UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Soliciting Material Pursuant to §240.14a-12
Taubman Centers, Inc.
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Support the Board that Continues to Implement Significant Governance Enhancements,
Has the Right Expertise, and Is Overseeing a Proven Strategy to Drive Shareholder Value
VOTE THE ENCLOSED WHITE PROXY CARD TODAY
“FOR” TAUBMAN CENTERS’ DIRECTOR NOMINEES
AND “AGAINST” L&B CAPITAL’S PROPOSAL
May 1, 2018
Dear Fellow Shareholder,
You have important voting decisions to make in advance of the upcoming Annual Meeting of
Shareholders, which will be held on May 31, 2018.
Under the leadership and guidance of the Company’s Board of Directors, we have assembled an
industry-leading portfolio of high-quality assets that have consistently delivered outstanding long-term
shareholder returns. Over the last several years, following extensive engagement with shareholders, we
have also taken significant actions to increase transparency and enhance corporate governance.
We continue to make progress refreshing our Board, and we added two new independent directors with
diverse expertise and complementary skillsets in January 2018. Since April 2016, we have added four
new, independent directors to our Board.
Both of these new directors are up for election, as is our Chief Operating Officer, William S.
Taubman, and the Board recommends that shareholders vote “FOR” each of its director nominees
– Mayree C. Clark, Michael J. Embler, and William S. Taubman – on the enclosed WHITE proxy
card.
Following a comprehensive process with an independent search firm, the Board appointed as directors
Mayree C. Clark, Founding Partner of Eachwin Capital LP, and Michael J. Embler, former Chief
Investment Officer for Franklin Mutual Advisers LLC. Ms. Clark and Mr. Embler are strong, independent
voices, and they bring significant investor stewardship experience to our boardroom. In addition, their
appointments further increased the diversity of the Board and reduced the average age and tenure of the
Company’s independent directors. Both are independent directors under applicable SEC and NYSE
standards.
The third director up for election this year is our Chief Operating Officer, William S. Taubman. Mr. W.
Taubman brings a deep understanding of our business and culture and significant industry expertise to
the Board, including through his service as former Chairman of the International Council of Shopping
Centers. He also maintains valuable relationships with prominent retailers and brands and possesses
significant merchandising expertise acquired throughout his accomplished career. He has been a leader
of the Company through many economic cycles, overseen internal and external growth and capital
recycling initiatives, and helped drive other key operational and strategic efforts.
We are confident that our highly qualified director nominees will continue to guide the Company and
management as we execute on our proven strategy.
The Company’s Significant Governance Enhancements Exemplify
Our Commitment to Having a Strong, Independent Board that Is
Accountable to Shareholders
We continue to implement robust governance enhancements, demonstrating the Board’s commitment to
improving our governance structure. After a detailed review of the Board’s composition, the Company
conducted a director search process, led by a leading, independent search firm, to identify candidates,
taking into consideration the qualities and experience recommended by our shareholders.
Since April 2016, we have added four new directors to our Board, each of whom is independent. We are
committed to refreshing the Board on a regular basis to ensure that we remain well positioned to identify
and implement value-enhancing strategic initiatives.
In addition, we continue to work with a search firm to identify another additional independent director to
be appointed before the 2019 Annual Meeting of Shareholders. These recent developments follow our
previously announced commitment to accelerate Board refreshment.
The Board also created the role of independent Lead Director in December 2016 and appointed Mike
Ullman. The Lead Director is tasked with supporting a strong Board culture, with the ultimate goal of
fostering an environment of open dialogue and constructive feedback among the directors. Mike has
been heavily involved in enhancing the Company’s corporate governance practices and has also served
as the Board’s conduit to shareholders.
To help drive greater accountability, we announced Board declassification bylaw amendments in 2017,
under which we will transition to annual elections for directors. Directors will be elected for one-year
terms beginning with the 2018 class of directors. Later classes will also stand for one-year terms at
subsequent annual meetings, and the Board will be fully declassified by the 2020 Annual Meeting of
Shareholders, when the directors elected at the 2017 annual meeting complete their terms.
