Taubman Centers Issues Strong Second Quarter Results - Adjusted Funds from Operations Per Share Up 14.7 percent

- Net Operating Income (NOI) Excluding Lease Cancellation Income Up 4.5 percent

- Sale of Seven Malls to Starwood Capital Group Announced

BLOOMFIELD HILLS, Mich., July 30, 2014 /PRNewswire/ -- Taubman Centers, Inc. (NYSE:  TCO) today reported financial results for the second quarter of 2014.

 


June 30, 2014

Three Months

Ended

June 30, 2013

Three Months

Ended

June 30, 2014

Six Months

Ended

June 30, 2013

Six Months

Ended

Net income allocable to common shareholders (EPS) per diluted share

$0.33

$0.28

$6.08

$0.71

Funds from Operations (FFO) per diluted

share

$0.80

$0.75

$1.70

$1.65

Growth rate

6.7%


3.0%


Adjusted Funds from Operations (Adjusted FFO) per diluted share(1)

$0.86

$0.75

$1.76

$1.65

Growth rate

14.7%


6.7%


(1) Adjusted FFO for the three and six months ended June 30, 2014 excludes charges related to the expected sale of seven centers to Starwood Capital Group.

 

"We're pleased to announce strong results for the quarter. FFO increased 6.7 percent, and 14.7 percent on an adjusted basis. Our results benefited from increased rents and recoveries, and reduced interest and operating expenses. Lease cancellation income was also higher," said Robert S. Taubman, chairman, president and chief executive officer of Taubman Centers.

"During the quarter we announced an agreement to sell a portfolio of seven malls. The sale is part of our ongoing strategy to recycle capital. It's a transformative opportunity that will significantly enhance NOI growth and create net asset value for our investors over time." 

Operating Statistics

Comparable center NOI excluding lease cancellation income was up 4.5 percent in the quarter, bringing year-to-date growth to 3.2 percent. Excluding the company's assets that are currently held for sale, comparable center NOI excluding lease cancellation income was up 4.6 percent in the quarter.

Average rent per square foot for the second quarter of 2014 was $51.46, up 3.7 percent from $49.61 in the comparable period last year. Excluding the company's assets that are currently held for sale, average rent per square foot for the quarter was $60.88, up 5.3 percent.

Trailing twelve month releasing spreads per square foot for the period ended June 30, 2014 were 15.4 percent. Excluding the company's assets that are currently held for sale, spreads were 23.1 percent. 

Ending occupancy - excluding temporary tenants - in comparable centers was 90.1 percent on June 30, 2014, down 0.5 percent from 90.6 percent on June 30, 2013. Excluding the company's assets that are currently held for sale, ending occupancy in comparable centers was 91.6 percent, down 1 percent.

Mall tenant sales per square foot were down 0.8 percent from the second quarter of 2013. This brings the company's 12-month trailing mall tenant sales per square foot to $707, a 0.9 percent decline from the 12-months ended June 30, 2013. Excluding the company's assets that are currently held for sale, mall tenant sales per square foot were down 1.2 percent from the second quarter of 2013, bringing the 12-month trailing mall tenant sales per square foot to $806, a 0.7 percent decline from the 2013 comparable period.  

"A number of categories, like home furnishings, jewelry, and food, continue to be strong," said Mr. Taubman. "Electronics continue to struggle; excluding them, growth in the quarter and for the last twelve months would have been positive."

Sale of Seven Malls Announced

In June, the company announced the sale of seven malls to Starwood Capital Group. The transaction is expected to close in the fourth quarter of 2014. The malls held for sale are:

  • MacArthur Center (Norfolk, Va.)
  • Stony Point Fashion Park (Richmond, Va.)
  • Northlake Mall (Charlotte, N.C.)
  • The Mall at Wellington Green (Wellington, Fla.)
  • The Shops at Willow Bend (Plano, Tex.)
  • The Mall at Partridge Creek (Clinton Township, Mich.)
  • Fairlane Town Center (Dearborn, Mich.)

Total consideration, before transaction costs, will be $1.405 billion. See Taubman To Sell Seven Malls To Starwood Capital GroupJune 18, 2014.

