TAUBMAN CENTERS, INC. BLOOMFIELD HILLS, Mich., Oct. 30, 2014 /PRNewswire/ -- Taubman Centers, Inc. (NYSE: TCO) today reported financial results for the third quarter of 2014.
September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
------------------ ------------------ ----------------- -----------------
Net income allocable to common
shareholders (EPS) per diluted
share
$0.53 $0.38 $6.60 $1.09
--- ----- ----- ----- -----
Funds from Operations (FFO) per
diluted share
$0.87 $0.89 $2.57 $2.53
Growth rate (2.2)% 1.6%
----------- ----- ---
Adjusted Funds from Operations
(Adjusted FFO) per diluted
share(1)
$0.91 $0.89 $2.67 $2.53
Growth rate 2.2% 5.5%
----------- --- ---
(1) Adjusted FFO for the three and nine months ended September 30, 2014 excludes charges related to the sale of seven centers to Starwood.
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"It was a productive quarter with solid results," said Robert S. Taubman, chairman, president and chief executive officer of Taubman Centers. "Then in October, we were delighted with the very successful opening of University Town Center in Sarasota, Florida. We were also pleased to complete the Starwood transaction, which is transformational for the company.
"With increased rents and recoveries and lower predevelopment expenses, our adjusted FFO grew by two cents in the quarter despite a tough comparison with last year," added Mr. Taubman. Last year the company received the final incentive fee for leasing IFC Mall in Seoul, South Korea. This year the company is also experiencing dilution from the January 2014 sales of Arizona Mills (Tempe, Ariz.) and a 49.9 percent interest in International Plaza (Tampa, Fla.). These items combined for nearly 10 cents of FFO during the third quarter of last year.
Operating Statistics
Comparable center NOI excluding lease cancellation income was up 2.5 percent in the quarter, bringing year-to-date growth to 3 percent. Excluding the company's assets that were sold to Starwood, comparable center NOI excluding lease cancellation income was up 2.8 percent in the quarter, and up 3.1 percent year-to-date.
Average rent per square foot for the quarter was $51.54, up 4.5 percent from $49.31 in the comparable period last year. Excluding the company's assets that were sold to Starwood, average rent per square foot for the quarter was $61.12, up 6.3 percent.
Trailing 12-month releasing spreads per square foot for the period ended September 30, 2014 were 22.3 percent. Excluding the company's assets that were sold to Starwood, spreads were 29.9 percent.
Excluding the company's assets that were sold to Starwood, mall tenant sales per square foot were up 0.2 percent from the third quarter of 2013. This brings the company's 12-month trailing mall tenant sales per square foot to $807, a 1 percent decline from the 12-months ended September 30, 2013.
"Our releasing spreads were outstanding and although mall tenant sales per square foot were only modestly positive, we were encouraged by an acceleration throughout the quarter," said Mr. Taubman.
Excluding the company's assets that were sold to Starwood, ending occupancy in comparable centers was 94.1 percent, down 1.5 percent. This includes temporary tenants of 2.7 percent.
Sale of Seven Malls to Starwood Complete
In October, the company completed the previously announced sales of seven malls to Starwood. The sales are part of the company's ongoing strategy to recycle capital, maximize its NOI growth rate and create net asset value for investors over time. Total consideration, excluding transaction costs, was $1.403 billion. See Taubman Completes Sale of Seven Malls to Starwood Capital Group - Oct. 17, 2014.
The Mall at University Town Center Successfully Opened October 16, 2014
On October 16, 2014, the company held the grand opening of The Mall at University Town Center (UTC) (Sarasota, Fla.), the only newly built enclosed regional shopping center to open in the United States this year. The Mall at UTC, which is anchored by Saks Fifth Avenue, Macy's and Dillard's, opened over 90 percent leased. Well over half of the center's more than 100 retailers and restaurants are unique to the Sarasota-Manatee market.
The Mall at UTC is the focal point of the larger University Town Center Development that features additional retail, dining and hotels, with a world-class rowing competition facility located immediately adjacent to the mall. "We have filled the tremendous void for upscale retail in the broader Sarasota market," said Mr. Taubman. See Shoppers Welcome Sarasota's Premier Shopping Destination - Oct. 16, 2014.
Ownership in Hanam Union Square Increased
In August, the company announced it increased its ownership in the Hanam Union Square project. Taubman Asia partnered with a major institution in Asia to acquire an additional 19 percent stake from Shinsegae Group. The new institutional partner owns 14.7 percent of the project, increasing Taubman Asia's effective ownership from 30 percent to 34.3 percent. Collectively, the partnership has a 49 percent ownership interest. See Taubman Asia Announces Additional Partner and Ownership Increase in Hanam Union Square, South Korea - Aug. 26, 2014.
2014 Guidance
The company is changing its guidance for 2014 Adjusted FFO per diluted share to the range of $3.58 to $3.68 from the previous range of $3.72 to $3.82. This guidance now includes the impact of the company's sale of seven centers to Starwood, which the company estimates will reduce adjusted FFO by 14 cents. The company's Adjusted FFO guidance excludes charges related to the discontinuation of hedge accounting on the interest rate swap previously designated to hedge the MacArthur note payable, a restructuring charge, and disposition and debt extinguishment costs incurred related to the sale of centers to Starwood.
The company's 2014 FFO per diluted share guidance is $3.07 to $3.17 per share.
2014 EPS is expected to be in the range of $13.40 to $13.54. 2014 EPS includes $5.30 per share gains from the first quarter 2014 sales of the company's 50 percent interest in Arizona Mills, land in Syosset, New York, and a 49.9 percent interest in International Plaza. The range also includes the impact of the company's sale of seven centers to Starwood. The impact includes an estimated gain of approximately $600 million, or $6.65 per share, to be recognized in the fourth quarter of 2014.
