Real estate is one of the last giant industries that remains a family affair. And as the battle for control of Taubman Centers illustrates, when rival dynasties clash, business can become a blood sport. As the vitriol-laced press releases and accusations of hypocrisy continue to fly between the Simons and Taubmans, retail real estate execs remain riveted, eager to see how the battle for the industry's most coveted collection of upscale malls will play out. "This is the Hatfield and McCoys of REIT-dom, it really goes back a long way. Hostile takeovers rarely occur among REITs, and this has been a particularly nasty and drawn-out fight. It's kind of like a wrestling match that isn't choreographed, so you never seem to know who's on top," says Barry Vinocur, a longtime REIT observer and editor-in-chief of Realty Stock Review.

Their stories, and the story of the battle for mall supremacy, make David Simon, Peter Lowy and Robert Taubman the most important players in retail real estate this year. How these execs fare in their current battle-David Simon and Westfield's Peter Lowy have teamed up to take over Robert Taubman's empire-will have a huge impact on how the development and management business morphs in the coming years.

All three mall heirs are in their forties and are the sons of hard-driving self-made men. All have exceeded their fathers' educations and David Simon and Peter Lowy even cut their teeth at ritzy Wall Street firms. These three men grew up seeing their family-owned businesses mushroom into giant public REITs. As second-generation corporate leaders, they all feel pressure to maintain the legacy of their fathers' empires. But they are also stewards of public companies with outside shareholders to answer to, requiring a different set of management skills. And, finally, as inheritors rather than builders, these guys have something to prove.

It won't be easy, because building lots of new malls isn't feasible anymore. And acquisitions are getting tougher because the supply of mall real estate is actually shrinking as weaker properties convert to other formats or become greyfields. So this generation needs to re-organize portfolios, find new lines of business and somehow continue to pay off shareholders.

Columbia MBA David Simon, the 42-year-old first-born son of Mel, joined the company founded by his father and uncle Herb as chief financial officer in 1990. In 1993, after the company's $1 billion IPO, he became president; then CEO after Mel and Herb became co-chairman.

David guided the company through its acquisition of DeBartolo Property Group and its subsequent growth to be the largest shopping center owner in the United States. Now, he's on a mission to take Indianapolis-based Simon upscale from its traditional base of middle-ground properties. That was the motivation behind Simon's bid for Taubman, an owner of tony properties such as the Beverly Center in Los Angeles.

Simon was so determined to make a deal that when Taubman rebuffed a friendly offer, he launched a hostile bid last November that has rocked the close-knit mall development community. Before the Taubman bid, Simon had already scooped up high-end malls in major markets, including the Corporate Property Investors and New England Development portfolios. In partnership with Westfield and Rouse, it bought the Rodamco North America portfolio and in May 2002. Simon paid $330 million for Stanford Shopping Center in Palo Alto, Calif.

Robert Taubman, 49, first-born son of Alfred, shows no signs of relenting in his effort to keep Taubman Centers out of the hands of Simon. Taubman's lawyers have been working overtime and keeping business reporters busy. The maneuvers have included lobbying the state legislature to change a Michigan corporate-governance law to protect Taubman from the Simon dynasty. But more about that later. Robert joined Bloomfield, Hills, Mich.-based Taubman Centers in 1976 after obtaining a BS in economics from Boston University, and became president and CEO in 1990. He stepped up to chairman in 2001, when his father Alfred-who built a mall empire on a $5,000 bank loan--was sent to jail after being convicted in a price-fixing scheme at Sotheby's auction house. Robert guided the posh company through its most prodigious development season ever in 2001, opening four new malls at a cost of $700 million.

The most recent entry to the fray, Peter Lowy, became managing director of Australia-based Westfield's North American Operations in 2000. Peter, who holds a commerce degree from the University of New South Wales, is the 44-year-old middle son of Frank Lowy, a Czechoslovakian refugee who turned a coffee house in New South Wales, Australia, into a billion-dollar global mall empire. (Peter's older brother manages the family's personal wealth.)

Peter took a leadership role in Westfield's U.S. and Australian initial public offerings in 1996 and 1997. Working out of the firm's U.S. headquarters in Los Angeles, he and fellow exec Richard Green expanded the Westfield America portfolio to 39 centers from seven centers during the 1990s. Also CEO of Westfield America, he continues to guide the company's global expansion, including acquisitions, redevelopments and joint ventures, such as the $390 million San Francisco Centre project with Forest City. Under his leadership, the firm initiated a program to rebrand landmark malls into Westfield Shoppingtowns.

