the Credit Faility, the Supplemental Faility provides for a money market ompetitive bid option program and allows for multi-urreny borrowings. During the seond quarter of 2012, we moved $285.0 million (U.S. dollar equivalent) of Yen-denominated borrowings from the Credit Faility to the Supplemental Faility. on Marh 13, 2012, the Operating Partnership issued $600.0 million of senior unseured notes at a fixed interest rate of 2.15% with a maturity date of September 2017, $600.0 million of senior unseured notes at a fixed interest rate of 3.375% with a maturity date of Marh 2022, and $550.0 million of senior unseured notes at a fixed interest rate of 4.75% with a maturity date of Marh Proeeds from the unseured notes offerings were used to fund a portion of the ost of the aquisition of our equity stake in Klépierre and the Mills transation. on Deember 17, 2012, the Operating Partnership issued $750.0 million of senior unseured notes at a fixed interest rate of 1.50% with a maturity date of February 2018 and $500.0 million of senior unseured notes at a fixed interest rate of 2.75% with a maturity date of February Proeeds from the unseured notes offerings were used to pay down borrowings on the Credit Faility and fund general working apital requirements. During 2012, we redeemed at par $231.0 million of senior unseured notes with fixed rates ranging from 5.75% to 6.88%. on November 1, 2011, we entered into a $900.0 million unseured term loan. We drew $160.0 million on the term loan in the first quarter of In the seond quarter of 2012, we repaid the outstanding balane in full and terminated the term loan. Seured Debt total seured indebtedness was $8.0 billion and $6.8 billion at Deember 31, 2012 and 2011, respetively. During 2012, we repaid $536.2 million in mortgage loans with a weighted average interest rate of 3.95%, unenumbering 19 properties, and repaid the outstanding balane of a $735.0 million seured term loan in full. As a result of the aquisition of additional interests in properties in the Mills transation in Marh 2012, as further disussed in Note 7, we onsolidated nine properties enumbered by property-level mortgage debt totaling $2.6 billion. This property-level mortgage debt was previously presented as debt of our unonsolidated entities. We and our joint venture partner had equal ownership in these properties prior to the transation Annual Report 55

58 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) Debt Maturity and Other our sheduled prinipal repayments on indebtedness as of Deember 31, 2012 are as follows: 2013 $ 821, ,337, ,098, ,642, ,281,808 thereafter 8,869,279 total prinipal maturities 23,050,750 net unamortized debt premium 62,257 total mortgages and other indebtedness $ 23,113,007 Our ash paid for interest in eah period, net of any amounts apitalized, was as follows: For the Year Ended Deember 31, Cash paid for interest $1,122,223 $ 979,436 $ 1,015,989 Derivative Finanial Instruments our exposure to market risk due to hanges 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 ombination of interest rate protetion agreements to effetively fix or ap a portion of variable rate debt. We are also exposed to foreign urreny risk on finanings of ertain foreign operations. Our intent is to offset gains and losses that our on the underlying exposures, with gains and losses on the derivative ontrats hedging these exposures. We do not enter into either interest rate protetion or foreign urreny rate protetion agreements for speulative purposes. We may enter into treasury lok agreements as part of an antiipated debt issuane. Upon ompletion of the debt issuane, the fair value of these instruments is reorded as part of aumulated other omprehensive inome (loss) and is amortized to interest expense over the life of the debt agreement. the fair value of our interest rate swap agreements is a net liability balane of $1.5 million and $10.0 million at Deember 31, 2012 and 2011, respetively, and is inluded in other liabilities. The interest rate ap agreements were of nominal value at Deember 31, 2012 and 2011, and we generally do not apply hedge aounting to these arrangements. In addition, the unamortized loss of our treasury loks and terminated hedges reorded in aumulated other omprehensive inome (loss) was $78.0 million and $89.7 million as of Deember 31, 2012 and 2011, respetively. As of Deember 31, 2012, our outstanding LIBOR based derivative ontrats onsisted of: interest rate ap protetion agreements with a notional amount of $442.4 million whih mature in July 2013 and June 2014, and fixed rate swap agreements with a notional amount of $483.7 million whih have a weighted average fixed pay rate of 2.52% and a weighted average variable reeive rate of 0.58%. Within the next year, we expet to relassify to earnings approximately $13.2 million of losses related to ative and terminated interest rate swaps from the urrent balane held in aumulated other omprehensive inome (loss). The amount of ineffetiveness relating to ash flow hedges reognized in inome during the periods presented was not signifiant. our joint ventures may also enter into interest rate swaps or aps, whih are reorded at fair value on the joint venture balane sheets. Inluded in our aumulated other omprehensive inome (loss) as of Deember 31, 2012 and 2011 is our share of the joint ventures aumulated derivative losses of $0.4 million and $14.0 million, respetively. 56 Simon Property Group, In.

59 Fair Value of Debt the arrying value of our variable-rate mortgages and other loans approximates their fair values. We estimate the fair values of onsolidated fixed-rate mortgages using ash flows disounted at urrent borrowing rates and other indebtedness using ash flows disounted at urrent market rates. We estimate the fair values of onsolidated fixed-rate unseured notes using quoted market pries, or, if no quoted market pries are available, we use quoted market pries for seurities with similar terms and maturities. The book value of our onsolidated fixed-rate mortgages and other indebtedness was $21.0 billion and $15.9 billion as of Deember 31, 2012 and 2011, respetively. The fair values of these finanial instruments and the related disount rate assumptions as of Deember 31 are summarized as follows: Fair value of fixed-rate mortgages and other indebtedness $ 23,373 $ 17,905 Weighted average disount rates assumed in alulation of fair value for fixed-rate mortgages 3.24% 3.60% 9. Rentals under Operating Leases Future minimum rentals to be reeived under non-anelable tenant operating leases for eah of the next five years and thereafter, exluding tenant reimbursements of operating expenses and perentage rent based on tenant sales volume as of Deember 31, 2012 are as follows: 2013 $ 2,572, ,363, ,083, ,810, ,524,365 Thereafter 4,079,160 $ 14,433,477 Approximately 0.6% of future minimum rents to be reeived are attributable to leases with an affiliate of a limited partner in the Operating Partnership. 10. Equity Our Board of Diretors is authorized to relassify exess ommon stok into one or more additional lasses and series of apital stok, to establish the number of shares in eah lass or series and to fix the preferenes, onversion and other rights, voting powers, restritions, limitations as to dividends, and qualifiations and terms and onditions of redemption of suh lass or series, without any further vote or ation by the stokholders. The issuane of additional lasses or series of apital stok may have the effet of delaying, deferring or preventing a hange in ontrol of us without further ation of the stokholders. The ability to issue additional lasses or series of apital stok, while providing flexibility in onnetion with possible aquisitions and other orporate purposes, ould have the effet of making it more diffiult for a third party to aquire, or of disouraging a third party from aquiring, a majority of our outstanding voting stok. Holders of our ommon stok are entitled to one vote for eah share held of reord on all matters submitted to a vote of stokholders, other than for the eletion of diretors. The holders of our Class B ommon stok have the right to elet up to four members of the Board of Diretors. All 8,000 outstanding shares of the Class B ommon stok are subjet to two voting trusts as to whih Herbert Simon and David Simon are the trustees. Shares of Class B ommon stok onvert automatially into an equal number of shares of ommon stok upon the ourrene of ertain events and an be onverted into shares of ommon stok at the option of the holders Annual Report 57

