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Simon Properties CEO backs Target over land
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Target Corp. on Monday fired another shot across the bow in the battle for its board room.
The Minneapolis-based retailer made public a letter from the president of Simon Property Group, a mall operator and the nation's largest public real estate company, that blasts a real-estate proposal by activist shareholder William Ackman.
Ackman, who is gunning for five seats on Target's board of directors, launched his proxy fight in part because he didn't believe the retailer was giving his real estate proposal a fair hearing. He has urged Target to sell the land under its stores and put it into a real estate investment trust. Target would own its stores, but lease back the land for 75 years.
Richard Sokolov, president and chief operating officer of Indianapolis-based Simon, wrote in a letter to Target CEO Gregg Steinhafel dated Monday: "We believe your approach to your real estate portfolio is the correct one."
Sokolov argued that Ackman's proposal, "in all probability," would lead to a credit downgrade, which would decrease Target's flexibility to borrow money and increase its borrowing costs. The sale also would restrict Target's future ability to renovate, expand or make enhancements, he wrote.
"Most of the retailers we deal with would be very pleased to own all of their real estate and have the financial strength and flexibility that Target has today," he said in the letter.
Ackman could not be reached for comment. He has said the transaction would raise $4 billion, allowing Target to pay down its debt and maintain its credit rating. It could generate cash flow of $1.4 billion.
JACKIE CROSBY
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