Simon Properties Group – Real Estate and Retail

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Simon Property Group

Angel Bloodworth

Strategic Planning for Organizations MGT450

University of Arizona

14 March 2022

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Achieving a high level of financial stability while operating a profitable company is

one of the most challenging tasks a business can face. After all, any firm facing cash flow and

budgetary challenges will eventually collapse if these issues are not handled as soon as

possible. One organization that has been having financial issues recently is Simon Properties

Group. The company's financial woes, which partly has been caused by Covid-19, have

damaged the company's reputation, and the public is slowly losing trust in the company's

capabilities. Additionally, the fear of bankruptcy has adversely affected the company's

long-term creditworthiness. This paper necessitates an analysis of Simon Properties Group,

including its leadership, potential competition, and a recent news item posing a challenge to

its strategy.

Organization

Established in the United States, Simon Property Group is a real estate investment trust

specializing in outlet malls, retail malls, and lifestyle complexes. The company was founded in

1982 and currently has its headquarters in Indianapolis, Indiana. The Simon Property Group

was founded in Indianapolis by brothers Herbert and Melvin Simon, who started by

developing strip malls in the city. The company has locations around Europe, North America,

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and Asia, where the firm serves thousands of people every day and earns millions of dollars in

sales each year. The company's portfolio includes properties that have gained national and

international attention - assets that have proven to be the preferred destination for retailers

(Jie & Jianwei, 2021). Simon is also known for its strong financial position, a senior

management team that has been in place for many years and is highly regarded, as well as its

innovative mindset, which is reflected in the company's history.

The industry

The corporation operates in the real estate business. Real estate has a lengthy history

in the United States. The federal government sold and gave the property to private individuals

for their own use after the Revolutionary War when it was no longer under the control of

England. As the nation grew westward, this practice continued, most notably with the passage

of the Homestead Act in 1862, which authorized individual ownership of U.S. property in

return for maintaining and developing the area for at least five years (Katzler, 2017). Through

the Homestead Act, the United States government granted more than 300 million acres of

public land to private landowners, laying the groundwork for the real estate industry, which

is currently worth $203.1 billion.

Mission and Vision

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The company’s mission is to become the top retail real estate developer, owner, and

manager globally.

The company's vision statement is that it wants to be the unchallenged leader in the

business.

Values and purpose

Integrity, innovation, and a commitment to excellence are all qualities that the

business maintains and encourages. Whether it's corporate structure or shopping mall

platforms, Simon brings a wealth of expertise and unique industry knowledge to the table.

Employees' continuing professional improvement is facilitated by a combination of factors,

including dedication, hands-on learning, and opportunities for further training and

development.

Leadership

Simon Properties Group uses the hierarchical style of leadership. Power structures and

Organizational roles are well defined, and people are allowed to develop within their niches

since management assigns responsibility based on workers' specialized abilities. David Simon,

a well-known American real estate developer, serves as the company's chief executive officer.

Several other significant executives work for the firm, including Steven Broadwater (CAO),

Timothy G. Earnest (EVP), and Chidi Achara (SVP).

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Identified challenge

Although Simon Property Group is one of the most well-known and leading real estate

developers in the United States and internationally, the firm has lately faced a financial crisis

that has negatively affected its strategic goals. Due to this financial crisis, the business has

been forced to abandon four underperforming retail malls with mortgage debt totaling more

than $400 million. The company plans to utilize the net proceeds of the selling to settle

outstanding liabilities under its $3.5 billion unsecured revolving credit facility and other

corporate purposes. Simon's stock, which has a market valuation of $34 billion, has declined

by 41% since January 2020 as a result of the Covid-19 epidemic. Simon Property Group's

overall revenue by the end of 2020 was about $1,174 million, a decrease of 27 percent from the

same quarter the previous year. Total operating income fell even more precipitously in 2021,

from $705 million in the same quarter of 2020 to $403 million in 2021, a 42 percent drop

(Burayidi & Yoo, 2021). The worldwide pandemic has taken a toll on Simon Property Group,

and in the third quarter, funds from operations were down $1.09 per share owing to lower

sales from the company's domestic and overseas activities. This has substantially influenced

the company's capacity to meet its profitability-related strategic goals.

Conclusion

The current scenario is undoubtedly difficult for Simon Property Group, but it might

also provide an excellent chance for long-term development and a high return on investment.

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Simon Property Group is unquestionably one of the market's better and stronger participants,

and it may be able to profit from the suffering of other enterprises. To begin with, the newly

completed partnership with TRG provides SPG with an 80 percent ownership stake, which

represents a solid possibility to preserve the firm from bankruptcy or other major problems.

Before the COVID-19 outbreak, the real estate market was already under stress, and the

pandemic just escalated the situation. As a result, several firms are anticipated to file for

bankruptcy and may be shut down. Simon Property Group may be able to take advantage of

some excellent purchasing opportunities as a result of this. It might lead to the acquisition of

other enterprises, but it could also lead to the acquisition of other assets (malls, property, or

other assets). It might also lead to possibilities to revamp its malls with new tenants or other

customer-centric products.

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References

Burayidi, M. A., & Yoo, S. (2021). Shopping Malls: Predicting Who Lives, Who Dies, and Why?. 

Journal of Real Estate Literature, 29(1), 60-81.

Jie, G, & Jianwei, L. U. (2021). Research on Linear Properties of SIMON Class Nonlinear

Function. 43(11), 3359-3366.

Katzler, S. (2017). Improving strategic decisions for real estate investors: Perspectives on

allocation and management (Doctoral dissertation, KTH Royal Institute of Technology).