Taubman Centers Inc. TCO reported second-quarter 2019 adjusted funds from operations (FFO) per share of 94 cents, beating the Zacks Consensus Estimate of 83 cents. The figure also compares favorably with the year-ago quarter’s reported tally of 87 cents.
Results reflect higher rents, recoveries and lease cancellation income, as well as additional business interruption proceeds associated with The Mall of San Juan.
Moreover, adjusted revenues, including rental revenues, minimum rents, overage rents, expense recoveries and management, leasing, and development services, came in at $149.6 million, outpacing the Zacks Consensus Estimate of $147.0 million. The reported figure also compares favorably with the prior-year quarter’s reported tally of $140.5 million.
Quarter in Detail
Comparable center NOI (excluding lease cancellation income and foreign exchange impact) was up 1.4% in the second quarter. Comparable tenant sales per square foot increased 8.8%, year on year. Trailing 12-month tenant sales per square foot of $848 was up 10.8% over the 12-month period ended Jun 30, 2018.
Average rent per square foot for the quarter was $56.79, marking 2.1% increase from $55.64 in the year-ago period. For the period ended Jun 30, 2019, the trailing 12-month releasing spreads per square foot were 3.3%.
As of Jun 30, 2019, leased space in comparable centers was 95.1%, unchanged year over year. Additionally, ending occupancy in comparable centers was 92.2% at end of the reported quarter, down 0.4% year over year.
Notably, in June, Taubman Centers received a final payment for claims associated with the widespread damage and business interruption at The Mall of San Juan that resulted from Hurricane Maria in September 2017. This payment included $4.5 million of business interruption proceeds as well as $0.2 million for reimbursement of operating expenses. Both of these were included in FFO.
Taubman Centers exited second-quarter 2019 with cash and cash equivalents of $42.7 million, down from the $48.4 million reported at the end of December 2018.
The company revised its projections for 2019 FFO per share to $3.47-$3.57 from the prior range of $3.60-$3.72. Moreover, adjusted FFO, which excludes 17 cents per share of year-to-date adjustments, is now projected at $3.64-$3.74, compared with the prior guided outlook of $3.62-$3.74. The Zacks Consensus Estimate for the same is pinned at $3.65.
The full-year FFO per share guidance is backed by assumption of comparable-center NOI growth of about 2%.
We are encouraged with Taubman Centers’ better-than-expected performance in the April-June period. With sales per square foot going up 8.8%, the company witnessed its 12th consecutive quarter of positive growth. Also, apparel sales were up for the seventh straight quarter, which is encouraging.
The company’s solid retail real estate portfolios, high-quality retailers in tenant roster, and diligent restructuring measures have the capacity to support its long-term growth. Focus on implementing cost-saving initiatives also augurs well. Nonetheless, store closures and retailers’ bankruptcies are likely to keep the retail real estate market turbulent for the next couple of quarters.
At present, Taubman Centers carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Taubman Centers, Inc. Price, Consensus and EPS Surprise
Taubman Centers, Inc. price-consensus-eps-surprise-chart | Taubman Centers, Inc. Quote
We now look forward to the earnings releases of other retail REITs like Simon Property Group, Inc. SPG, Federal Realty Investment Trust FRT and Regency Centers Corporation REG. While Simon Property is slated to report second-quarter earnings on Jul 31, Federal Realty and Regency Centers are scheduled to release the same on Aug 1.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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