Supplemental Investor Information Available
The company provides supplemental investor information along with its earnings announcements, available online at www.taubman.com under "Investors." This includes the following:
-- Company Information
-- Income Statements
-- Earnings Reconciliations
-- Changes in Funds from Operations and Earnings Per Share
-- Components of Other Income, Other Operating Expense, and Nonoperating
Income
-- Recoveries Ratio Analysis
-- Balance Sheets
-- Debt Summary
-- Other Debt, Equity and Certain Balance Sheet Information
-- Construction and Redevelopment
-- Dispositions
-- Capital Spending
-- Operational Statistics
-- Operational Statistics - Excluding Centers Sold to Starwood Capital
Group in October 2014
-- Owned Centers
-- Major Tenants in Owned Portfolio - Excluding Centers Sold to Starwood
Capital Group in October 2014
-- Anchors in Owned Portfolio - Excluding Centers Sold to Starwood Capital
Group in October 2014
-- Operating Statistics Glossary
Investor Conference Call
The company will host a conference call at 11:00 a.m. EDT on Friday, October 31 to discuss these results, business conditions and the company's outlook for the remainder of 2014. The conference call will be simulcast at www.taubman.com. An online replay will follow shortly after the call and continue for approximately 90 days.
About Taubman
Taubman Centers, Inc. is an S&P MidCap 400 Real Estate Investment Trust engaged in the ownership, management and/or leasing of 21 regional, super-regional and outlet shopping centers in the U.S. and Asia. Taubman's U.S.-owned properties are the most productive in the publicly held U.S. regional mall industry. Taubman is currently developing five properties in the U.S. and Asia totaling 4.7 million square feet. Taubman, with more than 60 years of experience in the shopping center industry, is headquartered in Bloomfield Hills, Mich., and Taubman Asia is headquartered in Hong Kong. www.taubman.com.
For ease of use, references in this press release to "Taubman Centers," "company," "Taubman" or an operating platform mean Taubman Centers, Inc. and/or one or more of a number of separate, affiliated entities. Business is actually conducted by an affiliated entity rather than Taubman Centers, Inc. itself or the named operating platform.
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements reflect management's current views with respect to future events and financial performance. The forward-looking statements included in this release are made as of the date hereof. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future. Actual results may differ materially from those expected because of various risks and uncertainties. You should review the company's filings with the Securities and Exchange Commission, including "Risk Factors" in its most recent Annual Report on Form 10-K and subsequent quarterly reports, for a discussion of such risks and uncertainties.
TAUBMAN CENTERS, INC.
Table 1 - Summary of Results
For the Periods Ended September 30, 2014 and 2013
-------------------------------------------------
(in thousands of dollars, except as indicated)
Three Months Ended Year to Date
------------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
Net income 56,637 43,243 621,848 123,202
Noncontrolling share of income of consolidated joint ventures (2,643) (2,198) (8,013) (6,752)
Noncontrolling share of income of TRG (14,057) (10,338) (170,922) (29,915)
Preferred stock dividends (5,784) (5,784) (17,353) (15,148)
Distributions to participating securities of TRG (471) (435) (1,409) (1,313)
Net income attributable to Taubman Centers, Inc. common shareowners 33,682 24,488 424,151 70,074
Net income per common share - basic 0.53 0.38 6.71 1.10
Net income per common share - diluted 0.53 0.38 6.60 1.09
Beneficial interest in EBITDA - Combined (1) 116,972 128,320 838,015 371,430
Adjusted Beneficial interest in EBITDA- Combined (1) 120,354 128,320 360,613 371,430
Funds from Operations(1) 78,450 80,500 231,537 230,222
Funds from Operations attributable to TCO (1) 56,045 57,737 165,418 164,692
Funds from Operations per common share - basic(1) 0.89 0.91 2.62 2.59
Funds from Operations per common share - diluted (1) 0.87 0.89 2.57 2.53
Adjusted Funds from Operations (1) 81,832 80,500 240,755 230,222
Adjusted Funds from Operations attributable to TCO (1) 58,466 57,737 172,015 164,692
Adjusted Funds from Operations per common share- basic(1) 0.92 0.91 2.72 2.59
Adjusted Funds from Operations per common share- diluted (1) 0.91 0.89 2.67 2.53
Weighted average number of common shares outstanding - basic 63,317,680 63,753,748 63,249,400 63,653,155
Weighted average number of common shares outstanding - diluted 64,087,742 64,690,909 64,876,051 64,702,648
Common shares outstanding at end of period 63,319,539 63,524,788
Weighted average units - Operating Partnership - basic 88,453,782 88,933,226 88,392,327 88,903,234
Weighted average units - Operating Partnership - diluted 90,095,106 90,741,649 90,018,978 90,823,989
Units outstanding at end of period - Operating Partnership 88,454,989 88,702,310
Ownership percentage of the Operating Partnership at end of period 71.6% 71.6%
Number of owned shopping centers at end of period (2) 24 25 24 25
Operating Statistics:
Net Operating Income excluding lease cancellation income -growth %
(1)(3) 2.5% 3.2% 3.0% 4.0%
Ending occupancy - all centers 89.0% 90.9% 89.0% 90.9%
Ending occupancy - comparable(3) 89.6% 91.0% 89.6% 91.0%
Average occupancy - all centers 89.2% 90.8% 89.7% 90.7%
Average occupancy - comparable (3) 89.7% 90.8% 90.3% 90.6%
Leased space - all centers 91.2% 92.6% 91.2% 92.6%
Leased space - comparable(3) 91.6% 92.8% 91.6% 92.8%
Average rent per square foot - Consolidated Businesses (3) 48.58 48.13 48.11 48.04
