THE $400 MILLION FRIENDSHIP Call yourself rich if developer Al Taubman is your pal. While racking up his own $3.7 billion fortune in real estate and retailing, he has also made a bundle for his chums.
By Alex Taylor III REPORTER ASSOCIATES Frederick Hiroshi Katayama and David J. Morrow

(FORTUNE Magazine) – THE MIGRATION to the suburbs after World War II created great fortunes, and one of the largest belongs to shopping center magnate A. Alfred Taubman. Starting as a builder of small stores in 1950, Taubman became the nation's preeminent developer of giant regional malls. In the 1980s he turned to buying department stores, constructing Manhattan skyscrapers, and marketing fine art. He closed out the decade with a net worth that FORTUNE estimates at $3.7 billion (see table, page 88). Taubman, 65, believes in spreading his wealth. In the past six years, he has given about $40 million to three universities for buildings and new courses of study. He also has made bundles for a coterie of like-minded men whose money he put in two of his blockbuster deals: Irvine Co. and Sotheby's Holdings. The group's combined profits exceed $400 million. The story of Al and his pals reinforces the truth of several wizened business axioms. One: It is not what you know but who you know (although what Taubman knows is important too). While most people lose money and make enemies when they invest with friends, Team Taubman scores big and stays close. The reason has something to do with maxim two: Scratch my back and I'll scratch yours. In return for their profits, Taubman's friends tell him what they know, providing him with counsel and outside contacts for his other projects. Maxim three: Them that has, gets. Successful businessmen in their own right, Taubman's major partners -- Max M. Fisher, Milton Petrie, and Leslie Wexner -- have a combined net worth of $3.1 billion. Some of Al's other pals are well heeled and have included Earl E.T. Smith, the former mayor of Palm Beach, and the late Henry Ford II. Think of them as the oldest of the old boys' networks. Their nexus is Detroit industrialist Max Fisher, 81, who made his $400 million fortune largely in oil refining and later served as chairman of United Brands. A college football lineman in his youth, the imposing and imperturbable Fisher is a longtime Republican power broker and big fund raiser for Jewish causes. He gave Taubman an early boost nearly 40 years ago: erecting gas stations for Fisher's Speedway 76 chain (now part of Marathon Oil) when Taubman was just a struggling builder in Pontiac, Michigan. Almost a surrogate father to Taubman, Fisher helped him strengthen ties with two other big money men: Milton Petrie, 87, the irascible founder of Petrie Stores who is worth $900 million and still answers his own phone; and Henry Ford, who died at 70 in 1987. The newest member of the Taubman circle is a relative youngster: Leslie Wexner, 52, chairman of the Limited stores and worth $1.8 billion. Except for Wexner, none of these old boys is willing to discuss his relationship with Taubman for publication. Taubman, who assiduously seeks publicity for his malls and relentlessly touts his philanthropic activities in the media, refused to speak to FORTUNE. ''Every businessman is unhappy with the press because generally you get very bad stories,'' he once said. ''I've done far better by not talking.'' He's not doing all that well now. The past 12 months have been hard on the Taubman wallet. His $410 million acquisition of the aging Woodward & Lothrop and John Wanamaker department store chains and his $17 million stake in Macy's look shaky in a treacherous retailing environment. Fears that the art bubble has burst have ripped more than $300 million out of the value of the Sotheby's stock that Taubman owns. BUT AT AN AGE when corporate executives are safely retired to the 19th hole, Taubman is out making a run on his fourth billion. Robust, sleek, and perpetually tanned, he is developing two major projects in Manhattan: a $200 < million office and retail tower on Fifth Avenue and another $200 million, 35- story office building one block west near Sixth Avenue. Two huge Taubman malls in Denver and Nashville are due to open in August. And Taubman and Fisher are building the second phase of their $120 million riverfront apartment complex in Detroit. Bloomfield Hills, Detroit's highest-priced suburb, remains Taubman's business and personal headquarters, although he divides his time among houses in Southampton, New York, and Palm Beach, Florida, and apartments in Manhattan and London. For his residences he has acquired an extensive collection of fine paintings and French, English, American, and Chinese furniture. Propelled by his second wife, Judith -- two decades his junior and the 1962 Miss Israel -- whom he married in 1982, he has become a paparazzi target on the international haute-society circuit. He has two sons and a daughter by his first marriage, and the older son, Robert, 35, is chief operating officer of Taubman Co. The 1980s spawned tycoons like tadpoles in a mud pond, but Taubman swims