BofA Downgrades Simon Property Amid Unprecedented Challenges In Retail

Simon Property Group Inc SPG and its mall peers are likely to face unprecedented challenges and uncertainties even when the world reopens after the lockdowns, according to BofA Securities.

The Simon Property Group Analyst

Craig Schmidt downgraded Simon Property from Buy to Neutral, raising the price target from $56 to $62.

The Simon Property Group Thesis

Although Simon Property’s stock has underperformed over the past year, it has risen recently and is trading more than 48% higher than its lows, warranting the rating change, Schmidt said in the note.

The lack of visibility for retail real estate is now more than it has ever been. The global shutdowns are unprecedented, and it is yet unknown when the lockdowns will end. There’s no surety around when or whether tenants will pay rent and several lawsuits are likely to follow.

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Schmidt said there is also low visibility into the damage to consumer balance sheets, confidence and the impact on future discretionary spending. He added that there is the risk that consumers may not visit enclosed centers even after the lockdowns open.

There is also the increased risk of retail bankruptcies, store closings and finding replacement tenants. He added, however, that Simon Property’s long-term prospects remain intact.

SPG Price Action

Despite the downgrade, shares of Simon Property rose almost 4.4% to $68.12 on Tuesday.