What's At Stake For Shopping Mall REIT Taubman As Activist Clash Comes To A Climax

The fate of Taubman Centers, Inc. (NYSE: TCO) seems to rest on Thursday’s annual shareholder meeting.

Since October, activist investor Jonathan Litt has campaigned with Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance, to supplant CEO, President and Chairman Robert Taubman and J C Penney Company Inc (NYSE: JCP) CEO Myron Ullman III on the company board.

Litt has long accused the board of intransigence and contentment with financial underperformance, and Thursday’s vote will determine his capacity to influence change.

If elected, the co-founder of Land & Buildings Investment Management LLC will aim to correct inefficient capital allocations in Asian and Puerto Rican branches, suspend current growth strategies, initiate stock buybacks and asset sales, urge adaptation to online shopping trends and explore buyouts or privatization. Taubman’s 27-mall portfolio stands in the crossfire.

Potential To Get Litt

The investor’s track record merits debatable optimism, as he led NorthStar Realty Finance Corp., New York REIT Inc. and Associated Estates Realty Corp. to pursue or consider alternative strategies through asset or company sales.

Despite failure to affect his entire vision in any instance, the advisory firms of Institutional Shareholder Services Inc. and Glass Lewis & Co. issued their endorsements for the Taubman campaign, citing concerns with the company’s present financials and governance.

So far, Litt’s prospects have prompted board members to engage in shareholder outreach.

Taubman’s Retort

A recent company statement defended the value of Taubman and Ullman, as each contributed to 20-year compounded annual shareholder returns of about 15 percent, the highest of regional mall real estate investment trust peers over the same period.

It further contended that neither Litt nor Elson would well serve the board’s present strategy. “Jonathan Litt has no operational experience, and his track record as a sell-side analyst demonstrates a consistent misunderstanding of Taubman’s strategy and ability to create value,” the firm wrote. It measured Litt’s 28 underperform ratings proposing 13.7-percent value declines against ensuing average investor returns of 33.3 percent."It is unfortunate that Land & Buildings continues to wage a campaign based on inaccurate attacks in an attempt to obtain board representation for its director nominees who are significantly less qualified than Taubman's nominees,” the company told Crain’s earlier in May. “Taubman is confident it has the right strategy and board to continue delivering strong financial and operational results and driving value for all Taubman shareholders."

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