The Company Has a Demonstrated History of Operational and Financial Success
Our Board and management team have consistently delivered superior long-term results for
shareholders, growing total shareholder returns in a sustainable and responsible manner through several
market cycles. In fact, we have been the best performing public mall REIT over both the last two
and 20 years1. We have an outstanding track record of growth and value creation and are successfully
executing on a clear strategic plan to own, manage, develop, and acquire high-quality retail properties
that deliver superior financial performance to shareholders. This strategy is driven by the critical oversight
and significant operating experience of members of the Board.
Notwithstanding the challenging retail market, we achieved growth in nearly all of our key metrics in 2017,
including increases in net operating income, adjusted FFO, sales per square foot, occupancy, and
average rent per square foot. We are navigating a rapidly evolving retail environment from a strong
competitive position with best-in-class assets and are confident in our ability to build on our progress.
We recently reached the end of another development cycle that will further enhance shareholder value,
just as we have following past development cycles. We believe we are poised to achieve significant cash
flow and NOI growth over the short-to-medium term, including $70 to $75 million of NOI in 2020 from our
recently developed assets, up from $35 million in 2017.
1 As of April 20, 2018
Furthermore, our executive compensation is aligned with shareholders’ interests and is part of a broader
strategy to enhance operating efficiencies and deliver further value. In light of retail sector headwinds
throughout 2017, management proactively took actions to deliver on its earnings targets and best position
the Company for long-term success. Accordingly, our Board approved a voluntary forfeiture by Robert S.
Taubman, our Chief Executive Officer, and William Taubman of most of their 2017 base salaries and their
2017 equity grants, and created a tiered cash bonus structure that would only pay them individual cash
bonuses if the Company’s FFO/share performance was at the upper end of the company’s 2017 guidance
range. These actions were initiated by Mr. R. Taubman and Mr. W. Taubman, who are focused, along
with the rest of our Board, on the long-term health of the business and advancing long-term value
creation for all shareholders.
Our strong historical financial performance and industry-leading portfolio demonstrate that the Board and
management’s value creation strategy, which includes relatively long development periods to ensure
future growth, has been successful and continues to be the right approach for our shareholders.
L&B Capital’s Nominee, Jonathan Litt, Is Unqualified to Represent
the Company’s Shareholders
Despite the expertise of our strong, experienced, and recently refreshed Board and our track record of
value creation, Land & Buildings Capital Growth Fund, LP (“L&B Capital”) has nominated its founder,
Jonathan Litt, to replace one of our current directors on the Company’s Board.
Mr. Litt has no operational retail experience, and we believe that his present, SECOND proxy contest is
not in the best interests of the Company and all of its shareholders. Furthermore, we believe Mr. Litt’s
campaign of misinformation is either intentionally misleading, or further evidence of his inability to
understand our structure, business model, and strategy despite his claim to have followed the Company
for 20+ years. Finally, as described below, Mr. Litt’s proposal to eliminate Taubman Centers’ Series B
preferred stock would cause a misalignment of the interests of the Company’s shareholders. In light of
the foregoing considerations, the Board cannot recommend to our shareholders that Mr. Litt serve as
director.
The Company’s Board and management team remain focused on executing our business plan and
strategies for driving value, and we strongly encourage all shareholders to vote “FOR” each of the
Company’s director nominees.
L&B Capital’s Non-Binding Proposal to Eliminate the Series B Preferred Stock Is
Not in the Best Interests of the Company and Its Shareholders
L&B Capital’s non-binding proposal to eliminate Taubman Centers’ Series B preferred stock would, if
implemented, result in (i) a misalignment of voting and economic interests and (ii) the dilution in the
economic value of the existing shares of common stock.
In its solicitation material, L&B Capital, at the direction of its founder, Jonathan Litt, misleads shareholders
by omitting material facts to create a false narrative that our economic and voting interests are not fully
aligned. L&B Capital says that the Series B shareholders have “30% of the voting power, despite
collectively owning just 2% of Taubman Common Stock.”
L&B Capital notably ignores the fact that the Company’s capital and voting structure ensures
proportionate economic and voting rights. As shown in the “Existing Structure” chart below, the
Company’s sole asset is its 71% partnership interest in The Taubman Realty Group Limited Partnership
(“TRG”), the operating partnership that beneficially owns interests in all of the shopping centers and other
assets. The remaining 29% of the TRG partnership interests are held by TRG’s partners other than the
Company, including members of the Taubman family.