Average rent per square foot - Unconsolidated Joint Ventures (3) 58.20 52.79 58.02 52.19
Average rent per square foot - Combined (3) 51.54 49.31 51.07 49.09
Operating Statistics Excluding Centers Sold to Starwood Capital Group in October 2014 (5):
Net Operating Income excluding lease cancellation income -growth %
(1) 2.8% 3.1%
Ending occupancy - comparable(3) 91.4% 92.9% 91.4% 92.9%
Ending occupancy - comparable with TILs(3) 94.1% 95.6% 94.1% 95.6%
Leased space - comparable(3) 93.4% 94.7% 93.4% 94.7%
Average rent per square foot - Combined 58.06 53.08 56.99 51.93
All centers (4):
Mall tenant occupancy costs as a percentage of tenant sales -
Consolidated Businesses 15.0% 14.4% 14.8% 13.9%
Mall tenant occupancy costs as a percentage of tenant sales -
Unconsolidated Joint Ventures 14.5% 14.1% 14.1% 13.2%
Mall tenant occupancy costs as a percentage of tenant sales -
Combined 14.8% 14.3% 14.5% 13.7%
Comparable centers (3)(4):
Mall tenant occupancy costs as a percentage of tenant sales -
Consolidated Businesses 15.1% 14.5% 14.9% 14.0%
Mall tenant occupancy costs as a percentage of tenant sales -
Unconsolidated Joint Ventures 14.5% 13.9% 14.1% 13.0%
Mall tenant occupancy costs as a percentage of tenant sales -
Combined 14.9% 14.3% 14.5% 13.6%
Mall tenant sales - all centers (4) 1,121,619 1,177,657 3,368,300 3,578,702
Mall tenant sales - comparable (3)(4) 1,111,848 1,126,993 3,344,320 3,447,116
(1) Beneficial
Interest in
EBITDA
represents the
Operating
Partnership's
share of the
earnings
before
interest,
income taxes,
and
depreciation
and
amortization
of its
consolidated
and
unconsolidated
businesses.
The Company
believes
Beneficial
Interest in
EBITDA
provides a
useful
indicator of
operating
performance,
as it is
customary in
the real
estate and
shopping
center
business to
evaluate the
performance of
properties on
a basis
unaffected by
capital
structure.
The Company
uses Net
Operating
Income (NOI)
as an
alternative
measure to
evaluate the
operating
performance of
centers, both
on individual
and stabilized
portfolio
bases. The
Company
defines NOI as
property-
level
operating
revenues
(includes
rental income
excluding
straight-line
adjustments of
minimum rent)
less
maintenance,
taxes,
utilities,
promotion,
ground rent
(including
straight-line
adjustments),
and other
property
operating
expenses.
Since NOI
excludes
general and
administrative
expenses, pre-
development
charges,
interest
income and
expense,
depreciation
and
amortization,
impairment
charges,
restructuring
charges, and
gains from
peripheral
land and
property
dispositions,
it provides a
performance
measure that,
when compared
period over
period,
reflects the
revenues and
expenses most
directly
associated
with owning
and operating
rental
properties, as
well as the
impact on
their
operations
from trends in
tenant sales,
occupancy and
rental rates,
and operating
costs. The
Company also
uses NOI
excluding
lease
cancellation
income as an
alternative
measure
because this
income may
vary
significantly
from period to
period, which
can affect
comparability
and trend
analysis. The
Company
generally
provides
separate
projections
for expected
comparable
center NOI
growth and
lease
cancellation
income.
Comparable
centers are
generally
defined as
centers that
were owned and
open for the
entire current
and preceding
period
presented.
The National
Association of
Real Estate
Investment
Trusts
(NAREIT)
defines Funds
from
Operations
(FFO) as net
income
(computed in
accordance
with Generally
Accepted
Accounting
Principles
(GAAP)),
excluding
gains (or
losses) from
extraordinary
items and
sales of
properties and
impairment
write-downs
of depreciable
real estate,
plus real
estate related
depreciation
and after
adjustments
for
unconsolidated
partnerships
and joint
ventures. The
Company
believes that
FFO is a
useful
supplemental
measure of
operating
performance
for REITs.
Historical
cost
accounting for
real estate
assets
implicitly
assumes that
the value of
real estate
assets
diminishes
predictably
over time.
Since real
estate values
instead have
historically
risen or
fallen with
market
conditions,
the Company
and most
industry
investors and
analysts have
considered
presentations
of operating
results that
exclude
historical
cost
depreciation
to be useful
in evaluating
the operating
performance of
REITs. The
Company
primarily uses
FFO in
measuring
performance
and in
formulating
corporate
goals and
compensation.
The Company may
also present
adjusted
versions of
NOI,
Beneficial
Interest in
EBITDA, and
FFO when used
by management
to evaluate
operating
performance
when certain
significant
items have
impacted
results that
affect
comparability
with prior or
future periods
due to the
nature or
amounts of
these items.
The Company
believes the
disclosure of
the adjusted
items is
similarly
useful to
investors and
others to
understand
management's
view on
comparability
of such
measures
between
periods. For
the three and
nine month
periods ended
September 30,
2014, FFO and
EBITDA were
adjusted for
expenses
related to the
sale of seven
centers to an
affiliate of
Starwood
Capital Group
(Starwood)
completed in
October 2014.
Specifically,
these measures
were adjusted
for charges
related to the
discontinuation
of hedge
accounting on
the interest
rate swap
previously
designated to
hedge the
MacArthur
Center
(MacArthur)
note payable,
a
restructuring
charge and
disposition
costs incurred
related to the
sale. In
addition, for
the nine month
period ended
September 30,
2014, EBITDA
was adjusted
for the gain
on
dispositions
of interests
in
International
Plaza, Arizona
Mills, and
land in
Syosset, New
York related
to the former
Oyster Bay
project.
These non-GAAP
measures as
presented by
the Company
are not
necessarily
comparable to
similarly
titled
measures used
by other REITs
due to the
fact that not
all REITs use
the same
definitions.