60 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) Common Stok Issuanes in 2012, we issued 921,676 shares of ommon stok to 31 limited partners in exhange for an equal number of units pursuant to the partnership agreement of the Operating Partnership. in addition, we issued 5,873,620 shares of ommon stok to The Melvin Simon Family Enterprises Trust in exhange for 6,526,245 units on September 25, We issued 712 shares of ommon stok related to employee stok options exerised during We used the net proeeds from the option exerises to aquire additional units in the Operating Partnership. on Marh 14, 2012, we issued 9,137,500 shares of ommon stok in a publi offering at a prie of $ per share. Proeeds of $1.2 billion from the offering, net of issue osts, were used to fund a portion of the aquisition ost of our equity stake in Klépierre and the Mills transation. on July 20, 2012, the Operating Partnership redeemed 2,000,000 units from a limited partner for $ per unit in ash. on Deember 4, 2012, the Operating Partnership issued 205,335 units in onnetion with the aquisition of the remaining 50% nonontrolling interest in two outlet properties as disussed in Note 4. Temporary Equity We lassify as temporary equity those seurities for whih there is the possibility that we ould be required to redeem the seurity for ash irrespetive of the probability of suh a possibility. As a result, we lassify one series of preferred units of the Operating Partnership and nonontrolling redeemable interests in properties in temporary equity. Eah of these seurities is disussed further below. Limited Partners Preferred Interest in the Operating Partnership and Nonontrolling Redeemable Interests in Properties. The following table summarizes the preferred units of the Operating Partnership and the amount of the nonontrolling redeemable interests in properties as of Deember 31. The redemption features of the preferred units of the Operating Partnership ontain provisions whih ould require us to settle the redemption in ash. As a result, this series of preferred units in the Operating Partnership remains lassified outside permanent equity. The remaining interest in a property or portfolio of properties whih are redeemable at the option of the holder or in irumstanes that may be outside our ontrol, are aounted for as temporary equity within limited partners preferred interest in the Operating Partnership and nonontrolling redeemable interests in properties in the aompanying onsolidated balane sheets. The arrying amount of the nonontrolling interest is adjusted to the redemption amount assuming the instrument is redeemable at the balane sheet date. Changes in the redemption value of the underlying nonontrolling interest are reorded within aumulated defiit. There are no nonontrolling interests redeemable at amounts in exess of fair value % Cumulative Redeemable Preferred Units, 260,000 units authorized, 255,373 issued and outstanding $ 25,537 $ 25,537 Other nonontrolling redeemable interests in properties 152, ,408 Limited partners preferred interest in the Operating Partnership and other nonontrolling redeemable interests in properties $ 178,006 $ 267, % Cumulative Redeemable Preferred Units. This series of preferred units arues umulative quarterly distributions at a rate of $7.50 annually. The Operating Partnership may redeem the preferred units on or after November 10, 2013, or earlier upon the ourrene of ertain tax triggering events suh as death of the initial holder, or the transfer of any units to any person or entity other than the persons or entities entitled to the benefits of the original holder. The redemption prie is the liquidation value ($ per preferred unit) plus arued and unpaid distributions, payable either in ash or fully registered shares of our ommon stok at our eletion. In the event of the death of a holder of the preferred units, the ourrene of ertain tax triggering events appliable to the holder, or on or after November 10, 2006, the holder may require the Operating Partnership to redeem the preferred units at the same redemption prie payable at the option of the Operating Partnership in either ash or shares of ommon stok. 58 Simon Property Group, In.

61 Permanent Equity Preferred Stok. Dividends on all series of preferred stok are alulated based upon the preferred stok s preferred return multiplied by the preferred stok s orresponding liquidation value. The Operating Partnership pays preferred distributions to us equal to the dividends we pay on the preferred stok issued. Series J 8% Cumulative Redeemable Preferred Stok. Dividends arue quarterly at an annual rate of 8% per share. We an redeem this series, in whole or in part, on or after Otober 15, 2027 at a redemption prie of $50.00 per share, plus aumulated and unpaid dividends. This preferred stok was issued at a premium of $7.5 million. The unamortized premium inluded in the arrying value of the preferred stok at Deember 31, 2012 and 2011 was $4.9 million and $5.2 million, respetively. Other Equity Ativity Notes Reeivable from Former CPI Stokholders. Notes reeivable of $15.3 million from stokholders of an entity we aquired in 1998 are refleted as a dedution from apital in exess of par value in the onsolidated statements of equity in the aompanying finanial statements. The notes do not bear interest and beome due at the time the underlying shares are sold. The Simon Property Group 1998 Stok Inentive Plan. This plan, or the 1998 plan, provides for the grant of equity-based awards in the form of options to purhase shares, stok appreiation rights, restrited stok grants and performane unit awards. Options may be granted whih are qualified as inentive stok options within the meaning of Setion 422 of the Internal Revenue Code and options whih are not so qualified. An aggregate of 17,300,000 shares of ommon stok have been reserved for issuane under the 1998 plan. Additionally, the partnership agreement requires us to purhase units for ash in an amount equal to the fair market value of suh shares. Administration. The 1998 plan is administered by the Compensation Committee of the Board of Diretors, or the Compensation Committee. The Compensation Committee determines whih eligible individuals may partiipate and the type, extent and terms of the awards to be granted to them. In addition, the Compensation Committee interprets the 1998 plan and makes all other determinations deemed advisable for its administration. Options granted to employees beome exerisable over the period determined by the Compensation Committee. The exerise prie 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. Awards for Eligible Diretors. Diretors who are not also our employees or employees of our affiliates are eligible to reeive awards under the 1998 plan. Currently, eah eligible diretor reeives on the first day of the first alendar month following his or her initial eletion an award of restrited stok with a value of $82,500 (pro-rated for partial years of servie). Thereafter, as of the date of eah annual meeting of stokholders, eligible diretors who are re-eleted reeive an award of restrited stok having a value of $82,500. In addition, eligible diretors who serve as hairpersons of the standing ommittees reeive an additional annual award of restrited stok having a value of $10,000 (in the ase of the Audit and Compensation Committees) or $7,500 (in the ase of the Governane and Nominating Committees). The Lead Independent Diretor also reeives an annual restrited stok award having a value of $12,500. The restrited stok vests in full after one year. one vested, the delivery of the shares of restrited stok (inluding reinvested dividends) is deferred under our Diretor Deferred Compensation Plan until the diretor retires, dies or beomes disabled or otherwise no longer serves as a diretor. The diretors may vote and are entitled to reeive dividends on the underlying shares; however, any dividends on the shares of restrited stok must be reinvested in shares of ommon stok and held in the deferred ompensation plan until the shares of restrited stok are delivered to the former diretor Annual Report 59

