Taubman Centers (TCO) Q4 FFO Tops, Falls Y/Y, Guides Low - Analyst Blog

Retail real estate investment trust ("REIT"), Taubman Centers Inc. 's ( TCO ) fourth-quarter 2014 adjusted funds from operations ("FFO") per share came in at $1.00, down 9.9% from $1.11 in the year-ago period. The Zacks Consensus Estimate for the stock was pegged at 97 cents.

Taubman also guided its 2015 adjusted FFO per share lower than the Zacks Consensus Estimate. Revenues came in at $158.3 million, down 25.2% from the prior-year quarter and lagging the Zacks Consensus Estimate of $172 million.

For full year 2014, Taubman reported adjusted FFO per share of $3.67, edging up 0.5% from $3.65 reported a year ago. Full-year revenues came in at $679.1 million, down 11.5% year over year.

Quarter in Detail

Comparable center net operating income ("NOI"), excluding lease cancellation income, rose 1.9% year over year, while average rent per square foot was $61.19, climbing 5.6% from the year-ago quarter. For the trailing 12-month period, releasing spreads per square foot were 32.1%.

Comparable mall tenant sales per square foot were $809 for 2014, reflecting a 1.2% decrease from 2013. However, for fourth-quarter 2014, mall tenant sales per square foot grew 0.7%. The electronics group continued to be strained, while softness in the South American tourism affected the results. As of Dec 31, 2014, comparable centers' portfolio was 96.7% leased, denoting a 0.8% slip, while ending occupancy was 95.4%, reflecting 0.9% decline.

Notably, in October, the company accomplished the previously disclosed sale of seven malls to Starwood for a total consideration, excluding transaction costs of $1.4 billion.


As of Dec 31, 2014, Taubman's cash and cash equivalents were $276.4 million, up from around $41 million at year-end 2013.

2015 Outlook

Taubman has established its outlook for 2015. The company expects 2015 FFO per share in the range of $3.18 to $3.28. This comes below the Zacks Consensus Estimate of $3.54 per share.

The company's 2015 outlook is backed by comparable center NOI growth (excluding lease cancellation income) of about 3% for the year. It also takes into account the year-over-year negative impact from Taubman's sale of seven centers to Starwood in Oct 2014. The seven centers attributed 46 cents to adjusted FFO per share in the company's 9.5 months of ownership.

Our Viewpoint

Though results were down year over year, we believe that going forward, the company is well poised to improve its results on the back of a solid retail portfolio and strong tenant base. Besides, strategic investments in high-end markets bode well for its top-line growth. However, though the disposition moves are a strategic fit, these will tend to dilute earnings in the near term.

Taubman currently has a Zacks Rank #3 (Hold). Investors interested in the retail REIT industry may consider stocks like American Assets Trust, Inc. ( AAT ), Pennsylvania Real Estate Investment Trust ( PEI ) and Regency Centers Corporation ( REG ). All these stocks carry a Zacks Rank #2 (Buy).

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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