Taubman's favorite seasonal activity is most likely holiday shopping. The real estate investment trust (REIT), through its majority-owned operating partnership, acquires, owns, and develops shopping malls, primarily in the US. Taubman owns about two dozen properties (mostly super-regional malls with more than 800,000 sq. ft. each) in about a dozen states. Its largest tenants include L Brands, The Gap, and Forever 21 (though none account for more than 10% of rental revenue). Its Taubman Asia subsidiary in Hong Kong develops malls internationally. Taubman was founded in 1950 by former chairman A. Alfred Taubman, who with his family controls about one-quarter of the REIT.
Taubman's properties are located throughout the US and in Asia. Taubman Asia (founded in 2005) is active in China and South Korea, two high-growth markets. Based in Bloomfield Hills, Michigan, Taubman has offices in Hong Kong, Korea, and New York.
A landlord's fortunes rise and fall with those of its tenants. Poor consumer confidence and weak retail sales during the Great Recession hurt many of Taubman's retail tenants, leading to a period of flat revenue growth for Taubman. However, the REIT's fortunes have since rebounded along with the economy and a sunnier outlook among consumers. In 2012 Taubman's revenue increased 16% versus 2011 to $748 million, a record for the REIT. The double-digit increase was driven by rising rents. Indeed, rent per square foot increased 3.3% in 2012 and the year-end occupancy rate was 91.6%, up 1% from 2011. The REIT anticipates 2013 year-end occupancy to rise modestly from 2012.
Net income declined 45% in 2012 versus 2011 due to increased operating expenses, primarily attributable to increases in maintenance expenses, taxes, utility costs, and promotion and interest expenses.
The REIT seeks to assemble a diverse mix of mall tenants at each location to attract shoppers and generate high sales for its clients. With the US economy on the rebound and mall traffic picking up, Taubman expects the demand for new shopping centers to grow over the next 10 years. (During the recession, weak consumer confidence and soft retail sales hurt many of Taubman's tenants and left it with vacancies to fill.) To lure and retain retailers the company is focused on maintaining the quality of its centers. However, new projects will depend upon a sustained increase in retail spending and department store growth.
During 2012 the REIT focused on expanding its portfolio with the opening and development of traditional and outlet centers in the US and Asia, including the opening of City Creek Center, a mixed-use project in Salt Lake City, Utah; the continued development of three projects under construction; a new outlet mall in Chesterfield, Missouri; and new regional malls in Sarasota, Florida, and San Juan, Puerto Rico.
In the meantime, Taubman is working to finish several projects both domestically and abroad. It is providing development, management, and leasing services for Songdo Shopping Center, a new 1 million sq. ft. retail and entertainment complex in South Korea. To further build its business in Asia, in late 2011 the REIT acquired a majority stake in a Beijing-based real estate consulting firm, which was renamed Taubman TCBL, for $23.7 million. Closer to home, Taubman bought The Mall at Green Hills (Nashville), and The Gardens on El Paseo and El Paseo Village (in Palm Desert, California) for a total consideration of $560 million.
Mergers and Acquisitions
In 2012 Taubman acquired an additional 49.9% interest in International Plaza, located in Tampa, Florida, for $437 million, as well as an additional 25% in Waterside Shops, in Naples, Florida, for $155 million. In 2011 the REIT purchased The Mall at Green Hills (Nashville, Tennessee), The Gardens on El Paseo, and El Paseo Village in Palm Desert, Florida, for a total consideration of $560 million.
Taubman Venture Group LLC owns more than 25% of the company.