Taubman Centers Too Cheap To Ignore - Value Investors Buying High Quality Retail Real Estate

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1 Taubman Centers Too Cheap To Ignore - Value Investors Buying High Quality Retail Real Estate December 2017 Please questions or comments to: SaveTaubman@LandandBuildings.com

2 High Quality Retail Real Estate Drawing in Prominent Buyers Opportunistic buyers are taking advantage of extreme discounts at publicly traded retail real estate companies The recently announced $25B sale of high quality mall company Westfield Corp. is the latest transaction highlighting deep value in the sector - Taubman s portfolio, which we believe is even higher quality, at a 4% cap rate implies ~60% upside to ~$100 NAV - Hudson s Bay Company (HBC:CN) has been valued at 3x the current share price despite applying a more conservative 5% cap rate than the announced Westfield sale The 8-K filed by TCO on December 13 th disclosed a severance plan that protects senior level management in the event of a change of control transaction Better-than-expected holiday shopping season is tailwind for retailers and landlords Taubman malls are bustling with activity, evident in the latest photo tour Source: Land & Buildings analysis, Bloomberg, The Wall Street Journal, Thomson Reuters, Financial Times, Company SEC filings 2

3 Value Investors Buying High Quality Retail Real Estate Unibail-Rodamco agreed to a $25B purchase of high quality US/Europe mall landlord Westfield Elliott Management disclosed a 4% stake in Taubman Centers Starboard Value and Third Point have both disclosed stakes in Macerich Brookfield Asset Management made a public offer for GGP WeWork/Rhône made investment in Hudson s Bay, which owns a collection of high quality retail real estate Prominent investors continue to take advantage of the opportunity to purchase the highest quality retail real estate at an attractive cost basis Source: Wall Street research, Land & Buildings' research, Thomson Reuters, Bloomberg, National Real Estate Investor, Institutional Investor 3

4 Westfield Sale Highlights Severe Discount for Taubman Centers TCO merits a higher valuation than Westfield, in our view, given superior quality on various metrics TCO has 30% greater concentration of Class A or better as % of NOI TCO has nearly 30% more exposure to malls with sales over $800 psf TCO has 10% higher sales productivity 100% 90% 90% 70% 60% 62% $820 $800 $802 50% $780 80% 40% 34% $760 70% 30% $740 $726 60% 61% 20% 10% $720 $700 50% TCO WFD 0% TCO WFD $680 TCO WFD Source: Land & Buildings research, Wall Street research, company filings Note: Concentration of Class A and sales over $800 psf are based on Westfield s assets in the United States, which comprise approximately 75% of Westfield s portfolio, with the balance in the United Kingdom/Europe; Overall sales productivity based on entire portfolios of each company 4

5 Taubman Offers a Superior Mall Portfolio with Significant Operational Upside Taubman s EBITDA margins underperformed Class A Mall Peers by 770 bps on average over the past five years - Taubman s NAV would increase by $20 per share, or 20%, if Taubman closes EBITDA margin gap to Class A Mall Peers, in our view Taubman s NAV is $100 per share applying the same ~4% cap rate paid for Westfield, yet Taubman owns a higher quality portfolio with more operational upside Source: Land & Buildings research, Company SEC filings, Wall Street Research Note: Class A Mall Peers defined by Land & Buildings as Taubman s high quality Class A Mall Peers GGP, Inc., The Macerich Company and Simon Property Group Inc. (collectively, Class A Mall Peers ) 5

6 The Street Underscores Positive Implications for Taubman The primary beneficiaries on the news [Westfield] are Taubman Centers (TCO) and Macerich (MAC) but Taubman to a larger degree.both operate high quality malls and are of similar quality to Westfield s U.S. portfolio, in aggregate Taubman has considerably more upside given the discount to NAV at which it currently trades relative to Macerich Green Street Advisors (emphasis added) with ~75% of Westfield s portfolio in the U.S., the pricing appears favorable and suggests a continued bid for high-quality Class A U.S. malls. Citi Research (emphasis added) We believe the valuation has positive implications for A-mall players in the U.S. and possibly puts more pressure on them to consider strategic alternatives to close the gap between their current valuation and NAV. Jefferies Research (emphasis added) The Westfield acquisition is a testament to investor demand for class A malls and bodes well for Taubman Centers Source: Bloomberg, Citi Research, Green Street Advisors, Jefferies Research 6

