Land and Buildings Investment Management is making good on its promise to fight Taubman Centers Inc., launching on Wednesday an official proxy battle and sending an open letter to Taubman shareholders.
The activist firm is seeking to elect its two nominees — Charles Elson, a corporate governance expert, and Jonathan Litt, founder and chief investment officer of Land and Buildings — to the real estate investment trust’s board at the company’s 2017 annual meeting of shareholders. The two have been battling over corporate governance issues since October. Litt’s firm has about a 1 percent stake in the REIT. He has been trying to get the mall operator to improve operations and consider taking the company private.
In naming two nominees, Litt is seeking to replace current board members Robert Taubman, chairman, president and chief executive officer of the REIT and lead director Myron E. Ullman III.
Taubman hasn’t yet filed its proxy materials, which would disclose when this year’s shareholders’ meeting would be held, although it is expected in a few days.
Litt said previously that the REIT has underperformed its class A mall REIT peers by 4 percent, 29 percent and 57 percent over the past one, three and five years, respectively. He also has alleged in the past that the Taubman’s chairman has made board-level decisions without consulting independent board members.
In Wednesday’s open letter to shareholders, Litt said, “The board, led by chairman Bobby Taubman, has overseen repeated horrible capital allocation decisions during the past five years, resulting in significant cost overruns, delays and woefully inadequate returns on new investments.” Litt cited impairments “likely” totaling $1 billion on four ill-advised developments in the past five years. He also suggested $1.7 billion of value creation, or $20 per share, that was lost due to missed opportunities. He also took issue with the Taubman family’s control over the company via preferred stock. He also suggested that with two new board members, there was the “potential of 60 percent upside to net asset value” of Taubman’s shares from $66 to at least $106. Litt noted some ideas on how to do that, including: selling assets and returning capital to shareholders; increasing property income by including kiosks and short-term leasing; slashing corporate overhead, and enforcing ownership limits on the Taubman family.
A Taubman spokeswoman said, “Taubman Centers’ board and management team remain focused on building the company’s 25-year history of outstanding shareholder value creation and working collaboratively with, and in the best interests of, all shareholders. We have with the input of our shareholders continued to build one of the most highly qualified and experienced boards of directors in the industry for overseeing and driving value in the premier retail mall industry during these critical times.”
She said the company will soon be filing and mailing its definitive proxy statement to shareholders, and “we look forward to continuing to meet with investors to discuss our portfolio management and capital allocation priorities, balance approach to stewardship and governance and our strategic plan to drive growth and shareholder value.”