Taubman Centers, Inc. - Company Profile, Information, Business Description, History, Background Information on Taubman Centers, Inc.



200 East Long Lake Road, Suite 300
P.O. Box 200
Bloomfield Hills, Michigan 48303-0200
U.S.A.

Company Perspectives:

Our mission is to own, manage, develop and acquire retail properties that deliver superior financial performance to our shareholders.

We distinguish ourselves by creating extraordinary retail properties where customers choose to shop, dine and be entertained; and where re tailers can thrive.

We foster a rewarding and empowering work environment, where we striv e for excellence, encourage innovation and demonstrate teamwork.

History of Taubman Centers, Inc.

Taubman Centers, Inc. (TCO) is a publicly traded real estate investme nt trust (REIT) that holds a controlling interest in one of the Unite d States' leading developers of regional malls, The Taubman Realty Gr oup Limited Partnership, which owns the management company known as T he Taubman Company LLC. The group's portfolio includes 21 shopping ce nters in nine states. Part of the empire founded in 1950 by A. Alfred Taubman, the business has maintained a reputation for innovation and quality. Its malls consistently exceed the industry standard in sale s per square foot.

Origins

The Taubman Company was formed in 1950 by A. Alfred Taubman, who woul d be credited with pioneering the regional mall concept. According to official lore, he started the business with a $5,000 bank loan a t the age of 25. Early projects focused on retail establishments in t he Detroit area. North Flint Plaza, built in 1953, was a significant increase in scale, with 26 stores anchored by Federated's Department Store.

In 1955, company headquarters was relocated to a boxy, one-story buil ding in Oak Park, Michigan. In 1968, it was relocated to Southfield, Michigan, where it remained for ten years.

Taubman had an office in northern California by the early 1960s. Ther e, it completed its first enclosed regional mall, Southland, in 1964. At 300,000 square feet, it was twice the average size of its contemp oraries.

There were other notable new malls in the 1960s and 1970s. Concord, C alifornia's Sunvalley was billed as "the world's largest air conditio ned shopping center" when it opened in 1967. At 2.3 million square fe et, Woodfield of Schaumburg, Illinois, was the largest enclosed mall built up to 1971 and remained one of the five largest in the United S tates through the end of the century. Some early design innovations i ncluded parking around the full perimeter of a mall to allow for cust omer convenience and even distribution of traffic.

Taubman Centers, Inc. was incorporated in 1973. It served as the mana ging partner of the Taubman Realty Group Limited Partnership.

Taubman was among the first to capitalize upon the improving highway system to bring shopping to the suburbs. He later told Crain's Det roit Business that he and other developers were unfairly charged with contributing to the decline of downtown areas. He cited an attem pt to build a new mall in downtown Detroit in the mid-1970s that was scuttled under pressure from an existing department store. In fact, n otes the company's 1999 annual report, of the nine malls Taubman buil t in the 1980s, four very successful ones were located in urban areas (Los Angeles; Charleston; Stamford, Connecticut; and Columbus, Ohio) .

Taubman engineered many history-making deals. He led a group that acq uired the 77,000-acre Irvine Ranch for $337.4 million in 1977. Th e enterprise also was credited with innovations, such as the first tw o-story regional mall. Taubman developed a signature style: clean, si mple designs that highlighted the tenant stores. Robert Taubman later told the Wall Street Journal that the company disdained food courts because their hectic atmosphere discouraged long visits.

Taubman company headquarters moved to a glassy corporate edifice in T roy, Michigan, in 1978. In April 1985, corporate headquarters were re located to Bloomfield Hills, another suburb of Detroit.

Taubman's growth was financed with $625 million borrowed from Gen eral Motors pension trusts in 1985. The Taubman Realty Group Limited Partnership was created in this transaction. The funds would be repai d when Taubman Centers, Inc. went public following the collapse of th e freewheeling commercial real estate market of the 1980s.

Public in 1992

Taubman Centers, Inc. (TCO) had its initial public offering (IPO) on the New York Stock Exchange in November 1992, raising $295 millio n. TCO became a real estate investment trust (REIT) through the offer ing, owning about 36 percent of the Taubman Realty Group Limited Part nership (TRG). It was TRG that owned interests in the malls.

TCO was led by Robert S. Taubman, who had joined the Taubman group in 1976 and had become its CEO in 1990. Another of Alfred Taubman's son s, William S. Taubman, was also active in management. Both visited th eir father's construction sites often while growing up.



Taubman had about 400 employees in the mid-1990s. It ran 19 malls acr oss the United States. With high-end anchors such as Saks Fifth Avenu e and Nordstrom, it generated per-foot sales far above the industry a verage. According to Forbes, the company's relatively short le ases (six years) helped its malls stay on top of retail trends.

