Is Simon Property Group (SPG) Reaching a Short-Selling Threshold Amid Rising Valuation and Easing Leasing Momentum?

Simon Property Group (SPG), the largest mall REIT in the U.S., has long been a bellwether for retail real estate dynamics. However, as of August 2025, the stock faces a critical juncture: its valuation metrics have surged to levels that defy historical norms, while leasing momentum shows early signs of softening. This article explores whether SPG is approaching a short-selling threshold through a contrarian lens, analyzing valuation divergence, technical indicators, and sector-wide trends.

Valuation Metrics: A Tale of Contradictions

SPG's trailing twelve-month (TTM) P/E ratio of 26.36 and P/B ratio of 22.92 (as of August 2025) starkly contrast with its 5-year averages of 20.9 and 14.3, respectively. These metrics suggest a stock trading at a premium to its earnings and book value, even as its enterprise value to EBITDA (EV/EBITDA) of 18.03—25% above its 5-year average—signals a valuation gap.

In the broader REIT sector, SPG's valuation appears inflated. While the sector's average P/E ratio hovers around 30–50, SPG's 26.36 P/E is relatively modest. However, its P/B ratio of 22.92 dwarfs the sector's typical range of 1.0–5.0, indicating a disconnect between market capitalization and tangible asset value. This divergence raises questions about whether SPG's premium reflects overconfidence in its ability to sustain high occupancy rates and rental growth.

Leasing Momentum: A Slowing Engine

Despite SPG's 96.0% domestic mall occupancy and 99.3% occupancy at The Mills, leasing activity has shown signs of fatigue. While the company signed 1,000 leases in Q2 2025, 30% of these were new deals—a drop from historical averages. Moreover, average base minimum rent per square foot increased only marginally to $58.70, suggesting tenants are resisting aggressive rent hikes.

The retail sector's structural challenges—e-commerce penetration, shifting consumer preferences, and high interest rates—loom large. SPG's recent acquisition of Brickell City Centre in Miami for $512 million underscores its bet on high-traffic assets, but such moves may not offset broader sector headwinds.

Technical Divergence: A Bearish Signal Amid Bullish Fundamentals

SPG's technical indicators paint a mixed picture. While the stock remains above its 50-day ($162.50), 100-day ($161.80), and 200-day ($157.20) moving averages, the MACD has turned negative, and the RSI (58 as of August 4) is trending toward oversold territory. A KDJ Death Cross and Bearish Marubozu on the 15-minute chart signal short-term bearish momentum.

The stock's recent rebound from the $160.50 support level—a bullish hammer pattern—has not been accompanied by sustained volume. While the 50-day MA crossed above the 200-day MA in June (a golden cross), volume on up days has lagged behind down days, casting doubt on the sustainability of the bullish trend.

Historical backtesting of a shorting strategy triggered by the KDJ Death Cross—holding for 30 trading days—reveals mixed outcomes. From 2022 to August 2025, the strategy generated a 10.84% return, significantly underperforming the benchmark's 34.71% over the same period. While the strategy avoided any drawdowns (maximum drawdown of 0%), its 21.88% volatility and 0.14 Sharpe Ratio highlight its limited risk-adjusted appeal. These results suggest that while the KDJ Death Cross may signal short-term bearish momentum, it lacks robustness as a standalone shorting trigger in SPG's volatile trading environment.

Sector Context: REITs in a High-Yield, Low-Growth Environment

The REIT sector as a whole is grappling with elevated valuations. The sector's average P/FFO of 14.4x in Q1 2025 and implied cap rate of 5.6% suggest a market pricing in modest returns. SPG's P/FFO of 15.76 (as of August 2025) aligns with these averages but lags behind peers like Realty Income (O), which trades at a P/E of 50.96. This premium for SPG reflects its dividend yield of 5.08%, but it also highlights the sector's reliance on income-seeking investors rather than growth expectations.

Contrarian Case for Shorting SPG

For contrarian investors, SPG's valuation and technical divergence present a compelling shorting opportunity. The stock's elevated P/B ratio and EV/EBITDA suggest a disconnect between market optimism and fundamentals. Additionally, the RSI's proximity to oversold levels and the MACD's negative momentum indicate potential for a near-term pullback.

However, SPG's strong balance sheet ($9 billion in liquidity) and raised FFO guidance ($12.45–$12.65/share) provide a buffer against immediate distress. A breakout above $165.22 with volume exceeding 2.2 million shares could validate the bullish case, but until then, the technicals favor caution.

Investment Advice: A Wait-and-See Approach

While SPG's fundamentals remain robust, its valuation and technical indicators signal a potential inflection point. Investors should monitor:
1. Q3 2025 Earnings: A miss on FFO or leasing guidance could accelerate the bearish trend.
2. Macro Risks: Geopolitical tensions (e.g., Russia's Odesa attack) and potential Trump-era tariffs on Indian goods could weigh on retail demand.
3. Technical Validation: A sustained close above $165.22 would negate the shorting case, while a breakdown below $160.50 would confirm bearish momentum.

In conclusion, SPG is at a crossroads. Its valuation appears stretched relative to historical and sector benchmarks, while technical indicators hint at short-term divergence. For contrarians, this is a high-conviction shorting opportunity—but one that requires vigilance and a clear exit strategy.

"""