**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

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

For the quarterly periodended June 30, 2007

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

(Exact name of registrantas specified in its charter)

Delaware

(State of incorporation ororganization)

33-11491

(Commission File No.)

34-1755769

(I.R.S. EmployerIdentification No.)

225 West Washington Street Indianapolis, Indiana 46204

(Address of principalexecutive offices)

(317) 636-1600

(Registrant’s telephonenumber, including area code)

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

Indicate by check markwhether the Registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer:

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

 

Indicate by check markwhether Registrant is a shell company (as defined by Rule 12b-2 ofthe Exchange Act).   Yes o   No x

Registrant has no common stock outstanding.

 

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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, 2007 and December 31, 2006                                                       |     | 3 |   |
|                                               |       |       | Consolidated Statements of  Operations and Comprehensive Income for the three months and six months ended  June 30, 2007 and 2006 |     | 4 |   |
|                                               |       |       | Consolidated Statements of  Cash Flows for the six months ended June 30, 2007 and 2006                                            |     | 5 |   |
|                                               |       |       | Condensed Notes to Consolidated  Financial Statements                                                                                  |     | 6 |   |
|                                               | Item 2.    |       | Management’s Discussion and  Analysis of Financial Condition and Results of Operations                                            |     | 14 |   |
|                                               | Item 3.    |       | Qualitative and Quantitative  Disclosure About Market Risk                                                                             |     | 29 |   |
|                                               | Item 4.    |       | Controls and Procedures                                                                                                                |     | 29 |   |
| **Part II — Other Information**     |       |       |                                                                                                                                   |
|                                               | Item 1.    |       | Legal Proceedings                                                                                                                      |     | 29 |   |
|                                               | Item 1A.   |       | Risk Factors                                                                                                                           |     | 29 |   |
|                                               | Item 5.    |       | Other Information                                                                                                                      |     | 29 |   |
|                                               | Item 6.    |       | Exhibits                                                                                                                               |     | 30 |   |
| **Signatures**                                     |       | 31         |                                                                                                                                   |

 

2

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

| ** **                                                                                                                               | ** ** | **June 30,** | ** **     | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|----------------|-----------------------|------------|
| ** **                                                                                                                               | ** ** | **2007**          | ** **     | **2006**              | ** ** |
| ** **                                                                                                                               | ** ** | ***Unaudited***   | ** **     | ** **            | ** ** |
| **ASSETS:**                                                                                                                              |       |              |           |                  |       |
| Investment  properties, at cost                                                                                                          | ** ** | **$**             | **23,631,847** |                  | $          | 22,863,963 |   |
| Less — accumulated  depreciation                                                                                               | ** ** | **4,971,424**     |           | 4,606,130             |       |
|                                                                                                                                     | ** ** | **18,660,423**    |           | 18,257,833            |       |
| Cash and cash  equivalents                                                                                                               | ** ** | **381,175**       |           | 929,360               |       |
| Tenant  receivables and accrued revenue, net                                                                                             | ** ** | **324,776**       |           | 380,128               |       |
| Investment in  unconsolidated entities, at equity                                                                                        | ** ** | **1,852,819**     |           | 1,526,235             |       |
| Deferred costs  and other assets                                                                                                         | ** ** | **1,132,490**     |           | 990,899               |       |
| Notes receivable  from related parties                                                                                                   | ** ** | **532,580**       |           | —                |       |
| **Total  assets**                                                                                                                        | ** ** | **$**             | **22,884,263** |                  | $          | 22,084,455 |   |
| **LIABILITIES:**                                                                                                                         |       |              |           |                  |       |
| Mortgages and  other indebtedness                                                                                                        | ** ** | **$**             | **16,438,845** |                  | $          | 15,394,489 |   |
| Accounts payable,  accrued expenses, intangibles, and deferred revenue                                                                   | ** ** | **1,113,213**     |           | 1,109,190             |       |
| Cash  distributions and losses in partnerships and joint ventures, at equity                                                             | ** ** | **232,802**       |           | 227,588               |       |
| Other  liabilities, minority interest, and accrued distributions                                                                         | ** ** | **188,327**       |           | 178,250               |       |
| **Total  liabilities**                                                                                                                   | ** ** | **17,973,187**    |           | 16,909,517            |       |
| COMMITMENTS AND  CONTINGENCIES                                                                                                           |       |              |           |                  |       |
| 7.75%/8.00% Cumulative  Redeemable Preferred Units, 850,698 units issued and outstanding,  respectively, at liquidation value            | ** ** | **85,070**        |           | 85,070                |       |
| **PARTNERS’  EQUITY:**                                                                                                              |       |              |           |                  |       |
| Preferred units,  22,698,450 and 23,456,495 units outstanding, respectively. Liquidation values  $1,116,134 and $1,151,325, respectively | ** ** | **1,122,426**     |           | 1,157,010             |       |
| General Partner,  223,398,016 and 221,431,071 units outstanding, respectively                                                            | ** ** | **2,929,617**     |           | 3,095,022             |       |
| Limited Partners,  57,888,247 and 59,113,438 units outstanding, respectively                                                             | ** ** | **773,963**       |           | 837,836               |       |
| **Total  partners’ equity**                                                                                                         | ** ** | **4,826,006**     |           | 5,089,868             |       |
| **Total liabilities and partners’  equity**                                                                                         | ** ** | **$**             | **22,884,263** |                  | $          | 22,084,455 |   |

 

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

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**Simon Property Group, 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,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------|-------------|-----------------------------------------------------------------------|------------|
| ** **                                                                                                                   | ** ** | **2007**                                                                | ** **  | **2006**                                                              | ** ** | **2007** | ** ** | **2006** | ** ** |
| **REVENUE:**                                                                                                                 |       |                                                                    |        |                                                                  |       |   |   |   |   |
| Minimum  rent                                                                                                                | ** ** | **$**                                                                   | **522,086** |                                                                  | $          | 485,826 | ** ** | **$** | **1,032,951** |   | $ | 973,914 |   |
| Overage  rent                                                                                                                | ** ** | **18,634**                                                              |        | 15,297                                                                | ** ** | **36,526** |   | 31,356 |   |
| Tenant  reimbursements                                                                                                       | ** ** | **237,984**                                                             |        | 226,777                                                               | ** ** | **468,597** |   | 447,812 |   |
| Management  fees and other revenues                                                                                          | ** ** | **17,542**                                                              |        | 19,399                                                                | ** ** | **38,417** |   | 39,568 |   |
| Other  income                                                                                                                | ** ** | **59,686**                                                              |        | 51,439                                                                | ** ** | **131,582** |   | 93,737 |   |
| **Total revenue**                                                                                                            | ** ** | **855,932**                                                             |        | 798,738                                                               | ** ** | **1,708,073** |   | 1,586,387 |   |
| **EXPENSES:**                                                                                                                |       |                                                                    |        |                                                                  |       |   |   |   |   |
| Property  operating                                                                                                          | ** ** | **112,122**                                                             |        | 107,257                                                               | ** ** | **221,349** |   | 213,204 |   |
| Depreciation  and amortization                                                                                               | ** ** | **230,611**                                                             |        | 211,363                                                               | ** ** | **445,882** |   | 420,810 |   |
| Real  estate taxes                                                                                                           | ** ** | **79,063**                                                              |        | 70,404                                                                | ** ** | **158,245** |   | 152,209 |   |
| Repairs  and maintenance                                                                                                     | ** ** | **28,744**                                                              |        | 24,839                                                                | ** ** | **57,751** |   | 50,794 |   |
| Advertising  and promotion                                                                                                   | ** ** | **20,410**                                                              |        | 20,541                                                                | ** ** | **39,294** |   | 37,943 |   |
| Provision  for credit losses                                                                                                 | ** ** | **1,424**                                                               |        | 4,466                                                                 | ** ** | **1,966** |   | 4,460 |   |
| Home  and regional office costs                                                                                              | ** ** | **29,270**                                                              |        | 32,652                                                                | ** ** | **62,969** |   | 62,988 |   |
| General  and administrative                                                                                                  | ** ** | **6,119**                                                               |        | 5,005                                                                 | ** ** | **10,018** |   | 9,498 |   |
| Other                                                                                                                        | ** ** | **14,618**                                                              |        | 12,162                                                                | ** ** | **28,082** |   | 25,228 |   |
| **Total operating expenses**                                                                                                 | ** ** | **522,381**                                                             |        | 488,689                                                               | ** ** | **1,025,556** |   | 977,134 |   |
| **OPERATING  INCOME**                                                                                                        | ** ** | **333,551**                                                             |        | 310,049                                                               | ** ** | **682,517** |   | 609,253 |   |
| Interest expense                                                                                                             | ** ** | **(243,654**                                                            | **)**       | (200,743                                                              | )          | **(466,132** | **)** | (404,815 | ) |
| Minority interest in  income of consolidated entities                                                                        | ** ** | **(3,136**                                                              | **)**       | (3,433                                                                | )          | **(6,046** | **)** | (4,358 | ) |
| Income tax benefit  (expense) of taxable REIT subsidiaries                                                                   | ** ** | **528**                                                                 |        | (3,220                                                                | )          | **(757** | **)** | (4,859 | ) |
| Income from  unconsolidated entities                                                                                         | ** ** | **7,459**                                                               |        | 19,882                                                                | ** ** | **29,232** |   | 49,805 |   |
| Gain on sales of assets  and interests in unconsolidated entities, net                                                       | ** ** | **500**                                                                 |        | 7,599                                                                 | ** ** | **500** |   | 41,949 |   |
| **Income from continuing operations**                                                                                        | ** ** | **95,248**                                                              |        | 130,134                                                               | ** ** | **239,314** |   | 286,975 |   |
| Results of  operations from discontinued operations                                                                          | ** ** | **20**                                                                  |        | (135                                                                  | )          | **(183** | **)** | 56 |   |
| Gain on disposal or sale  of discontinued operations, net                                                                    | ** ** | **—**                                                              |        | 112                                                                   | ** ** | **—** |   | 84 |   |
| **NET  INCOME**                                                                                                              | ** ** | **95,268**                                                              |        | 130,111                                                               | ** ** | **239,131** |   | 287,115 |   |
| Preferred unit  requirement                                                                                                  | ** ** | **(19,900**                                                             | **)**       | (25,323                                                               | )          | **(39,545** | **)** | (50,722 | ) |
| **NET  INCOME AVAILABLE TO UNITHOLDERS**                                                                                     | ** ** | **$**                                                                   | **75,368**  |                                                                  | $          | 104,788 | ** ** | **$** | **199,586** |   | $ | 236,393 |   |
| **NET  INCOME AVAILABLE TO UNITHOLDERS ATTRIBUTABLE TO:**                                                                    | ** ** | ** **                                                              | ** **  | ** **                                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| General  Partner                                                                                                             | ** ** | **$**                                                                   | **59,917**  |                                                                  | $          | 82,868 | ** ** | **$** | **158,298** |   | $ | 186,885 |   |
| Limited  Partners                                                                                                            | ** ** | **15,451**                                                              |        | 21,920                                                                | ** ** | **41,288** |   | 49,508 |   |
| **Net income**                                                                                                               | ** ** | **$**                                                                   | **75,368**  |                                                                  | $          | 104,788 | ** ** | **$** | **199,586** |   | $ | 236,393 |   |
| **BASIC  EARNINGS PER UNIT**                                                                                                 | ** ** | ** **                                                              | ** **  | ** **                                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income  from continuing operations                                                                                           | ** ** | **$**                                                                   | **0.27**    |                                                                  | $          | 0.37 | ** ** | **$** | **0.71** |   | $ | 0.85 |   |
| Discontinued  operations                                                                                                     | ** ** | **—**                                                              |        | —                                                                | ** ** | **—** |   | — |   |
| Net  Income                                                                                                                  | ** ** | **$**                                                                   | **0.27**    |                                                                  | $          | 0.37 | ** ** | **$** | **0.71** |   | $ | 0.85 |   |
| **DILUTED  EARNINGS PER UNIT**                                                                                               |       |                                                                    |        |                                                                  |       |   |   |   |   |
| Income  from continuing operations                                                                                           | ** ** | **$**                                                                   | **0.27**    |                                                                  | $          | 0.37 | ** ** | **$** | **0.71** |   | $ | 0.84 |   |
| Discontinued  operations                                                                                                     | ** ** | **—**                                                              |        | —                                                                | ** ** | **—** |   | — |   |
| Net  Income                                                                                                                  | ** ** | **$**                                                                   | **0.27**    |                                                                  | $          | 0.37 | ** ** | **$** | **0.71** |   | $ | 0.84 |   |
| Net income                                                                                                                   | ** ** | **$**                                                                   | **95,268**  |                                                                  | $          | 130,111 | ** ** | **$** | **239,131** |   | $ | 287,115 |   |
| Unrealized gain on  interest rate hedges                                                                                     | ** ** | **3,208**                                                               |        | 8,068                                                                 | ** ** | **2,748** |   | 11,384 |   |
| Net income on derivative  instruments reclassified from accumulated other comprehensive income (loss)  into interest expense | ** ** | **543**                                                                 |        | 913                                                                   | ** ** | **1,015** |   | 1,214 |   |
| Currency translation  adjustments                                                                                            | ** ** | **1,364**                                                               |        | 1,072                                                                 | ** ** | **1,515** |   | (1,224 | ) |
| Other income (loss)                                                                                                          | ** ** | **(4**                                                                  | **)**       | (422                                                                  | )          | **(732** | **)** | (475 | ) |
| **Comprehensive Income**                                                                                                     | ** ** | **$**                                                                   | **100,379** |                                                                  | $          | 139,742 | ** ** | **$** | **243,677** |   | $ | 298,014 |   |

