Please ensure Javascript is enabled for purposes of website accessibility

Why Simon Property Group Fell Over 10% on June 24

By Reuben Gregg Brewer – Updated Jun 24, 2020 at 1:44PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The giant mall landlord is dealing with health headwinds, merger troubles, and a negative view of its retail investments.

What happened

Shares of mall-focused real estate investment trust (REIT) Simon Property Group (SPG 0.70%) fell 10% in morning trading on Wall Street. That drop seemingly coincides with a material decline in the S&P 500 index, but there's more going on at this giant retail landlord than just a one-day shift in investor sentiment. And most of it isn't pretty.

So what

The broader market sold off as states that had been early to reopen their economies following COVID-19-related shutdowns saw an uptick in coronavirus cases. That's bad news for Simon, which owns around 200 enclosed malls and outlet centers. If previous business and social restrictions are put back in place, the properties it owns will see foot traffic fall. That will make it even harder to collect rent from tenants, some of which have already chosen not to pay for the period that Simon's properties weren't open. The REIT, for example, is currently suing a key tenant over unpaid rent. So, it's understandable that Simon's stock fell as coronavirus concerns picked up.

Two people with shopping bags standing in a mall

Image source: Getty Images.

However, that's not the only thing on Simon's plate. It is also trying to scuttle a deal it had inked earlier in the year to acquire peer Taubman Centers. Taubman isn't keen on that idea, however, so that's likely to be another court case for Simon to work through. Then there's the deal, with partners, to acquire Forever 21. This followed on a fairly successful investment in Aeropostale a few years earlier. Although these two investments aren't a particular issue, there are now rumors that Simon and its partners are looking to buy bankrupt retailer J.C. Penney. Industry watchers, notably in a Wall Street Journal article today, are expressing skepticism about the approach's long-term viability. Effectively, there are concerns that Simon is desperately trying to soften the blow from the so-called "retail apocalypse," but that it won't be able to offset the impact forever.  

Now what

All in, there's a lot of moving parts in the Simon Property Group story right now. In fact, since most of the issues the REIT is facing aren't particularly positive, ongoing share price volatility should be expected. Only more aggressive investors should be looking at Simon today, as it looks to cope with the hit from COVID-19 and a host of other material issues.

Reuben Gregg Brewer owns shares of Simon Property Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Simon Property Group, Inc. Stock Quote
Simon Property Group, Inc.
$89.75 (0.70%) $0.62

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.