The Mall at University Town Center to Open October 16, 2014

The grand opening of The Mall at University Town Center (Sarasota, Fla.) is scheduled for 10:00 a.m. on Thursday, October 16, 2014. The center, with its unique-to-market merchandising, will feature more than 100 specialty stores, a premier collection of restaurants and will be anchored by Saks Fifth Avenue, Dillard's, and Macy's. The center will be over 90 percent leased at opening. "University Town Center will be the leading shopping and dining destination in the significantly underserved Sarasota market," said Mr. Taubman.

2014 Guidance (including the full year operations of assets currently held for sale)

The company's Adjusted FFO and EPS guidance excludes the impact of the company's sale of seven assets, which is expected to close in the fourth quarter. The company expects its 2014 Adjusted FFO to be in the range of $3.72 to $3.82 per diluted share, unchanged from the company's previous FFO guidance.

2014 EPS is expected to be in the range of $7.33 to $7.48. 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. 2014 EPS also includes a charge recognized in the second quarter for the discontinuation of hedge accounting on an interest rate swap related to a center now held for sale.

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 – Proforma Statistics Excluding Centers Expected to be Sold to Starwood Capital Group
  • Owned Centers
  • Major Tenants in Owned Portfolio
  • Anchors in Owned Portfolio
  • Operating Statistics Glossary

Investor Conference Call

The company will host a conference call at 11:00 a.m. EDT on Thursday, July 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.

Taubman Centers is an S&P MidCap 400 Real Estate Investment Trust engaged in the ownership, management and/or leasing of 27 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 six properties in the U.S. and Asia totaling 5.6 million square feet. Taubman Centers is headquartered in Bloomfield Hills, Mich. and Taubman Asia is headquartered in Hong Kong. Founded in 1950, Taubman has more than 60 years of experience in the shopping center industry. 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, including that the conditions to one or more transaction closings may not be satisfied, the occurrence of any event, change or other circumstances that could give rise to the termination of the sale agreements with respect to any or all of the seven centers, and general economic conditions. 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 June 30, 2014 and 2013






(in thousands of dollars, except as indicated)














Three Months Ended 


Year to Date



2014


2013


2014


2013











Net income

39,054


33,603


565,211


79,959


Noncontrolling share of income of consolidated joint ventures

(2,252)


(1,773)


(5,370)


(4,554)


Noncontrolling share of income of TRG 

(9,203)


(7,788)


(156,865)


(19,577)


Preferred stock dividends 

(5,785)


(5,764)


(11,569)


(9,364)


Distributions to participating securities of TRG

(470)


(436)


(938)


(878)


Net income attributable to Taubman Centers, Inc. common shareowners

21,344


17,842


390,469


45,586


Net income per common share - basic 

0.34


0.28


6.18


0.72


Net income per common share - diluted

0.33


0.28


6.08


0.71


Beneficial interest in EBITDA - Combined (1)

112,054


114,627


721,043


243,110


Adjusted Beneficial interest in EBITDA- Combined (1)

117,890


114,627


240,259


243,110


Funds from Operations(1)

71,864


68,209


153,087


149,722


Funds from Operations attributable to TCO (1)

51,337


48,750


109,373


106,954


Funds from Operations per common share - basic(1)

0.81


0.76


1.73


1.68


Funds from Operations per common share - diluted (1)

0.80


0.75


1.70


1.65


Adjusted Funds from Operations (1)

77,700


68,209


158,923


149,722


Adjusted Funds from Operations attributable to TCO (1)

55,513


48,750


113,549


106,954


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

0.88


0.76


1.80


1.68


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

0.86


0.75


1.76


1.65


Weighted average number of common shares outstanding - basic

63,263,237


63,786,083


63,214,694


63,602,025


Weighted average number of common shares outstanding - diluted

63,974,613


64,842,511


64,834,009


64,707,684


Common shares outstanding at end of period

63,263,470


63,816,192






Weighted average units - Operating Partnership - basic

88,408,808


89,013,712


88,361,090


88,887,990


Weighted average units - Operating Partnership - diluted

89,991,446


90,941,402


89,980,405


90,864,911


Units outstanding at end of period - Operating Partnership

88,408,920


89,013,714






Ownership percentage of the Operating Partnership at end of period

71.6%


71.7%






Number of owned shopping centers at end of period

24


24


24


24











Operating Statistics:









Net Operating Income excluding lease cancellation income - growth % (1)(2)