 

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

4

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

| ** **                                                                                         | ** ** | **For the Six Months  Ended June 30,** | ** **  |
|----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|-------------|
| ** **                                                                                         | ** ** | **2007**                                                        | ** **  | **2006** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                          |       |                                                            |        |   |   |
| **Net income**                                                                                     | ** ** | **$**                                                           | **239,131** |   | $ | 287,115 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities — |       |                                                            |        |   |   |
| Depreciation and amortization                                                                      | ** ** | **429,522**                                                     |        | 401,193 |   |
| Gain on sales of assets and interests in  unconsolidated entities                                  | ** ** | **(500**                                                        | **)**       | (41,949 | ) |
| Loss on disposal or sale of discontinued operations,  net                                          |       | —                                                          |        | (84 | ) |
| Straight-line rent                                                                                 | ** ** | **(8,312**                                                      | **)**       | (4,963 | ) |
| Minority interest                                                                                  | ** ** | **6,046**                                                       |        | 4,358 |   |
| Minority interest distributions                                                                    | ** ** | **(61,770**                                                     | **)**       | (8,554 | ) |
| Equity in income of unconsolidated entities                                                        | ** ** | **(29,232**                                                     | **)**       | (49,805 | ) |
| Distributions of income from unconsolidated entities                                               | ** ** | **37,147**                                                      |        | 37,137 |   |
| **Changes in assets and liabilities —**                                                  |       |                                                            |        |   |   |
| Tenant receivables and accrued revenue, net                                                        | ** ** | **67,211**                                                      |        | 54,157 |   |
| Deferred costs and other assets                                                                    | ** ** | **(51,609**                                                     | **)**       | (46,699 | ) |
| Accounts payable, accrued expenses, intangibles,  deferred revenues and other liabilities          | ** ** | **(18,161**                                                     | **)**       | (47,200 | ) |
| **Net cash provided by operating activities**                                                      | ** ** | **609,473**                                                     |        | 584,706 |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                                          |       |                                                            |        |   |   |
| Acquisitions                                                                                       | ** ** | **(153,130**                                                    | **)**       | — |   |
| Notes receivable from related parties                                                              | ** ** | **(532,580**                                                    | **)**       | — |   |
| Capital expenditures, net                                                                          | ** ** | **(412,615**                                                    | **)**       | (276,412 | ) |
| Cash impact from the consolidation and  de-consolidation of properties                             | ** ** | **4,073**                                                       |        | — |   |
| Net proceeds from sale of partnership interest,  other assets and discontinued operations          |       | —                                                          |        | 62,683 |   |
| Investments in unconsolidated entities                                                             | ** ** | **(467,825**                                                    | **)**       | (112,583 | ) |
| Distributions of capital from unconsolidated  entities and other                                   | ** ** | **112,568**                                                     |        | 182,543 |   |
| **Net cash used in investing activities**                                                          | ** ** | **(1,449,509**                                                  | **)**       | (143,769 | ) |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                          |       |                                                            |        |   |   |
| Partnership contributions and issuance of units                                                    | ** ** | **2,282**                                                       |        | 16,463 |   |
| Purchase of preferred units, partnership units                                                     | ** ** | **(27,615**                                                     | **)**       | (10,842 | ) |
| Preferred Unit redemptions                                                                         | ** ** | **(250**                                                        | **)**       | (244 | ) |
| Partnership distributions                                                                          | ** ** | **(511,746**                                                    | **)**       | (475,150 | ) |
| Mortgage and other indebtedness proceeds, net of  transaction costs                                | ** ** | **2,967,406**                                                   |        | 2,252,028 |   |
| Mortgage and other indebtedness principal payments                                                 | ** ** | **(2,138,226**                                                  | **)**       | (2,229,955 | ) |
| **Net cash provided by (used in) financing  activities**                                           | ** ** | **291,851**                                                     |        | (447,700 | ) |
| **DECREASE IN CASH AND CASH EQUIVALENTS**                                                          | ** ** | **(548,185**                                                    | **)**       | (6,763 | ) |
| **CASH AND CASH EQUIVALENTS, beginning of year**                                                   | ** ** | **929,360**                                                     |        | 337,048 |   |
| **CASH AND CASH EQUIVALENTS, end of period**                                                       | ** ** | **$**                                                           | **381,175** |   | $ | 330,285 |   |

 

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

5

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

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

**1.**                 Organization

Simon Property Group, L.P., a Delaware limitedpartnership (the “Operating Partnership”), is a majority-owned subsidiaryof Simon Property Group, Inc., a Delaware corporation (“Simon Property”). SimonProperty is a self-administered and self-managed real estate investment trust (“REIT”)under the Internal Revenue Code of 1986, as amended (the “Code”). In thesecondensed notes to the unaudited consolidated financial statements, the terms “we”,“us” and “our” refer to the Operating Partnership, and its subsidiaries.

We are engaged primarilyin the ownership, development, and management of retail real estate, primarilyregional malls, Premium Outlet® centers, The Mills®, and community/lifestylecenters. As of June 30, 2007, we owned or held an interest in 323 income-producingproperties in the United States, which consisted of 189 regional malls, 71community/lifestyle centers, 17 Mills properties, 36 Premium Outlet centers and10 other shopping centers or outlet centers in 41 states and Puerto Rico(collectively, the “Properties”, and individually, a “Property”). We also owninterests in four parcels of land held in the United States for futuredevelopment (together with the Properties, the “Portfolio”). Internationally asof June 30, 2007, we have ownership interests in 53 European shoppingcenters (France, Italy and Poland); five Premium Outlet centers in Japan; onePremium Outlet center in Mexico; and one Premium Outlet center in South Korea. Also,through a joint venture arrangement we have ownership interests in fourshopping centers under construction in China.

**2.**                 Basisof Presentation

The accompanying unaudited consolidated financialstatements include the accounts of the Operating Partnership and itssubsidiaries, and all significant inter-company amounts have beeneliminated. Due to the seasonal nature of certain operational activities, theresults for the interim period ended June 30, 2007 are not necessarilyindicative of the results that may be obtained for the full fiscal year.

These consolidated financial statements have been preparedin accordance with the instructions to Form 10-Q and include all ofthe information and disclosures required by accounting principles generallyaccepted in the United States (GAAP) for interim reporting. Accordingly, theydo not include all of the disclosures required by GAAP for complete financialstatements. In the opinion of management, all adjustments necessary for fairpresentation (including normal recurring accruals) have been included. Theconsolidated financial statements in this Form 10-Q should be readin conjunction with the audited consolidated financial statements and relatednotes contained in our 2006 Annual Report on Form 10-K.

As of June 30, 2007, of our 383 properties weconsolidated 200 wholly-owned properties and 19 additional propertiesthat are less than wholly-owned, but which we control or for which we arethe primary beneficiary. We account for the remaining 164 properties using theequity method of accounting (joint venture properties). We manage theday-to-day operations of 94 of the 164 joint venture properties but havedetermined that our partner or partners have substantive participating rightswith respect to the assets and operations of these joint venture properties. Additionally,we account for our investment in SPG-FCM Ventures, LLC (“SPG-FCM”), whichacquired The Mills Corporation and its majority-owned subsidiary, The MillsLimited Partnership (collectively “Mills”), using the equity method ofaccounting. We have determined that SPG-FCM is not a variable interest entity(VIE) and that Farallon Capital Management, L.L.C. (“Farallon”), our jointventure partner, has substantive participating rights with respect to theassets and operations of SPG-FCM pursuant to the applicable partnershipagreements.

6

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We allocate our net operating results after preferreddistributions based on our partners’ respective weighted average ownership. Inaddition, Simon Property owns certain of our preferred units. Simon Property’sweighted average ownership interest in us was 79.3% and 79.1% for the sixmonths ended June 30, 2007 and 2006, respectively. As of June 30,2007 and December 31, 2006, Simon Property’s ownership interest in us was79.4% and 78.9%, respectively. We adjust the limited partners’ interest at theend of each period to reflect their respective ownership interest in theOperating Partnership.

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

**3.**                 SignificantAccounting Policies

***Cash and Cash Equivalents***

We consider all highlyliquid investments purchased with an original maturity of 90 days or lessto be cash and cash equivalents. Cash equivalents are carried at cost, whichapproximates market value. Cash equivalents generally consist of commercialpaper, bankers acceptances, Eurodollars, repurchase agreements, and moneymarkets. Cash and cash equivalents, as of June 30, 2007, includes abalance of $32.6 million related to our co-branded gift card programs whichwe do not consider available for general working capital purposes.

