**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

**QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15 (d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

For the quarterly periodended March 31, 2007

**SIMON PROPERTY GROUP, L.P.**

(Exact name of registrantas specified in its charter)

Delaware

(State of incorporation ororganization)

33-11491

(Commission File No.)

34-1755769

(I.R.S. EmployerIdentification No.)

225 West Washington StreetIndianapolis, Indiana 46204

(Address of principalexecutive offices)

(317) 636-1600

(Registrant’s telephonenumber, including area code)

Indicate by check mark whether the Registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the Registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days.   Yes x   No o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer:

| Large accelerated filer o | Accelerated  filer o | Non-accelerated  filer x |
|--------------------------------|---------------------------|-------------------------------|

 

Indicate by check mark whether Registrant is a shellcompany (as defined by Rule 12b-2 of the Exchange Act).   Yes o   No x

Registranthas no common stock outstanding.

 

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**Simon PropertyGroup, L.P. and SubsidiariesForm 10-QIndex**
|                                                   | ** ** | ** **    | ** ** | ** **                                                                                                              | ** ** | **Page** | ** ** |
|---------------------------------------------------|------------|---------------|------------|-------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| **Part I — Financial Information** |       |          |       |                                                                                                                    |       |
|                                              |       | Item 1.  |       | Consolidated Financial Statements (Unaudited)                                                                           |       |     |       |   |   |
|                                              |       |          |       | Consolidated  Balance Sheets as of March 31, 2007 and December 31, 2006                                       |       |     | 3          |   |   |
|                                              |       |          |       | Consolidated Statements of Operations and  Comprehensive Income for the three months ended March 31, 2007 and 2006 |       |     | 4          |   |   |
|                                              |       |          |       | Consolidated Statements of Cash Flows for the three  months ended March 31, 2007 and 2006                          |       |     | 5          |   |   |
|                                              |       |          |       | Condensed Notes to Consolidated Financial Statements                                                                    |       |     | 6          |   |   |
|                                              |       | Item 2.  |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                             |       |     | 14         |   |   |
|                                              |       | Item 3.  |       | Qualitative and Quantitative Disclosure About Market  Risk                                                              |       |     | 27         |   |   |
|                                              |       | Item 4.  |       | Controls and Procedures                                                                                                 |       |     | 27         |   |   |
| **Part II —  Other Information**   |       |          |       |                                                                                                                    |       |
|                                              |       | Item 1.  |       | Legal  Proceedings                                                                                                      |       |     | 27         |   |   |
|                                              |       | Item 1A. |       | Risk  Factors                                                                                                           |       |     | 28         |   |   |
|                                              |       | Item 5.  |       | Other  Information                                                                                                      |       |     | 28         |   |   |
|                                              |       | Item 6.  |       | Exhibits                                                                                                                |       |     | 28         |   |   |
| **Signatures**                                    |       |          |       |                                                                                                                    |       |     | 29         |   |   |

 

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**Simon Property Group, L.P. and Subsidiaries***ConsolidatedBalance Sheets**(Dollars in thousands, exceptunit amounts)*

| ** **                                                                                                                               | ** ** | **March 31,  2007** | ** **     | **December 31,  2006** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|----------------|-----------------------------|------------|
| ** **                                                                                                                               | ** ** | ***Unaudited***          | ** **     | ** **                  | ** ** |
| **ASSETS:**                                                                                                                              | ** ** | ** **               |           |                        |       |
| Investment  properties, at cost                                                                                                          | ** ** | **$**                    | **23,400,940** |                        | $          | 22,863,963 |   |
| Less — accumulated  depreciation                                                                                               | ** ** | **4,800,439**            |           | 4,606,130                   |       |
|                                                                                                                                     | ** ** | **18,600,501**           |           | 18,257,833                  |       |
| Cash and cash  equivalents                                                                                                               | ** ** | **339,953**              |           | 929,360                     |       |
| Tenant  receivables and accrued revenue, net                                                                                             | ** ** | **339,341**              |           | 380,128                     |       |
| Investment in  unconsolidated entities, at equity                                                                                        | ** ** | **1,874,255**            |           | 1,526,235                   |       |
| Deferred costs  and other assets                                                                                                         | ** ** | **1,116,000**            |           | 990,899                     |       |
| Notes receivable  from related parties                                                                                                   | ** ** | **1,473,540**            |           | —                      |       |
| **Total  assets**                                                                                                                        | ** ** | **$**                    | **23,743,590** |                        | $          | 22,084,455 |   |
| **LIABILITIES:**                                                                                                                         | ** ** | ** **               |           |                        |       |
| Mortgages and  other indebtedness                                                                                                        | ** ** | **$**                    | **17,152,418** |                        | $          | 15,394,489 |   |
| Accounts payable,  accrued expenses, intangibles, and deferred revenue                                                                   | ** ** | **1,082,809**            |           | 1,109,190                   |       |
| Cash  distributions and losses in partnerships and joint ventures, at equity                                                             | ** ** | **250,737**              |           | 227,588                     |       |
| Other  liabilities, minority interest, and accrued distributions                                                                         | ** ** | **185,072**              |           | 178,250                     |       |
| **Total liabilities**                                                                                                                    | ** ** | **18,671,036**           |           | 16,909,517                  |       |
| COMMITMENTS AND  CONTINGENCIES                                                                                                           | ** ** | ** **               |           |                        |       |
| 7.75%/8.00% Cumulative  Redeemable Preferred Units, 850,698 units issued and outstanding,  respectively, at liquidation value       | ** ** | **85,070**               |           | 85,070                      |       |
| **PARTNERS’  EQUITY:**                                                                                                              | ** ** | ** **               |           |                        |       |
| Preferred units,  22,801,160 and 23,456,495 units outstanding, respectively. Liquidation values  $1,119,633 and $1,151,325, respectively | ** ** | **1,125,623**            |           | 1,157,010                   |       |
| General Partner,  223,387,096 and 221,431,071 units outstanding, respectively                                                       | ** ** | **3,053,198**            |           | 3,095,022                   |       |
| Limited Partners,  57,945,408 and 59,113,438 units outstanding, respectively                                                        | ** ** | **808,663**              |           | 837,836                     |       |
| **Total  partners’ equity**                                                                                                         | ** ** | **4,987,484**            |           | 5,089,868                   |       |
| **Total liabilities and partners’  equity**                                                                                         | ** ** | **$**                    | **23,743,590** |                        | $          | 22,084,455 |   |

 

*The accompanying notes are an integral part of these statements.*

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**SimonProperty Group, L.P. and Subsidiaries***Unaudited ConsolidatedStatements of Operations and Comprehensive Income(Dollars in thousands, except per unit amounts)*

| ** **                                                                                                                   | ** ** | **For the Three Months  Ended March 31,** | ** **  |
|------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|-------------|
| ** **                                                                                                                   | ** ** | **2007**                                                           | ** **  | **2006** | ** ** |
| **REVENUE:**                                                                                                                 |       |                                                               |        |   |   |
| Minimum  rent                                                                                                                | ** ** | **$**                                                              | **510,865** |   | $ | 488,088 |   |
| Overage  rent                                                                                                                | ** ** | **17,892**                                                         |        | 16,059 |   |
| Tenant  reimbursements                                                                                                       | ** ** | **230,613**                                                        |        | 221,035 |   |
| Management  fees and other revenues                                                                                          | ** ** | **20,875**                                                         |        | 20,169 |   |
| Other  income                                                                                                                | ** ** | **71,896**                                                         |        | 42,298 |   |
| **Total revenue**                                                                                                            | ** ** | **852,141**                                                        |        | 787,649 |   |
| **EXPENSES:**                                                                                                                |       |                                                               |        |   |   |
| Property  operating                                                                                                          | ** ** | **109,227**                                                        |        | 105,947 |   |
| Depreciation  and amortization                                                                                               | ** ** | **215,271**                                                        |        | 209,447 |   |
| Real  estate taxes                                                                                                           | ** ** | **79,182**                                                         |        | 81,805 |   |
| Repairs  and maintenance                                                                                                     | ** ** | **29,007**                                                         |        | 25,955 |   |
| Advertising  and promotion                                                                                                   | ** ** | **18,884**                                                         |        | 17,402 |   |
| Provision  for (recovery of) credit losses                                                                                   | ** ** | **542**                                                            |        | (6 | ) |
| Home  and regional office costs                                                                                              | ** ** | **33,699**                                                         |        | 30,336 |   |
| General  and administrative                                                                                                  | ** ** | **3,899**                                                          |        | 4,493 |   |
| Other                                                                                                                        | ** ** | **13,464**                                                         |        | 13,066 |   |
| **Total operating expenses**                                                                                                 | ** ** | **503,175**                                                        |        | 488,445 |   |
| **OPERATING  INCOME**                                                                                                        | ** ** | **348,966**                                                        |        | 299,204 |   |
| Interest  expense                                                                                                            | ** ** | **(222,478**                                                       | **)**       | (204,072 | ) |
| Minority  interest in income of consolidated entities                                                                        | ** ** | **(2,910**                                                         | **)**       | (925 | ) |
| Income  tax expense of taxable REIT subsidiaries                                                                             | ** ** | **(1,285**                                                         | **)**       | (1,639 | ) |
| Income  from unconsolidated entities                                                                                         | ** ** | **21,773**                                                         |        | 29,923 |   |
| Gain  (loss) on sales of assets and interests in unconsolidated entities, net                                                | ** ** | **—**                                                         |        | 34,350 |   |
| **Income from continuing operations**                                                                                        | ** ** | **144,066**                                                        |        | 156,841 |   |
| Results  of operations from discontinued operations                                                                          | ** ** | **(203**                                                           | **)**       | 191 |   |
| Gain  (loss) on disposal or sale of discontinued operations, net                                                             | ** ** | **—**                                                         |        | (28 | ) |
| **NET  INCOME**                                                                                                              | ** ** | **143,863**                                                        |        | 157,004 |   |
| Preferred  unit requirement                                                                                                  | ** ** | **(19,645**                                                        | **)**       | (25,399 | ) |
| **NET  INCOME AVAILABLE TO UNITHOLDERS**                                                                                     | ** ** | **$**                                                              | **124,218** |   | $ | 131,605 |   |
| **NET  INCOME AVAILABLE TO UNITHOLDERS ATTRIBUTABLE TO:**                                                                    |       |                                                               | ** **  | ** ** | ** ** |
| General  Partner                                                                                                             | ** ** | **$**                                                              | **98,381**  |   | $ | 104,017 |   |
| Limited  Partners                                                                                                            | ** ** | **25,837**                                                         |        | 27,588 |   |
| **Net income**                                                                                                               | ** ** | **$**                                                              | **124,218** |   | $ | 131,605 |   |
| **BASIC  EARNINGS PER UNIT**                                                                                                 |       |                                                               | ** **  | ** ** | ** ** |
| Income  from continuing operations                                                                                           | ** ** | **$**                                                              | **0.44**    |   | $ | 0.47 |   |
| Discontinued  operations                                                                                                     | ** ** | **—**                                                         |        | — |   |
| Net  Income                                                                                                                  | ** ** | **$**                                                              | **0.44**    |   | $ | 0.47 |   |
| **DILUTED  EARNINGS PER UNIT**                                                                                               |       |                                                               |        |   |   |
| Income  from continuing operations                                                                                           | ** ** | **$**                                                              | **0.44**    |   | $ | 0.47 |   |
| Discontinued  operations                                                                                                     | ** ** | **—**                                                         |        | — |   |
| Net  Income                                                                                                                  | ** ** | **$**                                                              | **0.44**    |   | $ | 0.47 |   |
| Net income                                                                                                                   | ** ** | **$**                                                              | **143,863** |   | $ | 157,004 |   |
| Unrealized (loss) gain on  interest rate hedges                                                                              | ** ** | **(460**                                                           | **)**       | 3,316 |   |
| Net income on derivative  instruments reclassified from accumulated other comprehensive income (loss)  into interest expense | ** ** | **472**                                                            |        | 301 |   |
| Currency translation  adjustments                                                                                            | ** ** | **151**                                                            |        | (2,296 | ) |
| Other income (loss)                                                                                                          | ** ** | **(728**                                                           | **)**       | (53 | ) |
| **Comprehensive Income**                                                                                                     | ** ** | **$**                                                              | **143,298** |   | $ | 158,272 |   |

