**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 quarterlyperiod ended June 30, 2005

| **SIMON PROPERTY GROUP, L.P.**                             |
|------------------------------------------------------------|
| (Exact  name of registrant as specified in its charter)    |
| Delaware                                                   |
| (State  of incorporation or organization)                  |
| 33-11491                                                   |
| (Commission  File No.)                                     |
| 34-1755769                                                 |
| (I.R.S.  Employer Identification No.)                      |
| National City Center                                       |
| 115  West Washington Street, Suite 15 East            |
| Indianapolis,  Indiana 46204                               |
| (Address  of principal executive offices)                  |
| (317) 636-1600                                             |
| (Registrant’s  telephone number, 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 for suchshorter period that the Registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.       **YES   ****x**       **NO   ****o**

Indicate by check mark whether Registrant is anaccelerated filer (as defined by Rule 12b-2 of the SecuritiesExchange Act of 1934).       **YES   ****o**       **NO   ****x**

 

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**SIMON PROPERTYGROUP, L.P. AND SUBSIDIARIES**

**FORM 10-Q**

**INDEX**
|                                              | *** *** | *** *** | *** ***                                                                                                                           | ***Page*** |
|----------------------------------------------|--------------|--------------|----------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Part I — Financial Information** |         |         |
|                                         |         | Item 1.      | Consolidated Financial  Statements (Unaudited)                                                                                         |       |   |
|                                         |         |         | Consolidated Balance Sheets  as of June 30, 2005 and December 31, 2004                                                       |       | 3 |
|                                         |         |         | Consolidated Statements of  Operations and Comprehensive Income for the three months and six months ended  June 30, 2005 and 2004 |       | 4 |
|                                         |         |         | Consolidated Statements of  Cash Flows for the six months ended June 30, 2005 and 2004                                       |       | 5 |
|                                         |         |         | Condensed Notes to Consolidated  Financial Statements                                                                                  |       | 6 |
|                                         |         | Item 2.      | Management’s Discussion and  Analysis of Financial Condition and Results  of Operations                                      |       | 16 |
|                                         |         | Item 3.      | Qualitative and Quantitative  Disclosure About Market Risk                                                                             |       | 30 |
|                                         |         | Item 4.      | Controls and Procedures                                                                                                                |       | 30 |
| **Part II — Other Information**    |         |         |
|                                         |         | Item 1.      | Legal Proceedings                                                                                                                      |       | 31 |
|                                         |         | Item 2.      | Unregistered Sales of Equity  Securities and Use of Proceeds                                                                           |       | 32 |
|                                         |         | Item 6.      | Exhibits                                                                                                                               |       | 32 |
| **Signatures**                               |         | 33           |

 

2

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**Simon Property Group, L.P. and Subsidiaries***Unaudited Consolidated Balance Sheets**(Dollars in thousands, except unit amounts)*
| *** ***                                                                                                                               | *** *** | ***June 30,***   | *** *** | ***December 31,*** | *** *** |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------------|-----------------------|--------------|-------------------------|--------------|
| *** ***                                                                                                                               | *** *** | ***2005***            | *** *** | ***2004***              | *** *** |
| **ASSETS:**                                                                                                                                |         |                  |         |                    |         |
| Investment properties, at cost                                                                                                             | ** **   | **$ 21,161,935** |         | $ 21,085,693       |         |
| Less — accumulated depreciation                                                                                                       | ** **   | **3,440,838**         |         | 3,136,195               |         |
| ** **                                                                                                                                 |         | **17,721,097**        |         | 17,949,498              |         |
| Cash and cash equivalents                                                                                                                  | ** **   | **375,575**           |         | 519,556                 |         |
| Tenant receivables and accrued revenue, net                                                                                                | ** **   | **310,606**           |         | 358,990                 |         |
| Investment in unconsolidated entities, at equity                                                                                           | ** **   | **1,709,899**         |         | 1,920,983               |         |
| Deferred costs and other assets                                                                                                            | ** **   | **1,200,889**         |         | 1,172,875               |         |
| **Total assets**                                                                                                                           | ** **   | **$ 21,318,066** |         | $ 21,921,902       |         |
| **LIABILITIES:**                                                                                                                           |         |                  |         |                    |         |
| Mortgages and other indebtedness                                                                                                           | ** **   | **$ 14,247,220** |         | $ 14,586,393       |         |
| Accounts payable, accrued expenses, intangibles, and  deferred revenues                                                                    | ** **   | **1,016,179**         |         | 1,111,481               |         |
| Cash distributions and losses in partnerships and  joint ventures, at equity                                                               | ** **   | **111,694**           |         | 37,739                  |         |
| Other liabilities, minority interest, and accrued  distributions                                                                           | ** **   | **163,755**           |         | 324,160                 |         |
| **Total liabilities**                                                                                                                      | ** **   | **15,538,848**        |         | 16,059,773              |         |
| COMMITMENTS AND  CONTINGENCIES                                                                                                             |         |                  |         |                    |         |
| 7.75%/8.00% Cumulative Redeemable Preferred Units,  850,698 and 822,588 units issued and outstanding, respectively, at  liquidation value. | ** **   | **85,070**            |         | 82,259                  |         |
| **PARTNERS’  EQUITY:**                                                                                                                |         |                  |         |                    |         |
| Preferred units, 32,904,156 and 33,042,122 units  outstanding, respectively. Liquidation values $1,398,428 and $1,402,330,  respectively   | ** **   | **1,396,662**         |         | 1,393,269               |         |
| General Partner, 220,586,621 and 218,702,347 units  outstanding, respectively                                                              | ** **   | **3,419,405**         |         | 3,516,902               |         |
| Limited Partners, 59,194,454 and 60,876,619 units  outstanding, respectively                                                               | ** **   | **917,598**           |         | 980,316                 |         |
| Note receivable from Simon Property (interest at  7.8%, due 2009)                                                                          | ** **   | **—**            |         | (88,804                 | )            |
| Unamortized restricted stock award                                                                                                         | ** **   | **(39,517**           | **)**        | (21,813                 | )            |
| **Total partners’ equity**                                                                                                            | ** **   | **5,694,148**         |         | 5,779,870               |         |
| **Total  liabilities and partners’ equity**                                                                                           | ** **   | **$ 21,318,066** |         | $ 21,921,902       |         |

 

*The accompanying notes are anintegral part of these statements.*

3

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**Simon PropertyGroup, L.P. and Subsidiaries***UnauditedConsolidated Statements of Operations and Comprehensive Income(Dollars in thousands, except per unit amounts)*
| *** ***                                                                                                       | *** *** | ***For the Three Months  Ended June 30,***    | *** *** | ***For the Six Months  Ended June 30,***      | *** *** |
|--------------------------------------------------------------------------------------------------------------------|--------------|------------------------------------------------------------------------|--------------|------------------------------------------------------------------------|--------------|
| *** ***                                                                                                       | *** *** | ***     2005     *** | *** *** | ***     2004     *** | *** *** | ***2005*** | *** *** | ***2004*** | *** *** |
| **REVENUE:**                                                                                                       |         |                                                                   |         | ** **                                                             |         |   |   | ** ** |   |   |   |   |   |
| Minimum rent                                                                                                       | ** **   | ** **                                                             | **$**        | **470,387**                                                            | ** **   |   |   | $ | 352,533 | ** ** | ** ** | **$** | **937,026** |   | $ | 697,941 |   |
| Overage rent                                                                                                       | ** **   | ** **                                                             | **14,423**   | ** **                                                             |         |   | 8,515 | ** ** | ** ** | **27,731** |   | 17,883 |   |
| Tenant reimbursements                                                                                              | ** **   | ** **                                                             | **213,873**  | ** **                                                             |         |   | 173,348 | ** ** | ** ** | **425,470** |   | 341,937 |   |
| Management fees and other  revenues                                                                                | ** **   | ** **                                                             | **17,505**   | ** **                                                             |         |   | 18,490 | ** ** | ** ** | **37,185** |   | 36,403 |   |
| Other income                                                                                                       | ** **   | ** **                                                             | **40,074**   | ** **                                                             |         |   | 35,800 | ** ** | ** ** | **76,769** |   | 64,395 |   |
| **Total  revenue**                                                                                                 | ** **   | ** **                                                             | **756,262**  | ** **                                                             |         |   | 588,686 | ** ** | ** ** | **1,504,181** |   | 1,158,559 |   |
| **EXPENSES:**                                                                                                      |         |                                                                   |         | ** **                                                             |         |   |   | ** ** |   |   |   |   |   |
| Property operating                                                                                                 | ** **   | ** **                                                             | **100,916**  | ** **                                                             |         |   | 84,179 | ** ** | ** ** | **202,567** |   | 166,486 |   |
| Depreciation and  amortization                                                                                     | ** **   | ** **                                                             | **206,444**  | ** **                                                             |         |   | 141,679 | ** ** | ** ** | **418,070** |   | 275,263 |   |
| Real estate taxes                                                                                                  | ** **   | ** **                                                             | **71,783**   | ** **                                                             |         |   | 58,006 | ** ** | ** ** | **143,892** |   | 115,769 |   |
| Repairs and maintenance                                                                                            | ** **   | ** **                                                             | **24,904**   | ** **                                                             |         |   | 19,772 | ** ** | ** ** | **53,230** |   | 41,506 |   |
| Advertising and promotion                                                                                          | ** **   | ** **                                                             | **18,687**   | ** **                                                             |         |   | 12,556 | ** ** | ** ** | **36,860** |   | 24,995 |   |
| Provision for credit  losses (recoveries)                                                                          | ** **   | ** **                                                             | **(1,688**   | **)**                                                                  |         |   | 3,137 | ** ** | ** ** | **824** |   | 6,580 |   |
| Home and regional office  costs                                                                                    | ** **   | ** **                                                             | **30,802**   | ** **                                                             |         |   | 21,267 | ** ** | ** ** | **57,992** |   | 42,232 |   |
| General and  administrative                                                                                        | ** **   | ** **                                                             | **4,459**    | ** **                                                             |         |   | 3,461 | ** ** | ** ** | **8,251** |   | 7,021 |   |
| Other                                                                                                              | ** **   | ** **                                                             | **11,107**   | ** **                                                             |         |   | 7,621 | ** ** | ** ** | **21,958** |   | 16,519 |   |
| **Total  operating expenses**                                                                                      | ** **   | ** **                                                             | **467,414**  | ** **                                                             |         |   | 351,678 | ** ** | ** ** | **943,644** |   | 696,371 |   |
| **OPERATING INCOME**                                                                                               | ** **   | ** **                                                             | **288,848**  | ** **                                                             |         |   | 237,008 | ** ** | ** ** | **560,537** |   | 462,188 |   |
| Interest expense                                                                                                   | ** **   | ** **                                                             | **199,153**  | ** **                                                             |         |   | 156,216 | ** ** | ** ** | **395,763** |   | 308,877 |   |
| **Income before minority interest**                                                                                | ** **   | ** **                                                             | **89,695**   | ** **                                                             |         |   | 80,792 | ** ** | ** ** | **164,774** |   | 153,311 |   |
| Minority interest                                                                                                  | ** **   | ** **                                                             | **(2,253**   | **)**                                                                  |         |   | (3,820 | ) | ** ** | **(5,560** | **)** | (4,681 | ) |
| Gain (loss) on sales of assets and other, net                                                                      | ** **   | ** **                                                             | **2,134**    | ** **                                                             |         |   | 11,619 | ** ** | ** ** | **12,607** |   | (1,881 | ) |
| Income tax expense of taxable REIT subsidiaries                                                                    | ** **   | ** **                                                             | **(2,734**   | **)**                                                                  |         |   | (6,632 | ) | ** ** | **(7,420** | **)** | (8,642 | ) |
| **Income before unconsolidated entities**                                                                          | ** **   | ** **                                                             | **86,842**   | ** **                                                             |         |   | 81,959 | ** ** | ** ** | **164,401** |   | 138,107 |   |
| Income from unconsolidated entities                                                                                | ** **   | ** **                                                             | **14,456**   | ** **                                                             |         |   | 19,836 | ** ** | ** ** | **32,383** |   | 36,908 |   |
| **Income from continuing operations**                                                                              | ** **   | ** **                                                             | **101,298**  | ** **                                                             |         |   | 101,795 | ** ** | ** ** | **196,784** |   | 175,015 |   |
| Results of operations from discontinued operations                                                                 | ** **   | ** **                                                             | **1,596**    | ** **                                                             |         |   | 1,687 | ** ** | ** ** | **4,073** |   | 3,889 |   |
| Gain on disposal or sale of discontinued operations,  net                                                          | ** **   | ** **                                                             | **119,692**  | ** **                                                             |         |   | 197 | ** ** | ** ** | **119,780** |   | 288 |   |
| **NET INCOME**                                                                                                     | ** **   | ** **                                                             | **222,586**  | ** **                                                             |         |   | 103,679 | ** ** | ** ** | **320,637** |   | 179,192 |   |
| Preferred unit requirement                                                                                         | ** **   | ** **                                                             | **(25,757**  | **)**                                                                  |         |   | (12,734 | ) | ** ** | **(51,078** | **)** | (25,475 | ) |
| **NET INCOME AVAILABLE TO UNITHOLDERS**                                                                            | ** **   | ** **                                                             | **$**        | **196,829**                                                            | ** **   |   |   | $ | 90,945 | ** ** | ** ** | **$** | **269,559** |   | $ | 153,717 |   |
| **NET INCOME AVAILABLE TO UNITHOLDERS ATTRIBUTABLE  TO:**                                                          |         |                                                                   |         | ** **                                                             |         |   |   | ** ** |   |   |   |   |   |
| General Partner                                                                                                    | ** **   | ** **                                                             | **$**        | **154,811**                                                            | ** **   |   |   | $ | 70,746 | ** ** | ** ** | **$** | **211,878** |   | $ | 118,956 |   |
| Limited Partners                                                                                                   | ** **   | ** **                                                             | **42,018**   | ** **                                                             |         |   | 20,199 | ** ** | ** ** | **57,681** |   | 34,761 |   |
| **Net income**                                                                                                     | ** **   | ** **                                                             | **$**        | **196,829**                                                            | ** **   |   |   | $ | 90,945 | ** ** | ** ** | **$** | **269,559** |   | $ | 153,717 |   |
| **BASIC EARNINGS PER UNIT:**                                                                                       |         |                                                                   |         | ** **                                                             |         |   |   | ** ** |   |   |   |   |   |
| Income from continuing  operations                                                                                 | ** **   | ** **                                                             | **$**        | **0.27**                                                               | ** **   |   |   | $ | 0.34 | ** ** | ** ** | **$** | **0.52** |   | $ | 0.57 |   |
| Discontinued operations                                                                                            | ** **   | ** **                                                             | **0.43**     | ** **                                                             |         |   | 0.01 | ** ** | ** ** | **0.44** |   | 0.02 |   |
| **Net  income**                                                                                                    | ** **   | ** **                                                             | **$**        | **0.70**                                                               | ** **   |   |   | $ | 0.35 | ** ** | ** ** | **$** | **0.96** |   | $ | 0.59 |   |
| **DILUTED EARNINGS PER UNIT:**                                                                                     |         |                                                                   |         | ** **                                                             |         |   |   | ** ** |   |   |   |   |   |
| Income from continuing  operations                                                                                 | ** **   | ** **                                                             | **$**        | **0.27**                                                               | ** **   |   |   | $ | 0.34 | ** ** | ** ** | **$** | **0.52** |   | $ | 0.57 |   |
| Discontinued operations                                                                                            | ** **   | ** **                                                             | **0.43**     | ** **                                                             |         |   | 0.01 | ** ** | ** ** | **0.44** |   | 0.02 |   |
| **Net  income**                                                                                                    | ** **   | ** **                                                             | **$**        | **0.70**                                                               | ** **   |   |   | $ | 0.35 | ** ** | ** ** | **$** | **0.96** |   | $ | 0.59 |   |
| **Net Income**                                                                                                     | ** **   | ** **                                                             | **$**        | **222,586**                                                            | ** **   |   |   | $ | 103,679 | ** ** | ** ** | **$** | **320,637** |   | $ | 179,192 |   |
| Unrealized (loss) gain on interest rate hedge  agreements                                                          | ** **   | ** **                                                             | **(9,430**   | **)**                                                                  |         |   | 2,741 | ** ** | ** ** | **(8,828** | **)** | 3,447 |   |
| Net income on derivative instruments reclassified  from accumulated other comprehensive loss into interest expense | ** **   | ** **                                                             | **(678**     | **)**                                                                  |         |   | (1,037 | ) | ** ** | **(1,290** | **)** | (2,736 | ) |
| Currency translation adjustments                                                                                   | ** **   | ** **                                                             | **307**      | ** **                                                             |         |   | 1,462 | ** ** | ** ** | **(1,646** | **)** | 6,703 |   |
| Other (loss) income                                                                                                | ** **   | ** **                                                             | **154**      | *** ***                                                           |         |   | (870 | ) | ** ** | **(317** | **)** | (654 | ) |
| **Comprehensive  Income**                                                                                          | ** **   | ** **                                                             | **$**        | **212,939**                                                            | *** *** |   |   | $ | 105,975 | ** ** | ** ** | **$** | **308,556** |   | $ | 185,952 |   |