62 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) Stok Based Compensation Awards under our stok based ompensation plans primarily take the form of LTIP units and restrited stok grants. These awards are all performane based and are based on various orporate and business unit performane measures as further desribed below. In the aggregate, we reorded ompensation expense, net of apitalization, related to these stok based ompensation arrangements of approximately $31.8 million, $26.2 million, and $21.5 million for the years ended Deember 31, 2012, 2011 and 2010, respetively, whih is inluded within home and regional offie osts and general and administrative osts in the aompanying statements of operations and omprehensive inome. LTIP Programs. On Marh 16, 2010, the Compensation Committee approved three long-term, performane based inentive ompensation programs, or the 2010 LTIP programs, for ertain senior exeutive offiers. Awards under the LTIP programs take the form of LTIP units, a form of limited partnership interest issued by the Operating Partnership, and will be onsidered earned if, and only to the extent to whih, appliable total shareholder return, or TSR, performane benhmarks, as defined, are ahieved during the performane period. One earned, LTIP units will beome the equivalent of units only after a two year servie-based vesting period, beginning after the end of the performane period. Awarded LTIP units not earned are forfeited. During the performane period, partiipants are entitled to reeive on the LTIP units awarded to them distributions equal to 10% of the regular quarterly distributions paid on a unit of the Operating Partnership. As a result, we aount for these LTIP units as partiipating seurities under the two- lass method of omputing earnings per share. The 2010 LTIP programs had one, two and three year performane periods, whih ended on Deember 31, 2010, 2011 and 2012, respetively. In the first quarter of 2011, the Compensation Committee determined the extent to whih the performane measures were ahieved and 133,673 LTIP units were earned under the one-year 2010 LTIP program and, pursuant to the award agreements, will vest in two equal installments in 2012 and In the first quarter of 2012, the Compensation Committee determined the extent to whih the performane measures were ahieved and 337,006 LTIP units were earned under the two-year 2010 LTIP program and, pursuant to the award agreements, will vest in two equal installments in 2013 and During July 2011, the Compensation Committee approved a new three-year long-term performane based inentive ompensation program, or the LTIP program, and awarded LTIP units to ertain senior exeutive offiers. The LTIP program has a three year performane period ending on Deember 31, During Marh 2012, the Compensation Committee approved a three-year long-term performane based inentive ompensation program, or the LTIP program, and awarded LTIP units to ertain senior exeutive offiers. The LTIP program has a three year performane period ending Deember 31, 2014 and will be onsidered earned if, and only to the extent to whih, appliable TSR performane benhmarks are ahieved during the performane period. One-half of the earned LTIP units will vest on January 1 of eah of the seond and third years following the end of the appliable performane period, subjet to the partiipant maintaining employment with us through those dates. the 2010 LTIP program awards have an aggregate grant date fair value, adjusted for estimated forfeitures, of $7.2 million for the one-year program, $14.8 million for the two-year program and $23.0 million for the three-year program. Both the LTIP program and LTIP program have aggregate grant date fair values of $35.0 million, adjusted for estimated forfeitures. Grant date fair values were estimated based upon the results of a Monte Carlo model, and the resulting expense will be reorded regardless of whether the TSR benhmarks are ahieved, if the required servie is delivered throughout the performane period. The grant date fair values are being amortized into expense over the period from the grant date to the date at whih the awards, if any, beome vested. Restrited Stok. The 1998 plan also provides for shares of restrited stok to be granted to ertain employees at no ost to those employees, subjet to ahievement of ertain finanial and return-based performane measures established by the Compensation Committee related to the most reent year s performane. One granted, the shares of restrited stok then vest annually over a three or four-year period (equally eah year) beginning on January 1 of eah year. The ost of restrited stok grants, whih is based upon the stok s fair market value on the grant date, is harged to earnings ratably over the vesting period. Through Deember 31, 2012 a total of 5,340,313 shares of restrited stok, net of forfeitures, have been awarded under the plan. Information regarding restrited stok awards is summarized in the following table for eah of the years presented: 60 Simon Property Group, In.

63 For the Year Ended Deember 31, Restrited stok awarded during the year, net of forfeitures 114, , ,726 Weighted average fair value of shares granted during the year $ $ $ Amortization expense $ 14,001 $ 14,018 $ 16,839 Other Compensation Arrangements. On July 6, 2011, in onnetion with the exeution of a long-term employment agreement, the Compensation Committee granted David Simon, our Chairman and CEO, a retention award in the form of 1,000,000 LTIP units for his ontinued servie as our Chairman and Chief Exeutive Offier through July 5, The award vests in one-third inrements on July 5th of 2017, 2018 and 2019, subjet to ontinued employment. The grant date fair value of the retention award was $120.3 million whih is being reognized as expense over the eight-year term of his employment agreement on a straight-line basis. information relating to employee options from Deember 31, 2009 through Deember 31, 2012 is as follows: Weighted average exerise Prie Options Per Share Shares under option at Deember 31, ,682 $ Granted (1) exerised (none were forfeited during the period) (178,683) Shares under option at Deember 31, ,999 $ Granted exerised (none were forfeited during the period) (324,720) Shares under option at Deember 31, ,279 $ Granted exerised (none were forfeited during the period) (712) Shares under option at Deember 31, ,567 $ (1) Sine 2001, we have not granted any options to offiers, diretors or employees, exept for a series of reload options we assumed as part of a prior business ombination. All 1,567 options outstanding at Deember 31, 2012, are exerisable and have an exerise prie of $50.17 and a weighted average life of 1.17 years. We also maintain a tax-qualified retirement 401(k) savings plan and offer no other post-retirement or post-employment benefits to our employees. Exhange Rights Limited partners in the Operating Partnership have the right to exhange all or any portion of their units for shares of ommon stok on a one-for-one basis or ash, as determined by the Board of Diretors. The amount of ash to be paid if the exhange right is exerised and the ash option is seleted will be based on the trading prie of our ommon stok at that time. At Deember 31, 2012, we had reserved 58,151,188 shares of ommon stok for possible issuane upon the exhange of units, stok options and Class B ommon stok. 11. Commitments and Contingenies Litigation We are involved from time-to-time in various legal proeedings that arise in the ordinary ourse of our business, inluding, but not limited to ommerial disputes, environmental matters, and litigation in onnetion with transations inluding aquisitions and divestitures. We believe that suh litigation, laims and administrative proeedings will not have a material adverse impat on our finanial position or our results of operations. We reord a liability when a loss is onsidered probable and the amount an be reasonably estimated Annual Report 61

