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Rating Action:

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

19 May 2010

Approximately $12 Billion of Securities Affected

New York, May 19, 2010 -- Moody's Investors Service has confirmed the ratings of Simon Property Group (senior unsecured at A3) and changed the outlook to stable. This action concludes Moody's review of Simon initiated on February 16, 2010. This rating action follows Simon's announcement on May 7, 2010 that it had withdrawn its fully financed acquisition and recapitalization proposals for General Growth Properties. This rating confirmation reflects the REIT's market leadership in US regional malls, strong liquidity position and stable earnings from its core retail property portfolio.

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.

Moody's notes that Simon's unencumbered property portfolio generates over $1.8 billion of EBITDA. Simon's liquidity and funding have been managed conservatively, as evidenced by the REIT's well-laddered debt maturity schedule and refinancing of its revolving credit facility. The REIT refinanced its credit facility in December 2009 with a new $3.6 billion revolver. During 1Q10, Simon received commitments for an additional $280 million from five new banks, bringing the size up to $3.85 billion. Simon's size, franchise, and high-quality property portfolio have enabled it to maintain excellent access to multiple sources of capital (secured and unsecured debt, common equity) throughout the past few years, despite at times constrained capital market conditions. As of 1Q10, Simon had approximately $3.2 billion available on its unsecured credit facility and an additional $3.6 billion of cash (including its share from unconsolidated joint ventures). Simon's 2010 debt maturities are manageable, with $2.5 billion coming due, given its current cash position, line capacity, substantial retained cash flow, and modest development spending needs. Simon's unencumbered asset pool is adequate at 67% of gross assets (including consolidated cash) and is comprised of the REIT's higher-quality assets.

Simon's effective leverage at book value (Debt + Preferred Equity as a % Gross Assets) and Net Debt/EBITDA are high at 63% and 6.1x, respectively, including pro-rata share of joint ventures. Moody's notes that book leverage declines to 54% when accounting for the REIT's $3.6 billion of cash. Secured debt remains high due to the REIT's extensive use of joint ventures, which tend to be funded with substantial amounts of mortgage debt. Secured debt has increased over the years from 27% in 2006 to 32% at 1Q10 (based on book value, including JVs). The higher secured leverage is mitigated by Simon's consistent and superior access to different sources of capital, despite very difficult capital market conditions at times, and consistent earnings generation. Now that Simon has withdrawn its proposal to purchase General Growth, Moody's expects the REIT will use some of its excess liquidity to reduce overall and secured leverage levels.

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 (including pro-rata share of joint ventures); 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; net debt/EBITDA approaching 7x; and secured debt over 35% of gross assets.

The following ratings were confirmed at A3 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.

Moody's last rating action with respect to Simon was on February 16, 2010 when its ratings were placed under review direction uncertain.

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 properties, primarily regional and super-regional malls as well as premium outlet centers. It currently owns or has an interest in 381 properties comprising 261 million SF of gross leaseable area in North America, Europe and Asia. At March 31, 2010, Simon had consolidated gross book assets of $32.0 billion, book equity of $4.4 billion, a total market capitalization of $53.8 billion, and an equity market capitalization of $29.5 billion.

The principal methodology used in rating Simon was the Rating Methodology for REITs and Other Commercial Property Firms, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating Simon can also be found in the Rating Methodologies sub-directory on Moody's website.

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

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

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