 

*The accompanying notes are an integral part of these statements.*

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**Simon Property Group, L.P.and Subsidiaries***Unaudited ConsolidatedStatements of Cash Flows(Dollars in thousands)*

| ** **                                                                                    | ** ** | **For the Three Months  Ended March 31,** | ** **  |
|-----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|-------------|
| ** **                                                                                    | ** ** | **2007**                                                           | ** **  | **2006** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                                    |       |                                                               | ** **  | ** ** | ** ** |
| **Net  income**                                                                               | ** ** | **$**                                                              | **143,863** |   | $ | 157,004 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities — |       |                                                               |        |   |   |
| Depreciation and  amortization                                                                | ** ** | **207,580**                                                        |        | 199,747 |   |
| Gain on sales of  assets and interests in unconsolidated entities                             |       | —                                                             |        | (34,350 | ) |
| Loss on disposal  or sale of discontinued operations, net                                     |       | —                                                             |        | 28 |   |
| Straight-line  rent                                                                           | ** ** | **(4,293**                                                         | **)**       | (3,673 | ) |
| Minority interest                                                                             | ** ** | **2,910**                                                          |        | 925 |   |
| Minority interest  distributions                                                              | ** ** | **(13,855**                                                        | **)**       | (5,578 | ) |
| Equity in income  of unconsolidated entities                                                  | ** ** | **(21,773**                                                        | **)**       | (29,923 | ) |
| Distributions of  income from unconsolidated entities                                         | ** ** | **19,633**                                                         |        | 19,131 |   |
| **Changes  in assets and liabilities —**                                            |       |                                                               |        |   |   |
| Tenant  receivables and accrued revenue, net                                                  | ** ** | **49,298**                                                         |        | 37,741 |   |
| Deferred costs  and other assets                                                              | ** ** | **(46,951**                                                        | **)**       | (45,108 | ) |
| Accounts payable,  accrued expenses, intangibles, deferred revenues and other liabilities     | ** ** | **(26,392**                                                        | **)**       | (42,126 | ) |
| **Net  cash provided by operating activities**                                                | ** ** | **310,020**                                                        |        | 253,818 |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES:**                                                    |       |                                                               |        |   |   |
| Acquisitions                                                                                  | ** ** | **(135,581**                                                       | **)**       | — |   |
| Notes receivable  from related parties                                                        | ** ** | **(1,473,540**                                                     | **)**       | — |   |
| Capital  expenditures, net                                                                    | ** ** | **(205,678**                                                       | **)**       | (136,293 | ) |
| Cash impact from  the consolidation and de-consolidation of properties                        | ** ** | **4,073**                                                          |        | — |   |
| Net proceeds from  sale of partnership interest, other assets and discontinued operations     |       | —                                                             |        | 53,864 |   |
| Investments in  unconsolidated entities                                                       | ** ** | **(431,935**                                                       | **)**       | (79,554 | ) |
| Distributions of  capital from unconsolidated entities and other                              | ** ** | **74,390**                                                         |        | 71,647 |   |
| **Net  cash used in investing activities**                                                    | ** ** | **(2,168,271**                                                     | **)**       | (90,336 | ) |
| **CASH  FLOWS FROM FINANCING ACTIVITIES:**                                                    |       |                                                               |        |   |   |
| Partnership  contributions and issuance of units                                              | ** ** | **751**                                                            |        | 1,891 |   |
| Purchase of  preferred units and partnership units                                            | ** ** | **(14,987**                                                        | **)**       | (2,671 | ) |
| Partnership  distributions                                                                    | ** ** | **(255,620**                                                       | **)**       | (237,356 | ) |
| Mortgage and  other indebtedness proceeds, net of transaction costs                           | ** ** | **1,918,674**                                                      |        | 1,262,180 |   |
| Mortgage and  other indebtedness principal payments                                           | ** ** | **(379,974**                                                       | **)**       | (1,225,537 | ) |
| **Net  cash provided by (used in) financing activities**                                      | ** ** | **1,268,844**                                                      |        | (201,493 | ) |
| **DECREASE  IN CASH AND CASH EQUIVALENTS**                                                    | ** ** | **(589,407**                                                       | **)**       | (38,011 | ) |
| **CASH  AND CASH EQUIVALENTS, beginning of year**                                             | ** ** | **929,360**                                                        |        | 337,048 |   |
| **CASH AND CASH EQUIVALENTS, end  of period**                                                 | ** ** | **$**                                                              | **339,953** |   | $ | 299,037 |   |

 

*The accompanying notes are an integral part of these statements.*

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**SimonProperty Group, L.P. and SubsidiariesCondensed Notes to Consolidated Financial Statements(Unaudited)**

(Dollars in thousands, except unit and per unit amounts and whereindicated as in millions or billions)

**1.**                 Organization

Simon Property Group, L.P., a Delaware limitedpartnership (the “Operating Partnership”), is a majority owned subsidiary ofSimon Property Group, Inc., a Delaware corporation (“Simon Property”).Simon Property is a self-administered and self-managed real estate investmenttrust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).In these condensed notes to the unaudited consolidated financial statements,the terms “we”, “us” and “our” refer to the Operating Partnership and itssubsidiaries.

We are engaged primarilyin the ownership, development, and management of retail real estate, primarilyregional malls, Premium Outlet® centers and community/lifestyle centers. As of March 31,2007, excluding assets acquired in the transaction with The Mills Corporation (“Mills”)as described below, we owned or held an interest in 285 income-producingproperties in the United States, which consisted of 171 regionalmalls, 68 community/lifestyle centers, 36 Premium Outlet centers and 10 othershopping centers or outlet centers in 38 states and Puerto Rico(collectively, the “Properties”, and individually, a “Property”). We alsoown interests in four parcels of land held in the United States for futuredevelopment (together with the Properties, the “Portfolio”). Internationally, wehave ownership interests in 53 European shopping centers (France, Italyand Poland); five Premium Outlet centers in Japan; and one Premium Outletcenter in Mexico. We also have begun construction on a Premium Outlet center inSouth Korea and, through a joint venture arrangement we have ownershipinterests in four shopping centers under construction in China. Additionally,on March 29, 2007, SPG-FCM Ventures, LLC (“SPG-FCM”), a jointventure between an entity owned 50% by the Operating Partnership and 50% byfunds managed by Farallon Capital Management, L.L.C. (“Farallon”), successfullycompleted a tender offer to acquire all of the outstanding common stock of TheMills Corporation. As of the end of March 31, 2007, SPG-FCM owned75.38% of the outstanding common stock of Mills. As a result, we now hold aninterest in an additional 38 properties located throughout the UnitedStates, including 18 regional malls, 3 community/lifestyle centers, and 17other retail properties which will be referred to as The Mills. Mills was alsoa partner in two assets in which we already held an ownership interest.

**2.**                 Basisof Presentation

The accompanying unaudited consolidated financialstatements include the accounts of theOperating Partnership and its subsidiaries, and all significant inter-companyamounts have been eliminated. Due to the seasonal nature of certain operationalactivities, the results for the interim period ended March 31, 2007 arenot necessarily indicative of the results that may be obtained for the full fiscalyear.

These consolidated financial statements have beenprepared in accordance with the instructions to Form 10-Q andinclude all of the information and disclosures required by accountingprinciples generally accepted in the United States (GAAP) for interimreporting. Accordingly, they do not include all of the disclosures required byGAAP for complete financial statements. In the opinion of management, alladjustments necessary for fair presentation (including normal recurringaccruals) have been included. The consolidated financial statements in this Form 10-Qshould be read in conjunction with the audited consolidated financialstatements and related notes contained in our 2006 Annual Report on Form 10-K.

As of March 31, 2007, excluding assets acquiredin the transaction with Mills as described above, of our 344 properties weconsolidated 200 wholly-owned properties and 19 additional propertiesthat are less than wholly-owned, but which we control or for which we arethe primary beneficiary. We account for the 

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remaining 125 propertiesusing the equity method of accounting (joint venture properties). We manage theday-to-day operations of 56 of the 125 joint venture properties but havedetermined that our partner or partners have substantive participating rightswith respect to the assets and operations of these joint venture properties.Additionally, our investment in SPG-FCM, which holds an interest inMills, and as a result the additional 38 properties acquired in its acquisitionof Mills, is also accounted for by us under the equity method of accounting. Wehave determined that SPG-FCM is not a variable interest entity (VIE) andFarallon has substantive participating rights with respect to the assets andoperations of SPG-FCM pursuant to the applicable partnership agreements.

We allocate our net operating results after preferreddistributions based on our partners’ respective weighted average ownership. In addition, Simon Property owns certain of ourpreferred units. Simon Property’s weighted average ownership interest inus was 79.2% and 79.0% for the three months ended March 31, 2007 and 2006,respectively. As of March 31, 2007 and December 31, 2006, SimonProperty’s ownership interest in us was 79.4% and 78.9%, respectively. Weadjust the limited partners’ interest at the end of each period to reflecttheir respective ownership interest in the Operating Partnership.

Preferred distributions inthe accompanying statements of operations and cash flows representdistributions on outstanding preferred units of limited partnership interest.

**3.**                 SignificantAccounting Policies

***Cash and Cash Equivalents***

We consider all highlyliquid investments purchased with an original maturity of 90 days or less to becash and cash equivalents. Cash equivalents are carried at cost, whichapproximates market value. Cash equivalents generally consist of commercialpaper, bankers acceptances, Eurodollars, repurchase agreements, and moneymarkets. Cash and cash equivalents, as of March 31, 2007, includes abalance of $33.0 million related to these gift card programs which we donot consider available for general working capital purposes.

**4.**                 PerUnit Data

We determine basic earnings per unit based on theweighted average number of common units outstanding during the period. We determinediluted earnings per unit based on the weighted average number of common unitsoutstanding combined with the incremental weighted average units that wouldhave been outstanding assuming all dilutive potential common units wereconverted into units at the earliest date possible. The following table setsforth the computation of our basic and diluted earnings per unit.

| ** **                                                        | ** ** | **For the Three Months  Ended March 31,** | ** **  |
|-------------------------------------------------------------------|------------|--------------------------------------------------------------------|-------------|
| ** **                                                        | ** ** | **2007**                                                           | ** **  | **2006** | ** ** |
| **Common  Unitholders’ share of:**                           |       |                                                               |        |   |   |
| **Income  from continuing operations**                            | ** ** | **$**                                                              | **124,421** |   | $ | 131,442 |   |
| Discontinued  operations                                          | ** ** | **(203**                                                           | **)**       | 163 |   |
| **Net  Income available to Common Unitholders — Basic** | ** ** | **$**                                                              | **124,218** |   | $ | 131,605 |   |
| **Weighted Average Units Outstanding — Basic**          | ** ** | **280,858,656**                                                    |        | 279,083,336 |   |
| Effect of stock  options                                          | ** ** | **857,469**                                                        |        | 973,102 |   |
| **Weighted Average Units  Outstanding — Diluted**       | ** ** | **281,716,125**                                                    |        | 280,056,438 |   |

 

For the three months endedMarch 31, 2007, potentially dilutive securities include stock options ofSimon Property and certain preferred units which are exchangeable for commonunits. The only potentially dilutive security that had a dilutive effect forthe three months ended March 31, 2007 and 2006 were stock 

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optionsof Simon Property. Common units may be exchanged for shares of Simon Propertycommon stock, on a one-for one basis, in certain circumstances. We accruedistributions when they are declared.