These measures
should not be
considered
alternatives
to net income
or as an
indicator of
the Company's
operating
performance.
Additionally,
these measures
do not
represent cash
flows from
operating,
investing, or
financing
activities as
defined by
GAAP.
(2) In October
2014, the
Company
completed the
sale of seven
centers to
affiliates of
Starwood
Capital Group.
(3) Statistics
exclude non-
comparable
centers. In
2014 and 2013,
non-
comparable
centers are
Taubman
Prestige
Outlets
Chesterfield
and Arizona
Mills.
(4) Based on
reports of
sales
furnished by
mall tenants.
(5) Statistics have
been adjusted
to exclude the
portfolio of
seven centers
included in
the sale to
Starwood
Capital Group
in October
2014.
TAUBMAN CENTERS, INC.
Table 2 - Income Statement
For the Three Months Ended September 30, 2014 and 2013
------------------------------------------------------
(in thousands of dollars)
2014 2013
---- ----
CONSOLIDATED BUSINESSES UNCONSOLIDATED JOINT CONSOLIDATED BUSINESSES UNCONSOLIDATED JOINT
VENTURES (1) VENTURES (1)
----------- -----------
REVENUES:
Minimum rents 96,691 48,226 103,501 42,532
Percentage rents 5,263 2,270 7,021 2,137
Expense
recoveries 63,527 28,517 67,943 25,738
Management,
leasing, and
development
services 3,135 8,753
Other 7,428 1,658 6,720 1,452
-----
Total revenues 176,044 80,671 193,938 71,859
EXPENSES:
Maintenance,
taxes,
utilities, and
promotion 52,184 20,457 55,375 18,807
Other operating 18,036 3,611 19,295 3,372
Management,
leasing, and
development
services 1,539 1,027
General and
administrative 11,369 11,812
Restructuring
charge 3,031
Interest expense 23,382 18,255 32,515 17,048
Depreciation and
amortization 24,553 11,939 40,982 10,068
Total expenses 134,094 54,262 161,006 49,295
Nonoperating income (expense) 891 (22) (456) (1)
--- --- ---- ---
42,841 26,387 32,476 22,563
====== ======
Income tax expense (683) (1,453)
Equity in income of Unconsolidated
Joint Ventures 14,479 12,220
------ ------
Net income 56,637 43,243
Net income attributable to noncontrolling interests:
Noncontrolling
share of income
of consolidated
joint ventures (2,643) (2,198)
Noncontrolling
share of income
of TRG (14,057) (10,338)
Distributions to participating
securities of TRG (471) (435)
Preferred stock dividends (5,784) (5,784)
Net income attributable to Taubman
Centers, Inc. common shareowners 33,682 24,488
====== ======
SUPPLEMENTAL INFORMATION:
EBITDA - 100% 90,776 56,581 105,973 49,679
EBITDA -outside
partners' share (5,566) (24,819) (5,653) (21,679)
----------------
Beneficial
interest in
EBITDA 85,210 31,762 100,320 28,000
Beneficial
interest
expense (21,273) (10,006) (30,352) (9,415)
Beneficial
income tax
expense -TRG
and TCO (683) (1,453)
Beneficial
income tax
expense -TCO 112 (29)
Non-real estate
depreciation (888) (787)
Preferred
dividends and
distributions (5,784) (5,784)
Funds from
Operations
contribution 56,694 21,756 61,915 18,585
=============
STRAIGHTLINE AND PURCHASE ACCOUNTING ADJUSTMENTS:
Net straight-
line
adjustments to
rental revenue,
recoveries,
and ground rent expense at TRG % 405 304 1,081 226
Green Hills
purchase
accounting
adjustments -
minimum rents
increase 229 186
Green Hills, El
Paseo Village,
and Gardens on
El Paseo
purchase
accounting
adjustments -interest expense
reduction 306 858
Waterside Shops
purchase
accounting
adjustments -
interest
expense
reduction 263 263
Taubman BHO
headquarters
purchase
accounting
adjustment -
interest expense reduction 183
(1) With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint
Ventures. Amounts are net of intercompany transactions. The Unconsolidated Joint Ventures are presented at
100% in order to allow for measurement of their performance as a whole, without regard to the Company's
ownership interest. In its consolidated financial statements, the Company accounts for its investments in
the Unconsolidated Joint Ventures under the equity method. International Plaza's operations were
consolidated through the disposition date. Subsequent to the disposition, the Company's remaining 50.1%
interest is accounted for under the equity method of accounting within Unconsolidated Joint Ventures. In
addition, Arizona Mills' operations were accounted for under equity method accounting through the
disposition in January 2014.
TAUBMAN CENTERS, INC.
