We cannot assure you that we will achieve our business objectives.

            We develop and acquire properties to generate both current income and long-term appreciation in value. We do not limit the amount or percentage of assets that may be invested in any particular property or type of property or in any geographic area. We may purchase or lease properties for long-term investment or develop, redevelop, and/or sell our Properties, in whole or in part, when circumstances warrant. We participate with other entities in property ownership, through joint ventures or other types of co-ownership. These equity investments may be subject to existing mortgage financing and other indebtedness that have priority over our equity interest.

            While we emphasize equity real estate investments, we may, at our discretion, invest in mortgages and other real estate interests consistent with Simon Property's qualification as a real estate investment trust, ("REIT") under the Internal Revenue Code of 1986, as amended ("Code").or REIT. We do not currently intend to invest to a significant extent in mortgages or deeds of trust; however, we hold an interest in one Propertyproperty through a mortgage note which results in us

receiving 100% of the economics of the Property.property. We may invest in participating or convertible mortgages if we conclude that we may benefit from the cash flow or any appreciation in the value of the property.

            We may also invest in securities of other entities engaged in real estate activities or securities of other issuers. However, any of these investments would be subject to the percentage ownership limitations and gross income tests necessary to maintain Simon Property's qualification as a REIT. These REIT limitations mean that Simon Property cannot make an investment that would cause its real estate assets to be less than 75% of its total assets. In addition, at least 75% of Simon Property's gross income must be derived directly or indirectly from investments relating to real property or mortgages on real property, including "rents from real property," dividends from other REIT's and, in certain circumstances, interest from certain types of temporary investments. At least 95% of Simon Property's income must be derived from such real property investments, and from dividends, interest and gains from the sale or dispositions of stock or securities or from other combinations of the foregoing.

            Subject to these REIT limitations, we may invest in the securities of other issuers in connection with acquisitions of indirect interests in real estate. Such an investment would normally be in the form of general or limited partnership or membership interests in special purpose partnerships and limited liability companies that own one or more properties. We may, in the future, acquire all or substantially all of the securities or assets of other REITs, management companies or similar entities where such investments would be consistent with our investment policies.

Financing Policies

            We must comply with the covenant restrictions of the debtcovenants contained in our financing agreements that limit our ratio of debt to total asset or market valuation.value, as defined. For example, our lines of credit and the indentures for our debt securities contain

covenants that restrict the total amount of debt to 65%, or 60% in relation to certain debt, of total assets, as defined under the related arrangement, and secured debt to 50% of total assets. In addition, these agreements contain other covenants requiring compliance with financial ratios. Furthermore, the amount of debt that we may incur is limited as a practical matter by our desire to maintain acceptable ratings for Simon Property's equity securities and our debt securities.

            We may raise additional capital throughby issuing units of limited partnership interests, or Units, or debt financing,securities, creating joint ventures with existing ownership interests in Properties,properties, retention of cash flows or a combination of these methods. If the Board determines to raise additional equity capital at the Operating Partnership level, weWe may, without limited partner approval, issue additional units of limited partnershipUnits or equity interests or units.in us. We may issue units in any manner and on such terms and for such consideration as we deem appropriate. This may include issuing units in exchange for property. The unitsThese may be preferred units and may be senior to the outstanding classes of our units and may be convertible into units. Existing holders of units will have no preemptive right to purchase units in any subsequent offerings. Any such offering could dilute a unitholder'slimited partner's investment in us.

            We anticipate that anyexpect most additional borrowings would be made in the form of bank borrowings, publicly and privately placed debt instruments, or purchase money obligations to the sellers of properties. Any of such indebtedness may be unsecuredsecured or may be secured by any or all of our assets, or any existing or new property-owning partnership.unsecured. Any such indebtedness may also have full or limited recourse to allthe borrower or any portion of the assets of any of the foregoing.cross-collateralized with other debt, or may be fully or partially guaranteed by us. Although we may borrow to fund the payment of dividends,distributions, we currently have no expectation that we will regularly be required to do so.

            We may obtainhave a $3.5 billion revolving unsecured or secured lines of credit.credit facility. We also may determine to issue debt securities. Any suchsecurities, but we may issue our debt securities which may be convertible into units, preferred units or be accompanied by warrants to purchase equity interests or be exchangeable for stock of Simon Property. We also may sell or securitize our lease receivables. The proceeds from any borrowings or financings may be used for one or more of the following:

•

financing acquisitions;

•

developing or redeveloping properties;

•

refinancing existing indebtedness;

•

working capital or capital improvements; or

•

assisting Simon Property to meet the income distribution requirements applicable to REITs, if Simon Property has income without the receipt of cash sufficient to enable Simon Property to meet such distribution requirements.REITs.

            We also may determine toalso finance acquisitions through the following:

•

issuance of additional units;

•

issuance of additionalcommon or preferred units;

•

issuance of other securities; or

•

sale or exchange of ownership interests in Properties.properties.

            Our ability to offerissue units to transferors may result in beneficial tax treatment for the transferors. This is because the exchange of units for properties or other partnership interests may defer gain recognition for tax purposes by the transferor. It may also be advantageous for us since certain investors may be limited inthere are ownership limits that restrict the number of units that theyinvestors may purchase.own.

