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Taubman Centers, Inc.

Taubman Centers, Inc.

200 East Long Lake Road, Suite 300
P.O. Box 200
Bloomfield Hills, Michigan 48303-0200
U.S.A.
Telephone: (248) 258-6800
Fax: (248) 258-7596
Web site: http://www.taubman.com

Public Company
Incorporated:
1973
Employees: 509
Sales: $471.5 million (2004)
Stock Exchanges: New York
Ticker Symbol: TCO
NAIC: 525930 Real Estate Investment Trusts

Taubman Centers, Inc. (TCO) is a publicly traded real estate investment trust (REIT) that holds a controlling interest in one of the United States' leading developers of regional malls, The Taubman Realty Group Limited Partnership, which owns the management company known as The Taubman Company LLC. The group's portfolio includes 21 shopping centers 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 sales per square foot.

Origins

The Taubman Company was formed in 1950 by A. Alfred Taubman, who would be credited with pioneering the regional mall concept. According to official lore, he started the business with a $5,000 bank loan at the age of 25. Early projects focused on retail establishments in the 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 building 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. There, it completed its first enclosed regional mall, Southland, in 1964. At 300,000 square feet, it was twice the average size of its contemporaries.

There were other notable new malls in the 1960s and 1970s. Concord, California's Sunvalley was billed as "the world's largest air conditioned shopping center" when it opened in 1967. At 2.3 million square feet, Woodfield of Schaumburg, Illinois, was the largest enclosed mall built up to 1971 and remained one of the five largest in the United States through the end of the century. Some early design innovations included parking around the full perimeter of a mall to allow for customer convenience and even distribution of traffic.

Taubman Centers, Inc. was incorporated in 1973. It served as the managing 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 Detroit Business that he and other developers were unfairly charged with contributing to the decline of downtown areas. He cited an attempt to build a new mall in downtown Detroit in the mid-1970s that was scuttled under pressure from an existing department store. In fact, notes the company's 1999 annual report, of the nine malls Taubman built 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 acquired the 77,000-acre Irvine Ranch for $337.4 million in 1977. The enterprise also was credited with innovations, such as the first two-story regional mall. Taubman developed a signature style: clean, simple 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 Troy, Michigan, in 1978. In April 1985, corporate headquarters were relocated to Bloomfield Hills, another suburb of Detroit.

Taubman's growth was financed with $625 million borrowed from General Motors pension trusts in 1985. The Taubman Realty Group Limited Partnership was created in this transaction. The funds would be repaid when Taubman Centers, Inc. went public following the collapse of the 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 million. TCO became a real estate investment trust (REIT) through the offering, owning about 36 percent of the Taubman Realty Group Limited Partnership (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 sons, William S. Taubman, was also active in management. Both visited their father's construction sites often while growing up.

Taubman had about 400 employees in the mid-1990s. It ran 19 malls across the United States. With high-end anchors such as Saks Fifth Avenue and Nordstrom, it generated per-foot sales far above the industry average. According to Forbes, the company's relatively short leases (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 expectations, 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, Taubman bought five centers and expanded ten more.

1998 Restructuring

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

Taubman ventured into a new type of development in 1998 through a joint venture with The Mills Corporation. The team agreed to develop seven value malls, which had more entertainment and food choices than traditional malls and were intended to attract more tourists. One of these, Great Lakes Crossing near Detroit, would attract ten million visitors a year, making it a leading destination in its own right.

Finally, in 1998 the company instituted a new philosophy of architectural design. Officials told Chain Store Age the aim was to differentiate Taubman's centers from traditional boxy malls. "Society is changing, and we are evolving with the changes," said John Simon, senior 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 company was already a pioneer in bringing high-end accoutrements such as marble and artwork to the suburbs. The firm devoted considerable attention to matching the style of its malls to their respective surroundings.

Unprecedented Growth After 2000

TCO benefited from renewed interest in REITs following the collapse of the Internet bubble. Taubman continued to open malls even as the economy 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 resigned as Taubman Centers chairman in December 2001, but retained about 30 percent of shares, and later served ten months in jail. By this time, Taubman's sons had been running the company's daily operations for years.

Resisting Simon Takeover in 2003

Simon Property Group, Inc. attempted a $1.7 billion hostile takeover of Taubman Centers from November 2002 to October 2003; Westfield America Inc. joined the bid in January. Simon was the country's largest mall owner with about 250 malls to TCO's 30. After a number of legal 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.

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 retailers can thrive.

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

Key Dates:

1950:
Alfred Taubman launches a shopping center empire.
1973:
Taubman Centers is incorporated.
1985:
Taubman Realty Group Limited Partnership is formed as Taubman gets financing from GM pensions.
1992:
Taubman Centers, Inc. goes public on the New York Stock Exchange.
1998:
Restructuring returns control of TCO to the Taubman family.
2003:
TCO defeats a hostile takeover from Simon Property Group Inc.

