Taubman Centers is pushing back at Simon Property Group. Still in the process of fending off Simon’s hostile takeover attempt, Taubman announced this morning an agreement that could force Simon out of its joint venture interest in the highly profitable Forum Shops at Caesar’s Palace in Las Vegas.

Taubman is partnering with Gordon Group, Simon’s joint-venture partner in the enclosed center. The agreement triggers a "buy/sell" provision that compels Simon to either buy out Gordon’s 42 percent interest or sell its own 58 percent interest at a gross property valuation of $590 million. Gordon is also making a simultaneous $24 per share equity investment in Taubman that could increase the REIT’s valuation far beyond the $18 per share offer Simon is making for the company.

"Simon must decide within 30 days whether to buy or sell an interest in the Forum Shops at a low estimated cap rate of 6.2 percent to 6.5 percent," says Weisel and Partners analyst Paul Morgan in a report on the announcement. "Given the property’s status within the Simon portfolio and the current 1745,000-square-foot expansion (which Simon, not Gordon, is financing), we would not anticipate a high level of interest in selling the property."

In his report on the announcement, Morgan Stanley analyst Matthew Ostrower says it’s clear Gordon is unhappy with its existing Simon partnership, but the reasons why are not as obvious. "We believe Gordon Group’s need for mezzanine capital in order to make the purchase is what is driving it to agree to partner with Taubman. Part of the mezzanine capital Gordon receives will be a 12 percent preferred investment Taubman will make in the asset, and the other portion of the mezzanine is Gordon’s exchange of an ownership interest in the asset for Taubman units priced at $24 per share. We view this entire component as very expensive mezzanine capital for Gordon."

"This latest chapter in the Simon-Taubman takeover saga illustrates our thesis that the hostile bid will prove a costly distraction to Simon," Morgan says. "Taubman management is clearly doing everything possible to avoid a merger with Simon, and has been successful to date at frustrating efforts to consummate the deal."