• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Jim Cramer

Jim Cramer: Why Simon Property's Taubman Centers Buy Is So Important

This is a statement buy that is changing the shopping mall narrative, and we need to see one in oil and gas next.
By JIM CRAMER Feb 11, 2020 | 07:14 AM EST
Stocks quotes in this article: TCO, SPG, AAPL, M, SHLD, JCP, AMZN

At last a statement buy. I'm talking about Simon Property Group's (SPG) take out of Taubman Centers (TCO) , the premier shopping mall in the country, for $52.50 in cash per share, a 51% premium. That's a monster bid, one that's generous to a fault, one that gives the Taubman family a different kind of stake that allows them to participate in the upside but still allows for a partnership that eliminates the large public costs that weigh down any enterprise.

Rather incredibly, despite the generosity of the terms, Taubman's stock is trading nicely above this bountiful bid, for whatever reason, perhaps because there are shareholders who want even more -- perhaps, highly unlikely, there's another bidder lurking.

I have no idea of what's behind that premium to Simon's colossal premium to the standalone operation, but perhaps it's a recognition of just how cheap this group has become. It is staggering to think how cheap Taubman's equity has become, given that it is still trading at 5% yield even after the Simon merger.

Why do I call this a statement buy? Because when you listen to the conference call on the merger, you will hear the dean of real estate value, David Simon, talk about how he can fund the deal, as he says "without ever going to third party financing."

More importantly, he's not giving away his previous equity down here. "If you look at a multiple of earnings, EBITDA, Net Asset Value, any metrics you want, where we are undervalued and I have no desire to issue stock at this time," Simon said. That's a staggering indictment of the market's inability to judge how to value Simon's stock, coupled with a way of investment -- the REIT index -- that seems to equate the good with the bad, and Simon is definitely part of the good. What makes me say that? Because Simon has paid $33 billion in distributions as a public company and you can't do that unless you have a real good handle on your financials.

Taubman is largely a collection of the finest malls. I have one literally down the block from me that I can walk to, The Mall at Short Hills, and while there has been turnover at the mall and it has a Neiman Marcus as an anchor, a suspect tenant because of all the debt on the company, it's still a destination worth going to, with a fabulous set of high end foreign specialty stores and the best Apple (AAPL) retail outlet I have ever been to, and I have been to a dozen of them.

That said, I think these entities get valued by their lowest common denominator: four JC Penneys (JCP) , three Sears (SHLD) , three Lord & Taylors and four Macy's (M)  -- and all of these are places that would be viewed as an opportunity to short one or both REITs. I think you do so at your own peril, as Simon says they will have replacements for these stores that are "really fantastic." It's pretty clear that Simon has something big up his sleeve because he was able to capture Forever 21 in bankruptcy along with Brookfield Property Partners and Authentic Brands for $81 million. Authentic likes brand value, and it must see it in Forever 21 -- and Simon and Brookfield could stand to make a lot of money if they can lease these spaces for much more than they would have gotten from Forever 21.

Now put these both together and you can see a picture of a determined, smart real estate deacon who thinks his stock is too low despite the perils of brick and mortar in an Amazon (AMZN) world and has an alternative to the stores that are closing that is more lucrative than current contracts and will allow for further boosts in distributions.

Why is this so important? Because there is another group that is rife for similar consolidation: oil and gas. While the multiple of these stocks has collapsed because of the ETFs that are easily shorted and the anti-fossil-fuel divestment movement, it is time for a David Simon of the oil patch to stand up and make a statement buy.

The longer we don't get one, the more likely that these are correct prices, so different from what Simon sees. It's this capacity in an era of a triumphal presidential reign of the most pro-fossil-fuel leader on earth, that has given this group one last breath. Will someone stand up and play Simple Simon? The clock is ticking, the bell is tolling, tolling for the entire oil and gas group. Now is anyone listening?

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long AAPl and AMZN.

TAGS: Mergers and Acquisitions | Fundamental Analysis | Investing | REITs | Stocks | Jim Cramer | U.S. Equity |

More from Jim Cramer

Jim Cramer: I'll Put My Money With 'Boring but Lucrative' Any Day

Jim Cramer
Sep 29, 2021 1:28 PM EDT

Let's look at that recent downgrade of 'dull' Morgan Stanley and see why exciting is best left for the stadiums and amusement parks -- and not stocks.

Jim Cramer: America's Toughest Job? Finding Workers

Jim Cramer
Sep 28, 2021 12:17 PM EDT

It's the question of our time: Where are the people willing to take on these better paying gigs? Let's see what's going on and what we need to happen.

Jim Cramer: Here's How Analysts Can Be Off By a Wide Margin

Jim Cramer
Sep 24, 2021 12:02 PM EDT

Let's look at the reactions to Nike, Costco and Salesforce to see what happens when they're viewed from a real world perspective.

Jim Cramer: It's Pure Insanity That We Don't Make Chips Here in the U.S.

Jim Cramer
Sep 23, 2021 11:05 AM EDT

While the big guns meet at the White House about the global chip shortage, the president and these companies are approaching this all wrong.

Jim Cramer: Go Ahead, Have a Cow, but I Say Powell and Xi Are Bulls

Jim Cramer
Sep 22, 2021 3:51 PM EDT

We rallied, because China's President Xi and Fed Chair Powell made decisions that they knew would lead to rallies.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:13 PM EDT BRUCE KAMICH

    8 Trading Rules from T. T. Hoyne

    You just read the header for this missive and prob...
  • 08:42 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How Elite Traders Make Big Profits
  • 02:58 PM EDT BRUCE KAMICH

    Classic Trading Rules From Bernard Baruch

    Bernard Baruch listed the rules (below) in his aut...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login