64 Notes to Consolidated Finanial Statements (Dollars in thousands, exept share and per share amounts and where indiated as in millions or billions) In May 2010, Opry Mills sustained signifiant flood damage. Insurane proeeds of $50 million have been funded by the insurers and remediation work has been ompleted. The property was re-opened Marh 29, The exess insurane arriers (those providing overage above $50 million) have denied the laim under the poliy for additional proeeds (of up to $150 million) to pay further amounts for restoration osts and business interruption losses. We and our lenders are ontinuing our efforts through pending litigation to reover our losses under the exess insurane poliies for Opry Mills and we believe reovery is probable, but no assuranes an be made that our efforts to reover these funds will be suessful. Lease Commitments As of Deember 31, 2012, a total of 28 of the onsolidated properties are subjet to ground leases. The termination dates of these ground leases range from 2013 to These ground leases generally require us to make fixed annual rental payments, or a fixed annual rental plus a perentage rent omponent based upon the revenues or total sales of the property. Some of these leases also inlude esalation lauses and renewal options. We inurred ground lease expense, whih is inluded in other expense, as follows: For the Year Ended Deember 31, Ground lease expense $ 43,421 $ 42,284 $ 36,750 Future minimum lease payments due under these ground leases for years ending Deember 31, exluding appliable extension options, are as follows: 2013 $ 26, , , , ,106 Thereafter 889,307 $ 1,031,577 Insurane We maintain insurane overage with third party arriers who provide a portion of the overage for speifi layers of potential losses inluding ommerial general liability, fire, flood, extended overage and rental loss insurane on all of our properties in the United States. The initial portion of overage not provided by third party arriers is either insured through our whollyowned aptive insurane ompanies, Rosewood Indemnity, Ltd. and Bridgewood Insurane Company, Ltd., or other finanial arrangements ontrolled by us. The third party arrier has, in turn, agreed to provide evidene of overage for this layer of losses under the terms and onditions of the arrier s poliy. A similar poliy written through our aptive insurane entities also provides initial overage for property insurane and ertain windstorm risks at the properties loated in oastal windstorm loations. We urrently maintain insurane overage against ats of terrorism on all of our properties in the United States on an all risk basis in the amount of up to $1 billion. The urrent federal laws whih provide this overage are expeted to operate through Despite the existene of this insurane overage, any threatened or atual terrorist attaks where we operate ould adversely affet our property values, revenues, onsumer traffi and tenant sales. Guarantees of Indebtedness Joint venture debt is the liability of the joint venture and is typially seured by the joint venture property, whih is non-reourse to us. As of Deember 31, 2012 and 2011, the Operating Partnership guaranteed joint venture related mortgage or other indebtedness of $84.9 million and $30.2 million, respetively. Mortgages guaranteed by us are seured by the property of the joint venture and that property ould be sold in order to satisfy the outstanding obligation. Conentration of Credit Risk our malls, Premium Outlets, The Mills, and ommunity/lifestyle enters rely heavily upon anhor tenants to attrat ustomers; however, anhor retailers do not ontribute materially to our finanial results as many anhor retailers own their spaes. All material operations are within the United States and no ustomer or tenant aounts for 5% or more of our onsolidated revenues. 62 Simon Property Group, In.

65 Limited Life Partnerships We are the ontrolling partner in several onsolidated partnerships that have a limited life. We estimated the settlement values of these nonontrolling interests as of Deember 31, 2012 and 2011 as approximately $143 million and $140 million, respetively. The settlement values are based on the estimated fair values upon a hypothetial liquidation of the partnership interests and estimated yield maintenane or prepayment penalties assoiated with the payment to settle any underlying seured mortgage debt. 12. related Party Transations our management ompany provides management, insurane, and other servies to Melvin Simon & Assoiates, In., a related party, unonsolidated joint ventures, and other non-owned properties. Amounts for servies provided by our management ompany and its affiliates to our unonsolidated joint ventures and other related parties were as follows: For the Year Ended Deember 31, Amounts harged to unonsolidated joint ventures $ 119,534 $ 125,306 $ 118,905 Amounts harged to properties owned by related parties 4,416 4,353 4,308 During 2012, 2011 and 2010, we reorded interest inome of $2.0 million, $9.8 million and $9.9 million, respetively, net of inter-entity eliminations, related to the loans that we have provided to TMLP and SPG-FCM. In addition, during 2012, 2011 and 2010, we reorded development, royalty and other fees related to our international investments of $15.5 million, $12.3 million, and $10.8 million, respetively, whih is inluded in other inome in the aompanying onsolidated statements of operations and omprehensive inome. 13. quarterly Finanial Data (Unaudited) Quarterly 2012 and 2011 data is summarized in the table below. Quarterly amounts may not sum to annual amounts due to rounding. first Seond Third Fourth Q quarter Quarter Quarter Quarter 2012 Total revenue $ 1,118,969 $ 1,188,066 $1,228,617 $ 1,344,431 Operating inome 516, , , ,598 Consolidated net inome 781, , , ,496 Net inome attributable to ommon stokholders 645, , , ,383 Net inome per share Basi $ 2.18 $ 0.71 $ 0.84 $ 1.01 Net inome per share Diluted $ 2.18 $ 0.71 $ 0.84 $ 1.01 Weighted average shares outstanding 295,693, ,252, ,107, ,137,350 Diluted weighted average shares outstanding 295,694, ,253, ,108, ,138, Total revenue $ 1,019,874 $ 1,040,861 $ 1,074,360 $ 1,171,337 Operating inome 451, , , ,389 Consolidated net inome 219, , , ,931 Net inome attributable to ommon stokholders 179, , , ,930 Net inome per share Basi $ 0.61 $ 0.70 $ 0.93 $ 1.24 Net inome per share Diluted $ 0.61 $ 0.70 $ 0.93 $ 1.24 Weighted average shares outstanding 293,080, ,367, ,735, ,821,920 Diluted weighted average shares outstanding 293,290, ,402, ,758, ,832, Annual Report 63

66 Total Return Performane Deember 31, 2007 to Deember 31, 2012 $225 $200 $175 m Simon Property Group, In. m FTSE NAREIT Equity REIT Index m S&P 500 Index m m $150 $125 $100 $75 $50 m m m m m m m m m m m 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/ Compound Year End annual Annual Return Return 3 Year 5 Year Simon Property Group, In $ 100 $ $ $ $ $ % 29.3% 17.0% FTSE NAREIT Equity REIT Index $ 100 $ $ $ $ $ % 17.8% 5.5% S&P 500 Index $ 100 $ $ $ $ $ % 10.9% 1.7% The line graph above ompares the perentage hange in the umulative total shareholder return on our ommon stok as ompared to the umulative total return of the S&P 500 Index and the FTSE NAREIT Equity REIT Index for the period Deember 31, 2007 through Deember 31, The graph assumes an investment of $100 on Deember 31, 2007, a reinvestment of dividends and atual inrease in the market value of the ommon stok relative to an initial investment of $100. The omparisons in this table are required by the Seurities and Exhange Commission and are not intended to foreast or be indiative of possible future performane. 64 Simon Property Group, In.