4.5%


3.9%


3.2%


4.5%


Mall tenant sales - all centers (3)

1,358,891


1,406,196


2,694,185


2,860,984


Mall tenant sales - comparable (2)(3)

1,350,526


1,366,953


2,679,976


2,779,351


Ending occupancy - all centers

89.4%


90.7%


89.4%


90.7%


Ending occupancy - comparable(2)

90.1%


90.6%


90.1%


90.6%


Average occupancy - all centers 

89.6%


90.7%


89.9%


90.6%


Average occupancy - comparable (2)

90.2%


90.5%


90.5%


90.5%


Leased space - all centers

91.9%


92.6%


91.9%


92.6%


Leased space - comparable(2)

92.3%


92.3%


92.3%


92.3%


All centers:









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

14.2%


13.7%


14.6%


13.7%


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

14.2%


13.6%


13.9%


12.7%


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

14.2%


13.6%


14.3%


13.4%


Comparable centers:









Mall tenant occupancy costs as a percentage of tenant sales - Consolidated Businesses (2)(3)

14.3%


13.7%


14.6%


13.7%


Mall tenant occupancy costs as a percentage of tenant sales - Unconsolidated Joint Ventures (2)(3)

14.2%


13.4%


13.9%


12.6%


Mall tenant occupancy costs as a percentage of tenant sales - Combined (2)(3)

14.2%


13.6%


14.4%


13.4%


Average rent per square foot - Consolidated Businesses (2)

48.53


48.43


48.21


48.03


Average rent per square foot - Unconsolidated Joint Ventures (2)

58.06


53.08


56.99


51.93


Average rent per square foot - Combined (2)

51.46


49.61


50.84


49.01











Proforma Operating Statistics Excluding Centers Expected to be Sold to Starwood Capital Group (4):








Net Operating Income excluding lease cancellation income - growth % (1)(4)

4.6%




3.2%




Mall tenant occupancy costs as a percentage of tenant sales - Combined (3)(4)

14.3%


13.5%


14.4%


13.3%


Ending occupancy - comparable(4)

91.6%


92.6%


91.6%


92.6%


Average rent per square foot - Combined (4)

60.88


57.79


60.00


57.03





























(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 six month periods ended June 30, 2014, FFO and EBITDA were adjusted for expenses related to the expected sale of seven centers to Starwood Capital Group announced in June 2014. Specifically, these measures were adjusted for a charge related to the discontinuation of hedge accounting on the interest rate swap previously designated to hedge the MacArthur Center (MacArthur) note payable as well as disposition costs incurred related to the expected sale of centers.  In addition, for the six month period ended June 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)

Statistics exclude non-comparable centers. In 2014 and 2013, non-comparable centers are Taubman Prestige Outlets Chesterfield and Arizona Mills. 





(3)

Based on reports of sales furnished by mall tenants. 














(4)

Statistics exclude non-comparable centers. The June 30, 2013 statistics have been restated to include comparable centers to 2014. In addition, the statistics have been further adjusted to exclude the portfolio of seven centers expected to be sold in the fourth quarter of 2014.










 

 

 TAUBMAN CENTERS, INC. 









 Table 2 - Income Statement 









 For the Three Months Ended June 30, 2014 and 2013 









 (in thousands of dollars) 























2014


2013





CONSOLIDATED BUSINESSES


 UNCONSOLIDATED JOINT
VENTURES (1) 


CONSOLIDATED BUSINESSES


 UNCONSOLIDATED JOINT
VENTURES (1) 













REVENUES:










Minimum rents

96,532


48,364


103,233


42,076



Percentage rents

1,094


1,103


1,083


1,429



Expense recoveries

61,203


27,591


65,569


24,600



Management, leasing, and development services

2,965




1,819





Other

8,191


3,236


6,483


1,669




Total revenues

169,985


80,294


178,187


69,774













EXPENSES:










Maintenance, taxes, utilities, and promotion

48,830


19,989


52,762


17,975



Other operating

16,050


4,497


18,492


4,168



Management, leasing, and development services

1,696




1,119





General and administrative

11,587




12,628





Interest expense

25,434


18,137


32,622


16,994



Depreciation and amortization 

36,850


11,092


38,258


9,187




Total expenses

140,447


53,715


155,881


48,324













Nonoperating income (expense)(2)

(5,321)


