Retail real estate investment trust (REIT) -
Taubman Centers Inc.
) - reported second-quarter 2014 FFO (funds from operations) per
share of 86 cents, beating the Zacks Consensus Estimate by a nickel
and the year-ago quarter figure by 14.7%.
The solid performance was driven by increased rents and recoveries,
along with reduced operating as well as interest expenses. However,
share prices moved southward during yesterday's regular trading
session on broader market concerns.
Though Taubman's total second-quarter revenue was down 4.6% year
over year at roughly $170 million, yet it managed to beat the Zacks
Consensus Estimate of $166 million.
Quarter in Detail
Comparable net operating income (NOI), excluding lease cancellation
income, rose 4.5% year over year to $158.2 million. Average rent
per square foot was $51.46, climbing 3.7% on a year-over-year
basis. For the 12-months trailing period, comparable mall tenant
sales per square foot inched down 0.9% year over year to $707.
Excluding temporary tenants, ending occupancy in comparable centers
was 90.1% on Jun 30, 2014, reflecting a marginal dip of 0.5% year
over year. Releasing spreads per square foot (trailing 12 month)
for the period ended Jun 30, 2014, were 15.4%.
In June, Taubman Centers announced the sale of seven malls to
Starwood Capital Group in a transaction valued at $1.4 billion. The
move comes as part of the company's effort to capitalize on rising
investors' interest in premium region malls and its focus on
capital recycling. (Read:
Taubman to Sell 7 Malls to Starwood, Reuse
). It is expected to close in the fourth quarter of this year.
As of Jun 30, 2014, Taubman's cash and cash equivalents were $132.4
million, up from around $41 million at year-end 2013.
2014 Outlook Reaffirmed
Taubman has reiterated its adjusted FFO per share guidance in the
range of $3.72 - $3.82 for full-year 2014. Notably, this guidance
excludes the impact of the company's seven-asset sale anticipated
to close in the fourth quarter. The Zacks Consensus Estimate of
$3.77 lies within this guided range.
While Taubman managed to beat estimates in the second quarter, a
drop in ending occupancy levels as well as comparable mall tenant
sales per square foot, add to our concerns. Moreover, though the
disposition moves are a strategic fit, they will tend to dilute
earnings in the near term.
Taubman currently has a Zacks Rank #4 (Sell). Investors interested
in the retail REIT industry may consider stocks like Cedar Realty
Trust, Inc. (
), DDR Corp. (
) and General Growth Properties, Inc. (
). All these stocks carry a Zacks Rank #2 (Buy).
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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