 

*Theaccompanying notes are an integral part of these statements.*

4

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**SimonProperty Group, L.P. and Subsidiaries***Unaudited Consolidated Statements of Cash Flows(Dollars in thousands)*
| *** ***                                                                               | *** *** | ***For the Six Months  Ended June 30,*** | *** *** |
|--------------------------------------------------------------------------------------------|--------------|-------------------------------------------------------------------|--------------|
| *** ***                                                                               | *** *** | ***2005***                                                        | *** *** | ***2004*** | *** *** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                                 |         |                                                              |         |   |   |
| **Net income**                                                                             | ** **   | **$**                                                             | **320,637**  |   | $ | 179,192 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities—    |         |                                                              |         |   |   |
| Depreciation and amortization                                                              | ** **   | **399,510**                                                       |         | 287,815 |   |
| (Gain) loss on sales of assets and other, net                                              | ** **   | **(12,607**                                                       | **)**        | 1,881 |   |
| (Gain)  on  disposal or sale of discontinued operations, net                          | ** **   | **(119,780**                                                      | **)**        | (288 | ) |
| Straight-line rent                                                                         | ** **   | **(9,386**                                                        | **)**        | (2,120 | ) |
| Minority interest                                                                          | ** **   | **5,560**                                                         |         | 4,681 |   |
| Minority interest distributions                                                            | ** **   | **(12,757**                                                       | **)**        | (38,811 | ) |
| Equity in income of unconsolidated entities                                                | ** **   | **(32,383**                                                       | **)**        | (36,908 | ) |
| Distributions of income from unconsolidated entities                                       | ** **   | **40,955**                                                        |         | 41,635 |   |
| **Changes in assets and liabilities —**                                               |         |                                                              |         |   |   |
| Tenant receivables and accrued revenue                                                     | ** **   | **59,950**                                                        |         | 25,771 |   |
| Deferred costs and other assets                                                            | ** **   | **(66,281**                                                       | **)**        | (25,773 | ) |
| Accounts payable, accrued expenses, intangibles,  deferred revenues, and other liabilities | ** **   | **(175,092**                                                      | **)**        | (119,683 | ) |
| **Net cash provided by operating activities**                                              | ** **   | **398,326**                                                       |         | 317,392 |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES:**                                                 |         |                                                              |         |   |   |
| Acquisitions                                                                               | ** **   | **—**                                                        |         | (573,455 | ) |
| Capital expenditures, net                                                                  | ** **   | **(287,964**                                                      | **)**        | (225,717 | ) |
| Cash from acquisitions                                                                     | ** **   | **—**                                                        |         | 3,966 |   |
| Cash impact from the consolidation and  de-consolidation of properties                     | ** **   | **(8,951**                                                        | **)**        | 2,507 |   |
| Net proceeds from sale of partnership interest, other  assets and discontinued operations  | ** **   | **320,046**                                                       |         | 32,320 |   |
| Investments in unconsolidated entities                                                     | ** **   | **(15,978**                                                       | **)**        | (24,273 | ) |
| Distributions of capital from unconsolidated entities  and other                           | ** **   | **211,288**                                                       |         | 90,661 |   |
| **Net cash used in investing activities**                                                  | ** **   | **218,441**                                                       |         | (693,991 | ) |
| **CASH  FLOWS FROM FINANCING ACTIVITIES:**                                                 |         |                                                              |         |   |   |
| Partnership contributions and issuance of units                                            | ** **   | **762**                                                           |         | 4,057 |   |
| Purchase of preferred units, partnership units, and  treasury units                        | ** **   | **(127,125**                                                      | **)**        | (10,084 | ) |
| Preferred Unit redemptions                                                                 | ** **   | **(579**                                                          | **)**        | **—** | ** ** |
| Minority interest contributions                                                            | ** **   | **—**                                                        |         | 35,173 |   |
| Partnership distributions                                                                  | ** **   | **(443,601**                                                      | **)**        | (365,463 | ) |
| Mortgage and other indebtedness proceeds, net of  transaction costs                        | ** **   | **2,584,808**                                                     |         | 2,430,467 |   |
| Mortgage and other indebtedness principal payments                                         | ** **   | **(2,775,013**                                                    | **)**        | (1,731,124 | ) |
| **Net cash (used in) provided by financing  activities**                                   | ** **   | **(760,748**                                                      | **)**        | 363,026 |   |
| **DECREASE IN CASH AND CASH EQUIVALENTS**                                                  | ** **   | **(143,981**                                                      | **)**        | (13,573 | ) |
| **CASH AND CASH EQUIVALENTS, beginning of year**                                           | ** **   | **519,556**                                                       |         | 529,036 |   |
| **CASH AND  CASH EQUIVALENTS, end of period**                                              | ** **   | **$**                                                             | **375,575**  |   | $ | 515,463 |   |

 

*The accompanying notes arean integral part of these statements.*

5

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**Simon Property Group, L.P. and SubsidiariesCondensed Notes toConsolidated Financial Statements(Unaudited)**

(Dollars in thousands,except unit and per unit amounts and where indicated as in millions orbillions)

**1.**   Organization

Simon Property Group, L.P. (the“Operating Partnership”), a Delaware limited partnership, is a majority ownedsubsidiary of Simon Property Group, Inc. (“Simon Property”) which is theOperating Partnership’s sole general partner. Simon Property is a self-administeredand self-managed real estate investment trust (“REIT”) under the InternalRevenue Code of 1986, as amended (the “Code”). In these notes, the terms “we”, “us”and “our” refer to the Operating Partnership and its subsidiaries.

We are engaged in theownership, development and management of retail real estate, primarily regionalmalls, Premium Outlet® centers and community/lifestyle centers. As of June 30,2005, we owned or held an interest in 295 income-producingproperties in the United States, which consisted of 172 regional malls, 32Premium Outlet centers, 71 community/lifestyle centers, and 20 other shoppingcenters or outlet centers in 40 states and Puerto Rico (collectively, the “Properties”,and individually, a “Property”). In addition, we also own interests in elevenparcels of land held for future development (together with the Properties, the “Portfolio”).Finally, we have ownership interests in 51 European shopping centers (inFrance, Italy, Poland and Portugal), five Premium Outlet centers in Japan, onePremium Outlet center in Mexico, and one shopping center in Canada.

M.S. Management Associates, Inc.(the “Management Company”) is our wholly-owned subsidiary that providesleasing, management, and development services to most of the Properties. Inaddition, insurance subsidiaries of the Management Company insure theself-insured retention portion of our general liability program, and thedeductible associated with our workers’ compensation programs, and providereinsurance for the primary layer of general liability coverage to our thirdparty maintenance providers while performing services under contract with us.Third party providers provide coverage above the insurance subsidiaries’limits.

**2.**   Basis of Presentation

The accompanying unauditedconsolidated financial statements of the Operating Partnership include theaccounts of all majority-owned subsidiaries, and all significant inter-companyamounts have been eliminated. Due to the seasonal nature of certain operationalactivities, including overage rent revenues and property operating expenses,the results for the interim period ended June 30, 2005 are not necessarilyindicative of the results that may be obtained for the full fiscal year.

These consolidatedfinancial statements have been prepared in accordance with the instructions to Form 10-Qand include all of the information and disclosures required by accountingprinciples generally accepted in the United States (GAAP) for interim reporting.Accordingly, they do not include all of the disclosures required by GAAP forcomplete financial statements. In the opinion of management, all adjustmentsnecessary for fair presentation (including normal recurring accruals) have beenincluded. The consolidated financial statements in this Form 10-Q shouldbe read in conjunction with the audited consolidated financial statements andrelated notes contained in our 2004 Form 10-K.

As of June 30, 2005,of our 353 properties we consolidate 208 wholly owned properties, consolidate20 additional properties that are less than wholly owned which we controlor for which we are the primary beneficiary, and account for 125 propertiesusing the equity method of accounting (joint venture properties). We alsomanage the day-to-day operations of 58 of the 125 joint venture properties.

We allocate our netoperating results after preferred distributions based on our partners’respective weighted average ownership interests. In addition, Simon Propertyowns certain of our preferred units. Simon Property’s weighted averageownership interest in the Operating Partnership was 78.6% and 77.4% for the sixmonths ended June 30, 2005 and 2004, respectively. As of June 30,2005 and December 31, 2004, Simon Property’s ownership interest in us was78.8% and 78.2%, respectively. We adjust the limited partners’ interest at theend of each period to reflect changes in their ownership interests in theOperating Partnership.

6

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We made certain reclassifications of prior periodamounts in the financial statements to conform to the 2005 presentation. Thesereclassifications have no impact on net income previously reported. Also, thestatements of operations and comprehensive income for the three and six monthperiods ended June 30, 2004 have been reclassified to reflect significantdispositions of properties sold during 2004 and 2005.

**3.**   Significant Accounting Policies

***Cash and CashEquivalents***

Cash and cash equivalentsas of June 30, 2005 includes $36.7 million related to a co-brandedgift card and gift certificate program, which we do not consider available forgeneral working capital purposes. During 2005, an independent federal bankbegan administering the gift card program. As a result, significantly all ofthe cash collected from gift card sales, and the related liability for fundsthat will be owed to retailers which honor a gift card for tender of goods andservices, are now held by the bank. We collect gift card funds at the point ofsale and then remit those funds onto the bank for further processing.

***Deferred Costs andOther Assets***

Thefollowing summarizes the recorded amounts, net of related amortization, ofdeferred costs and other assets on the consolidated balance sheets:
| *** ***                                                  | *** *** | ***As of  June 30,  2005*** | *** ***  | ***As of   December 31,   2004*** | *** *** |
|---------------------------------------------------------------|--------------|---------------------------------------|---------------|-------------------------------------------------------|--------------|
| Deferred financing and  lease costs, net                      | ** **   | **$**                                 | **183,117**   |                                                  |         | $ | 179,689 |   |   |
| In-place lease  intangibles                                   | ** **   | **153,495**                           |          |                                                  | 173,224      |   |   |
| Fair market value of  acquired above market lease intangibles | ** **   | **116,110**                           |          |                                                  | 130,061      |   |   |
| Tenant relationship and  other intangibles                    | ** **   | **167,250**                           |          |                                                  | 176,250      |   |   |
| Marketable securities of  our captive insurance companies     | ** **   | **97,282**                            |          |                                                  | 95,493       |   |   |
| Goodwill                                                      | ** **   | **20,098**                            |          |                                                  | 20,098       |   |   |
| Minority interests                                            | ** **   | **57,553**                            |          |                                                  | 51,412       |   |   |
| Prepaids, notes  receivable, and other assets                 | ** **   | **405,984**                           |          |                                                  | 346,648      |   |   |
| ** **                                                    |         | **$**                                 | **1,200,889** |                                                  |         | $ | 1,172,875 |   |   |

 

***Intangible Assets.  ***Intangibleassets that are included in deferred costs and other assets on the accompanyingconsolidated balance sheets principally relate to amounts allocated as acomponent of 2004 acquisitions and are based on our preliminary valuations andwill be finalized within one year of the related acquisition.

We also record intangibleliabilities which are included in accounts payable, accrued expenses,intangibles, and deferred revenues on the consolidated balance sheets relatedto the fair value of below market leases. The unamortized amounts as of June 30,2005 and December 31, 2004 are $304.4 million and$337.6 million, respectively. The average life of these intangiblesapproximates 6 years.

***Goodwill.  ***Goodwillresulted from Simon Property’s merger with Corporate Property Investors, Inc.in 1998. We review goodwill for impairment at the reporting unit level on anannual basis or more frequently if an event occurs that would change the fairvalue of the reporting unit below its carrying amount. If we determine thegoodwill is impaired, the loss would be recognized as an impairment loss in thestatement of operations and comprehensive income.

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**4.**   Per Unit Data

Wedetermine basic earnings per unit based on the weighted average number of unitsoutstanding during the period. We determine diluted earnings per unit based onthe weighted average number of units outstanding combined with the incremental weightedaverage units that would have been outstanding assuming all potentiallydilutive units were converted into units at the earliest date possible. Thefollowing table sets forth the computation for our basic and diluted earningsper unit.
| *** ***                                          | *** *** | ***For the three months ended  June 30,*** | *** *** | ***For the six months ended  June 30,*** | *** *** |
|-------------------------------------------------------|--------------|---------------------------------------------------------------------|--------------|-------------------------------------------------------------------|--------------|
| *** ***                                          | *** *** | ***2005***                                                          | *** *** | ***2004***                                                        | *** *** | ***2005*** | *** *** | ***2004*** | *** *** |
| **Weighted Average Units  Outstanding — Basic**  | ** **   | **279,762,141**                                                     |         | 261,486,587                                                       | ** **   | **280,281,917** |   | 261,326,220 |   |
| Effect of stock options                               | ** **   | **883,274**                                                         |         | 808,063                                                           | ** **   | **886,915** |   | 887,742 |   |
| **Weighted Average Units Outstanding — Diluted** | ** **   | **280,645,415**                                                     |         | 262,294,650                                                       | ** **   | **281,168,832** |   | 262,213,962 |   |

 

Potentially dilutivesecurities include the stock options of Simon Property and certain preferredunits which are exchangeable for units. The only potentially dilutive securitythat had a dilutive effect for the three and six months ended June 30,2005 and 2004 were the stock options of Simon Property.

