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Announcement:

Moody's affirms Simon's A3 debt rating; stable outlook

11 May 2009

Approximately $11 Billion of Securities Affected.

New York, May 11, 2009 -- Moody's Investors Service affirmed the ratings of Simon Property Group, Inc. (senior debt at A3). This rating affirmation reflects the REIT's market leadership in US regional malls, strong liquidity position and stable earnings from its core retail property portfolio. The rating outlook is stable.

Simon is the largest REIT in the USA and is focused on operating a nationwide portfolio of retail properties. Simon possesses proven ability to generate growth in earnings both internally (positive releasing spreads, redevelopment and adjacent activities such as Simon Brand Ventures) and externally (greenfield development, acquisitions and international expansion). Simon's management team is strong and innovative, with a deep bench that positions it well to pursue innovative asset management, tenant-relationship and marketing programs.

Simon's dominance in the retail space is enhanced by its international presence. The REIT participates in joint ventures that own 52 shopping centers in Europe, seven Premium Outlet Centers in Japan and one each in Korea, China and Mexico. International ventures account for 4% of Simon's EBITDA. Simon approaches international expansion cautiously by entering into partnerships with local retail real estate developers and targeting high-growth, under-retailed markets with strong demographics. Its US development pipeline has been reduced prudently in the current retail environment, with approximately $180 million in funding needed for 2009, and $50 million for each of 2010, 2011 and 2012.

Moody's notes that Simon's unencumbered property portfolio generates over $1.7 billion of EBITDA and that the unencumbered properties consist of high quality malls. Simon's mall portfolio generates $455 in average sales PSF and its Premium Outlet Centers generate $507 sales PSF at 1Q09.

Simon's fixed charge coverage (inclusive of JVs) increased to 2.5x at 1Q09 from 2.3x at YE 2006, 2007 and 2008. Liquidity remains strong with $3 billion available under its $3.5 billion credit facility at 1Q09; with $1.15 billion of cash and $1.2 billion generated by its May 7 equity issuance, Simon has current liquidity of $5.35 billion. Its debt maturity schedule continues to be well-laddered with $685 million remaining to be paid in 2009 consisting of $200 million of unsecured notes between July and August, and mortgages due in November 2009. In addition, Simon has continued to demonstrate excellent access to capital despite constrained market conditions. Simon was the first REIT to access the public debt markets in almost a year with their March 2009 issuance of $650 million and raised $1.7 billion in two equity issuances during the past six weeks.

Simon's key credit challenges include high overall (65.8% based on book value including JVs) and secured leverage levels. Secured debt has increased over the years from 26.7% in 2006 to 34.1% at 1Q09 (based on book value including JVs). Moody's anticipates that secured debt will remain in the upper end of this range during the current capital markets environment. In addition, Simon faces pressure from the cyclical economic downturn on consumer spending and its effects on the demand for retail space.

Upwards rating movement would be contingent upon net debt/EBITDA consistently below 6x or secured debt comfortably below 25% of gross assets on a book value basis; deepening leadership in the USA; and strengthening the international platform closer to 10% of the REIT's EBITDA. A negative rating action would reflect an acute reversal in earnings strength, stability or competitive position, most likely tied to a highly levered, large acquisition of a firm that is already highly geared with secured debt; fixed charge coverage consistently less than 2.0x; and secured debt over 35% of gross assets.

Last rating action with respect to Simon Property Group was on November 1, 2006 when Moody's upgraded Simon's unsecured debt rating to A3 with a stable outlook.

The following ratings were affirmed with a stable outlook:

Simon Property Group, L.P. -- Senior unsecured debt at A3; senior unsecured debt shelf at (P)A3.

Simon Property Group, Inc. -- Preferred stock at Baa1; preferred stock shelf at (P)Baa1.

Corporate Property Investors -- Senior debt at A3.

CPG Partners, LP -- Senior debt at A3.

Chelsea Property Group, Inc. -- Senior debt at A3.

Simon Property Group, Inc. [NYSE: SPG], headquartered in Indianapolis, Indiana, USA, is the largest retail REIT in the USA. Simon owns, manages, leases and develops 386 properties, primarily regional and super-regional malls as well as Premium Outlet Centers, encompassing 262 million SF of gross leaseable area in North America, Europe and Asia. At March 31, 2009, Simon had consolidated gross book assets of $23 billion and book equity of $3 billion.

The principal methodology used in rating Simon Property Group was the Rating Methodology for REITs and Other Commercial Property Firms, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.

New York
Merrie S. Frankel
VP - Senior Credit Officer
Commercial Real Estate Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Lori Marks
Asst Vice President - Analyst
Commercial Real Estate Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Simon's A3 debt rating; stable outlook
No Related Data.
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