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 nearly 20 properties (mostly super-regional malls with more than 800,000 sq. ft. each) in urban and suburban shopping centers in 10 states. Its largest tenants have included L Brands, The Gap, and Forever 21. Its Taubman Asia subsidiary in Hong Kong develops malls in China and South Korea. Taubman was founded in 1950 by former chairman A. Alfred Taubman, who with his family controls about one-quarter of the REIT.
Taubman generated 55% of its total revenue from minimum rents in 2014, while its percentage rents made up another 3% and management, leasing, and development services accounted for about 2% of total revenues. The REIT's expense recoveries (reimbursements from tenants for common expenses) made up 35% of total revenue during the year.
Taubman's properties are located throughout the US and in Asia. Hong-Kong-headquartered Taubman Asia is active in China and South Korea. Based in Bloomfield Hills, Michigan, Taubman has offices in Hong Kong, Korea, and New York.
Sales and Marketing
While no tenant accounted for more than 10% of its revenues in 2014, the company's largest tenant, Forever 21, made up around 5% of minimum rents during the year. Other top tenants include The Gap, and Limited Brands.
Taubman's revenues and profits have been trending higher over the past few years as it has grown its property portfolio and as rent prices have increased with the strengthened economy.
The REIT's revenue reversed course in 2014 despite higher rent prices, with revenue falling by 11% to $679.13 million. This is mostly because minimum rents decreased after the company sold off its properties to an affiliate of Starwood Capital. Additionally, the REIT suffered from lower occupancy rates, and further lost revenue after its International Plaza was reclassified into an unconsolidated joint venture.
Despite lower revenues in 2014, Taubman's profit rose nearly seven-fold to a record $893.01 million, mostly thanks to its gains on the sale of its interests in International Plaza; Arizona Mills; land in Syosset, New York (related to its former Oyster Bay project); and the sale of its centers to Starwood Capital. Taubman's operating cash dipped by 2% to $363.69 million after adjusting its earnings for non-cash gains on its property sales during the year.
Taubman seeks to assemble a diverse mix of mall tenants at each location to attract shoppers and generate high sales for its clients. With population growth in its target markets, Taubman expects the demand for new shopping centers to grow over the next 10 years. To lure and retain retailers, the company is focused on maintaining the quality of its centers and choosing the right locations for optimal traffic.
The REIT in 2015 continued its focus on expanding its rent-earning property portfolio with the opening and development of traditional and outlet centers in the US and Asia. During 2014, Taubman opened a new center in the US in October and broke ground on six new shopping centers in both the US and Asia.
The landlord also strategically sells properties that are underperforming to free up resources for better investment opportunities. In 2014, Taubman sold seven of its centers (including MacArthur Center, Stony Point Fashion Park, Northlake Mall, The Mall at Wellington Green, The Shops at Willow Bend, The Mall at Partridge Creek, and Fairlane Town Center) to an affiliate of Starwood Capital Group for a total of $1.4 billion.
Mergers and Acquisitions
Taubman sometimes uses acquisitions and equity investments to help grow its property investment exposure. In 2015, for example, the REIT acquired an additional 15% equity stake in The Mall of San Juan (in San Juan, Puerto Rico), bringing its total stake in the mall to 95%.
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.