**5.**   Investment in Unconsolidated Entities

**Real Estate JointVentures**

Joint ventures are commonin the real estate industry. We use joint ventures to finance properties,develop new properties, and diversify our risk in a particular property orportfolio. We held joint venture ownership interests in 67 Properties asof June 30, 2005 and December 31, 2004. We also held interests in twojoint ventures which owned 51 European shopping centers as of June 30,2005 and December 31, 2004. We also held an interest in five joint ventureproperties in Japan and one joint venture property in Mexico, through ourownership of CPG Partners L.P. which we acquired in Simon Property’s 2004acquisition of Chelsea Property Group, Inc. (“Chelsea”), and oneadditional joint venture property in Canada. We account for these propertiesusing the equity method of accounting.

During 2005, we and ourjoint venture partner completed the construction, obtained permanent financingfor, and opened St. John’s Town Center (St. Johns). Prior to the completion ofconstruction and opening of the center, we were responsible for 85% of thedevelopment costs, and guaranteed this same percentage of the outstandingconstruction debt. As a result, we consolidated St. Johns during itsconstruction phase. Upon obtaining permanent financing, the guarantee wasreleased, and our partner and our ownership percentages were each adjusted to50%. We received a distribution from the partnership of $15.7 million inrepayment of our capital contributions to equalize our ownership interests andaccordingly, this Property is now accounted for using the equity method ofaccounting. Total investment property of St. Johns at the date of refinancingwas approximately $136 million.

On June 1, 2005, werefinanced Westchester Mall, a joint venture Property, with a $500.0 million,4.86% fixed rate mortgage that matures on June 1, 2010. The balances ofthe two previous mortgages, which were repaid, were $142.0 million and$50.1 million and bore interest at fixed rates of 8.74% and 7.20%,respectively. Both were scheduled to mature on September 1, 2005. Wereceived our share of the excess refinancing proceeds of approximately$120 million on the closing of the new mortgage loan.

Substantially all of ourjoint venture Properties are subject to rights of first refusal, buy-sellprovisions, or other sale rights for partners which are customary in realestate joint venture agreements and the industry. Our partners in these jointventures may initiate these provisions at any time (subject to any applicablelock up or similar restrictions), which will result in either the sale of ourinterest or the use of available cash or borrowings to acquire the jointventure interest.

**EuropeanJoint Venture Investments**

The carrying amount of our total combined investment inthe two European joint venture investments, European Retail Enterprises, B.V. (“ERE”)and Gallerie Commerciali Italia (“GCI”), was $287.4 million and$320.6 million as of June 30, 2005 and December 31, 2004,respectively, net of the related cumulative translation adjustments, includingsubordinated debt in ERE. We have a 34.7% ownership in ERE and a 49% ownershipin GCI.

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The agreements for our34.7% interest in ERE are structured to either require or permit us to acquireup to an additional 26.1% ownership in ERE at amounts which may vary fromtime-to-time.

In addition, theshareholder agreements for ERE contain customary buy/sell provisions, as wellas a marketing right which either we or the 39.5% shareholder may exercise. The39.5% shareholder has initiated this marketing right and we have elected topurchase their interest. We have also entered into a definitive agreement witha third party institutional investor which calls for us to sell the sharesacquired from the 39.5% shareholder to the third party investor for the sameprice, and otherwise upon substantially the same terms and conditions. Becausewe are obligated to immediately sell the shares acquired from the 39.5%shareholder to the institutional third party for the same price and uponsubstantially the same terms and conditions, we will recognize no gain or lossin this transaction and will not at any time control ERE. Closing is expectedto occur in the third quarter. To the extent we acquire any portion of the26.1% interest, we will first acquire the amount necessary to equalize ourownership in ERE with the third party institutional investor, and one-half ofany other portion thereafter acquired will be sold to the third party investor fora fixed price so that we and the third party investor will maintain equalownership interests in ERE.

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Summaryfinancial information of the joint ventures and a summary of our investment inand share of income from such joint ventures follow. We condensed into separateline items major captions of the statements of operations for joint ventureinterests sold or consolidated. Consolidation occurs when we acquire anadditional interest in the joint venture and as a result, gain unilateralcontrol of the Property or are determined to be the primary beneficiary. Wereclassify these line items into “Discontinued Joint Venture Interests” and “ConsolidatedJoint Venture Interests” on the balance sheets and statements of operations, ifmaterial, so that we may present comparative results of operations for thosejoint venture interests held as of June 30, 2005.
| *** ***                                              | *** *** | ***June 30,*** | *** ***  | ***December 31,*** | *** *** |
|-----------------------------------------------------------|--------------|---------------------|---------------|-------------------------|--------------|
| *** ***                                              | *** *** | ***2005***          | *** ***  | ***2004***              | *** *** |
| **BALANCE SHEETS**                                        | ** **   | ** **          | ** **    |                    | ** **   | ** ** |   |
| **Assets:**                                               |         |                |          |                    |         | ** ** |   |
| Investment  properties, at cost                           | ** **   | **$**               | **9,454,830** |                    |         | $ | 9,429,465 | ** ** |   |
| Less —  accumulated depreciation                     | ** **   | **1,833,801**       |          |                    | 1,745,498    | ** ** |   |
| ** **                                                |         | **7,621,029**       |          |                    | 7,683,967    | ** ** |   |
| Cash  and cash equivalents                                | ** **   | **285,919**         |          |                    | 292,770      | ** ** |   |
| Tenant  receivables                                       | ** **   | **185,988**         |          |                    | 209,040      | ** ** |   |
| Investment  in unconsolidated entities                    | ** **   | **134,453**         |          |                    | 167,182      | ** ** |   |
| Deferred  costs and other assets                          | ** **   | **337,460**         |          |                    | 322,660      | ** ** |   |
| Total  assets                                             | ** **   | **$**               | **8,564,849** |                    |         | $ | 8,675,619 | ** ** |   |
| **Liabilities  and Partners’ Equity:**               |         |                |          |                    |         | ** ** |   |
| Mortgages  and other indebtedness                         | ** **   | **$**               | **6,738,891** |                    |         | $ | 6,398,312 | ** ** |   |
| Accounts  payable, accrued expenses, and deferred revenue | ** **   | **347,324**         |          |                    | 373,887      | ** ** |   |
| Other  liabilities                                        | ** **   | **207,941**         |          |                    | 179,443      | ** ** |   |
| Total  liabilities                                        | ** **   | **7,294,156**       |          |                    | 6,951,642    | ** ** |   |
| Preferred  units                                          | ** **   | **67,450**          |          |                    | 67,450       | ** ** |   |
| Partners’  equity                                    | ** **   | **1,203,243**       |          |                    | 1,656,527    | ** ** |   |
| Total  liabilities and partners’ equity              | ** **   | **$**               | **8,564,849** |                    |         | $ | 8,675,619 | ** ** |   |
| **Our  Share of:**                                        |         |                |          |                    |         | ** ** |   |
| Total  assets                                             | ** **   | **$**               | **3,589,234** |                    |         | $ | 3,619,969 | ** ** |   |
| Partners’  equity                                    | ** **   | **$**               | **564,620**   |                    |         | $ | 779,252 | ** ** |   |
| Add:  Excess Investment                                   | ** **   | **1,033,585**       |          |                    | 1,103,992    | ** ** |   |
| Our  net Investment in Joint Ventures                     | ** **   | **$**               | **1,598,205** |                    |         | $ | 1,883,244 | ** ** |   |
| Mortgages and other  indebtedness                         | ** **   | **$**               | **2,903,088** |                    |         | $ | 2,750,327 | ** ** |   |

 

“Excess Investment”represents the unamortized difference of our investment over our share of theequity in the underlying net assets of the joint ventures acquired. We amortizeexcess investment over the life of the related Properties, typically35 years, and the amortization is included in the reported amount ofincome from unconsolidated entities.

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| *** ***                                                      | *** *** | ***For the Three Months Ended***                               | *** *** | ***For the Six Months Ended***                                 | *** *** |
|-------------------------------------------------------------------|--------------|------------------------------------------------------------------------------------|--------------|------------------------------------------------------------------------------------|--------------|
| *** ***                                                      | *** *** | ***June 30,***                                                                | *** *** | ***June 30,***                                                                | *** *** |
| *** ***                                                      | *** *** | ***      2005      *** | *** *** | ***      2004      *** | *** *** | ***      2005      *** | *** *** | ***      2004      *** | *** *** |
| **STATEMENTS OF OPERATIONS**                                      | ** **   |                                                                               | ** **   | ** **                                                                         |         |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| **Revenue:**                                                      |         |                                                                               | ** **   | ** **                                                                         |         |   |   | ** ** |   |   | ** ** | ** ** |   |   |   | ** ** |   |
| Minimum  rent                                                     | ** **   |                                                                               | **$**        | **262,318**                                                                        | ** **   |   |   | $ | 225,055 | ** ** |   |   | **$** | **515,287** | ** ** |   |   | $ | 452,972 | ** ** |   |
| Overage  rent                                                     | ** **   |                                                                               | **19,653**   | ** **                                                                         |         |   | 3,525 | ** ** |   |   | **31,621** | ** ** |   |   | 8,758 | ** ** |   |
| Tenant  reimbursements                                            | ** **   |                                                                               | **131,020**  | ** **                                                                         |         |   | 118,437 | ** ** |   |   | **258,183** | ** ** |   |   | 232,657 | ** ** |   |
| Other  income                                                     | ** **   |                                                                               | **33,035**   | ** **                                                                         |         |   | 16,160 | ** ** |   |   | **57,663** | ** ** |   |   | 28,738 | ** ** |   |
| Total  revenue                                                    | ** **   |                                                                               | **446,026**  | ** **                                                                         |         |   | 363,177 | ** ** |   |   | **862,754** | ** ** |   |   | 723,125 | ** ** |   |
| **Operating  Expenses:**                                          |         |                                                                               | ** **   | ** **                                                                         |         |   |   | ** ** |   |   | ** ** | ** ** |   |   |   | ** ** |   |
| Property  operating                                               | ** **   |                                                                               | **91,552**   | ** **                                                                         |         |   | 66,918 | ** ** |   |   | **172,784** | ** ** |   |   | 136,124 | ** ** |   |
| Depreciation  and amortization                                    | ** **   |                                                                               | **84,707**   | ** **                                                                         |         |   | 67,508 | ** ** |   |   | **160,876** | ** ** |   |   | 134,655 | ** ** |   |
| Real  estate taxes                                                | ** **   |                                                                               | **33,013**   | ** **                                                                         |         |   | 30,742 | ** ** |   |   | **66,093** | ** ** |   |   | 63,533 | ** ** |   |
| Repairs  and maintenance                                          | ** **   |                                                                               | **18,276**   | ** **                                                                         |         |   | 16,920 | ** ** |   |   | **39,872** | ** ** |   |   | 33,915 | ** ** |   |
| Advertising  and promotion                                        | ** **   |                                                                               | **8,129**    | ** **                                                                         |         |   | 8,475 | ** ** |   |   | **15,836** | ** ** |   |   | 16,514 | ** ** |   |
| Provision  for credit losses                                      | ** **   |                                                                               | **1,725**    | ** **                                                                         |         |   | 2,446 | ** ** |   |   | **5,100** | ** ** |   |   | 4,629 | ** ** |   |
| Other                                                             | ** **   |                                                                               | **29,390**   | ** **                                                                         |         |   | 15,964 | ** ** |   |   | **53,891** | ** ** |   |   | 32,433 | ** ** |   |
| Total  operating expenses                                         | ** **   |                                                                               | **266,792**  | ** **                                                                         |         |   | 208,973 | ** ** |   |   | **514,452** | ** ** |   |   | 421,803 | ** ** |   |
| **Operating Income**                                              | ** **   |                                                                               | **179,234**  | ** **                                                                         |         |   | 154,204 | ** ** |   |   | **348,302** | ** ** |   |   | 301,322 | ** ** |   |
| Interest  expense                                                 | ** **   |                                                                               | **99,458**   | ** **                                                                         |         |   | 92,622 | ** ** |   |   | **196,965** | ** ** |   |   | 185,617 | ** ** |   |
| **Income Before Minority Interest and  Unconsolidated Entities**  | ** **   |                                                                               | **79,776**   | ** **                                                                         |         |   | 61,582 | ** ** |   |   | **151,337** | ** ** |   |   | 115,705 | ** ** |   |
| Loss  from Unconsolidated Entities                                | ** **   |                                                                               | **(637**     | **)**                                                                              |         |   | (1,612 | ) |   |   | **(1,892** | **)** |   |   | (2,301 | **)** |   |
| **Income from Continuing Operations**                             | ** **   |                                                                               | **79,139**   | ** **                                                                         |         |   | 59,970 | ** ** |   |   | **149,445** | ** ** |   |   | 113,404 | ** ** |   |
| Income  from Consolidated Joint Venture Interests                 | ** **   |                                                                               | **—**   | ** **                                                                         |         |   | 4,363 | ** ** |   |   | **—** | ** ** |   |   | 10,334 | ** ** |   |
| Income  from Discontinued Joint Venture Interests                 | ** **   |                                                                               | **542**      | ** **                                                                         |         |   | 9,704 | ** ** |   |   | **1,004** | ** ** |   |   | 6,560 | ** ** |   |
| (Loss)/Gain  on disposal or sale of Discontinued  Operations, net | ** **   |                                                                               | **(34**      | **)**                                                                              |         |   | 4,704 | ** ** |   |   | **98,359** | ** ** |   |   | 4,704 | ** ** |   |
| **Net Income**                                                    | ** **   |                                                                               | **$**        | **79,647**                                                                         | ** **   |   |   | $ | 78,741 | ** ** |   |   | **$** | **248,808** | ** ** |   |   | $ | 135,002 | ** ** |   |
| **Third-Party Investors’ Share of Net Income**               | ** **   |                                                                               | **$**        | **49,305**                                                                         | ** **   |   |   | $ | 52,831 | ** ** |   |   | **$** | **141,067** | ** ** |   |   | $ | 85,851 | ** ** |   |
| **Our Share of Net Income**                                       | ** **   |                                                                               | **30,342**   | ** **                                                                         |         |   | 25,910 | ** ** |   |   | **107,741** | ** ** |   |   | 49,151 | ** ** |   |
| **Amortization of Excess Investment**                             | ** **   |                                                                               | **15,903**   | ** **                                                                         |         |   | 6,074 | ** ** |   |   | **26,179** | ** ** |   |   | 12,243 | ** ** |   |
| **Write-off of Investment Related To Property Sold**              | ** **   |                                                                               | **(945**     | **)**                                                                              |         |   | — | ** ** |   |   | **37,778** | ** ** |   |   | — | ** ** |   |
| **Our Share of Net Gain Related to Property Sold**                | ** **   |                                                                               | **928**      | ** **                                                                         |         |   | — | ** ** |   |   | **11,401** | ** ** |   |   | — | ** ** |   |
| **Income  from Unconsolidated Entities**                          | ** **   |                                                                               | **$**        | **14,456**                                                                         | ** **   |   |   | **$** | **19,836** | ** ** |   |   | **$** | **32,383** | ** ** |   |   | **$** | **36,908** | ** ** |   |

 

The 2005 gain on disposal or sale of discontinuedoperations, net, above represents the gain on sale of Metrocenter on January 11,2005. Our share of the gain of $11,401, net of the write-off of the relatedinvestment, is included in the Gain/(Loss) on Sales of Assets and Other, Net,in the 2005 consolidated statements of operations. Our share of the proceedsfrom the sale of Metrocenter was $62.6 million.