67 Properties at Deember 31, 2012 Malls Alaska Anhorage 5th Avenue Mall M, Anhorage Arkansas MCain Mall, N. Little Rok California Brea Mall, Brea (Los Angeles) Coddingtown Mall, Santa Rosa Del Amo Fashion Center, torrane (Los Angeles) Fashion Valley, San Diego Laguna Hills Mall, Laguna Hills (Los Angeles) Santa Rosa Plaza, Santa Rosa Shops at Mission Viejo, The, mission Viejo (Los Angeles) Shops at Montebello M, The, montebello (Los Angeles) Stanford Shopping Center, Palo Alto (San Jose) Stoneridge Shopping Center, Pleasanton (San Franiso) Westminster Mall, Westminster (Los Angeles) Colorado Mesa Mall, Grand Juntion Town Center at Aurora, Aurora (Denver) Connetiut Crystal Mall, Waterford Delaware Dover Mall, Dover Florida Aventura Mall, Miami Beah (Miami) Avenues, The, Jaksonville Boynton Beah Mall, Boynton Beah (Miami) Coonut Point, Estero Coral Square, Coral Springs (Miami) Cordova Mall, Pensaola Dadeland Mall, Miami Edison Mall, Fort Myers Falls, The, Miami Florida Mall, The, Orlando Gulf View Square, Port Rihey (Tampa) Indian River Mall, Vero Beah Melbourne Square, Melbourne Miami International Mall, Miami Orange Park Mall, Orange Park (Jaksonville) Paddok Mall, Oala Port Charlotte Town Center, Port Charlotte Seminole Towne Center, Sanford (Orlando) Shops at Sunset Plae, The, South Miami St. Johns Town Center, Jaksonville Town Center at Boa Raton, Boa Raton (Miami) Treasure Coast Square, Jensen Beah Tyrone Square, St. Petersburg (Tampa) Georgia Lenox Square, Atlanta Mall of Georgia, Buford (Atlanta) Northlake Mall, Atlanta Phipps Plaza, Atlanta Town Center at Cobb, Kennesaw (Atlanta) Illinois Linolnwood Town Center, Linolnwood (Chiago) Northfield Square, Bourbonnais Northwoods Mall, Peoria Orland Square, Orland Park (Chiago) River Oaks Center, Calumet City (Chiago) White Oaks Mall, Springfield Woodfield Mall, Shaumburg (Chiago) Indiana Castleton Square, Indianapolis Cirle Centre, Indianapolis College Mall, Bloomington Fashion Mall at Keystone, The, Indianapolis Greenwood Park Mall, Greenwood (Indianapolis) Markland Mall, Kokomo Munie Mall, Munie Tippeanoe Mall, Lafayette University Park Mall, Mishawaka Washington Square, Indianapolis Iowa Lindale Mall, Cedar Rapids Southern Hills Mall, Sioux City Kansas Towne East Square, Wihita Towne West Square, Wihita West Ridge Mall, Topeka Louisiana Prien Lake Mall, Lake Charles Maine Bangor Mall, Bangor Maryland Bowie Town Center, Bowie (Washington, D.C.) St. Charles Towne Center, Waldorf (Washington, D.C.) Massahusetts Arsenal Mall, Watertown (Boston) Auburn Mall, Auburn Burlington Mall, Burlington (Boston) Cape Cod Mall, Hyannis Copley Plae, Boston Emerald Square, North Attleboro (Providene, RI) Greendale Mall, Worester (Boston) Liberty Tree Mall, Danvers (Boston) Mall at Chestnut Hill, The, hestnut Hill (Boston) Northshore Mall, Peabody (Boston) Solomon Pond Mall, Marlborough (Boston) South Shore Plaza, Braintree (Boston) Square One Mall, Saugus (Boston) Mihigan Briarwood Mall, Ann Arbor Novi Town Center M, Novi (Detroit) Minnesota Maplewood Mall, St. Paul (Minneapolis) Miller Hill Mall, Duluth Southdale Center, Edina (Minneapolis) Missouri Battlefield Mall, Springfield Independene Center, independene (Kansas City) Nevada Forum Shops at Caesars, The, Las Vegas Meadowood Mall, Reno New Hampshire Fox Run Mall M, Newington (Boston, MA) Mall at Rokingham Park, The, Salem (Boston) Mall of New Hampshire, The, Manhester Pheasant Lane Mall, Nashua New Jersey Brunswik Square, East Brunswik (New York) Livingston Mall, Livingston (New York) Menlo Park Mall, Edison (New York) Newport Centre M, Jersey City (New York) Oean County Mall, Toms River (New York) Quaker Bridge Mall, Lawreneville Rokaway Townsquare, Rokaway (New York) Shops at Riverside, The, Hakensak (New York) New Mexio Cottonwood Mall, Albuquerque New York Chautauqua Mall, Lakewood Jefferson Valley Mall, yorktown Heights (New York) Roosevelt Field, Garden City (New York) Smith Haven Mall, Lake Grove (New York) Walt Whitman Shops, Huntington Station (New York) Westhester, The, White Plains (New York) North Carolina SouthPark, Charlotte Ohio Great Lakes Mall, Mentor (Cleveland) Lima Mall, Lima Mall at Tuttle Crossing, The, Dublin (Columbus) Rihmond Town Square, rihmond Heights (Cleveland) Southern Park Mall, Youngstown Summit Mall, Akron Upper Valley Mall, Springfield Oklahoma Penn Square Mall, Oklahoma City Woodland Hills Mall, Tulsa Pennsylvania King of Prussia The Pavilion M, King of Prussia (Philadelphia) King of Prussia Mall, King of Prussia (Philadelphia) Lehigh Valley Mall, Whitehall Montgomery Mall, North Wales (Philadelphia) Oxford Valley Mall, Langhorne (Philadelphia) Ross Park Mall, Pittsburgh South Hills Village, Pittsburgh Springfield Mall, Springfield (Philadelphia) Puerto Rio Plaza Carolina, Carolina (San Juan) 2012 Annual Report 65

