## NOTE 1. ORGANIZATION 

Simon Property Group, Inc. (“Simon Property”) is a Delaware corporation that operates as a self-administered and self-managed real estate investment trust (“REIT”). Simon Property Group, L.P. (the “Operating Partnership”) is a majority- owned partnership subsidiary of Simon Property that owns all but one of our real estate properties. In these notes, the terms “we”, “us” and “our” refer to Simon Property, the Operating Partnership, and their subsidiaries. 

We are engaged primarily in the ownership, operation, leasing, management, acquisition, expansion and development of real estate properties. Our real estate properties consist primarily of regional malls and community shopping centers. As of December 31, 2003, we owned or held an interest in 246 income-producing properties in North America, which consisted of 175 regional malls, 67 community shopping centers, and four office and mixed-use properties in 37 states and Canada (collectively, the “Properties”, and individually, a “Property”). Mixed-use properties are properties that include a combination of retail space, office space, and/or hotel components. In addition, we also own interests in three parcels of land held for future development (together with the Properties, the “Portfolio”). Finally, we have ownership interests in 47 assets in Europe (France, Italy, Poland and Portugal). 

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

● Base minimum rents and cart and kiosk rentals, 

● Overage and percentage rents based on tenants’ sales volume, and 

● Recoveries of substantially all of our recoverable expenditures, which consist of property operating, real estate tax, repairs and maintenance, and advertising and promotional expenditures. 

We also generate revenues due to our size and tenant relationships from: 

● Pursuing mall marketing initiatives, including the sale of gift cards, 

● Forming consumer focused strategic corporate alliances, and 

● Offering property operating services to our tenants and others resulting from our relationships with vendors. 

M.S. Management Associates, Inc. (the “Management Company”) is a wholly-owned subsidiary that provides leasing, management, and development services to most of the Properties. In addition, insurance subsidiaries of the Management Company insure the self-insured retention portion of our general liability program and the deductible associated with our workers’ compensation programs. In addition, they provide reinsurance for the primary layer of general liability coverage to our third party maintenance providers while performing services under contract with us. Third party providers provide coverage above the insurance subsidiaries’ limits. 

We are subject to risks incidental to the ownership and operation of commercial real estate. These risks include, among others, the risks normally associated with changes in the general economic climate, trends in the retail industry, creditworthiness of tenants, competition for tenants and customers, changes in tax laws, interest rate and foreign currency levels, the availability of financing, and potential liability under environmental and other laws. Our regional malls and community shopping centers rely heavily upon anchor tenants like most retail properties. Three retailers’ anchor stores occupied 337 of the approximately 958 anchor stores in the Properties as of December 31, 2003. An affiliate of one of these retailers is a limited partner in the Operating Partnership. 

## Structural Simplification 

On December 31, 2002, we continued to simplify our organizational structure by merging SPG Realty Consultants, Inc. (“SPG Realty”) into Simon Property, ending our “paired share” REIT structure resulting from our combination with Corporate Property Investors, Inc. All of the outstanding stock of SPG Realty was previously held in trust for the benefit of the holders of common stock of Simon Property. As a result of the merger, our stockholders who were previously the beneficial owners of the SPG Realty stock are now, by virtue of their ownership of our common stock, the owners of the assets and operations formerly owned or conducted by SPG Realty. Note 2 describes the basis of presentation of the merger in the accompanying financial statements. 