7 Taubman s New Severance Plan Protects Senior Management in the Event of a Change of Control Last week, Taubman Centers disclosed a new severance plan for certain members of senior management, protecting such executives in the event of termination following a change in control, with the following features: 1. Cash lump sum payment equal to the sum of: 250% of the sum of: a) 12 times the highest monthly base salary in the preceding 12 months; and b) Greater of the target bonus of the termination year or the highest bonus earned in the last 3 full years 18x the monthly COBRA premium 2. Full and immediate vesting of unvested equity awards under the Long Term Incentive Plan 3. Vesting of unvested performance equity awards 4. Payment of accrued but unpaid salary plus accrued but unused paid time off Taubman implemented similar agreements in 2003 when Simon was seeking to purchase the Company Source: Land & Buildings research, Wall Street research, Company SEC filings, The Deal Pipeline 7

8 Westfield and WeWork Highlight Demand for High Quality Retail Real Estate High quality retail real estate is in high demand, most recently evidenced by: - Unibail-Rodamco s purchase of Class A US/Europe mall landlord Westfield Corporation for $25 billion, or a ~4% cap rate - Hudson s Bay s real estate value disclosed by management, which is triple the current share price, is based on a 5% blended cap rate - Hudson s Bay sold its Lord & Taylor flagship store to WeWork for $850 million, or 30% more than its appraised value HBC management s potential plans with respect to a go-private transaction, as reported over the summer, were likely thwarted just months ago by the tightening of the credit markets after Toys R Us announced its bankruptcy - Investor demand for high quality retail real estate that HBC owned could provide capital for such a transaction Source: Land & Buildings research, Wall Street research, Company SEC filings 8

9 Holiday Shopping Season Exceeding Expectations According to Street Commentary U.S. retail sales rose more than forecast in November and the previous month was revised higher, indicating a broad strengthening of consumer demand as the holiday shopping season got under way Bloomberg News (emphasis added) We are broadly raising estimates and price targets across our coverage based on encouraging early reads on Holiday, including stronger traffic trends and upbeat management commentary Goldman Sachs Research (emphasis added) It s really portending for a very solid and maybe one of the best holiday seasons that we ve seen in years National Retail Federation(emphasis added) Top-tier malls proved to be popular destinations on busiest shopping day of the year Source: Bloomberg, The Wall Street Journal, Wall Street Research, Forbes, California Apparel News, Baltimore Business Journal, Chain Store Age, National Retail Federation 9

10 Taubman s Malls Are Not the Problem Taubman s problems are self-inflicted Taubman has repeatedly blamed poor performance on the industry when its problems lie with management and poor oversight by the Board of Directors Significant share price upside In the next 14 months we believe TCO could return 50% or more if management fixes the sorry state of affairs at the Company - If actions are not taken, the Taubman Family could lose control of the Board as a majority of new independent Directors could be nominated in just 14 months - TCO has substantially underperformed its peers since the June 2017 Annual Meeting as horrible operating performance, capital allocation and corporate governance have persisted Taubman s NAV could be double current share price Taubman trades at a 5.4% implied cap rate and is likely worth at least 60% more than the current share price due to the extraordinary value of Taubman s nine dominant malls and the dearth of high-quality malls available for institutions to purchase, with cap rates around 4% Management has continued to overpromise and under deliver TCO has repeatedly revised down guidance, which is likely to again occur over the next year Source: Land & Buildings research, Wall Street research, Bloomberg 10

11 Taubman Mall Traffic Robust During Holiday Shopping Season Photos from the weekend of Saturday December 16 th at Taubman s nine dominant malls highlight strong consumer demand Packed parking lots and long lines were a common theme as shoppers visited the malls to fulfill their holiday shopping The following pages highlight bustling activity at Taubman s malls over this past weekend Source: Company website, Land & Buildings' research 11

12 Mall at Short Hills Short Hills, NJ Livingston Mall ($360 Sales PSF) The Mall at Short Hills ($1,230 Sales PSF) Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property; All photos on subsequent slides were taken on the weekend of Saturday, December 16,

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14 Dolphin Mall Miami, FL Dolphin Mall ($850 Sales PSF) Miami International Mall ($590 Sales PSF) Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property 14

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16 The Mall at Millenia Orlando, FL Mall at Millenia ($1,380 Sales PSF) Orlando International Premium Outlets ($1,100 Sales PSF) The Florida Mall ($1,050 Sales PSF) Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property 16