68 Properties at Deember 31, 2012 South Carolina Anderson Mall, Anderson Haywood Mall, Greenville South Dakota Empire Mall, Sioux Falls Rushmore Mall, Rapid City Tennessee Knoxville Center, Knoxville Oak Court Mall, Memphis West Town Mall, Knoxville Wolfhase Galleria, Memphis Texas Barton Creek Square, Austin Broadway Square, Tyler Cielo Vista Mall, El Paso Domain, The, Austin Firewheel Town Center, Garland (Dallas) Galleria Dallas M, Dallas Galleria, The, Houston Ingram Park Mall, San Antonio Irving Mall, Irving (Dallas) La Plaza Mall, MAllen Lakeline Mall, Cedar Park (Austin) Longview Mall, Longview Midland Park Mall, Midland North East Mall, Hurst (Dallas) Rolling Oaks Mall, San Antonio Sunland Park Mall, El Paso Valle Vista Mall, Harlingen Virginia Apple Blossom Mall, Winhester Charlottesville Fashion Square, Charlottesville Chesapeake Square, Chesapeake (Virginia Beah) Fashion Centre at Pentagon City, the, Arlington (Washington, D.C.) Virginia Center Commons, Glen Allen Washington Columbia Center, Kennewik Northgate Mall, Seattle Taoma Mall, Taoma (Seattle) Wisonsin Bay Park Square, Green Bay Forest Mall, Fond Du La Southridge Mall, Greendale (Milwaukee) Premium Outlets California Camarillo Premium Outlets, amarillo (Los Angeles) Carlsbad Premium Outlets, arlsbad (San Diego) Desert Hills Premium Outlets, abazon (Palm Springs) Folsom Premium Outlets, Folsom (Saramento) Gilroy Premium Outlets, Gilroy (San Jose) Las Amerias Premium Outlets, San Diego Livermore Premium Outlets, Livermore (San Franiso) Napa Premium Outlets, Napa Petaluma Village Premium Outlets, Petaluma (San Franiso) Pismo Beah Premium Outlets, Pismo Beah Vaaville Premium Outlets, Vaaville Connetiut Clinton Crossing Premium Outlets, Clinton Florida Ellenton Premium Outlets, ellenton (Tampa) Orlando Premium Outlets International Dr, Orlando Orlando Premium Outlets Vineland Ave, Orlando Silver Sands Premium Outlets, Destin St. Augustine Premium Outlets, St. Augustine (Jaksonsville) Georgia Calhoun Premium Outlets, Calhoun North Georgia Premium Outlets, Dawsonville (Atlanta) Hawaii Waikele Premium Outlets, Waipahu (Honolulu) Illinois Chiago Premium Outlets, Aurora (Chiago) Indiana Edinburgh Premium Outlets, edinburgh (Indianapolis) Lighthouse Plae Premium Outlets, mihigan City (Chiago, IL) Maine Kittery Premium Outlets, Kittery Maryland Hagerstown Premium Outlets, Hagerstown (Baltimore/ Washington, D.C.) Queenstown Premium Outlets, Queenstown (Baltimore) Massahusetts Lee Premium Outlets, Lee Wrentham Village Premium outlets, Wrentham (Boston) Mihigan Birh Run Premium Outlets, Birh Run (Detroit) Minnesota Albertville Premium Outlets, Albertville (Minneapolis) Mississippi Gulfport Premium Outlets, Gulfport Missouri Osage Beah Premium Outlets, osage Beah Nevada Las Vegas Premium Outlets north, Las Vegas Las Vegas Premium Outlets South, Las Vegas New Hampshire Merrimak Premium Outlets, Merrimak New Jersey Jakson Premium Outlets, Jakson (New York) Jersey Shore Premium Outlets, tinton Falls (New York) Liberty Village Premium Outlets, Flemington (New York) New York Waterloo Premium Outlets, Waterloo Woodbury Common Premium outlets, Central Valley (New York) North Carolina Carolina Premium Outlets, Smithfield (Raleigh) Ohio Aurora Farms Premium Outlets, Aurora (Cleveland) Cininnati Premium Outlets, monroe (Cininnati) Oregon Columbia Gorge Premium Outlets, troutdale (Portland) Pennsylvania Grove City Premium Outlets, Grove City (Pittsburgh) Philadelphia Premium Outlets, Limerik (Philadelphia) The Crossings Premium Outlets, Tannersville Puerto Rio Puerto Rio Premium Outlets, Bareloneta South Carolina Gaffney Premium Outlets, Gaffney (Greenville/Charlotte) Tennessee Lebanon Premium Outlets, Lebanon (Nashville) Texas Allen Premium Outlets, Allen (Dallas) Grand Prairie Premium Outlets, Grand Prairie (Dallas) Houston Premium Outlets, ypress (Houston) Rio Grande Valley Premium Outlets, meredes (MAllen) Round Rok Premium Outlets, round Rok (Austin) San Maros Premium Outlets, San Maros (Austin/San Antonio) Tanger Outlets Galveston/Houston (Texas City) Virginia Leesburg Corner Premium Outlets, Leesburg (Washington, D.C.) Williamsburg Premium Outlets, Williamsburg Washington North Bend Premium Outlets, north Bend (Seattle) Seattle Premium Outlets, Tulalip (Seattle) Wisonsin Johnson Creek Premium Outlets, Johnson Creek Pleasant Prairie Premium Outlets, Pleasant Prairie (Chiago, IL/ Milwaukee) The Mills Arizona Arizona Mills, Tempe (Phoenix) California Great Mall, Milpitas (San Jose) Ontario Mills, Ontario (Riverside) Outlets at Orange, The, Orange (Los Angeles) 66 Simon Property Group, In.