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**6.**   Debt

**Unsecured Debt**

On January 11, 2005, we refinanced our unsecuredrevolving credit facility (the “Credit Facility”) expanding the facility from$1.25 billion to $2.0 billion. The Credit Facility has a maturitydate of January 11, 2008, with an additional one-year extension availableat our option. The facility can also be increased to $2.5 billion withinthe first two years of closing at our option. The Credit Facility bearsinterest at LIBOR plus 55 basis points with an additional 15 basis point facilityfee on the entire facility and provides for variable grid pricing based uponour corporate credit rating. In addition, the Credit Facility has a$500 million U.S. dollar equivalent multi-currency tranche for Euro,Yen or Sterling borrowings. The Credit Facility contains financial covenantsrelating to a capitalization value and leverage criteria, minimum EBITDA andunencumbered EBITDA coverage ratio requirements and a minimum equity value.

On June 7, 2005, we issued two tranches of seniorunsecured notes to institutional investors pursuant to Rule 144A totaling$1.0 billion at a weighted average fixed interest rate of 4.90%. The firsttranche is $400.0 million at a fixed interest rate of 4.60% due June 15,2010 and the second tranche is $600.0 million at a fixed interest rate of5.10% due June 15, 2015. We received net proceeds of $993.0 million. Weused $358.0 million of the net proceeds to reduce borrowings on our CreditFacility, $600.0 million to reduce a $1.8 billion term loan we used tofinance part of the acquisition of Chelsea (the “Acquisition Facility”), andthe remaining portion was used for general working capital purposes. On July 19,2005**,**we filed a registration statementunder the Securities Act of 1933 registering notes to be exchanged for the Rule 144Anotes. The registration statement has been declared effective and the exchangeoffer is underway. The exchange notes and the Rule 144A notes have thesame economic terms and conditions.

***CreditFacility.  ***Other significant activity on the CreditFacility during the six-month period ended June 30, 2005 was as follows:
| ***Draw Date***        | *** *** | *** *** | *** *** | ***Draw Amount***                                                                                                                                                       | *** *** | ***Use of Credit  Line Proceeds*** |
|------------------------|--------------|--------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|------------------------------------|
| January 20,  2005 |         | $200,000     |         | ·        To  repay a $250 million unsecured term loan, which had a rate of LIBOR plus  65 basis points.                    |
| March 31,  2005   |         | 17,268       |         | ·        Repayment  of CPG Partners, L.P.’s Yen unsecured loan facility, which had a rate of  TIBOR plus 125 basis points. |
| May 16,  2005     |         | 110,000      |         | ·        Repayment of $110 million  unsecured notes, which had a fixed rate of  7.625%.                                    |
| June 15,  2005    |         | 300,000      |         | ·        Repayment  of $300 million of unsecured notes, which had a fixed rate of 6.75%.                                   |
| June 24,  2005    |         | 100,000      |         | ·        Repayment  of $100 million Medium Term Notes, which had a fixed rate of 7.125%.                                   |

 

Other amounts drawn on the Credit Facility were for generalworking capital purposes. The total amount repaid on the Credit Facility duringthe six month period ended June 30, 2005 was $776.0 million. Thetotal outstanding balance of the Credit Facility was $805.8 million as of June 30,2005. During the first six months of 2005, the maximum amount outstanding underthe Credit Facility was $991.9 million and the weighted average amountoutstanding was $752.1 million.

***Acquisition Facility.  ***Weborrowed the $1.8 billion Acquisition Facility in 2004 to finance the cashportion of the acquisition of Chelsea Property Group. As of June 30, 2005,$1.2 billion remained outstanding. The Acquisition Facility matures on October 12,2006 and has remaining principal payments of two equal installments: March 12,2006 and at maturity. The Acquisition Facility bears interest at LIBOR plus 55basis points with an additional 15 basis point facility fee on all loansoutstanding, and provides for variable grid pricing based upon our creditrating.

**Secured Debt**

Total secured indebtedness was $4.7 billion and$5.0 billion at June 30, 2005 and December 31, 2004,respectively.

During the six-month period ended June 30, 2005,we repaid $47.7 million in mortgage loans, unencumbering four separateproperties.

On June 1, 2005, wealso repaid a $110 million mortgage related to our disposition ofRiverway, which bore interest at LIBOR plus 115 basis points, and had amaturity date of October 1, 2006.

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**7.**   Partners’Equity

On January 1, 2005, Simon Property assigned theeconomic rights of Ocean County Mall, the only Property held directly by SimonProperty, to the Operating Partnership in exchange for 1,602,821 units and thesettlement of an $88.8 million note receivable. The Property is nowconsolidated with the Operating Partnership. The assignment was a final step toalign the ownership interests in the properties acquired as a result of themerger with Corporate Properties Inc. in 1998and the acquisition of the NorthshoreMall in 1999.

On March 11, 2005, we issued 407,200 units toSimon Property at a fair value of $60.57 per share. On May 11, 2005,we issued 7,400 units to Simon Property at a fair value of $68.40 pershare. And on June 1, 2005, we issued 1,000 units to Simon Propertyat a fair value of $69.91 per share. All of these units were issued inconjunction with Simon Property’s issuance of shares of restricted stock thatwere awarded under The Simon Property Group 1998 Stock Incentive Plan. The fairmarket value of the restricted stock awarded has been deferred and is beingamortized over a four-year vesting period. The issuance of the restricted stockutilized existing shares held by Simon Property as treasury shares.

During the first six months of 2005, seven limitedpartners exchanged 1,719,741 units for a like number of shares of common stockof Simon Property, increasing Simon Property’s ownership in the OperatingPartnership.

During the first quarter of 2005, Simon Propertyrepurchased 2,000,000 shares of common stock in the open market under its $250 millionBoard approved share repurchase program at an average price of $61.88. Theprogram permitted Simon Property to acquire shares through May 6, 2005. Intotal, Simon Property has repurchased 2,317,300 shares as part of thisprogram. As a result of these share repurchases, we repurchased the same numberof our units from Simon Property.

On May 11, 2005, Simon Property’s Board ofDirectors authorized a new 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 repurchase the sharesin the open market or in privately negotiated transactions. In connection with anyrepurchases of common stock, we will repurchase the same number of units fromSimon Property. As of June 30, 2005, no shares had been repurchased underthis program.

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

**8.**   Commitmentsand Contingencies

**Litigation**

On November 15, 2004, the Attorneys General ofMassachusetts, New Hampshire and Connecticut filed complaints in theirrespective state Superior Courts against us and our affiliate, SPGGC, Inc.,alleging that the sale of co-branded, bank-issued gift cards sold in certain ofits Portfolio Properties violated gift certificate statutes and consumerprotection laws in those states. Each of these suits seeks injunctive relief,unspecified civil penalties and disgorgement of any fees determined to beimproperly charged to consumers.

In addition, we are a defendant in three otherproceedings relating to the gift card program. Each of the three proceedingshas been brought by a private plaintiff as a purported class action and allegesviolation of state consumer protection laws, state abandoned property andcontract laws or state statutes regarding gift certificates or gift cards andseeks a variety of remedies including unspecified damages and injunctiverelief.

We believe that we have viable defenses under bothstate and federal laws to the above gift card actions. Although it is notpossible to provide any assurance of the ultimate outcome of any of thesepending actions, management does not believe that an adverse outcome would havea material adverse effect on our financial position, results of operations orcash flow.

*Triple Five of Minnesota, Inc., a Minnesotacorporation, v. Melvin Simon, et al.* On or about November 9,1999, Triple Five of Minnesota, Inc. commenced an action in the DistrictCourt for the state of Minnesota, Fourth Judicial District, against, amongothers, Mall of America, certain members of the Simon family and entitiesallegedly controlled by such individuals, and us. The action was later removedto federal court. On September 10, 2003, the court issued its decision ina Memorandum and Order (the “Order”). In the Order, the court found thatcertain entities and 

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individuals breached theirfiduciary duties to Triple Five. The court did not award Triple Five damagesbut instead awarded Triple Five equitable and other relief and imposed aconstructive trust on that portion of the Mall of America owned by us.Specifically, as it relates to us, the court ordered that Triple Five wasentitled to purchase from us the one-half partnership interest that wepurchased in October 1999, provided Triple Five remits to us the sum of$81.38 million within nine months of the Order. On August 6, 2004,Triple Five closed on its purchase of our one-half partnership interest. Thecourt further held that we must disgorge all “net profits” that we received asa result of our ownership interest in the Mall from October 1999 to thepresent.

As a result of the Order, we initially recorded a$6.0 million charge for our share of the estimated loss in 2003. In thefirst quarter of 2004, as a result of the May 3, 2004 memorandum issued bythe court appointed mediator, which has now been affirmed by the court, werecorded an additional $13.5 million charge for our share of the loss thatis included in “(Loss) gain on sales of assets and other, net” in theaccompanying consolidated financial statements of operations and comprehensiveincome. We ceased recording any contribution to net income or from the resultsof operations of Mall of America as of September 1, 2003.

We appealed the Order to the United States Court ofAppeals for the Eighth Circuit. On April 21, 2005, the Court of Appealsissued its opinion, affirming in part and reversing in part the Order of thetrial court. The Appellate Court opinion changes the equitable remedy containedin the Order and requires that the one-half partnership interest Triple Fiveacquired from us pursuant to the Order must instead be offered, for the sameprice, to Mall of America Associates, a general partnership in which TripleFive and an entity affiliated with the Simon family are 50/50 partners. If Mallof America Associates refuses to purchase the interest, then Triple Five musttransfer back to us one-half of the interest it acquired from us in August,2004. The case has been remanded to the trial court for proceedings consistentwith the Appellate Court’s decision. It is not possible to provide anyassurance of the ultimate outcome of this litigation.

We are involved in variouslegal proceedings that arise in the ordinary course of our business. We believethat such routine litigation, claims and administrative proceedings will nothave a material adverse impact on our financial position or our results ofoperations. We record a liability when a loss is considered probable and theamount 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 June 30, 2005, we haveguaranteed or have provided letters of credit to support our share of$121.6 million of our total $2.9 billion share of joint venturemortgage and other indebtedness in the event the joint venture partnershipdefaults under the terms of the mortgage or other indebtedness. The mortgagesand other indebtedness guaranteed are secured by the property of the jointventure partnership, which could be sold in order to satisfy the outstandingobligation.

**9.**   Real Estate Acquisitions andDispositions

Duringthe six-month period ended June 30, 2005, we had significant dispositionsof properties summarized as follows (dollars in millions):
| ***Properties***                               | *** *** | ***Our  Ownership %*** | *** *** | ***Date of Disposal*** | *** *** | ***Sales Price*** | *** ***      | ***Gain/(Loss)*** | *** *** |
|------------------------------------------------|--------------|-----------------------------|--------------|----------------------------------|--------------|------------------------|-------------------|-------------------|--------------|
| Riverway and O’Hare  International Center |         |                        | 100          | %                                |         |                   | June 1, 2005 |              |         |   | $ | 257.3 |   |   |   | $ | 119.7 |   |   |
|                                                |              |                             |              |                                  |              |                        |                   |                   |              |  |  |  |  |  |  |  |  |  |  |

 

Substantially all of the proceeds from the sale, net ofrepayment of outstanding debt, of Riverway and O’Hare International Center willbe reinvested in tax-free “like-kind” exchange investments pursuant to Section 1031of the Internal Revenue Code.

We had no propertyacquisitions during the six-month period ended June 30, 2005.

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**10.**   NewAccounting Pronouncements

In December 2004, the FASB issued SFAS No. 153,“Exchanges of Nonmonetary Assets — an amendment of APB Opinion No. 29.”This statement requires exchanges of productive assets to be accounted for atfair value, rather than at carryover basis, unless (a) neither the assetreceived nor the asset surrendered has a fair value that is determinable withinreasonable limits, or (b) the transactions lack commercial substance. SFASNo. 153 is effective for nonmonetary asset exchanges occurring in fiscalperiods beginning after June 15, 2005. The adoption of this statement isnot anticipated to have a material impact on our financial position or resultsof operations.

In June 2005, the FASB ratified its consensus inEITF Issue 04-05, “Determining Whether a General Partner, or the GeneralPartners as a Group, Controls a Limited Partnership or Similar Entity When theLimited Partners Have Certain Rights” (Issue 04-05). The effective datefor Issue 04-05 is June 29, 2005 for all new or modifiedpartnerships and January 1, 2006 for all other partnerships for theapplicable provisions. The adoption of the provisions of EITF 04-05 isnot anticipated to have a material impact on our financial position or resultsof operations.

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**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: international, national,regional and local economic climates, competitive market forces, changes inmarket rental rates, trends in the retail industry, the inability to collectrent due to the bankruptcy or insolvency of tenants or otherwise, risksassociated with acquisitions, the impact of terrorist activities, environmentalliabilities, pending litigation, maintenance of Simon Property’s REIT status,changes in applicable laws, rules and regulations, changes in market ratesof interest and fluctuations in exchange rates of foreign currencies. 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.(the “Operating Partnership”), a Delaware limited partnership, is a majorityowned subsidiary of Simon Property Group, Inc. (“Simon Property”). SimonProperty is our sole general partner and a self-administered andself-managed real estate investment trust (“REIT”) under the Internal RevenueCode of 1986, as amended (the “Code”). In this discussion, the terms “we”, “us”and “our” refer to the Operating Partnership and its subsidiaries.

We are engaged in the ownership,development and management of retail real estate,  primarily regional malls, Premium Outlet®centers and community/lifestyle centers. As of June 30, 2005, we owned orheld an interest in 295 income-producing properties in the United States,which consisted of 172 regional malls, 71 community/lifestyle centers, 32Premium Outlet centers and 20 other shopping centers or outlet centers in 40states plus Puerto Rico (collectively, the “Properties”, and individually, a “Property”).In addition, we also own interests in eleven parcels of land held in the UnitedStates for future development (together with the Properties, the “Portfolio”).Finally, we have ownership interests in 51 European shopping centers (France,Italy, Poland and Portugal); five Premium Outlet centers in Japan; one PremiumOutlet center in Mexico; and one shopping center in Canada.

Our wholly-ownedsubsidiary, M.S. Management Associates, Inc. (the “Management Company”)provides leasing, management, and development services to most of theProperties. In addition, insurance subsidiaries of the Management Companyinsure the self-insured retention portion of our general liability program, andthe deductible associated with our workers’ compensation programs, and providereinsurance for the primary layer of general liability coverage to our thirdparty maintenance providers while performing services under contract with us.Third party providers provide coverage above the insurance subsidiaries’limits.

***OperatingPhilosophy***

We seekgrowth in our earnings and cash flows through:

·             focusingon our core business of regional malls,

·             acquiringindividual properties or portfolios of properties, focusing on quality retailreal estate. As part of our acquisition strategy, we review and evaluate a numberof acquisition opportunities and evaluate each based on its compliment to ourPortfolio,

·             pursuingnew development as well as strategic expansion and renovation activity toenhance existing assets’ profitability and market share when we believe the investmentof our capital meets our risk-reward criteria. We seek to selectively developnew properties in major metropolitan areas that exhibit strong population andeconomic growth.

