Taubman Centers is teaming up with Morgan Stanley--and hiring a top Morgan Stanley executive--to greatly expand its development role in Asia. The regional mall REIT announced yesterday that it is hiring Morgan Parker, a Morgan Stanley vice president based in Tokyo who oversaw Morgan Stanley Real Estate Funds' retail investment and management business in Asia. Parker will run the newly-formed Taubman Asia subsidiary, which will be headquartered in Hong Kong.
Taubman took its first steps overseas a year ago when it signed on to be the exclusive retail developer for the $20 billion New Songdo City project, a massive Korean development that will eventually house 250,000 people and have about 100 million square feet of commercial real estate, including 10 million square feet of retail. "New Songdo is our first order of business," says Robert S. Taubman, chairman, president and CEO of Taubman Centers told Retail Traffic. "But together with Morgan Stanley, we expect to be looking at a number of projects throughout the region. We expect to find opportunities that we'll capitalize on."
Taubman declines to identify other potential Asian developments, but points to Morgan Parker's experience in the region as a key to finding deals. At Morgan Stanley, and before that with Macquarie Bank and Lend Lease, Morgan developed a deep knowledge of property markets in China, Japan, Taiwan and Indonesia. His connection to the Morgan Stanley Real Estate Fund also puts Taubman in position to tap into the fund as a joint venture partner. (Morgan Stanley Real Estate Fund is also an investor in New Songdo City and Morgan Stanley as a whole owns about 8.4 percent of Taubman's outstanding shares.)
Taubman says it will "limit its financial exposure" on any Asian investments and rely on Morgan Stanley, or other private equity funds, to invest in the developments. Taubman would not specify, however, how large the ownership positions it would retain would be.
"We won't rush anything," says Taubman. "We will be cautious and disciplined and limit financial exposure. But it's quite possible that this office can grow quickly: Morgan Stanley Real Estate Fund is an international fund. They have 2,500 people on the ground in Asia and have invested over $10 billion. They have done very little on the retail side. I think that their expectation is that with us they will do more."
Taubman, which fought off a hostile takeover bid from Simon Property Group and saw a lucrative management contract disappear when the General Motors Pension Fund sold its properties to Mills Corp., has been looking for growth strategies. One has been to move into new types of development, such as The Pier at Caesars in Atlantic City, which it is co-developing with Gordon Group Holdings, a co-developer of the Forum Shops in Las Vegas.
In launching an overseas expansion, Taubman is joining a long list of top REITs that are looking for more opportunity than North America can provide. Mills Corp. has ventured into Spain, the United Kingdom and Rome. Simon Property Group has interests in Japan and Italy. General Growth Properties has an alliance with companies in South America.
-- David Bodamer