Taubman Centers Announces First Quarter Results

TAUBMAN CENTERS, INC.

Table 1 - Summary of Results

For the Periods Ended March 31, 2010 and 2009

(in thousands of dollars, except as indicated)

Three Months Ended

2010

2009

Net income

16,813

24,526

Noncontrolling share of income of consolidated joint ventures

(2,013)

(1,693)

Noncontrolling share of income of TRG

(3,882)

(6,586)

TRG series F preferred distributions

(615)

(615)

Preferred stock dividends

(3,658)

(3,658)

Distributions to participating securities of TRG

(362)

(475)

Net income attributable to Taubman Centers, Inc. common shareowners

6,283

11,499

Net income per common share - basic

0.12

0.22

Net income per common share - diluted

0.11

0.22

Beneficial interest in EBITDA - Consolidated Businesses (1)

72,027

77,689

Beneficial interest in EBITDA - Unconsolidated Joint Ventures (1)

23,415

23,948

Funds from Operations (1)

49,731

56,570

Funds from Operations attributable to TCO (1)

33,487

37,758

Funds from Operations per common share - basic (1)

0.62

0.71

Funds from Operations per common share - diluted (1)

0.60

0.70

Adjusted Funds from Operations (1)

49,731

59,031

Adjusted Funds from Operations attributable to TCO (1)

33,487

39,401

Adjusted Funds from Operations per common share - basic (1)

0.62

0.74

Adjusted Funds from Operations per common share - diluted (1)

0.60

0.73

Weighted average number of common shares outstanding - basic

54,357,122

53,066,910

Weighted average number of common shares outstanding - diluted

55,368,907

53,265,959

Common shares outstanding at end of period

54,440,569

53,120,036

Weighted average units - Operating Partnership - basic

80,723,827

79,507,119

Weighted average units - Operating Partnership - diluted

82,606,874

80,577,430

Units outstanding at end of period - Operating Partnership

80,787,345

79,557,721

Ownership percentage of the Operating Partnership at end of period

67.4%

66.8%

Number of owned shopping centers at end of period

23

23

Operating Statistics (2):

Mall tenant sales (3)

1,005,181

921,158

Ending occupancy

88.2%

88.8%

Average occupancy

88.4%

89.0%

Leased space at end of period

91.2%

90.7%

Mall tenant occupancy costs as a percentage of tenant sales - Consolidated Businesses (3)

15.9%

18.5%

Mall tenant occupancy costs as a percentage of tenant sales - Unconsolidated Joint Ventures (3)

14.5%

16.1%

Mall tenant occupancy costs as a percentage of tenant sales - Combined (3)

15.4%

17.7%

Rent per square foot - Consolidated Businesses

42.92

44.20

Rent per square foot - Unconsolidated Joint Ventures

43.80

45.08

Rent per square foot - Combined

43.20

44.48

(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 straightline adjustments of minimum rent) less maintenance, taxes, utilities, ground rent, 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 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 NOI growth and lease cancellation income.

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  from extraordinary items and sales of properties, 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. For the three months ended March 31, 2009, FFO was adjusted for a restructuring charge.

(2) Statistics exclude The Pier Shops.

(3) Based on reports of sales furnished by mall tenants.

TAUBMAN CENTERS, INC.

Table 2 - Income Statement

For the Three Months Ended March 31, 2010 and 2009

(in thousands of dollars)

2010

2009

CONSOLIDATED BUSINESSES

UNCONSOLIDATED JOINT VENTURES (1)

CONSOLIDATED BUSINESSES

UNCONSOLIDATED JOINT VENTURES (1)

REVENUES:

Minimum rents

83,354

37,944

87,436

38,967

Percentage rents

2,074

992

2,160

1,108

Expense recoveries

52,921

22,339

56,758

23,826

Management, leasing, and development services

3,056

3,556

Other

10,084

2,065

7,780

2,189

Total revenues

151,489

63,340

157,690

66,090

EXPENSES:

Maintenance, taxes, and utilities

43,076

15,847

44,541

16,037

Other operating

17,805

4,608

14,965

6,388

Restructuring charge

2,461

Management, leasing, and development services

1,593

1,906

General and administrative

7,389

6,888

Interest expense

37,417

15,818

36,233

15,950

Depreciation and amortization

37,084

9,524

36,293

9,437

Total expenses

144,364

45,797

143,287

47,812

Nonoperating income

149

12

235

54

7,274

17,555

14,638

18,332

Income tax expense

(196)