Table 3 - Income Statement
For the Nine Months Ended September 30, 2014 and 2013
-----------------------------------------------------
(in thousands of dollars)
2014 2013
---- ----
CONSOLIDATED BUSINESSES UNCONSOLIDATED JOINT CONSOLIDATED BUSINESSES UNCONSOLIDATED JOINT
VENTURES (1) VENTURES (1)
----------- -----------
REVENUES:
Minimum rents 291,113 143,098 309,043 124,679
Percentage rents 11,019 5,427 13,732 5,763
Expense
recoveries 187,439 83,144 197,549 73,922
Management,
leasing, and
development
services 8,605 13,954
Other 22,631 6,521 21,104 4,820
-----
Total revenues 520,807 238,190 555,382 209,184
EXPENSES:
Maintenance,
taxes,
utilities, and
promotion 148,955 60,449 154,694 53,993
Other operating 49,582 13,035 53,950 11,643
Management,
leasing, and
development
services 4,520 4,172
General and
administrative 34,493 36,676
Restructuring
charge 3,031
Interest expense 74,946 54,284 99,589 50,976
Depreciation and
amortization 96,521 34,731 116,262 29,326
Total expenses 412,048 162,499 465,343 145,938
Nonoperating income (expense) (2) (3,327) (25) 1,831 (1)
------ --- ----- ---
105,432 75,666 91,870 63,245
====== ======
Income tax expense (1,693) (2,715)
Equity in income of Unconsolidated
Joint Ventures 41,222 34,047
------ ------
144,961 123,202
Gain on dispositions of International
Plaza, Arizona Mills, and Oyster Bay,
net of tax (3) 476,887
-------
Net income 621,848 123,202
Net income attributable to noncontrolling interests:
Noncontrolling
share of income
of consolidated
joint ventures (8,013) (6,752)
Noncontrolling
share of income
of TRG (170,922) (29,915)
Distributions to participating
securities of TRG (1,409) (1,313)
Preferred stock dividends (17,353) (15,148)
-------
Net income attributable to Taubman
Centers, Inc. common shareowners 424,151 70,074
======= ======
SUPPLEMENTAL INFORMATION:
EBITDA -100%
(4) 763,519 164,681 307,721 143,547
EBITDA -outside
partners' share (17,840) (72,345) (17,068) (62,770)
----------------
Beneficial
interest in
EBITDA 745,679 92,336 290,653 80,777
Gain on
dispositions of
International
Plaza, Arizona
Mills, and
Oyster Bay (486,620)
Beneficial
interest
expense (68,687) (29,805) (93,049) (28,192)
Beneficial
income tax
expense -TRG
and TCO (1,693) (2,715)
Beneficial
income tax
expense -TCO 258 132
Non-real estate
depreciation (2,578) (2,236)
Preferred
dividends and
distributions (17,353) (15,148)
Funds from
Operations
contribution 169,006 62,531 177,637 52,585
=============
STRAIGHTLINE AND PURCHASE ACCOUNTING ADJUSTMENTS:
Net straight-
line
adjustments to
rental revenue,
recoveries,
and ground rent expense at TRG % 1,229 843 2,881 451
Green Hills
purchase
accounting
adjustments -
minimum rents
increase 620 590
Green Hills, El
Paseo Village,
and Gardens on
El Paseo
purchase
accounting
adjustments -interest expense
reduction 917 2,573
Waterside Shops
purchase
accounting
adjustments -
interest
expense
reduction 788 788
Taubman BHO
headquarters
purchase
accounting
adjustment -
interest expense reduction 425
(1) With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures.
Amounts are net of intercompany transactions. The Unconsolidated Joint Ventures are presented at 100% in
order to allow for measurement of their performance as a whole, without regard to the Company's ownership
interest. In its consolidated financial statements, the Company accounts for its investments in the
Unconsolidated Joint Ventures under the equity method. International Plaza's operations were consolidated
through the disposition date. Subsequent to the disposition, the Company's remaining 50.1% interest is
accounted for under the equity method of accounting within Unconsolidated Joint Ventures. In addition,
Arizona Mills' operations were accounted for under equity method accounting through the disposition in
January 2014.
(2) Nonoperating expense for the nine months ended September 30, 2014 includes $5.5 million in connection with the
discontinuation of hedge accounting related to the MacArthur interest rate swap and $1 million of disposition
costs related to the sale of seven centers to Starwood Capital Group.
(3) During the nine months ended September 30, 2014, the gain on dispositions of interests in International Plaza,
Arizona Mills and land in Syosset, New York related to the former Oyster Bay project is net of income tax
expense of $9.7 million.
(4) For the nine months ended September 30, 2014, EBITDA includes the Company's $486.6 million (before tax) gain
from the dispositions of interests in International Plaza, Arizona Mills, and Land in Syosset, New York
related to the former Oyster Bay project.
TAUBMAN CENTERS, INC.
Table 4 - Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations
and Adjusted Funds from Operations
For the Three Months Ended September 30, 2014 and 2013
------------------------------------------------------
(in thousands of dollars except as noted; may not add or recalculate due to rounding)
2014 2013
---- ----
Shares Per Share Shares Per Share
Dollars /Units /Unit Dollars /Units /Unit
------- ------ ----- ------- ------ -----
Net income attributable to TCO common
shareowners -Basic 33,682 63,317,680 0.53 24,488 63,753,748 0.38
Add impact of share-based compensation 121 770,062 107 937,161
--- ------- --- -------
Net income attributable to TCO common
shareowners -Diluted 33,803 64,087,742 0.53 24,595 64,690,909 0.38
Add depreciation of TCO's additional basis 1,617 0.03 1,720 0.03
Add (less) TCO's additional income tax
expense (benefit) 112 0.00 (29) (0.00)
--- ---- --- -----
Net income attributable to TCO common
shareowners,
excluding step-up
depreciation and
additional income
tax expense
(benefit) 35,532 64,087,742 0.55 26,286 64,690,909 0.41
Add:
Noncontrolling share of income of TRG 14,057 25,136,102 10,338 25,179,478
Distributions to participating
securities of TRG 471 871,262 435 871,262
Net income attributable to partnership
unitholders
and participating securities 50,060 90,095,106 0.56 37,059 90,741,649 0.41
Add (less) depreciation and amortization:
Consolidated businesses at 100% 24,553 0.27 40,982 0.45
Depreciation of TCO's additional basis (1,617) (0.02) (1,720) (0.02)
Noncontrolling partners in consolidated
joint ventures (814) (0.01) (1,292) (0.01)
Share of Unconsolidated Joint Ventures 7,277 0.08 6,365 0.07
Non-real estate depreciation (888) (0.01) (787) (0.01)
Less impact of share-based compensation (121) 0.00 (107) (0.00)
---- ---- ---- -----
Funds from Operations 78,450 90,095,106 0.87 80,500 90,741,649 0.89
TCO's average ownership percentage of TRG 71.6% 71.7%
---- ----
Funds from Operations attributable to TCO,
excluding additional income tax benefit
(expense) 56,157 0.87 57,708 0.89
Add (less) TCO's additional income tax
benefit (expense) (112) (0.00) 29 0.00
---- ----- --- ----
Funds from Operations attributable to TCO 56,045 0.87 57,737 0.89
====== ==== ====== ====
Funds from Operations 78,450 90,095,106 0.87 80,500 90,741,649 0.89
Disposition costs related to the Starwood
sale 513 0.01
Restructuring charge 3,031 0.03
Discontinuation of hedge accounting -
MacArthur (162) (0.00)
---- -----
Adjusted Funds from Operations 81,832 90,095,106 0.91 80,500 90,741,649 0.89
TCO's average ownership percentage of TRG 71.6% 71.7%
---- ----
Adjusted Funds from Operations attributable
to TCO,
excluding additional income tax benefit
(expense) 58,578 0.91 57,708 0.89
Add (less) TCO's additional income tax
benefit (expense) (112) (0.00) 29 0.00
---- ----- --- ----
Adjusted Funds from Operations attributable
to TCO 58,466 0.91 57,737 0.89
====== ==== ====== ====
TAUBMAN CENTERS, INC.
