Simon Properties Group – Real Estate and Retail

1

Simon Properties Group – Real Estate and Retail

Angel Bloodworth

MGT450: Strategic Planning

University of Arizona

21 March 2022

2

Introduction

Financial stability is advantageous to a company in several ways. It helps improve the

company’s image, facilitates access to capital, and gives the company more influence in the

industrial and political circles. Financial stability has so many benefits that it is considered

one of the essential goals in business management. The success of any company is dependent

on the stability with which it manages its finances. One of the characteristics of a financially

sound company is the ability to boast about having a diverse variety of resources at its

disposal. This is essential for the smooth functioning of the business and its long-term success.

This, however, is not the case with Simon Property Group, as it continues to struggle

financially. As mentioned in the previous assignment, the company faces a financial crisis that

severely impacts its strategic objectives. Its financial woes have forced the directors to release

four of its malls that have accumulated mortgage debt amounting to $400 million. The

company's stock, which has a market capitalization of $34 billion, has dropped by 41% in the

last two years. One of the reasons this challenge is a problem for the company is that it

reduces its chances of accessing funds. No firm or investor wants to be associated with or

invest in an underperforming company (Dang, Gorton & Holmström, 2020). The fact that

Simon Property Group is going through a rough patch financially limits the company's ability

3

to raise financing. While the company may access some funding because of its clean history of

profitability and its many assets, its capacity to obtain large sums of money may be

constrained.

The other reason this challenge is a problem for the company is its rising debts. Too

many debts are bad for any business since it inhibits the firm’s ability to generate surplus

cash. Furthermore, common investors, who are the last to be reimbursed when a company

goes bankrupt, may suffer from high debt levels. The fact that Simon Property Group is

contemplating selling some of its malls to pay off debts indicates that it is on the verge of

bankruptcy. Bad debts may harm a company in various ways, including limiting the amount

of cash available to operate the firm daily and jeopardizing its capacity to pay its creditors.

A huge financial crisis for Simon Property Group also means inconsistent cash flow.

Cash flow constancy should be a major goal for any firm in operation, be it big or small.

Paying employees, bills, and suppliers is difficult when you don't have enough cash.

Inconsistent cash flow is bad for Simon Property Group because it means that the

management will be forced to make late payments or take additional loans. Late payments

may also have a negative impact on a business's credit rating, making it more difficult for the

firm to get credit account privileges and loans in the future (Roberts, 2019). The other reason

why a financial crisis is a problem for Simon Property Group is because it means that the

company does not have enough capital to quench its investments and diversification needs.

4

Simon Property Group is well-known for its investing culture as a global corporation;

nevertheless, this is difficult if the business is in debt and has no money available for

investment.

Conclusion

Every company's worst enemy is a financial crisis. External aspects such as disasters or

weakening economy or internal aspects such as poor cash-flow management may result in a

financial crisis. If financial issues are not addressed properly and on time, they may severely

harm the company. Even if the firm strives to avoid them, owing to the status of the market

and resource prices, the company may get into debt; nonetheless, if these financial challenges

develop, it is critical to understand how to manage them in the most efficient manner

possible.

References

Dang, T. V., Gorton, G., & Holmström, B. (2020). The information view of financial crises. 

Annual Review of Financial Economics, 12, 39-65.

Roberts, R. (2019). Gambling with Other People's Money: How Perverse Incentives Caused the

Financial Crisis. Hoover Press.