(5)


50


(8)





24,217


26,574


22,356


21,442


Income tax expense 

(311)




(234)




Equity in income of Unconsolidated Joint Ventures

14,675




11,481







38,581




33,603




Gain on dispositions, net of tax (3)

473








Net income 

39,054




33,603




Net income attributable to noncontrolling interests:










Noncontrolling share of income of consolidated joint ventures 

(2,252)




(1,773)





Noncontrolling share of income of TRG

(9,203)




(7,788)




Distributions to participating securities of TRG

(470)




(436)




Preferred stock dividends 

(5,785)




(5,764)




Net income attributable to Taubman Centers, Inc. common shareowners 

21,344




17,842


























SUPPLEMENTAL INFORMATION:










EBITDA - 100% 

86,501


55,803


93,236


47,623



EBITDA - outside partners' share 

(5,931)


(24,319)


(5,355)


(20,877)



Beneficial interest in EBITDA

80,570


31,484


87,881


26,746



Beneficial interest expense

(23,348)


(9,955)


(30,408)


(9,401)



Beneficial income tax expense - TRG and TCO

(311)




(234)





Beneficial income tax expense - TCO

87




128





Non-real estate depreciation

(878)




(739)





Preferred dividends and distributions 

(5,785)




(5,764)





Funds from Operations contribution 

50,335


21,529


50,864


17,345













STRAIGHTLINE AND PURCHASE ACCOUNTING ADJUSTMENTS:










Net straight-line adjustments to rental revenue, recoveries,











and ground rent expense at TRG % 

403


393


777


122



Green Hills purchase accounting adjustments - minimum rents increase

199




200





Green Hills, El Paseo Village, and Gardens on El Paseo purchase accounting 











adjustments - interest expense reduction

305




858





Waterside Shops purchase accounting adjustments - interest expense reduction



263




263



Taubman BHO headquarters purchase accounting adjustment - 











interest expense reduction

181



















(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 three months ended June 30, 2014 includes $5.7 million in connection with the discontinuation of hedge accounting related to the MacArthur interest rate swap in connection with the pending sale and $0.4 million of disposition costs related to the expected sale of centers to Starwood Capital Group.





(3)

During the three months ended June 30, 2014, a reduction of $0.5 million to the tax on the gain on the disposition of interests in International Plaza was recognized.


 

 

 TAUBMAN CENTERS, INC. 




 Table 3 - Income Statement 

 For the Six Months Ended June 30, 2014 and 2013 


 (in thousands of dollars) 


















2014


2013





CONSOLIDATED BUSINESSES


 UNCONSOLIDATED
JOINT VENTURES (1) 


CONSOLIDATED BUSINESSES


 UNCONSOLIDATED
JOINT VENTURES (1) 













REVENUES:










Minimum rents

194,422


94,872


205,542


82,147



Percentage rents

5,756


3,157


6,711


3,626



Expense recoveries

123,912


54,627


129,606


48,184



Management, leasing, and development services

5,470




5,201





Other

15,203


4,863


14,384


3,368




Total revenues

344,763


157,519


361,444


137,325













EXPENSES:










Maintenance, taxes, utilities, and promotion

96,771


39,992


99,319


35,186



Other operating

31,546


9,424


34,655


8,271



Management, leasing, and development services

2,981




3,145





General and administrative

23,124




24,864





Interest expense 

51,564


36,029


67,074


33,928



Depreciation and amortization 

71,968


22,792


75,280


19,258




Total expenses

277,954


108,237


304,337


96,643













Nonoperating income (expense) (2)

(4,218)


(3)


2,287







62,591


49,279


59,394


40,682


Income tax expense 

(1,010)




(1,262)




Equity in income of Unconsolidated Joint Ventures 

26,743




21,827







88,324




79,959




Gain on dispositions, net of tax (3)

476,887








Net income attributable to noncontrolling interests:

565,211




79,959





Noncontrolling share of income of consolidated joint ventures 

(5,370)




(4,554)





Noncontrolling share of income of TRG

(156,865)




(19,577)




Distributions to participating securities of TRG

(938)




(878)




Preferred stock dividends 

(11,569)




(9,364)




Net income attributable to Taubman Centers, Inc. common shareowners

390,469




45,586


























SUPPLEMENTAL INFORMATION:










EBITDA - 100% (4)

672,743


108,100


201,748


93,868



EBITDA - outside partners' share 

(12,274)


(47,526)


(11,415)


(41,091)



Beneficial interest in EBITDA

660,469


60,574


190,333


52,777



Gain on dispositions

(486,620)









Beneficial interest expense 

(47,414)


(19,799)


(62,697)


(18,777)



Beneficial income tax expense - TRG and TCO

(1,010)




(1,262)





Beneficial income tax expense - TCO

146




161





Non-real estate depreciation

(1,690)




(1,449)





Preferred dividends and distributions

(11,569)




(9,364)





Funds from Operations contribution

112,312


40,775


115,722


34,000













STRAIGHTLINE AND PURCHASE ACCOUNTING ADJUSTMENTS:










Net straight-line adjustments to rental revenue, recoveries,











and ground rent expense at TRG % 

824


539


1,800


225



Green Hills purchase accounting adjustments - minimum rents increase

391




404





Green Hills, El Paseo Village, and Gardens on El Paseo purchase accounting 











adjustments - interest expense reduction

611




1,715





Waterside Shops purchase accounting adjustments - interest expense reduction



525




525



Taubman BHO headquarters purchase accounting adjustment - 











interest expense reduction

242



















(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 50.0% 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 six months ended June 30, 2014 includes $5.7 million in connection with the discontinuation of hedge accounting related to the MacArthur interest rate swap in connection with the pending sale and $0.4 million of disposition costs related to the expected sale of centers to Starwood Capital Group.





(3)

During the six months ended June 30, 2013, the gain on dispositions of interest 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 six months ended June 30, 2014, EBITDA includes the Company's $486.6 million (before tax) gain from the dispositions of interest 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 June 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


21,344


63,263,237


0.34


17,842


63,786,083


0.28

















Add impact of share-based compensation


74


711,376




92


1,056,428



















Net income attributable to TCO common shareowners - Diluted


21,418


63,974,613


0.33


17,934


64,842,511


0.28

















Add depreciation of TCO's additional basis


1,720




0.03


1,720




0.03


Add TCO's additional income tax expense


87




0.00


128




0.00

















Net income attributable to TCO common shareowners,















excluding step-up depreciation and additional income tax expense

23,225


63,974,613


0.36


19,782


64,842,511


0.31

















Add:















Noncontrolling share of income of TRG 


9,203


25,145,571




7,788


25,227,629





Distributions to participating securities of TRG


470


871,262




436


871,262



















Net income attributable to partnership unitholders 















and participating securities


32,898


89,991,446


0.37


28,006


90,941,402


0.31

















Add (less) depreciation and amortization:















Consolidated businesses at 100%


36,850




0.41


38,258




0.42



Depreciation of TCO's additional basis


(1,720)




(0.02)


(1,720)




(0.02)



Noncontrolling partners in consolidated joint ventures


(1,593)




(0.02)


(1,368)




(0.02)



Share of Unconsolidated Joint Ventures


6,854




0.08


5,864




0.06



Non-real estate depreciation


(878)




(0.01)


(739)




(0.01)


Less gain on dispositions, net of tax


(473)




(0.01)








Less impact of share-based compensation


(74)




(0.00)


(92)




(0.00)

















Funds from Operations


71,864


89,991,446


0.80


68,209


90,941,402


0.75

















TCO's average ownership percentage of TRG


71.6%






71.7%





















Funds from Operations attributable to TCO,















excluding additional income tax expense


51,424




0.80


48,878




0.75

















Less TCO's additional income tax expense


(87)




(0.00)


(128)




(0.00)

















Funds from Operations attributable to TCO 


51,337




0.80


48,750




0.75

















Funds from Operations


71,864


89,991,446


0.80


68,209


90,941,402


0.75

















Disposition costs related to the pending Starwood sale


441




0.00








Discontinuation of hedge accounting - MacArthur


5,395




0.06























Adjusted Funds from Operations


77,700


89,991,446


0.86


68,209


90,941,402


0.75

















TCO's average ownership percentage of TRG


71.6%






71.7%





















Adjusted Funds from Operations attributable to TCO,















excluding additional income tax expense


55,600




0.86


48,878




0.75

















Less TCO's additional income tax expense


(87)




(0.00)


(128)




(0.00)

