**5.**                 Investmentin Unconsolidated Entities

**Real Estate JointVentures**

Joint ventures are common in the real estate industry.We use joint ventures to finance properties, develop new properties, and diversifyour risk in a particular property or portfolio. Excluding assets acquired inthe transaction with Mills as described above, we held joint venture ownershipinterests in 66 Properties in the United States as of March 31, 2007and 68 as of December 31, 2006. We also held interests in two jointventures which owned 53 European shopping centers as of March 31, 2007 andDecember 31, 2006. We also held an interest in five joint ventureproperties under operation in Japan and one joint venture property in Mexico.We account for these Properties using the equity method of accounting.

Substantially all of ourjoint venture Properties are subject to rights of first refusal, buy-sellprovisions, or other sale or marketing rights for partners which are customaryin real estate joint venture agreements and the industry. Our partners in thesejoint ventures may initiate these provisions at any time (subject to anyapplicable lock up or similar restrictions), which could result in either thesale of our interest or the use of available cash or borrowings to acquire ajoint venture interest from our partner.

**Acquisition of TheMills Corporation by SPG-FCM**

On February 16, 2007, SPG-FCM entered intoa definitive merger agreement with Mills to acquire all of the outstandingcommon stock of Mills for $25.25 per common share in cash. The acquisition wascompleted through a cash tender, which concluded on March 29, 2007. As of March 31,2007 we and Farallon had each funded $475 million into SPG-FCM toacquire the shares that were submitted for tender as of March 29, 2007,representing 75.38% of the outstanding shares of common stock of Mills. Inconnection with the closing of the tender offer, we also loaned $286 millionthrough three separate one-year note payable arrangements to SPG-FCM thatbear interest at rates ranging from LIBOR plus 37.5 basis points to LIBOR plus270 basis points. The $286 million in notes receivable from SPG-FCMare reported with notes receivable from related parties on the consolidatedbalance sheet. We expect these notes will be repaid by SPG-FCM at parduring the second quarter of 2007 from the proceeds of refinancing activity.

In connection with the execution of a definitivemerger agreement with Mills, we made a loan to Mills on February 16, 2007to permit it to repay an existing loan facility. The $1.187 billion loanto Mills carries a rate of LIBOR plus 270 basis points and payment is due infull one year from issuance. The loan facility also permits Mills to borrow anadditional $365 million on a revolving basis for working capitalrequirements and general corporate purposes. We received a financing fee of $15 millionat the closing of loan which is being amortized into other income over theone-year term of the loan. No borrowings under the revolving portion of thisarrangement had been drawn as of the end of the first quarter of 2007.

On April 3, 2007, the mergerof a subsidiary of SPG-FCM and Mills was completed. On April 18,2007, a subsidiary of SPG-FCM was merged into Mills’ operating partnership(“Mills LP”) was completed. The common unitholders in the Mills LP will receive$25.25 per unit in cash, subject to certain qualified unitholders having theoption to exchange their units for limited partnership units of the OperatingPartnership based on a fixed exchange ratio of 0.211 Operating Partnershipunits for each limited partnership unit in the Mills LP. As a result of the change in control of Mills, holders of Mills’ $316.3 millionin Series F Convertible Cumulative Redeemable Preferred Stock have theright to require that Mills repurchase their shares for cash equal to theliquidation preference per share plus accrued and unpaid 

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dividends.If all of the holders of Mills’ Series F preferred stock exercise thisright, Mills will be required to pay approximately $333 million.

We have and intend to obtain all funds necessary tofulfill our equity requirement to SPG-FCM, as well as any funds that wehave or will provide in the form of loans to Mills or SPG-FCM, fromavailable cash and our Credit Facility. Beginning in the second quarter of2007, Simon Property or an affiliate will also begin to serve as the managerfor substantially all of the additional 38 properties in which SPG-FCMholds an interest. As a result of this acquisition, we now hold a controllinginterest in two properties where we previously held a 50% ownership interest(Town Center at Cobb and Gwinnett Place) and as a result we consolidated thesetwo properties at the date of acquisition.

SPG-FCM is in theprocess of performing the necessary purchase price allocations for itsacquisition of Mills. The valuations will be developed with the assistance of athird-party professional appraisal firm. The acquisition of Mills by SPG-FCMwill involve the assumption of $954.9 million of preferred stock and aproportionate share of property-level mortgage debt, SPG-FCM’s share ofwhich approximates $4 billion, both of which are exclusive of any fairmarket value adjustments which will be included in SPG-FCM’s preliminarypurchase accounting allocations to be finalized during the second quarter of2007.

**International JointVenture Investments**

We conduct our international operations in Europethrough our two European joint venture investment entities; Simon IvanhoeS.à.r.l. (“Simon Ivanhoe”), and Gallerie Commerciali Italia (“GCI”). Thecarrying amount of our total combined investment in these two joint ventureinvestments is $339.0 million and $338.1 million as of March 31,2007 and December 31, 2006, respectively, net of the related cumulativetranslation adjustments. The Operating Partnership has a 50% ownership in SimonIvanhoe and a 49% ownership in GCI as of March 31, 2007.

We conduct our international Premium Outlet operationsin Japan through joint venture partnerships with Mitsubishi Estate Co., Ltd.and Sojitz Corporation (formerly known as Nissho Iwai Corporation). Thecarrying amount of our investment in these Premium Outlet joint ventures inJapan is $279.3 million and $281.2 million as of March 31, 2007and December 31, 2006, respectively, net of the related cumulativetranslation adjustments. We have a 40% ownership in these Japan Premium Outletjoint ventures. As of March 31, 2007, we held a 50% ownership interest ina Premium Outlet in South Korea which is now substantially complete, for whichour investment approximated $19.2 million.

During 2006, we finalized the formation of jointventure arrangements to develop and operate shopping centers in China. Theshopping centers will be anchored by Wal-Mart stores and will be through a 32.5%ownership in a joint venture entity, Great Mall Investments, Ltd. (“GMI”). Weare planning on initially developing five centers, four of which are currentlyunder construction, with our share of the total equity commitment ofapproximately $49.5 million. We account for our investments in GMI underthe equity method of accounting. As of March 31, 2007, our combinedinvestment in these shopping centers in GMI is approximately $17.5 million.

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**Summary FinancialInformation**

Summaryfinancial information of all of our joint ventures, excluding that of SPG-FCM,and a summary of our investment in and share of income from such joint venturesfollow. We condensed into separate line items major captions of the statementsof operations for joint venture interests sold or consolidated. Consolidationoccurs when we acquire an additional interest in the joint venture and, as aresult, gain unilateral control of the Property or are determined to be the primarybeneficiary. We reclassify these line items into “Discontinued Joint VentureInterests” and “Consolidated Joint Venture Interests” on the balance sheets andstatements of operations, if material, so that we may present comparativeresults of operations for those joint venture interests held as of March 31,2007.

| ** **                                                | ** ** | **March 31,  2007** | ** **     | **December 31,  2006** | ** ** |
|-----------------------------------------------------------|------------|--------------------------|----------------|-----------------------------|------------|
| **BALANCE SHEETS**                                        |       |                     |           |                        |       |
| **Assets:**                                               |       |                     |           |                        |       |
| Investment properties,  at cost                           | ** ** | **$**                    | **10,645,934** |                        | $          | 10,669,967 |   |
| Less — accumulated  depreciation                | ** ** | **2,190,574**            |           | 2,206,399                   |       |
|                                                      | ** ** | **8,455,360**            |           | 8,463,568                   |       |
| Cash and cash  equivalents                                | ** ** | **372,964**              |           | 354,620                     |       |
| Tenant receivables                                        | ** ** | **229,421**              |           | 258,185                     |       |
| Investment in  unconsolidated entities                    | ** ** | **170,301**              |           | 176,400                     |       |
| Deferred costs and other  assets                          | ** ** | **321,864**              |           | 307,468                     |       |
| Total assets                                              | ** ** | **$**                    | **9,549,910**  |                        | $          | 9,560,241 |   |
| **Liabilities  and Partners’ Equity:**               |       |                     |           |                        |       |
| Mortgages and other  indebtedness                         | ** ** | **$**                    | **8,099,076**  |                        | $          | 8,055,855 |   |
| Accounts payable,  accrued expenses, and deferred revenue | ** ** | **487,180**              |           | 513,472                     |       |
| Other liabilities                                         | ** ** | **256,501**              |           | 255,633                     |       |
| Total liabilities                                         | ** ** | **8,842,757**            |           | 8,824,960                   |       |
| Preferred units                                           | ** ** | **67,450**               |           | 67,450                      |       |
| Partners’ equity                                     | ** ** | **639,703**              |           | 667,831                     |       |
| Total liabilities  and partners’ equity              | ** ** | **$**                    | **9,549,910**  |                        | $          | 9,560,241 |   |
| **Our  Share of:**                                        |       |                     |           |                        |       |
| Total assets                                              | ** ** | **$**                    | **4,572,229**  |                        | $          | 4,113,051 |   |
| Partners’ equity                                     | ** ** | **$**                    | **402,005**    |                        | $          | 380,150 |   |
| Add: Investment in SPG-FCM  Ventures, LLC                 | ** ** | **421,218**              |           | —                      |       |
| Add: Excess Investment                                    | ** ** | **800,295**              |           | 918,497                     |       |
| Our net Investment in  Joint Ventures                     | ** ** | **$**                    | **1,623,518**  |                        | $          | 1,298,647 |   |
| Mortgages and other indebtedness                          | ** ** | **$**                    | **3,449,906**  |                        | $          | 3,472,228 |   |

 

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“ExcessInvestment” represents the unamortized difference of our investment over ourshare of the equity in the underlying net assets of the joint venturesacquired. We amortize excess investment over the life of the relatedProperties, typically no greater than 40 years, and the amortization isincluded in the reported amount of income from unconsolidated entities. We havepresented our investment in SPG-FCM as a single line item due to therecent acquisition of Mills as this amount will be affected by our preliminarypurchase price allocations which as discussed in note 2 are currently underway.We intend to present the assets and liabilities of SPG-FCM includedwithin this Summary Financial Information at the end of our second quarter.

