Loan to Taubman a boon for 2 GM pension funds


DETROIT -- A privately arranged 1985 loan to A. Alfred Taubman, first disclosed Monday, will yield hundreds of millions of dollars in profits for two General Motors pension funds.

The funds, which pay pensions to thousands of GM hourly and salaried workers, will get back almost three times the amount of their $574 million loan.

Under a proposed sale of most of Mr. Taubman's interest in his shopping mall empire, the GM funds also will become Mr. Taubman's business partners in a long-term plan to expand malls and buy or build new ones.

As disclosed in a filing with the U.S. Securities and Exchange Commission, the GM funds initially lent $625 million to Taubman Realty Group, the partnership that owns Mr. Taubman's mall interests.

An American Telephone and Telegraph Co. pension fund then acquired 8.2 percent, or $51 million, of the loan, reducing the GM funds' outlay to $574 million.

In exchange for the loan, the GM and AT&T; funds received options tobuy as much as half of Mr. Taubman's stake in 19 malls.

Mr. Taubman then borrowed $600 million from Taubman Realty Group in what turned out to be the first step in his cashing out most of his shopping-center stake, while also gaining an ally in the GM funds and access to Wall Street financing.

In the restructuring announced Monday, Mr. Taubman revealed plans to sell stock in his mall business to the public for the first time, within the next few months.

Of the total take from that sale, an estimated $327 million, the GM funds would get almost $301 million in cash. In addition, the funds would get nearly $108 million in stock in Taubman Realty Group as well as a $695 million interest in Taubman Centers Inc., a new public corporation that would own 32.5 percent of Taubman Realty Group. That's a return of $1.1 billion.

Since 1985, however, the GM funds also have been getting 10.5 percent annual interest on the loan, for an estimated total of $420 million. The total return to the GM funds is $1.5 billion, and the profit on the Taubman deal is about $926 million, or 161 percent.

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