            If the Board determines to obtain additional debt financing, we intend to do so generally through mortgages on Properties, borrowings under our revolving lines of credit or term loan facilities, or the issuance of unsecured debt. We may do this directly or through an entity owned or controlled by us. The mortgages may be non-recourse, recourse, or cross-collateralized.            We do not have a policy limiting the number or amount of mortgages that may be placed on any particular property. Mortgage financing instruments, however, usually limit additional indebtedness on such properties. We also have covenants on our unsecured debt that limit our total secured debt.

            Typically, we invest in or form special purpose entities only to obtainassist us in obtaining permanent financing for Properties on attractive terms. Permanent financing for Properties is typicallymay be structured as a mortgage loan on onea single property, or on a group of Propertiesproperties, and generally requires us to provide a mortgage interest on the property in favor of an institutional third party, as a joint venture with a third party, or as a securitized financing. For securitized financings, we are required to create special purpose entities to own the Properties.properties. These special purpose entities are structured so that they would not be consolidated with us in the event we would ever become subject to a bankruptcy proceeding. We decide upon the structure of the financing based upon the best terms then available to us and whether the proposed financing is consistent with our other business objectives. For accounting purposes, we include the outstanding securitized debt of special purpose entities owning consolidated Propertiesproperties as part of our consolidated indebtedness.

Conflict of Interest Policies

            We maintain policies and have entered into agreements designed to reduce or eliminate potential conflicts of interest. Simon Property has adopted governance principles governing its affairs and the affairs of its subsidiaries and the Simon Property Board of Directors, as well as written charters for each of the standing Committees of the Board.Board of

Directors. In addition, the Board of Directors of Simon Property has a Code of Business Conduct and Ethics, which applies to all of its officers, directors, and employees. At least a majority of the members of the Simon Property Board of Directors must qualify as independent under the listing standards for New York Stock Exchange companies and cannot be affiliated with the Simon or DeBartolo families who are significant stockholders. Any transaction between us and the Simons or the DeBartolos, including property acquisitions, service and property management agreements and retail space leases, must be approved by a majority of Simon Property's non-affiliated directors.

            The sale of certain of our properties may have an adverse tax impact on the Simons or the DeBartolos and the other limited partners. In order to avoid any conflict of interest between Simon Property and our limited partners, the Simon Property charter requires that at least six of the independentnon-affiliated directors of the Board of Directors must authorize and may require us to sell any property we own. Any such sale is subject to applicable agreements with third parties. Noncompetition agreements executed by each of the Simons contain covenants limiting the ability of the Simons to participate in certain shopping center activities in North America.

Policies With Respect To Certain Other Activities

            We intend to make investments which are consistent with Simon Property's qualification as a REIT, unless the Board of Directors determines that it is no longer in Simon Property's best interests to so qualify as a REIT. The Board of Directors may make such a determination because of changing circumstances or changes in the REIT requirements. We have authority to offer units of our equity interests or other securities in exchange for property. We also have authority to repurchase or otherwise reacquire our units or any other securities. We may engage in such activities in the future. We may also repurchase units subject to Board approval. It is ourOur policy to not makeprohibits us from making any loans to the directors or executive officers of Simon Property for any purpose. We may make loans to the joint ventures in which we participate.

Operating Strategies

            We plan to achieve our primary business objectives through a variety of methods discussed below, although we cannot assure you that we will achieve such objectives.

            Leasing.    We pursue a leasing strategy that includes:

•

marketing available space to maintain or increase occupancy levels;

•

renewing existing leases and originating new leases at higher base rents per square foot;

•

negotiating leases that allow us to recover from our tenants the majority of our property operating, real estate tax, and advertising and promotion expenditures; and

•

executing leases that provide for percentage or overage rents and/or regular or periodic fixed contractual increases in base rents.

            Management.    We draw upon our expertise gained through management of a geographically diverse Portfolio, nationally recognized as comprising high quality retail and other Properties. In doing so, we seek to maximize cash flow through a combination of:

•

an active merchandising program to maintain our shopping centers as inviting shopping destinations;

•

efforts to minimize overhead and operating costs which not only benefits our operations but also reduces the costs reimbursed to us from our tenants. A tenant's ability to pay rent is affected by the percentage of its sales represented by occupancy costs, which consist of rent and expense recoveries. As sales levels increase, if expenses subject to recovery are controlled, the tenant can afford to pay higher base rent.

•

coordinated marketing and promotional activities that establish and maintain customer loyalty; and

•

systematic planning and monitoring of results.

            We believe that if we are successful in our efforts to increase sales while controlling operating expenses we will be able to continue to increase base rents at the Properties.

            We are the manager of substantially all our Properties held as joint venture Properties and as a result we derive revenues from management fees and other services.

            Other Revenues.    Due to our size, tenant and vendor relationships, we also generate revenues from the activities of:

•

Simon Brand Ventures ("Simon Brand") obtains revenues from establishing our malls as leading market resource providers for retailers and other businesses and consumer-focused corporate alliances. Simon Brand revenues sources include: payment systems (including marketing fees relating to the sales of bank-issued prepaid cards), national marketing alliances, static and digital media initiatives, business development, sponsorship, and events.