**4.**                 PerUnit Data

Wedetermine basic earnings per unit based on the weighted average number ofcommon units outstanding during the period. We determine diluted earnings perunit based on the weighted average number of common units outstanding combinedwith the incremental weighted average units that would have been outstandingassuming all dilutive potential common units were converted into units at theearliest date possible. The following table sets forth the computation of ourbasic and diluted earnings per unit.

| ** **                                                                | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                | ** ** | **June 30,**                                  | ** ** | **June 30,**                                | ** ** |
| ** **                                                                | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Income  from continuing operations, after preferred unit requirements** | ** ** | **$**                                              | **75,348** |                                             | $          | 104,811 | ** ** | **$** | **199,769** |   | $ | 236,253 |   |
| Discontinued  Operations                                                  | ** ** | **20**                                             |       | (23                                              | )          | **(183** | **)** | 140 |   |
| **Net  Income available to Unitholders — Basic & Diluted**  | ** ** | **$**                                              | **75,368** |                                             | $          | 104,788 | ** ** | **$** | **199,586** |   | $ | 236,393 |   |
| **Weighted Average Units Outstanding — Basic**                       | ** ** | **281,282,172**                                    |       | 279,464,253                                      | ** ** | **281,083,829** |   | 279,274,847 |   |
| Effect of stock  options of Simon Property                                | ** ** | **836,855**                                        |       | 885,218                                          | ** ** | **847,130** |   | 929,923 |   |
| **Weighted Average Units  Outstanding — Diluted**                    | ** ** | **282,119,027**                                    |       | 280,349,471                                      | ** ** | **281,930,959** |   | 280,204,770 |   |

 

For the three and sixmonths ended June 30, 2007, potentially dilutive securities include stockoptions of Simon Property and certain preferred units which are exchangeablefor common stock units. The only potentially dilutive security that had adilutive effect for the three and six months ended June 30, 2007 and 2006were stock options of Simon Property. Common units may be exchanged for sharesof Simon Property common stock, on a one-for one basis, in certaincircumstances. We accrue distributions when they are declared.

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**5.**                 Investmentin Unconsolidated Entities

**Real Estate JointVentures**

Joint ventures are common in the real estate industry.We use joint ventures to finance properties, develop new properties, anddiversify our risk in a particular property or portfolio. We held joint ventureownership interests in 104 Properties in the United States as of June 30,2007 and 68 as of December 31, 2006. We also held interests in two jointventures which owned 53 European shopping centers as of June 30, 2007 and December 31,2006. We also held an interest in five joint venture properties under operationin Japan, one joint venture property in Mexico, and one joint venture propertyin South Korea. We account for these Properties using the equity method ofaccounting.

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

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

On February 16, 2007, SPG-FCM entered intoa definitive merger agreement with Mills to acquire all of the outstandingcommon stock of Mills for $25.25 per common share in cash. The acquisition wascompleted through a cash tender offer and a subsequent merger transaction, allof which was concluded on April 3, 2007. As of June 30, 2007 theOperating Partnership and Farallon had each funded $475 million into SPG-FCM toacquire all of the common stock of Mills. As part of the transaction, we alsohas loaned amounts to SPG-FCM and Mills that bear interest primarily at ratesof LIBOR plus 270-275 basis points. These funds were used by SPG-FCM andMills to repay loans and other obligations of Mills, including the redemptionof a series of preferred stock, during the period. Aggregate repayments of ourloans to SPG-FCM and Mills during the period reduced the principalbalance of those loans to approximately $532.6 million as of June 30,2007. During the first and second quarters of 2007, we recorded approximately$12 million and $14 million, respectively, in interest income (net ofinter-entity eliminations). We also recorded fee income, including fee incomeamortization related to up-front fees on loans made to SPG-FCM and Mills,during the first and second quarters of 2007 of approximately $1.9 millionand $7.9 million, respectively, (net of inter-entity eliminations) forproviding refinancing services to Mills’ properties and SPG-FCM.

As a result of the change in control of Mills, holdersof Mills’ $316.3 million in Series F convertible cumulative redeemablepreferred stock had the right to require that Mills repurchase their shares forcash equal to the liquidation preference per share plus accrued and unpaiddividends. During the second quarter of 2007, all of the holders of Mills’ Series Fpreferred stock exercised this right, and Mills paid approximately $333 millionto redeem, at par value, this series of preferred stock plus accrued dividends.Further, as of August 1, 2007, The Mills Corporation was liquidated andthe holders of the remaining series of Mills preferred stock received theirliquidation preference plus accrued dividends.

Subsequent to June 30, 2007, the holders of lessthan 5,000 common units in the Mills’ operating partnership (“Mills LP”)received $25.25 per unit in cash, and those holding 5,000 or more common unitsin Mills LP had the option to exchange their units for cash of $25.25 per unit,or for our limited partnership units based on a fixed exchange ratio of 0.211 ofour units for each limited partnership unit in the Mills LP. That option expired on August 1, 2007. Holdersof 312,967 limited partner units in Mills LP elected to exchange their Mills LPunits for 66,036 of our units. The remaining Mills LP units were exchanged forcash.

We have the funds necessary to fulfill our equityrequirement to SPG-FCM, as well as any funds that we have or will providein the form of loans to Mills or SPG-FCM, from our available cash and ourCredit 

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Facility. Also, effective July 1,2007, Simon Property or an affiliate began serving as the manager forsubstantially all of the additional 38 properties in which SPG-FCM holdsan interest. In conjunction with the Mills acquisition, we acquired acontrolling interest in two properties in which we previously held a 50%ownership interest (Town Center at Cobb and Gwinnett Place) and as a result wehave consolidated these two properties at the date of acquisition.

SPG-FCM has completed itspreliminary purchase price allocations for the acquisition of Mills. Thevaluations were developed with the assistance of a third-party professionalappraisal firm. The acquisition involved the assumption of $954.9 million ofpreferred stock, a proportionate share of property-level mortgage debt, SPG-FCM’sshare of which approximated $4 billion, and certain liabilities andcontingencies. The preliminary allocations will be finalized within one year ofthe acquisition date in accordance with applicable accounting standards.

**International JointVenture Investments**

We conduct our international operations in Europethrough our two European joint venture investment entities; Simon IvanhoeS.à.r.l. (“SimonIvanhoe”), and Gallerie Commerciali Italia (“GCI”). The carrying amount of ourtotal combined investment in these two joint venture investments is$340.1 million and $338.1 million as of June 30, 2007 and December 31,2006, respectively, net of the related cumulative translation adjustments. Wehave a 50% ownership in Simon Ivanhoe and a 49% ownership in GCI as of June 30,2007. Subsequent to June 30, 2007, Simon Ivanhoe sold five of its Europeanproperties in Poland. We received our share of the proceeds from the sale ofapproximately €91 million,and expect to recognize a gain on sale during the third quarter of 2007 inexcess of $70 million.

We conduct our international Premium Outlet operationsin Japan through joint venture partnerships with Mitsubishi EstateCo., Ltd. and Sojitz Corporation (formerly known as Nissho IwaiCorporation). The carrying amount of our investment in these Premium Outletjoint ventures in Japan is $277.3 million and $281.2 million as of June 30,2007 and December 31, 2006, respectively, net of the related cumulativetranslation adjustments. We have a 40% ownership in these Japan Premium Outletjoint ventures. On June 1, 2007, our Chelsea division opened Yeoju PremiumOutlets, the first Premium Outlet Center in South Korea. We hold a 50%ownership interest in this property for which our investment approximated$20.2 million as of June 30, 2007.

During 2006, we finalizedthe formation of joint venture arrangements to develop and operate shoppingcenters in China. The shopping centers will be anchored by Wal-Mart stores andwill be held by us through a 32.5% ownership in a joint venture entity, GreatMall Investments, Ltd. (“GMI”). We are planning on initially developingfive centers, four of which are currently under construction. Our share of the totalequity commitment is approximately $53.6 million. We account for ourinvestments in GMI under the equity method of accounting. As of June 30,2007, our combined investment in these GMI shopping centers was approximately$25.6 million.

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**Summary FinancialInformation**

Summaryfinancial information of all of our joint ventures and a summary of ourinvestment in and share of income from such joint ventures follow. We condensedinto separate line items major captions of the statements of operations forjoint venture interests sold or consolidated. Consolidation occurs when weacquire an additional interest in the joint venture and, as a result, gainunilateral control of the Property or are determined to be the primarybeneficiary. We reclassify these line items into “Discontinued Joint VentureInterests” and “Consolidated Joint Venture Interests” on the balance sheets andstatements of operations, if material, so that we may present comparativeresults of operations for those joint venture interests held as of June 30,2007.

| ** **                                                | ** ** | **June 30,  2007** | ** **     | **December 31,   2006** | ** ** |
|-----------------------------------------------------------|------------|-------------------------|----------------|-----------------------------------|------------|
| **BALANCE  SHEETS**                                       | ** ** | ** **              | ** **     | ** **                        | ** ** |
| **Assets:**                                               | ** ** | ** **              | ** **     | ** **                        | ** ** |
| Investment  properties, at cost                           | ** ** | **$**                   | **20,638,350** |                              | $          | 10,669,967 |   |
| Less — accumulated  depreciation                | ** ** | **2,918,983**           |           | 2,206,399                         |       |
|                                                      | ** ** | **17,719,367**          |           | 8,463,568                         |       |
| Cash and cash equivalents                                 | ** ** | **839,368**             |           | 354,620                           |       |
| Tenant  receivables                                       | ** ** | **350,855**             |           | 258,185                           |       |
| Investment in  unconsolidated entities                    | ** ** | **180,050**             |           | 176,400                           |       |
| Deferred costs  and other assets                          | ** ** | **815,404**             |           | 307,468                           |       |
| Total assets                                              |       | **$**                   | **19,905,044** | ** **                        | $          | 9,560,241 |   |
| **Liabilities and Partners’ Equity:**                | ** ** | ** **              | ** **     | ** **                        | ** ** |
| Mortgages and other  indebtedness                         | ** ** | **$**                   | **15,529,347** |                              | $          | 8,055,855 |   |
| Accounts payable,  accrued expenses, and deferred revenue | ** ** | **970,302**             |           | 513,472                           |       |
| Other liabilities                                         | ** ** | **974,091**             |           | 255,633                           |       |
| Total liabilities                                         |       | **17,473,740**          | ** **     | 8,824,960                         |       |
| Preferred units                                           | ** ** | **67,450**              |           | 67,450                            |       |
| Preferred stock                                           | ** ** | **639,695**             |           | —                            |       |
| Partners’ equity                                     | ** ** | **1,724,159**           |           | 667,831                           |       |
| Total liabilities and partners’ equity               |       | **$**                   | **19,905,044** | ** **                        | $          | 9,560,241 |   |
| **Our Share of:**                                         | ** ** | ** **              | ** **     | ** **                        | ** ** |
| Total assets                                              | ** ** | **$**                   | **8,162,161**  |                              | $          | 4,113,051 |   |
| Partners’ equity                                     | ** ** | **$**                   | **828,500**    |                              | $          | 380,150 |   |
| Add: Excess  Investment                                   | ** ** | **791,517**             |           | 918,497                           |       |
| Our net  Investment in Joint Ventures                     | ** ** | **$**                   | **1,620,017**  |                              | $          | 1,298,647 |   |
| Mortgages and other  indebtedness                         | ** ** | **$**                   | **6,188,391**  |                              | $          | 3,472,228 |   |

 

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“ExcessInvestment” represents the unamortized difference of our investment over ourshare of the equity in the underlying net assets of the joint venturesacquired. We amortize excess investment over the life of the relatedProperties, typically no greater than 40 years, and the amortization isincluded in the reported amount of income from unconsolidated entities.