Now the three junior moguls are locked in a war that began last November when David Simon initiated merger discussions with Robert Taubman. The two had always been on friendly terms and had often been golfing partners. But when David didn't take no for an answer and launched the hostile bid, the friendship was over. Taubman said in a legal document quoted by the Detroit Free Press that Simon taunted him at an industry conference. According to Taubman, David Simon asked him if he had any idea the kind of pressure that was going to brought to bear on him (Taubman) because his father was in jail and how was it going to look.

The Taubman board of directors flatly refused Simon's unsolicited offer of $17.50 a share, issuing a public statement that would become its mantra: "The company is not for sale." Furthermore, Robert Taubman said in a November statement: Simon "lacks the ability to create its own meaningful growth opportunities and needs to improve its aging and tired shopping centers by acquiring Taubman's premier properties."

Legg Mason Walker analyst David Fick, who believes Taubman Centers will eventually sell, agrees it has the best mall portfolio of any REIT when it comes to location, sales productivity and physical condition. But, he says, the company charges some of the highest rents and tolerates higher vacancies than other mall operators, which creates cache but not as much cash for shareholders.

As promised, David Simon intensified the pressure in January, enlisting the support of Peter Lowy. The two had teamed up in 2002 for a successful bid to acquire the mall assets of Rodamco North America and were ready to give it another whirl.

With Westfield America's backing, Simon upped the ante to $20 per share, an offer it felt Taubman Centers' common shareholders could not ignore. Wall Street agreed that the offer was significantly higher than any price the stock might achieve on its own.

By Valentine's Day, 85 percent of Taubman common stockholders had tendered their shares to the Simon/Westfield alliance, some even filing lawsuits against Taubman Centers, accusing the Taubman board of placing the founding family's concerns over those of the shareholders.

Simon and Westfield also sued in a Michigan court, challenging the Taubman family's effective veto power. Simon alleged that the Taubman family had illegally purchased a series of B shares that gave it a 33.6 percent voting bloc after Tony Deering, CEO of The Rouse Co., made merger overtures in 1998.

Taubman Centers insists the stock purchase was put in motion months before Rouse's offer and points out the Simon family itself owns only 2 percent of stock in its REIT, but reserves the right to elect four of its 13 board members and veto any hostile takeover attempt of Simon Property Group.

In late April, a Michigan District Court judge ruled in favor of Simon and Westfield and declared the Taubman family's use of its B-class shares illegal. But Wall Street analysts who predicted Taubman Centers would be gobbled up within months underestimated the Taubman family's determination to retain control of the business.

Taubman Centers appealed the ruling and enlisted the support of its powerful home-state allies. A Republican-sponsored bill that would overturn the judge's ruling passed in the Michigan House of Representatives in June, effectively allowing the Taubman family to block the takeover.

At press time, the state Senate was still considering the bill, but Morgan Stanley analyst Matthew Ostrower says the vote's 77 to 27 margin in the House indicates it could pass. And Michigan Governor Jennifer Granholm has said she will sign the bill into law if it does. David Simon, Peter Lowy, and a passel of high-priced lawyers and lobbyists representing both sides have descended on Lansing, Mich., to win friends and influence votes. And even if the bill becomes a law, "Simon and Westfield appear fully committed to fighting a proxy battle for seats on the Taubman board. The results of this battle are likely to be very close," Ostrower says.

So where will it all end? "Even if Taubman wins the day, Simon can continue its more gradual efforts to nominate new Taubman board members and hope the newly elected board would view the $20 Simon/Westfield bid more fondly," says Thomas Wiesel Partners analyst Paul Morgan.

Ostrower adds that a proxy contest could play out over a number of years, as Simon and Westfield attempt to fill Taubman board seats with people sympathetic to their cause.

If Taubman does lose its appeal and the support of the Michigan government, Robert Taubman-who now his father Alfred as an advisor-could still exact revenge on his unwelcome suitors. "Now that Alfred Taubman's out of jail, many people believe that he's called in every marker he has and he is not going to let the company be acquired by the Simons. There are more twists and turns in this thing than Lombard Street in San Francisco," Vinocur says.

Deutsche Bank Securities analyst Lou Taylor suggests Taubman Centers could put itself on the auction block, with potential private and public buyers such as General Growth Properties or Rouse outbidding Simon and Westfield. A Taubman family-led bid is also not out of the question, nor is a deal splitting the Taubman portfolio three ways between Simon, Westfield and Taubman, he says.

Whatever the outcome, David Simon, Peter Lowy and Robert Taubman will remain in the news for months to come. Count them among the Players.

And now, for the rest of the Players...