•

Simon Business Network ("Simon Business") revenues are derived from the offering of products and property operating services, resulting from its relationships with vendors, to our tenants and others. These services include such items as waste handling, facility services, and energy services, as well as major capital expenditures such as roofing, parking lots and energy systems.

            We also generate other revenues through the sale or lease of land adjacent to our Properties commonly referred to as "outlots" or "outparcels."

            International Expansion.    Our investments in properties that are under operation in Europe, Japan, and Mexico are conducted through joint ventures. In Europe, we have investments in partnerships with Groupe Auchan (known as Gallerie Commerciali Italia ("GCI") in Italy) and Ivanhoe Cambridge, Inc. (known as Simon Ivanhoe S.à.r.l. ("Simon Ivanhoe") in France and Poland). In Japan, our investments are in partnerships with Mitsubishi Estate Co., Ltd. and Sojitz Corporation (formerly known as Nissho Iwai Corporation). Our Mexico investment is a joint venture with Sordo Madaleno y Asociados. We have also formed a joint venture in South Korea to develop a Premium Outlet Center. We and our partner, Shinsegae Co., Ltd. and Shinsegae International Co., Ltd. (collectively "Shinsegae"), each own 50% of this partnership. Lastly, we have formed joint ventures with Morgan Stanley Real Estate Fund ("MSREF") and SZITIC Commercial Property Co., Ltd. ("SZITIC CP") to develop five shopping centers in China. Four of these centers are currently under construction. We account for our international joint venture activities under the equity method of accounting, as defined by accounting policies generally accepted in the United States.

            We believe that the expertise we have gained through the development, leasing, management, and marketing of our Properties in the United States can be utilized in retail properties abroad. There are risks inherent in international operations that may be beyond our control which are described in the following section entitled "Risk Factors."

Acquisitions

            The acquisition of high quality individual properties or portfolios of properties remain an integral component of our growth strategies. On November 1, 2006, we acquired the remaining 50% interest in Mall of Georgia, a regional mall Property, from our partner for $252.6 million, including the assumption of $96.0 million of debt. As a result, we now own 100% of Mall of Georgia, and the property was consolidated as of the acquisition date.

            During 2006, we also acquired an additional 15.3% net ownership in Simon Ivanhoe, increasing our ownership interest in this joint venture to 50% effective in the first quarter of 2006.

Dispositions

            As part of our strategic plan to own high quality retail real estate, we continually evaluate our properties and sell those which no longer meet our strategic criteria. We may use the capital generated from these dispositions to invest in higher-quality and higher-growth properties. We believe that the sale of these non-core Properties will not have a material impact on our future results of operations or cash flows nor will their sale materially affect our ongoing operations. We expect that any earnings dilution from the sales on our results of operations from these dispositions will be offset by the positive impact of acquisition, development and redevelopment activities.

            During the year ended December 31, 2006, we disposed of three consolidated properties and one joint venture property in which we held a 50% interest and accounted for under the equity method. We received net proceeds of $52.7 million and recorded our share of a net gain on the disposals totaling $12.2 million. We do not believe the sale of these properties will have a material impact on our future results of operations or cash flows. We believe the disposition of these properties will enhance the average overall quality of our Portfolio. In addition, we also received capital transaction proceeds related to a beneficial interest that we held during 2006 in a mall partnership, which resulted in an $86.5 million gain, terminating our beneficial interests in this entity.

Competition

            We consider ourOur principal competitors to be tenare nine major United States or internationally publicly-held companies that own or operate regional malls, outlet centers, and other shopping centers in the United States and abroad. We also compete with many commercial developers, real estate companies and other owners of retail real estate that operate in our trade areas. Some of our Propertiesproperties and investments are of the same type and are within the same market area as competitor properties. The existence of competitive properties could have a material adverse effect on our ability to lease space and on the level of rents we can obtain. This results in competition for both the acquisition of prime sites (including land for development and operating properties) and for tenants to occupy the space that we and our competitors develop and manage. In addition, our Propertiesproperties compete against non-physical basedother forms of retailing, such as catalog companies and e-commerce websites, that offer retail products and services.

            We believe that our Portfolio is the largest, as measured by gross leasable area ("GLA"), of any publicly-traded retail real estate company. In addition, we own or have an interest in more regional malls than any other publicly-traded company.            We believe that we have a competitive advantage in the retail real estate business as a result of:

•

the size, quality and diversity of our Properties;properties;

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our management and operational expertise;

•

our extensive experience and relationships with retailers and lenders;

•

our mall marketing initiatives and consumer focused strategic corporate alliances, including those developed by Simon Brand and Simon Business;alliances; and

•

our ability to use our size to reduce the total occupancy cost of our tenants.

            Our size reduces our dependence upon individual retail tenants. Approximately 4,2005,100 different retailers occupy more than 24,00028,600 stores in our Propertiesproperties and no retail tenant represents more than 3.8%2.1% of our Properties'properties' total minimum rents.