Adjusted Funds from Operations attributable to TCO 


55,513




0.86


48,750




0.75

















 

 

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 Six Months Ended June 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


390,469


63,214,694


6.18


45,586


63,602,025


0.72

















Add distributions to participating securities of TRG


938


871,262










Add impact of share-based compensation


2,618


748,053




245


1,105,659



















Net income attributable to TCO common shareowners - Diluted


394,025


64,834,009


6.08


45,831


64,707,684


0.71

















Add depreciation of TCO's additional basis


3,440




0.05


3,440




0.05


Add TCO's additional income tax expense


146




0.00


161




0.00

















Net income attributable to TCO common shareowners,















excluding step-up depreciation and additional income tax expense

397,611


64,834,009


6.13


49,432


64,707,684


0.76

















Add:















Noncontrolling share of income of TRG 


156,865


25,146,396




19,577


25,285,965





Distributions to participating securities of TRG








878


871,262



















Net income attributable to partnership unitholders 















and participating securities


554,476


89,980,405


6.16


69,887


90,864,911


0.77

















Add (less) depreciation and amortization:















Consolidated businesses at 100% 


71,968




0.80


75,280




0.83



Depreciation of TCO's additional basis


(3,440)




(0.04)


(3,440)




(0.04)



Noncontrolling partners in consolidated joint ventures


(2,754)




(0.03)


(2,484)




(0.03)



Share of Unconsolidated Joint Ventures


14,032




0.16


12,173




0.13



Non-real estate depreciation


(1,690)




(0.02)


(1,449)




(0.02)


Less gain on dispositions, net of tax


(476,887)




(5.30)








Less impact of share-based compensation


(2,618)




(0.03)


(245)




(0.00)

















Funds from Operations


153,087


89,980,405


1.70


149,722


90,864,911


1.65

















TCO's average ownership percentage of TRG


71.5%






71.6%





















Funds from Operations attributable to TCO,















excluding additional income tax expense


109,519




1.70


107,115




1.65

















Less TCO's additional income tax expense


(146)




(0.00)


(161)




(0.00)

















Funds from Operations attributable to TCO


109,373




1.70


106,954




1.65

















Funds from Operations


153,087


89,980,405


1.70


149,722


90,864,911


1.65

















Disposition costs related to the pending Starwood sale


441




0.00








Discontinuation of hedge accounting - MacArthur


5,395




0.06























Adjusted Funds from Operations


158,923


89,980,405


1.77


149,722


90,864,911


1.65

















TCO's average ownership percentage of TRG


71.5%






71.6%





















Adjusted Funds from Operations attributable to TCO,















excluding additional income tax expense


113,695




1.77


107,115




1.65

















Less TCO's additional income tax expense


(146)




(0.01)


(161)




(0.00)

















Adjusted Funds from Operations attributable to TCO


113,549




1.76


106,954




1.65

















 

 

TAUBMAN CENTERS, INC.









Table 6 - Reconciliation of Net Income to Beneficial Interest in EBITDA and Adjusted Beneficial Interest in EBITDA


For the Periods Ended June 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


39,054


33,603


565,211


79,959












Add (less) depreciation and amortization:










Consolidated businesses at 100%


36,850


38,258


71,968


75,280


Noncontrolling partners in consolidated joint ventures


(1,593)


(1,368)


(2,754)


(2,484)


Share of Unconsolidated Joint Ventures


6,854


5,864


14,032


12,173












Add (less) interest expense and income tax expense:










Interest expense:











Consolidated businesses at 100% 


25,434


32,622


51,564


67,074



Noncontrolling partners in consolidated joint ventures


(2,086)


(2,214)


(4,150)


(4,377)



Share of Unconsolidated Joint Ventures


9,955


9,401


19,799


18,777


Income tax expense:











Income tax expense on dispositions


(473)




9,733





Other income tax expense


311


234


1,010


1,262












Less noncontrolling share of income of consolidated joint ventures


(2,252)


(1,773)


(5,370)


(4,554)












Beneficial Interest in EBITDA


112,054


114,627


721,043


243,110












TCO's average ownership percentage of TRG


71.6%


71.7%


71.5%


71.6%












Beneficial Interest in EBITDA attributable to TCO


80,183


82,140


515,761


173,936


































Beneficial Interest in EBITDA 


112,054


114,627


721,043


243,110













Disposition costs related to the pending Starwood sale


441




441




Discontinuation of hedge accounting - MacArthur


5,395




5,395




Gain on dispositions






(486,620)














Adjusted Beneficial Interest in EBITDA


117,890


114,627


240,259


243,110












TCO's average ownership percentage of TRG


71.6%


71.7%


71.5%


71.6%












Adjusted Beneficial Interest in EBITDA attributable to TCO


84,359


82,140


171,883


173,936












 

  

TAUBMAN CENTERS, INC.

