Table 5 - Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations
and Adjusted Funds from Operations
For the Nine Months Ended September 30, 2014 and 2013
-----------------------------------------------------
(in thousands of dollars except as noted; may not add or recalculate due to rounding)
2014 2013
---- ----
Shares Per Share Shares Per Share
Dollars /Units /Unit Dollars /Units /Unit
------- ------ ----- ------- ------ -----
Net income attributable to TCO common
shareowners -Basic 424,151 63,249,400 6.71 70,074 63,653,155 1.10
Add distributions to participating
securities of TRG 1,409 871,262
Add impact of share-based compensation 2,742 755,389 352 1,049,493
----- ------- --- ---------
Net income attributable to TCO common
shareowners -Diluted 428,302 64,876,051 6.60 70,426 64,702,648 1.09
Add depreciation of TCO's additional basis 5,057 0.08 5,160 0.08
Add TCO's additional income tax expense 258 0.00 132 0.00
--- ---- --- ----
Net income attributable to TCO common
shareowners,
excluding step-up depreciation and
additional income tax expense 433,617 64,876,051 6.68 75,718 64,702,648 1.17
Add:
Noncontrolling share of income of TRG 170,922 25,142,927 29,915 25,250,079
Distributions to participating
securities of TRG 1,313 871,262
Net income attributable to partnership
unitholders
and participating securities 604,539 90,018,978 6.72 106,946 90,823,989 1.18
Add (less) depreciation and amortization:
Consolidated businesses at 100% 96,521 1.07 116,262 1.28
Depreciation of TCO's additional basis (5,057) (0.06) (5,160) (0.06)
Noncontrolling partners in consolidated
joint ventures (3,568) (0.04) (3,776) (0.04)
Share of Unconsolidated Joint Ventures 21,309 0.24 18,538 0.20
Non-real estate depreciation (2,578) (0.03) (2,236) (0.02)
Less gain on dispositions of International
Plaza, Arizona Mills, and Oyster Bay, net
of tax (476,887) (5.30)
Less impact of share-based compensation (2,742) (0.03) (352) (0.00)
------ ----- ---- -----
Funds from Operations 231,537 90,018,978 2.57 230,222 90,823,989 2.53
TCO's average ownership percentage of TRG 71.6% 71.6%
---- ----
Funds from Operations attributable to TCO,
excluding additional income tax expense 165,676 2.57 164,824 2.53
Less TCO's additional income tax expense (258) (0.00) (132) (0.00)
---- ----- ---- -----
Funds from Operations attributable to TCO 165,418 2.57 164,692 2.53
======= ==== ======= ====
Funds from Operations 231,537 90,018,978 2.57 230,222 90,823,989 2.53
Disposition costs related to the Starwood
sale 954 0.01
Restructuring charge 3,031 0.03
Discontinuation of hedge accounting -
MacArthur 5,233 0.06
----- ----
Adjusted Funds from Operations 240,755 90,018,978 2.67 230,222 90,823,989 2.53
TCO's average ownership percentage of TRG 71.6% 71.6%
---- ----
Adjusted Funds from Operations attributable
to TCO,
excluding additional income tax expense 172,273 2.67 164,824 2.53
Less TCO's additional income tax expense (258) (0.00) (132) (0.00)
---- ----- ---- -----
Adjusted Funds from Operations attributable
to TCO 172,015 2.67 164,692 2.53
======= ==== ======= ====
TAUBMAN CENTERS, INC.
Table 6 - Reconciliation of Net Income to Beneficial Interest in EBITDA and Adjusted Beneficial Interest in EBITDA
For the Periods Ended September 30, 2014 and 2013
-------------------------------------------------
(in thousands of dollars; amounts attributable to TCO may not recalculate due to rounding)
Three Months Ended Year to Date
------------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
Net income 56,637 43,243 621,848 123,202
Add (less) depreciation and amortization:
Consolidated businesses at
100% 24,553 40,982 96,521 116,262
Noncontrolling partners in
consolidated joint ventures (814) (1,292) (3,568) (3,776)
Share of Unconsolidated
Joint Ventures 7,277 6,365 21,309 18,538
Add (less) interest expense and income tax expense:
Interest expense:
Consolidated businesses at 100% 23,382 32,515 74,946 99,589
Noncontrolling partners in consolidated joint ventures (2,109) (2,163) (6,259) (6,540)
Share of Unconsolidated Joint Ventures 10,006 9,415 29,805 28,192
Income tax expense:
Income tax expense on
dispositions of
International Plaza, Arizona
Mills, and Oyster Bay 9,733
Other income tax expense 683 1,453 1,693 2,715
Less noncontrolling share of income of consolidated joint ventures (2,643) (2,198) (8,013) (6,752)
------ ------ ------ ------
Beneficial Interest in EBITDA 116,972 128,320 838,015 371,430
TCO's average ownership percentage of TRG 71.6% 71.7% 71.6% 71.6%
---- ---- ---- ----
Beneficial Interest in EBITDA attributable to TCO 83,732 91,989 599,493 265,925
====== ====== ======= =======
Beneficial Interest in EBITDA 116,972 128,320 838,015 371,430
Disposition costs related to
the Starwood sale 513 954
Restructuring charge 3,031 3,031
Discontinuation of hedge
accounting -MacArthur (162) 5,233
Gain on dispositions of
International Plaza,
Arizona Mills, and Oyster
Bay (486,620)
Adjusted Beneficial Interest in EBITDA 120,354 128,320 360,613 371,430
TCO's average ownership percentage of TRG 71.6% 71.7% 71.6% 71.6%
---- ---- ---- ----
Adjusted Beneficial Interest in EBITDA attributable to TCO 86,153 91,989 258,036 265,925
====== ====== ======= =======
TAUBMAN CENTERS, INC.