69 Colorado Colorado Mills, Lakewood (Denver) Florida Sawgrass Mills, Sunrise (Miami) Illinois Gurnee Mills, Gurnee (Chiago) Maryland Arundel Mills, Hanover (Baltimore) North Carolina Conord Mills, Conord (Charlotte) Tennessee Opry Mills, Nashville Texas Grapevine Mills, Grapevine (Dallas) Katy Mills, Katy (Houston) Virginia Potoma Mills, Woodbridge (Washington, D.C.) Community/Lifestyle Centers Colorado Denver West Village, Lakewood (Denver) Connetiut Plaza at Bukland Hills, The, Manhester Florida Gaitway Plaza, Oala Highland Lakes Center, Orlando Indian River Commons, Vero Beah Naples Outlet Center, Naples Pier Park, Panama City Beah Royal Eagle Plaza, Coral Springs (Miami) Terrae at The Florida Mall, Orlando Waterford Lakes Town Center, Orlando West Town Corners, Altamonte Springs (Orlando) Westland Park Plaza, Orange Park (Jaksonville) Georgia Mall of Georgia Crossing, Buford (Atlanta) Illinois Bloomingdale Court, Bloomingdale (Chiago) Countryside Plaza, Countryside (Chiago) Crystal Court, Crystal Lake (Chiago) Forest Plaza, Rokford Lake Plaza, Waukegan (Chiago) Lake View Plaza, Orland Park (Chiago) Linoln Crossing, O Fallon (St. Louis) Matteson Plaza, Matteson (Chiago) North Ridge Plaza, Joliet (Chiago) White Oaks Plaza, Springfield Willow Knolls Court, Peoria Indiana Clay Terrae, Carmel (Indianapolis) Greenwood Plus, Greenwood (Indianapolis) Hamilton Town Center, Noblesville (Indianapolis) Keystone Shoppes, Indianapolis Markland Plaza, Kokomo Munie Towne Plaza, Munie New Castle Plaza, New Castle Northwood Plaza, Fort Wayne Tippeanoe Plaza, Lafayette University Center, Mishawaka Village Park Plaza, Carmel (Indianapolis) Washington Plaza, Indianapolis Kansas West Ridge Plaza, Topeka Maryland Arundel Mills Marketplae, Hanover (Baltimore) St. Charles Towne Plaza, Waldorf (Washington, D.C.) Mississippi Ridgewood Court, Jakson Missouri Regeny Plaza, St. Charles (St. Louis) New Jersey Newport Crossing M, Jersey City (New York) Newport Plaza M, Jersey City (New York) Rokaway Commons, Rokaway (New York) Rokaway Town Plaza, Rokaway (New York) New Mexio ABQ Uptown, Albuquerque New York Cobblestone Court, Vitor North Carolina Conord Mills Marketplae, onord (Charlotte) Dare Centre, Kill Devil Hills MaGregor Village, Cary North Ridge Shopping Center, Raleigh Ohio Great Lakes Plaza, Mentor (Cleveland) Lima Center, Lima Pennsylvania DeKalb Plaza, King of Prussia (Philadelphia) Henderson Square, King of Prussia (Philadelphia) Linoln Plaza, King of Prussia (Philadelphia) Whitehall Mall, Whitehall South Carolina Charles Towne Square, Charleston South Dakota Empire East, Sioux Falls Texas Arboretum, Austin Gateway Center, Austin Lakeline Plaza, Cedar Park (Austin) Palms Crossing, MAllen Rihardson Square, Rihardson (Dallas) Shops at Arbor Walk, The, Austin Shops at North East Mall, The, Hurst (Dallas) Wolf Ranh, Georgetown (Austin) Virginia Chesapeake Center, Chesapeake (Virginia Beah) Fairfax Court, Fairfax (Washington, D.C.) Martinsville Plaza, Martinsville Other California Hilltop Mall, Rihmond (San Franiso) Florida Florida Keys Outlet Center, Florida City Outlet Marketplae, Orlando University Town Plaza (1), Pensaola Georgia Sugarloaf Mills, Lawreneville (Atlanta) Illinois Huntley Outlet Center, Huntley Indiana Claypool Court M, Indianapolis Louisiana Esplanade, The, Kenner (New Orleans) Maryland Marley Station, Glen Burnie (Baltimore) Mississippi Northpark Mall, Ridgeland Missouri Shoppes at Branson Meadows, the, Branson Fatory Stores of Ameria, Lebanon New York Galleria at White Plains, The, White Plains (New York) Shops at Nanuet, The (1), nanuet (New York) Pennsylvania Franklin Mills, Philadelphia Liberty Plaza, Philadelphia International Premium Outlets Japan Ami Premium Outlets, Ami (Tokyo) Gotemba Premium Outlets, Gotemba City (Tokyo) Kobe-Sanda Premium Outlets, Kobe (Osaka) Rinku Premium Outlets, Izumisano (Osaka) Sano Premium Outlets, Sano (Tokyo) Sendai Izumi Premium Outlets, izumi Park Town (Sendai) Toki Premium Outlets, Toki (Nagoya) Tosu Premium Outlets, Fukuoka (Kyushu) Korea Paju Premium Outlets, Paju (Seoul) Yeoju Premium Outlets, Yeoju (Seoul) Malaysia Johor Premium Outlets, Johor (Singapore) Mexio Premium Outlets Punta Norte, mexio City M Managed by Simon (not owned) (1) Center is undergoing a major redevelopment 2012 Annual Report 67

70 Board of Diretors Melvyn E. Bergstein Former Chairman of Diamond Management & Tehnology Consultants, In. ( Diamond ), a management and advisory firm, from 2006 until 2010 at whih time Diamond was sold to PriewaterhouseCoopers LLC. Mr. Bergstein previously served as Chairman and Chief Exeutive Offier of Diamond and its predeessors, Diamondluster, In. and Diamond Tehnology Partners, In. sine its founding in From 1968 to 1989, Mr. Bergstein served in several apaities with Arthur Andersen & Co. s onsulting division (now Aenture). Diretor sine Age 71 Larry C. Glassok Former Chairman of WellPoint, In., a healthare insurane ompany, from 2005 to Mr. Glassok also served as President and Chief Exeutive Offier of WellPoint, In. from 2004 to Mr. Glassok served as Chairman, President and Chief Exeutive Offier of Anthem, In. from 2003 to 2004 and served as President and Chief Exeutive Offier of Anthem, In. from 2001 to Mr. Glassok serves as a diretor of Zimmer Holdings, In., Sprint Nextel Corporation and Syso Corporation. Diretor sine Age 64 Karen N. Horn, Ph.D. Retired President, Global Private Client Servies and Managing Diretor, Marsh, In., a subsidiary of MMC, having served in these positions from 1999 to Prior to joining Marsh, she was Senior Managing Diretor and Head of International Private Banking at Bankers Trust Company; Chairman and Chief Exeutive Offier, Bank One, Cleveland, N.A.; President of the Federal Reserve Bank of Cleveland; Treasurer of Bell of Pennsylvania; and Vie President of First National Bank of Boston. Ms. Horn has served as Senior Managing Diretor of Brok Capital Group, a orporate advisory and investment banking firm, sine 2003 and serves as a diretor of Eli Lilly and Company, Norfolk Southern Corporation and T. Rowe Prie Mutual Funds. She is also Vie Chairman of the U.S. Russia Foundation, and a diretor of the National Bureau of Eonomi Researh. Diretor sine Age 69 Allan Hubbard Co-Founder and Chief Exeutive Offier of E&A Industries, In., a privately-held holding ompany whih aquires and operates established manufaturing ompanies. Mr. Hubbard served as Assistant to the President for Eonomi Poliy and diretor of the National Eonomi Counil for the George W. Bush administration. He also served as Exeutive Diretor of the President s Counil of Competitiveness for the George H.W. Bush administration. Mr. Hubbard serves as a diretor of PIMCO Equity Series and PIMCO Equity Series VIT. Diretor sine Age 65 Reuben S. Leibowitz Managing Member of JEN Partners, a private equity firm, sine Mr. Leibowitz was a Managing Diretor of Warburg Pinus from 1984 to He serves as a diretor of AV Homes In. Mr. Leibowitz was a diretor of Chelsea Property Group, In. from 1993 until it was aquired by the Company in Diretor sine Age 65 David Simon Chairman of the Board of Simon Property Group, In. sine 2007 and Chief Exeutive Offier of the Company sine Mr. Simon was President of the Company from 1993 to Prior to joining Simon, he was Vie President of Wasserstein Perella & Company from 1988 to 1990 and an Assoiate at First Boston Corp. from 1985 to Diretor sine Age 51 Herbert Simon Chairman Emeritus of the Board of Simon Property Group, In. sine Mr. Simon was Co-Chairman of the Board of Diretors from 1995 to 2007 and Chief Exeutive Offier of the Company from 1993 to Mr. Simon serves as a diretor of The Cheeseake Fatory Inorporated. He also serves on the Board of Governors for the National Basketball Assoiation and as Chairman of the Board of Diretors of Melvin Simon & Assoiates, In., the predeessor ompany he founded in 1960 with his brother, Melvin Simon. Diretor sine Age Simon Property Group, In.

