The battle between Taubman Centers Inc. and Jonathan Litt entered another phase Thursday when the activist investor launched a proxy fight against the mall developer.
Litt, founder and chief investment officer of Land and Buildings Investment Management, on Thursday issued a letter to shareholders of Taubman Centers — a real estate investment trust — naming two candidates for election to the REIT’s board at the annual shareholders’ meeting later this year. The letter said the proxy fight was primarily over the issue of corporate governance. Litt nominated himself and corporate governance expert and professor Charles Elson for election to the board.
A spokeswoman for Taubman said the “company will review the notice of nomination, and will respond in due course.” The spokeswoman also said Taubman has a strong track record of growth and shareholder value creation, noting that the company delivered a total compounded annualized shareholder return of “14.5 percent over the past 20 years.”
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She added that the company has a highly qualified and independent board comprised of directors with a diverse range of expertise, and Taubman is committed to engaging constructively with shareholders.
Since October, Litt — who owns only about 1 percent of Taubman’s shares — has been trying to shake things up at the REIT in an attempt to get the developer to consider taking the company private. Litt has claimed that Taubman’s stock could rise to $106 if the company improved operations and margins, as well as have a better allocation of capital. Shares of Taubman are in the trading range of $65.58.
In Thursday’s letter, Litt said he has been an investor since 1992 either through his prior firm when Taubman went public in 1992 or with his current firm. He wrote of communications with Taubman chairman, president and chief executive officer Robert Taubman, and Litt alleged the ceo made it clear that “he prefers to dig in his heels against shareholders rather than reach an amicable solution” to address the change that the activist believes is necessary at the company.
The letter also contained allegations that the chairman runs the REIT as if he is the only shareholder, that board-level decisions are made without consulting independent board members, and replacing directors through a plurality vote, among other alleged transgressions. He also charged that independent board members have not held Taubman accountable, which has resulted in “horrible total return when compared to peers.”
Litt said the poor track record of independent board members includes supporting combined chairman and ceo roles, as well as maintaining a “staggered stale, male and clubby board.” Further, he charged that changes since his firm’s engagement with the company — such as designating existing board member Myron E. “Mike” Ullman 3rd, most recently the former chairman and ceo of J.C. Penney, in a newly created role of lead director — “have solely been cosmetic and have only occurred to preserve the status quo.”
He also claimed that, “Over the past one, three and five years, Taubman has underperformed its high-quality class A mall REIT peers by 4 percent, 29 percent and 57 percent, respectively.”