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Simon Property Group announces Q4 results, quarterly dividends, provides 2009 guidance

INDIANAPOLIS, Ind. — Simon Property Group, Inc. (NYSE: SPG) today announced results for the quarter and twelve months ended December 31, 2008:

  • Funds from operations (“FFO”) for the quarter increased 6.5% to $540.5 million from $507.7 million in the fourth quarter of 2007. On a diluted per share basis the increase was 5.7% to $1.86 from $1.76 in 2007. Included in fourth quarter 2008 FFO was an impairment charge of $21.2 million, or $0.07 per share, related to the write-off of certain predevelopment projects that have been abandoned and the write-down of an operating asset to its estimated net realizable value.
  • FFO for the twelve months increased 9.5% to $1.852 billion from $1.692 billion in 2007. On a diluted per share basis the increase was 8.8% to $6.42 from $5.90 in 2007.
  • Net income available to common stockholders for the quarter increased 28.6% to $145.2 million from $112.9 million in the fourth quarter of 2007. On a diluted per share basis the increase was 25.5% to $0.64 from $0.51 in 2007.
  • Net income available to common stockholders for the twelve months decreased 3.1% to $422.5 million from $436.2 million in 2007. On a diluted per share basis the decrease was 4.1% to $1.87 from $1.95 in 2007.

“We are very pleased to report such strong performance, especially in these difficult economic times. It is a testament to our high quality portfolio and strong balance sheet that we delivered FFO growth of 8.8% for the year,” said David Simon, Chairman and Chief Executive Officer. “We recognized well over a year ago that the economy was deteriorating and adopted aggressive cost control measures, significantly reduced our development spending, and enhanced our liquidity position. The retail environment has been and will continue to be challenging in the upcoming months, however, we are experienced in working through difficult economic cycles. We believe we are positioned to deliver earnings and FFO growth in 2009.

Our Board of Directors has made the prudent decision to pay our quarterly dividend of $0.90 per share in a combination of 10% cash and 90% common stock. We believe this change in composition will fortify one of the industry’s strongest balance sheets (rated A-/A3) as it will permit us to retain over $925 million of cash if adopted for all of 2009. This decision is a reflection of our conservative stance on capital allocation and liability management and is not in response to the current retail operating environment.”

Dividends

Today the Company announced that its Board of Directors approved the declaration of a quarterly common stock dividend of $0.90 per share, consisting of a combination of cash and shares of the Company’s common stock. The Company intends that the aggregate cash component of the dividend will not exceed 10% in the aggregate, or $0.09 per share. The dividend is payable on March 18, 2009 to stockholders of record on February 12, 2009.

Paying 90% of the 2009 dividend in shares of SPG common stock allows SPG to satisfy its REIT taxable income distribution requirement while enhancing its already considerable financial flexibility and balance sheet strength.

In accordance with the provisions of IRS Revenue Procedure 2008-68, stockholders may elect to receive payment of the dividend all in cash or all in common shares. To the extent that more than 10% of cash is elected, the cash portion will be prorated. Stockholders who elect to receive the dividend in cash will receive a cash payment of at least $0.09 per share. Stockholders who do not make an election will receive 10% in cash and 90% in common stock.

The Company expects the dividend to be a taxable dividend to its stockholders, without regard to whether a particular stockholder receives the dividend in the form of cash or shares, and reserves the right to pay the dividend entirely in cash.

The number of shares issued as a result of the dividend will be calculated based on the volume weighted average trading prices of the Company’s common stock on March 11, March 12 and March 13, 2009.

An information letter and election form will be mailed to stockholders of record promptly after February 12, 2009. The properly completed election form to receive cash or common shares must be received by the Company’s transfer agent prior to 5:00 p.m. Eastern Standard Time on March 10, 2009. Registered stockholders with questions regarding the dividend election may call BNY Mellon Shareowner Services, the Company’s transfer agent, at (800)454-9768. If your shares are held through a bank, broker or nominee, and you have questions regarding the dividend election please contact such bank, broker or nominee, who will also be responsible for distributing to you the letter and election form and submitting the election form on your behalf.

The Company also declared dividends on its two outstanding public issues of preferred stock:

  • 6% Series I Convertible Perpetual Preferred (NYSE: SPGPrI) dividend of $0.75 per share is payable on February 27, 2009 to stockholders of record on February 13, 2009.
  • 8 3/8% Series J Cumulative Redeemable Preferred (NYSE: SPGPrJ) dividend of $1.046875 per share is payable on March 31, 2009 to stockholders of record on March 17, 2009.

2009 Guidance

After giving effect to the estimated impact of paying up to 90% of the Company’s 2009 common stock dividends in common stock, the Company estimates that diluted FFO will be within a range of $6.40 to $6.60 per share for the year ending December 31, 2009, and diluted net income will be within a range of $1.95 to $2.15 per share.

The Company’s 2009 guidance estimates are based upon its internal budgeting and planning process and management’s view of current market and economic conditions, including those in the retail real estate business. The Company’s expectations also reflect the weaker retail environment and weakened state of the U.S. economy, as well as the current dislocation in the U.S. capital markets.

The 2009 guidance assumes comparable property NOI growth for the following operating portfolios:

Regional Malls Flat to 1.0%

Premium Outlet Centers 3.0% to 5.0%

The 2009 guidance assumes an interest rate environment that is consistent with the current forward yield curves for one month LIBOR and the 10 Year U.S. Treasury note and makes certain assumptions on debt spreads. The guidance assumes no future acquisition or disposition activities other than the impact in 2009 from 2008 activity.

