Taubman's Q2 FFO Misses Ests, Guides Same
Real estate investment trust (:REIT) – Taubman Centers Inc.’s (TCO) FFO (funds from operations) per share rose 2.7% year over year but the figure came 5.1% short of the Zacks Consensus Estimate.
The company reported second-quarter 2013 FFO per share of 75 cents, missing the Zacks Consensus Estimate by 4 cents. The miss is mainly due to the lower-than-expected revenue generated in the quarter.
However, FFO per share moved up 2 cents from the year ago-quarter as the decline in expenses was more than the fall in revenues. The company has, however, reiterated its guidance range for 2013.
Taubman’s total revenue during the reported quarter stood at $178.2 million, down 0.7% from the year-ago quarter and below the Zacks Consensus Estimate of $180 million. While the company experienced growth in minimum rents, a fall in revenue from management, leasing, and development services pulled the revenue figure down. On the other hand, total expenses decreased 1.8% year over year.
Behind the Headline Numbers
Taubman's leased space in all centers increased to 92.6% as of Jun 30, 2013 from 92.3% at prior-year end. Ending occupancy in all centers rose to 90.7% at the second-quarter end from 90.1% reported a year ago.
Average rent per square foot for the quarter was $48.98, increasing 4.8% from $46.73 in the year-ago quarter. Net Operating Income (:NOI), excluding lease cancellation income, increased 3.9% year over year.
Mall tenant sales per square foot remained unchanged year over year, leading the tally to be at $698 over the trailing 12-month period. Though shoes and women's specialty delivered decent performance, a weak feat by the electronics segment marred that impact.
Notable Activities
Taubman completed was carried on progressing with the development work in Taubman Prestige Outlets Chesterfield (Chesterfield, Mo.). Slated to open on Aug 2, the center will have several outlet stores including retailers like Ralph Lauren Corporation (RL) and Abercrombie & Fitch Co. (ANF).
In addition, Taubman announced in June that Saks Fifth Avenue, an upscale department store chain owned by Saks Incorporated (SKS), will anchor the International Market Place (Waikiki, Honolulu, Hawaii). The move comes as part of the revitalization efforts for the shopping center.
Balance Sheet Position
As of Jun 30, 2013, Taubman’s cash and cash equivalents stood at $63.5 million, compared with $32.1 million at year-end 2012.
Subsequent to the quarter-end, the company accomplished a secured financing on City Creek Center (Salt Lake City, Utah) worth $85 million (10-year, non-recourse, all-in fixed rate of 4.43%). The move helped the company reap proceeds that were above its investment of $76 million and were utilized for lowering the debt under its revolving credit facility.
Outlook Reiterated
Taubman has kept its guidance range for 2013 FFO per share unchanged at $3.57 – $3.67. It includes a negative impact of 6.5 cent of its Series K Preferred Stock offering in Mar 2013.
Our Take
An earnings miss at Taubman is obviously disappointing but we believe that given its solid portfolio of best-in-class retail malls, the company would be able to improve its results in the quarters ahead. It has hiked its dividend 16 times since it went public, leading to a 4.2% compounded annual growth rate. Yet, increase in consumer purchases through catalogs and the Internet could hurt the demand for its properties.
Taubman currently carries a Zacks Rank #3 (Hold).
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.
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