Tosupport this growth, our capital strategy is three-fold:

·             toprovide the capital necessary to fund growth,

·             tomaintain sufficient flexibility to access capital in many forms, both publicand private, and

·             tomanage our overall financial structure in a fashion that preserves ourinvestment grade ratings.

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We own and operate investment properties which generaterevenues primarily from long-term leases; therefore, our financing strategyrelies primarily on long-term fixed rate debt. We manage our floating rate debtto be approximately 15–25% of total outstanding indebtedness by settinginterest modalities for each financing or refinancing based on current marketconditions. We also enter into interest rate protection agreements asappropriate to assist in managing our interest rate risk. We believe thisstrategy is the most appropriate for the long-term health of our company. Our$2.0 billion unsecured revolving credit facility (“Credit Facility”)provides liquidity as our cash needs vary from time to time.

We derive most ofour liquidity from leases that generate positive net cash flow from operationsand distributions of capital from unconsolidated entities that totaled$609.6 million in the first and second quarters of 2005. We generate themajority of revenues from leases with retail tenants including:

·             Baseminimum rents, cart and kiosk rentals,

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

·             Recoveriesof a significant amount of our recoverable expenditures, which consist ofproperty operating, real estate tax, repairs and maintenance, and advertisingand promotional expenditures.

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

We also generaterevenues from outlot land sales and, due to our size and tenant relationships,from the following:

·             SimonBrand Ventures (“Simon Brand”) mall marketing initiatives, including the saleof co-branded gift cards under the Simon brand. Simon Brand revenues alsoinclude payment services, national media contracts, a national beveragecontract and other contracts with national companies.

·             Simon BusinessNetwork (“Simon Business”) property operating services to our tenants andothers resulting from its relationships with vendors.

***Results Overview***

Our core business fundamentals remained healthy duringthe first six months of 2005. Regional mall comparable sales per square foot (“psf”)strengthened during the first six months of 2005, increasing 5.5% to $442 psffrom $419 psf for the same period in 2004 as a result of strong retail demandby consumers. Our regional mall average base rents increased 3.8% to $34.16 psfas of June 30, 2005 from $32.92 psf as of June 30, 2004 and ourregional mall leasing spreads were $7.33 psf as of June 30, 2005 comparedto $6.18 psf as of June 30, 2004. Finally, regional mall occupancyincreased 0.9% to 92.2% as of June 30, 2005 from 91.3% due to strongdemand for retail space and lower bankruptcy rates.

During the first sixmonths of 2005 we disposed of four properties as follows:

·             OnJanuary 11, 2005, Metrocenter, a regional mall located in Phoenix, Arizonawas sold and we recorded a gain on disposition of $11.4 million. We held a50% interest in Metrocenter.

·             OnMarch 31, 2005, we sold Lakeland Factory Outlet, located in Lakeland,Tennessee. There was no gain or loss on the sale of this property.

·             OnJune 1, 2005, we sold our Riverway and O’Hare International Center officebuilding complexes, located in Rosemont, Illinois. We recorded a gain on thedisposition of these two properties of $119.7 million.

Our overalleffective weighted average borrowing rate increased by 16 basis points ascompared to our overall effective weighted average borrowing rate at December 31,2004 due to increasing variable interest rates. However, as compared to theprior year period, our overall effective weighted average borrowing rateincreased 2 basis points. Our financing activities were highlighted by thefollowing significant transactions:

·             OnJanuary 11, 2005, we refinanced the Credit Facility, increasing it to amaximum of $2.0 billion and extending the maturity to January 11,2008, with an additional one-year extension available at our option. The CreditFacility can be increased to $2.5 billion within the first two years ofclosing at our option subject to a fee approximating 25 basis points. TheCredit Facility bears interest at LIBOR plus 55 basis points with 

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an additional 15 basispoint facility fee on the entire $2.0 billion facility and provides forvariable grid pricing based upon our corporate credit rating. In addition, thenew facility has a $500 million multi-currency tranche for Euro, Yenor Sterling borrowings and also includes a money market competitive bid optionprogram that allows us to hold auctions to obtain lower pricing for short-termfunds for up to $1.0 billion.

·             Wepaid off a $110 million mortgage that bore interest at LIBOR plus 115 basispoints, as a result of our disposition of the property (Riverway).

·             Weissued two tranches of senior unsecured notes totaling $1.0 billion at aweighted average fixed interest rate of 4.90%, and used $358 million to repayborrowings on the Credit Facility and $600 million to repay borrowings on theloan incurred to finance a portion of the acquisition of Chelsea Property Group, Inc.and its affiliates (collectively “Chelsea”) in 2004.

·             We repaid $510million in unsecured borrowings which bore interest at fixed rates ranging from6.75% to 7.625%, and $250 million in unsecured borrowings that bore a variablerate of LIBOR plus 65 basis points.

***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. We include acquired Properties in this data beginning in the year ofacquisition and we do not include any Properties located outside of the UnitedStates. The following table sets forth these key operating statistics for:

·             Propertiesthat we consolidate in our consolidated financial statements,

·             Propertiesthat we account for under the equity method as unconsolidated joint ventures,and

·             theforegoing two categories of Properties on a total Portfolio basis.

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| *** ***                             | *** *** | ***June 30,      2005    *** | *** *** | ***% Change   from prior   period*** | *** *** | ***June 30,***    2004     | *** *** | ***% Change  from prior   period*** | *** *** |
|------------------------------------------|--------------|---------------------------------------------------------------------------|--------------|----------------------------------------------------------|--------------|-------------------------------------------------------------------------|--------------|----------------------------------------------------|--------------|
| **Regional  Malls:**                     | ** **   |                                                                      | ** **   | ** **                                               |         |                                                                    | ** **   | ** **                                         |         |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| ***Occupancy***                          | *** *** |                                                                      | ** **   | ** **                                               | * *     | * *                                                                | *** *** | ** **                                         | * *     | * * | *** *** | ** ** | * * | * * | *** *** | ** ** |   |
| Consolidated                             | ** **   |                                                                      | **92.3**     | **%**                                                    |         |                                                                    |         | ** **                                         |         |   | 91.0 | % |   |   |   | ** ** |   |
| Unconsolidated                           | ** **   |                                                                      | **92.0**     | **%**                                                    |         |                                                                    |         | ** **                                         |         |   | 91.8 | % |   |   |   | ** ** |   |
| **Total  Portfolio**                     | ** **   |                                                                      | **92.2**     | **%**                                                    |         |                                                                    |         | ** **                                         |         |   | 91.3 | % |   |   |   | ** ** |   |
| ***Average Base Rent per Square  Foot*** |         |                                                                      | ** **   | ** **                                               |         |                                                                    |         | ** **                                         |         |   |   |   |   |   |   | ** ** |   |
| Consolidated                             | ** **   |                                                                      | **$**        | **33.53**                                                | ** **   |                                                                    |         | **4.8**                                            | **%**        |   |   | $ | 31.94 |   |   |   | 5.9 | % |   |
| Unconsolidated                           | ** **   |                                                                      | **$**        | **35.31**                                                | ** **   |                                                                    |         | **2.7**                                            | **%**        |   |   | $ | 34.38 |   |   |   | 2.7 | % |   |
| **Total  Portfolio**                     | ** **   |                                                                      | **$**        | **34.16**                                                | ** **   |                                                                    |         | **3.8**                                            | **%**        |   |   | $ | 32.88 |   |   |   | 4.6 | % |   |
| ***Comparable Sales Per Square  Foot***  |         |                                                                      | ** **   | ** **                                               |         |                                                                    |         | ** **                                         |         |   |   |   |   |   |   |   |   |
| Consolidated                             | ** **   |                                                                      | **$**        | **427**                                                  | ** **   |                                                                    |         | **5.5**                                            | **%**        |   |   | $ | 404 |   |   |   | 7.6 | % |   |
| Unconsolidated                           | ** **   |                                                                      | **$**        | **474**                                                  | ** **   |                                                                    |         | **5.9**                                            | **%**        |   |   | $ | 448 |   |   |   | 5.2 | % |   |
| **Total  Portfolio**                     | ** **   |                                                                      | **$**        | **442**                                                  | ** **   |                                                                    |         | **5.5**                                            | **%**        |   |   | $ | 419 |   |   |   | 6.6 | % |   |
| **Premium Outlet Centers:**              |         |                                                                      | ** **   | ** **                                               |         |                                                                    |         | ** **                                         |         |   |   |   |   |   |   |   |   |
| Occupancy                                | ** **   |                                                                      | **99.2**     | **%**                                                    |         |                                                                    |         | ** **                                         |         |   |   |   |   |   |   |   |   |
| Average Base Rent  Per Square Foot       | ** **   |                                                                      | **$**        | **22.83**                                                | ** **   |                                                                    |         | **—**                                         | ** **   |   |   | — |   |   |   | — |   |   |
| Comparable Sales  Per Square Foot        | ** **   |                                                                      | **$**        | **426**                                                  | ** **   |                                                                    |         | **—**                                         | ** **   |   |   | — |   |   |   | — |   |   |
| **Community/Lifestyle Centers:**         |         |                                                                      | ** **   | ** **                                               |         |                                                                    |         | ** **                                         |         |   |   |   |   |   |   |   |   |
| ***Occupancy***                          |         |                                                                      | ** **   | ** **                                               |         |                                                                    |         | ** **                                         |         |   |   |   |   |   |   |   |   |
| Consolidated                             | ** **   |                                                                      | **89.3**     | **%**                                                    |         |                                                                    |         | ** **                                         |         |   | 89.8 | % |   |   |   |   |   |
| Unconsolidated                           | ** **   |                                                                      | **96.1**     | **%**                                                    |         |                                                                    |         | ** **                                         |         |   | 95.1 | % |   |   |   |   |   |
| **Total  Portfolio**                     | ** **   |                                                                      | **91.5**     | **%**                                                    |         |                                                                    |         | ** **                                         |         |   | 91.5 | % |   |   |   |   |   |
| ***Average Base Rent Per Square  Foot*** |         |                                                                      | ** **   | ** **                                               |         |                                                                    |         | ** **                                         |         |   |   |   |   |   |   |   |   |
| Consolidated                             | ** **   |                                                                      | **$**        | **11.44**                                                | ** **   |                                                                    |         | **3.3**                                            | **%**        |   |   | $ | 11.08 |   |   |   | 7.7 | % |   |
| Unconsolidated                           | ** **   |                                                                      | **$**        | **10.51**                                                | ** **   |                                                                    |         | **4.4**                                            | **%**        |   |   | $ | 10.07 |   |   |   | 2.5 | % |   |
| **Total  Portfolio**                     | ** **   |                                                                      | **$**        | **11.13**                                                | ** **   |                                                                    |         | **3.4**                                            | **%**        |   |   | $ | 10.77 |   |   |   | 6.2 | % |   |
| ***Comparable Sales Per Square Foot***   |         |                                                                      | ** **   | ** **                                               |         |                                                                    |         | ** **                                         |         |   |   |   |   |   |   |   |   |
| Consolidated                             | ** **   |                                                                      | **$**        | **224**                                                  | ** **   |                                                                    |         | **2.8**                                            | **%**        |   |   | $ | 218 |   |   |   | 8.1 | % |   |
| Unconsolidated                           | ** **   |                                                                      | **$**        | **203**                                                  | ** **   |                                                                    |         | **(0.5**                                           | **%)**       |   |   | $ | 204 |   |   |   | (0.2 | %) |   |
| **Total Portfolio**                      | ** **   |                                                                      | **$**        | **218**                                                  | ** **   |                                                                    |         | **2.1**                                            | **%**        |   |   | $ | 213 | ** ** |   |   | 5.3 | % |   |

 

***Occupancy Levels and Average Base Rent PerSquare Foot.  ***Occupancy and average base rent arebased on mall and freestanding GLA owned by us (“Owned GLA”) in the regionalmalls, all tenants at the Premium Outlet centers, and all tenants atcommunity/lifestyle centers. We believe the continued growth in regional malloccupancy is primarily the result of the overall quality of our Portfolio. Theresult of the growth in occupancy is an increase in nearly every category ofrevenue. Our Portfolio has maintained stable occupancy and increased averagebase rents despite the uncertain economic climate.

***ComparableSales Per Square Foot.  ***Comparable sales includetotal reported retail sales at Owned GLA (for mall and freestanding stores withless than 10,000 square feet) in the regional malls and all reporting tenantsat the Premium Outlet centers and community/lifestyle centers. Retail sales atOwned GLA affect revenue and profitability levels because sales determine theamount of minimum rent that can be charged, the percentage rent realized, andthe recoverable expenses (common area maintenance, real estate taxes, etc.)that tenants 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.Discussion regarding our results of operations for our investment inunconsolidated entities is included in our year over year comparisons whichfollow.
| *** ***                           | *** *** | ***June 30,  2005*** | *** *** | ***Change   from prior   period*** | *** *** | ***June 30,  2004*** | *** *** |
|----------------------------------------|--------------|---------------------------|--------------|---------------------------------------------------|--------------|---------------------------|--------------|
| **European  Shopping Centers**         |         |                      |         |                                              |         | ** **                |         |   |   |   |   |
| Occupancy                              | ** **   | **97.9**                  | **%**        | ** **                                        | ** **   | ** **                | ** **   | ** ** | **99.3** | **%** |   |
| Comparable sales  per square foot (1)  | ** **   | **$**                     | **444**      |                                              |         | —                    | ** **   | ** ** | ** ** | **—** |   |   |
| Average base rent  per square foot (1) | ** **   | **$**                     | **31.10**    |                                              |         | 1.7                       | %            | ** ** | ** ** | **$** | **30.58** |   |   |
| **International Premium Outlets (2)**  |         |                      |         |                                              |         | ** **                |         |   |   |   |   |
| Occupancy                              | ** **   | **100**                   | **%**        |                                              |         | ** **                |         |   | — |   |   |
| Comparable sales  per square foot      | ** **   | **$**                     | **827**      |                                              |         | —                    | ** **   |   |   | — |   |   |
| Average base rent per  square foot     | ** **   | **$**                     | **42.50**    |                                              |         | —                    | ** **   |   |   | — |   |   |
|                                        |              |                           |              |                                                   |              |                           |              |  |  |  |  |  |  |

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(1)                    Basedon a conversion factor (USD: Euro) of 1.2066 for 2005 and 1.2085 for 2004.

(2)                    Doesnot include Premium Outlets Punta Norte in Mexico, which opened December 2004and Montreal Forum in Canada.

(3)                    Basedon a conversion factor of (USD: Yen) of 107.55 for 2005.

**Results of Operations**

In addition to theactivity discussed in the Results Overview, the following acquisitions,dispositions, and openings affected our consolidated results from continuingoperations in the comparative periods:

·             On June 1, 2005,we sold the Riverway and O’Hare International Center office building complexes,in Rosemont, Illinois for $257.3 million and recognized a gain on theirdisposition of $119.7 million.

·             On May 6, 2005,we opened Seattle Premium Outlets.

·    Finally, on January 1, 2005, Simon Propertyassigned the economic rights of Ocean County Mall, the only Property helddirectly by Simon Property, to the Operating Partnership in exchange for1,602,821 units and the settlement of an $88.8 million note receivable.The Property is now consolidated with the Operating Partnership.