| ** **                                                                  | ** ** | **For the Three Months  Ended June 30,** | ** **  | **For the Six Months  Ended June 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------------------------------------------------|-------------|-----------------------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2007**                                                          | ** **  | **2006**                                                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| **STATEMENTS OF OPERATIONS**                                                |       |                                                              |        |                                                            |       |   |   |   |   |
| **Revenue:**                                                                |       |                                                              |        |                                                            |       |   |   |   |   |
| Minimum rent                                                                | ** ** | **$**                                                             | **447,346** |                                                            | $          | 258,692 | ** ** | **$** | **717,275** |   | $ | 508,637 |   |
| Overage rent                                                                | ** ** | **20,346**                                                        |        | 18,307                                                          | ** ** | **37,642** |   | 32,424 |   |
| Tenant  reimbursements                                                      | ** ** | **220,429**                                                       |        | 128,040                                                         | ** ** | **352,250** |   | 250,034 |   |
| Other income                                                                | ** ** | **47,298**                                                        |        | 36,121                                                          | ** ** | **88,866** |   | 67,841 |   |
| Total revenue                                                               | ** ** | **735,419**                                                       |        | 441,160                                                         | ** ** | **1,196,033** |   | 858,936 |   |
| **Operating  Expenses:**                                                    |       |                                                              |        |                                                            |       |   |   |   |   |
| Property  operating                                                         | ** ** | **154,698**                                                       |        | 85,577                                                          | ** ** | **241,644** |   | 169,087 |   |
| Depreciation and  amortization                                              | ** ** | **157,095**                                                       |        | 79,185                                                          | ** ** | **239,914** |   | 151,066 |   |
| Real estate taxes                                                           | ** ** | **66,365**                                                        |        | 32,337                                                          | ** ** | **100,916** |   | 65,121 |   |
| Repairs and  maintenance                                                    | ** ** | **30,144**                                                        |        | 20,107                                                          | ** ** | **53,026** |   | 40,491 |   |
| Advertising and  promotion                                                  | ** ** | **15,341**                                                        |        | 6,952                                                           | ** ** | **23,045** |   | 13,541 |   |
| Provision for  credit losses                                                | ** ** | **6,712**                                                         |        | 1,039                                                           | ** ** | **6,723** |   | 1,432 |   |
| Other                                                                       | ** ** | **42,651**                                                        |        | 36,432                                                          | ** ** | **68,364** |   | 60,156 |   |
| Total operating  expenses                                                   | ** ** | **473,006**                                                       |        | 261,629                                                         | ** ** | **733,632** |   | 500,894 |   |
| **Operating  Income**                                                       | ** ** | **262,413**                                                       |        | 179,531                                                         | ** ** | **462,401** |   | 358,042 |   |
| Interest expense                                                            | ** ** | **(238,349**                                                      | **)**       | (102,117                                                        | )          | **(345,505** | **)** | (201,733 | ) |
| Income (loss) from  unconsolidated entities                                 | ** ** | **(3**                                                            | **)**       | 145                                                             | ** ** | **(87** | **)** | 239 |   |
| Gain (loss) on sale of  asset                                               | ** ** | **—**                                                        |        | 94                                                              | ** ** | **(4,759** | **)** | 94 |   |
| **Income from Continuing Operations**                                       | ** ** | **24,061**                                                        | ** **  | 77,653                                                          | ** ** | **112,050** | ** ** | 156,642 |   |
| Income from consolidated  joint venture interests                           | ** ** | **—**                                                        |        | 2,671                                                           | ** ** | **2,681** |   | 5,588 |   |
| Income from discontinued  joint venture interests                           | ** ** | **159**                                                           |        | 175                                                             | ** ** | **176** |   | 502 |   |
| Gain on disposal or sale  of discontinued operations, net              | ** ** | **19**                                                            |        | 21,151                                                          | ** ** | **19** |   | 20,704 |   |
| **Net Income**                                                              | ** ** | **$**                                                             | **24,239**  |                                                            | $          | 101,650 | ** ** | **$** | **114,926** |   | $ | 183,436 |   |
| **Third-Party Investors’ Share of  Net Income**                        | ** ** | **$**                                                             | **6,027**   |                                                            | $          | 59,863 | ** ** | **$** | **60,672** |   | $ | 109,439 |   |
| **Our Share of Net Income**                                                 | ** ** | **18,212**                                                        |        | 41,787                                                          | ** ** | **54,254** |   | 73,997 |   |
| **Amortization of Excess  Investment**                                      | ** ** | **(10,753**                                                       | **)**       | (12,374                                                         | )          | **(25,022** | **)** | (24,892 | ) |
| **Income from Beneficial  Interests and Other, Net**                        | ** ** | **—**                                                        |        | 1,045                                                           | ** ** | **—** |   | 11,276 |   |
| **Write-off of Investment Related  to Properties Sold**                     | ** ** | **—**                                                        |        | (2,977                                                          | )          | **—** |   | (2,977 | ) |
| **Our Share of Net Gain Related  to Properties Sold**                       | ** ** | **—**                                                        |        | (7,599                                                          | )          | **—** |   | (7,599 | ) |
| **Income from Unconsolidated Entities and  Beneficial Interests, Net** | ** ** | **$**                                                             | **7,459**   | ** **                                                      | **$**      | **19,882** | ** ** | **$** | **29,232** | ** ** | **$** | **49,805** |   |

 

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**6.**                 Debt

**Unsecured Debt**

***Credit Facility.******  ***Significantdraws on the Credit Facility during the six months ended June 30, 2007were as follows:

| *Draw Date*       | *** *** | ***Draw  Amount*** | *** *** | ***Use of Credit Line Proceeds***                                              |
|------------------------|--------------|--------------------|--------------|----------------------------------------------------------------------------------------------------|
| February 16, 2007 |         | $600,000           |         | Borrowing to partially fund a $1.187 billion loan to  Mills.                                       |
| March 29, 2007    |         | 550,000            |         | Borrowing to fund  our equity commitment for the Mills acquisition and to fund a loan to  SPG-FCM. |
| April 17, 2007    |         | 140,000            |         | Borrowing to fund a loan to SPG-FCM.                                                               |
| June 28, 2007     |         | 181,000            |         | Borrowing to fund a loan to SPG-FCM.                                                               |

 

Other amounts drawn on theCredit Facility were primarily for general working capital purposes. We repaida total of $1.6 billion on the Credit Facility during the six months ended June 30,2007 with proceeds we received from the refinancing of selected Millsproperties and the refinancing of a senior term loan facility. The totaloutstanding balance on the Credit Facility as of June 30, 2007 was $952.0million, and the maximum amount outstanding during the six months ended June 30,2007 was approximately $2.0 billion. During the first six months of 2007,the weighted average outstanding balance on the Credit Facility wasapproximately $1.2 billion.

**Secured Debt**

Total secured indebtedness was $4.8 billion and$4.4 billion at June 30, 2007 and December 31, 2006,respectively. During the six months ended June 30, 2007, we repaid$191.3 million in mortgage loans, unencumbering four properties.

As a result of theacquisition of Mills by SPG-FCM, we now hold a controlling ownership interestin Gwinnett Place and Town Center at Cobb, and as a result they wereconsolidated as of the acquisition date. This included the consolidation of twomortgages secured by Gwinnett Place of $35.6 million and $79.2 million at fixedrates of 7.54% and 7.25%, respectively, and two mortgages secured by TownCenter at Cobb of $45.4 million and $60.3 million at fixed rates of 7.54% and7.25%, respectively. On May 23, 2007, we refinanced Gwinnett Place andTown Center at Cobb with $115.0 million and $280.0 million mortgages at fixedrates of 5.68% and 5.74% respectively.

**7.**                 Partners’Equity

Under The Simon Property Group 1998 Stock IncentivePlan, on February 26, 2007, the Compensation Committee of Simon Property’sBoard of Directors, awarded 246,271 restricted shares of Simon Propertycommon stock to employees under this Plan at a fair value of $115.62 per share.On May 10, 2007, our non-employee Directors were awarded 6,892 restrictedshares of Simon Property common stock under this plan at a fair value of$114.30 per share. The fair market value of the restricted stock awarded on February 26,2007 has been deferred and is being amortized over a four-year vesting serviceperiod. The fair market value of the restricted stock awarded on May 10,2007, has been deferred and is being amortized over a one-year vesting serviceperiod. As a result, we issued a like number of units to Simon Property inaccordance with our partnership agreement.

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

On July 26, 2007, the Simon Property Board ofDirectors authorized a common stock repurchase program under which SimonProperty may purchase up to $1.0 billion of its common stock over the next 

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twenty-four months asmarket conditions warrant. Simon Property may purchase the shares in the openmarket or in privately negotiated transactions. If Simon Property repurchasesany shares under this program, we will repurchase a corresponding number of ourcommon units from Simon Property.

As previously disclosed, for the quarter ending June 30,2007, holders of Series I 6% Convertible Perpetual Units (“Series IPreferred Units”) and Simon Property’s Series I 6% Convertible PerpetualPreferred Stock (“Series I Preferred Stock”) could elect to convert theirsecurities during the quarter into our common units and shares of SimonProperty common stock, respectively. The optional conversion is as a result ofthe closing sale price of Simon Property’s common stock exceeding theapplicable trigger price per share for a period of 20 trading days in the last30 trading days of the prior quarter. If holders of a Series I PreferredUnit convert into common units, then the holder may also elect to convert thoseunits into common stock on a one-for-one basis in accordance with ourpartnership agreement. During the six months ended June 30, 2007, 29,788shares of Series I Preferred Stock were converted into 23,454 shares ofSimon Property common stock and Simon Property converted a like number of its Series IPreferred Units into common units. As of June 30, 2007, the conversiontrigger price of $79.02 had been met and the Series I Preferred Units areconvertible into 0.790897 of a common unit and the Series I PreferredStock is convertible into 0.790897 of a share of Simon Property common stockbeginning July 2, 2007 through September 28, 2007.

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

**8.**                 Commitmentsand Contingencies

**Litigation**

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

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

**Guarantees ofIndebtedness**

Joint venture debt is theliability of the joint venture, and is typically secured by the joint ventureProperty, which is non-recourse to us. As of June 30, 2007, we have loanguarantees and other guarantee obligations of $123.3 million and $26.7million, respectively, to support our total $6.2 billion share of joint venturemortgage and other indebtedness in the event that the joint venture partnershipdefaults under the terms of the underlying arrangement. Mortgages which areguaranteed by us are secured by the property of the joint venture and thatproperty could be sold in order to satisfy the outstanding obligation.

**9.**                 RealEstate Acquisitions and Dispositions

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

We did not dispose of anyconsolidated properties during the six months ended June 30, 2007.

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**10.**          RecentFinancial Accounting Standards

On January 1, 2007, we adopted FASBInterpretation No. 48, “Accounting for Uncertainty in Income Taxes, anInterpretation of FASB Statement No. 109” (“FIN 48”). FIN 48clarifies the accounting for uncertainty in income taxes recognized in acompany’s financial statements and prescribes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return. TheInterpretation also provides guidance on description, classification, interestand penalties, accounting in interim periods, disclosure and transition. Theadoption of FIN 48 did not have any impact on our financial position orresults of operations.

