Taubman Centers, Inc. (TCO), a real estate investment trust (REIT), has reported second quarter 2011 FFO (funds from operations) of 61 cents per share, which was similar to the year-earlier quarter. Funds from operations, 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, while adjusted FFO excludes the impairment and restructuring charges.
The second quarter 2011 reported FFO marginally missed the Zacks Consensus Estimate by a penny. The quarterly FFO per share included a non-cash charge of 6 cents relating to the ownership of The Pier Shops at Atlantic City, New Jersey. Excluding the non-recurring charges, adjusted FFO for the reported quarter was 67 cents per share compared to 64 cents in the year-ago period.
Total revenues during the reported quarter were $155.4 million compared to $154.1 million in the year-ago quarter. Total revenues for second quarter 2011 well exceeded the Zacks Consensus Estimate of $146 million. Occupancy of the entire portfolio increased a tad to 88.2% at quarter-end from 88.0% in the year-earlier period.
Average rents in the overall portfolio were $45.36 per square foot during the quarter compared to $43.64 in the year-ago quarter, representing a healthy year-over-year increase of 3.9%. Mall tenant sales per square foot improved 14.1% during the quarter on a year-over-year basis. On a trailing 12-month basis, mall tenant sales were $600 per square foot – a record of sorts for the company as well as the U.S. public regional mall portfolios.
During second quarter 2011, Taubman closed its first secondary offering since its initial public offering in 1992. The equity offer of 2 million shares included those sold to the underwriters pursuant to the full exercise of the over-allotment options. The company utilized the net proceeds from the share issue (totaling $112 million) to repay the outstanding debt under its $615 million revolving credit facilities.
Taubman has one of the strongest balance sheets in its sector. The company has moderate debt maturities in 2011. The company’s debt to total market cap ratio was 34.8% at quarter end, with $16.8 million of cash and cash equivalents.
Taubman has reiterated its earlier FFO guidance for full year 2011 in the range of $2.88 to $2.98 per share. We think Taubman is better positioned than many of its competitors due to its clean balance sheet and minimal debt maturity. In addition, the current dividend at 44 cents per share appears safe and the company is covering the payout with operating cash.
We maintain our ‘Neutral’ recommendation on Taubman, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Equity One Inc. (EQY), one of the peers of Taubman.
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TAUBMAN CENTERS (TCO): Free Stock Analysis Report
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