Is Simon Property Group a Bad Investment?

PHOTO CREDIT: Simon Property Group

OVERVIEW

Simon Property Group Incorporation is a company based in the United States. The company buys land and develops malls and premier shopping centers on it. In these malls and shopping centers, they lease out space and different storefronts to a variety of small and large businesses who wish to sell products inside the mall. Simon Property Group has properties in North America, Europe, and Asia. The company was founded in 1993.

Why You Should?

  1. Simon Property Group owns over 240 million square feet of land. The company then builds a mall on top of this land which it rents out to many businesses. This real estate investment will benefit the company in the future because if the demand for mall space does indeed fall, they can repurpose this land for many other uses. This will also benefit investors of the company.
  2. Simon Property Group will benefit from a stronger global economy returning as people go out to malls and spend more money at these locations. Businesses will have the money in order to expand their presence and sign leases on Simon’s land. This will benefit the company and its investor base as well.

Why You Should Not?

  1. The COVID-19 Pandemic has decimated the demand for mall leases as businesses move their stores online and not sign leases with Simon. This might be the start of new consumer trends, where most shopping is done online and not in a mall. This will negatively impact Simon’s ability to get new customers to sign long leases on mall property.
  2. Having a storefront in a mall in order to conduct business is not the future of the retail landscape. Companies like Amazon, Shopify, and many others offer ways for businesses of all sizes to set up online storefronts. This is cheaper and more effective than having retail space in a mall. These new methods might hurt Simons's ability to gain new leases on their premier shopping centers in the future.
  3. Simon Property Group has seen falling earnings due to the lack of demand for leases in order to get a storefront at a mall. Though other companies have recovered, Simon has seen falling numbers ever since March. This comes to show the weakness of Simon’s core business. It may take Simon a long time in order to fully recover from this pandemic, not making it the best investment to make.
  4. Simon Property Group faces tough competition from other US companies as well as international property development companies. Some of these companies include Realty Income Corporation, Boston Properties, Toll Brothers, and many others. This tough competition might hurt the company’s future growth.

MY OPINION

In my opinion, I think that investors should hold off putting money into Simon Property Group because of impacts from the COVID-19 Pandemic, new and more effective ways to conduct business, the lack of any recovery from this pandemic, as well as tough competition. However, its vast land holdings and a strong global economy returning will benefit the company’s recovery.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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