Common shareholders in the Company hold a 71% voting interest in the Company. The other TRG
partners, through their ownership of Series B preferred stock, hold a 29% voting interest in the Company,
corresponding to their 29% partnership interest in TRG. Thus, the economics and voting are in full
alignment; there is no disproportionate voting power.
The Company’s structure also follows the principle of “one share, one vote.” On matters with respect to
which the common shareholders of the Company vote, including the election of directors, the holders of
Series B preferred stock vote together with the common shareholders as a single class and are entitled to
just one vote per share.
Ignoring our one share, one vote structure, L&B Capital tries to bolster its false narrative by comparing
the Company to two companies that have classes of stock with disproportionate voting power, e.g., one
class with one vote per share and another class with 10 votes per share. Contrary to L&B Capital’s
deliberate mischaracterization, the Company does NOT have disproportionate dual class voting
stock. L&B Capital is either trying to confuse shareholders to gain support for its misguided campaign, or
it fails to understand the Company’s capital and voting structure despite Mr. Litt’s claim to have followed
the Company for more than two decades.
L&B Capital has proposed that the Company exchange 8 million shares of its common stock for all of the
outstanding shares of the Series B preferred stock. If the Company were to pursue this proposal, it would
dilute the existing common shareholders’ indirect interest in TRG from 71% to 62% while increasing the
Series B shareholders’ interest in TRG from 29% to 38%, as shown in the “L&B Proposal” chart above.
Since the proposal calls for the dilution of the economic interest of the existing common shareholders, the
existing common shareholders would receive a significantly lower percentage of every dividend
distribution.
Had the proposal been put into effect for the first quarter of 2018, assuming the same aggregate amount
of dividends had been paid by the Company, current holders of the common stock would have received a
dividend of $0.579 per share (compared with the $0.655 per share received for Q1 2018), which would
have reduced their quarterly distribution by $0.076.
L&B Capital’s proposal results in this economic dilution of the current common shareholders, in part,
because it grants the Series B preferred stock a conversion right far greater than it actually has under the
Company’s articles of incorporation. L&B Capital proposes that the Series B preferred stock, of which
there are 24,937,221 shares as of the record date, be exchanged for 8 million shares of common stock, a
ratio of three to one, when, the articles of incorporation establish a conversion right of 14,000 shares of
Series B stock to one share of common stock.
For the reasons discussed above, our Board has determined that L&B Capital’s proposal is not in the best
interests of the Company and its shareholders, as it is premised on a misunderstanding of the Company’s
capital and voting structure and, if implemented, would result in (i) a misalignment of economic and voting
interests and (ii) the dilution in the economic value of the existing shares of common stock.
We urge you to vote “FOR” the Company’s director nominees – Mayree C. Clark,
Michael J. Embler, and William S. Taubman – and “AGAINST” L&B Capital’s
proposal on the enclosed WHITE proxy card today.
Thank you for your continued support.
Sincerely,
Taubman Centers, Inc., Board of Directors
Jerome A. Chazen
Mayree C. Clark
Michael J. Embler
Craig M. Hatkoff
Chair, Compensation Committee
Cia Buckley Marakovits
Robert S. Taubman
Chairman, President, and CEO
William S. Taubman
Chief Operating Officer
Ronald W. Tysoe
Chair, Audit Committee
Myron E. Ullman, III
Lead Director; Chair, Nominating and Corporate Governance Committee
Your Vote Is Important, No Matter How Many Shares or How Few Shares You Own!
If you have any questions or require any assistance in voting your shares,
please call the Company’s proxy solicitor listed below:
INNISFREE M&A INCORPORATED
Toll-free at (888) 750-5834 (from the U.S. or Canada)
or
(412) 232-3651 (from other locations)
FORWARD-LOOKING STATEMENTS
For ease of use, references in this letter to “we,” “Taubman Centers,” “company,” “Taubman” or an operating platform mean Taubman Centers, Inc.
and/or one or more of a number of separate, affiliated entities. Business is actually conducted by an affiliated entity rather than Taubman Centers, Inc.
itself or the named operating platform.
