Simon's $3.5b buyout of Chelsea Property Group.

Simon Property Group, Inc. and Chelsea Property Group, Inc. announced that they have signed a definitive merger agreement whereby Simon will acquire all of the outstanding common stock and operating partnership units of Chelsea in a transaction valued at approximately $3.5 billion.

Simon will also assume Chelsea's existing indebtedness and preferred stock, which totaled approximately $1.3 billion as of March 31, 2004.

Under terms of the agreement, which has been unanimously approved by each company's board of directors, Simon will pay consideration of $66.00 per share for all of Chelsea's outstanding common stock and units.

The consideration to Chelsea's common shareholders comprises $36.00 in cash, $15.00 of SPG common stock based on a fixed conversion ratio of 0.2936 per Chelsea common share, and $15.00 of a new issue of SPG convertible preferred stock.

The new series of convertible preferred shares yield 6.0%, have a liquidation preference of $50 per share, and are convertible into SPG common stock at $63.86 per share, with a contingent conversion feature of an additional 25%. This will be a taxable transaction to Chelsea common shareholders.

Chelsea unitholders will receive 100% of their consideration in equity, equally split between Simon common units and convertible preferred units.

The Chelsea operating partnership, CPG Partners, L.P., will become a wholly-owned subsidiary of the Simon operating partnership, Simon Property Group, L.P.

Chelsea Property Group is the leading owner, developer and manager of premium Outlet centers in the U.S. and Asia.

Commenting on the transaction, David Simon, SPG CEO, stated, "Chelsea is a significant opportunity for Simon as it represents a great strategic fit and a strong driver of growth for us going forward. Chelsea and Simon have pursued identical strategies over the past decade, each leading the consolidation in our respective sectors while focusing on highly-productive, high-quality retail real estate.

"Chelsea is the preeminent brand in the premium outlet industry, just as Simon is in the regional mall industry, and we've had three very successful joint ventures between the two companies. We are very excited to welcome David Bloom and the Chelsea team to the Simon organization."

David Bloom, Chelsea Chairman and CEO, commented, "We are extremely pleased to join forces with Simon in a transaction that recognizes the value of Chelsea Property Group."

Chelsea will be managed as a division of SPG and will continue to be headquartered in Roseland, New Jersey with David Bloom and the existing Chelsea management team continuing in their current roles. David Bloom will also join the Simon Property Group Board as an Advisory Director.

Simon expects an initial year unlevered yield of 7.2% from the transaction, and expects the transaction to be at least $0.09 per share accretive to 2005 Funds from Operations ("FFO") and $0.18 accretive to 2006 FFO.

The transaction is subject to approval by Chelsea's shareholders, as well as customary closing conditions, and is expected to close during the fourth quarter of 2004.

Simon expects to fund the cash portion of the transaction on an interim basis with a $1.8 billion acquisition facility. Simon was advised in this transaction by UBS Investment Bank, who rendered a fairness opinion to the Simon Board of Directors, and by Morgan Stanley.

Chelsea was advised by Merrill Lynch & Co., who rendered a fairness opinion to the Chelsea Board of Directors.