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Taubman Centers Continues with Portfolio Restructuring

Zacks Equity Research

On Jun 27, 2014, we issued an updated research report on Taubman Centers, Inc. (TCO). The Bloomfield Hills, MI-based company is continuing with its portfolio restructuring strategy. Besides focusing on development of properties in major submarkets across the world, the company is also shedding its non-core assets.

Taubman Centers intends to invest approximately $265.0 million in five U.S. properties through 2014. With its decent balance sheet and sturdy liquidity position, we believe that the company will be able to carry out the planned development initiatives. Moreover, through divestiture of non-core assets, Taubman Centers will be able to enhance its profitability and create more value for its shareholders.

On Apr 24, Taubman Centers reported its first-quarter 2014 funds from operations (:FFO) of 90 cents per share, beating the Zacks Consensus Estimate by a penny. The reported figure came in line with the prior-year quarter figure. Results were benefited by a rise in rents and a fall in interest expenses, which were, however, partly offset by one-time items incurred in 2013.

The divestitures currently being pursued by the company are likely to fetch long-term benefits, although this may lead to earnings dilution in the near future. Also, the development and redevelopment activities pose operational risks to Taubman Centers. Further, increasing competition, both through offline and online routes, may keep a lid on the demand of its properties.

Over the past 60 days, the Zacks Consensus Estimates for 2014 and 2015 declined 0.8% and 5.1% to $3.75 and $3.91, respectively.

Taubman Centers currently carries a Zacks Rank #3 (Hold).

Some better-ranked retail REITs include Regency Centers Corp. (REG), Retail Properties of America, Inc. (RPAI) and Rouse Properties, Inc. (RSE). All these stocks hold a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Read the Full Research Report on TCO
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