In September 2006,the FASB issued FASB No. 157, “Fair Value Measurements”. SFAS 157 isdefinitional and disclosure oriented and addresses how companies shouldapproach measuring fair value when required by GAAP; it does not create ormodify any current GAAP requirements to apply fair value accounting. TheStandard provides a single definition for fair value that is to be appliedconsistently for all accounting applications, and also generally describes andprioritizes according to reliability the methods and inputs used in valuations.SFAS 157 prescribes various disclosures about financial statementcategories and amounts which are measured at fair value, if such disclosuresare not already specified elsewhere in GAAP. The new measurement and disclosurerequirements of SFAS 157 are effective for us in the first quarter of2008. We do not expect the adoption of SFAS 157 will have a significantimpact on our results of operations or financial position.

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

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

**Overview**

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

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We are engaged in theownership, development, and management of retail real estate properties,primarily regional malls, Premium Outlet® centers, The Mills®, andcommunity/lifestyle centers. As of June 30, 2007, we owned or held aninterest in 323 income-producing properties in the United States, whichconsisted of 189 regional malls, 71 community/lifestyle centers, 17 Millsproperties, 36 Premium Outlet centers and 10 other shopping centers or outletcenters in 41 states plus Puerto Rico (collectively, the “Properties”, andindividually, a “Property”). We also own interests in four parcels of land heldin the United States for future development (together with the Properties, the “Portfolio”).In the United States, we have five new properties currently under developmentaggregating approximately 3.1 million square feet which will open during2007 or early 2008. Internationally, we have ownership interests in 53 Europeanshopping centers (France, Italy and Poland); five Premium Outlet centers inJapan; one Premium Outlet center in Mexico; and one Premium Outlet center inSouth Korea. We also own a 32.5% interest in five shopping centers located inChina, four of which are currently under construction.

***Operating Fundamentals***

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

·       Baseminimum rents and cart and kiosk rentals,

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

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

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

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

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

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

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

·       Acquiringhigh quality real estate assets or portfolios of assets, and

·       Sellingnon-core assets.

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

·       Simon Brand Ventures (“Simon Brand”) mall marketinginitiatives revenue sources which include: payment systems (including marketingfees relating to the sales of bank-issued prepaid cards), national marketingalliances, static and digital media initiatives, business development,sponsorship, and other events.

·       Simon Business Network (“Simon Business”) offersproperty operating services to our tenants and others resulting from itsrelationships with vendors.

We focus on high quality real estate across the retailreal estate spectrum. We expand or renovate to enhance existing assets’profitability and market share when we believe the investment of our capitalmeets 

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our risk-reward criteria.We selectively develop new properties in major metropolitan areas that exhibitstrong population and economic growth.

We also routinely review and evaluate acquisitionopportunities based on their complement to our Portfolio. We are selectivelyexpanding our international presence. Our international strategy includespartnering with established real estate companies and financing internationalinvestments with local currency to minimize foreign exchange risk.

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

·       Providethe capital necessary to fund growth.

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

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

***Results Overview***

Diluted earnings per unit decreased  $0.13 during the first six months of 2007, or15.5%, to $0.71 from $0.84 for the same period last year. The 2006 resultsinclude a $34.4 million gain (or $0.12 per diluted unit) from the sale ofpartnership interests in one of our European joint ventures to our partner, Ivanhoe Cambridge, Inc. (“Ivanhoe”), anaffiliate of Caisse de dépôt et placement du Québec, and the recognitionof $11.3 million in income (or $0.04 per diluted unit) from a regional mallentity that was sold in late 2006 in which we held  beneficial interests to receive cash flow,capital distributions, and related profits and losses.  Included in the six month period in 2007 wasthe receipt of $19.0 million of lease settlements from anchor store activityand approximately $26 million of interest income attributable to loans made toThe Mills Corporation and its majority-owned subsidiary, The Mills LimitedPartnership (collectively “Mills”) and SPG-FCM Ventures, LLC (“SPG-FCM”), netof inter-entity eliminations. Also included in the second quarter of 2007 wasapproximately $28 million of additional amortization and depreciation,representing our share of step ups in the basis of acquired assets by SPG-FCM.

Our core business fundamentals remained strong duringthe first six months of 2007. Regional mall comparable sales per square foot (“psf”)strengthened during the first six months of 2007, increasing 4.5% to$489 psf from $468 psf for the same period in 2006 reflecting strong retail sales activity.Our regional mall average base rents increased 4.0% to $36.51 psf as of June 30,2007 from $35.10 psf as of June 30, 2006.  Regional mall occupancy was 92.0% as of June 30,2007 as compared to 91.6% as of June 30, 2006. In addition, our regional mall leasing spreads were$9.03 psf as of June 30, 2007 representing a 23.6% increase overexpiring rents. The operating fundamentals of the Premium Outlet centers alsocontributed to the improved operating results for the six month period, withthe Portfolio effectively fully occupied at 99.4%, comparable sales psfincreasing 8.6%, and leasing spreads at $7.32, or 30.8% above expiring rents.

Despite theinterest rate environment that has maintained a fairly stable LIBOR rate (5.32%at June 30, 2007 versus 5.35% at June 30, 2006), our effectiveoverall borrowing rate for the six months ended June 30, 2007 decreased 14basis points as compared to the six months ended June 30, 2006. This wasprincipally as a result of the issuance of fixed rate debt during the latterpart of 2006. Our financing activities for the six months ended June 30,2007 are highlighted by the following:

·       Werepaid four mortgages totaling $191.3 million that bore interest at fixed ratesranging from 7.65% to 9.38%.

·       Weincreased our borrowings on the Credit Facility to approximately $952.0 millionduring the six months ended June 30, 2007, principally as a result of  our $475 million funding commitment toSPG-FCM in relation to the Mills acquisition and for loans to Mills and SPG-FCMtotaling $532.6 million.

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·       As a result of the Millsacquisition, we now hold a controlling ownership interest in Gwinnett Place andTown Center at Cobb, and as a result we now consolidate these two Properties. Includedin this consolidation were two mortgages secured by Gwinnett Place of $35.6million and $79.2 million at fixed rates of 7.54% and 7.25%, respectively, andtwo mortgages secured by Town Center at Cobb of $45.4 million and $60.3 millionat fixed rates of 7.54% and 7.25%, respectively. On May 23, 2007, werefinanced Gwinnett Place and Town Center at Cobb with $115.0 million and$280.0 million mortgages at fixed rates of 5.68% and 5.74%, respectively.

***United States Portfolio Data***

The Portfolio datadiscussed in this overview includes the following key operating statistics:occupancy, average base rent per square foot, and comparable sales per squarefoot for our three domestic platforms. We include acquired Properties in thisdata beginning in the year of acquisition andremove properties sold in the year disposed. We do not include any Propertieslocated outside of the United States. This data excludes amounts forrecently acquired assets in the Mills acquisition. We expect to begin reportingthe data for these acquired properties with our existing Properties during thethird quarter of 2007. The following table sets forth these key operatingstatistics for:

·       Propertiesthat are consolidated in our consolidated financial statements,

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

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

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***Domestic PropertyData:***

| ** **                               | ** ** | **June 30,  2007** | ** ** | **%/basis point  Change (1)** | ** ** | **June 30,  2006** | ** ** | **%/basis point  Change (1)** | ** ** |
|------------------------------------------|------------|-------------------------|------------|-----------------------------------------|------------|-------------------------|------------|-----------------------------------------|------------|
| **Regional  Malls:**                     |       |                    |       |                                    |       |                    |       |                                    |       |   |   |   |   |   |   |
| ***Occupancy***                          | ** ** | ** **              | ** ** | ** **                              | ** ** | ** **              |       |                                    |       |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **              | **92.2%**  | ** **                              | ** ** | **+90 bps**             |       |                                    | 91.3%      |   |   |   | **-**100 bps |   |   |
| Unconsolidated                           | ** ** | ** **              | **91.7%**  | ** **                              | ** ** | **-40 bps**             |       |                                    | 92.1%      |   |   |   | +10  bps |   |   |
| **Total  Portfolio**                     | ** ** | ** **              | **92.0%**  | ** **                              | ** ** | **+40 bps**             |       |                                    | 91.6%      |   |   |   | **-**60 bps |   |   |
| ***Average Base Rent per Square  Foot*** | ** ** | ** **              | ** ** | ** **                              | ** ** | ** **              |       |                                    |       |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **              | **$**      | **35.60**                               | ** ** | ** **              | **2.8%**   |                                    |       | $ | 34.64 |   |   |   | 3.3% |   |   |
| Unconsolidated                           | ** ** | ** **              | **$**      | **38.25**                               | ** ** | ** **              | **6.5%**   |                                    |       | $ | 35.93 |   |   |   | 1.8% |   |   |
| **Total  Portfolio**                     | ** ** | ** **              | **$**      | **36.51**                               | ** ** | ** **              | **4.0%**   |                                    |       | $ | 35.10 |   |   |   | 2.8% |   |   |
| ***Comparable Sales Per Square  Foot***  | ** ** | ** **              | ** ** | ** **                              | ** ** | ** **              |       |                                    |       |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **              | **$**      | **469**                                 | ** ** | ** **              | **3.5%**   |                                    |       | $ | 454 |   |   |   | 6.3% |   |   |
| Unconsolidated                           | ** ** | ** **              | **$**      | **526**                                 | ** ** | ** **              | **6.7%**   |                                    |       | $ | 495 |   |   |   | 4.4% |   |   |
| **Total  Portfolio**                     | ** ** | ** **              | **$**      | **489**                                 | ** ** | ** **              | **4.5%**   |                                    |       | $ | 468 |   |   |   | 5.9% |   |   |
| **Premium Outlet Centers:**              | ** ** | ** **              | ** ** | ** **                              | ** ** | ** **              |       |                                    |       |   |   |   |   |   |   |
| Occupancy                                | ** ** | ** **              | **99.4%**  | ** **                              | ** ** | **unchanged**           |       |                                    | 99.4%      |   |   |   | +20  bps |   |   |
| Average Base Rent  per Square Foot       | ** ** | ** **              | **$**      | **25.11**                               | ** ** | ** **              | **5.6%**   |                                    |       | $ | 23.78 |   |   |   | 4.2% |   |   |
| Comparable Sales  Per Square Foot        | ** ** | ** **              | **$**      | **492**                                 | ** ** | ** **              | **8.6%**   |                                    |       | $ | 453 |   |   |   | 6.3% |   |   |
| **Community/Lifestyle Centers:**         |       |                    |       |                                    |       |                    |       |                                    |       |   |   |   |   |   |   |
| ***Occupancy***                          |       |                    |       |                                    |       |                    |       |                                    |       |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **              | **91.2%**  | ** **                              | ** ** | **+430 bps**            |       |                                    | 86.9%      |   |   |   | **-**240 bps |   |   |
| Unconsolidated                           | ** ** | ** **              | **96.7%**  | ** **                              | ** ** | **+50 bps**             |       |                                    | 96.2%      |   |   |   | +10  bps |   |   |
| **Total  Portfolio**                     | ** ** | ** **              | **92.9%**  | ** **                              | ** ** | **+320 bps**            |       |                                    | 89.7%      |   |   |   | **-**180 bps |   |   |
| ***Average Base Rent per Square  Foot*** | ** ** | ** **              | ** ** | ** **                              | ** ** | ** **              |       |                                    |       |   |   |   |   |   |   |
| Consolidated                             | ** ** | ** **              | **$**      | **12.18**                               | ** ** | ** **              | **2.2%**   |                                    |       | $ | 11.92 |   |   |   | 4.2% |   |   |
| Unconsolidated                           | ** ** | ** **              | **$**      | **11.74**                               | ** ** | ** **              | **6.0%**   |                                    |       | $ | 11.08 |   |   |   | 5.4% |   |   |
| **Total Portfolio**                      | ** ** | ** **              | **$**      | **12.03**                               | ** ** | ** **              | **3.3%**   |                                    |       | $ | 11.65 |   |   |   | 4.7% |   |   |

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(1)          Percentages may notrecalculate due to rounding.