While Taubman had two traditional malls under development in 2005Syosset, in New York's Oyster Bay (though it faced legal complications) and Northlake Mall in Charlotte, North Carolinathe company was looking for new types of developments as well as overseas opportunities. In January 2005, the company announced that it was setting up a retail 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 Partnership; Fairlane Town Center, LLC; La Cienega Partners Limited Partnership d/b/a Beverly Center; Lakeside/Novi Land Partnership, LLC; MacArthur Shopping Center, LLC; Northlake Land LLC; Oyster Bay Associates Limited Partnership; Short Hills Associates, LLC d/b/a The Mall at Short Hills; Stony Point Associates, LLC d/b/a Stony Point Fashion Park; Stony Point Land LLC; Tampa Westshore Associates Limited Partnership 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 Management, Inc.; Taub-Co Management IV, Inc.; Taubman Auburn Hills Associates 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 Partnership; TJ Palm Beach Associates Limited Partnership d/b/a The Mall at Wellington 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 Corporation; Simon Property Group, Inc.

Further Reading

"Against All Odds," Chain Store Age, May 2002, pp. 62+.

Barsky, Neil, "Taubman Files New Prospectus to Lure Public," Wall Street Journal, October 19, 1992, p. C17.

Brauer, Molly, "Two REITs Team Up to Build Seven Value Malls," Knight Ridder/Tribune Business News, May 19, 1998.

Bridgeforth, Art, Jr., "Taubman Builds Success; Great Lakes Crossing Shows Vision," Crain's Detroit Business, January 18, 1999, pp. 1+.

Cohen, Nancy E., America's Marketplace: The History of Shopping Centers, International Council of Shopping Centers, 2002.

Crump, Constance, "New Era for REITs: Taubman Offering Success Is a Signal," Crain's Detroit Business, December 7, 1992, p. 2.

, "Taubman Co. Still Has Acquiring Mind," Crain's Detroit Business, March 29, 1993, p. 1.

Day, Sherri, and Andrew Ross Sorkin, "Simon Group Gives Up Hostile Bid for Taubman Centers," The New York Times, October 9, 2003, p. C1.

Eichenwald, Kurt, "Taubman Is Trying Again on Initial Public Offering," The New York Times, October 20, 1992, p. 21.

Gearty, Robert, "Convicted Sotheby's Former Chief Steps Down from Helm of Shopping-Mall Empire," Daily News (New York), December 12, 2001.

Gentry, Connie Robbins, "Designing Lifestyle Experiences," Chain Store Age, August 2000, pp. 131+.

"Goldman's Dangerous REIT Game: Firm Now Defending Unpopular Strategy It Helped Devise," Investment Dealers' Digest, February 24, 2003.

Kirkpatrick, David D., "Taubman Centers Revival," Wall Street Journal, August 13, 1997, p. B8.

Light, Sara Jo, "HR Strategies and Tactics Help Taubman Weather a Crisis," Journal of Organizational Excellence, Spring 2005, pp. 29+.

"Mall Culture to Hit Asia As Operators Start to Set Up Shop," Vietnam Investment Review, June 27, 2005, p. 22.

Matnard, Micheline, "If a Name Is Tarnished, But Carved in Stone," New York Times, December 9, 2001, p. BU4.

Moukheiber, Zina, "Tempting the Jaded Shopper," Forbes, May 20, 1996, pp. 48+.

"My Three Sons," Retail Traffic, September 2003.

Norris, Floyd, "Taubman Centers, a Mall Empire, to Go Public; Big Developer to Shed Debt in Stock Sale," The New York Times, August 4, 1992, p. 1.

"Shopping Center Magnate Proposes Public Stock Offering," Associated Press, August 3, 1992.

Snavely, Brent, "Crash Or Charge?," Crain's Detroit Business, July 23, 2001, pp. 1+.

, "Failed Takeover Bid Didn't Derail Taubman Centers' Expansion," Crain's Detroit Business, October 13, 2003, p. 4.

, "Taubman Centers' Decision to Go Public Put It at Risk for a Takeover," Crain's Detroit Business, November 25, 2002, p. 4.

, "Taubman Centers' Stock Price Stays Up As Takeover Battle Ends," Crain's Detroit Business, November 3, 2003, p. 43.

, "Taubman Shores Up Its Malls, Prepares to Move Beyond Them," Crain's Detroit Business, April 25, 2005, p. 4.

Snavely, Brent, and Jennette Smith, "Making Things Happen; Taubman Speaks on His Legacy in Business, His Time in Prison and the Future of Retail," Crain's Detroit Business, April 4, 2005, p. 11.

Starkman, Dean, "After Conviction, Taubman Resigns from Mall REIT," Wall Street Journal, December 12, 2001, p. B2.

, "Taubman's Mall-Building Efforts Raise Eyebrows," Wall Street Journal, March 7, 2001, p. B10.

, "Taubmans Take Law into Their Own Hands," Wall Street Journal, June 17, 2003, pp. C1+.

Vincour, Barry, "Refashioned Taubman Offering Still Draws Fire," Barron's, October 26, 1992, p. 47.

Vogel, Carol, "Taubman Centers, a Mall Empire, to Go Public; Still Dealing and Living in 80's Style," The New York Times, August 4, 1992, p. 1.

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