Is Benderson UTC up for Sale?

October 25, 2016

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IS BENDERSON UTC UP FOR SALE AS PARTNER IS TOLD TO “TIGHTEN BELT OR SELL OUT”

By Jon Susce

THE WALL STREET JOURNAL has reported a prominent real estate investor, Jonathan Litt is calling on Taubman Centers Inc., which is a partner with Randy Benderson in the University Town Center (UTC),” to tighten its belt or explore selling itself.”
TAUBMAN STOCK IS WORST IN BLOOMBERG INDEX
The Taubman Company, owner of various high-end properties, has a market capitalization of $4.3 billion—or about $6 billion including the Taubman family’s ownership. Its shares are down 7% this year, and Taubman’s stock has fallen 7.2 percent this year, which is the worst performance in a Bloomberg index of regional mall owners.

Calls from THE SARASOTA PHOENIX to Randy Benderson, who is a is CEO of Benderson Development and an equal partner with Taubman in the $312 million UTC Mall, seeking comment on this WALL STREET JOURNAL article have not been returned.

IS UTC UP FOR SALE?

Further questions that Benderson needs to address will be to answer if Litt’s request for Taubman “to tighten its belt or explore selling itself” will effect Benderson’s operation of the UTC Mall, and whether the mall will be on the market. For example, Taubman recently sold seven shopping centers in five states to Starwood Capital Group for $1.4 billion.

WILL SHT COMMENT ON LITT’S CRITICAL ASSESSMENT OF TAUBMAN?

Maybe one of the reporters at the Sarasota Herald Tribune (SHT) can stop kissing up to Randy Benderson and ask a few questions about Benderson’s business partner.

LITT TO TAUBMAN: “CUT COSTS OR SELL”

littAccording to THE WALL STREET JOURNAL article, “Activist investor Jonathan Litt has launched a public broadside after spending the summer privately pushing for change in meetings with Chairman and Chief Executive Robert S. Taubman, according to people familiar with the matter. Mr. Litt, frustrated by a stock price that in his view lags behind the value of the malls the company owns, is urging it to cut costs and stop expanding—and failing that, to sell itself.”

Litt is the Founder and Chief Investment Officer at Land and Buildings Investment Management, LLC. He co-founded the firm in 2008. He has more than 22 years of experience as a Global Real Estate Strategist and an Investor in public real estate securities and direct property. He was Equity Analyst at UBS Investment Bank, Research Division.

“TAUBMAN HAS UNDERPERFORMED 145%”

Litt, in a letter to Taubman states that, “Our independent directors, gave the Taubman management team a chance to prove themselves in 2003 when you rejected the offer from Simon Property Group, Inc. (“Simon Property Group”) to purchase the Company. Shares of Taubman have since underperformed Simon Property Group by 145%. Further, in the past 1, 3, and 5 years Taubman has underperformed its high quality class A mall REIT peers by 4%, 29% and 57%, respectively.”

“TAUBMAN UNDERPERFORMANCES ARE CLEAR”

Litt, in his letter to Robert Taubman states that he believes the root causes of the underperformance are clear and straightforward and stated the following:

*The Company has a bloated cost structure and is not capitalizing on all available revenue opportunities. This has resulted in operating margins 670 basis points below peers, potentially due to a culture of lavish spending at the corporate level. Management appears to have run roughshod over the Board on the issue of the Company’s inferior operating margins and it is time management is held accountable.

*The Company’s capital allocation policy has delivered disastrous returns on many new developments, persistently and consistently. Management’s missteps have forced shareholders and this Board to endure repeated impairments in the hundreds of millions of dollars, cost overruns, lower than expected yields and decades of uncertainty related to an overly ambitious development program.

*Management, under the stewardship of this Board, has incurred exorbitant corporate expenses which are difficult to fathom, given the leaner and more efficient peers who have demonstrated operational excellence at a substantially lower cost. Taubman’s overhead costs were 4 xs higher than its peers and, disturbingly, are set to rise further.

*Taubman has earned the dubious distinction of owning the worst corporate governance score among all REITs from the preeminent REIT research firm Green Street Advisors. Considering that the REIT industry is known for egregious corporate governance practices broadly, so for Taubman to be the industry leader in poor governance is truly a feat.

