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Taubman Centers (TCO) Q2 FFO Meets Estimates, Revenues Up

Zacks Equity Research
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Taubman Centers Inc. TCO reported second-quarter 2018 adjusted funds from operations (FFO) per share of $0.87, in line with the Zacks Consensus Estimate. The figure came in 5.4% lower than the year-ago tally of 92 cents.

Adjusted revenues, including minimum rents, overage rents and expense recoveries, for the quarter came in at $139.7 million, missing the Zacks Consensus Estimate of $141 million. The figure improved nearly 1.7% from the prior-year quarter.

The quarter experienced higher rents and greater lease cancellation income. Further, cost-saving initiatives executed in the previous year enabled the company to enjoy lower general and administrative expenses.

Quarter in Detail

Comparable center net operating income (NOI) inched up 1.7% for the quarter. Average rent per square foot in comparable centers came in at $57.90, up 3.6% from the prior-year quarter. For the period ended Jun 30, 2018, the trailing 12-month releasing spreads per square foot were 2.3%.

Moreover, comparable center mall tenant sales per square foot rose 6% in the reported quarter. Further, the company’s year-to-date comparable center mall tenant sales per square foot marked a 9.1% increase.

As of Jun 30, 2018, leased space in comparable centers was 94.9%, down 0.7% from the comparable period last year. Additionally, ending occupancy in comparable centers was 92.2% at the end of the quarter under review, down 1.1% year over year.


Taubman Centers exited the April-June quarter with cash and cash equivalents of $35.4 million, down from the $53.9 million reported at the end of the prior quarter.


The company projects 2018 adjusted FFO per share of $3.74-$3.84, revised upward from the previous outlook of $3.72-$3.86. The Zacks Consensus Estimate for the same is pegged at $3.80.

The full-year FFO per share guidance is backed by assumption of comparable center NOI growth of about 3-4% for the year, up from the earlier forecast of 2-3%.

Consolidated and unconsolidated interest expenses are estimated to be $189-$192 million. Also, the guidance does not include any future costs that might be incurred related to shareowner activism or fair value change in its investment.

Our Viewpoint

Taubman recorded encouraging NOI growth during the April-June quarter. The company’s operating performance benefited from the new comparable centers in the quarter.  In addition, it witnessed higher net recoveries and robust growth in sales per square foot.

However, Taubman’s leased space in comparable centers fell down year over year. In fact, with online retail taking precedence, mall traffic continues to suffer, which has made retailers reconsider their footprint and eventually opt for store closures. This is feared to impact demand for retail space at Taubman’s shopping centers. Furthermore, the company has been witnessing elevated levels of tenant turnover for the past two years.

Taubman Centers, Inc. Price, Consensus and EPS Surprise

Taubman Centers, Inc. Price, Consensus and EPS Surprise | Taubman Centers, Inc. Quote

Currently, Taubman Centers has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Federal Realty Investment Trust FRT, STORE Capital Corporation STOR and Regency Centers Corporation REG. Federal Realty is scheduled to release results on Aug 1, while STORE Capital and Regency Centers are slated to report their quarterly numbers on Aug 2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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