| ** **                                                | ** ** | **For the Three Months  Ended March 31,** | ** **  |
|-----------------------------------------------------------|------------|--------------------------------------------------------------------|-------------|
| ** **                                                | ** ** | **2007**                                                           | ** **  | **2006** | ** ** |
| **STATEMENTS OF OPERATIONS**                              |       |                                                               |        |   |   |
| **Revenue:**                                              |       |                                                               |        |   |   |
| Minimum rent                                              | ** ** | **$**                                                              | **277,972** |   | $ | 257,703 |   |
| Overage rent                                              | ** ** | **17,341**                                                         |        | 14,159 |   |
| Tenant  reimbursements                                    | ** ** | **135,283**                                                        |        | 125,558 |   |
| Other income                                              | ** ** | **41,745**                                                         |        | 32,098 |   |
| Total revenue                                             | ** ** | **472,341**                                                        |        | 429,518 |   |
| **Operating  Expenses:**                                  |       |                                                               |        |   |   |
| Property operating                                        | ** ** | **89,151**                                                         |        | 85,767 |   |
| Depreciation and  amortization                            | ** ** | **84,083**                                                         |        | 73,136 |   |
| Real estate taxes                                         | ** ** | **35,111**                                                         |        | 33,342 |   |
| Repairs and  maintenance                                  | ** ** | **23,214**                                                         |        | 20,680 |   |
| Advertising and  promotion                                | ** ** | **8,102**                                                          |        | 6,929 |   |
| Provision for  credit losses                              | ** ** | **165**                                                            |        | 431 |   |
| Other                                                     | ** ** | **25,763**                                                         |        | 23,755 |   |
| Total operating  expenses                                 | ** ** | **265,589**                                                        |        | 244,040 |   |
| **Operating  Income**                                     | ** ** | **206,752**                                                        |        | 185,478 |   |
| Interest expense                                          | ** ** | **(111,239**                                                       | **)**       | (103,776 | ) |
| Loss from unconsolidated  entities                        | ** ** | **(84**                                                            | **)**       | — |   |
| Gain (loss) on sale of  asset                             | ** ** | **(4,759**                                                         | **)**       | 94 |   |
| **Income from Continuing  Operations**                    | ** ** | **90,670**                                                         |        | 81,796 |   |
| Income from consolidated  joint venture interests         | ** ** | **—**                                                         |        | 110 |   |
| Income from discontinued  joint venture interests         | ** ** | **17**                                                             |        | 327 |   |
| Loss on disposal or sale  of discontinued operations, net | ** ** | **—**                                                         |        | (447 | ) |
| **Net Income**                                            | ** ** | **$**                                                              | **90,687**  |   | $ | 81,786 |   |
| **Third-Party Investors’ Share of  Net Income**      | ** ** | **$**                                                              | **54,645**  |   | $ | 49,576 |   |
| **Our Share of Net Income**                               | ** ** | **36,042**                                                         |        | 32,210 |   |
| **Amortization of Excess  Investment**                    | ** ** | **(14,269**                                                        | **)**       | (12,518 | ) |
| **Income from Beneficial  Interests**                     | ** ** | **—**                                                         |        | 10,231 |   |
| **Income from Unconsolidated Entities, Net**              | ** ** | **$**                                                              | **21,773**  | ** ** | **$** | **29,923** | ** ** |

 

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**6.**                 Debt

**Unsecured Debt**

***Credit Facility.***   Significantdraws on the Credit Facility during the three months ended March 31, 2007were as follows:

| ***Draw Date***    | *** *** | ***Draw******Amount* | *** *** | ***Use of Credit Line Proceeds*** | *** ***                                                                                                      |
|-------------------------|--------------|----------------------|--------------|-------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|
| February 16,  2007 |         | $                    | 600,000      |                                                  | Borrowing to partially  fund a $1.187 billion loan to Mills.                                                 |   |
| March 29, 2007     |         | $                    | 550,000      |                                                  | Borrowing to fund our equity requirement for the acquisition of Mills  and to partially fund the loan to SPG-FCM. |   |

 

Other amounts drawn on theCredit Facility were primarily for general working capital purposes. We repaida total of $170.0 million on the Credit Facility during the three monthsended March 31, 2007. The total outstanding balance on the Credit Facilityas of March 31, 2007 was $1.8 billion, and the maximum amountoutstanding during the quarter was approximately $2.0 billion. During thefirst three months of 2007, the weighted average outstanding balance on theCredit Facility was approximately $741.0 million.

**Secured Debt**

Total secured indebtedness was $4.6 billion and$4.4 billion at March 31, 2007 and December 31, 2006,respectively. During the three months ended March 31, 2007, we repaid$122.4 million in mortgage loans, unencumbering two properties.

As a result of theacquisition of Mills by SPG-FCM, as of March 31, 2007, we now hold acontrolling ownership interest in Gwinnett Place and Town Center at Cobb, andas a result they were consolidated as of the acquisition date. This includedthe consolidation of two mortgages secured by Gwinnett Place of $35.6 millionand $79.2 million at fixed rates of 7.54% and 7.25%, respectively, and twomortgages secured by Town Center at Cobb of $45.4 million and $60.3 millionat fixed rates of 7.54% and 7.25%, respectively.

**7.**                 Partners’Equity

Under The Simon Property Group 1998 Stock Incentive Plan,on February 26, 2007, the Compensation Committee of Simon Property’s Boardof Directors, under The Simon Property Group 1998 Stock Incentive Plan, awarded246,271 restricted shares of Simon Property common stock to employees underthis Plan at a fair value of $115.62 per share. The fair market value of therestricted stock awarded on February 26, 2007 has been deferred and isbeing amortized over a four-year vesting service period. As a result of theaward of restricted stock, we issued a like number of units to Simon Propertyin accordance with our partnership agreement.

During the first three months of 2007, nine limitedpartners exchanged 1,692,474 units for a like number of shares of common stockof Simon Property, increasing Simon Property’s interest in us.

On May 11, 2006, the Simon Property Board ofDirectors authorized a common stock repurchase program under which SimonProperty may purchase up to 6,000,000 shares of its common stock subject to amaximum aggregate purchase price of $250 million over the next twelvemonths as market conditions warrant. Simon Property may purchase the shares inthe open market or in privately negotiated transactions. There have been no purchases under this program in2007.

As previously disclosed, for the quarter ending March 31,2007, holders of Series I 6% Convertible Perpetual Units (“Series IPreferred Units”) and Simon Property’s Series I 6% Convertible PerpetualPreferred Stock (“Series I Preferred Stock”) could elect to convert theirsecurities during the quarter into common units of the Operating Partnershipand shares of Simon Property common stock, respectively. 

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The optional conversion isas a result of the closing sale price of Simon Property’s common stockexceeding the applicable trigger price per share for a period of 20 tradingdays in the last 30 trading days of the prior quarter. If holders of a Series IPreferred Unit convert into common units, then the holder may also elect toconvert those units into common stock on a one-for-one basis in accordance withour partnership agreement. During the three months ended March 31, 2007,6,461 shares of Series I Preferred Stock were converted into 5,075 sharesof Simon Property common stock and Simon Property converted a like number ofits Series I Preferred Units into common units. As of March 31, 2007,the conversion trigger price of $79.16 had been met and the Series IPreferred Units are convertible into 0.78957 of a common unit and the Series IPreferred Stock is convertible into 0.78957 of a share of Simon Property commonstock beginning April 2, 2007 through June 29, 2007.

Preferred units whoseredemption is outside of our control have been classified as temporary equityin the accompanying balance sheets.

**8.**                 Commitmentsand Contingencies

**Litigation**

There have been no material developments with respectto the pending litigation disclosed in our 2006 Annual Report on Form 10-K.

We are involved in variousother legal proceedings that arise in the ordinary course of our business. Webelieve that such routine litigation, claims and administrative proceedingswill not have a material adverse impact on our financial position or ourresults of operations. We record a liability when a loss is considered probableand the amount can be reasonably estimated.

**Guarantees ofIndebtedness**

Joint venture debt is theliability of the joint venture, and is typically secured by the joint ventureProperty, which is non-recourse to us. As of March 31, 2007, we have loanguarantees and other guarantee obligations of $79.6 million and $23.2 million,respectively, to support our total $3.4 billion share of joint venturemortgage and other indebtedness in the event that the joint venture partnershipdefaults under the terms of the underlying arrangement. Mortgages which areguaranteed by us are secured by the property of the joint venture and thatproperty could be sold in order to satisfy the outstanding obligation.

**9.**                 RealEstate Acquisitions and Dispositions

On March 1, 2007, we acquired the additional 40%interest in both University Park Mall and University Center located inMishawaka, IN from our partner and as a result, we now own 100% of UniversityPark Mall, a regional mall Property, and University Center, acommunity/lifestyle center Property. On March 28, 2007, we acquired The MaineOutlet, a 112,000 square foot outlet center located in Kittery, Maine, adjacentto our Kittery Premium Outlets Property.

We had no consolidatedproperty dispositions during the three months ended March 31, 2007.

**10.**          RecentFinancial Accounting Standards

On January 1, 2007, we adopted FASBInterpretation No. 48, “Accounting for Uncertainty in Income Taxes, anInterpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies theaccounting for uncertainty in income taxes recognized in a company’s financialstatements and prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. The Interpretation also provides guidanceon description, classification, interest and penalties, accounting in interimperiods, disclosure and transition. The adoption of FIN 48 did not have anyimpact on our financial position or results of operations.

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In September 2006, the FASB issued FASBNo. 157, “Fair Value Measurements”. SFAS 157 is definitional anddisclosure oriented and addresses how companies should approach measuring fairvalue when required by GAAP; it does not create or modify any current GAAPrequirements to apply fair value accounting. The Standard provides a singledefinition for fair value that is to be applied consistently for all accountingapplications, and also generally describes and prioritizes according toreliability the methods and inputs used in valuations. SFAS 157 prescribesvarious disclosures about financial statement categories and amounts which aremeasured at fair value, if such disclosures are not already specified elsewherein GAAP. The new measurement and disclosure requirements of SFAS 157 areeffective for us in the first quarter of 2008. We do not expect the adoption ofSFAS 157 will have a significant impact on our results of operations orfinancial position.

**Item 2.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations

You should read thefollowing discussion in conjunction with the financial statements and notesthereto that are included in this report. Certain statements made in thissection or elsewhere in this report may be deemed “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995. Although we believe the expectations reflected in any forward-lookingstatements are based on reasonable assumptions, we can give no assurance thatour expectations will be attained, and it is possible that our actual resultsmay differ materially from those indicated by these forward-lookingstatements due to a variety of risks and uncertainties. Those risks anduncertainties include, but are not limited to: our ability to meet debt servicerequirements, the availability of financing, changes in our credit rating,changes in market rates of interest and foreign exchange rates for foreigncurrencies, the ability to hedge interest rate risk, risks associated with theacquisition, development and expansion of properties, general risks related toretail real estate, the liquidity of real estate investments, environmentalliabilities, international, national, regional and local economic climates,changes in market rental rates, trends in the retail industry, relationshipswith anchor tenants, the inability to collect rent due to the bankruptcy orinsolvency of tenants or otherwise, risks relating to joint venture properties,costs of common area maintenance, competitive market forces, risks related tointernational activities, insurance costs and coverage, impact of terroristactivities, inflation and maintenance of REIT status. We discussed these andother risks and uncertainties under the heading “Risk Factors” in our annualand quarterly periodic reports filed with the SEC that could cause our actualresults to differ materially from the forward-looking statements that we make.We may update that discussion in our periodic reports, but otherwise weundertake no duty or obligation to update or revise these forward-lookingstatements, whether as a result of new information, future developments, orotherwise.

**Overview**

Simon Property Group, L.P., a Delaware limitedpartnership (the “Operating Partnership”), is a majority owned subsidiary ofSimon Property Group, Inc., a Delaware corporation (“Simon Property”).Simon Property is our general partner and a self-administered and self-managedreal estate investment trust. In this discussion, the terms the “we”, “us” and “our”refer to the Operating Partnership and its subsidiaries.