·             On December 15,2004, we increased our ownership interest in Woodland Hills, located in Tulsa,Oklahoma, to approximately 94.5% for $119.5 million, including theassumption of our $39.7 million share of debt

·             OnNovember 19, 2004, we increased our ownership interest in Lehigh Valley,located in Whitehall, Pennsylvania, to 37.6% for approximately $42.3 million,including the assumption of our $25.9 million share of debt.

·             OnOctober 14, 2004, Simon Property completed the acquisition of Chelsea. Theacquisition included 32 Premium Outlets, 4 Premium Outlets in Japan, 3community centers, 21 other retail centers, 1 Premium Outlet in Mexico, and itsdevelopment portfolio. The purchase price was approximately $5.2 billionincluding the assumption of debt. As a result, Simon Property acquired theremaining 50% interests in two Premium Outlets in Las Vegas and Chicago, whichresulted in our owning a 100% interest in these Properties which werepreviously accounted for under the equity method of accounting.

·             OnMay 4, 2004, we purchased a 100% interest in Plaza Carolina in San Juan,Puerto Rico for approximately $309.0 million.

·             OnApril 27, 2004, we increased our ownership interest in Bangor Mall andMontgomery Mall to approximately 67.6% and 54.4%, respectively, forapproximately $67.0 million and the assumption of our $16.8 millionshare of debt.

·             OnApril 1, 2004, we increased our ownership interest in Mall of GeorgiaCrossing from 50% to 100% for approximately $26.3 million, including theassumption of our $16.5 million share of debt.

·             OnFebruary 5, 2004 we purchased a 95% interest in Gateway Shopping Center inAustin, Texas for approximately $107.0 million.

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Inaddition to the activity discussed in the Results Overview, the followingacquisitions, dispositions, and openings affected our income fromunconsolidated entities in the comparative periods:

·             InMarch 2005, we and our joint venture partner opened St. Johns Town Center,a 1.5 million square foot open-air retail project, located inJacksonville, Florida. Through the construction period, we owned 85% of thisproject, including our 85% guarantee underlying the construction financing.Also in March, the construction loan was refinanced with permanent secureddebt, the guarantee was released, and the ownership percentages were eachadjusted to50%. As a result, we changed the method of accountingfor this Property from consolidated to the equity method. We received proceedsfrom the refinancing of $15.7 million as a repayment of our capitalcontribution.

·             InMarch 2005, we opened Toki Premium Outlets in Japan.

·             OnJanuary 11, 2005, Metrocenter, a regional mall located in Phoenix,Arizona, was sold. We held a 50% interest in Metrocenter, which was accountedfor on the equity method of accounting.

·             OnOctober 14, 2004, we opened Clay Terrace in Carmel, Indiana.

·             OnMay 10, 2004, we and our joint venture partner (Chelsea) completedconstruction and opened Chicago Premium Outlets.

·             OnApril 7, 2004, we sold the joint venture interest in a hotel property heldby the Management Company.

·             August 6,2004, we completed the court ordered sale of our joint venture interest in Mallof America, in Minneapolis, Minnesota.

We soldthe following Properties in 2004 and 2005:
| · | Hutchinson Mall on June 15, 2004              | · | Heritage Park Mall on December 29, 2004        |
|--------|----------------------------------------------------|--------|-----------------------------------------------------|
| · | Bridgeview Court on July 22, 2004             | · | Lakeland Factory Outlet Mall on March 31, 2005 |
| · | Woodville Mall on September 1, 2004           | · | Riverway and O’Hare International Center on    |
| · | Santa Fe Premium Outlets on December 28, 2004 |   | June 1, 2005                                   |

 

For the purposes of thefollowing comparison between the three and six months ended June 30, 2005and 2004, the above transactions are referred to as the Property Transactions. Propertiesthat were owned in both of the periods under comparison are referred to ascomparable properties.

***Three Months Ended June 30,2005 vs. Three Months Ended June 30, 2004***

Minimumrents, excluding rents from our consolidated Simon Brand and Simon Businessinitiatives, increased $116.1 million during the period. The net effect ofthe Property Transactions increased minimum rents $109.2 million,$91.9 million of which was due to the operations of the Premium Outletcenters and other Properties acquired from Chelsea in October of 2004.Amortization of the fair market value of in-place leases increased minimumrents by $3.6 million over that of the second quarter of 2004, includingthe impact of the Property Transactions, principally the result of the Chelseatransaction. Comparable non-Simon Brand and Simon Business rents increased $7.2 million,or 2.1%. This was primarily due to the leasing of space at higher rents thatresulted in an increase in base rents of $7.4 million. In addition, rentsfrom carts, kiosks, and other temporary tenants increased comparable rents by$3.3 million. Total overage rents increased $5.9 million,$1.7 million of which was from comparable properties, reflecting strengtheningretail sales.

Tenant reimbursements,excluding Simon Business initiatives, increased $39.8 million, of whichthe Property Transactions accounted for $35.9 million, $28.9 millionof which was due to the operations of the Premium Outlets and other propertieswhich were acquired from Chelsea in October of 2004. The remainder of theincrease of $3.9 million, or 2.2%, was in comparable properties and wasdue to increased property operating costs and the impact of moving tenants toour fixed common area maintenance reimbursement program.

Management fees and otherrevenues decreased $1.0 million primarily due to decreased constructionand development fees from joint ventures due to timing of these activities.

Consolidatedrevenues from Simon Brand and Simon Business initiatives increased $6.8 millionto $34.1 million from $27.3 million. The increase in revenues isprimarily due to:

·             increasedrevenue from our co-branded gift card program,

·             increasedrents and fees from service providers,

·             increasedadvertising rentals, and

·             increasedevent and sponsorship income.

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The increased revenues from Simon Brand and SimonBusiness were offset partially by increases in Simon Brand and Simon Businessexpenses of $1.2 million, that primarily resulted from increased gift cardand other operating expenses included in total property operating expenses.

Property operating expensesincreased $16.7 million, $1.2 million from comparable properties(representing an increase of 1%) principally as a result of increased personnelcosts and insurance. The remaining increase in property operating expenses wasdue to the net effect of the Property Transactions, principally the acquisitionof the Chelsea portfolio.

Depreciation and amortization expenses increased$64.8 million primarily due to the net effect of the PropertyTransactions. The Chelsea properties accounted for $55.9 million of theincrease. Comparable properties depreciation and amortization increased$1.0 million, due to the effect of expansions and renovation activity.

Real estate taxes increased $13.8 million dueprincipally to the Property Transactions. The Chelsea properties accounted for$8.8 million of the increase. The comparable property increase was$3.2 million, or 5.5%.

Repairs and maintenance increased $5.1 million dueprincipally to the Property Transactions. The Chelsea properties accounted for$3.1 million of the increase. The comparable property increase was $1.4 million,or 7.2%.

Advertising and promotion expenses increased$6.1 million due to the net effect of the Property Transactions, primarilythe Chelsea properties.

Provision for credit losses decreased $4.8 millionfrom the prior period due to a reduction of gross receivables and recoveries ofamounts previously written off or provided for in prior periods.

Home office and regional costs increased$9.5 million due to the Property Transactions, primarily due to theacquisition of Chelsea and the costs of operating the Roseland, NJ offices.Other expenses increased $3.5 million primarily due to ground rent andlegal expense increases.

Interest expenseincreased $42.9 million due to the following:

·             theeffect of the borrowings to finance the Property Transactions,

·             theconsolidation and/or acquisition of debt related to Property Transactions, principallythe Chelsea acquisition in the fourth quarter of 2004, which increased interestexpense by $15.0 million,

·             increased average borrowings resulting from theimpact of an unsecured note offering in August of 2004, and

·             increasesin our overall weighted average borrowing rate.

The gain on sale of assets in the second quarter of2005 of $2.1 million relates to the sale of our ownership in a propertymanagement entity acquired as part of our acquisition of Rodamco North AmericaN.V. (“Rodamco”) and other non-core asset sales. In 2004, we recorded a pretaxgain of $11.6 million upon the sale of a hotel also acquired as part ofthe Rodamco acquisition.

The gain on disposal of discontinued operations of$119.7 million represents the net gain upon disposition of our Riverwayand O’Hare International Center properties in June of 2005.

Preferred unit requirementincreased $13.0 million due to the issuance of preferred units inconjunction with the acquisition of Chelsea.

***Six Months Ended June 30, 2005 vs. Six MonthsEnded June 30, 2004***

Minimum rents, excluding rentsfrom our consolidated Simon Brand and Simon Business initiatives, increased $238.1 millionduring the period. The net effect of the Property Transactions increasedminimum rents $222.4 million, $179.3 million of which was due to theoperations of the Premium Outlet centers and other Properties acquired fromChelsea in October of 2004. Total amortization of the fair market value ofin-place leases increased minimum rents by $9.8 million over that of thefirst six months of 2004, including the impact of the Property Transactions,principally the result of the Chelsea transaction. Comparable non-Simon Brandand Simon Business rents increased $15.8 million, or 2.4%. This wasprimarily due to the leasing of space at higher rents that resulted in anincrease in base rents of $15.9 million. In addition, rents from carts,kiosks, and other temporary tenants increased comparable rents by $7.0 million.Total overage rents increased $9.8 million, $3.0 million of which wasfrom comparable properties, reflecting strengthening retail sales.

Tenant reimbursements, excluding Simon Businessinitiatives, increased $78.0 million, of which the Property Transactionsaccounted for $74.5 million, $56.1 million of which was due to theoperations of the Premium Outlets and other properties which were acquired fromChelsea in October of 2004. The remainder of the increase of$3.5 million, 

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or 1.0%, was in comparableproperties and was due to the increase in property operating cost expenses andthe impact of moving tenants to our fixed common area maintenance reimbursementprogram.

Management fees and other revenues increased$0.8 million primarily due to increased construction and development feesfrom joint venture activities. Total other income, excluding consolidated SimonBrand and Simon Business initiatives, increased $6.0 million during theperiod. This increase included the effect of increased land sale activity overthe prior year’s period of $4.1 million, increases in interest income of$.7 million, and increases in net fee income received for construction andfinancing activities for joint venture Properties.

Consolidatedrevenues from Simon Brand and Simon Business initiatives increased $12.9 millionto $56.0 million from $43.1 million. The increase in revenues isprimarily due to:

·             increasedrevenue from our co-branded gift card program,

·             increasedrents and fees from service providers,

·             increasedadvertising rentals, and

·             increasedevent and sponsorship income.

The increased revenues from Simon Brand and SimonBusiness were offset by increases in Simon Brand and Simon Business expenses of$0.7 million, that primarily resulted from increased gift card and otheroperating expenses included in property operating expenses.

Property operating expenses increased$36.1 million, $4.5 million from comparable properties (representingan increase of 2.7%). The remainder of the increase is due to the net effect ofthe Property Transactions, due principally to the acquisition of the Chelseaproperties.

Depreciation and amortization expenses increased$142.8 million primarily due to the net effect of the PropertyTransactions. The Chelsea properties accounted for $113.4 million of theincrease. Comparable properties depreciation and amortization increased$3.7 million, due to the effect of expansions and renovations.

Real estate taxes increased $28.1 million due tothe Property Transactions. The Chelsea properties accounted for $17.2 millionof the increase. The comparable property increase was $6.4 million, or5.5%.

Repairs and maintenance increased $11.7 milliondue principally to the Property Transactions. The Chelsea properties accountedfor $6.6 million of the increase. The comparable property increase was $3.2 million,or 7.7%.

Advertising and promotion expenses increased$11.9 million due principally to net effect of the Property Transactions.The Chelsea properties added $12.5 million to this increase.

Provision for credit losses decreased $5.8 millionfrom the prior period due to a reduction of gross receivables and recoveries ofamounts previously written off or provided for in prior periods.

Home office and regional costs increased$15.8 million due to the Property Transactions, primarily due to the acquisitionof Chelsea and the additional costs of operating the Roseland, NJ offices, andincremental discretionary incentive compensation arrangements. Other expensesincreased $5.4 million primarily due to ground rent and legal expenseincreases.

Interest expenseincreased $86.9 million due to the following:

·             theeffect of the borrowings to finance the Property Transactions,

·             theconsolidation and/or acquisition of debt related to Property Transactions,principally the Chelsea acquisition in the fourth quarter of 2004, whichincreased interest expense by $31.2 million,

·             increasedaverage borrowings resulting from the impact of an unsecured note offering in August 2004,and

·             increasesin our overall weighted average borrowing rate.

The gain on sale of assets in 2005 of$12.6 million relates to the sale of our joint venture interest inMetrocenter in January 2005 and the sale of a property management entityacquired as part of the Rodamco acquisition in 2002. In 2004, we recorded a$13.5 million net loss on the forced sale of our interest in the Mall ofAmerica offset by a $11.6 pretax gain upon the disposition of a hotel acquiredalso as part of our acquisition of Rodamco.

Preferred unit requirementincreased $25.6 million due to the issuance of preferred units inconjunction with the acquisition of Chelsea.

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**Liquidity and Capital Resources**

Our balance of cash and cash equivalents decreased$144.0 million to $375.6 million as of June 30, 2005. Thereduction in cash was due to changes in the gift card program. The cash andrelated liability to gift card holders for the unused portion of the card arenow held and administered by an independent bank.

On June 30, 2005, the Credit Facility hadavailable borrowing capacity of $1.19 billion. During the first six monthsof 2005, the maximum amount outstanding under the Credit Facility was$991.9 million and the weighted average amount outstanding was$752.1 million. The weighted average interest rate was 3.24% for the six-monthperiod ended June 30, 2005.

We andSimon Property also have access to public and private capital markets forequity and unsecured debt. We also have access to private equity frominstitutional investors and other joint venture investors at the Propertylevel. Our current senior unsecured debt ratings are Baa2 by Moody’s InvestorsService and BBB+ by Standard & Poor’s.

**Cash Flows**

Our net cash flowfrom operating activities and distributions of capital from unconsolidatedentities totaled $609.6 million. We also received proceeds of$320.0 million from the sale of properties and partnership interestsduring the first six months of 2005. In addition, we had a net use of cash fromall of our debt financing and repayment activities of $190.2 million.These activities are further discussed below in Financing and Debt. We also:

·             repurchasedlimited partner units, preferred units, and treasury units amounting to$127.1 million,

·             paidunitholder distributions of $392.5 million,

·             paidpreferred unit distributions totaling $51.1 million,

·             fundedconsolidated capital expenditures of $288.0 million, These capitalexpenditures include development costs of $114.7 million, renovation andexpansion costs of $123.3 million, and tenant costs and other operationalcapital expenditures of $50.0 million, and

·             fundedinvestments in unconsolidated entities of $16.0 million.

In general, weanticipate that cash generated from operations will be sufficient to meetoperating expenses, monthly debt service, recurring capital expenditures, anddistributions to unitholders necessary to maintain Simon Property’s REITqualification for 2005 and on a long-term basis. In addition, we expect to beable to obtain capital for nonrecurring capital expenditures, such asacquisitions, major building renovations and expansions, as well as forscheduled principal maturities on outstanding indebtedness, from:

·             excesscash generated from operating performance and working capital reserves,

·             borrowingson our Credit Facility,

·             additionalsecured or unsecured debt financing, or

·             additional equityraised by Simon Property in the public or private markets.

**Financing and Debt**

***Unsecured Debt.  ***Aspreviously discussed, on January 11, 2005, we refinanced our CreditFacility, expanding the facility from $1.25 billion to $2.0 billion.