Certain Activities

            During the past three years, we have:

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issued 6,563,7254,062,082 units to Simon Property upon the exchange of units for common stock of Simon Property;

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issued 1,026,274274,920 units to other partners upon the conversion of 1,061,580 Series C preferred units and 283,907349,814 Series I preferred units;

•

issued 966,8301,437,501 units upon the conversion of preferred units;

•

issued 120,671 units in 2004;

•

issued 4,277 7.5% Cumulative Redeemable Preferred Units;

•

issued 1,181,2411,038,364 restricted units to Simon Property, net of forfeitures, with respect to the issuance of a like number of restricted shares of common stock issued under The Simon Property Group 1998 Stock Incentive Plan;

•

issued 1,014,066852,148 units to Simon Property in exchange for cash contributed resulting from the exercise of stock options under The Simon Property Group 1998 Stock Incentive Plan;

•

issued 147,241 units for the purchase of Maine Premium Outlets;

•

issued 67,309 units to the Mills Limited Patners;

•

purchased and retired 181,000111,000 common units;

•

repurchased 3,132,7003,387,400 common units for $202.8$231.7 million;

•

redeemed 587,670675,065 limited partner units for cash;

•

issued 4,652,232 units to limited partners and 12,978,795 units to Simon Property in connection with the October 2004 acquisition of Chelsea Property Group, Inc. and its subsidiary CPG Partners, L.P. (collectively "Chelsea"), (the "Chelsea Acquisition");

•

repurchased 78,012redeemed 26,553 Series H preferred units in 2004;

•

issued and subsequently converted for cash 1,156,039 Series D preferred units in 2004 and redeemed 19,287 Series D preferred units in 2005;

•

redeemed all outstanding Series E preferred units;

•

redeemed all outstanding Series F preferred units;

•

issued 4,753,794redeemed all outstanding Series G preferred units;

•

redeemed 19,677 Series I preferred units to Chelsea limited partners and 13,261,712 Series I preferred units to Simon Property in the Chelsea Acquisition and redeemed 14,677 Series I preferred units in 2005 and 2006;

•

issued 796,948 Series J preferred units in the Chelsea Acquisition;units;

•

issued 1,602,821 units to Simon Property in exchange for the economic rights of Ocean County Mall;

•

issued and repurchased 8,000,000 Series K preferred units in 2006;

•

issued and repurchased 6,000,000 Series L preferred units in 2007;

•

borrowed a maximum amount of $2.0$2.6 billion under our unsecured revolving$3.5 billion credit facility; the outstanding amount of borrowings under this facility as of December 31, 2006,2007 was $305.1 million;$2.4 billion;

•

as a co-borrower with Simon Property, borrowed $1.8 billion under an unsecured acquisition facility in connection with our acquisition of the former Chelsea Acquisition,Property Group in 2004, that has beenwas fully repaid as of December 31, 2006;

•

not made loans to other entities or persons, including Simon Property's executive officers and directors, other than to certain joint venture properties;

•

not invested in the securities of other issuers for the purpose of exercising control, other than certain wholly-owned subsidiaries and to acquire interests in real estate;

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not underwritten securities of other issuers; and

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not engaged in the purchase and sale or turnover of investments for the purpose of trading.

Employees

            At January 26, 2007,28, 2008, we and our affiliates employed approximately 4,3005,100 persons at various properties and offices throughout the United States, of which approximately 1,6001,900 were part-time. Approximately 1,0001,100 of these employees were located at our corporate headquarters in Indianapolis, IN and 140150 were located at our Chelsea offices in Roseland, NJ.

Corporate Headquarters

            Our corporate headquarters are located at 225 West Washington Street, Indianapolis, Indiana 46204, and our telephone number is (317) 636-1600.

Available Information

            Our Internet website address is www.simon.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available or may be accessed free of charge through the "About Simon/Investor Relations/Financial Information" section of our Internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

Item 1A.    Risk Factors

            The following factors, among others, could cause our actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by our management from time to time. These factors, among others, may have a material adverse effect on our business, financial condition, operating results and cash flows, and you should carefully consider them. It is not possible to predict or identify all such factors. You should not consider this list to be a complete statement of all potential risks or uncertainties. Past performance should not be considered an indication ofuncertainties and we may update them in our future performance.periodic reports.

Risks Relating to Debt and the Financial Markets

We have a substantial debt burden that could affect our future operations.

            As of December 31, 2006,2007, our consolidated mortgages and other indebtedness, excluding the related premium and discount, totaled $15.3$17.2 billion, of which approximately $1.7 billion$751 million matures during 2007,2008, including recurring principal amortization.amortization on mortgages maturing during 2007. We are subject to the risks normally associated with debt financing, including the risk that our cash flow from operations will be insufficient to meet required debt service. Our debt service costs generally will not be reduced if developments at the Property,property, such as the entry of new competitors or the loss of major tenants, cause a reduction in the income from the Property.property. Should such events occur, our operations may be adversely affected. If a Propertyproperty is mortgaged to secure payment of indebtedness and income from the Propertyproperty is insufficient to pay that indebtedness, the Propertyproperty could be foreclosed upon by the mortgagee resulting in a loss of income and a decline in our total asset value.

We depend on external financings for our growth and ongoing debt service requirements.

            We depend primarily on external financings, principally debt financings, to fund the growth of our business and to ensure that we can meet ongoing maturities of our outstanding debt. Our access to financing depends on our credit rating, the willingness of banks to lend to us and conditions in the capital markets which have experienced increasing volatility in general.recent months. We cannot assure you that we will be able to obtain the financing we need for future growth or to meet our debt service as obligations mature, or that the financing available to us will be on acceptable terms.