Table 7 - Reconciliation of Net Income to Net Operating Income (NOI)

















For the Periods Ended June 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


39,054


33,603


33,603


31,448


565,211


79,959


79,959


63,625





















Add (less) depreciation and amortization:


















Consolidated businesses at 100%

36,850


38,258


38,258


36,235


71,968


75,280


75,280


72,669



Noncontrolling partners in consolidated joint ventures

(1,593)


(1,368)


(1,368)


(2,338)


(2,754)


(2,484)


(2,484)


(4,762)



Share of Unconsolidated Joint Ventures

6,854


5,864


5,864


5,364


14,032


12,173


12,173


10,475





















Add (less) interest expense and income tax expense:


















Interest expense:



















Consolidated businesses at 100%

25,434


32,622


32,622


36,676


51,564


67,074


67,074


74,203




Noncontrolling partners in consolidated joint ventures

(2,086)


(2,214)


(2,214)


(4,203)


(4,150)


(4,377)


(4,377)


(8,409)




Share of Unconsolidated Joint Ventures

9,955


9,401


9,401


8,225


19,799


18,777


18,777


16,319



Share of income tax expense:



















Income tax expense on dispositions

(473)








9,733










Other income tax expense

311


234


234


515


1,010


1,262


1,262


726





















Less noncontrolling share of income of consolidated joint ventures

(2,252)


(1,773)


(1,773)


(2,875)


(5,370)


(4,554)


(4,554)


(4,709)





















Add EBITDA attributable to outside partners:


















EBITDA attributable to noncontrolling partners in consolidated joint ventures

5,931


5,355


5,355


9,393


12,274


11,415


11,415


17,860



EBITDA attributable to outside partners in Unconsolidated Joint Ventures

24,319


20,877


20,877


20,242


47,526


41,091


41,091


40,723





















EBITDA at 100%

142,304


140,859


140,859


138,682


780,843


295,616


295,616


278,720





















Add (less) items excluded from shopping center NOI:


















General and administrative expenses

11,587


12,628


12,628


10,043


23,124


24,864


24,864


18,450



Management, leasing, and development services, net

(1,269)


(700)


(700)


(1,572)


(2,489)


(2,056)


(2,056)


(1,698)



Straight-line of rents

(1,243)


(1,158)


(1,158)


(1,831)


(2,287)


(2,614)


(2,614)


(2,480)



Gain on dispositions









(486,620)









Disposition costs related to the pending Starwood sale

441








441









Discontinuation of hedge accounting - MacArthur

5,678








5,678









Gain on sale of peripheral land











(863)


(863)





Gain on sale of marketable securities











(1,323)


(1,323)





Dividend income

(612)








(836)









Interest income

(181)


(42)


(42)


(64)


(308)


(101)


(101)


(196)



Other nonoperating income









(754)









Non-center specific operating expenses and other

5,211


6,924


6,935


8,520


8,959


10,516


10,786


15,416





















NOI - all centers at 100%

161,916


158,511


158,522


153,778


325,751


324,039


324,309


308,212





















Less - NOI of non-comparable centers

560

(1)

(6,700)

(2)

(2,399)

(3)

(3,006)

(3)

(872)

(4)

(13,032)

(2)

(5,525)

(3)

(3,355)

(3)




















NOI at 100% - comparable centers

162,476


151,811


156,123


150,772


324,879


311,007


318,784


304,857



















NOI - growth %

7.0%




3.5%




4.5%




4.6%























NOI at 100% - comparable centers

162,476


151,811


156,123


150,772


324,879


311,007


318,784


304,857





















Lease cancellation income

(4,291)


(430)


(430)


(950)


(6,249)


(2,266)


(2,266)


(1,939)





















NOI at 100% - comparable centers excluding lease cancellation income

158,185


151,381


155,693


149,822


318,630


308,741


316,518


302,918





















NOI at 100% excluding lease cancellation income - growth %

4.5%




3.9%




3.2%




4.5%























NOI at 100% excluding lease cancellation income - post-sale portfolio growth % (5)

4.6%








3.2%



























(1)

Includes Taubman Prestige Outlets Chesterfield.





