*These poor governance practices include a classified board with unusually long tenure, questionable director independence and substantial ability to block an acquisition of the Company without an intervention from a truly independent Board, no matter how compelling the offer is to shareholders.

*Furthermore, many of the largest dedicated REIT investors likely do not own Taubman shares due to the Company’s horrible corporate governance.

IS BENDERSON’S  UTC FINANCIAL INVESTMENT STABLE?
What has been addressed with this scathing critical assessment of Benderson’s partner, Taubman Centers is the financial stability of the Benderson Corporation investment in the $312 million dollar UTC Mall.

SERIOUS QUESTIONS IN $MILLIONS$ OF PUBLIC FUNDING

In addition serious questions have to be raised concerning the $millions of public money invested in various infrastructure expenditures to financially benefit the Benderson/Taubman UTC Mall, especially in light of this critical assessment of the Taubman Centers apparent financial problems. Benderson has to address these serious financial issues being brought by Litt concerning his partner in the UTC Mall.

TAUBMAN TAKES $24 MILLION LOSS ON WORLD CENTER MALL IN MIAMI

Another troubling issue Benderson needs to address concerning his partner in the UTC Mall is the recent write off of about 24 million dollars taken by Taubman Centers after cancelling plans to build an enclosed mall at Miami Worldcenter.  The reason given was that the developers decided an open-air model mall, with individual stores on a pedestrian friendly street grid instead of an enclosed mall, was a better model for Miami.

Brian Bandell wrote in the South Florida Business Journal that, “One of the most ambitious development projects slated for Miami has ditched its signature feature. The Miami Worldcenter Development has announced it will no longer include an enclosed shopping mall. The news comes just months before the mall was scheduled to break ground. Instead, the development will now include a less ambitious Lincoln Road-style, open-air shopping promenade

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ENCLOSED MALL NOT GOOD FOR MIAMI, BUT GOOD FOR SARASOTA?

Robert Taubman who is partnering on the project was quoted in the Miami Herald as saying. “We believe that ‘high street’ retail is the right way to move forward. The retail and restaurants, combined with the new residential developments and surrounding amenities, will create a very desirable urban experience.”

Benderson needs to answer this question:  If his partner Taubman agrees that an open air mall in Miami is a better model, why was an enclosed mall built in Sarasota, which is the only enclosed mall that has been built in this county in the last 12 years?

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UTC MALL IS NO CITY CREEK CENTER IN SALT LAKE CITY
By the way, to compare the City Creek Center in Salt Lake City to UTC as an enclosed mall built in the last 12 years is preposterous. The new City Creek Center contains an interconnected, walkable community of residences, offices, and retail stores. There are approximately 300 housing units, consisting of condos and apartments, in the City Creek Center.

The mall feels like an architectural feat with its retractable roof, and manicured creek with flora and fauna. The mall is half inside, as they have brought the outdoors inside by incorporating a creek through the whole mall. There are trout ponds indoors, and a huge waterfall outside and half inside.

LITT ASSESSMENT DAMAGES TAUBMAN’S CREDIBILITY
If Litt’s description found in the WALL STREET JOURNAL concerning Taubman is accurate, how flawed is the following statement that Robert Taubman made a few years ago, “The Mall at University Town Center will be one of the premier shopping destinations on the west coast of Florida and it will be the preferred shopping destination in the Sarasota region for locals and visitors alike.”
LITT ASSESSMENT DAMAGES BENDERSON’S CREDIBILITY
In addition if Litt’s description found in the WALL STREET JOURNAL concerning Taubman is accurate, how flawed is this statement by Randy Benderson made a few years ago: “This represents the perfect addition to the Gulf Coast’s finest retail corridor. This extraordinary investment in Southwest Florida’s future will exceed anyone’s expectations.”
LITT ASSESSMENT DAMAGES ROBINSON’S CREDIBILITY
robinsonIn addition if Litt’s description found in the WALL STREET JOURNAL concerning Taubman is accurate, how flawed is this statement by Christine Robinson, who was Sarasota County Commission Chairman when she made the following statement in 2012: “The Mall at University Town Center will be a legacy project for Sarasota County. The mall was created by a visionary public-private partnership and based on a sustainable concept that will become a national benchmark for combining a world-class rowing and recreational facility with a world-class commercial and residential center.”