We are engaged in theownership, development, and management of retail real estate properties,primarily regional malls, Premium Outlet® centers and community/lifestylecenters. As of March 31, 2007, excluding assets acquired in thetransaction with The Mills Corporation (“Mills”) as described below, we ownedor held an interest in 285 income-producing properties in the UnitedStates, which consisted of 171 regional malls, 68 community/lifestyle centers,36 Premium Outlet centers and 10 other shopping centers or outlet centers in 38states plus Puerto Rico (collectively, the “Properties”, and individually, a “Property”).We also own interests in four parcels of land held in the United States for futuredevelopment (together with the Properties, the “Portfolio”). In the UnitedStates, we have six new properties currently under development aggregatingapproximately 3.2 million square feet which will open during 2007 or early

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2008.Internationally, we have ownership interests in 53 European shopping centers(France, Italy and Poland); five Premium Outlet centers in Japan; and onePremium Outlet center in Mexico. We also have begun construction on a PremiumOutlet center in which we will hold a 50% interest located in South Korea and,through a joint venture arrangement, we will have a 32.5% interest in fiveshopping centers (four of which are under construction) in China. Additionally,on March 29, 2007, SPG-FCM Ventures, LLC (“SPG-FCM”), a jointventure between an entity owned 50% by the Operating Partnership and 50% byfunds managed by Farallon Capital Management, L.L.C. (“Farallon”), successfullycompleted a tender offer to acquire all of the outstanding common stock of TheMills Corporation (“Mills”). As a result, we now hold an interest in anadditional 38 properties owned by Mills located throughout the United States,including 18 regional malls, 3 community/lifestyle centers, and 17 other retailproperties which will be referred to hereafter as The Mills.

***Operating Fundamentals***

We generate themajority of revenues from leases with retail tenants including:

·       Baseminimum rents and cart and kiosk rentals,

·       Overageand percentage rents based on tenants’ sales volume, and

·       Recoveriesof a significant portion of our operating expenses, including common areamaintenance, real estate taxes, and insurance.

Revenues of our management company, after intercompanyeliminations, consist primarily of management fees that are typically basedupon the revenues of the property being managed.

We seek growth inour earnings and cash flows by enhancing the profitability and operation of ourproperties and investments. We seek to accomplish this growth through thefollowing:

·       Focusingon leasing to increase revenues and utilization of economies of scale to reduceoperating expenses,

·       Expandingand re-tenanting existing franchise locations at competitive market rates,

·       Addingmixed-use elements to our Portfolio through our asset intensificationinitiatives. This may include adding elements such as multifamily,condominiums, hotel and self-storage at selected locations,

·       Theacquisition of high quality real estate assets or portfolios of assets, and

·       Sellingnon-core assets.

We also grow bygenerating supplemental revenues in our existing real estate portfolio, fromoutlot parcel sales and, due to our size and tenant relationships, from thefollowing:

·       SimonBrand Ventures (“Simon Brand”) mall marketing initiatives revenue sources whichinclude: payment systems (including marketing fees relating to the sales ofbank-issued prepaid cards), national marketing alliances, static and digitalmedia initiatives, business development, sponsorship, and other events.

·       Simon Business Network (“SimonBusiness”) offers property operating services to our tenants and othersresulting from its relationships with vendors.

We focus on high quality real estate across the retailreal estate spectrum. We expand or renovate to enhance existing assets’profitability and market share when we believe the investment of our capitalmeets our risk-reward criteria. We selectively develop new properties in majormetropolitan areas that exhibit strong population and economic growth.

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We routinely review and evaluate acquisitionopportunities based on their complement to our Portfolio. Lastly, we areselectively expanding our international presence. Our international strategyincludes partnering with established real estate companies and financinginternational investments with local currency to minimize foreign exchangerisk.

To support ouroverall growth goals, we employ a three-fold capital strategy:

·       Providethe capital necessary to fund growth.

·       Maintainsufficient flexibility to access capital in many forms, both public andprivate.

·       Manage our overallfinancial structure in a fashion that preserves our investment grade ratings.

***Results Overview***

Diluted earnings per unit decreased $0.03 during thefirst three months of 2007, or 6.4%, to $0.44 from $0.47 for the same periodlast year. The 2006 results include a $34.4 million gain (or $0.12 perdiluted unit) from the sale of partnership interests in one of our Europeanjoint ventures to our new partner, IvanhoeCambridge, Inc. (“Ivanhoe”), an affiliate of Caisse de dépôt et placementdu Québec, and recognition of $10.2 million in income (or $0.03 perdiluted unit) from contributed beneficial interests, representing the right toreceive cash flow, capital distributions, and related profits and losses in aregional mall entity. Included in the first quarter of 2007 was the receipt of$19.0 million of lease settlements from anchor store activity and $11.9 millionof interest income attributable to a mezzanine loan made to Mills prior to SPG-FCMacquiring a controlling portion of the common shares of Mills on March 29,2007. The remaining portion of the activity that offset the items occurring inthe first quarter of 2006 was driven by strong core operations as furtherdescribed below.

Our core business fundamentals remained strong duringthe first three months of 2007. Regional mall comparable sales per square foot(“psf”) strengthened during the first three months of 2007, increasing 5.6% to$487 psf from $461 psf for the same period in 2006 reflecting robust retail sales activity. Our regional mall averagebase rents increased 3.9% to $36.18 psf as of March 31, 2007 from $34.83psf as of March 31, 2006. In addition, our regional mall leasing spreads were $7.99 psf as of March 31,2007 representing a 21.3% increase over expiring rents, compared with recentyear’s performance. The operating fundamentals of the Premium Outlet centersand community/lifestyle centers also contributed to the improved operatingresults for the nine month period as seen in the following section entitledPortfolio Data, with the Portfolio effectively fully occupied at 99.1% andleasing spreads at $6.60, or 29.2% above expiring rents. Finally, regional malloccupancy was 91.8% as of March 31, 2007 as compared to 91.6% as of March 31,2006.

Regarding financingactivities, despite the increasing interest rate environment resulting in anapproximate 49 basis point increase in LIBOR (5.32% at March 31, 2007versus 4.83% at March 31, 2006), our effective overall borrowing rate forthe three months ended March 31, 2007 decreased two basis points ascompared to the three months ended March 31, 2006. This was principally asa result of the issuance of fixed rate debt during 2006. Our financingactivities for the three months ended March 31, 2007 are highlighted bythe following:

·       Wepaid off two mortgages totaling $122.4 million that bore interest at fixedrates ranging from 7.65% to 7.85%.

·       Borrowingson the Credit Facility increased to approximately $1.8 billion during thethree months ended March 31, 2007, principally as a result of fundsrequired to effect the acquisition of Mills by SPG-FCM for our equityinvestments of $475 million and for loans to Mills and SPG-FCMtotaling $1.473 billion.

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·       As a result of theacquisition of Mills by SPG-FCM, at March 31, 2007, we now hold acontrolling ownership interest in Gwinnett Place and Town Center at Cobb, andas a result we now consolidate these two Properties. Included in thisconsolidation are two mortgages secured by Gwinnett Place of $35.6 millionand $79.2 million at fixed rates of 7.54% and 7.25%, respectively, and twomortgages secured by Town Center at Cobb of $45.4 million and $60.3 millionat fixed rates of 7.54% and 7.25%, respectively.

***United States Portfolio Data***

The Portfolio datadiscussed in this overview includes the following key operating statistics:occupancy, average base rent per square foot, and comparable sales per squarefoot for our three domestic platforms. We include acquired Properties in thisdata beginning in the year of acquisition andremove properties sold in the year disposed. We do not include any Propertieslocated outside of the United States. The following table sets forththese key operating statistics for:

·       Propertiesthat are consolidated in our consolidated financial statements,

·       Propertieswe account for under the equity method of accounting as joint ventures, and

·       the foregoing twocategories of Properties on a total Portfolio basis.

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***Domestic PropertyData:***

| ** **                               | ** ** | **March 31,  2007** | ** ** | **%/basis point  Change **(1) | ** ** | **March 31,  2006** | ** **      | **%/basis point  Change **(1) | ** ** |
|------------------------------------------|------------|--------------------------|------------|-----------------------------------------|------------|--------------------------|-----------------|-----------------------------------------|------------|
| **Regional  Malls:**                     |       |                     |       |                                    |       |                     |            |                                    |       |   |   |   |   |   |   |   |   |
| ***Occupancy***                          | ** ** | ** **               | ** ** | ** **                              | ** ** | ** **               | ** **      |                                    |       |   |   |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **               | **91.8%**  | ** **                              | ** ** | ** **               | **+20 b**  | **ps**                                  |       |   | 91.6% |   |   |   | +30 b | ps |   |
| Unconsolidated                           | ** ** | ** **               | **91.7%**  | ** **                              | ** ** | ** **               | **—**      |                                    |       |   | 91.7% |   |   |   | -10 b | ps |   |
| **Total  Portfolio**                     | ** ** | ** **               | **91.8%**  | ** **                              | ** ** | ** **               | **+20 b**  | **ps**                                  |       |   | 91.6% |   |   |   | +10 b | ps |   |
| ***Average Base Rent per Square  Foot*** | ** ** | ** **               | ** ** | ** **                              | ** ** | ** **               | ** **      |                                    |       |   |   |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **               | **$35.34** | ** **                              | ** ** | ** **               | **2.6%**        | ** **                              |       |   | $34.44 |   |   |   | 3.6% |   |   |
| Unconsolidated                           | ** ** | ** **               | **$37.78** | ** **                              | ** ** | ** **               | **6.3%**        | ** **                              |       |   | $35.53 |   |   |   | 1.1% |   |   |
| **Total  Portfolio**                     | ** ** | ** **               | **$36.18** | ** **                              | ** ** | ** **               | **3.9%**        | ** **                              |       |   | $34.83 |   |   |   | 2.7% |   |   |
| ***Comparable Sales Per Square  Foot***  | ** ** | ** **               | ** ** | ** **                              | ** ** | ** **               | ** **      |                                    |       |   |   |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **               | **$470**   | ** **                              | ** ** | ** **               | **4.9%**        | ** **                              |       |   | $448 |   |   |   | 6.7% |   |   |
| Unconsolidated                           | ** ** | ** **               | **$522**   | ** **                              | ** ** | ** **               | **7.2%**        | ** **                              |       |   | $487 |   |   |   | 5.0% |   |   |
| **Total  Portfolio**                     | ** ** | ** **               | **$487**   | ** **                              | ** ** | ** **               | **5.6%**        | ** **                              |       |   | $461 |   |   |   | 5.5% |   |   |
| **Premium Outlet Centers:**              | ** ** | ** **               | ** ** | ** **                              | ** ** | ** **               | ** **      |                                    |       |   |   |   |   |   |   |   |   |
| Occupancy                                | ** ** | ** **               | **99.1%**  | ** **                              | ** ** | ** **               | **-20 b**  | **ps**                                  |       |   | 99.3% |   |   |   | +30 b | ps |   |
| Average Base Rent  per Square Foot       | ** ** | ** **               | **$24.84** | ** **                              | ** ** | ** **               | **4.1%**        | ** **                              |       |   | $23.85 |   |   |   | 3.9% |   |   |
| Comparable Sales  Per Square Foot        | ** ** | ** **               | **$485**   | ** **                              | ** ** | ** **               | **9.2%**        | ** **                              |       |   | $444 |   |   |   | 5.0% |   |   |
| **Community/Lifestyle Centers:**         |       |                     |       |                                    |       |                     |            |                                    |       |   |   |   |   |   |   |   |   |
| ***Occupancy***                          |       |                     |       |                                    |       |                     |            |                                    |       |   |   |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **               | **91.4%**  | ** **                              | ** ** | ** **               | **+380 b** | **ps**                                  |       |   | 87.6% |   |   |   | -210 b | ps |   |
| Unconsolidated                           | ** ** | ** **               | **96.4%**  | ** **                              | ** ** | ** **               | **+40 b**  | **ps**                                  |       |   | 96.0% |   |   |   | +20 b | ps |   |
| **Total  Portfolio**                     | ** ** | ** **               | **93.1%**  | ** **                              | ** ** | ** **               | **+280 b** | **ps**                                  |       |   | 90.3% |   |   |   | -130 b | ps |   |
| ***Average Base Rent per Square  Foot*** | ** ** | ** **               | ** ** | ** **                              | ** ** | ** **               | ** **      |                                    |       |   |   |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **               | **$12.06** | ** **                              | ** ** | ** **               | **2.5%**        | ** **                              |       |   | $11.77 |   |   |   | 2.2% |   |   |
| Unconsolidated                           | ** ** | ** **               | **$11.70** | ** **                              | ** ** | ** **               | **7.4%**        | ** **                              |       |   | $10.89 |   |   |   | 3.5% |   |   |
| **Total Portfolio**                      | ** ** | ** **               | **$11.94** | ** **                              | ** ** | ** **               | **4.1%**        | ** **                              |       |   | $11.47 |   |   |   | 2.7% |   |   |

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(1)          Percentages may notrecalculate due to rounding.