(2)

Includes Arizona Mills.















(3)

Includes City Creek Center.





























(4)

Includes Taubman Prestige Outlets Chesterfield and Arizona Mills for the approximately one-month period prior to its disposition.

















(5)

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 June 30, 2014 and December 31, 2013

 (in thousands of dollars)



As of



June 30, 2014


December 31, 2013

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





Assets:






Properties


3,024,045


4,485,090


Accumulated depreciation and amortization


(934,657)


(1,516,982)



2,089,388


2,968,108


Investment in Unconsolidated Joint Ventures


343,189


327,692


Cash and cash equivalents


132,404


40,993


Restricted cash


45,490


5,046


Accounts and notes receivable, net


36,076


73,193


Accounts receivable from related parties


2,948


1,804


Deferred charges and other assets


153,248


89,386


Assets of centers held for sale (2)


778,340





3,581,083


3,506,222






Liabilities:






Notes payable


1,997,971


3,058,053


Accounts payable and accrued liabilities


261,601


292,280


Distributions in excess of investments in and net income of







Unconsolidated Joint Ventures


408,019


371,549


Liabilities of centers held for sale (2)


651,496





3,319,087


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


802,986


796,787



Accumulated other comprehensive income (loss)


(9,908)


(8,914)



Dividends in excess of net income


(586,780)


(908,656)



206,956


(120,127)


Noncontrolling interests:







Noncontrolling interests in consolidated joint ventures


(15,982)


(37,191)



Noncontrolling interests in partnership equity of TRG


71,022


(58,342)



55,040


(95,533)



261,996


(215,660)



3,581,083


3,506,222











Combined Balance Sheet of Unconsolidated Joint Ventures (1)(3):










Assets:






Properties


1,476,040


1,305,658


Accumulated depreciation and amortization


(532,027)


(478,820)




944,013


826,838


Cash and cash equivalents


29,337


28,782


Accounts and notes receivable, net


28,260


33,626


Deferred charges and other assets 


32,993


28,095



1,034,603


917,341






Liabilities:






Notes payable


1,761,458


1,551,161


Accounts payable and other liabilities


69,494


70,226



1,830,952


1,621,387






Accumulated Deficiency in Assets:






Accumulated deficiency in assets - TRG


(450,250)


(406,266)


Accumulated deficiency in assets - Joint Venture Partners


(333,707)


(285,904)


Accumulated other comprehensive income (loss) - TRG


(6,196)


(5,938)


Accumulated other comprehensive income (loss) - Joint Venture Partners


(6,196)


(5,938)



(796,349)


(704,046)



1,034,603


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 June 30, 2014 as a result of the January 2014 disposition of interests.




(2)

Includes the assets and liabilities of the shopping centers expected to be sold to Starwood Capital Group in the fourth quarter of 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 (1)


3.72


3.82








Discontinuation of hedge accounting - MacArthur and disposition costs






related to the pending Starwood Sale (2)


(0.06)


(0.06)







Funds from Operations per common share (1)


3.66


3.76







Gain on dispositions, net of tax (3)


5.30


5.30







Real estate depreciation - TRG (4)


(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) (1)


7.33


7.48



















(1)

The range excludes the expected impact of the planned sale of centers to Starwood Capital Group, including (but not limited to) the loss of operations of the centers, debt extinguishment costs, and disposition and other transaction costs as well as the impact from the use of sale proceeds.







(2)

Costs only include amounts  incurred in the second quarter of 2014.







(3)

During the six months ended June 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. Excludes gain expected to be recognized upon closing of the sale of centers to Starwood.







(4)

As a result of the expected sale of centers in the fourth quarter of 2014 to Starwood Capital Group, the Company is no longer recognizing depreciation on the property balances that are classified as held for sale. This resulted in a reduction of approximately $0.25 of real estate depreciation per share expected to be recognized in 2014.









 

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SOURCE Taubman Centers, Inc.



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