How totally absurd are such statements when malls around the country have been hurt by an increase in online shopping, lackluster economic growth and other factors, which are forcing landlords to undertake costly redevelopment initiatives in an effort to draw shoppers. Malls are turning to grocery stores, gyms and movie theaters to fill up empty spaces left by the departure of struggling department stores.

MALLS ARE FAILING AND DYING ACROSS U.S
No doubt, Litt’s scathing assessment about Taubman is centered on Taubman’s management of financially troubled malls, which today are failing and dying across the U.S. No new enclosed mall has been built in the last 12 years except for the Benderson/ Taubman UTC Mall.  
“HALF OF MALLS WILL CLOSE IN NEXT TEN YEARS”
Robin Lewis, author of “The New Rules of Retail “predicts fully half of all our malls will close in the next 10 years. “All of a sudden, the consumer now has every single retail store throughout the world a key tap away,” said Lewis.
“A DYING BREED: THE AMERICAN SHOPPING MALL”
A headline in TIME MAGAZINE in the June 29th issue of 2014 read, “A DYING BREED: THE AMERICAN SHOPPING MALL” The article contained this observation, “What was a Golden Age of shopping, which lasted until a new Golden Age came along, courtesy of the Internet. “

So since the beginning of the Bush recession, we have seen malls die as a square footage rationalization has begun, with spending no longer sustaining the over-stored situation. Within 15 to 20 years, retail consultant Howard Davidowitz expects as many as half of America’s shopping malls to fail.

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$MILLIONS$ IN PUBLIC FUNDING FOR UTC INFRASTRUCTURE  NOW QUESTIONABLE
What is highly questionable now, considering Litt’s devastating financial description of Taubman’s lack of financial acumen, is that not one local politician vetted the Taubman/Benderson $312 million UTC Mall before approving various zoning regulations for the UTC Mall and buttressing it with hundreds of millions of dollars in infrastructure  costs.
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BENDERSON NEEDS TO ADDRESS LITT’S ASSESSMENT OF TAUBMAN
Litt’s  accusations of financial mismanagement by Taubman, especially with millions of public dollars already appropriated in public expenditures to alleviate the massive urban sprawl centered around the Taubman/Benderson UTC Mall, need to be addressed by Benderson.
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ARE $MILLIONS OF PUBLIC FUNDING COMPROMISED?
Local politicians who pumped $millions of dollars in infrastructure costs to financially benefit Taubman and Benderson’s $312 million UTC Mall and other Benderson projects, need Benderson to address Litt’s demands of Taubman to, “Tighten His Belt or Sell.” Will this situation compromise the validity of the $millions in public funding approved for various Benderson projects, like the $70 million dollar rowing park?
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CONSTRUCTION OF INTERCHANGE AND TRAFFIC ISSUES
Local, State of Florida and federal politicians who were in support of Benderson projects on the University Boulevard/I-75 Corridor, which include the anticipated TWO HUNDRED MILLION DOLLAR interchanges needed to move the traffic along the massive sprawl Benderson has created at the Corridor, need answers from Randy Benderson— not one of his mouthpieces.
MOST IMPORTANTLY IS THE UTC MALL FOR SALE?
By the way, those politicians who pumped $millions to alleviate the massive sprawl created by the $312 UTC Mall due to a developer who is on his way out the door, should have read the TIME MAGAZINE cover from July 1998. It features Jerry Yang, who was CEO of Yahoo Inc. at the time and reads, “Kiss Your Mall Goodbye: Online Shopping is Faster, Cheaper and Better.”
NEXT IN THE SARASOTA PHOENIX

Will Randy Benderson’s UTC Mall Turn Into a $312 Million

Dollar White Elephant Exposing A Corrupt Political System? 

Posted in Breaking News, Business, News, Regional / Local Politics, State News

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