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Mall owner Taubman now faces double the activist pressure

Key Points
  • Paul Singer's hedge fund, Elliott Management, has built a position in Taubman Centers, a source familiar with the matter tells CNBC.
  • The firm could argue for changes at the real estate investment trust, and potentially a sale, the source says.
  • Taubman has already come under attack by activist Jonathan Litt's firm, Land & Buildings Investment Management.
Robert Taubman, chairman, president and chief executive officer of Taubman Centers Inc.
Andrew Harrer | Bloomberg | Getty Images

Taubman Centers, a top U.S. mall operator, now has a second activist investor on its case.

Paul Singer's hedge fund, Elliott Management, has built a position in Taubman, a source familiar with the situation told CNBC. The activist firm has spoken with management of the real estate investment trust about pursuing potential options that include going private, the source said. However, it's unclear what the next steps for the activist fund will be.

New York-based Elliott has taken a stake below the 5 percent threshold that would require it to disclose the position to regulators. The exact size of the stake could not immediately be determined.

The source who spoke to CNBC asked not to be named because the information is confidential. A representative from Elliott didn't respond to CNBC's request for comment. Taubman declined to comment.

Bloomberg first reported on Elliott's position Monday evening.

Taubman shares were up 4.8 percent Tuesday on the news.

Taubman has already come under attack by activist Jonathan Litt's firm, Land & Buildings Investment Management. Litt has also pushed the mall owner to consider putting itself up for sale, among other changes.

Taubman's portfolio consists mainly of U.S. shopping centers, but the REIT also has a small presence in China and South Korea.

As retailers' woes balloon, Taubman's stock has tumbled more than 25 percent in 2017, with short sellers targeting its shares in addition to those of REIT rivals Seritage, Simon Property Group, General Growth Properties and Macerich.

The news comes as activist pressure has been building in the REIT industry, and particularly against those landlords with retail exposure.

Just last week, Dan Loeb's Third Point hedge fund revealed it had built a position in Macerich. Loeb could push for a potential sale of the U.S. mall operator over time, according to reports.

Additionally, GGP, one of the largest publicly traded U.S. mall owners, has received a nearly $15 billion bid from Brookfield Property Partners to acquire the shares it currently doesn't own in the REIT.

Brookfield has reportedly held "preliminary discussions" with GGP about taking the company private. GGP and Brookfield both declined to comment on those talks.

In defending itself, Taubman has taken steps such as appointing two new independent directors to the REIT's board, and making other so-called governance enhancements.

In August, Litt wrote to Taubman's management team: "It is time for you, the independent Board members, to finally hold management accountable and take immediate action to evaluate the current leadership of the Company and remove ineffective management in order to maximize the value of Taubman Centers' assets."

"The time has come for all of you to reject management's repeated explanations and excuses for the horrible operating performance, development strategy and shareholder returns at Taubman," Litt said.

In addition to Taubman, Elliott's targets this year have included mining company BHP Billiton and electricity distributor Sempra Energy.

— CNBC's Lauren Hirsch contributed to this reporting.