Taubman Centers (TCO) Reports Q4 Revenues Beat

Taubman Centers (NYSE: TCO) reported Q4 EPS of ($0.29), $0.57 worse than the analyst estimate of $0.28. Revenue for the quarter came in at $176.74 million versus the consensus estimate of $175.29 million.

Simon Property Group to Acquire Taubman

On February 10, the company announced a definitive agreement for Simon Property Group, Inc. (NYSE: SPG) (Simon) to acquire an 80% ownership interest in The Taubman Realty Group Limited Partnership (TRG). Simon, through its operating partnership, Simon Property Group, L.P., will acquire all of Taubman’s common stock for $52.50 per share in cash and the Taubman family will sell approximately one-third of its ownership interest at the transaction price and remain a 20% partner in TRG. See the press release issued separately today by Simon Property Group, Inc. and Taubman Centers, Inc.

Full Year 2019 Net Income and Earnings Per Diluted Common Share (EPS) Up Primarily Due to Gains on Sales of Interests in Starfield Hanam and CityOn.Zhengzhou

• Pro Rata Total Portfolio NOI, Excluding Lease Cancellation Income, Up 4.6 Percent for the Quarter and 3.9 Percent for the Year
• Industry-leading Sales Per Square Foot $876, Up 3.1 Percent for the Quarter and 9.8 Percent for the Year
• U.S. Comp Center Sales Per Square Foot $972, Up 11 Percent for the Year
• Average Rent Per Square Foot Up 1.6 Percent for the Year

“We produced solid results in the fourth quarter concluding what was a very productive year for the company,” said Robert S. Taubman, chairman, president and chief executive officer of Taubman Centers.

“In 2019 we enhanced our portfolio through our partnership with Blackstone in Asia, the acquisition of The Gardens Mall in Palm Beach and by executing on our vision for The Mall at Green Hills in Nashville, all while navigating a challenging retail environment.”

Operating Statistics

Total portfolio NOI growth at our beneficial interest, excluding lease cancellation income, was up 3.9 percent for the year and up 4.6 percent for the fourth quarter.

For the year, comparable center NOI, excluding lease cancellation income was up 0.2 percent, and was up 1.4 percent at our share. Fourth quarter, comparable center NOI, excluding lease cancellation income was down 0.1 percent, and was up 1.7 percent at our share.

“We were pleased with our NOI growth in a year where we experienced elevated tenant bankruptcies and unfavorable foreign currency exchange rates,” said Mr. Taubman. “Our high-quality portfolio of assets continues to grow, notwithstanding a volatile retail environment.”

Tenant sales per square foot in U.S. comparable centers reached a record high of $972 for 2019, an increase of 11 percent. U.S. comparable center tenant sales per square foot were up 2.7 percent in the fourth quarter.

Including Asia, comparable center tenant sales per square foot were $876 for 2019, up 9.8 percent over 2018. Fourth quarter comparable center tenant sales per square foot were up 3.1 percent.

“Sales growth was well-distributed across centers and categories,” said Mr. Taubman. “Apparel, shoes, electronics, food and jewelry all posted increases, building upon strong growth last year.”

For the year, average rent per square foot in comparable centers was $56.12, up 1.6 percent from last year. For the fourth quarter, average rent per square foot was $55.98, up 0.8 percent.

Average rent per square foot in U.S. comparable centers increased to $62.11 in 2019. In the fourth quarter average rent per square foot in U.S. comparable centers was $61.79, essentially flat compared to last year.

The trailing 12-month releasing spread per square foot for the period ended December 31, 2019 was negative 1.1 percent. This spread remains impacted by a small number of deals, concentrated within a few centers, which have an average lease term of less than two years. Without these leases, the releasing spread was 3.2 percent.

Ending occupancy in comparable centers was 94.3 percent at year-end, down 0.6 percent from December 31, 2018. Leased space in comparable centers was 95.7 percent at year-end, down 0.7 percent from December 31, 2018. Both occupancy and leased space were impacted by Stamford Town Center, which is currently being marketed for sale, as well as the Forever 21 store at The Mall at Short Hills (Short Hills, NJ) which closed in late December.

“Although tenant turnover remains elevated, demand for space in our portfolio remains high,” said Mr. Taubman.

2019 Milestones, Events and Financings

During 2019, the company:

Announced agreements to sell 50 percent of Taubman Asia’s interests in three Asia-based shopping centers to funds managed by The Blackstone Group L.P. See Taubman to Sell 50 Percent of its Interests in its Three Asia Shopping Centers to Blackstone – February 14, 2019.
Increased the regular quarterly dividend by 3.1 percent to $0.675 per share of common stock. See Taubman Centers Increases Quarterly Common Dividend 3.1 Percent to $0.675 Per Share – March 4, 2019.
Completed a new 1.2 billion Chinese Yuan Renminbi (RMB) (approximately $156 million using December 31, 2019 exchange rate), 10-year, fully-amortizing, non-recourse financing at CityOn.Xi’an (Xi’an, China), with an all-in fixed rate of 6 percent. – March 14, 2019.
Announced the nomination of Michelle Goldberg to the company’s Board of Directors, who was appointed to the Board on May 30, 2019. Ms. Goldberg, along with Janice (Jan) Fields and Nancy Killefer, was one of three new independent directors who joined the Taubman Board in 2019. See Taubman Nominates Michelle J. Goldberg to Board of Directors – April 22, 2019.
Acquired a 48.5 percent interest in The Gardens Mall (Palm Beach Gardens, Fla.) in an off-market, non-cash transaction for 1.5 million Taubman Realty Group Limited Partnership (TRG) units and the assumption of its pro rata share of debt. See Taubman Centers, Inc. Issues Solid First Quarter Results – April 30, 2019.
Completed the sale of 50 percent of Taubman Asia’s interest in Starfield Hanam (Hanam, South Korea) to funds managed by Blackstone. See Taubman Completes Sales of Interest in Starfield Hanam to Blackstone– September 19, 2019.
Announced Paul Wright’s promotion to president, Taubman Asia, effective January 1, 2020. See Peter Sharp Resigns as President of Taubman Asia; Paul Wright to be Promoted into Role – October 11, 2019.
Amended and extended the company’s primary revolving line of credit and one of two unsecured term loans. The $1.1 billion revolving line of credit was extended to February 2024, with two six-month extension options. The term loan, which has a principal balance of $275 million, was extended to February 2025. – October 28, 2019.
Resolved the litigation with Hudson’s Bay Company regarding the former Saks Fifth Avenue location at The Mall of San Juan (San Juan, Puerto Rico), which resulted in a $10.1 million net gain. See Taubman Centers, Inc. Issues Third Quarter Results – October 29, 2019.

For earnings history and earnings-related data on Taubman Centers (TCO) click here.

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