STAMFORD, CT—Activist investor Jonathan Litt is pushing for change at mall REIT Taubman Centers, urging it to consider strategic alternatives including a management-led privatization or a sale of the company to a third party. In a letter to the Bloomfield Hills, MI-based REIT's independent directors, made public on Wednesday, the founder and CIO of Land and Buildings Investment Management cites Taubman's “drastic discount to NAV, inferior margins, poor capital allocation and horrible corporate governance practices” despite owning “the most productive class A malls available to the investing public.”

In his letter, Litt notes that he has held “countless discussions” with Taubman management over the years, going back as far as his days covering the REIT as an analyst. “After decades of voicing our concerns to management we are done listening to excuses from the Taubman family for the company's undervaluation and inferior operating performance,” he writes.

He sees “tremendous opportunity” to reverse “decades of poor stewardship” and allow the company's stock to reach its net asset value of $106 per share, or approximately 50% upside from current levels. “We estimate fair value is closer to $144 per share, or approximately 100% upside from current levels, which is achievable through improved operations and margins, superior capital allocation and shareholder-friendly corporate governance enhancements,” writes Litt.

Since Simon Property Group's unsuccessful bid to acquire Taubman in 2003, shares of Taubman have underperformed those of Simon by 145%, Litt writes. Over the past one, three and five years, “Taubman has underperformed its high quality class A mall REIT peers by 4%, 29% and 57%, respectively,” according to Litt.

A Taubman spokeswoman says the company “values the strong relationships we have with our shareholders and welcomes open and constructive dialogue toward the goal of enhancing long-term value.” She says Taubman has “an outstanding track record of growth and is successfully executing on a clear strategic plan to own, manage, develop and acquire high-quality retail properties that deliver superior financial performance to shareholders. The success of Taubman Centers is reflected in the company's strong long-term financial and operational performance.”

Domestically, Taubman owns and operates 22 upscale shopping centers, including Beverly Center in Los Angeles, Dolphin Mall in Miami and the Mall at Short Hills in Short Hills, NJ. It has two more under development.

Instant Insights /

Litt Pushes Taubman to Cut Costs or Sell

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