Simon Property Group continues to mislead

Taubman Centers, Inc. responded to today’s misleading announcement from Simon Property Group, Inc.

Taubman Centers said:
Simon’s statements are obviously designed to obfuscate Simon Property Group’s undemocratic and disproportionate control structure. As Simon well knows, it is engaged in extreme hypocrisy when it criticizes the governance of Taubman Centers. Unlike Simon, Taubman Centers has a democratic voting structure with exact alignment between economic ownership and voting rights -- one-share, one-unit, one-vote. This structure provides all holders of economic interest in Taubman with a proportionate voice in the decisions of Taubman Centers.

In Simon’s press release dated November 18, 2002, Simon disclaims the fact that it is controlled disproportionately by the Simon family. This is in sharp contrast to Simon Property Group’s own SEC filings. The facts are:

Simon Family has the Sole Right to Designate Four Directors. The Simon family owns a special class of stock, Class B Common Stock, which gives it the sole right to designate four directors. This undemocratic right exists without relation to Simon’s approximate 15% economic ownership in the entities that comprise the Simon Property Group. (See Simon’s Proxy Statement for its 2002 Annual Meeting.)

Simon Family has the Exclusive Right to Block Transactions. The Simon operating partnership agreement, as filed with the SEC by Simon, grants the Simon family an extraordinary veto power to block any sale or merger involving Simon Property Group. (See the Seventh Amended and Restated Limited Partnership Agreement of Simon Property Group, L.P., filed as Exhibit 3.1 to the Annual Report on Form 10-K for the Simon Property Group, L.P. for the year ended December 31, 2000.) Section 9.1 and 9.2 of the operating partnership agreement provide that Simon Property Group shall not 'merge, consolidate or engage in any combination with another Person [other than affiliated entities],' or 'sell all or substantially all of its assets' or 'sell, assign, pledge, encumber or otherwise dispose of all or any portion of its Partnership Units or Preferred Units except to the Partnership,' in each case, without consent of a majority of the limited partners of the operating partnership.

The Simon family and related entities collectively control a blocking position of more than a majority of the limited partnership units. So long as the Simon family continues to own a majority of the limited partnership units, the Simon family will continue to hold its blocking position regardless of how small an interest in Simon Property Group it owns.

Specifically to this point, Simon’s own SEC filings provide that, 'The limited partnership agreement of the Operating Partnership contains voting requirements that limit the possibility that Simon Property will be acquired or undergo a change in control, even if some of Simon Property´s stockholders believe that a change would be in its and their best interests.' (See Simon Property Group Registration Statement on Form S-3, filed November 6, 2002.)

Simon Family has Veto Rights on all Major Decisions. Section 7.3(b) of the operating partnership agreement prohibits the Simon Property Group from making 'Major Decisions' without the consent of the Simon family. Major Decisions include: agreeing to or consummating the merger or consolidation of the operating partnership; amending the excess share provisions in the Simon Property Group Charter; dissolving the operating partnership; or withdrawing the Simon Property Group from the operating partnership.

(source: Taubman Centers)

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