Taubman Centers Issues First Quarter Results

TAUBMAN CENTERS, INC.

Table 1 - Summary of Results

For the Periods Ended March 31, 2011 and 2010

(in thousands of dollars, except as indicated)

Three Months Ended

2011

2010

Net income

24,444

16,813

Noncontrolling share of income of consolidated joint ventures

(3,385)

(2,013)

Noncontrolling share of income of TRG

(5,689)

(3,882)

TRG series F preferred distributions

(615)

(615)

Preferred stock dividends

(3,658)

(3,658)

Distributions to participating securities of TRG

(381)

(362)

Net income attributable to Taubman Centers, Inc. common shareowners

10,716

6,283

Net income per common share - basic

0.19

0.12

Net income per common share - diluted

0.19

0.11

Beneficial interest in EBITDA - Consolidated Businesses (1)

74,463

72,027

Beneficial interest in EBITDA - Unconsolidated Joint Ventures (1)

23,709

23,415

Funds from Operations (1)

52,730

49,731

Funds from Operations attributable to TCO (1)

36,180

33,487

Funds from Operations per common share - basic (1)

0.65

0.62

Funds from Operations per common share - diluted (1)

0.63

0.60

Weighted average number of common shares outstanding - basic

55,560,988

54,357,122

Weighted average number of common shares outstanding - diluted

56,980,832

55,368,907

Common shares outstanding at end of period

55,875,471

54,440,569

Weighted average units - Operating Partnership - basic

80,976,967

80,723,827

Weighted average units - Operating Partnership - diluted

83,268,073

82,606,874

Units outstanding at end of period - Operating Partnership

81,034,357

80,787,345

Ownership percentage of the Operating Partnership at end of period

69.0%

67.4%

Number of owned shopping centers at end of period

23

23

Operating Statistics (2):

Mall tenant sales (3)

1,114,951

994,793

Ending occupancy

87.9%

88.2%

Average occupancy

88.2%

88.5%

Leased space at end of period

90.5%

91.3%

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

14.8%

15.9%

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

13.1%

14.5%

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

14.2%

15.4%

Average rent per square foot - Consolidated Businesses

45.28

43.60

Average rent per square foot - Unconsolidated Joint Ventures

45.04

43.80

Average rent per square foot - Combined

45.20

43.68

(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, promotion, ground rent (including straightline 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 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. In Tables 3 and 5 of this Press Release, the Company has separately presented the impacts of The Pier Shops and Regency Square, as the timing of transfer of ownership of these centers is uncertain.

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 common definitions. None of these non-GAAP measures should be considered alternatives to net income as an indicator of the Company's operating performance, and they do not represent cash flows from operating, investing, or financing activities as defined by GAAP.

(2)

Statistics exclude The Pier Shops and Regency Square.

(3)

Based on reports of sales furnished by mall tenants.

TAUBMAN CENTERS, INC.

Table 2 - Income Statement

For the Three Months Ended March 31, 2011 and 2010

(in thousands of dollars)

2011

2010

CONSOLIDATED
BUSINESSES

UNCONSOLIDATED JOINT
VENTURES (1)

CONSOLIDATED
BUSINESSES

UNCONSOLIDATED JOINT
VENTURES (1)

REVENUES:

Minimum rents

85,985

38,791

83,354

37,944

Percentage rents

3,392

1,357

2,074

992

Expense recoveries

54,043

22,230

52,921

22,339

Management, leasing, and development services

5,860

3,056

Other

6,239

981

10,084

2,065

Total revenues

155,519

63,359

151,489

63,340

EXPENSES (2):

Maintenance, taxes, utilities, and promotion

43,937

16,180

44,925

16,723

Other operating

18,834

3,764

15,956

3,732

Management, leasing, and development services

2,280

1,593

General and administrative

7,284

7,389

Interest expense

35,015

15,596

37,417

15,818

Depreciation and amortization

33,789

9,375

37,084

9,524

Total expenses

141,139

44,915

144,364

45,797

Nonoperating income

128

5

149

12

14,508

18,449

7,274

17,555

Income tax expense

(210)

(196)

Equity in income of Unconsolidated Joint Ventures

10,146

9,735

Net income

24,444

16,813

Net income attributable to noncontrolling interests:

Noncontrolling share of income of consolidated joint ventures

(3,385)

(2,013)

TRG series F preferred distributions

(615)

(615)

Noncontrolling share of income of TRG

(5,689)

(3,882)

Distributions to participating securities of TRG

(381)

(362)

Preferred stock dividends

(3,658)

(3,658)

Net income attributable to Taubman Centers, Inc. common shareowners

10,716

6,283

SUPPLEMENTAL INFORMATION:

EBITDA - 100%

83,312

43,420

81,775

42,897

EBITDA - outside partners' share

(8,849)

(19,711)

(9,748)

(19,482)

Beneficial interest in EBITDA

74,463

23,709

72,027

23,415

Beneficial interest expense

(32,116)

(8,077)

(32,197)

(8,202)

Beneficial income tax expense

(210)

(196)

Non-real estate depreciation

(766)

(843)

Preferred dividends and distributions

(4,273)

(4,273)

Fund from Operations contribution

37,098

15,632

34,518

15,213

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

(195)

28

(237)

(141)

(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.

(2)

Promotion expenses, which were previously classified in "Other operating", are now included in "Maintenance, taxes, utilities and promotion" expense. Amounts for 2010 have been reclassified to conform to the 2011 classification.

TAUBMAN CENTERS, INC.

