A View From The Top
October 14, 2014 • I recently attended a Breakfast in the C Suite with William S. Taubman, the Chief Operating Officer of Taubman Centers, which develops, owns, and operates regional malls throughout the United States and Asia. It was a rare opportunity to gain insight into one of the most powerful retail real estate owners in the world.
What impressed me the most was the transparency with which Bill described what it was like growing up in a real estate family and the challenges and opportunities that Taubman faces today.
Taubman Takeaways
1. Quality is a core value for Taubman Centers, emanating back to Bill’s father Alfred who founded the company and was trained as an architect. Bill noted that Taubman often builds higher quality projects than the market dictates because they are “talking up to the customer,” a philosophy that dictates how they design, merchandise, and operate their properties.
2. Taubman, which has four new mall developments in the works, is the only company to build a first-class regional mall in the United States in the past eight years. In each case: Miami, Sarasota, San Juan, and Hawaii, they believe that they are bringing a retail product that doesn’t exist to an understored market. Time will tell if they are right. Bill acknowledged that it’s impossible to predict which developments will outperform (or underperform) expectations. He could never have predicted that Dolphin Mall, a discount/outlet mall that Taubman developed in Sweetwater, FL, would be a home run.
3. Technology will be the biggest game changer for retail real estate in terms of how properties are operated, with the power to both undermine and enhance the underlying real estate. Bill predicts that one-day mall owners will know with specificity when a customer is in the mall and how much time and money they spend at each store. Access to this information would theoretically enable the property owner to enhance each shopper’s overall experience, to everyone’s benefit. The challenge is the onslaught of untested and competing technologies with no clear pathway for the future.
4. Bill was surprisingly forthright when he acknowledged that climate change does not factor into Taubman’s decision-making process, as evidenced by the three regional malls they are developing in the coastal communities of Miami, San Juan, and Hawaii. Bill’s rationale for this is that “someone else will figure things out” and ultimately their investments will not be jeopardized.
5. Taubman has invested $100 million in its Asian operations with no immediate expectation of profitability. They have three projects under construction, two in China and one in Korea, with anchors that Bill likened to Macy’s and Bloomingdale’s. In addition to their 80-person Asian company, Taubman has a local partner for each project. Taubman handles the leasing while their partners handle the development. Bill believes that in 15 years they could have 15 projects in Asia but that they will not see significant profits for at least another 10 years.
In It for the Long Haul
It will be interesting to see which of Taubman’s U.S. and Asian developments are profitable over the next decade or so, but one thing seems fairly certain: in ten year’s time, Taubman Centers will still be developing and operating regional malls and talking to us about their outlook for the future.