Simon Property Inc. ‘s Annual Report

01/31/2017

Yanshu(Alisa) Li

Corp Finance

#1 Homework

• Simon Property Inc. ‘s Business Model:

Optimizing results across Simon’s global portfolio of Malls, Simon Premium Outlets and The Mills is its priority both short and long term. Simon Property Inc. continues to engage in redevelopment projects that refine and reimagine how people around the world shop. With a view to the collective success of Simon, its retail partners, and neighbors, Simon Property Inc. is investing in its future. Over the next three years, Simon will invest $3 billion in new development and redevelopment projects to enhance and expand some of our best properties, thus further diversifying and increasing the quality and reach of its portfolio.

• Simon Property Inc.’s long-term strategy which includes the following:

1. Focus on the ownership of high-quality retail real estate
2. Own assets along the price spectrum of retail real estate;
3. Lead the industry in successful and profitable acquisitions;
4. Export our “know-how” internationally;
5. Enhance the shopping experience through innovations and investments in the “Mall of the Future” and establish a direct relationship with our shopper;
6. Accomplish all of this while maintaining a high investment-grade rating and access to multiple forms of capital.

• Analysis of strategy using the Porter Framework:

Threat of entry

-Incumbency advantages independent of size:

As an industry-leading retail properties and investments across North America, Europe and Asia, Simon Property Inc. provides shopping experiences(global property portfolio: malls 108, premium outlets 71) for millions of consumers every day, which means new entrants can hardly challenge incumbents’ retail capabilities to shake up competition.

-Capital requirements:

Since Simon property Inc. achieved an outstanding financial results in 2015 (FFO increased to $3.571 billion and Net income was $1.824 billion), its large financial resources have created a powerful barrier to new entrants who cannot meet the huge capital requirements.

-Restrictive government policy:

Simon Property Inc. expand its global footprint through international investments (acquired a majority interest in a leading outlet center in Germany) which have made with professional international partners (McArthurGlen Group). More specifically, this results can be, to some extent, credited to its partners’ connection with local government so that Simon Property Inc. can avoid foreign investment barriers and finally conduct projects.

Thus, as for Simon Property, the level of threat of entry is pretty high.