Indianapolis-based Simon Property Group Inc. is supporting Target Corp.’s efforts to maintain ownership of its real estate rather than transferring it into a separate company as an activist shareholder is suggesting.
Pershing Square Capital Management, a hedge fund engaged in a proxy battle with the Minneapolis-based retailer, is proposing that Target put its real estate into a new independently controlled company to eventually be taken public, according to Reuters.
Pershing, headed by outspoken investor William Ackman, owned 24.8 million shares-or 7.8 percent-of Target’s stock as of March 31, according to Reuters.
In a public letter addressed yesterday to Target CEO Gregg Steinhafel, Simon President and Chief Operating Officer Richard Sokolov said spinning off the real estate isn’t advisable.
Sokolov said doing so would lead to a credit downgrade, which would increase Target’s borrowing costs and decrease the retailer’s ability to borrow money. The sale also would hinder the company’s ability to make necessary renovations, expansions and enhancements, he wrote.
Fourteen Target stores, totaling 1.8 million square feet, are attached to Simon malls, according to the Boston Herald.
“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,” Sokolov said in the letter.
Ackman is attempting to take five seats on Target’s board of directors. Its annual meeting is set for May 28.