This document may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. These statements reflect management’s current views with respect to future events and financial
performance. Forward-looking statements can be identified by words such as “will”, “may”, “could”, “expect”, “anticipate”, “believes”, “intends”, “should”,
“plans”, “estimates”, “approximate”, “guidance” and similar expressions in this document that predict or indicate future events and trends and that do
not report historical matters. The forward-looking statements included in this document are made as of the date hereof. Except as required by law, we
assume no obligation to update these forward-looking statements, even if new information becomes available in the future. Actual results may differ
materially from those expected because of various risks, uncertainties and other factors. Such factors include, but are not limited to: changes in market
rental rates; unscheduled closings or bankruptcies of tenants; relationships with anchor tenants; trends in the retail industry; challenges with
department stores; changes in consumer shopping behavior; the liquidity of real estate investments; the company’s ability to comply with debt
covenants; the availability and terms of financings; changes in market rates of interest and foreign exchange rates for foreign currencies; changes in
value of investments in foreign entities; the ability to hedge interest rate and currency risk; risks related to acquiring, developing, expanding, leasing
and managing properties; competitors gaining economies of scale through M&A and consolidation activity; changes in value of investments in foreign
entities; risks related to joint venture properties; insurance costs and coverage; security breaches that could impact the company’s information
technology, infrastructure or personal data; costs associated with response to technology breaches; the loss of key management personnel;
shareholder activism costs and related diversion of management time; terrorist activities; maintaining our status as a real estate investment trust;
changes in the laws of states, localities, and foreign jurisdictions that may increase taxes on our operations; and changes in global, national, regional
and/or local economic and geopolitical climates. You should review our filings with the U.S. Securities and Exchange Commission (the “SEC”),
including “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent quarterly reports, for a discussion of such risks and
uncertainties.
This document may also include disclosures regarding, but not limited to, estimated future earnings assumptions and estimated project costs and
stabilized returns for centers under development and redevelopment which are subject to adjustment as a result of certain factors that may not be
under the direct control of the company. Refer to our filings with the SEC on Form 10-K and Form 10-Q for other risk factors.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
The Company has filed a definitive proxy statement and associated WHITE proxy card with the SEC in connection with the solicitation of proxies for the
2018 Annual Meeting of Shareholders of the Company (the “Annual Meeting”). The Company, its directors, its executive officers and certain other
individuals set forth in the definitive proxy statement are deemed participants in the solicitation of proxies from shareholders in respect of the Annual
Meeting. Information regarding the names of the Company’s directors and executive officers and certain other individuals and their respective interests
in the Company by security holdings or otherwise is set forth in the Annual Report on Form 10-K of the Company for the fiscal year ended December
31, 2017, which was filed with the SEC on February 27, 2018, and has been included in the definitive proxy statement filed with the SEC on April 30,
2018. Details containing the nominees of the Company’s Board of Directors for election at the Annual Meeting are included in the definitive proxy
statement. BEFORE MAKING ANY VOTING DECISION, SHAREHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT
DOCUMENTS FILED WITH OR FURNISHED TO THE SEC, INCLUDING THE DEFINITIVE PROXY STATEMENT AND ANY SUPPLEMENTS
THERETO AND ACCOMPANYING WHITE PROXY CARD BECAUSE THEY CONTAIN IMPORTANT INFORMATION. The Company’s definitive proxy
statement and a form of proxy have been mailed to shareholders of the Company. Investors and shareholders can obtain a copy of the documents
filed by the Company with the SEC, including the definitive proxy statement, free of charge by visiting the SEC’s website, www.sec.gov. The
Company’s shareholders can also obtain, without charge, a copy of the definitive proxy statement and other relevant filed documents, when available,
from the Company’s website at www.taubman.com.
NON-GAAP MEASURES
Net Operating Income is a non-GAAP financial measure as defined by SEC Regulation G. The forward-looking non-GAAP measure used herein may
differ significantly from the corresponding GAAP measure, net income, due to depreciation and amortization, tax expense, and/or interest expense,
some or all of which management has not quantified for the future periods. See the Company’s Annual Report on Form 10-K for the year ended
December 31, 2017 filed with the SEC on February 27, 2018 for the definition and a discussion of such non-GAAP measure. This non-GAAP measure
as presented by the Company is not necessarily comparable to similarly titled measures used by other REITs due to the fact that not all REITs use the
same definitions. This measure should not be considered an alternative to net income or as an indicator of the Company's operating performance.
Additionally, this measure does not represent cash flows from operating, investing, or financing activities as defined by GAAP.