A. Alfred Taubman, the Michigan real estate developer who bought Woodward & Lothrop Inc. a year ago, has obtained a $650 million loan to enable him to make more acquisitions in real estate, retailing and other businesses.
In an unusually large and complicated transaction announced yesterday, Taubman said his interests in 17 regional shopping centers -- including two in this area -- Fair Oaks Mall in Fairfax and Lakeforest Mall in Gaithersburg -- will be used as collateral for a loan from the pension trusts of General Motors Corp. and American Telephone & Telegraph Co.
Under the agreement, Taubman will continue to manage the properties, which do more than $3 billion of business a year and are regarded as among the best malls in the country.
Taubman declined to disclose the amount of the loan, but informed sources said it was near $650 million.
"This action provides the feasibility to take advantage of a number of opportunities for growth and diversification while maintaining our strong commitment to and control of retail properties," said Taubman, the 60-year-old Detroit multimillionaire who in the past five years has been busy diversifying his portfolio from shopping malls (currently valued at $2 billion) that made him rich and famous.
Taubman also owns Sotheby's, the world's largest international art auction house, and A&W Restaurants. He is also majority owner of the USFL Oakland Invaders, a professional football team that just merged with Taubman's money-losing but 1983 pennant-winning Michigan Panthers.
A spokesman for Taubman said the money could be used to buy a number of different companies, not necessarily limited to retailing. "There are opportunities in a number of fields. . . . He is not ruling out anything. But the guidelines are that the opportunity has to be profitable, and it would be a business Taubman would enjoy owning," the spokesman said.
The money may or may not be used to expand Woodies, the spokesman added.
Under the agreement, the pension funds, in return for the loan, have the right to become jointly a 50 percent limited partner in the properties in 1997 when the agreement expires.
This agreement "was created by Salomon Brothers Inc. [Taubman's investment banker] as a way to use considerable equity in the properties . . . and put it in more liquid form . . . while at the same time keep control of managing the properties," Taubman's spokesman said.
It is not unusual for pension funds to invest in real estate, according to investment advisers. However, investment advisers yesterday noted that this deal was unusual because of its size and structure. Of the two pension funds, the GM fund's participation is the larger, according to Taubman officials.
Normally, creditors obtain first mortgage rights or an equity position in the real estate, noted Daniel Kearney, managing director of Salomon Brothers. "This is a hybrid. . . . The size of the transaction was fairly large," which limited its availability "to eight to 10 very sophisticated large institutional investors," Kearney said.
The agreement was so complicated that it took seven months to complete after it was first agreed to, Kearney said. More than 4,000 documents had to change hands before the agreement was signed late Tuesday -- Taubman's private plane had to fly the documents to Boston, where the pension funds' advisers were located.