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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).

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Simon Properties Group – Real Estate and Retail

Angel Bloodworth

MGT450: Strategic Planning

University of Arizona

21 March 2022

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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

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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.

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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.

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SWOT Analysis- Simon Property Group

Angel Bloodworth

MGT 450

University of Arizona

28 March 2022

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A SWOT analysis is a framework for analyzing a company's competitive position in its

industry. It provides critical information on both internal and external factors that may

impact an organization's ability to succeed. The tool can help an organization improve

performance, identify new opportunities, maximize return on resources invested, and

mitigate various business and policy risks.

SWOT Analysis

Strengths

The word "strengths" refers to the beneficial internal activities, habits, and processes

inside a corporation. Those are the aspects that contribute to the success of the firm and the

success of its brand (Quezada et al., 2019). Strengths are important because they will provide

Simon Property Group with the right tools to solve the existing challenge (Financial crisis).

i. Reach and distribution. Simon Property Group is supported by a

comprehensive distribution network that guarantees its items are easily available

to many customers on time. SPG has risen to become one of the most recognizable

retail brands globally due to its innovation and one-of-a-kind merchandise (Lin et

al., 2017). This particular strength means that the company has a strong brand in

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the market that can help attract a huge amount of money to help the company

solve its financial crisis.

ii. Financial Position. Simon Property Group has a strong financial position, with

a history of steady profitability and profit reserves that can be used to support

future capital expenditures. Simon Property Group is well-positioned to meet its

long-term goals. Most of the company's income comes from the return on capital

expenditures made in the past on various initiatives. Furthermore, the company

has a large asset base, contributing to its ability to remain viable (Burayidi & Yoo,

2021). The fact that the SPG is in good financial standing shows that it has received

a consistent stream of positive returns over an extended period. In this case, the

firm can use a portion of its income to pay off debts that it has accrued over the last

two fiscal years. Furthermore, since the company has a large asset base, it may be

able to use these assets as collateral to get loans rapidly to resolve its financial

woes.

iii. Skilled labor force. A great amount of money has been invested in staff

training, resulting in many highly skilled and motivated employees at SPG. The

company's staff comprises people from a diverse range of geographical, ethnic,

cultural, and educational backgrounds (Watson, 2016). Using this authority, the

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company can ensure that skilled employees aid the firm in introducing new ideas

and ways of doing things, especially in solving the current financial problem.

Weaknesses

Weakness in an organization is a limitation, shortcoming, or defect that inhibits the

organization from achieving its objectives and achieving its goals. When a company's

weaknesses are present, it cannot achieve its full potential. Those are the areas where the firm

has to improve to remain competitive (JATMIKO et al., 2021). Identifying weaknesses will help

Simon Property Group identify areas of improvement in regard to the current problem it is

facing. Doing this will allow SPG to design measures to rectify and manage its weak points,

which will help the company prosper.

i. Research and Development. Although SPG spends more on research and

development than the industry average, it spends far less than a small number of

businesses that have earned a significant competitive advantage due to their

innovative ways.

ii. Market dependability. SPG is primarily dependent on the markets in the

United States, with sales in the country accounting for around 87 percent of total

revenues (Sutherland, 2018). Although it has extended its operations in Asia, it is

still predominantly dependent on the North American market. SPG's income and

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operational resources might be jeopardized if the American economy experiences

another downturn, which would be catastrophic for the company. SPG must

diversify into other markets to avoid probable failures in the case of a downturn in

the US economy.

iii. Low current ratio. The company's current ratio is lower than the industry

standard, meaning it could face challenges meeting its short-term financial

obligations. This might indicate that the company will have liquidity challenges in

the future.

Opportunities

Opportunity refers to any favorable circumstance that exists in the organization.

Opportunities are defined as external factors that have the potential to provide a firm with a

competitive advantage over its competitors. In this case, by identifying the opportunities,

Simon Property Group will be in a position to understand areas where it can capitalize to

solve its current problem.

i. E-commerce. The e-commerce industry has seen a new trend and a rise in sales.

As a result, many customers are opting to make purchases online rather than in

person. Simon Property Group may be able to create revenue by developing online

stores and selling their products through them.

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ii. Social Media. The number of individuals who use social media has increased

dramatically throughout the world. Facebook, Twitter, and Instagram are the three

social media platforms that have had the biggest increase in monthly active users

over the last five years (Toscani, Tosin & Zanella, 2018). Simon Property Group can

use social media platforms to promote its products, communicate with customers,

and solicit feedback.

iii. Technological advancements. Technology offers several benefits in a range

of different industries. Technology makes it easy for SPG to collect more accurate

information on customers and increase marketing campaigns' effectiveness.

Threats

Threat refers to a situation that has the potential to create significant financial harm.

Identifying threats is important for Simon Property Group because it will provide the

management with insights on possible threats and ways to counteract them. This will help

prevent further escalation of the current problem the organization is facing.

i. Increasing competitiveness. There has been an increase in competition

within the retail industry, resulting in less downward pressure on prices (Wahba,

2016). If Simon Property Group does not respond to the price hikes, it risks losing

market share.

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ii. Exchange rate. A corporation like Simon Property Group, which has

international sales but relies on local suppliers, is can significantly be affected by

fluctuations in the currency rate.

iii. Technology development. Consumers attracted to new technologies by a few

rivals within the industry pose a threat to Simon Property Group since customers

may leave for competitors, resulting in a reduction in Simon Property Group's

overall market share.

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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.

JATMIKO, B., Udin, U. D. I. N., RAHARTI, R., LARAS, T., & ARDHI, K. F. (2021). Strategies for

MSMEs to achieve sustainable competitive advantage: The SWOT analysis method. The

Journal of Asian Finance, Economics and Business, 8(3), 505-515.

Lin, D., Mehta, T., Suradja, T., Tai, J., Tsai, K., & Vinayagam, T. (2017). Simon Says

Consulting Group BA 324 Simon Property Group November 15, 2017.

Quezada, L. E., Reinao, E. A., Palominos, P. I., & Oddershede, A. M. (2019). Measuring

performance using SWOT analysis and balanced scorecard. Procedia Manufacturing, 

39, 786-793.

Sutherland, S. (2018). The Simon/Tanger Outlet Mall Health Impact Assessment: Resulting in

Active Transportation through Community Connectivity. Chronicles of Health Impact

Assessment, 3(2), 4-14.

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Toscani, G., Tosin, A., & Zanella, M. (2018). Opinion modeling on social media and marketing

aspects. Physical Review E, 98(2), 022315.

Wahba, P. (2016). SIMON PROPERTY GROUP. FORTUNE, 174(8), 148-155.

Watson, S. (2016). What is happening to commercial malls: Evaluating contradicting opinions.

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