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18 Beverly Center Los Angeles, CA Beverly Center is currently undergoing a $500 million renovation; it is unique among all Taubman malls in that it is not the dominant mall in its trade area Beverly Center ($990 Sales PSF) Century City ($3,160 Sales PSF) The Grove ($2,200 Sales PSF) Westside Pavilion ($350 Sales PSF) Baldwin Hills Crenshaw Plaza ($230 Sales PSF) Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property 18

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20 International Plaza Tampa, FL International Plaza ($940 Sales PSF) Westshore Plaza ($430 Sales PSF) Hyde Park Village Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property 20

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22 The Mall at Green Hills Nashville, TN Opry Mills ($490 Sales PSF) Mall at Green Hills ($870 Sales PSF) CoolSprings Galleria ($540 Sales PSF) Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property 22

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24 Cherry Creek Shopping Center Denver, CO Denver Pavilions Cherry Creek Shopping Center ($980 Sales PSF) Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property 24

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26 Twelve Oaks Mall Novi, MI Twelve Oaks Mall ($600 Sales PSF) Laurel Park Place ($350 Sales PSF) Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property 26

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28 Westfarms West Hartford, CT Blue Black Square Westfarms ($610 Sales PSF) Source: Company website, Land & Buildings' research, Wall Street research, Google Maps Note: Retailers listed are representative of Taubman tenants at the property 28

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30 Disclaimer This presentation is for discussion and general informational purposes only. It does not have regard to the specific investment objective, financial situation, suitability, or the particular need of any specific person who may receive this presentation, and should not be taken as advice on the merits of any investment decision. This presentation is not an offer to sell or the solicitation of an offer to buy interests in a fund or investment vehicle managed by Land & Buildings Investment Management, LLC ( Land & Buildings ) and is being provided to you for informational purposes only. The views expressed herein represent the opinions of Land & Buildings, and are based on publicly available information with respect to Taubman Centers, Inc. ( Taubman or the Company ) and certain other companies referenced herein. Certain financial information and data used herein have been derived or obtained from public filings, including filings made by Taubman with the Securities and Exchange Commission ( SEC ), and other sources. Land & Buildings recognizes that there may be nonpublic or other information in the possession of the companies discussed herein that could lead these companies and others to disagree with Land & Buildings conclusions. Land & Buildings has not sought or obtained consent from any third party to use any statements or information indicated herein as having been obtained or derived from statements made or published by third parties. Any such statements or information should not be viewed as indicating the support of such third party for the views expressed herein. No warranty is made that data or information, whether derived or obtained from filings made with the SEC or from any third party, are accurate. Land & Buildings shall not be responsible or have any liability for any misinformation contained in any such SEC filing or third party report relied upon in good faith by Land & Buildings that is incorporated into this presentation. No agreement, arrangement, commitment or understanding exists or shall be deemed to exist between or among Land & Buildings and any third party or parties by virtue of furnishing this presentation. The analyses provided may include certain forward-looking statements, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the companies discussed in this presentation, access to capital markets, market conditions and the values of assets and liabilities. Such statements, estimates, and projections reflect Land & Buildings various assumptions concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with respect to any other materials herein and Land & Buildings disclaims any liability with respect thereto. Actual results may differ materially from those contained in the forward-looking statements. None of Land & Buildings, its affiliates, or their representatives, agents or associated companies or any other person makes any express or implied representation or warranty as to the reliability, accuracy or completeness of the information contained in this presentation, or in any other written or oral communication transmitted or made available to the recipient. Land & Buildings, its affiliates and their representatives, agents and associated companies expressly disclaim any and all liability based, in whole or in part, on such information, errors therein or omissions therefrom. There is no assurance or guarantee with respect to the prices at which any securities of the Company will trade, and such securities may not trade at prices that may be implied herein. The estimates, projections and pro forma information set forth herein are based on assumptions which Land & Buildings believes to be reasonable, but there can be no assurance or guarantee that actual results or performance of the Company will not differ, and such differences may be material. This presentation does not recommend the purchase or sale of any security. Land & Buildings reserves the right to change any of its opinions expressed herein at any time as it deems appropriate. Land & Buildings disclaims any obligation to update the information contained herein. All registered or unregistered service marks, trademarks and trade names referred to in this presentation are the property of their respective owners, and Land & Buildings use herein does not imply an affiliation with, or endorsement by, the owners of these service marks, trademarks and trade names. 30