(270)

Equity in income of Unconsolidated Joint Ventures

9,735

10,158

Net income

16,813

24,526

Net income attributable to noncontrolling interests:

Noncontrolling share of income of consolidated joint ventures

(2,013)

(1,693)

TRG series F preferred distributions

(615)

(615)

Noncontrolling share of income of TRG

(3,882)

(6,586)

Distributions to participating securities of TRG

(362)

(475)

Preferred stock dividends

(3,658)

(3,658)

Net income attributable to Taubman Centers, Inc. common shareowners

6,283

11,499

SUPPLEMENTAL INFORMATION:

EBITDA - 100%

81,775

42,897

87,164

43,719

EBITDA - outside partners' share

(9,748)

(19,482)

(9,475)

(19,771)

Beneficial interest in EBITDA

72,027

23,415

77,689

23,948

Beneficial interest expense

(32,197)

(8,202)

(31,360)

(8,284)

Beneficial income tax expense

(196)

(270)

Non-real estate depreciation

(843)

(880)

Preferred dividends and distributions

(4,273)

(4,273)

Fund from Operations contribution

34,518

15,213

40,906

15,664

Net straightline adjustments to rental revenue, recoveries, and ground rent expense at TRG %

(237)

(141)

80

55

TAUBMAN CENTERS, INC.

Table 3 - Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common

 Shareowners to Funds from Operations and Adjusted Funds from Operations

For the Periods Ended March 31, 2010 and 2009

(in thousands of dollars except as noted; may not add or recalculate due to rounding)

Three Months Ended

2010

2009

Shares

Per Share

Shares

Per Share

Dollars

/Units

/Unit

Dollars

/Units

/Unit

Net income attributable to TCO common shareowners

6,283

55,368,907

0.11

11,499

53,265,959

0.22

Add depreciation of TCO's additional basis

1,720

0.03

1,720

0.03

Net income attributable to TCO common shareowners,

excluding step-up depreciation

8,003

55,368,907

0.14

13,219

53,265,959

0.25

Add:

Noncontrolling share of income of TRG

3,882

26,366,705

6,586

26,440,209

Distributions to participating securities

362

871,262

475

871,262

Net income attributable to partnership unit holders and participating securities

12,247

82,606,874

0.15

20,280

80,577,430

0.25

Add (less) depreciation and amortization:

Consolidated businesses at 100%

37,084

0.45

36,293

0.45

Depreciation of TCO's additional basis

(1,720)

(0.02)

(1,720)

(0.02)

Noncontrolling partners in consolidated joint ventures

(2,515)

(0.03)

(2,909)

(0.04)

Share of Unconsolidated Joint Ventures

5,478

0.07

5,506

0.07

Non-real estate depreciation

(843)

(0.01)

(880)

(0.01)

Funds from Operations

49,731

82,606,874

0.60

56,570

80,577,430

0.70

TCO's average ownership percentage of TRG

67.3%

66.7%

Funds from Operations attributable to TCO

33,487

0.60

37,758

0.70

Funds from Operations

49,731

82,606,874

0.60

56,570

80,577,430

0.70

Restructuring charge

2,461

0.03

Adjusted Funds from Operations

49,731

82,606,874

0.60

59,031

80,577,430

0.73

TCO's average ownership percentage of TRG

67.3%

66.7%

Adjusted Funds from Operations attributable to TCO

33,487

0.60

39,401

0.73

TAUBMAN CENTERS, INC.

Table 4 - Reconciliation of Net Income to Beneficial Interest in EBITDA

For the Periods Ended March 31, 2010 and 2009

(in thousands of dollars; amounts attributable to TCO may not recalculate due to rounding)

Three Months Ended

2010

2009

Net income

16,813

24,526

Add (less) depreciation and amortization:

Consolidated businesses at 100%

37,084

36,293

Noncontrolling partners in consolidated joint ventures

(2,515)

(2,909)

Share of Unconsolidated Joint Ventures

5,478

5,506

Add (less) interest expense and income tax expense:

Interest expense:

Consolidated businesses at 100%

37,417

36,233

Noncontrolling partners in consolidated joint ventures

(5,220)

(4,873)

Share of Unconsolidated Joint Ventures

8,202

8,284

Income tax expense

196

270

Less noncontrolling share of income of consolidated joint ventures

(2,013)

(1,693)

Beneficial Interest in EBITDA

95,442

101,637

TCO's average ownership percentage of TRG

67.3%

66.7%

Beneficial Interest in EBITDA attributable to TCO

64,232

67,792

TAUBMAN CENTERS, INC.