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

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

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***International Property Data***

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

| ** **                            | ** ** | **June 30,  2007** | ** ** | **%/basis point  Change** | ** ** | **June 30,  2006** | ** ** | **%/basis point  Change** | ** ** |
|---------------------------------------|------------|-------------------------|------------|--------------------------------|------------|-------------------------|------------|--------------------------------|------------|
| **European  Shopping Centers:**       |       |                    |       |                           |       |                    |       |                           |       |   |   |   |   |
| Occupancy                             | ** ** | **97.1%**               | ** ** | ** **                     | **—** |                    |       | 97.1%                          |       |   | -140 bps |   |   |
| Comparable sales per  square foot     | ** ** | **€399**           |       | ** **                     | **5.4**    | **%**                   |       | €378                      |       |   | 2.8% |   |   |
| Average base rent  per square foot    | ** ** | **€26.65**         |       | ** **                     | **2.5**    | **%**                   |       | €26.01                    |       |   | 0.9% |   |   |
| **International Premium Outlets (1)** | ** ** | ** **              |       | ** **                     | ** ** |                    |       |                           |       |   |   |   |   |
| Occupancy                             | ** ** | **100%**                | ** ** |                           | —     |                    |       | 100%                           |       |   | — |   |   |
| Comparable sales  per square foot     | ** ** | **¥91,101**        |       | ** **                     | **2.6**    | **%**                   |       | ¥88,752                   |       |   | 3.7% |   |   |
| Average base rent per  square foot    | ** ** | **¥4,654**         |       | ** **                     | **0.2**    | **%**                   |       | ¥4,645                    |       |   | 3.0% |   |   |

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(1)          Doesnot include our centers in Mexico (Premium Outlets Punta Norte) and South Korea(Yeoju Premium Outlets).

**Results ofOperations**

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

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

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

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

·       OnNovember 2, 2006, we received $102.2 million resulting from the saleof a regional mall entity in which we held beneficial interests to receive cashflow, capital distributions, and related profits and losses. This transactionterminated our beneficial interests and resulted in the recognition of an$86.5 million gain.

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

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

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

·       OnJune 1, 2007, we opened Yeoju Premium Outlets, a 250,000 square footcenter in South Korea.

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

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

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

·       OnSeptember 28, 2006, we opened Gliwice Shopping Center, a 380,000 squarefoot shopping center in Gliwice, Poland.

·       OnMay 31, 2006, Gallerie Commerciali Italia (“GCI”) opened Giugliano, an800,000 square foot center anchored by a hypermarket, in Italy.

For the purposes of the following comparison betweenthe six months ended June 30, 2007 and 2006, the above transactions arereferred to as the “Property Transactions”. Inthe following discussions of our results of operations, “comparable” refers toProperties open and operating throughout the periods in both 2007 and 2006.

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

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

 

***Three Months Ended June 30, 2007 vs. Three MonthsEnded June 30, 2006***

Minimum rents, excluding rents from our consolidatedSimon Brand and Simon Business initiatives, increased $35.1 million duringthe period, of which the Property Transactions accounted for $24.6 millionof the increase. Total amortization of the fair market value of in-place leasesdecreased minimum rents by $2.5 million over that of the second quarter of2006. Comparable rents, excluding rents from Simon Brand and Simon Business,increased $10.4 million, or 2.2%. This was primarily due to the leasing ofspace at higher rents that resulted in an increase in minimum rents of$11.0 million.

Overage rents increased $3.3 million or 21.8%,reflecting increases in tenants’ sales.

Tenantreimbursements, excluding Simon Business initiatives, increased$10.0 million, which was primarily due to the Property Transactions. Total other income, excluding Simon Brand andSimon Business initiatives, increased $7.5 million, and was principally theresult of the following:

·       a$15.0 million increase in interest income due primarily to interest income forthe period as a result of Mills-related loans, net of inter-entityeliminations, combined with increased rates on short term investment of excesscash,

·       a$7.9 million increase in loan financing fees related to Mills-related loans,

·       a$13.3 million decrease in gains on land sale activity, and

·       a$1.9 million decrease in lease settlement income.

Revenues from Simon Brand and Simon Businessinitiatives increased $3.1 million to $32.7 million from$29.6 million. The increase in revenues was primarily due to increasedevent and sponsorship income.

Property operating expenses increased$4.9 million, $6.5 million increase from the effect of the PropertyTransactions and a $1.6 million decrease in the comparable properties or 1.5%principally from the result of decreased administration expenses.

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Depreciation and amortization expense increased $19.2million and is primarily a result of the Property Transactions.

Real estate taxes increased $8.7 million from theprior period due principally to refunds received in the second quarter of 2006of approximately $4.6 million reducing overall expenses for that period. Refundsreceived in 2007 have been minimal. The remainder of the increase in realestate tax expense was due to the effect of increased assessments and growth ofthe portfolio, including the Property Transactions.

Repairs and maintenance increased $3.9 million due toincreased snow removal costs in 2007 than that of 2006, inflationary increasesand new property openings.

Provision for credit losses decreased $3.0 million dueto fewer tenant bankruptcies in the quarter as compared to the prior year.

Home office and regional costs decreased$3.4 million due primarily to increased capitalized leasing anddevelopment overhead expenses, offset partially by increased personnel costs.The increase in personnel costs was primarily due to the effect that ourincreased stock price had on our stock-based compensation programs.

Other expenses increased $2.5 million primarily due toincreases in ground rent expenses and state and local taxes.

Interest expense increased $42.9 million dueprincipally to the impact of the issuances of unsecured notes in May, August,and December of 2006, and the costs of borrowings used to fund the Millsacquisition. Also impacting interest expense was the consolidation of TownCenter at Cobb, Gwinnett Place, and Mall of Georgia as a result of ouracquisition of additional ownership interests.

Income tax expense of taxable REIT subsidiariesdecreased $3.7 million due to a reduction in the taxable income for themanagement company as a result of structural changes made to our wholly-ownedcaptive insurance entities.

Income from unconsolidated entities decreased $12.4 millionyear over year as a result of the inclusion of the Mills properties. On a netincome basis, our share of income from SPG-FCM approximated a net loss of $10million due to additional depreciation and amortization expenses on asset basisstep ups in purchase accounting approximating $28 million for the quarter.

Gain on sales of assets and interests inunconsolidated entities decreased $7.1 million over the prior period due to therecording of a $7.6 million gain on the sale of a community/lifestyle center in2006.

Preferred unit requirementdecreased $5.4 million because we had redeemed our Series F preferredstock in the fourth quarter of 2006.

***Six Months Ended June 30, 2007 vs. Six MonthsEnded June 30, 2006***

Minimum rents, excluding rents from our consolidatedSimon Brand and Simon Business initiatives, increased $56.1 million duringthe period, of which the Property Transactions accounted for $37.6 millionof the increase. Total amortization of the fair market value of in-place leasesdecreased minimum rents by $4.2 million over that of the first six monthsof 2006. Comparable rents, excluding rents from Simon Brand and Simon Business,increased $18.5 million, or 2.0%. This was primarily due to the leasing ofspace at higher rents that resulted in an increase in minimum rents of$20.4 million. In addition, rents from carts, kiosks, and other temporarytenants increased comparable rents by $0.6 million.

Overage rents increased $5.2 million or 16.5%,reflecting the increases in tenants’ sales.

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Tenant reimbursements, excluding Simon Businessinitiatives, increased $19.0 million, of which the Property Transactionsaccounted for $15.7 million. The remainder of the increase of$3.3 million, or 0.8%, was in comparable Properties and was due to inflationaryincreases in property operating costs.

Total other income,excluding Simon Brand and Simon Business initiatives, increased $38.6 million,and was principally the result of the following:

·       a$31.8 million increase in interest income due to $25.3 million in net interestincome for the period as a result of Mills-related loans, combined withincreased interest rates and excess cash from our December 2006 seniornotes offering,

·       a$12.8 million increase in lease settlement income as a result of settlementsreceived from two department anchor stores in 2007 as compared to our 2006lease settlement income from certain non-anchor tenants,

·       $9.8million in loan financing fees related to Mills-related loans,

·       a$13.4 million decrease in gains on land sale activity, and

·       a$2.4 million decrease in other net activity during the comparable period of2006 on comparable Properties.

Revenues from Simon Brand and Simon Businessinitiatives increased $4.0 million to $62.4 million from$58.4 million. The increase in revenues is primarily due to increasedevent and sponsorship income.

Property operating expenses increased$8.1 million, a $8.9 million increase from the effect of the PropertyTransactions, and a $0.8 million decrease in the comparable properties, or 0.4%,principally the result of overall decreased administration expenses.

Depreciation and amortization expense increased $25.1million and is primarily a result of the Property Transactions.

Real estate taxes increased $6.0 million from theprior period due principally to increases in expenses at our comparableproperties of $4.4 million due to the effect of increased assessments.  During the six month comparable period of2006, we realized a net impact of $4.7 million in refunds received at variousproperties. The six month period of 2007 also has an increase for real estatetax expenses of the Property Transactions which serves to somewhat offset theeffect of the prior year refunds.

Repairs and maintenance increased $7.0 million due toincreased snow removal costs in 2007 than that of 2006, inflationary increasesand new property openings.

Provision for credit losses decreased $2.5 million dueto fewer tenant bankruptcies in the period as compared to the prior year.

Other expenses increased $2.9 million primarily due toincreased ground rent expense, professional fees, and state and local taxes.

Interest expenseincreased $61.3 million due principally to the following:

·       theadditional borrowings to fund the Mills-related loans,

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

·       theimpact of increased fixed rate debt of $2.7 billion, which are generally athigher rates than our variable rate debt, due to the issuances of fixed-rateunsecured notes in May, August, and December of 2006.

Also impacting interest expense was the consolidationof Town Center at Cobb, Gwinnett Place, and Mall of Georgia as a result of ouracquisition of additional ownership interests.

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Income tax expense of taxable REIT subsidiariesdecreased $4.1 million due to a reduction in the taxable income for themanagement company as a result of structural changes made to our wholly-ownedcaptive insurance entities.

Income from unconsolidated entities decreased $20.6million, principally due to the prior year recognition of $11.3 million for thereceipt of a beneficial interest in a regional mall entity, which representsthe majority of the decrease in our income from unconsolidated entities, net inthe consolidated financial statements. This beneficial interest was terminatedin November 2006. Also contributing to the decrease is the impact of theMills transaction (net of eliminations). On a net income basis, our share ofincome from SPG-FCM approximates a net loss of $10 million due to additionaldepreciation and amortization expenses on asset basis step ups in purchaseaccounting approximating $28 million for the second quarter of 2007.

Gain on sales of assets andinterests in unconsolidated entities decreased $41.4 million over the priorperiod due to the recording of a $34.4 million gain on the sale of 10.5%of our interests in Simon Ivanhoe B.V./S.à.r.l. (“Simon Ivanhoe”), and a $7.6 million gain on the sale GreatNortheast Plaza in 2006.