in his own pool. No trader, dealmaker, or asset stripper, he operates and improves the properties he buys. After four decades of merchandising, he has a shrewd understanding of consumer behavior and a knack for getting the most out of properties by dressing them up. A purchase, he claims, is often secondary to the shopping experience, and so his malls are designed for what he describes as ''fantasy, fun, and entertainment.'' Merchants have discovered that negotiating a lease with Taubman is like trying to sneak a fast ball past Bo Jackson. He will leave stores vacant for years until he gets the right deal. Recently he ousted Garfinckel's department store from his Fair Oaks Shopping Center in Fairfax, Virginia, because it wasn't generating sufficient income for him. Taubman's suburban malls encircle Detroit and are widely blamed for accelerating its decline, but he has refused to develop a downtown mall because key retailers waffled about becoming tenants. As he once said, ''The only true offer is one with a check.'' AL'S HARDHEADED acumen paid off big for the old boys when they followed him into California real estate in 1977. Mobil Corp. was negotiating with the Irvine Foundation to buy the 68,000-acre Irvine Ranch -- more than quadruple Manhattan's size -- south of Los Angeles for $250 million. Having heard about the sale, Taubman flew out to look at the property at the prompting of investment banker Charles Allen Jr. of Allen & Co. After two months of study, he decided to bid. While Mobil priced Irvine at a multiple of its current income, Taubman, seeing thousands of acres of undeveloped land, priced it on its potential. Calling in Fisher, Ford, Petrie, and West Coast developer Donald Bren, he amassed a $100 million war chest plus bank financing, and beat out Mobil with a bid of $337.4 million. Once in control of Irvine, Taubman installed new management and watched his acquisition spew cash as the value of Orange County real estate rocketed. Six years later, Donald Bren valued the acreage at $1 billion and offered to buy everyone else out for $518 million. Taubman sold. He and Bren were at odds over which of them was running Irvine, and Max Fisher persuaded him to take Bren's offer. California real estate had gone into a brief slump, and land-use regulations were making development difficult. Though Irvine is probably worth $3 billion today, Taubman cleared $140 million on the deal, and his friends split profits of $203.5 million. Says Kathleen DuRoss Ford, widow of Henry Ford II: ''When Henry went into that, I don't think anybody realized what a blockbuster it was going to be. Henry was very pleased.'' Six months later, Taubman pounced on another undervalued asset: Sotheby's Holdings, the parent of the then-struggling London-based art auction house. When the British government dithered over a $100 million takeover bid from two New York businessmen, Marshall Cogan and Stephen Swid, Taubman stepped in. Backed by Fisher, Petrie, Ford, and Wexner, he offered a winning $139 million, and Henry Ford II was rumored, though never proven, to have greased the deal by putting in a good word with Queen Elizabeth II. When the prize was his, Taubman installed Michael Ainslie, a Harvard MBA, as president to put Sotheby's on a sound operational footing, while he began revving up its marketing. He accelerated the publication of auction catalogues, developed a 100,000-name mailing list, and pampered potential patrons. By offering good customers financing for up to half the most conservative estimate of the value of Sotheby's art, he succeeded in expanding the universe of buyers and liquefying an aesthetic pursuit. Sotheby's prospered when the 1986 tax act chipped away at deductions for donations of art to museums, and collectors began selling their stuff instead. Traditionalists carped that he had turned the auction house into a stock < exchange of art. And they were right. Propelled partly by Taubman's easy credit, prices of fine paintings have jumped from the outrageous to the astronomical, taking Sotheby's from a $6 million loss in 1984 to a $113 million profit in 1989. The company went public in 1988 at $18 a share, and after a 2-for-1 split, the shares hit a high of $37 before falling off to $23 last fall when the nose dive in the stock market made investors wary of a collapse in the art market. Even at that price, Taubman has a paper profit of approximately $400 million, and his pals have gains of more than $200 million. WEXNER AND FISHER, however, have a little bit more. Only days before the price tumbled in November, Wexner sold Sotheby's stock at a 1,000% profit. His business manager unloaded $1.65 million worth of Wexner's shares, saying the transaction was a normal investment decision. In September a corporation controlled by the children of Max Fisher sold 600,000 shares. In a group this close-knit, suspicions inevitably arise that they might be swapping inside information or doing deals that benefit themselves at the expense of other shareholders. But, there is no evidence that any of them has used his position in this