Table 7 - Reconciliation of Net Income to Net Operating Income (NOI)
For the Periods Ended September 30, 2014, 2013, and 2012
--------------------------------------------------------
(in thousands of dollars)
Three Months Ended Three Months Ended Year to Date Year to Date
------------------ ------------------ ------------ ------------
2014 2013 2013 2012 2014 2013 2013 2012
---- ---- ---- ---- ---- ---- ---- ----
Net income 56,637 43,243 43,243 45,061 621,848 123,202 123,202 108,686
Add (less) depreciation and amortization:
Consolidated businesses at 100% 24,553 40,982 40,982 36,414 96,521 116,262 116,262 109,083
Noncontrolling partners in consolidated joint ventures (814) (1,292) (1,292) (2,888) (3,568) (3,776) (3,776) (7,650)
Share of Unconsolidated Joint Ventures 7,277 6,365 6,365 5,311 21,309 18,538 18,538 15,786
Add (less) interest expense and income tax expense:
Interest expense:
Consolidated businesses at 100% 23,382 32,515 32,515 34,943 74,946 99,589 99,589 109,146
Noncontrolling partners in consolidated joint ventures (2,109) (2,163) (2,163) (4,225) (6,259) (6,540) (6,540) (12,634)
Share of Unconsolidated Joint Ventures 10,006 9,415 9,415 8,765 29,805 28,192 28,192 25,084
Share of income tax expense:
Income tax expense on dispositions of International Plaza, Arizona Mills, and Oyster Bay 9,733
Other income tax expense 683 1,453 1,453 667 1,693 2,715 2,715 1,393
Less noncontrolling share of income of consolidated joint ventures (2,643) (2,198) (2,198) (2,079) (8,013) (6,752) (6,752) (6,788)
Add EBITDA attributable to outside partners:
EBITDA attributable to noncontrolling partners in consolidated joint ventures 5,566 5,653 5,653 9,257 17,840 17,068 17,068 27,117
EBITDA attributable to outside partners in Unconsolidated Joint Ventures 24,819 21,679 21,679 21,536 72,345 62,770 62,770 62,259
-----------
EBITDA at 100% 147,357 155,652 155,652 152,762 928,200 451,268 451,268 431,482
Add (less) items excluded from shopping center NOI:
General and administrative expenses 11,369 11,812 11,812 9,571 34,493 36,676 36,676 28,021
Management, leasing, and development services, net (1,596) (7,726) (7,726) (4,069) (4,085) (9,782) (9,782) (5,767)
Straight-line of rents (1,195) (1,706) (1,706) (2,055) (3,482) (4,320) (4,320) (4,535)
Gain on dispositions of International Plaza, Arizona Mills, and Oyster Bay (486,620)
Disposition costs related to the Starwood sale 519 960
Restructuring charge 3,031 3,031
Discontinuation of hedge accounting - MacArthur (171) 5,507
Gain on sale of peripheral land (863) (863)
Gain on sale of marketable securities (1,323) (1,323)
Dividend income (761) (1,597)
Interest income (456) (43) (43) (74) (764) (144) (144) (270)
Other nonoperating expense (income) 500 500 (754) 500 500
Non-center specific operating expenses and other 5,628 7,987 7,995 6,357 14,587 18,503 18,781 21,773
-----------
NOI - all centers at 100% 163,725 166,476 166,484 162,492 489,476 490,515 490,793 470,704
Less - NOI of non-comparable centers 698 (1) (6,360) (2) (1,781) (3) (2,487) (4) (174) (5) (19,392) (2) (7,306) (3) (5,842) (4)
--- ------ ------ ------ ---- ------- ------ ------
NOI at 100% - comparable centers 164,423 160,116 164,703 160,005 489,302 471,123 483,487 464,862
======= ======= ======= ======= ======= ======= ======= =======
NOI - growth % 2.7% 2.9% 3.9% 4.0%
NOI at 100% - comparable centers 164,423 160,116 164,703 160,005 489,302 471,123 483,487 464,862
Lease cancellation income (1,126) (761) (741) (1,076) (7,375) (3,027) (3,007) (3,015)
------ ---- ---- ------ ------ ------ ------ ------
NOI at 100% - comparable centers excluding lease cancellation income 163,297 159,355 163,962 158,929 481,927 468,096 480,480 461,847
======= ======= ======= ======= ======= ======= ======= =======
NOI at 100% excluding lease cancellation income - growth % 2.5% 3.2% 3.0% 4.0%
NOI at 100% excluding lease cancellation income - post-sale portfolio growth % (6) 2.8% 3.1%
(1) Includes Taubman Prestige Outlets Chesterfield.
(2) Includes Arizona Mills and Taubman Prestige Outlets Chesterfield
(3) Includes City Creek Center and Taubman Prestige Outlets Chesterfield.