***Occupancy Levelsand Average Base Rent Per Square Foot.***   Occupancyand average base rent are based on mall and freestanding Gross Leaseable Area (“GLA”)owned by us (“Owned GLA”) in the regional malls, all tenants at the PremiumOutlet centers, and all tenants at community/lifestyle centers. Our Portfoliohas maintained stable occupancy and increased average base rents.

***Comparable Sales Per Square Foot.***   Comparablesales include total reported retail tenant sales at Owned GLA (for mall andfreestanding stores with less than 10,000 square feet) in the regional mallsand all reporting tenants at the Premium Outlet centers. Retail sales at OwnedGLA affect revenue and profitability levels because sales determine the amountof minimum rent that can be charged, the percentage rent realized, and therecoverable expenses (common area maintenance, real estate taxes, etc.) thattenants can afford to pay.

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***International Property Data***

Thefollowing key operating statistics are provided for our internationalproperties, which are accounted for using the equity method of accounting.

| ** **                         | ** ** | **March 31,  2007** | ** **       | **%/basis point  Change** | ** ** | **March 31,  2006** | ** **     | **%/basis point  Change** | ** ** |
|------------------------------------|------------|--------------------------|------------------|--------------------------------|------------|--------------------------|----------------|--------------------------------|------------|
| **European  Shopping Centers:**    |       |                     |             |                           |       |                     |           |                           |       |   |   |   |   |   |   |   |   |
| Occupancy                          | ** ** | ** **               | **97.6%**        |                           | ** ** | ** **               | **+40 b** | **ps**                         |       |   | 97.2% |   |   |   | +20 b | ps |   |
| Comparable sales  per square foot  | ** ** | ** **               | **€395**    |                           | ** ** | ** **               | **4.2%**       | ** **                     |       |   | €379 |   |   |   | -0.8% |   |   |
| Average base rent  per square foot | ** ** | ** **               | **€26.55**  |                           | ** ** | ** **               | **0.1%**       | ** **                     |       |   | €26.52 |   |   |   | 4.9% |   |   |
| **International Premium Outlets**  | ** ** | ** **               | ** **       |                           | ** ** | ** **               | ** **     |                           |       |   |   |   |   |   |   |   |   |
| Occupancy                          | ** ** | ** **               | **100%**         |                           |       |                     | —         |                           |       |   | 100% |   |   |   | — |   |   |
| Comparable sales  per square foot  | ** ** | ** **               | **¥89,554** |                           | ** ** | ** **               | **1.8%**       | ** **                     |       |   | ¥87,994 |   |   |   | 2.0% |   |   |
| Average base rent per  square foot | ** ** | ** **               | **¥4,654**  |                           | ** ** | ** **               | **0.4%**       | ** **                     |       |   | ¥4,634 |   |   |   | 3.1% |   |   |

 

**Results ofOperations**

In addition to theactivity discussed above and in the Results Overview, the followingacquisitions, Property openings, and other activity affected our consolidatedresults from continuing operations in the comparative periods:

·       OnMarch 9, 2007, we opened The Domain, in Austin, Texas, which combines700,000 square feet of luxury fashion and restaurant space, 75,000 square feetof Class A office space and 390 apartments. The Domain is anchored bycentral Texas’ first Neiman Marcus and Macy’s.

·       OnDecember 1, 2006, we opened Shops at Arbor Walk, a 230,841 square footcommunity center located in Austin, Texas.

·       OnNovember 2, 2006, we opened Rio Grande Valley Premium Outlets, a 404,000square foot upscale outlet center in Mercedes, Texas, 20 miles east of McAllen,Texas, and 10 miles from the Mexico border.

·       OnNovember 2, 2006, we received capital transaction proceeds of $102.2 millionrelated to beneficial interests in a mall contributed to us in 2006 by theSimon family members who were partners in the underlying mall partnership. Thistransaction terminated our beneficial interests and resulted in the recognitionof an $86.5 million gain.

·       OnNovember 1, 2006, we acquired the remaining 50% interest in Mall ofGeorgia from our partner for $252.6 million, including the assumption of$96.0 million of debt.

·       OnAugust 4, 2006, we opened Round Rock Premium Outlets, a 432,000 squarefoot Premium Outlet center located 20 minutes North of Austin, Texas in RoundRock, Texas.

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In addition to theactivity discussed in the Results Overview, the following acquisitions,dispositions, and openings affected our income from unconsolidated entities inthe comparative periods:

·       OnNovember 10, 2006 we opened Coconut Point, in Bonita Springs, Florida, a1.2 million square foot, open-air shopping center complex with village,lakefront and community center areas.

·       OnOctober 26, 2006, we opened the 200,000 square foot expansion of ashopping center in Wasquehal, France.

·       OnOctober 14, 2006 we opened a 53,000 square foot expansion of Toki PremiumOutlets.

·       OnSeptember 28, 2006, our Simon Ivanhoe joint venture opened GliwiceShopping Center, a 380,000 square foot shopping center in Gliwice, Poland.

·       OnMay 31, 2006, GCI opened Giugliano, an 800,000 square foot center anchoredby a hypermarket, in Italy.

For the purposes of the following comparison betweenthe three months ended March 31, 2007 and 2006, the above transactions arereferred to as the Property Transactions. Inthe following discussions of our results of operations, “comparable” refers toProperties open and operating throughout the periods in both 2007 and 2006.

Wesold the following properties in 2006 on the indicated date. Due to the limitedsignificance of these properties on our financial statements, we did not reportthese properties as discontinued operations.

| Property        | ** ** | **Date of Disposition** | ** ** |
|-----------------|------------|-----------------------------------|------------|
| Wabash Village  |       | July 27,  2006               |       |
| Trolley Square  |       | August 3,  2006              |       |
| Northland Plaza |       | December 22, 2006            |       |

 

***Three Months Ended March 31, 2007 vs. ThreeMonths Ended March 31, 2006***

Minimum rents, excluding rents from our consolidatedSimon Brand and Simon Business initiatives, increased $21.0 million duringthe period, of which the Property Transactions accounted for $13.0 millionof the increase. Total amortization of the fair market value of in-place leasesdecreased minimum rents by $1.7 million over that of the first quarter of2006. Comparable rents, excluding rents from Simon Brand and Simon Business,increased $8.0 million, or 1.7%. This was primarily due to the leasing ofspace at higher rents that resulted in an increase in minimum rents of $9.4 million.In addition, rents from carts, kiosks, and other temporary tenants increasedcomparable rents by $0.5 million.

Overage rents increased $1.8 million or 11.4%,reflecting the increases in tenants’ sales.

Tenant reimbursements, excluding Simon Businessinitiatives, increased $9.0 million, of which the Property Transactionsaccounted for $5.2 million. The remainder of the increase of $3.8 million,or 1.8%, was in comparable Properties and was due to inflationary increases inproperty operating costs.

Total other income,excluding Simon Brand and Simon Business initiatives, increased $30.9 million,and was principally the result of the following:

·       $16.8 millionin increased interest income due to $11.9 million in interest income forthe period as a result of the loan to Mills, combined with increased interestrates and excess cash we held in the first half of the quarter from our December 2006senior notes offering;

·       $14.7 millionin increased lease settlement income as a result of settlements received fromtwo department anchor stores in 2007 as compared to our 2006 lease settlementincome from certain non-anchor tenants;

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·       $1.9 millionin loan financing fee amortization related to the $1.187 billion loan toMills made on February 16, 2007; and

·       offsetby decreases of $2.5 million in other net activity during the comparableperiod of 2006 on comparable Properties.

Revenues from Simon Brand and Simon Businessinitiatives increased $1.0 million to $35.4 million from $34.4 million.The increase in revenues is primarily due to increased event and sponsorshipincome.

Property operating expenses increased $3.3 million,$0.7 million from comparable properties (representing an increase of 0.7%)principally as a result of inflationary increases. The remainder of theincrease in property operating expenses was due to the effect of the PropertyTransactions.

Depreciation and amortization expense increased $5.8 millionand is primarily a result of the Property Transactions.

Real estate taxes decreased $2.6 million from theprior period due principally to a 2006 $6.5 million multi-year assessmentsettlement at a Property, partially offset by increases in expenses at ourother comparable properties of $2.3 million. The remainder of the increasein Real estate tax expense was due to the effect of the Property Transactions.

Repairs and maintenance increased $3.1 milliondue to heavier snow removal costs in 2007 than that of 2006.

Home office and regional costs increased $3.4 milliondue to increased personnel costs, which is primarily due to the effect of theincrease in our stock price on our stock-based compensation programs.

Interest expenseincreased $18.4 million due principally to the following:

·       theadditional borrowings to fund the mezzanine loan to Mills:

·       theimpact of increases in our average borrowing rates for our variable rate debt;and

·       theimpact of increased fixed rate debt of $3.3 billion, which are generallyat higher rates than our variable rate debt, due to the issuances of unsecurednotes in May, August, and December of 2006.

During the first quarter of 2006, we recognized thereceipt of a beneficial interest in a regional mall entity, which representsthe majority of the decrease in our income from unconsolidated entities, net inthe consolidated financial statements. This beneficial interest was terminatedin November 2006.

Gain on sales of assets andinterests in unconsolidated entities decreased $34.4 million over theprior period due to the recording of a $34.4 million gain on thesale of 10.5% of our interests in Simon Ivanhoe B.V./S.à.r.l. (“Simon Ivanhoe”)in 2006.

Preferred unit requirementdecreased $5.8 million as a result of the redemption of the Series FPreferred Units in the fourth quarter of 2006.

**Liquidity andCapital Resources**

Because we generate revenues primarily from long-termleases, our financing strategy relies primarily on long-term fixed rate debt.We manage our floating rate debt to be at or below 15–25% of total outstandingindebtedness by setting interest rates for each financing or refinancing basedon current market conditions. Because ofattractive fixed-rate debt opportunities in the past three years, floating ratedebt currently comprises approximately 14% of our total consolidated debt. Mostof our floating rate debt relates to borrowings made from our Credit Facilityto consummate the acquisition of Mills. We also enter into interest rateprotection agreements as appropriate to assist in managing our interest raterisk. We derive most of our liquidity from leases that generate positive netcash flow from operations and 

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distributions of capitalfrom unconsolidated entities that totaled $1.1 billion during the firstthree months of 2007. In addition, our Credit Facility provides an alternativesource of liquidity as our cash needs vary from time to time.