According to the Wall Street Journal, Taubman did not open any new malls for four years after its IPO. Growth failed to meet expect ations, said one analyst. In 1997, however, the company began a plan to open one mall per year for the next six years. During the 1990s, T aubman bought five centers and expanded ten more.

1998 Restructuring

Taubman Centers underwent a restructuring in 1998, a year of many cha nges. The Taubman family was able to increase its voting control from 7 percent to 33 percent by buying series B preferred shares. This in creased--some characterized it as disproportionate--power allowed the family to rebuff several takeover advances.

Taubman ventured into a new type of development in 1998 through a joi nt venture with The Mills Corporation. The team agreed to develop sev en value malls, which had more entertainment and food choices than tr aditional malls and were intended to attract more tourists. One of th ese, Great Lakes Crossing near Detroit, would attract ten million vis itors a year, making it a leading destination in its own right.

Finally, in 1998 the company instituted a new philosophy of architect ural design. Officials told Chain Store Age the aim was to dif ferentiate Taubman's centers from traditional boxy malls. "Society is changing, and we are evolving with the changes," said John Simon, se nior vice-president and managing director of development. "People are very lifestyle-conscious, unemployment is low and often the cost of an item or money issues are transcended by lifestyle choices." The co mpany was already a pioneer in bringing high-end accoutrements such a s marble and artwork to the suburbs. The firm devoted considerable at tention to matching the style of its malls to their respective surrou ndings.

Unprecedented Growth After 2000

TCO benefited from renewed interest in REITs following the collapse o f the Internet bubble. Taubman continued to open malls even as the ec onomy staggered after 2000. Four malls were opened in 2001, a record, totaling about 5.5 million square feet of retail space. The opening of so many malls at once was accidental, stressed company officials.

Such developments unfolded even as Alfred Taubman was caught up in a price-fixing scandal at the British auction house Sotheby's Holdings Inc., which he had acquired with an investment group in 1983. He resi gned as Taubman Centers chairman in December 2001, but retained about 30 percent of shares, and later served ten months in jail. By this t ime, Taubman's sons had been running the company's daily operations f or years.

Resisting Simon Takeover in 2003

Simon Property Group, Inc. attempted a $1.7 billion hostile takeo ver of Taubman Centers from November 2002 to October 2003; Westfield America Inc. joined the bid in January. Simon was the country's large st mall owner with about 250 malls to TCO's 30. After a number of leg al challenges, the takeover attempt was ultimately derailed after TCO persuaded the Michigan legislature to create a law allowing for the Taubman family to form an alliance with other shareholders.

While Taubman had two traditional malls under development in 2005--Sy osset, in New York's Oyster Bay (though it faced legal complications) and Northlake Mall in Charlotte, North Carolina--the company was loo king for new types of developments as well as overseas opportunities. In January 2005, the company announced that it was setting up a reta il center connected to an Atlantic City casino, Caesars. TCO also was studying the $20 billion New Songdo City project in South Korea, a planned commercial district with ten million square feet of retail space that was expected to open by 2009. Taubman also was looking at opportunities in China and Japan, and had budgeted $100 million a year for development in North America and Asia, its Asia president told the Vietnam Investment Review.

Principal Subsidiaries: Dolphin Mall Associates Limited Partne rship; Fairlane Town Center, LLC; La Cienega Partners Limited Partner ship d/b/a Beverly Center; Lakeside/Novi Land Partnership, LLC; MacAr thur Shopping Center, LLC; Northlake Land LLC; Oyster Bay Associates Limited Partnership; Short Hills Associates, LLC d/b/a The Mall at Sh ort Hills; Stony Point Associates, LLC d/b/a Stony Point Fashion Park ; Stony Point Land LLC; Tampa Westshore Associates Limited Partnershi p d/b/a International Plaza; Taub-Co Finance LLC; Taub-Co Finance II, Inc.; Taub-Co Kemp, Inc.; Taub-Co Land Holdings, Inc.; Taub-Co Manag ement, Inc.; Taub-Co Management IV, Inc.; Taubman Auburn Hills Associ ates Limited Partnership d/b/a Great Lakes Crossing; Taubman Regency Square Associates, LLC d/b/a Regency Square; The Taubman Company, LLC d/b/a The Taubman Company; The Taubman Realty Group Limited Partners hip; TJ Palm Beach Associates Limited Partnership d/b/a The Mall at W ellington Green; TRG Charlotte, LLC d/b/a Northlake Mall; Twelve Oaks Mall, LLC; Willow Bend Kemp Limited Partnership; Willow Bend Realty Limited Partnership; Willow Bend Shopping Center Limited Partnership.

Principal Competitors: CBL & Associates Properties, Inc.; General Growth Properties, Inc.; The Macerich Company; The Mills Corp oration; Simon Property Group, Inc.

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