Adverse changes in our credit rating could affect our borrowing capacity and borrowing terms.

            Our outstanding senior unsecured notes and the preferred stock of Simon Property are periodically rated by nationally recognized credit rating agencies. TheThese credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial position, and other factors viewed by the credit rating agencies as relevant to our industry and the economic outlook in general. TheThese credit rating of our senior unsecured notes and Simon Property's preferred stockratings can also affect the amount of capital we can access, as well as the terms of any financing we obtain. Since we depend primarily on debt financing to fund our growth, adverse changes in our credit rating could have a negative effect on our future growth.

Our hedging interest rate protection arrangements may not effectively limit our interest rate risk.

            We manage our exposure to interest rate risk by a combination of interest rate protection agreements to effectively fix or cap a portion of our variable rate debt, or in the case of a fair value hedge, effectively convert fixed rate debt to variable rate debt. In addition, we refinance fixed rate debt at times when we believe rates and terms are appropriate. Our efforts to manage these exposures may not be successful.

            Our use of interest rate hedging arrangements to manage risk associated with interest rate volatility may expose us to additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Termination of these hedging agreements typically involveinvolves costs, such as transaction fees or breakage costs.

Rising interest rates could adversely affect our debt service costs.

            As of December 31, 2006, approximately $0.8 billion of our total consolidated debt, adjusted to reflect outstanding derivative instruments, was subject to floating interest rates. In a rising interest rate environment, these

debt service costs will increase. Increased debt service costs would adversely affect our cash flow. The impact of changes in market rates of interest on the fair value of our debt and, in turn, our future earnings and cash flows appears elsewhere in this report.

Factors Affecting Real Estate Investments and Operations

We face risks associated with the acquisition, development and expansion of properties.

            We regularly acquire and develop new properties and expand and redevelop existing Properties,properties, and these activities are subject to various risks. We may not be successful in pursuing acquisition, development or redevelopment/expansion opportunities. In addition, newly acquired, developed or redeveloped/expanded properties may not perform as well as expected. We are subject to other risks in connection with any acquisition, development and redevelopment/expansion activities, including the following:

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construction costs of a project may be higher than projected, potentially making the project unfeasible or unprofitable;

•

we may not be able to obtain financing or to refinance construction loans on favorable terms, if at all;

•

we may be unable to obtain zoning, occupancy or other governmental approvals;

•

occupancy rates and rents may not meet our projections and the project may not be profitable; and

•

we may need the consent of third parties such as anchor tenants, mortgage lenders and joint venture partners, and those consents may be withheld.

            If a development or redevelopment/expansion project is unsuccessful, either because it is not meeting our expectations when operational or was not completed according to the project planning, we could lose our investment in the project. Further, if we guarantee the property's financing, our loss could exceed our investment in the project.

We are subject to risks related to owning retail real estate.

            We are subject to risks incidental to the ownership and operation of retail 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;

•

consumer confidence;

•

impact of terrorist activities;

•

changes in tax laws;

•

interest and foreign currency exchange rates;

•

the availability of financing; and

•

potential liability under environmental and other laws.

Real estate investments are relatively illiquid.

            Our Propertiesproperties represent a substantial portion of our total consolidated assets. These investments are relatively illiquid. As a result, our ability to sell one or more of our Propertiesproperties or investments in real estate in response to any changes in economic or other conditions is limited. If we want to sell a Property,property, we cannot assure you that we will be able to dispose of it in the desired time period or that the sales price of a Propertyproperty will exceed the cost of our investment.

Environmental Risks

As owners of real estate, we can face liabilities for environmental contamination.

            Federal, state and local laws and regulations relating to the protection of the environment may require us, as a current or previous owner or operator of real property, to investigate and clean up hazardous or toxic substances or petroleum product releases at a Propertyproperty or at impacted neighboring properties. These laws often impose liability regardless of whether the property owner or operator knew of, or was responsible for, the presence of hazardous or toxic substances. These laws and regulations may require the abatement or removal of asbestos containing materials in

the event of damage, demolition or renovation, reconstruction or expansion of a Propertyproperty and also govern emissions of and exposure to asbestos fibers in the air. Those laws and regulations also govern the installation, maintenance and removal of underground storage tanks used to store waste oils or other petroleum products. Many of our Propertiesproperties contain, or at one time contained, asbestos containing materials or underground storage tanks (primarily related to auto service center establishments or emergency electrical generation equipment). The costs of investigation, removal or remediation of hazardous or toxic substances may be substantial and could adversely affect our results of operations or financial condition but is not estimable. The presence of contamination, or the failure to remediate contamination, may also adversely affect our ability to sell, lease or redevelop a Propertyproperty or to borrow using a Propertyproperty as collateral.

Our efforts to identify environmental liabilities may not be successful.

            Although we believe that our Portfolioportfolio is in substantial compliance with Federal, state and local environmental laws, ordinances and regulations regarding hazardous or toxic substances, this belief is based on limited testing. Nearly all of our Propertiesproperties have been subjected to Phase I or similar environmental audits. These environmental audits have not revealed, nor are we aware of, any environmental liability that we believe will have a material adverse effect on our results of operations or financial condition. However, we cannot assure you that:

•

existing environmental studies with respect to the Portfolioportfolio reveal all potential environmental liabilities;

•

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

•

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

•

future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations or the interpretation thereof) will not result in environmental liabilities.