Our balance of cash and cash equivalents decreased$589.4 million during 2007 to $340.0 million as of March 31,2007. The March 31, 2007 and December 31, 2006 balances include $33.0 millionand $27.2, respectively, related to our co-branded gift card programs, which wedo not consider available for general working capital purposes.

On March 31, 2007, our Credit Facility hadavailable borrowing capacity of approximately $1.1 billion During thefirst three months of 2007, the maximum amount outstanding under the CreditFacility was $2.0 billion and the weighted average amount outstanding was$741.0 million. The weighted average interest rate was 4.92% for theperiod ended March 31, 2007.

We and Simon Property alsohave access to public equity and long term unsecured debt markets and access toprivate equity from institutional investors at the Property level.

**Acquisition of TheMills Corporation by SPG-FCM**

On February 16, 2007, SPG-FCM entered intoa definitive merger agreement with Mills to acquire all of the outstandingcommon stock of Mills for $25.25 per common share in cash. The acquisition wascompleted through a cash tender, which concluded on March 29, 2007. As ofMarch 31, 2007, we and Farallon had each funded $475 million into SPG-FCMto acquire the shares that were submitted for tender as of March 29, 2007,representing 75.38% of the outstanding shares of common stock of Mills. Inconnection with the closing of the tender offer, we also loaned $286 millionthrough three separate one-year note payable arrangements to SPG-FCM thatbear interest at rates ranging from LIBOR plus 37.5 basis points to LIBOR plus270 basis points. The $286 million in notes receivable from SPG-FCMare reported with notes receivable from related parties on the consolidatedbalance sheet. We expect these notes will be repaid by SPG-FCM at parduring the second quarter of 2007 from the proceeds of refinancing activity.

In connection with execution of a definitive mergeragreement with Mills, we made a loan to Mills on February 16, 2007 topermit it to repay an existing loan facility. The $1.187 billion loan toMills carries a rate of LIBOR plus 270 basis points and payment is due in fullone year from issuance. The loan facility also permits Mills to borrow anadditional $365 million on a revolving basis for working capitalrequirements and general corporate purposes. We received a financing fee of $15 millionat the closing of loan which is being amortized into other income over theone-year term of the loan. No borrowings under the revolving portion of thisarrangement had been drawn as of the end of the first quarter of 2007.

On April 3, 2007, the mergerof a subsidiary of SPG-FCM and Mills was completed. OnApril 18, 2007, a subsidiary of SPG-FCM was merged into Mills’operating partnership (“Mills LP”) was completed. The common unitholders in theMills LP will receive $25.25 per unit in cash, subject to certain qualifiedunitholders having the option to exchange their units for limited partnershipunits of the Operating Partnership based on a fixed exchange ratio of 0.211Operating Partnership units for each limited partnership unit in the Mills LP. As a result of the change in control of Mills,holders of Mills’ $316.3 million in Series F Convertible CumulativeRedeemable Preferred Stock have the right to require that Mills repurchasetheir shares for cash equal to the liquidation preference per share plusaccrued and unpaid dividends. If all of the holders of Mills’ Series Fpreferred stock exercise this right, Mills will be required to payapproximately $333 million.

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We have and intend toobtain all funds necessary to fulfill our equity requirement to SPG-FCM,as well as any funds that we have or will provide in the form of loans toMills, from available cash and the Credit Facility. Beginning in the secondquarter of 2007, Simon Property or an affiliate will also begin to serve as themanager for substantially all of the 38 properties in which SPG-FCMholds an interest. At the end of the second quarter of 2007, we would expect tohave funded $650 million of equity and have outstanding loans to Mills andSPG-FCM totaling approximately $1 billion.

**Cash Flows**

Our net cash flowfrom operating activities and distributions of capital from unconsolidatedentities for the three months ended March 31, 2007 totaled $384.4 million.In addition, we had net proceeds from all of our debt financing and repaymentactivities in this period of $1.5 billion. These activities are furtherdiscussed below in Financing and Debt. We also:

·       repurchasedunits and preferred units amounting to $15.0 million,

·       paidunitholder distributions of $236.0 million,

·       paidpreferred unit distributions totaling $19.6 million,

·       fundedconsolidated capital expenditures of $205.7 million. These capitalexpenditures include development costs of $121.5 million, renovation andexpansion costs of $54.8 million, and tenant costs and other operationalcapital expenditures of $29.4 million, and

·       fundedinvestments in unconsolidated entities of $431.9 million.

In general, weanticipate that cash generated from operations will be sufficient to meetoperating expenses, monthly debt service, recurring capital expenditures, anddistributions necessary to maintain Simon Property’s REIT qualification for2007 and on a long-term basis. In addition, we expect to be able to obtaincapital for nonrecurring capital expenditures, such as acquisitions, majorbuilding renovations and expansions, as well as for scheduled principalmaturities on outstanding indebtedness, from:

·       excesscash generated from operating performance and working capital reserves,

·       borrowingson our Credit Facility,

·       additionalsecured or unsecured debt financing, or

·       additional equity raised inthe public or private markets.

**Financing and Debt**

***UnsecuredDebt***

***Credit Facility.***   Othersignificant draws on the Credit Facility during the three months ended March 31,2007 were as follows:

| ***Draw Date***    | *** *** | ***Draw  Amount*** | *** *** | ***Use of Credit Line Proceeds*** | *** ***                                                                                                       |
|-------------------------|--------------|--------------------|--------------|-------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|
| February 16,  2007 |         | $                  | 600,000      |                                                  | Borrowing to  partially fund a $1.187 billion loan to Mills.                                                  |   |
| March 29, 2007     |         | $                  | 550,000      |                                                  | Borrowing to fund our  equity requirement for the acquisition of Mills and to partially fund the  loan to SPG-FCM. |   |

 

Other amounts drawn on theCredit Facility were primarily for general working capital purposes. We repaida total of $170.0 million on the Credit Facility during the three monthsended March 31, 2007. The total outstanding balance on the Credit Facilityas of March 31, 2007 was $1.8 billion, and the maximum 

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amountoutstanding during the quarter was approximately $2.0 billion. During thefirst three months of 2007, the weighted average outstanding balance on theCredit Facility was approximately $741.0 million.

***SecuredDebt***

Total secured indebtedness was $4.6 billion and$4.4 billion at March 31, 2007 and December 31, 2006,respectively. During the three months ended March 31, 2007, we repaid$122.4 million in mortgage loans, unencumbering two properties.

As a result of theacquisition of Mills by SPG-FCM, at March 31, 2007, we now hold acontrolling ownership interest in Gwinnett Place and Town Center at Cobb, andas a result we now consolidate these two Properties. Included in thisconsolidation are two mortgages secured by Gwinnett Place of $35.6 millionand $79.2 million at fixed rates of 7.54% and 7.25%, respectively, and twomortgages secured by Town Center at Cobb of $45.4 million and $60.3 millionat fixed rates of 7.54% and 7.25%, respectively.

***Summary of Financing***

Our consolidated debt,adjusted to reflect outstanding derivative instruments, and the effectiveweighted average interest rates as of March 31, 2007 and December 31,2006 consisted of the following (dollars in thousands):

| **Debt Subject to** | ** ** | ** ** | ** **    | **Adjusted Balance  as of  March 31, 2007** | ** ** | **Effective  Weighted  Average  Interest Rate** | ** ** | **Adjusted Balance  as of  December 31, 2006** | ** ** | **Effective  Weighted  Average  Interest Rate** | ** ** |
|-------------------------------|------------|------------|---------------|-----------------------------------------------------------------|------------|------------------------------------------------------|------------|--------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| **Fixed  Rate**               | ** ** |       | **$**         | **14,777,406**                                                  | ** ** |                                                 |       | **6.01**                                                           | **%**      |                                                 |       | $ | 14,548,226 |   |   |   | 6.02 | % |   |
| **Variable  Rate**            | ** ** |       | **2,375,012** | ** **                                                      |       |                                                 | **5.47**   | **%**                                                              |       |                                                 | 846,263    |   |   |   | 5.01 | % |   |
|                          | ** ** |       | **$**         | **17,152,418**                                                  | ** ** |                                                 |       | **5.94**                                                           | **%**      |                                                 |       | $ | 15,394,489 |   |   |   | 5.97 | % |   |

 

As of March 31, 2007, we had interest rate capprotection agreements on approximately $95 million of consolidatedvariable rate debt. We also hold $370.0 million of notional amountvariable rate swap agreements that have a weighted average variable pay rate of5.33% and a weighted average fixed receive rate of 3.72%. As of March 31,2007, the net effect of these agreements effectively converted $370.0 millionof fixed rate debt to variable rate debt.

***Contractual Obligations and Off-Balance SheetArrangements.***   There have been no material changes in ouroutstanding capital expenditure commitments since December 31, 2006, aspreviously disclosed in our 2006 Annual Report on Form 10-K. Thefollowing table summarizes the material aspects of our future obligations as ofMarch 31, 2007 for the remainder of 2007 and subsequent years thereafter(dollars in thousands):

| *** ***                                | *** *** | ***2007*** | *** *** | ***2008-2009*** | *** *** | ***2010-2012*** | *** *** | ***After 2012*** | *** *** | ***Total*** | *** *** |
|---------------------------------------------|--------------|------------|--------------|-----------------|--------------|-----------------|--------------|-----------------------|--------------|-------------|--------------|
| **Long  Term Debt**                         |         |       |         |            |         |            |         |                  |         |        |         |
| Consolidated (1)                       |         | $          | 1,695,285    |            | $            | 2,463,153       |         | $                     | 7,643,689    |        | $            | 5,300,067 |   | $ | 17,102,194 |   |
| **Pro  rata share of Long-Term Debt:**      |         |       |         |            |         |            |         |                  |         |        |         |
| Consolidated (2)                       |         | $          | 1,660,143    |            | $            | 2,449,550       |         | $                     | 7,593,299    |        | $            | 5,202,518 |   | $ | 16,905,510 |   |
| Joint Ventures (2)                     |         | 70,825     |         | 545,433         |         | 1,395,546       |         | 1,438,778             |         | 3,450,582   |         |
| **Total Pro Rata Share of  Long-Term Debt** |         | $          | 1,730,968    |            | $            | 2,994,983       |         | $                     | 8,988,845    |        | $            | 6,641,296 |   | $ | 20,356,092 |   |

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(1)          Represents principalmaturities and therefore, excludes net premiums and discounts and fair valueswaps of $50,224.

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(2)          Represents our pro ratashare of principal maturities and excludes net premiums and discounts,excluding the impact of the acquisition of Mills by SPG-FCM.

Our off-balance sheetarrangements consist primarily of our investments in real estate joint ventureswhich are common in the real estate industry and are described in Note 5 of thenotes to the accompanying financial statements. Joint venture debt is theliability of the joint venture, is typically secured by the joint ventureProperty, and is non-recourse to us. As of March 31, 2007, we have loanguarantees and other guarantee obligations of $79.6 million and $23.2 million,respectively, to support our total $3.4 billion share of joint venturemortgage and other indebtedness presented in the table above.

