The initial public offering announced by Taubman Co. this week may, as touted, open up a new capital market for real estate developers.

But a closer look shows that after being taken public, the shopping mall operator will still rely on old-fashioned bank loans for expansion, acquisitions, and operating capital.

According to the prospectus for the $326.8 million offering, Michigan-based Taubman is arranging a multiyear revolving line of credit. The size of the credit line and possible lenders were not disclosed. Chase Manhattan Bank, a longtime Taubman lender, did not return phone calls.

Debt Would Be Paid Off

The prospectus does not provide details of any acquisition plans, but does note that Taubman intends to expand four of the 19 malls that are being taken public.

The main purpose of the public offering is to pay off almost $700 million in debt. The creditors, two pensions funds, will receive the proceeds plus a 41% stake in the shopping mall business, which will become a real estate investment trust.

In addition, Taubman said it has arranged bank lines totaling $102 million that would be drawn on to pay off partners who have an interest in some of the 19 malls. The lenders were not named.

The prospectus also says that A. Alfred Taubman, the company's founder and chief executive, and his family have used their 15% stake in the public company as collateral for personal loans from "one or more banks."

Bernard Winograd, Taubman's chief financial officer, declined to elaborate on that disclosure. But an industry source said Mr. Taubman was seeking a short-term to medium-term loan of less than $100 million. If completed, the offering would demonstrate a public appetite for high-yielding but risky real estate investments.

"It's a big event, because its the first time that a large collection of properties that has major blue-chip institutional investors has tried to go public," said Kenneth Campbell, a real estate specialist with Audit Investments of Montvale, N.J.

Growth Potential Is Key

Analysts said Taubman's ability to pull off the deal could have implications for banks trying to shed real estate assets and for borrowers hoping to replace their bank lines.

"The development of a capital market is welcome news for the banks," said James Noteware, director of real estate services at the accounting firm Price Waterhouse.

But Mr. Campbell said the success would depend on the company's ability to grow. The prospectus shows the public trust expects to pay a dividend of 6.1% to 7% - far shy of the 12% to 15% return investors demand of an REIT, he said.

Mr. Winograd said growth "is clearly part of our plan," but noted acquisitions were not the only way to grow. Income growth at Taubman's shopping centers, not counting acquisitions, has ranged from 5% to 13% annually since 1987, he said.

The offering comes amid reports that Mr. Taubman is suffering from the cash squeeze that has afflicted most large developers, and that the shopping mall sector may be "over the hill," in Mr. Campbell's words.

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