Retail Operations Risks

We are subject to risks that affect the general retail environment.

            Our concentration in the retail real estate market means that we are subject to the risks that affect the retail environment generally, including the levels of consumer spending, seasonality, the willingness of retailers to lease space in our shopping centers, tenant bankruptcies, changes in economic conditions, consumer confidence and terrorist activities. The possibility that the United States may currently be experiencing a recession could adversely affect consumer spending. Any one or more of these factors could adversely affect our results of operations or financial condition.

We may not be able to lease newly developed Propertiesproperties and renew leases and relet space at existing Properties.properties.

            We may not be able to lease new Propertiesproperties to an appropriate mix of tenants or for rents that are consistent with our projections. Also, when leases for our existing Propertiesproperties expire, the premises may not be relet or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the current lease terms. To the extent that our leasing plans are not achieved, our cash generated before debt repayments and capital expenditures could be adversely affected.

Some of our Propertiesproperties depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of or a store closure by one or more of these tenants.

            Regional malls are typically anchored by department stores and other large nationally recognized tenants. The value of some of our Propertiesproperties could be adversely affected if these tenants fail to comply with their contractual obligations, seek concessions in order to continue operations, or cease their operations. Department store and larger store, also referred to as "big box", consolidations typically result in the closure of existing stores or duplicate or geographically overlapping store locations. We do not control the disposition of those department stores or larger stores that we do not own. We also may not control the vacant space that is not re-leased in those stores we do own. Other tenants may be entitled to modify the terms of their existing leases in the event of such closures. The modification could be unfavorable to us as the lessor and could decrease rents or expense recovery charges. Additionally, major tenant closures may result in decreased customer traffic which could lead to decreased sales at other stores. If the sales of stores operating in our Propertiesproperties were to decline significantly due to closing of anchors, economic conditions, or other reasons, tenants may be unable to pay their minimum rents or expense recovery charges.

In the event of default by a tenant or anchor store, we may experience delays and costs in enforcing our rights as landlord to recover amounts due to us under the terms of our agreements with those parties.

We face potential adverse effects from tenants'tenant bankruptcies.

            Bankruptcy filings by retailers occur frequently in the course of our operations. We are continually re-leasing vacant spaces resulting from tenant terminations. The bankruptcy of a tenant, particularly an anchor tenant, may make it more difficult to lease the remainder of the affected Properties.properties. Future tenant bankruptcies could adversely affect our Propertiesproperties or impact our ability to successfully execute our re-leasing strategy.

Risks Relating to Joint Venture Properties

We have limited control with respect to some of our Propertiesproperties that are partially owned or managed by third parties, which may adversely affect our ability to sell or refinance the Properties.them.

            As of December 31, 2006,2007, we owned interests in 146181 income-producing properties with other parties. Of those, 19 Propertiesproperties are included in our consolidated financial statements. We account for the other 127162 properties under the equity method of accounting, which we refer to as joint venture properties. We serve as general partner or property manager for 5893 of these 127162 properties; however, certain major decisions, such as selling or refinancing these properties, require the consent of the other owners. Of thesethe properties for which we do not serve as general partner or

property manager, 59 are in our international joint ventures. The other owners also have other participating rights that we consider substantive for purposes of determining control over the properties' assets. The remaining joint venture properties are managed by third parties. These limitations may adversely affect our ability to sell, refinance, or otherwise operate these properties.

We guaranteeThe Operating Partnership guarantees debt or otherwise provideprovides support for a number of joint venture Properties.properties.

            Joint venture debt is the liability of the joint venture and is typically secured by a mortgage on the joint venture Property.property. As of December 31, 2006,2007, we havehad loan guarantees and other guarantee obligations to support $43.6$132.5 million and $19.0$60.6 million, respectively, of our total $3.5$6.6 billion share of joint venture mortgage and other indebtedness. A default by a joint venture under its debt obligations may expose us to liability under a guaranty or letter of credit.

Other Factors Affecting Our Business

Our Common Area Maintenance (CAM) contributions may not allow us to recover the majority of our operating expenses from tenants.

            CAM costs typically include allocable energy costs, repairs, maintenance and capital improvements to common areas, janitorial services, administrative, property and liability insurance costs, and security costs. We historically have used leases with variable CAM provisions that adjust to reflect inflationary increases. However, we are making a concerted effort to shift from variable to fixed CAM contributions for our cost recoveries which will fix our tenants' CAM contributions to us. As a result, our CAM contributions may not allow us to recover all operating costs and, we cannot assure you that we will succeed in our efforts to recover a substantial portion of these costs in the future.operating costs.

We face a wide range of competition that could affect our ability to operate profitably.

            Our Propertiesproperties compete with other retail properties for tenants on the basis of the rent charged and location. The principal competition may come from existing or future developments in the same market areas and from discount shopping centers, outlet malls, catalogues, discount shopping clubs and electronic commerce. The presence of competitive properties also affects our ability to lease space and the level of rents we can obtain. Renovations and expansions at competing malls could also negatively affect our Properties.properties.

