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Here’s Why Taubman Centers Stock Is Soaring Today

By Matthew Frankel, CFP® - Feb 4, 2020 at 3:23PM

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The mall operator is up by more than 10%, but it’s not because of strong earnings.

What happened

At a time when retail bankruptcies are plentiful and malls are feeling the impact, it might seem odd that a real estate investment trust, or REIT, that invests in mall properties would be spiking. But that's exactly what's happening, and it's not even because of a strong earnings report.

Taubman Centers (TCO), which invests in high-end mall properties, has reportedly been in talks with massive mall REIT Simon Property Group (SPG 0.50%), with the latter interested in a potential acquisition.

Family shopping in an indoor mall.

Image source: Getty Images.

So what

To be clear, details are very light at this point. We have no idea if an acquisition price has been discussed, or how much Simon might be willing to pay, but it's fair to say that with Simon's market capitalization over $40 billion and Taubman's at less than $2 billion, it could easily afford to buy Taubman if it wanted to. And this isn't the first time that Simon has tried to acquire Taubman.

Now what

It's not a surprise to see some potential acquisition activity in the mall REIT space. Most mall REITs have seen their stock prices plummet in recent years, and with a 43% drop over the past year alone, Taubman has been hit harder than most, thanks to fears of what retail bankruptcies and store closures could mean for the company.

Simon, which has already been investing heavily in redevelopment of its own properties to adapt to the new retail environment, could see this as a chance to scoop up a high-value rival at a bargain. After all, Taubman has some top-quality malls in excellent locations, and Simon has the financial flexibility to invest in the properties as needed to keep up with the changing retail landscape.

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Stocks Mentioned

Simon Property Group, Inc. Stock Quote
Simon Property Group, Inc.
$100.12 (0.50%) $0.50
Taubman Centers, Inc. Stock Quote
Taubman Centers, Inc.

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