During the six-month period ended June 30, 2005,we repaid $1.36 billion in unsecured notes with borrowings from the CreditFacility and the proceeds of senior unsecured note offerings.

We issued two tranches of senior unsecured notestotaling $1.0 billion at a weighted average fixed interest rate of 4.90%. Thefirst tranche is $600.0 million at a fixed interest rate of 5.10% due June 15,2015, and the second tranche is $400.0 million at a fixed interest rate of4.60% due June 15, 2010.

***Secured Debt.  ***Duringthe six-month period ended June 30, 2005, we repaid $47.7 million inmortgage loans, unencumbering four properties.

On June 1, 2005, we also repaid a $110 millionmortgage related to our disposition of Riverway, which bore interest at LIBORplus 115 basis points, and had a maturity date of October 1, 2006.

We refinanced a jointventure property with a $500.0 million, 4.86% fixed rate mortgage thatmatures on June 1, 2010. The balances of the two previous mortgages, whichwere repaid, were $142.0 million and $50.1 million 

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and boreinterest at fixed rates of 8.74% and 7.20%, respectively. Both mortgages werescheduled to mature on September 1, 2005. We received our share of theexcess refinancing proceeds of approximately $120 million on closing ofthis new mortgage loan.

***Summary of Financing***

Ourconsolidated debt, after giving effect to outstanding derivative instruments,consisted of the following:
| ***Debt Subject to*** | *** *** | *** *** | *** *** | ***Adjusted  Balance as of  June 30, 2005*** | *** *** | ***Effective  Weighted  Average  Interest Rate*** | *** *** | ***Adjusted  Balance as of  December 31, 2004*** | *** *** | ***Effective  Weighted  Average  Interest Rate*** | *** *** |
|---------------------------------|--------------|--------------|--------------|------------------------------------------------------------------|--------------|--------------------------------------------------------|--------------|----------------------------------------------------------------------|--------------|--------------------------------------------------------|--------------|
| **Fixed Rate**                  |         | $            | 11,193,331   |                                                             |         | 6.31                                                   | %            |                                                                 |         | $                                                      | 10,766,015   |   |   |   | 6.48 | % |   |
| **Variable Rate**               |         | 3,053,889    |         |                                                             | 3.69         | %                                                      |         |                                                                 | 3,820,378    |                                                   |         |   | 3.06 | % |   |
| ** **                      |         | $            | 14,247,220   |                                                             |         | 5.74                                                   | %            |                                                                 |         | $                                                      | 14,586,393   |   |   |   | 5.58 | % |   |

 

As of June 30, 2005, we had interest rate capprotection agreements on $210.0 million of consolidated variable ratedebt. We also hold $370.0 million of notional amount variable rate swapagreements that had a weighted average pay rate of 3.64% and a weighted averagereceive rate of 3.72% at June 30, 2005. As of June 30, 2005, the neteffect of these agreements effectively converted $304.5 million of fixedrate debt to variable rate debt.

**ContractualObligations and Off-Balance Sheet Arrangements.****  **There have been no material changes in ouroutstanding capital expenditure commitments since December 31, 2004, aspreviously disclosed in our 2004 Annual Report on Form 10-K. The followingtable summarizes the material aspects of our future obligations as ofJune 30, 2005 for the remainder of 2005 and subsequent years thereafter(dollars in thousands):
| *** ***                               | *** *** | ***2005*** | *** *** | ***2006 - 2007*** | *** *** | ***2008 - 2010*** | *** *** | ***After 2010*** | *** *** | ***Total*** | *** *** |
|--------------------------------------------|--------------|------------|--------------|-----------------------------|--------------|-----------------------------|--------------|-----------------------|--------------|-------------|--------------|
| **Long Term Debt**                         |         |       |         |                        |         |                        |         |                  |         |        |         |
| Consolidated  (1)                          |         | $          | 238,789      |                        | $            | 3,973,999                   |         | $                     | 5,313,941    |        | $            | 4,613,050 |   | $ | 14,139,779 |   |
| **Pro rata share of Long Term  Debt:**     |         |       |         |                        |         |                        |         |                  |         |        |         |
| Consolidated  (2)                          |         | $          | 237,378      |                        | $            | 3,931,074                   |         | $                     | 5,272,137    |        | $            | 4,506,744 |   | $ | 13,947,333 |   |
| Joint  Ventures (2)                        |         | 91,437     |         | 673,437                     |         | 991,091                     |         | 1,147,413             |         | 2,903,378   |         |
| **Total Pro Rata Share of Long Term Debt** |         | $          | 328,815      |                        | $            | 4,604,511                   |         | $                     | 6,263,228    |        | $            | 5,654,157 |   | $ | 16,850,711 |   |

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(1)                    Representsprincipal maturities only and therefore, excludes net premiums and discountsand fair value swaps of $107,441.

(2)                    Represents ourpro rata share of principal maturities and excludes net premiums and discounts.

We generally expect to meet our 2005 debt maturitiesthrough refinancings, issuances of new debt securities or borrowings on theCredit Facility. We also expect to have the ability and financial resources tomeet all future long-term obligations. Specific financing decisions willbe made based upon market rates, property values, and our desired capitalstructure at the maturity date of each instrument.

Ouroff-balance sheet arrangements consist primarily of our investments in realestate joint ventures which are common in the real estate industry and aredescribed in Note 5 of the notes to the accompanying financial statements.Joint venture debt is the liability of the joint venture, is typically securedby the joint venture Property, and is non-recourse to us. As ofJune 30, 2005, we have guaranteed or have provided letters of credit tosupport our share of $121.6 million of our total $2.9 billion shareof joint venture mortgage and other indebtedness presented in the table above.

**Acquisitions and Dispositions**

Buy/sell provisions are common in real estatepartnership agreements. Most of our partners are institutional investors whohave a history of direct investment in regional mall properties. Our partnersin our joint ventures may initiate these provisions at any time and if wedetermine it is in our stockholders’ best interests for us to purchase thejoint venture interest, we believe we have adequate liquidity to execute thepurchases of the interests without hindering our cash flows or liquidity.Should we decide to sell any of our joint venture interests, we would expect touse the net proceeds from any such sale to reduce outstanding indebtedness.

 

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***Acquisitions.******  ***Althoughthe acquisition of high quality individual properties or portfolios ofproperties is an integral component of our growth strategies, we did notacquire any properties during the first six months of 2005.

***Dispositions.  ***We continue to pursue the sale of Properties andother assets that no longer meet our strategic criteria. During the first sixmonths of 2005 we disposed of Metrocenter, a regional mall in Phoenix, Arizona,Lakeland Factory Outlet in Lakeland, Tennessee, and our O’Hare InternationalCenter and Riverway office buildings, in Rosemont, Illinois. We received netproceeds of $320.0 million from the disposition of these properties and otherassets and recorded gains on their disposal totaling $132.4 million. Proceedsfrom the disposition of Metrocenter and Lakeland Factory Outlet were used forgeneral working capital purposes, while proceeds from the sale of Riverway andO’Hare International Center will be reinvested in tax-free “like-kind” exchangeinvestments pursuant to Section 1031 of the Internal Revenue Code. We donot believe the sale of these assets will have a material impact on our futureresults of operations or cash flows and their removal from service and salewill not materially affect our ongoing operations. If we sell any Propertiesthat are classified as held for use, their sale prices may differ from theircarrying value.

**Development Activity**

***New Developments.  ***The following describes our new development projects, the estimated totalcost, and our share of the estimated total cost and our share of theconstruction in progress balance as of June 30, 2005 (dollars inmillions):
| ***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**  |         |               |         |           |         |                        |         |                                  |         |                                                     |         |                                                         |         |                               |         |   |   |   |   |
| Wolf Ranch               |         | Georgetown, TX     |         | 670,000        |         |                        | $            | 62                                    |         |                                                     |         | $                                                            | 62           |                               |         |   | $ | 62 |   |   | 3rd Quarter 2005 |   |
| Firewheel Center         |         | Garland, TX        |         | 785,000        |         |                        | 98           |                                  |         |                                                     | 98           |                                                         |         |                               | 72           |   |   | 4th Quarter 2005 |   |
| Rockaway Plaza           |         | Rockaway, NJ       |         | 370,000        |         |                        | 8            |                                  |         |                                                     | 8            |                                                         |         |                               | 11           |   |   | 1st Quarter 2006 |   |
| Coconut Point            |         | Bonita Springs, FL |         | 1,200,000      |         |                        | 209          |                                  |         |                                                     | 105          |                                                         |         |                               | 36           |   |   | 1st Quarter 2006 (b) |   |
| The Domain (c)           |         | Austin, TX         |         | 775,000        |         |                        | 195          |                                  |         |                                                     | 195          |                                                         |         |                               | 55           |   |   | 1st Quarter 2007 |   |
| The Village at SouthPark |         | Charlotte,  NC     |         | 47,000         |         |                        | 27           |                                  |         |                                                     | 20           |                                                         |         |                               | —       |   |   | 2nd  Quarter 2007 |   |
|                          |              |                    |              |                |              |                             |              |                                       |              |                                                          |              |                                                              |              |                                    |              |  |  |  |  |  |  |  |  |  |

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

(b)                    The estimated opening date represents Phase I only.Phase II estimated opening date is 3rd quarter 2006.

(c)                     Propertybeing developed using proceeds from the sale of Riverway and O’HareInternational Center through tax-free “like-kind” exchanges pursuant to Section 1031of the Internal Revenue Code.

We expect to fund these capitalprojects with either available cash flow from operations, borrowings from ourCredit Facility, or project specific construction loans. We expect our share ofthe total 2005 new development costs during the year to be approximately$250 million.

***Strategic Expansions and Renovations.  ***The following describes our significant renovationand/or expansion projects currently under construction, the estimated totalcost, our share of the estimated total cost and our share of the constructionin progress balance as of June 30, 2005 (dollars in millions):
| ***Property***         | *** *** | *** *** | *** *** | ***Location*** | *** *** | ***Incremental  Gross  Leasable Area*** | *** *** | ***Estimated  Total  Cost (a)*** | *** *** | ***Our Share of  Estimated  Total Cost*** | *** *** | ***Our Share of  Construction  in Progress*** | *** *** | ***Estimated  Opening Date*** | *** *** |
|------------------------|--------------|--------------|--------------|----------------|--------------|----------------------------------------------|--------------|---------------------------------------|--------------|----------------------------------------------------------|--------------|--------------------------------------------------------------|--------------|------------------------------------|--------------|
| **Under Construction** |         |         |         |           |         |                                         |         |                                  |         |                                                     |         |                                                         |         |                               |         |   |   |   |   |   |   |
| Aurora Mall            |         | Aurora,  CO  |         |           | 51,000       |                                         |         |                                  | $            | 45                                                       |         |                                                         |         | $                                  | 45           |   |   |   | $ | 29 |   |   | 3rd  Quarter 2006 |   |
|                        |              |              |              |                |              |                                              |              |                                       |              |                                                          |              |                                                              |              |                                    |              |  |  |  |  |  |  |  |  |  |  |  |

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

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We expect to fund this capitalproject with either available cash flow from operations and borrowings from theCredit Facility. We have other renovation and/or expansion projects currentlyunder construction or in preconstruction development and expect to invest atotal of approximately $220 million (our share) on expansion and renovationactivities in 2005.

***International.  ***In 2003 we significantly increased our presence inEurope through our joint venture with the Rinascente Group, GallerieCommerciali Italia (“GCI”). Part of our international expansion strategyis to reinvest net cash flow to fund other future international developments.We believe that reinvesting the cash flows derived overseas in foreigndenominated development and redevelopment projects mitigates some of the riskto our initial investment and to changes in foreign currencies. In addition, todate we have funded the majority of our European investments withEuro-denominated borrowings that act as a natural hedge against local currencyfluctuations. This has also been the case with our Premium Outlet jointventures in Japan and Mexico where we use Yen and Peso denominated financing.

Currently, our net income exposureto changes in the volatility of the Euro, Yen, and Peso is not material. Inaddition, since cash flow from operations is currently being reinvested inother development projects, we do not expect to repatriate foreign denominatedearnings for the next few years.

The agreements for our 34.7%interest in ERE are structured to either require or permit us to acquire up toan additional 26.1% ownership in ERE at amounts which may vary from time-to-time.

In addition, the shareholderagreements for ERE, contain customary buy/sell provisions, as well as amarketing right which either we or the 39.5% shareholder may exercise. The39.5% shareholder has initiated this marketing right and we have elected to purchasetheir interest. We have also entered into a definitive agreement with a thirdparty institutional investor which calls for us to sell the shares acquiredfrom the 39.5% shareholder to the third party investor for the same price, andotherwise upon substantially the same terms and conditions. Because we areobligated to immediately sell the shares acquired from the 39.5% shareholder tothe institutional third party for the same price and upon substantially thesame terms and conditions, we will recognize no gain or loss in thistransaction and will not at any time control ERE. Closing is expected to occurin the third quarter of 2005. To the extent we acquire any portion of the 26.1%interest, we will first acquire the amount necessary to equalize our ownershipin ERE with the third party institutional investor, and one-half of any otherportion thereafter acquired will be sold to the third party investor for afixed price so that we and the third party investor will maintain equalownership interests in ERE.

Thecarrying amount of our total combined investment in ERE and GCI as of June 30,2005, net of the related currency translation adjustment, was$287.4 million, including subordinated debt in ERE. Our investments in EREand GCI are accounted for using the equity method of accounting. Currently 3European developments are under construction, which will add approximately3.3 million square feet of GLA for a total net cost of approximately €454 million, ofwhich our share is approximately € 93 million.

**Distributions**

The Board of Directors of SimonProperty, acting as our general partner, declared and we paid a distribution of$0.70 per unit in the second quarter of 2005. We are required to makedistributions to Simon Property to maintain Simon Property’s status as a REIT.Our distributions typically exceed our net income generated in any given yearprimarily because of depreciation, which is a “non-cash” expense. Our future distributionswill be determined by Simon Property’s Board of Directors based on actualresults of operations, cash available for distributions, and what may berequired to maintain Simon Property’s status as a REIT.

On January 1, 2005, SimonProperty assigned the economic rights of Ocean County Mall, the only Propertyheld directly by Simon Property, to the Operating Partnership in exchange for1,602,821 units and the settlement of an $88.8 million note receivable. Theproperty is now consolidated with the Operating Partnership. The assignment wasa final step to align the ownership interests in the properties acquired as aresult of the merger with Corporate Properties Inc. in 1998 and the acquisitionof the Northshore Mall in 1999.

During the first quarter of 2005,Simon Property repurchased 2,000,000 shares of common stock in the open marketunder a Board approved $250 million share repurchase program at an averageprice of $61.88. In total, Simon Property repurchased 2,317,300 shares as partof this program and we purchased the same number of our units from SimonProperty. This share repurchase program expired on May 6, 2005.

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On May 11,2005, the Board of Directors of Simon Property authorized a common stockrepurchase program under which Simon Property may purchase up to$250 million of its common stock over the next twelve months as marketconditions warrant. Simon Property may repurchase the shares in the open marketor in privately negotiated transactions. In connection with these repurchasesof common stock, we will repurchase the same number of units from SimonProperty. As of June 30, 2005, no shares had been repurchased under thisprogram.

