By Michele Lerner

After successfully thwarting an unsolicited hostile takeover bid, Taubman Centers, Inc. (NYSE: TCO) Chairman, President and Chief Executive Officer Robert S. Taubman told shareholders that he would continue to ensure that the company was run in their best interests. And 2004 results certainly backed up that assertion. Taubman Centers' total return to shareholders increased by more than 51 percent and the company hiked its dividend by 5.6 percent.

In addition, the company raised $1.3 billion in debt financing, completed its $103 million share repurchase program, began plans for Asian expansion and engaged in several other development, acquisition, leasing and renovation projects. In 2004, Taubman Centers' sales averaged $477 per square foot, making it the most productive public portfolio of malls in the U.S.

Founded in 1950 by Robert Taubman's father, entrepreneur A. Alfred Taubman, Taubman Centers debuted on the New York Stock Exchange in 1992. Robert Taubman joined the company in 1976, was elected executive vice president in 1984, CEO in 1988, president and CEO in 1990 and chairman in 2001, leading the company on its aggressive growth strategy.

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AGE: 51 FAMILY: Married with four children EDUCATION: B.S. degree in economics from Boston University FAVORITE SPORTS TEAMS: “All the Detroit teams are important to those of us who have grown up around here, so I follow them all.” FAVORITE PARTICIPANT SPORTS: Tennis, golf and skiing COMMUNITY ACTIVITIES: Member of the board of directors of Beaumont Hospitals; a trustee of The Skillman Foundation, a $500 million foundation that provides grants for programs which benefit children in the city of Detroit; a trustee of the Cranbrook Educational Community, and chairman of its investment committee; immediate past chairman of the Michigan campaign drive for the United Negro College Fund; a member of the United States Travel and Tourism Promotion Advisory Board. BUSINESS ACTIVITIES: Member of the board of directors of Comerica Incorporated and Sotheby's Holdings, Inc.; director of The Real Estate Roundtable; past trustee of the Urban Land Institute (ULI); past governor of NAREIT; immediate past chairman of ULI's Detroit Regional District Council.

Recently, Taubman talked to Portfolio about the company's battle to fend off a takeover bid, the company's expansion into international markets and his strategy for maintaining its successful growth rate.

Portfolio: Let's start by talking about the takeover bid. The company seems to have come out of that situation in excellent shape as Taubman's shares have soared since the takeover attempt. What did you learn from that situation and how did it change your company?
Taubman: The shareholders clearly won. There's no question that the board made the right decision in rejecting the unsolicited offer. In hindsight, I think the experience helped the general investing public understand the value real estate can add to a portfolio, especially retail malls. Retail real estate has been much more successful during these past 10 years than any other sector. It is much less of a commodity than other forms of real estate—the income streams are far more predictable.

Portfolio: Taubman was the first UPREIT, which gives your company a historical perspective that newer REITs don't have. What are some of the biggest changes you have seen in REITs over the years, and what direction do you think the REIT industry will take in future years?
Taubman: There's definitely a much greater acceptance of REITs today. I think most investors now recognize that real estate has the potential to add measurable value to any portfolio. Nonetheless, while there's been tremendous growth I still feel we are only at the beginning of acceptance by the capital markets.

Prudential recently published research that shows over $14 trillion of investable commercial real estate is available globally, but that only $560 billion is owned by REITs today. As best practices develop and REITs continue to expand we can become one of the most important components of the world's capital markets.

Portfolio: Speaking of international expansion, Taubman is in discussions to develop the retail components of New Songdo City in South Korea. How would you describe the market overseas for REITs? What's different about working in the international marketplace as opposed to developing retail sites domestically?
Taubman: REITs have a lot of value to add to other markets beyond the U.S., and we as an industry are beginning to recognize this. And retail REITs, especially the larger ones, will all need to grow internationally. In Korea we are exploring the idea of being the exclusive retail developer of New Songdo City, a project which could add to our company's growth for the next 10 years or longer. Over 10 million square feet of retail space will be part of this mixed-use development, part of which is already under construction. The entire development will have over 100 million square feet of space. It's a very exciting project and we have some terrific partners including Morgan Stanley and Gale International.

Portfolio: You are a member of the U.S. Travel and Tourism Promotion Advisory Board, which was formed in 2003 to assist the Department of Commerce in attracting international visitors to the U.S. In addition, Taubman Centers and the Department of Commerce teamed up in 2004 to study the correlation between shopping and cultural tourism. What have you learned from those experiences about attracting international visitors to the U.S. and their shopping habits?
Taubman: The study confirmed that shopping is the number one activity of tourists. We have centers with as much as one-third of their sales traced directly to tourism. Having a retail developer on the Tourism Promotion Advisory Board confirms the importance of shopping as a travel activity.

The U.S. has never before spent money marketing our country to overseas tourists the way other countries market themselves to us. Tourism is one of the most important industries in this country and there's now an effort to recognize that and have it supported by the Department of Commerce.

As an owner of shopping centers, there are countless things we can do to increase tourism visitors, ranging from store directories in other languages and individuals at the centers who speak other languages, to promoting retail centers through tour operators as part of a package tour.

Portfolio: On the domestic front, Taubman is investing in The Pier at Caesars in Atlantic City and has plans to work with Gordon Group Holdings on future projects. What types of projects are anticipated for this joint development agreement?
Taubman: We're thrilled with the investment at The Pier at Caesars and we really believe in the Gordon Group. They were the first to bring a sophisticated retail project to Las Vegas by creating the Forum Shops at Caesers about 15 years ago, way before anyone believed in the retail opportunity there. Now they are really doing the same for Atlantic City. As a matter of fact, their slogan is perfect: “If you thought the desert was exciting... wait until you see the ocean...” We're pleased with the opportunity to find more projects to do with them focusing on casino or entertainment-oriented retail.

Portfolio: Your company increased its ownership in International Plaza in Tampa last summer with the expansion of that center. What other plans for expansion do you have for 2005?
Taubman: We're moving on a number of other projects at the same time. We are expanding and renovating the Waterside Shops at Pelican Bay in Naples, Fla., plus we are creating more than 1.1 million square feet of retail space at Northlake Mall in Charlotte, N.C., which is under construction, on budget and on track to open this September. We're also getting terrific retailer response to our Mall at Oyster Bay on Long Island. And we've announced our involvement in a new project in downtown Salt Lake City directly across from Temple Square.

We usually have more than a dozen projects going at any one time, sometimes closer to two dozen. Our long-term goal is for FFO per share growth north of 8 percent per year. The key to achieving this target is for the core of our business to continue to grow by at least 5 percent per year on a leveraged basis while we add one new project each year through development or acquisition.

Portfolio: Your company maintains in-house capabilities in leasing, construction, planning and design, finance, market and consumer research, public affairs, marketing, retail analysis and center operations—how do all these elements factor into Taubman's success?
Taubman: We've been a full-service, vertically integrated company from the beginning, and we think this is critical to our success. When you are developing, building, leasing and managing you are continuously learning new things about each aspect of the business. But any business starts and ends with its people and we feel that we have the best in our sector. Over the last 10 years, our shareholders have enjoyed a 20 percent-plus compound annual total return—that suggests our vertical integration and our employees have achieved significant success.