way. Wexner's relationship with Taubman explains why so many people spend so much energy networking. He first encountered the developer 20 years ago at the other end of a telephone when they were haggling over a store lease. Some time afterward, Taubman took Wexner for a ride around Detroit in his helicopter. After they had circled over Limited stores in three Taubman malls, Taubman asked him: ''Do you know why I brought you here? Your stores are a blight on my shopping centers. You have a reputation as a bright young man, but you have to learn about store design.'' Later Taubman carved up a Styrofoam shopping center model with a razor blade to give Wexner a practical demonstration of consumer-oriented architecture. Their friendship flourished. When Taubman bought Irvine in 1977, the beguiling Wexner called to congratulate him at a time when, Wexner says, ''I don't think I had $12 of my own.'' Then when Taubman sold Irvine six years later, Wexner was on the phone again. With cash from the Limited beginning to pad his bank account, he said, ''It would be fun to play with you sometime. Forget the amount.'' A few months later, Taubman invited him to participate in the Sotheby's deal. Now Wexner is helping Taubman make his first plunge into the perilous world of Manhattan real estate. To knowledgeable observers, Taubman's 712 Fifth Avenue residential and retail project looks dicey. The slender, 52-story tower crowds a tiny site, so building costs are high and rentable floor space scant. Its windows are ''ludicrously small, considering the magnificent view,'' says a real estate pro who has seen the place. But Wexner agreed to lease five floors for Henri Bendel, the tony women's clothier that the Limited owns. Wexner is also a prime tenant -- and the prime mover -- in the giant shopping center that Taubman opened last August in Columbus, Ohio, Wexner's corporate headquarters. The project languished for several years because the downtown location turned off other developers. Says Wexner: ''I called Alfred and said, 'This is a great deal and no one has the vision to see it. Why don't you take a look at it?' I just introduced him to the opportunity.'' And eventually gave Taubman seven of the Limited's divisions, including Victoria's Secret, Abercrombie & Fitch, and Lane Bryant, as tenants. Says Wexner: ''Everybody is suspicious of the project, but I don't have an equity interest in it. Hopefully, I did get an advantage from leasing early.'' Taubman and Wexner share other interests. Both own homes in Manhattan, and for a time they were neighbors in Palm Beach. In 1981, Taubman joined the board of New York City's Whitney Museum of American Art, and then Wexner came along in 1984. But sometimes money is thicker than friendship. Taubman refused to aid Wexner in his unsuccessful attempt to take over the Carter Hawley Hale department store chain in 1984, so Wexner enlisted the backing of another shopping mall developer, Edward DeBartolo Sr. What happened? Carter Hawley fought the Limited off. ''Alfred would never participate in any kind of transaction that was hostile,'' says Wexner. ''He was right; I shouldn't have.'' Henry Ford II also discovered that he had many interests in common with Taubman, despite their divergent backgrounds, and the motor heir profited greatly from the friendship. By the late 1970s, an expensive second divorce and the plunging price of Ford Motor Co. stock depleted Henry's net worth to $70 million. His $19 million payoff from the Irvine Ranch sale boosted his assets 27%. Taubman has built a grand shopping center on land in Dearborn he bought from a Ford Motor Co. subsidiary. It is a traditional Taubman luxury mall, with fountains, elevators, expensive shops, and restaurants. Nearby is ! another Taubman mall, which opened last year. A lite version known as a ''power center,'' it has no roof, few amenities, and substitutes high- volume discounters for the usual full-line department stores. JUST AS HE DID with Wexner, Taubman managed to distance himself from Henry's fiasco, the Renaissance Center. Ford twisted every arm in Detroit to raise $400 million for the construction of this office and hotel complex that was supposed to resuscitate downtown Detroit. Taubman never contributed a dime, though he did help lease the center's boutiques. When the stores failed, he put out word that he had been called in too late to save them. The poorly designed RenCen floundered in 1983, and the ownership was restructured. If the events of the past 12 months are any indication, however, the 1990s could offer Taubman plenty of challenge. As a department store owner, he's in the wrong retail market, and as a developer he may be in the wrong geographical market. His Manhattan projects are nearing completion just when vacancies are rising. But when the subject is Al Taubman, never underestimate the force of friendship and finance that comes with $3.7 billion.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: THE TIES THAT BIND AL AND HIS PALS Together not only as investors, the group also lives and vacations near one another.