Table 5 - Balance Sheets

As of March 31, 2010 and December 31, 2009

(in thousands of dollars)

As of

March 31, 2010

December 31, 2009

Consolidated Balance Sheet of Taubman Centers, Inc. (1):

Assets:

 Properties

3,486,633

3,496,853

 Accumulated depreciation and amortization

(1,118,665)

(1,100,610)

2,367,968

2,396,243

 Investment in Unconsolidated Joint Ventures

87,111

89,804

 Cash and cash equivalents

13,746

16,176

 Accounts and notes receivable, net

41,676

44,503

 Accounts receivable from related parties

2,087

1,558

 Deferred charges and other assets

59,677

58,569

2,572,265

2,606,853

Liabilities:

 Notes payable

2,692,896

2,691,019

 Accounts payable and accrued liabilities

215,786

230,276

 Distributions in excess of investments in and net income of

    Unconsolidated Joint Ventures

158,430

160,305

3,067,112

3,081,600

Equity:

 Taubman Centers, Inc. Shareowners' Equity:

   Series B Non-Participating Convertible Preferred Stock

26

26

   Series G Cumulative Redeemable Preferred Stock

   Series H Cumulative Redeemable Preferred Stock

   Common Stock

544

543

   Additional paid-in capital

580,503

579,983

   Accumulated other comprehensive income (loss)

(23,246)

(24,443)

   Dividends in excess of net income

(901,043)

(884,666)

(343,216)

(328,557)

 Noncontrolling interests:

   Noncontrolling interests in consolidated joint ventures

(99,804)

(100,014)

   Noncontrolling interests in partnership equity of TRG

(81,044)

(75,393)

   Preferred Equity of TRG

29,217

29,217

(151,631)

(146,190)

(494,847)

(474,747)

2,572,265

2,606,853

Combined Balance Sheet of Unconsolidated Joint Ventures (1):

Assets:

   Properties

1,094,086

1,094,963

   Accumulated depreciation and amortization

(402,713)

(396,518)

691,373

698,445

   Cash and cash equivalents

11,524

18,544

   Accounts and notes receivable

22,717

26,982

   Deferred charges and other assets  

21,508

22,310

747,122

766,281

Liabilities:

   Notes payable

1,089,844

1,092,806

   Accounts payable and other liabilities, net

37,613

50,615

1,127,457

1,143,421

Accumulated Deficiency in Assets:

   Accumulated deficiency in assets - TRG

(200,284)

(200,169)

   Accumulated deficiency in assets - Joint Venture Partners

(170,547)

(166,866)

   Accumulated other comprehensive income (loss) - TRG

(5,062)

(5,397)

   Accumulated other comprehensive income (loss) - Joint Venture Partners

(4,442)

(4,708)

(380,335)

(377,140)

747,122

766,281

(1)  Certain 2009 amounts have been reclassified to conform to 2010 classifications.  

TAUBMAN CENTERS, INC.

 Table 6 -  Annual Outlook

(all dollar amounts per common share on a diluted basis; amounts may not add due to rounding)

Range for Year Ended

December 31, 2010

Funds from Operations per common share (1)

2.55

2.75

Real estate depreciation - TRG

(1.77)

(1.72)

Distributions on participating securities of TRG

(0.02)

(0.02)

Depreciation of TCO's additional basis in TRG

(0.12)

(0.12)

Net income attributable to common shareowners, per common share (EPS) (1)

0.64

0.89

(1) Guidance on Funds from Operations and EPS includes The Pier Shops' operations through June 2010. The loan on the center is in default and accrues interest at 10.01%. The foreclosure process is not in the Company's control, but the Company anticipates that the foreclosure will be completed in the late second or early third quarter of 2010, at which time the ownership of The Pier Shops will be transferred in satisfaction of the obligation under the debt. The Company expects a non-cash incremental impact on FFO per share of ($0.010) for each month the Company continues to own the center. Including the impact of depreciation and amortization, the impact on EPS is expected to be ($0.015) per month. A non-cash accounting gain is expected to be recognized when the loan obligation is extinguished upon transfer of title of The Pier Shops. This gain has been excluded from EPS and FFO per share estimates.