            We also compete with other retail property developers to acquire prime development sites. In addition, we compete with other retail property companies for attractive tenants and qualified management.

We expect to continue to pursueOur international expansion opportunities that may subject us to different or greater risk from those associated with our domestic operations.

            We hold interests in joint venture properties that are under operation in Europe, Japan, South Korea, and Mexico. We have also established arrangements to develop joint venture properties in China, and South Korea, and expect to pursue additional expansion opportunities outside the United States. International development and ownership activities carry risks that are different from those we face with our domestic Propertiesproperties and operations. These risks include:

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adverse effects of changes in exchange rates for foreign currencies;

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changes in foreign political and economic environments, regionally, nationally, and locally;

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challenges of complying with a wide variety of foreign laws including corporate governance, operations, taxes, and litigation;

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differing lending practices;

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differences in cultures;

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changes in applicable laws and regulations in the United States that affect foreign operations;

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difficulties in managing international operations; and

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obstacles to the repatriation of earnings and cash.

            Although our international activities currently are a relatively small portion of our business (international properties represented less than 7%6% of the GLA of all of our properties at December 31, 2006)2007), to the extent that we expand our international activities, these risks could increase in significance which in turn could adversely affect our results of operations and financial condition.

Some of our potential losses may not be covered by insurance.

            We maintain commercial general liability "all risk" property coverage including fire, flood, extended coverage and rental loss insurance on our Properties. One of ourproperties. Our captive insurance company subsidiaries indemnifiesindemnify our general liability carrier for a specific layer of losses. A similar policy written through our subsidiary also provides a portion of our initial coverage for property insurance and certain windstorm risks at the Propertiesproperties located in Florida.coastal windstorm locations. Even insured losses could result in a serious disruption to our business and delay our receipt of revenue.

            There are some types of losses, including lease and other contract claims that generally are not insured. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a Property,property, as well as the anticipated future revenue from the Property.property. If this happens, we may still remain obligated for any mortgage debt or other financial obligations related to the Property.property.

            The events of September 11, 2001 significantly affected ourWe currently maintain insurance programs. Although insurance rates remain high, since the President signed into law the Terrorism Risk Insurance Act (TRIA) in November of 2002, the pricecoverage against acts of terrorism insurance has steadily decreased, whileon all of our properties on an "all risk" basis in the available capacity has been substantially increased. We have purchased terrorism insurance covering all Properties. The program provides limitsamount of up to $1 billion per occurrence for Certified (Foreign)certified foreign acts of terrorism and $500 million per occurrence for Non-Certified (Domestic)non-certified domestic acts of terrorism. The current federal laws which provide this coverage is written on an "all risk" policy form. In Decemberare expected to operate through 2014. Despite the existence of 2005, the President signed into law the Terrorism Risk Insurance Extension Act (TRIEA) of 2005, thereby extending the federal terrorismthis insurance backstop through 2007. TRIEA narrows terms and conditions afforded by TRIA for 2006 and 2007 by: 1) excluding lines of coverage, for commercial automobile, surety, burglary and theft, farm owners' multi-peril and professional liability; 2) raising the certifiable event trigger mechanism from $5 million to $50 million during 2006 and to $100 million during 2007; and 3) increasing the deductibles and co-pays assigned to insurance companies. Upon the expiration of TRIEA in 2007, we could pay higher premiums for comparable terrorism coverage and/or obtain or be otherwise able to secure less coverage than we have currently.

Terrorist attacks may adversely affect the value of our properties.

            Our higher profile Properties or markets they operate in could be potential targets for terrorism attacks, due to the large quantities of people at the Property or in the surrounding areas. Threatenedany threatened or actual terrorist attacks in these high profile markets could directly or indirectly impactadversely affect our Properties by resulting in lower property values, a decline in revenue, or a decline in customerrevenues, consumer traffic and in turn, a decline in our tenants'tenant sales.

Inflation may adversely affect our financial condition and results of operations.

            Although inflation has not materially impacted our operations in the recent past, increased inflation could have a more pronounced negative impact on our mortgage and debt interest and general and administrative expenses, as these costs could increase at a rate higher than our rents. Also, inflation may adversely affect tenant leases with stated rent increases, which could be lower than the increase in inflation at any given time. Inflation could also have an adverse effect on consumer spending which could impact our tenants' sales and, in turn, our overage rents, where applicable.

Risks Relating to Federal Income Taxes

The failure of any of our subsidiaries to qualify as a REIT would have adverse tax consequences to us, our unitholders, and Simon Property.

            Two of our subsidiaries have elected to be treatedqualify as a REIT. Qualification as a REIT for federal income tax purposes is governed by highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations. If anyeither of thesethe REIT subsidiaries fails to qualify as a REITcomply with those provisions, and anyif available relief provisions do not apply:

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The REIT subsidiary will not be allowed a deduction for distributions to us in computing its taxable income;

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The REIT subsidiary will be subject to corporate level income tax, including any applicable alternative minimum tax, on its taxable income at regular corporate rates;

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Unless entitled to relief under relevant statutory provisions, the REIT subsidiary will also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost; and

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Simon Property would also fail to qualify as a REIT as a result of the subsidiary's failure and the same adverse consequences would apply to it and its stockholders.

