Hedge fund Elliott Management has taken a significant stake in shopping mall developer Taubman Centers and is pushing the company to unlock value, according to several news sources, including CNBC. Elliott didn't immediately return Retail Dive's request for comment.
Moves to accomplish that could include going private or putting up for sale. Elliott joins activist investor Land & Buildings Investment Management, which has been on Taubman's case for months (and launched a dedicated "Save Taubman" website) and has also accused the Taubman family of acting in their own interests rather than shareholders'.
The agitation around Taubman, like the recent bid from commercial real estate firm Brookfield Property Partners to acquire mall developer GGP for roughly $14.8 billion, is in part a reflection of the uncertainties in retail and a correction of an overbuilt brick-and-mortar landscape.
While many observers assume that shopping centers are under siege because of the falling fortunes of physical retail stores, it's actually more of a game of winners and losers.
Many shopping centers and malls are increasingly looking to diversify their portfolios as longstanding anchors like Macy's, J.C. Penney and Sears close stores and leave gaping holes at their properties. Those closures are exacerbated by specialty retailers like The Limited, Wet Seal, Payless, Rue21 and Bebe reducing their footprints or shuttering altogether. Some property executives see opportunity in those empty spaces, but many have taken pay cuts in the interim as their holdings falter.
Taubman is among the winners, though, with top malls that feature a mostly successful mix of retail and non-retail attractions, making its locked-in value more than a question of leveraging its real estate. That's what has Land & Buildings' Jonathan Litt seething. He has said that Taubman's problems are self-inflicted, that, while the company has repeatedly blamed poor performance on the industry, it actually lies with management and poor oversight by the board.
"Our recent photo tour of Taubman's nine dominant malls reveals bustling activity, in stark contrast to prevailing assumptions that Taubman's malls are dying," according to Land & Buildings. "Despite the rhetoric in the media and investment community about the health of the 2,000 malls in the United States, Taubman does not own 2,000 malls or even 50 malls, but rather has the vast majority of its value in just nine super regional dominant malls. Big data providers suggested Taubman's sales would decline in the second quarter yet the company reported sales growth of 2.9%."
The company's founding family, with voting power of some 30%, is in a position to block any deal — a sale or other maneuver — favored by the activist firms. "Taubman shares have underperformed its Class A Mall Peers by 16% since the Annual Meeting in June," Litt wrote in an October letter to the company's board. "At what point do Taubman's independent board members wake up and focus on common shareholders' interests and not the interests of the Taubman Family?"