71 Daniel C. Smith, Ph.D. President and Chief Exeutive Offier of the Indiana University Foundation sine 2012 and Professor of Marketing, Kelley Shool of Business, Indiana University. Mr. Smith joined the faulty of the Kelley Shool of Business in 1996 and served as Dean from 2005 to During his tenure at Indiana, Mr. Smith has also served as Chair of the MBA Program, Chair of the Marketing Department and Assoiate Dean of Aademi Affairs. Diretor sine Age 55 J. Albert Smith, Jr. President of Chase Bank in Central Indiana and Managing Diretor of JPMorgan Private Bank sine Mr. Smith was President of Bank One Central Indiana from 2001 to 2005; Managing Diretor of Bank One Corporation from 1998 to 2001; President of Bank One, Indiana, NA from 1994 to 1998; and President of Ban One Mortgage Corporation from 1974 to Diretor sine Age 72 Rihard S. Sokolov President and Chief Operating Offier of Simon Property Group, In. sine Mr. Sokolov was President and Chief Exeutive Offier of DeBartolo Realty Corporation from 1994 to Mr. Sokolov joined its predeessor, The Edward J. DeBartolo Corporation, in 1982 as Vie President and General Counsel and was named Senior Vie President, Development and General Counsel in Diretor sine Age 63 Audit Committee: J. Albert Smith, Jr., Chairman, Melvyn E. Bergstein, Larry C. Glassok, Reuben S. Leibowitz Compensation Committee: Reuben S. Leibowitz, Chairman, Melvyn E. Bergstein, Allan Hubbard, Daniel C. Smith, Ph.D. Governane and Nominating Committee: Karen N. Horn, Ph.D., Chairman, Larry C. Glassok, Allan Hubbard, Daniel C. Smith, Ph.D. Lead Independent Diretor: J. Albert Smith, Jr Annual Report 69

72 Exeutive Offiers and members of Senior Management Exeutive Offiers David Simon Chairman and Chief Exeutive Offier Rihard S. Sokolov Diretor, President and Chief Operating Offier James M. Barkley Seretary and General Counsel Stephen E. Sterrett Senior Exeutive Vie President and Chief Finanial Offier John Rulli Senior Exeutive Vie President and Chief Administrative Offier Andrew Juster Exeutive Vie President and Treasurer Steven E. Fivel Assistant General Counsel and Assistant Seretary Malls David J. Contis* Senior Exeutive Vie President and President Mihael E. MCarty Exeutive Vie President Development Gary Lewis Senior Exeutive Vie President Leasing Brue Tobin Senior Exeutive Vie President Leasing Viki Hanor Exeutive Vie President Leasing Buth Knerr Exeutive Vie President Leasing Barney Quinn Exeutive Vie President Leasing Sharon Polonia Exeutive Vie President Leasing Timothy G. Earnest Exeutive Vie President Management David L. Campbell Senior Vie President Finane * Also an Exeutive Offier Premium Outlets John R. Klein President Mark J. Silvestri Exeutive Vie President Development Rihard N. Lewis Exeutive Vie President Leasing Leslie Swanson Senior Vie President Management The Mills Gregg M. Goodman President Gary Dunan Exeutive Vie President Leasing Paul C. Fikinger Exeutive Vie President Management Community/Lifestyle Centers Myles H. Minton President Kevin A. Sims Senior Vie President Development Paul S. Ajdaharian Senior Vie President Leasing Corporate Mikael Thygesen Chief Marketing Offier and President Simon Brand Ventures Steven K. Broadwater Senior Vie President and Chief Aounting Offier Lawrene J. Krema Senior Vie President Human Resoures and Corporate Operations Matthew Lentz Senior Vie President Investments David Shaht Senior Vie President and Chief Information Offier Stanley Shashoua Senior Vie President International Brian J. Warnok Senior Vie President Aquisitions and Finanial Analysis 70 Simon Property Group, In.

73 Investor Information Corporate Headquarters Simon Property Group, In. 225 West Washington Street Indianapolis, IN Transfer Agent and Registrar Computershare, our transfer agent, maintains the reords for our registered stokholders and an assist you with a variety of stokholder servies inluding address hanges, ertifiate replaement/transfer and dividends. Stokholder orrespondene should be mailed to: Computershare P.O. Box Providene, RI Overnight orrespondene should be mailed to: Computershare 250 Royall Street Canton, MA or (Outside the U.S.) (TDD for Hearing Impaired) Diret Stok Purhase/Dividend Reinvestment Program Computershare administers a diret stok purhase and dividend reinvestment plan that allows interested investors to purhase Simon Property Group stok diretly, rather than through a broker, and beome a registered stokholder of the Company. The program offers many features inluding dividend reinvestment. For detailed information regarding this program, please ontat our transfer agent, Computershare or Stokholder Inquiries Shelly J. Doran Vie President of Investor Relations [email protected] Counsel Faegre Baker Daniels LLP Indianapolis, IN Wahtell, Lipton, Rosen & Katz New York, NY Independent Registered Publi Aounting Firm Ernst & Young LLP Indianapolis, IN Annual Report on Form 10-K A opy of the Simon Property Group, In. annual report on Form 10-K to the United States Seurities and Exhange Commission an be obtained free of harge by: Contating the Company s Investor Relations Department via written request or telephone, or Aessing the Finanial Information page of the Company s website at (Investors) Annual Meeting The Annual Meeting of Stokholders of Simon Property Group, In. will be held on Tuesday, May 14, 2013 at 225 W. Washington St., Indianapolis, IN, at 8:30 a.m., loal time. Website Information suh as finanial results, orporate announements, dividend news and orporate governane is available on Simon s website: (Investors) Member of National Assoiation of Real Estate Investment Trusts 2012 Annual Report 71

74 Investor Information Company Seurities Simon Property Group, In. ommon stok and one issue of preferred stok are traded on the New York Stok Exhange ( NYSE ) under the following symbols: Common Stok SPG 8.375% Series J Cumulative Preferred SPGPrJ The quarterly prie range on the NYSE for the ommon stok and the dividends delared per share for eah quarter in the last two fisal years are shown below: Delared High Low Close Dividends First Quarter 2012 $ $ $ $ 0.95 Seond Quarter Third Quarter Fourth Quarter Delared High Low Close Dividends First Quarter 2011 $ $ $ $ 0.80 Seond Quarter Third Quarter Fourth Quarter West Washington Street, Indianapolis, IN Simon Property Group ommon stok is traded under the tiker symbol SPG on the New York Stok Exhange. Simon is a trademark of Simon Property Group, L.P. Design and Prodution by 72 Simon Property Group, In.

75 2012 Annual Report 73

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