            As a result, net income and funds available for distribution to our unitholders would be reduced for those years in which any of thea REIT subsidiariessubsidiary fails to qualify as a REIT. Although we currently intend to operate ourthe REIT subsidiaries so as to qualify each as a REIT, we cannot assure you we will succeed or that future economic, market, legal, tax or other considerations might cause us to revoke the REIT election of anyeither of the REIT subsidiaries.

Item 1B.    Unresolved Staff Comments

            None.

Item 2.    Properties

United States Properties

            Our PropertiesU.S. properties primarily consist of regional malls, Premium Outlet centers, The Mills®, community/lifestyle centers, and other properties. Our PropertiesThese properties contain an aggregate of approximately 200242 million square feet of gross leasable area, or GLA, of which we own approximately 120.2150.8 million square feet ("Owned GLA").feet. Total estimated retail sales at the Propertiesproperties in 20062007 were approximately $53$60 billion.

            Regional malls typically contain at least one traditional department store anchor or a combination of anchors and big box retailers with a wide variety of smaller stores ("Mall" stores) connecting the anchors. Additional stores ("Freestanding" stores) are usually located along the perimeter of the parking area. Our 171168 regional malls are generally enclosed centers and range in size from approximately 400,000 to 2.02.3 million square feet of GLA. Our regional malls contain in the aggregate more than 17,80018,300 occupied stores, including approximately 675 anchors, which are mostly national retailers.

            Premium Outlet centers generally contain a wide variety of retailers located in open-air manufacturers' outlet centers. Our 3638 Premium Outlet centers range in size from approximately 200,000 to 600,000850,000 square feet of GLA. The Premium Outlet centers are generally located near metropolitan areas including New York City, Los Angeles, Chicago, Boston, Washington, D.C., and San Francisco; or within 20 miles of major tourist destinations including Palm Springs, Napa Valley, Orlando, Las Vegas, and Honolulu.

            The Mills portfolio consists of Mills centers, regional malls, and community centers. The 17 Mills centers generally range in size from 1.0 million to 2.3 million square feet of GLA. The Mills centers are located in major metropolitan areas and have a combination of traditional mall, outlet center, and big box retailers and entertainment uses. The 16 regional malls typically range in size from 700,000 to 1.3 million square feet of GLA and contain a wide variety of national retailers. The four community centers are adjacent to Mills centers, and contain a mix of big box and other local and national retail tenants.

Community/lifestyle centers are generally unenclosed and smaller than our regional malls. Our 6967 community/lifestyle centers generally range in size from approximately 100,000 to 600,000900,000 square feet of GLA. Community/

lifestyle centers are designed to serve a larger trade area and typically contain anchor stores and other tenants that are usually national retailers among the leaders in their markets. These tenants generally occupy a significant portion of the GLA of the center. We also own traditional community shopping centers that focus primarily on value-oriented and convenience goods and services. These centers are usually anchored by a supermarket, discount retailer, or drugstore and are designed to service a neighborhood area. Finally, we own open-air centers adjacent to our regional malls designed to take advantage of the drawing power of the mall.

            We also have interests in 10 other shopping centers or outlet centers. These other Propertiesproperties range in size from approximately 85,000 to 300,000 square feet of GLA. The combined other PropertiesGLA and in total represent less than 1% of our total operating income before depreciation.

            The following table provides representative data for our PropertiesU.S. properties as of December 31, 2006:2007:

            As of December 31, 2006,2007, approximately 93.2%93.5% of the Mall and Freestanding Ownedowned GLA in regional malls and the retail space of the other Propertiesproperties was leased, approximately 99.4%99.7% of Ownedowned GLA in the Premium Outlet centers was leased, approximately 94.1% of the owned GLA for the Mills and 89.5% of owned GLA for the Mills regional malls was leased, and approximately 93.2%94.1% of Ownedowned GLA in the community/lifestyle centers was leased.

            We own 100% of 199198 of our 286 Properties,properties, effectively control 19 Propertiesproperties in which we have a joint venture interest, and hold the remaining 68 Properties103 properties through unconsolidated joint venture interests. We are the managing or co-managing general partner or member of 276 of our Properties.310 properties. Substantially all of our joint venture Propertiesproperties are subject to rights of first refusal, buy-sell provisions, or other sale rights for all partners which are customary in real estate partnership agreements and the industry. Our partners in our joint ventures may initiate these provisions at any

time, which will result in either the use of available cash or borrowings to acquire their partnership interest or the disposal of our partnership interest.

            The following property table summarizes certain data on our regional malls, Premium Outlet centers, the properties acquired in the Mills acquisition, and community/lifestyle centers located in the United States, including Puerto Rico, as of December 31, 2006.2007.

Simon Property Group, L.P. and Subsidiaries

Property Table

U.S. Properties

Simon Property Group, L.P. and Subsidiaries

Property Table

U.S. Properties

Simon Property Group, L.P. and Subsidiaries

Property Table

U.S. Properties

Simon Property Group, L.P. and Subsidiaries

Property Table

U.S. Properties

Simon Property Group, L.P. and Subsidiaries

Property Table

U.S. Properties