(4) Includes City Creek Center.
(5) Includes Taubman Prestige Outlets Chesterfield and Arizona Mills for the approximately one-month period
prior to its disposition.
(6) In addition to non-comparable centers excluded above, excludes NOI of Fairlane Town Center, MacArthur Center, Northlake Mall, The Mall at Partridge Creek, Stony Point Fashion Park, The Mall at Wellington Green, and
The Shops at Willow Bend.
TAUBMAN CENTERS, INC.
Table 8 - Balance Sheets
As of September 30, 2014 and December 31,
2013
-----------------------------------------
(in thousands of dollars)
As of
-----
September 30, 2014 December 31, 2013
------------------ -----------------
Consolidated Balance Sheet of Taubman
Centers, Inc. (1):
Assets:
Properties 3,143,649 4,485,090
Accumulated
depreciation and
amortization (951,736) (1,516,982)
------------
2,191,913 2,968,108
Investment in
Unconsolidated
Joint Ventures 361,729 327,692
Cash and cash
equivalents 45,725 40,993
Restricted cash 43,258 5,046
Accounts and notes
receivable, net 38,187 73,193
Accounts receivable
from related
parties 2,258 1,804
Deferred charges
and other assets 149,042 89,386
Assets of centers
held for sale (2) 780,063
3,612,175 3,506,222
========= =========
Liabilities:
Notes payable 2,015,999 3,058,053
Accounts payable
and accrued
liabilities 275,211 292,280
Distributions in
excess of
investments in and
net income of
Unconsolidated Joint Ventures 401,809 371,549
Liabilities of
centers held for
sale (2) 652,068
------------
3,345,087 3,721,882
Equity:
Taubman Centers,
Inc. Shareowners'
Equity:
Series B Non-Participating Convertible
Preferred Stock 25 25
Series J Cumulative Redeemable Preferred
Stock
Series K Cumulative Redeemable Preferred
Stock
Common Stock 633 631
Additional paid-in capital 809,071 796,787
Accumulated other comprehensive income
(loss) (9,258) (8,914)
Dividends in excess of net income (587,291) (908,656)
213,180 (120,127)
Noncontrolling
interests:
Noncontrolling interests in consolidated
joint ventures (17,790) (37,191)
Noncontrolling interests in partnership
equity of TRG 71,698 (58,342)
------ -------
53,908 (95,533)
------ -------
267,088 (215,660)
------- --------
3,612,175 3,506,222
========= =========
Combined Balance Sheet of Unconsolidated
Joint Ventures (1)(3):
Assets:
Properties 1,517,439 1,305,658
Accumulated
depreciation and
amortization (539,451) (478,820)
------------
977,988 826,838
Cash and cash
equivalents 28,763 28,782
Accounts and notes
receivable, net 29,399 33,626
Deferred charges
and other assets 31,740 28,095
1,067,890 917,341
========= =======
Liabilities:
Notes payable 1,785,602 1,551,161
Accounts payable
and other
liabilities 73,889 70,226
------------
1,859,491 1,621,387
Accumulated Deficiency in Assets:
Accumulated
deficiency in
assets -TRG (448,523) (406,266)
Accumulated
deficiency in
assets -Joint
Venture Partners (333,220) (285,904)
Accumulated other
comprehensive
income (loss) -
TRG (4,929) (5,938)
Accumulated other
comprehensive
income (loss) -
Joint Venture
Partners (4,929) (5,938)
------------
(791,601) (704,046)
-------- --------
1,067,890 917,341
========= =======
(1) International Plaza was consolidated in the
Company's balance sheet as of December 31, 2013
but is an Unconsolidated Joint Venture as of
September 30, 2014 as a result of the January
2014 disposition of interests.
(2) Includes the assets and liabilities of the
shopping centers included in the sale to
Starwood Capital Group in October 2014.
(3) Unconsolidated Joint Venture amounts exclude the
balances of entities that own interests in Asia
projects that are currently under development.
TAUBMAN CENTERS, INC.
Table 9 - Annual Guidance
--------------------------
(all dollar amounts per common share on a diluted basis; amounts may not add due to
rounding)
Range for Year
Ended
December 31, 2014
-----------------
Adjusted Funds from Operations per
common share 3.58 3.68
Debt extinguishment costs (0.39) (0.39)
Discontinuation of hedge
accounting -MacArthur (0.08) (0.08)
Restructuring charge (0.03) (0.03)
Disposition costs related to the
Starwood sale (0.01) (0.01)
----- -----
Funds from Operations per common
share 3.07 3.17
Gain on dispositions, net of tax
(1) 11.95 11.95
Real estate depreciation - TRG (2) (1.50) (1.45)
Distributions to participating
securities of TRG (0.02) (0.02)
Depreciation of TCO's additional
basis in TRG (0.11) (0.11)
----- -----
Net income attributable to common
shareowners, per common share
(EPS) 13.40 13.54
===== =====
(1) During the nine
months ended
September 30,
2014, the
Company
recognized a
gain (net of
tax) of $476.9
million from
dispositions
of interests
in
International
Plaza, Arizona
Mills, and
land in
Syosset, New
York related
to the former
Oyster Bay
project. In
the fourth
quarter, the
Company
expects to
recognize a
gain of
approximately
$600 million,
or $6.65 per
share, related
to the sale of
centers to
Starwood in
October 2014.
This
represents an
approximation
of the
Company's
share of the
gain that will
be recorded on
the sale of
the centers.
The actual
gain recorded
on the sale of
centers to
Starwood will
be based on
the balance
sheets of the
disposed
centers at
closing and be
subject to
final
prorations and
adjustments.
(2) Effective with
the June 2014
announcement
of the
Starwood sale,
the Company
ceased
recognizing
depreciation
on the
property
balances that
are classified
as held for
sale.
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SOURCE Taubman Centers, Inc.