Preferred unit requirementdecreased $11.2 million because we had redeemed our Series F preferredstock in the fourth quarter of 2006 and the effect of the conversion ofpreferred units to common units or shares.

**Liquidity andCapital Resources**

Because we generate revenues primarily from long-termleases, our financing strategy relies primarily on long-term fixed rate debt.We manage our floating rate debt to be at or below 15–25% of total outstandingindebtedness by setting interest rates for each financing or refinancing basedon current market conditions. Because ofattractive fixed-rate debt opportunities in the past three years, floating ratedebt currently comprises only approximately 9% of our total consolidated debt.Most of our floating rate debt relates to borrowings made from our CreditFacility to consummate the Mills acquisition. We also enter intointerest rate protection agreements as appropriate to assist in managing ourinterest rate risk. We derive most of our liquidity from leases that generatepositive net cash flow from operations and distributions of capital fromunconsolidated entities that totaled $722.0 million during the first sixmonths of 2007.  In addition, our CreditFacility provides an alternative source of liquidity as our cash needs varyfrom time to time.

Our balance of cash and cash equivalents decreased$548.2 million during 2007 to $381.2 million as of June 30, 2007. The June 30,2007 and December 31, 2006 balances include $32.6 million and $27.2million, respectively, related to our co-branded gift card programs, which wedo not consider available for general working capital purposes.

On June 30, 2007, our Credit Facility hadavailable borrowing capacity of approximately $2.0 billion. During the firstsix months of 2007, the maximum amount outstanding under the Credit Facilitywas $2.0 billion and the weighted average amount outstanding was $1.2billion. The weighted average interest rate was 5.27% for the period ended June 30,2007.

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

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

On February 16, 2007, SPG-FCM entered intoa definitive merger agreement with Mills to acquire all of the outstandingcommon stock of Mills for $25.25 per common share in cash. The acquisition wascompleted through a cash tender offer and a subsequent merger transaction, allof which was concluded on April 3, 2007. As of June 30, 2007 theOperating Partnership and Farallon had each funded $475 million 

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into SPG-FCM to acquireall of the common stock of Mills. As part of the transaction, we also loanedamounts to SPG-FCM and Mills that bear interest primarily at rates of LIBORplus 270-275 basis points. These funds were used by SPG-FCM and Mills torepay loans and other obligations of Mills, including the redemption of aseries of preferred stock, during the period. Aggregate repayments of our loansto SPG-FCM and Mills during the period reduced the principal balance ofthose loans to approximately $532.6 million as of June 30, 2007. Duringthe first and second quarters of 2007, we recorded approximately $12 millionand $14 million, respectively, in interest income (net of inter-entityeliminations). We also recorded fee income, including fee income amortizationrelated to up-front fees on loans made to SPG-FCM and Mills, during the firstand second quarter of approximately $1.9 million and $7.9 million,respectively, (net of inter-entity eliminations) for providing refinancingservices to Mills’ properties and SPG-FCM.

As a result of the change in control of Mills, holdersof Mills’ $316.3 million in Series F convertible cumulative redeemablepreferred stock had the right to require that Mills repurchase their shares forcash equal to the liquidation preference per share plus accrued and unpaiddividends. During the second quarter of 2007, all of the holders of Mills’ Series Fpreferred stock exercised this right, and Mills paid approximately $333 millionto redeem, at par value, this series of preferred stock plus accrued dividends.Further, as of August 1, 2007, The Mills Corporation was liquidated andthe holders of the remaining series of Mills preferred stock received theirliquidation preference plus accrued dividends.

Subsequent to June 30, 2007, the holders of lessthan 5,000 common units in the Mills’ operating partnership (“Mills LP”)received $25.25 per unit in cash, and those holding 5,000 or more common unitsin Mills LP had the option to exchange their units for cash of $25.25 per unit,or for our limited partnership units based on a fixed exchange ratio of 0.211of our units for each limited partnership unit in the Mills LP. That option expired on August 1, 2007. Holdersof 312,967 limited partner units in Mills LP elected to exchange their Mills LPunits for 66,036 of our units. The remaining Mills LP units were exchanged forcash.

We have the funds necessary to fulfill our equityrequirement to SPG-FCM, as well as any funds that we have or will providein the form of loans to Mills or SPG-FCM, from our available cash and theCredit Facility. Also, effective July 1, 2007, Simon Property or anaffiliate began serving as the manager for substantially all of the additional38 properties in which SPG-FCM holds an interest. In conjunction with theMills acquisition, we acquired a controlling interest in two properties inwhich we previously held a 50% ownership interest (Town Center at Cobb andGwinnett Place) and as a result we have consolidated these two properties atthe date of acquisition.

SPG-FCM has completed itspreliminary purchase price allocations for the acquisition of Mills. Thevaluations were developed with the assistance of a third-party professionalappraisal firm. The acquisition involved the assumption of $954.9 million of preferredstock,  a proportionate share ofproperty-level mortgage debt, SPG-FCM’s share of which approximated $4 billion,and certain liabilities and contingencies. The preliminary allocations will befinalized within one year of the acquisition date in accordance with applicableaccounting standards.

**Cash Flows**

Our net cash flowfrom operating activities and distributions of capital from unconsolidatedentities for the six months ended June 30, 2007 totaled $722.0 million. Inaddition, we had net proceeds from all of our debt financing and repaymentactivities in this period of $829.2 million. These activities are furtherdiscussed below in Financing and Debt. We also:

·       repurchasedunits and preferred units amounting to $27.6 million,

·       paidunitholder distributions of $472.2 million,

·       paidpreferred unit distributions totaling $39.5 million,

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·       fundedconsolidated capital expenditures of $412.6 million. These capitalexpenditures include development costs of $219.2 million, renovation andexpansion costs of $125.5 million, and tenant costs and other operationalcapital expenditures of $67.9 million, and

·       fundedinvestments in unconsolidated entities of $467.8 million.

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

·       excesscash generated from operating performance and working capital reserves,

·       borrowingson our Credit Facility,

·       additionalsecured or unsecured debt financing, or

·       additional equity raised inthe public or private markets.

**Financing and Debt**

**Unsecured Debt**

***Credit Facility.******  ***Significantdraws on the Credit Facility during the six months ended June 30, 2007were as follows:

| *Draw Date*     | *** *** | ***Draw  Amount*** | *** *** | ***Use of Credit Line Proceeds***                                             |
|----------------------|--------------|--------------------|--------------|---------------------------------------------------------------------------------------------------|
| February 16, 2007    |         | $600,000           |         | Borrowing to partially  fund a $1.187 billion loan to Mills.                                      |
| March 29,  2007 |         | $550,000           |         | Borrowing to fund our equity commitment for the  Mills acquisition and to fund a loan to SPG-FCM. |
| April 17,  2007 |         | $140,000           |         | Borrowing to fund a loan  to SPG-FCM.                                                             |
| June 28, 2007   |         | $181,000           |         | Borrowing to fund a loan to SPG-FCM.                                                              |

 

Other amounts drawn on theCredit Facility were primarily for general working capital purposes.  We repaid a total of $1.6 billion on theCredit Facility during the six months ended June 30, 2007 with proceeds wereceived from the refinancing of selected Mills properties and the refinancingof a senior term loan facility. The total outstanding balance on the CreditFacility as of June 30, 2007 was $952.0 million, and the maximum amountoutstanding during the six months ended June 30, 2007 was approximately$2.0 billion. During the first six months of 2007, the weighted averageoutstanding balance on the Credit Facility was approximately $1.2 billion.

**Secured Debt**

Total secured indebtedness was $4.8 billion and$4.4 billion at June 30, 2007 and December 31, 2006,respectively. During the six months ended June 30, 2007, we repaid$191.3 million in mortgage loans, unencumbering four properties.

As a result of the Millsacquisition, we now hold a controlling ownership interest in Gwinnett Place andTown Center at Cobb, and as a result these Properties were consolidated as ofthe acquisition date. This included the consolidation of two mortgages securedby Gwinnett Place of $35.6 million and $79.2 million at fixed rates of 7.54%and 7.25%, respectively, and two mortgages secured by Town Center at Cobb of$45.4 million and $60.3 million at fixed rates of 7.54% and 7.25%, respectively.On May 23, 2007, we refinanced Gwinnett Place and Town Center at Cobb with$115.0 million and $280.0 million mortgages at fixed rates of 5.68% and 5.74%,respectively.

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***Summary of Financing***

Ourconsolidated debt, adjusted to reflect outstanding derivative instruments, andthe effective weighted average interest rates as of June 30, 2007 and December 31,2006 consisted of the following (dollars in thousands):

| **Debt Subject to** | ** ** | ** ** | ** **    | **Adjusted Balance  as of  June 30, 2007** | ** ** | **Effective  Weighted  Average  Interest Rate** | ** ** | **Adjusted Balance  as of  December 31, 2006** | ** ** | **Effective  Weighted  Average  Interest Rate** | ** ** |
|-------------------------------|------------|------------|---------------|----------------------------------------------------------------|------------|------------------------------------------------------|------------|--------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| **Fixed  Rate**               | ** ** |       | **$**         | **14,938,392**                                                 | ** ** |                                                 |       | **5.96**                                                           | **%**      |                                                 |       | $ | 14,548,226 |   |   |   | 6.02 | % |   |
| **Variable  Rate**            | ** ** |       | **1,500,453** | ** **                                                     |       |                                                 | **5.40**   | **%**                                                              |       |                                                 | 846,263    |   |   |   | 5.01 | % |   |
|                          | ** ** |       | **$**         | **16,438,845**                                                 | ** ** |                                                 |       | **5.91**                                                           | **%**      |                                                 |       | $ | 15,394,489 |   |   |   | 5.97 | % |   |

 

As of June 30, 2007, we had interest rate capprotection agreements on approximately $95 million of consolidated variablerate debt. We also hold $370.0 million of notional amount variable rate swapagreements that have a weighted average variable pay rate of 5.38% and aweighted average fixed receive rate of 3.72%. As of June 30, 2007, the neteffect of these agreements effectively converted $370.0 million of fixed ratedebt to variable rate debt.

***Contractual Obligations and Off-Balance SheetArrangements.******  ***There have been no material changes inour outstanding capital expenditure commitments since December 31, 2006,as previously disclosed in our 2006 Annual Report on Form 10-K. Thefollowing table summarizes the material aspects of our future obligations as ofJune 30, 2007 for the remainder of 2007 and subsequent years thereafter(dollars in thousands):

| ** **                                 | ** ** | ***2007*** | *** *** | ***2008-2009*** | *** *** | ***2010-2012*** | *** *** | ***After 2012*** | *** *** | ***Total*** | ** ** |
|--------------------------------------------|------------|------------|--------------|-----------------|--------------|-----------------|--------------|-----------------------|--------------|-------------|------------|
| **Long  Term Debt**                        | ** ** | ** ** | ** **   | ** **      | ** **   | ** **      | ** **   | ** **            | ** **   | ** **  | ** ** |
| Consolidated (1)                      |       | $          | 1,368,309    |            | $            | 2,463,153       |         | $                     | 7,159,852    |        | $          | 5,405,065 |   | $ | 16,396,379 |   |
| **Pro rata share of Long-Term  Debt:**     | ** ** | ** ** | ** **   | ** **      | ** **   | ** **      | ** **   | ** **            | ** **   | ** **  | ** ** |
| Consolidated (2)                      |       | $          | 1,356,551    |            | $            | 2,449,550       |         | $                     | 7,010,711    |        | $          | 5,307,517 |   | $ | 16,124,329 |   |
| Joint Ventures (2)                    |       | 117,348    |         | 1,282,318       |         | 2,224,467       |         | 2,535,698             |         | 6,159,831   |       |
| **Total Pro Rata Share of Long-Term Debt** |       | $          | 1,473,899    |            | $            | 3,731,868       |         | $                     | 9,235,178    |        | $          | 7,843,215 |   | $ | 22,284,160 |   |

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(1)          Represents principalmaturities and therefore, excludes net premiums and discounts and fair valueswaps of $42,466.