**Acquisitions andDispositions**

Buy-sell provisions are common in real estatepartnership agreements. Most of our partners are institutional investors whohave a history of direct investment in retailreal estate. Our partners in our joint venture properties may initiatethese provisions at any time and if we determine it is in our unitholders’ bestinterests for us to purchase the joint venture interest and we believe we haveadequate liquidity to execute the purchases of the interests without hinderingour cash flows or liquidity, then we mayelect to buy. Should we decide to sell any of our joint ventureinterests, we would expect to use the net proceeds from any such sale to reduceoutstanding indebtedness or to reinvest indevelopment, redevelopment, or expansion opportunities.

***Acquisitions.***   Theacquisition of high quality individual properties or portfolios of propertiesremain an integral component of our growth strategies.

On March 28, 2007, we acquired The Maine Outlet,a 112,000 square foot outlet center located in Kittery, Maine for a purchaseprice of $45.2 million. The center is 99% occupied.

On March 1, 2007, we acquired the additional 40%interest in both University Park Mall and University Center located inMishawaka, IN for a purchase price of $50.7 million. As a result we nowown 100% of University Park and University Center.

***Dispositions.***   We continue topursue the sale of Properties that no longer meet our strategic criteria.During the first three months of 2007, we did not dispose of any consolidatedproperties.

**DevelopmentActivity**

***New U.S. Developments.******  ***The following describescertain of our new development projects, the estimated total cost, and ourshare of the estimated total cost and our share of the construction in progressbalance as of March 31, 2007 (dollars in millions):

| ***Property***                | *** *** | ***Location***         | *** *** | ***Gross  Leasable  Area*** | *** *** | ***Estimated  Total  Cost**** (a)* | *** *** | ***Our Share of  Estimated  Total Cost*** | *** *** | ***Our Share of  Construction  in Progress*** | *** *** | ***Estimated  Opening Date*** | *** *** |
|-------------------------------|--------------|------------------------|--------------|-----------------------------|--------------|-----------------------------------------|--------------|----------------------------------------------------------|--------------|--------------------------------------------------------------|--------------|------------------------------------|--------------|
| **Under  Construction:**      |         |                   |         |                        |         |                                    |         |                                                     |         |                                                         |         |                               |         |   |   |   |   |   |   |   |   |
| Hamilton Town  Center         |         | Noblesville,  IN       |         |                        | 950,000      |                                    |         |                                                     | $            | 118                                                          |         |                               |         | $ | 59 |   |   |   | $ | 8 |   |   | 1st Quarter 2008 |   |
| Houston Premium  Outlets      |         | Houston,  TX           |         |                        | 433,000      |                                    |         |                                                     | 96           |                                                         |         |                               | 96           |   |   |   | 24 |   |   | 2nd Quarter 2008 |   |
| Palms Crossing                |         | McAllen,  TX           |         |                        | 385,000      |                                    |         |                                                     | 65           |                                                         |         |                               | 65           |   |   |   | 25 |   |   | 4th Quarter 2007 |   |
| Philadelphia  Premium Outlets |         | Limerick,  PA          |         |                        | 430,000      |                                    |         |                                                     | 119          |                                                         |         |                               | 119          |   |   |   | 48 |   |   | 4th Quarter 2007 |   |
| Pier Park                     |         | Panama  City Beach, FL |         |                        | 920,000      |                                    |         |                                                     | 127          |                                                         |         |                               | 127          |   |   |   | 49 |   |   | 1st Quarter 2008 |   |
| Village at SouthPark, The     |         | Charlotte, NC          |         |                        | 81,000       |                                    |         |                                                     | 26           |                                                         |         |                               | 26           |   |   |   | 17 |   |   | 2nd Quarter 2007 |   |
|                               |              |                        |              |                             |              |                                         |              |                                                          |              |                                                              |              |                                    |              |  |  |  |  |  |  |  |  |  |  |  |

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(a)           Represents the projectcosts net of land sales, tenant reimbursements for construction and other items(where applicable).

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We expect to fund these projects with available cashflow from operations, borrowings from our Credit Facility, or project specificconstruction loans. We expect our share of total 2007 new development costsremaining for the year to be approximately $430 million.

***StrategicExpansions and Renovations.******  ***In addition to new development, we also incurcosts related to construction for significant renovation and/or expansionprojects at our properties. Included in these projects are the renovation andaddition of Crate & Barrel and Nordstrom at Burlington Mall, Nordstromat Ross Park Mall and Aventura Mall, expansions and life-style additions atLehigh Valley Mall, Smith Haven Mall, Northgate Mall, and Town Center at BocaRaton, a Neiman Marcus expansion at Lenox Square, Phase II expansions atLas Vegas Premium Outlets, Orlando Premium Outlets, and St. Johns TownCenter, and the acquisition and renovation of several anchor stores previouslyoperated by Federated Department Stores.

We expect to fund these capital projects withavailable cash flow from operations or borrowings from the Credit Facility. Wehave other renovation and/or expansion projects currently under construction orin preconstruction development and expect to invest a total of approximately$590 million (our share) on expansion and renovation activities for theremainder of 2007.

***International.******  ***We typically reinvest netcash flow from our international investments to fund future internationaldevelopment activity. We believe this strategy mitigates some of the risk ofour initial investment and our exposure to changes in foreign currencies. We havealso funded our European investments with Euro-denominated borrowings that actas a natural hedge against local currency fluctuations. This has also been thecase with our Premium Outlet joint ventures in Japan and Mexico where we useYen and Peso denominated financing. Weexpect our share of international development for 2007 to approximate $200 million.

Currently, our net income exposure to changes in thevolatility of the Euro, Yen, Peso and otherforeign currencies is not material. In addition, since cash flows fromoperations are currently being reinvested in other development projects, we donot expect to repatriate foreign denominated earnings in the near term, exceptfor our share of the proceeds from a planned sale of five properties owned by SimonIvanhoe described below.

The carrying amount of our total combined investmentin Simon Ivanhoe and Gallerie Commerciali Italia (“GCI”) as of March 31,2007, net of the related cumulativetranslation adjustment, was $339.0 million. Our investments in SimonIvanhoe and GCI are accounted for using the equity method of accounting.Currently five European developments are under construction, which will addapproximately 3.2 million square feet of GLA for a total net cost ofapproximately €589.6 million, of whichour share is approximately €155.2 million, or $207.0 millionbased on current Euro:USD exchange rates. Additionally, we expect to sell fiveof our European properties in Poland held in Simon Ivanhoe during the secondquarter of 2007. Closing is expected for the second quarter of 2007, at whichtime we expect to receive our share of the proceeds from the sale ofapproximately €91 million,and to recognize a gain on sale .

As of March 31, 2007, the carrying amount of our40% joint venture investment in the five Japanese Premium Outlet centers net ofthe related cumulative translation adjustment was $279.3 million.Currently, Kobe-Sanda Premium Outlets, a 185,000 square foot Premium OutletCenter, is under construction in Kobe, Japan. The project’s total projected netcost is ¥5.9 billion, of which our share is approximately ¥2.4 billion,or $20.0 million based on current Yen:USD exchange rates.

In addition to the developments in Europe and Japan, construction has begun on Yeoju PremiumOutlets, a 253,000 square foot centernear Seoul, South Korea. The project’s total projected net cost is KRW 64.7 billion,of which our share is approximately KRW 32.4 billion, or approximately$34.8 million based on current KRW:USD exchange rates.

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During 2006, we finalizedthe formation of joint venture arrangements to develop and operate shoppingcenters in China. The shopping centers will be anchored by Wal-Mart stores andwill be through a 32.5% ownership in a joint venture entity, Great MallInvestments, Ltd. (“GMI”). We are planning on initially developing fivecenters in China, four of which are under construction, as of March 31,2007. Our total equity commitment for thesecenters approximates $49.5 million and as of March 31, 2007 our combined investment in GMI is approximately$17.5 million.

**Distributions**

The Board of Directors of Simon Property, our generalpartner, declared and we paid a distribution of $0.84 per unit in the firstquarter of 2007. Our distributions typically exceed our net income generated inany given year primarily because of depreciation, which is a “non-cash”expense. Our future distributions and the dividends of Simon Property will bedetermined by Simon Property’s Board of Directors based on actual results ofoperations, cash available for distributions, and what may be required tomaintain Simon Property’s status as a REIT.

On May 11, 2006, theSimon Property Board of Directors authorized a common stock repurchase programunder which Simon Property may purchase up to 6,000,000 shares of its commonstock subject to a maximum aggregate purchase price of $250 million overthe next twelve months as market conditions warrant. Simon Property maypurchase the shares in the open market or in privately negotiated transactions.There have been no purchases under thisprogram in 2007.

**Item 3.**                        Qualitativeand Quantitative Disclosure About Market Risk

***Sensitivity Analysis.***   We disclosed a comprehensivequalitative and quantitative analysis regarding market risk in theManagement’s Discussion and Analysis of Financial Condition and Results ofOperations included in our 2006 Annual Report on Form 10-K. Therehave been no material changes in the assumptions used or results obtainedregarding market risk since December 31, 2006.

**Item 4.**                        Controlsand Procedures

***Evaluation ofDisclosure Controls and Procedures.***   We carried outan evaluation under the supervision and with participation of management,including the Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of our “disclosure controls andprocedures” (as defined in Rule 13a-15(e) under the SecuritiesExchange Act of 1934 (the “Exchange Act”)) as of the end of the period coveredby this Quarterly Report on Form 10-Q. Based upon that evaluation,the Chief Executive Officer and Chief Financial Officer have concluded that ourdisclosure controls and procedures were effective as of March 31, 2007.

***Changes in Internal Control Over Financial Reporting.***   There have notbeen any changes in our internal control over financial reporting (as definedin Rule 13a-15(f)) that occurred during the quarter ended March 31,2007 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

**Part II —Other Information**

**Item 1.**                        LegalProceedings

There have been no material developments with respectto the pending litigation disclosed in our 2006 Annual Report on Form 10-K.

We are involved in variousother legal proceedings that arise in the ordinary course of our business. Webelieve that such routine litigation, claims and administrative proceedingswill not have a material 

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adverseimpact on our financial position or our results of operations. We record a liabilitywhen a loss is considered probable and the amount can be reasonably estimated.

**Item 1A.**                RiskFactors

Through the period coveredby this report, there were no significant changes to the Risk Factors disclosedin “Part I, Item 1: Business” of our 2006 Annual Report on Form 10-K.

**Item **5.                        Other Information

During the quarter covered by this report, the AuditCommittee of Simon Property’s Board of Directors approved Ernst &Young, LLP, our and Simon Property’s independent registered public accountingfirm, to perform certain tax compliance and advisory services. This disclosureis made pursuant to Section 10A(i)(2) of the Securities Exchange Act of1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002.

**Item 6.**                        Exhibits
| *Exhibit  Number* | *** *** | ***Exhibit Descriptions*** | *** *** |
|-------------------|--------------|---------------------------------|--------------|
|              | 31.1         |                            |         | Certification  by the Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a)  of the Securities Exchange Act of 1934, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |   |
|              | 31.2         |                            |         | Certification by  the Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a)  of the Securities Exchange Act of 1934, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |   |
|              | 32           |                            |         | Certification by the  Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002. |   |

 

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

|        | **SIMON PROPERTY GROUP, L.P.**By Simon Property Group, Inc.,  General Partner |
|--------|------------------------------------------------------------------------------------|
|   | /s/ Stephen E. Sterrett                                                            |
|   | Stephen E. Sterrett                                                                |
|   | Executive Vice President and Chief Financial Officer                               |
|   | Date: May 15, 2007                                                            |

 

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