**Market Risk**

Our exposure to market risk due tochanges in interest rates primarily relates to our variable rate debt obligations.We manage our exposure to interest rate risk by a combination of interest rateprotection agreements to effectively fix or cap a portion of our variable ratedebt, or in the case of a fair value hedge, effectively convert fixed rate debtto variable rate debt. In addition, we manage this exposure by refinancingfixed rate debt at times when rates and terms are appropriate.

We are also exposed to foreign currency risk on thefinancing of foreign operations. We seek to manage this foreign currency riskby using foreign-denominated debt to finance a significant portion of theseforeign operations. We also reinvest net cash flow from our internationaloperations in other international developments.

We do not enter into eitherinterest rate protection or foreign currency rate protection agreements forspeculative purposes.

Ourfuture earnings, cash flows and fair values relating to financial instrumentsare dependent upon prevalent market rates of interest, primarily LIBOR. We seekto mitigate the risk of changing interest rates by limiting the variable rateportion of our debt portfolio to a specified limit, currently no more than 25%of our overall borrowings, and we believe that we have limited the exposure toany potential significant adverse effect due to the variability in underlyinginterest rates.

**Retail Climate and Tenant Bankruptcies**

Bankruptcy filings by retailers arenormal in the course of our operations. We are continually releasing vacantspaces resulting from tenant terminations. Pressures that affect consumerconfidence, job growth, energy costs and income gains can affect retail salesgrowth, and a continuing soft economic cycle may impact our ability to retenantproperty vacancies resulting from bankruptcies. We lost approximately 65,000square feet of mall shop tenants to bankruptcies in the second quarter of 2005.

Consolidation of major departmentstores in the retail real estate industry can occur and is typically cyclicalin nature. Recently, the May and Federated department store companiesannounced their merger, which is expected to close in the fourth quarter of2005. Our strategy in these instances is to aggressively position, acquire, orrelease space vacated by store closings as a result of such consolidations. Generally,our exposure to department store consolidations and related store closings ordivestitures is more pronounced at our larger centers. As a result, we havehistorically been successful at finding quality replacement tenants in suchinstances.

Thegeographical diversity of our Portfolio mitigates some of the risk of aneconomic downturn. In addition, the diversity of our tenant mix also isimportant because no single retailer represents either more than 1.7% of totalGLA or more than 4.1% of our annualized base minimum rent. Bankruptcies andstore closings may, in some circumstances, create opportunities for us torelease spaces at higher rents to tenants with enhanced sales performance. Wehave demonstrated an ability to successfully retenant anchor and inline storelocations during soft economic cycles. While these factors reflect some of theinherent strengths of our portfolio in a difficult retail environment, wecannot assure you that we will successfully execute our releasing strategy.

**Insurance**

We maintain commercial generalliability, “all risk” property coverage including fire, flood, extendedcoverage and rental loss insurance on our Properties. RosewoodIndemnity, Ltd, a wholly-owned subsidiary of the Management Companyindemnifies our general liability carrier for a specific layer of losses. Thecarrier has, in turn, agreed to provide evidence of coverage for this layer oflosses under the terms and conditions of the carrier’s policy. A similar policywritten through Rosewood Indemnity, Ltd. also provides a portion of ourinitial coverage for property insurance and certain windstorm risks at theProperties located in Florida.

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Theevents of September 11, 2001 affected our insurance programs. Althoughinsurance rates remain high, since the President signed into law the TerrorismRisk Insurance Act (TRIA) in November of 2002, the price of terrorisminsurance has steadily decreased, while the available capacity has beensubstantially increased. We have purchased terrorism insurance covering allProperties. The program provides limits up to one billion per occurrence forCertified (Foreign) acts of terrorism and $500 million per occurrence forNon-Certified (Domestic) acts of terrorism. The coverage is written on an “allrisk” policy form that eliminates the policy aggregates associated with ourprevious terrorism policies. This policy is in place throughout the remainderof 2005. However, if TRIA is not extended in terms and conditions substantiallysimilar to those currently in place, our available coverage options and cost ofinsurance could be impacted.

**Inflation**

Inflation has remained relativelylow in recent years and has had minimal impact on the operating performance ofthe Properties. Nonetheless, substantially all of the tenants’ leases containprovisions designed to lessen our exposure to the impact of inflation. Theseprovisions include clauses enabling us to receive percentage rentals based ontenants’ gross sales, which generally increase as prices rise, and/orescalation clauses, which generally increase rental rates during the terms ofthe leases. In addition, many of the leases are for terms of less than tenyears, which may enable us to replace existing leases with new leases at higherbase and/or percentage rentals if rents of the existing leases are below thethen-existing market rate. A substantial portion of our leases, other thanthose for anchors, require the tenant to pay their proportionate share ofoperating expenses, including common area maintenance, real estate taxes andinsurance, thereby reducing our exposure to increases in costs and operatingexpenses resulting from inflation. For most of our remaining leases, we receivefixed reimbursement from the tenant which is subject to annual adjustments.

However,inflation may have a negative impact on some of our other operating items.Interest and general and administrative expenses may be adversely affected byinflation as these specified costs could increase at a rate higher than rents.Also, for tenant leases with stated rent increases, inflation may have anegative effect as the stated rent increases in these leases could be lowerthan the increase in inflation at any given time.

**Seasonality**

The shopping center industry isseasonal in nature, particularly in the fourth quarter during the holidayseason, when tenant occupancy and retail sales are typically at their highestlevels. In addition, shopping malls achieve most of their temporary tenantrents during the holiday season. As a result, our earnings are generallyhighest in the fourth quarter of each year.

Inaddition, given the number of Properties in warm summer climates our utilityexpenses are typically higher in the months of June through September dueto higher electricity costs to supply air conditioning to our Properties. As aresult some seasonality results in increased property operating expenses duringthese months; however, the majority of these costs are recoverable fromtenants.

**Environmental Matters**

*GeneralCompliance.  *Webelieve that the Portfolio is in compliance, in all material respects, with allFederal, state and local environmental laws, ordinances and regulationsregarding hazardous or toxic substances. Nearly all of the Portfolio have beensubjected to Phase I or similar environmental audits (which generally involveonly a review of records and visual inspection of the property without soilsampling or ground water analysis) by independent environmental consultants. PhaseI environmental audits are intended to discover information regarding, and toevaluate the environmental condition of, the surveyed properties andsurrounding properties. These environmental audits have not revealed, nor arewe aware of, any environmental liability that we believe will have a materialadverse effect on our results of operations. We cannot assure you that:

·             existing environmental studies with respect to thePortfolio reveal all potential environmental liabilities;

·             any previous owner, occupant or tenant of aProperty did not create any material environmental condition not known to us;

·             the current environmental condition of thePortfolio will not be affected by tenants and occupants, by the condition ofnearby properties, or by other unrelated third parties; or

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·             future uses or conditions (including, withoutlimitation, changes in applicable environmental laws and regulations or theinterpretation thereof) will not result in environmental liabilities.

*Asbestos-Containing Materials.  *Asbestos-containing materials are present in mostof the Properties, primarily in the form of vinyl asbestos tile, mastics androofing materials, which we believe are generally in good condition. Fireproofingand insulation containing asbestos is also present in certain Properties inlimited concentrations or in limited areas. The presence of suchasbestos-containing materials does not violate currently applicable laws. Generally,we remove asbestos-containing materials as required in the ordinary course ofany renovation, reconstruction, or expansion, and in connection with theretenanting of space.

*Mold Management.  *From time to time, during normal maintenanceactivities, increased levels of moisture may be found in building materials andmechanical systems. When this occurs, the source of the moisture (typically,due to a plumbing system malfunction or weather related damage) is correctedand the impact to building operations is assessed. When active mold growth isreasonably suspected or identified, the services of environmental professionalsare utilized to evaluate and address the situation appropriately.

*Underground Storage Tanks*.   Several of the Properties contain, or atone time contained, underground storage tanks used to store waste oils or otherpetroleum products primarily related to auto service center establishments oremergency electrical generation equipment. We believe that regulated tanks havebeen removed, upgraded or abandoned in accordance with applicable environmentallaws. Site assessments have revealed certain soil and groundwater contaminationassociated with such tanks at some of these Properties. Subsurface investigations(Phase II assessments) and remediation activities are either completed,ongoing, or scheduled to be conducted at such Properties. The costs ofremediation with respect to such matters has not been material and we do notexpect these costs will have a material adverse effect on our results ofoperations.

*Properties tobe Developed or Acquired.  *Land held for mall development or that may be acquired for developmentmay contain residues or debris associated with the use of the land by priorowners or third parties. In certain instances, such residues or debris could beor could contain hazardous wastes or hazardous substances. Prior to exercisingany option to acquire properties, we typically conduct environmental duediligence consistent with acceptable industry standards.

**Item 3.   Qualitative and Quantitative DisclosureAbout Market Risk**

***Sensitivity Analysis.  ***A comprehensive qualitative and quantitativeanalysis regarding market risk is disclosed in our Management’s Discussion andAnalysis of Financial Condition and Results of Operations included in ourAnnual Report on Form 10-K for the year ended December 31,2004. There have been no material changes in the assumptions used or resultsobtained regarding market risk since December 31, 2004.

**Item 4.   Controls andProcedures**

***Evaluation of DisclosureControls and Procedures.  ***We carried out an evaluation under the supervision and with participationof management, including the Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the design and operation of our “disclosurecontrols and procedures” (as defined in Rule 13a-15(e) underthe Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of theperiod covered by this Quarterly Report on Form 10-Q. Based uponthat evaluation, the Chief Executive Officer and Chief Financial Officer haveconcluded that our disclosure controls and procedures were effective as of June 30,2005.

***Changes in Internal Control Over FinancialReporting.  ***There have not been any changes in ourinternal control over financial reporting (as defined in Rule 13a-15(f))that occurred during the quarter ended June 30, 2005 that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

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**Part II — Other Information**

**Item 1.   LegalProceedings**

On November 15, 2004, the Attorneys General ofMassachusetts, New Hampshire and Connecticut filed complaints in theirrespective state Superior Courts against us and our affiliate, SPGGC, Inc.,alleging that the sale of co-branded, bank-issued gift cards sold in certain ofits Portfolio Properties violated gift certificate statutes and consumerprotection laws in those states. Each of these suits seeks injunctive relief,unspecified civil penalties and disgorgement of any fees determined to beimproperly charged to consumers.

In addition, we are a defendant in three otherproceedings relating to the gift card program: Lisa Corbiles and DanaWalicky vs. Simon Property Group, Inc. d/b/a Simon Malls, Superior Courtof New Jersey, County of Essex, Docket No: ESX-L-224-04, filed January 6,2004; Betty Benson and Andrea Nay-Richardson vs. Simon Property Group, Inc.,and Simon Property Group, L.P., Superior Court of Cobb County, State ofGeorgia, Case No.: 04-1-9617-42, filed December 9,2004; Christopher Lonner vs. Simon Property Group, Inc., Supreme Court ofthe State of NY, County of Westchester, Case No.: 04-2246, filed February 18,2004, Erin Reilly, individually and on behalf of all others similarly situatedvs. SPG, Inc., SPG, L.P. and SPGGC, Inc., Lee County Circuit Court,Florida, filed February 8, 2005 and Aliza Goldman, individually andon behalf of all others similarly situated vs. Simon Property Group, Inc.,Supreme Court of the State of New York, County of Nassau, filed February 7,2005. Each of these proceedings has been brought by a private plaintiff asa purported class action and alleges violation of state consumer protectionlaws, state abandoned property and contract laws or state statutes regardinggift certificates or gift cards and seeks a variety of remedies includingunspecified damages and injunctive relief.

We believe that we have viable defenses under bothstate and federal laws to the gift card actions. Although it is not possible toprovide any assurance of the ultimate outcome of any of these pending actions,management does not believe that an adverse outcome would have a materialadverse effect on our financial position, results of operations or cash flow.

*Triple Five of Minnesota, Inc., a Minnesotacorporation, v. Melvin Simon, et al.* On or about November 9,1999, Triple Five of Minnesota, Inc. commenced an action in the DistrictCourt for the state of Minnesota, Fourth Judicial District, against, amongothers, Mall of America, certain members of the Simon family and entitiesallegedly controlled by such individuals, and us. The action was later removedto federal court. On September 10, 2003, the court issued its decision ina Memorandum and Order (the “Order”). In the Order, the court found thatcertain entities and individuals breached their fiduciary duties to TripleFive. The court did not award Triple Five damages but instead awarded TripleFive equitable and other relief and imposed a constructive trust on thatportion of the Mall of America owned by us. Specifically, as it relates to us,the court ordered that Triple Five was entitled to purchase from us theone-half partnership interest that we purchased in October 1999, providedTriple Five remits to us the sum of $81.38 million within nine months ofthe Order. On August 6, 2004, Triple Five closed on its purchase of ourone-half partnership interest. The court further held that we must disgorge all“net profits” that we received as a result of our ownership interest in theMall from October 1999 to the present.

As a result of the Order, we initially recorded a$6.0 million charge for our share of the estimated loss in 2003. In thefirst quarter of 2004, as a result of the May 3, 2004 memorandum issued bythe court appointed mediator, which has now been affirmed by the court, werecorded an additional $13.5 million charge for our share of the loss thatis included in “(Loss) gain on sales of assets and other, net” in theaccompanying consolidated financial statements of operations and comprehensiveincome. We ceased recording any contribution to net income from the results ofoperations of Mall of America as of September 1, 2003.

We appealed the Order and the Ancillary Relief Order tothe United States Court of Appeals for the Eighth Circuit. On April 21,2005, the Court of Appeals issued its opinion, affirming in part and reversingin part the Order of the trial court. The Appellate Court concluded that as aresult of its decision, the Ancillary Relief Order is moot and it dismissedthat part of our appeal. The Appellate Court opinion changes the equitableremedy contained in the Order and requires that the one-half partnershipinterest Triple Five acquired from us pursuant to the Order must instead beoffered, for the same price, to Mall of America Associates, a generalpartnership in which Triple Five and an entity affiliated with the Simon familyare  50¤50partners. If Mall of America Associates refuses to purchase the interest, thenTriple Five must transfer back to us one-half of the interest it acquired fromus in August, 2004. The case has been remanded to the trial court forproceedings consistent with the Appellate Court’s decision. It is not possibleto provide any assurance of the ultimate outcome of this litigation.

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We are also involved invarious 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.

**Item 2.   UnregisteredSales of Equity Securities and Use of Proceeds**

During the second quarterof 2005, we issued 8,400 units to Simon Property related to shares ofrestricted stock awarded to directors under the Simon Property Group 1998 StockIncentive Plan. All of the issuances of units during the quarter were exemptfrom the registration under the Securities Act of 1933, as amended, in relianceupon Section 4(2) as private offerings.

**Item 6.**   Exhibits
| Exhibit Number | *** *** | ***Exhibit Descriptions***                                                                                                                                                                                                                                                                                                                      |
|----------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10             |         | Fifteenth Supplemental to the Indenture dated as of  November 26, 1996 between Simon Property Group, L.P. and JPMorgan Chase  Bank, N.A. (as successor to the Chase Manhattan Bank), as trustee,  (incorporated by reference to Exhibit 4.1 to the Current Report on  Form 8-K filed June 9, 2005 by Simon Property Group, L.P.) |
| 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**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|        | **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: August 12,  2005                           |

 

 

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