(2)          Represents our pro ratashare of principal maturities and excludes net premiums and discounts.

Our off-balance sheetarrangements consist primarily of our investments in real estate joint ventureswhich are common in the real estate industry and are described in Note 5of the notes to the accompanying financial statements. Joint venture debt isthe liability of the joint venture, is typically secured by the joint ventureProperty, and is non-recourse to us. As of June 30, 2007, we have loanguarantees and other guarantee obligations of $123.3 million and $26.7 million,respectively, to support our total $6.2 billion share of joint venture mortgageand other indebtedness presented in the table above.

**Acquisitions andDispositions**

Buy-sell provisions are common in real estatepartnership agreements. Most of our partners are institutional investors whohave a history of direct investment in retailreal estate. Our partners in our joint venture properties may initiatethese provisions at any time and if we determine it is in our unitholders’ bestinterests for us to purchase the joint venture interest and we believe we haveadequate liquidity to execute the purchases of the interests without hinderingour cash flows or liquidity, then we mayelect to 

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buy.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 or to reinvest in development, redevelopment, orexpansion opportunities.

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

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

On March 1, 2007, we acquired the additional 40%interest in both University Park Mall and University Center located inMishawaka, IN for a purchase price of $50.7 million. As a result we now own100% of University Park and University Center.

***Dispositions.******  ***We continue topursue the sale of Properties that no longer meet our strategic criteria orthat are not the primary retail venue within their trade area. During the firstsix months of 2007, we did not dispose of any consolidated properties.

**DevelopmentActivity**

***New U.S. Developments.******  ***The followingdescribes certain of our new development projects, the estimated total cost,and our share of the estimated total cost and our share of the construction inprogress balance as of June 30, 2007 (dollars in millions):

| ***Property***                | *** *** | ***Location***        | *** *** | ***Gross  Leasable  Area*** | *** *** | ***Estimated  Total  Cost (a)*** | *** *** | ***Our Share of  Estimated  Total Cost*** | *** *** | ***Our Share of  Construction  in Progress*** | *** *** | ***Estimated  Opening Date*** | *** *** |
|-------------------------------|--------------|-----------------------|--------------|-----------------------------|--------------|---------------------------------------|--------------|----------------------------------------------------------|--------------|--------------------------------------------------------------|--------------|------------------------------------|--------------|
| **Under Construction:**       |         |                  |         |                        |         |                                  |         |                                                     |         |                                                         |         |                               |         |   |   |   |   |   |   |   |   |
| Hamilton Town Center          |         | Noblesville, IN       |         |                        | 950,000      |                                  |         |                                                     | $            | 118                                                          |         |                               |         | $ | 59 |   |   |   | $ | 13 |   |   | 2nd Quarter 2008 |   |
| Houston Premium Outlets       |         | Houston, TX           |         |                        | 433,000      |                                  |         |                                                     | 96           |                                                         |         |                               | 96           |   |   |   | 39 |   |   | 2nd Quarter 2008 |   |
| Palms Crossing                |         | McAllen, TX           |         |                        | 396,000      |                                  |         |                                                     | 65           |                                                         |         |                               | 65           |   |   |   | 34 |   |   | 4th Quarter 2007 |   |
| Philadelphia Premium  Outlets |         | Limerick, PA          |         |                        | 425,000      |                                  |         |                                                     | 119          |                                                         |         |                               | 119          |   |   |   | 80 |   |   | 4th Quarter 2007 |   |
| Pier Park                     |         | Panama City Beach, FL |         |                        | 920,000      |                                  |         |                                                     | 127          |                                                         |         |                               | 127          |   |   |   | 65 |   |   | 1st Quarter 2008 |   |
|                               |              |                       |              |                             |              |                                       |              |                                                          |              |                                                              |              |                                    |              |  |  |  |  |  |  |  |  |  |  |  |

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

We expect to fund these projects with available cashflow from operations, borrowings from our Credit Facility, or project specificconstruction loans. We expect our share of total 2007 new development costsremaining for the year to be approximately $330 million.

***StrategicExpansions and Renovations.******  ***In addition tonew development, we also incur costs related to construction for significantrenovation and/or expansion projects at our properties. Included in theseprojects are the renovation and addition of Crate & Barrel andNordstrom at Burlington Mall, Nordstrom at Ross Park Mall and Aventura Mall,expansions and life-style additions at Lehigh Valley Mall, Northgate Mall, TownCenter at Boca Raton, and University Park Mall, a Neiman Marcus expansion atLenox Square, Phase II expansions at Las Vegas Premium Outlets, Orlando PremiumOutlets, Rio Grande Valley Premium Outlets, and St. Johns Town Center, and theacquisition and renovation of several anchor stores previously operated byFederated Department Stores.

We expect to fund these capital projects withavailable cash flow from operations or borrowings from the Credit Facility. Wehave other renovation and/or expansion projects currently under construction orin preconstruction development and expect to invest a total of approximately$495 million (our share) on expansion and renovation activities for theremainder of 2007.

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***International.******  ***We typicallyreinvest net cash flow from our international investments to fund futureinternational development activity. We believe this strategy mitigates some ofthe risk of our initial investment and our exposure to changes in foreign currencies.We have also funded our European investments with Euro-denominated borrowingsthat act as a natural hedge against local currency fluctuations. This has alsobeen the case with our Premium Outlet joint ventures in Japan and Mexico wherewe use Yen and Peso denominated financing. Weexpect our share of international development for 2007 to approximate$200 million.

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

The carrying amount of our total combined investmentin Simon Ivanhoe and Gallerie Commerciali Italia (“GCI”) as of June 30,2007, net of the related cumulativetranslation adjustment, was $340.1 million. Our investments in Simon Ivanhoeand GCI are accounted for using the equity method of accounting. Currently,four European developments are under construction, which will add approximately3.0 million square feet of GLA for a total net cost of approximately €593.6 million,of which our share is approximately €156.2 million, or $210.4million based on Euro:USD exchange rates. Additionally, subsequent to June 30,2007, Simon Ivanhoe sold five of its European properties in Poland. We receivedour share of the proceeds from the sale of approximately €91 million,and expect to recognize a gain on sale during the third quarter of 2007 inexcess of $70 million.

As of June 30, 2007, the carrying amount of our40% joint venture investment in the five Japanese Premium Outlet centers net ofthe related cumulative translation adjustment was $277.3 million.Currently, Kobe-Sanda Premium Outlets, a 185,000 square foot Premium OutletCenter, is under construction in Kobe, Japan. The project’s total projected netcost is ¥5.9 billion, of which our share is approximately¥2.4 billion, or $19.1 million based on Yen:USD exchange rates. Inaddition, two properties in Japan are undergoing expansion projects which willadd approximately 148,000 square feet of GLA for a total net cost of approximately¥8.9 billion, of which our share is approximately ¥3.6 billion, or$28.9 million based on Yen:USD exchange rates.

In addition to the developments in Europe and Japan, on June 1, 2007, our Chelsea division openedYeoju Premium Outlets, a 253,000 square footcenter near Seoul, South Korea. The project’s total projected net costis KRW 64.7 billion, of which our share is approximately KRW 32.4 billion, orapproximately $35.0 million based on KRW:USD exchange rates.

During 2006, we finalizedthe formation of joint venture arrangements to develop and operate shoppingcenters in China. The shopping centers will be anchored by Wal-Mart stores andwill be through a 32.5% ownership in a joint venture entity, Great MallInvestments, Ltd. (“GMI”). We are initially developing five centersin China, four of which are under construction, as of June 30, 2007. Ourtotal equity commitment for these centersapproximates $53.6 million and as of June 30, 2007 our combined investment in GMI is approximately$25.6 million.

**Distributions**

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

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On July 26, 2007, theSimon Property Group Board of Directors authorized Simon Property to repurchaseup to $1.0 billion of our common stock over the next twenty-four months asmarket conditions warrant. Simon Property may repurchase the shares in the openmarket or in privately negotiated transactions. If Simon Property repurchasesany shares under this program, we will repurchase a corresponding number of ourcommon units from Simon Property.

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

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

**Item 4.**                        Controlsand Procedures

***Evaluation ofDisclosure Controls and Procedures.******  ***We carried outan evaluation under the supervision and with participation of management,including the Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of our “disclosure controls andprocedures” (as defined in Rule 13a-15(e) under the SecuritiesExchange Act of 1934 (the “Exchange Act”)) as of the end of the period coveredby this Quarterly Report on Form 10-Q. Based upon that evaluation,the Chief Executive Officer and Chief Financial Officer have concluded that ourdisclosure controls and procedures were effective as of June 30, 2007.

***Changes in Internal Control Over Financial Reporting.******  ***There have notbeen any changes in our internal control over financial reporting (as definedin Rule 13a-15(f)) that occurred during the quarter ended June 30,2007 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

**Part II —Other Information**

**Item 1.**                        LegalProceedings

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

We are involved in variousother legal proceedings that arise in the ordinary course of our business. Webelieve that such routine litigation, claims and administrative proceedingswill not have a material 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 1A.**                RiskFactors

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

**Item 5.**                        OtherInformation

During the quarter coveredby this report, the Audit Committee of Simon Property’s Board of Directorsapproved Ernst & Young, LLP, the Company’s independent registeredpublic accounting firm, to perform certain international tax complianceservices. This disclosure is made pursuant to Section 10A(i)(2) ofthe Securities Exchange Act of 1934, as added by Section 202 of theSarbanes-Oxley Act of 2002.

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**Item6.**                        Exhibits
|        | ***Exhibit  Number*** | ** ** | ** ** | ***Exhibit Descriptions***                                                                                                                                                                                   |
|--------|-----------------------|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 31.1                  |       |       | Certification by the Chief Executive Officer  pursuant to rule 13a-14(a)/15d-14(a) of the Securities  Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002. |
|   | 31.2                  |       |       | Certification by  the Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a) of  the Securities Exchange Act of 1934, as adopted pursuant to Section 302  of the Sarbanes-Oxley Act of 2002. |
|   | 32                    |       |       | Certification by the  Chief Executive Officer and Chief Financial Officer pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002.              |
|        |                       |            |            |                                                                                                                                                                                                                   |  |  |

 

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|        | **SIMON PROPERTY GROUP, L.P.**By Simon Property Group, Inc.,  General Partner |
|--------|------------------------------------------------------------------------------------|
|   | /s/ Stephen E. Sterrett                                                            |
|   | Stephen E. Sterrett                                                           |
|   | Executive Vice President and Chief Financial Officer                               |
|   | Date: August 13,  2007                                                        |

 

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