Simon FFO Decreases

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Indianapolis-based Simon Property Group Inc. (NYSE: SPG) is reporting third quarter Funds From Operations of $689 million, compared to $803 million during the same period a year earlier. Chief Executive Officer David Simon says the company is continuing to grow in core business areas and "once again beat consensus." October 22, 2014

News Release

INDIANAPOLIS, Ind. - Simon, a leading global retail real estate company, today reported results for the quarter and nine months ended September 30, 2014.

Results for the Quarter

-Funds from Operations ("FFO") was $689.4 million, or $1.90 per diluted share, as compared to $802.8 million, or $2.21 per diluted share, in the prior year period. Included in the third quarter 2014 results is a loss on the extinguishment of debt of $127.6 million, or $0.35 per diluted share, related to the successful September cash tender offers and the redemption of a series of notes of Simon Property Group L.P. ("SPGLP") unsecured debt totaling $1.572 billion.

-Net income attributable to common stockholders was $252.0 million, or $0.81 per diluted share, as compared to $311.7 million, or $1.00 per diluted share, in the prior year period. Net income in the third quarter of 2014 includes the $0.35 per diluted share loss on the extinguishment of debt described above.

Results for the Nine Months

-Funds from Operations ("FFO") was $2.339 billion, or $6.43 per diluted share, as compared to $2.311 billion, or $6.38 per diluted share, in the prior year period.

-Net income attributable to common stockholders was $1.0 billion, or $3.22 per diluted share, as compared to $934.7 million, or $3.01 per diluted share, in the prior year period.

Effect of Cash Tender Offers and Early Notes Redemption Charge and Washington Prime Group Inc. Spin-Off

-Results for the three and nine months ended September 30, 2014 reflect the $0.35 charge related to the cash tender offers and early notes redemption mentioned above. Results for the three months ended September 30, 2013 include FFO per diluted share of $0.24 from the Washington Prime Group Inc. ("WPG") properties. Results for the nine months ended September 30, 2014 and 2013 include FFO per diluted share of $0.30 ($0.40 of FFO from the WPG properties' operations net of $0.10 of spin-off related transaction expenses) and $0.72, respectively, from the WPG properties.

-Growth in FFO per diluted share for the three and nine month periods in 2014 was 14.2% and 14.5%, respectively, excluding both the loss on the extinguishment of debt related to the cash tender offers and early notes redemption and the WPG properties and transaction costs related to the May 28, 2014 spin-off, as detailed in the table below.

"I am very pleased with our quarterly results that once again beat consensus," said David Simon, Chairman and CEO. "We continue to demonstrate our ability to grow our core business and allocate capital to generate growth in cash flow and FFO per share."

Comparable Property Net Operating Income

Comparable property NOI growth for the three months ended September 30, 2014 was 5.3%. The year-to-date growth for the nine months ended September 30, 2014 was 5.4%. Comparable properties include U.S. Malls, Premium Outlets and The Mills, and excludes the WPG properties.

Total sales from the U.S. Malls (less anchors) and Premium Outlets increased 2.6% on a trailing 12-month basis. The increase in total sales in the third quarter of 2014 compared to the third quarter of 2013 was 2.8%.

Dividends

Today Simon's Board of Directors declared a quarterly common stock dividend of $1.30 per share. This is a year-over-year increase of 8.3%. The dividend will be payable on November 28, 2014 to stockholders of record on November 14, 2014.

Simon's Board of Directors also declared the quarterly dividend on its 8 3/8% Series J Cumulative Redeemable Preferred Stock (NYSE: SPGPrJ) of $1.046875 per share, payable on December 31, 2014 to stockholders of record on December 17, 2014.

Development Activity

Two new Premium Outlets opened during the quarter:

-July 31st - Charlotte Premium Outlets is a 399,000 square foot center with 100 outlet stores featuring high-quality designer and name brands. The center opened fully leased and Simon owns a 50% interest in this asset.

-August 14th - Twin Cities Premium Outlets is a 409,000 square foot center serving the greater Minneapolis-St. Paul metropolitan area. The center opened fully leased and Simon owns a 35% interest in this asset.

Premium Outlets Montreal in Mirabel, Quebec, Canada will open on October 30, 2014. The center will serve the greater Montreal metropolitan market with 360,000 square feet of high-quality, name brand stores. Simon owns a 50% interest in this project.

During the third quarter, construction started on two significant expansion projects:

-Livermore Premium Outlets in Livermore (San Francisco), California – 185,000 square foot expansion

-The Colonnade at Sawgrass in Sunrise (Miami), Florida – 56,000 square foot expansion

Construction continues on other significant expansion projects including Roosevelt Field Mall, Del Amo Fashion Center, Woodbury Common Premium Outlets, Las Vegas Premium Outlets-North and Chicago Premium Outlets.

Redevelopment and expansion projects, including the addition of new anchors, are underway at 31 properties in the U.S., Asia and Mexico.

Construction continues on two new Premium Outlets opening in 2015:

-Vancouver Designer Outlet in Vancouver, British Columbia, Canada is a 242,000 square foot center scheduled to open in May of 2015. Simon owns a 45% interest in this project.

-Gloucester Premium Outlets in Gloucester, New Jersey, serving the greater Philadelphia metropolitan area, is a 375,000 square foot center scheduled to open in August of 2015. Simon owns a 50% interest in this project.

Construction began during the third quarter on two new Premium Outlets expected to open in October of 2015:

-Tucson Premium Outlets is a 366,000 square foot center. Simon owns 100% of this project.

-Tampa Premium Outlets is a 441,000 square foot center. Simon owns 100% of this project.

Simon's share of the costs of all development and redevelopment projects currently under construction is approximately $2.2 billion.

Financing Activity

In September, Simon completed a cash tender offer for five outstanding tranches of senior unsecured notes maturing in 2015, 2016 and 2017. Approximately $1.322 billion of notes were tendered and accepted for purchase. These notes had a weighted average remaining duration of 1.7 years and a weighted average coupon rate of 5.60%. Also in September, Simon redeemed all of its $250.0 million 7.875% notes due 2016. A $127.6 million or $0.35 per diluted share, loss on the extinguishment of debt was recorded in September of 2014 in connection with the tender offers and redemption.

In September, Simon issued $1.30 billion of senior unsecured notes in an underwritten public offering. The offering consisted of $900 million of 3.375% notes due 2024 and $400 million of 4.25% notes due 2044. Net proceeds from the offering and cash on hand were used to fund the cash purchase of the senior unsecured notes tendered and the redemption.

The aggregate result of the tender offers and redemption, combined with the sale of unsecured notes, was an extension of the duration of our senior notes portfolio from 6.3 years to 7.6 years and a decrease in the weighted average interest rate on that portfolio from 4.64% to 4.40%.

As of September 30, 2014, Simon had approximately $1.175 billion of cash on hand, including its share of joint venture cash, and $5.2 billion of available revolving credit capacity.

2014 Guidance

Today we raised FFO guidance to a range of $8.84 to $8.88 per diluted share for the year ending December 31, 2014, and also raised guidance for net income to a range of $4.45 to $4.49 per diluted share.