This guidance is a forward-looking statement and is subject to the risks and other factors described elsewhere in this release.

The following table provides the reconciliation of the range of estimated diluted net income available to common stockholders per share to estimated diluted FFO per share.

For the year ending December 31, 2009
Low High
End End

Estimated diluted net income available to
common stockholders per share $1.95 $2.15

Depreciation and amortization including our
share of joint ventures 4.56 4.56

Impact of additional dilutive securities (0.11) (0.11)

Estimated diluted FFO per share $6.40 $6.60

Capital Markets

During the fourth quarter, the Company completed seven asset financings, generating $583.9 million of proceeds (Simon’s share of proceeds was $313.2 million). The financings were completed with a weighted average term of 5.7 years and at an average interest rate of 5.9% on the fixed rate financings and a rate at year-end of 2.4% on the floating rate loans.

As of December 31, 2008, the Company had approximately $1.1 billion of cash on hand, including its share of joint ventures, and over $2.4 billion of available capacity on its revolving credit facility.

U.S. New Development and Redevelopment Activity

On November 13th, the Company announced the opening of Jersey Shore Premium Outlets. Located in Tinton Falls, Jersey Shore Premium Outlets contains 435,000 square feet of gross leasable area and 120 designer and name-brand outlet stores. The center is currently 92% leased to tenants including Ann Taylor, BCBG Max Azria, Banana Republic, Brooks Brothers, Burberry, Calvin Klein, Cole Haan, Elie Tahari, Geox, Guess, J.Crew, Juicy Couture, Kate Spade, Kenneth Cole, Lucky Brand, Michael Kors, Nike, Sony, Theory and Tommy Hilfiger.

The Company continues construction on the following development projects:

— Cincinnati Premium Outlets, a 400,000 square foot upscale manufacturers’ outlet center serving the greater Cincinnati and Dayton markets. The center is 100% owned by Simon and is scheduled to open in August of 2009.

— A 600,000 square foot Phase II expansion of The Domain in Austin, Texas. The expansion will include Dillard’s, a Village Road Show theater, Dick’s Sporting Goods, 136,000 square feet of small shops and restaurants, and 78,000 square feet of office space. Restaurant offerings at Domain II will include Maggiano’s and BJ’s Restaurant and Brewhouse. The Company owns 100% of this project, slated for an opening in November of 2009.

During the fourth quarter, the Company completed significant redevelopment projects at Northshore Mall in the Boston suburb of Peabody (with Nordstrom opening this March), Ross Park Mall in Pittsburgh, and Tacoma Mall in Tacoma, Washington as well as the expansion of Orlando Premium Outlets in Orlando, Florida.

Construction continues on two significant redevelopment projects:

— Camarillo Premium Outlets-The Promenade – 220,000 square foot expansion of the upscale outlet center to be anchored by Saks Fifth Avenue Off 5th and Neiman Marcus Last Call, opening in April of 2009.

— South Shore Plaza – Addition of Nordstrom opening in March of 2010.

International Activity

On October 16th, the Company opened Sendai-Izumi Premium Outlets, the seventh Premium Outlet Center in Japan. The 172,000 square foot first phase of the project is 100% leased to 80 tenants including Beams, Brooks Brothers, Bose, Coach, Hush Puppies, Jill Stuart, Kipling, Laundry, Levi’s, Miss Sixty, OshKosh B’Gosh, Pleats Please Issey Miyake, St. John, T-Fal, Tasaki, United Arrows, as well as the first outlet stores in Japan for PLS+T and Ray Ban. Simon owns 40% of this property.

Construction continues on the following international development projects:

— Ami Premium Outlets – an upscale manufacturers’ outlet center located approximately 34 miles northeast of central Tokyo. Phase I, comprising 225,000 square feet, is scheduled to open in July of 2009 with approximately 100 tenants, including global brands, domestic brands and restaurants. The center is expandable to approximately 360,000 square feet. Simon owns 40% of this project.

— Argine (Naples, Italy) – a 300,000 square foot shopping center scheduled to open in December of 2009. Simon owns a 24% interest in this project.

— Catania (Sicily, Italy) – a 642,000 square foot shopping center scheduled to open in June of 2010. Simon owns a 24% interest in this project.

— Three projects in China located in Hangzhou, Suzhou, and Zhengzhou. The centers range in size from 310,000 to 750,000 square feet, will be anchored by Wal-Mart, and are scheduled to open in 2009. Simon owns a 32.5% interest in each of these projects.

Conference Call

The Company will provide an online simulcast of its quarterly conference call at www.simon.com (Investor Relations tab), www.earnings.com, and www.streetevents.com. To listen to the live call, please go to any of these websites at least fifteen minutes prior to the call to register, download and install any necessary audio software. The call will begin at 11:00 a.m. Eastern Standard Time (New York time) today, January 30, 2009. An online replay will be available for approximately 90 days at www.simon.com, www.earnings.com, and www.streetevents.com. A fully searchable podcast of the conference call will also be available at www.REITcafe.com shortly after completion of the call.

Supplemental Materials

The Company will publish a supplemental information package which will be available at www.simon.com in the Investor Relations section, Financial Information tab. It will also be furnished to the SEC as part of a current report on Form 8-K. If you wish to receive a copy via mail or email, please call 800-461-3439.

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