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December 8th, 2009
Simon purchases Prime Outlets

STAFF REPORT

Simon Property Group, Inc. (SPG), announced Tuesday that it has entered into a definitive agreement to purchase all of Prime Outlets Acquisition Company’s outlet shopping business, including the Prime Outlets in San Marcos.

The transaction is valued at about $2.325 billion, including the assumption of Prime Outlets’ existing indebtedness and preferred stock.

The Prime Outlets portfolio acquired by Simon includes 22 outlet centers located in major metropolitan markets such as Washington-Baltimore, Austin-San Antonio and Orlando. The stores total 8,218,760 square feet.

The San Marcos location is the third largest of the properties, weighing in at 672,093 square feet, which trails only Prime Outlets Orlando (773,368) and Prime Outlets Birch Run in Birch Run, MI (681,621). More than half of the properties are less than half the size of the San Marcos outlet.

As of June 30, Prime Outlets’ centers were 92 percent occupied and generated annual sales per square foot of approximately $370.

“Prime Outlets is an excellent opportunity for Simon as it represents a strong strategic fit for our existing Premium Outlet portfolio and enhances our leadership position in the outlet business,” said SPG Chairman and Chief Executive Officer David Simon. “Following the completion of this transaction, our outlet portfolio will have 62 centers comprising approximately 25 million square feet.”

Under the agreement, Simon will pay equity consideration of approximately $0.7 billion for the owners’ interests in Prime Outlets. The equity consideration to Prime Outlets’ owners will generally be comprised of 80 percent in cash and 20 percent in SPG common operating partnership units, which will be based on a ten day trading average of SPG common stock shortly before closing, subject to a 10 percent collar. Simon intends to fund the cash portion of the equity consideration using its existing sources of capital.

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