This extract demonstrates how A Alfred Taubman amassed an extraordinary fortune through profitable investments in retail real estate development
Alfred Taubman describes himself as a developer, not an investor. The term asserts a distinction, although perhaps not a big difference, between the two practices.
Traditional investors—in stocks, bonds, currencies, real estate—focus on a particular context or investment theme, develop ideas within that theme, then research each idea, analyzing it and weighing its risks and potential rewards. Developers do much the same, but the context in which ideas are found is always land and infrastructure. They research the idea up, down, and sideways, weighing risks and rewards. If the decision is to go forward with the development, they sink a lot of money into what they project will be an even greater future value. In a very real sense, every project is of course an investment.
The distinction, therefore, comes down to context. In Taubman’s career, that means a single core competency—retail real estate development. Yes, he has dabbled in building other structures. When the mayor of Charleston, South Carolina, asked him to help save the downtown from a development stunningly out of keeping with that city’s history and spirit by building a hotel, Taubman did so. “I did it because I thought it ought to be done,” Taubman says. “This is a city important to America.” He has also developed mixed-use urban complexes like the Town Center in Stamford, Connecticut, and Beverly Center in Los Angeles. And when a friend initiating a fund of funds asked Taubman to take a stake, he did so—“I wanted to help,” he says. But the business of retail real estate development is what he knows and where he has a track record of extraordinary performance, having succeeded on 96 percent of his projects. “I haven’t had many losers,” says Taubman, “and I’ve covered the downside pretty well.” There seems little reason to depart from that very profitable home base.
|Arizona Mills||Tempe, AZ|
|Beverly Center||Los Angeles, CA|
|Charleston Place||Charleston, SC|
|Cherry Creek||Denver, CO|
|Crystals at City Center||Las Vegas, NV|
|Dolphin Mall||Miami, FL|
|Fair Oaks Mall||Fairfax, VA|
|Fairlane Town Center||Dearborn, MI|
|Great Lakes Crossing Outlets||Auburn Hills, MI|
|International Plaza||Tampa, FL|
|MacArthur Center||Norfolk, VA|
|The Mall at Millenia||Orlando, FL|
|The Mall at Partridge Creek||Clinton Township, MI|
|The Mall at Short Hills||Short Hills, NJ|
|The Mall at Wellington Green||Palm Beach County, FL|
|Northlake Mall||Charlotte, NC|
|The Pier Shops at Caesars||Atlantic City, NJ|
|Regency Square||Richmond, VA|
|The Shops at Willow Bend||Piano, TX|
|Stamford Town Center||Stamford, CT|
|Stony Point Fashion Park||Richmond, VA|
|Sunvalley Shopping Center||Concord, CA|
|Twelve Oaks Mall||Novi, MI|
|Waterside Shops||Naples, FL|
|Woodfield Shopping Center||Schaumburg, IL|
|City Creek Center||Salt Lake City, UT|
|International Fin Center (IFC)||Seoul, South Korea|
|International Market Place||Waikiki, HI|
|The Mall at Oyster Bay||Oyster Bay, NY|
|North Atlanta Center||North Atlanta, GA|
|Plaza Internacional||San Juan, PR|
That philosophy of covering the downside is something Taubman adheres to in his non-real-estate investing as well. Indeed, one of the key lessons to be learned from looking at Taubman’s career is that, if and when you do venture out of your core business, spread the risk. Even when he has had the cash to put up all the equity—and that is most of the time—Taubman eschews taking on all the debt himself; instead, he brings in other investors. It is what he did when he bid for the Irvine Ranch in 1977, despite having the wherewithal to do the deal by himself, through his own assets and his relationship with various banks. This is a general principle that is critical to Taubman’s thinking. It is also significant that Taubman is, in general, a long-term holder. That, too, is part of capitalizing on your core competency.
No wonder, that when he is asked to name his biggest win, Taubman answers without hesitation: “My best deal is The Taubman Company.” He created it with a loan of $5,000 and he today owns “well over a billion dollars’ worth of stock” that has provided a return of about 14 percent a year to its shareholders. “I’m a rich man,” says Taubman. “The Taubman Company is how I got rich.”
Check out the company’s peerless portfolio and it’s like scrolling through a who’s who of the country’s up-market malls. Indeed, researchers at Morgan Stanley, when preparing the underwriting for the company’s IPO, found that Taubman malls are in more than 90 of the 100 highest-income U.S. zip codes. Today the company is also invested in “three very successful off-price malls.” Says Taubman: “We do high end and low end. Never in between.” (For a more detailed look at Alfred Taubman’s malls, see table)
Taubman retired from any formal association with the company he founded, now known as Taubman Centers, although he is still involved by virtue of significant ownership of its shares and tight ties to its management; his two sons are today at the helm of the business. As would be expected, they still seek the master’s counsel on occasion, but they have proven themselves to be strong stewards of the business, and visionaries as well, by opening a beachhead office in Asia and developing a project in Puerto Rico that will be consistent with the company’s high-end venues.
THE BIG WIN
AUTHOR: Stephen L Weiss
PUBLISHER: John Wiley & Sons, Inc
Reprinted with permission from John Wiley & Sons, Inc.
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