Table 3 - Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations

For the Three Months Ended March 31, 2011 and 2010

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

2011

2010

Shares

Per Share

Shares

Per Share

Dollars

/Units

/Unit

Dollars

/Units

/Unit

Net income attributable to TCO common shareowners - Basic

10,716

55,560,988

0.19

6,283

54,357,122

0.12

Add impact of share-based compensation

98

1,419,844

48

1,011,785

Net income attributable to TCO common shareowners - Diluted

10,814

56,980,832

0.19

6,331

55,368,907

0.11

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

12,534

56,980,832

0.22

8,051

55,368,907

0.15

Add:

Noncontrolling share of income of TRG

5,689

25,415,979

3,882

26,366,705

Distributions to participating securities

381

871,262

362

871,262

Net income attributable to partnership unitholders and participating securities

18,604

83,268,073

0.22

12,295

82,606,874

0.15

Add (less) depreciation and amortization:

Consolidated businesses at 100%

33,789

0.41

37,084

0.45

Depreciation of TCO's additional basis

(1,720)

(0.02)

(1,720)

(0.02)

Noncontrolling partners in consolidated joint ventures

(2,565)

(0.03)

(2,515)

(0.03)

Share of Unconsolidated Joint Ventures

5,486

0.07

5,478

0.07

Non-real estate depreciation

(766)

(0.01)

(843)

(0.01)

Less impact of share-based compensation

(98)

(0.00)

(48)

(0.00)

Funds from Operations

52,730

83,268,073

0.63

49,731

82,606,874

0.60

TCO's average ownership percentage of TRG

68.6%

67.3%

Funds from Operations attributable to TCO

36,180

0.63

33,487

0.60

Funds from Operations

52,730

83,268,073

0.63

49,731

82,606,874

0.60

The Pier Shops negative FFO

4,001

0.05

2,377

0.03

Regency Square negative FFO

359

0.00

426

0.01

Funds from Operations, excluding The Pier Shops and Regency Square

57,090

83,268,073

0.69

52,534

82,606,874

0.64

TCO's average ownership percentage of TRG

68.6%

67.3%

Funds from Operations attributable to TCO, excluding The Pier Shops and Regency Square

39,171

0.69

35,355

0.64

TAUBMAN CENTERS, INC.

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

For the Periods Ended March 31, 2011 and 2010

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

Three Months Ended

2011

2010

Net income

24,444

16,813

Add (less) depreciation and amortization:

Consolidated businesses at 100%

33,789

37,084

Noncontrolling partners in consolidated joint ventures

(2,565)

(2,515)

Share of Unconsolidated Joint Ventures

5,486

5,478

Add (less) interest expense and income tax expense:

Interest expense:

Consolidated businesses at 100%

35,015

37,417

Noncontrolling partners in consolidated joint ventures

(2,899)

(5,220)

Share of Unconsolidated Joint Ventures

8,077

8,202

Income tax expense

210

196

Less noncontrolling share of income of consolidated joint ventures

(3,385)

(2,013)

Beneficial Interest in EBITDA

98,172

95,442

TCO's average ownership percentage of TRG

68.6%

67.3%

Beneficial Interest in EBITDA attributable to TCO

67,359

64,232

TAUBMAN CENTERS, INC.

Table 5 - Reconciliation of Net Income to Net Operating Income (NOI)

For the Periods Ended March 31, 2011 and 2010

(in thousands of dollars)

Three Months Ended

2011

2010

Net income

24,444

16,813

Add (less) depreciation and amortization:

Consolidated businesses at 100%

33,789

37,084

Noncontrolling partners in consolidated joint ventures

(2,565)

(2,515)

Share of Unconsolidated Joint Ventures

5,486

5,478

Add (less) interest expense and income tax expense:

Interest expense:

Consolidated businesses at 100%

35,015

37,417

Noncontrolling partners in consolidated joint ventures

(2,899)

(5,220)

Share of Unconsolidated Joint Ventures

8,077

8,202

Income tax expense

210

196

Less noncontrolling share of income of consolidated joint ventures

(3,385)

(2,013)

Add EBITDA attributable to outside partners:

EBITDA attributable to noncontrolling partners in consolidated joint ventures

8,849

9,748

EBITDA attributable to outside partners in Unconsolidated Joint Ventures

19,711

19,482

EBITDA at 100%

126,732

124,672

Add (less) items excluded from shopping center NOI:

General and administrative expenses

7,284

7,389

Management, leasing, and development services, net

(3,580)

(1,463)

Interest income

(133)

(161)

Straight-line of rents

(209)

28

The Pier Shops NOI

99

(1,153)

Regency Square NOI

(918)

(891)

Non-center specific operating expenses and other

7,270

6,175

NOI at 100%

136,545

134,596

NOI - growth %

1.4%

NOI at 100%

136,545

134,596

Lease cancellation income (1)

(1,384)

(5,948)

NOI at 100% excluding lease cancellation income

135,161

128,648

NOI excluding lease cancellation income - growth %

5.1%

(1)

Excludes The Pier Shops and Regency Square.

TAUBMAN CENTERS, INC.

Table 6 - Balance Sheets

As of March 31, 2011 and December 31, 2010

(in thousands of dollars)

As of

March 31, 2011

December 31, 2010

Consolidated Balance Sheet of Taubman Centers, Inc. :

Assets:

Properties

3,543,882

3,528,297

Accumulated depreciation and amortization

(1,223,672)

(1,199,247)

2,320,210

2,329,050

Investment in Unconsolidated Joint Ventures

74,461

77,122

Cash and cash equivalents

21,040

19,291

Accounts and notes receivable, net

46,911

49,906

Accounts receivable from related parties

1,595

1,414

Deferred charges and other assets

71,427

70,090

2,535,644

2,546,873

Liabilities:

Notes payable

2,636,672

2,656,560

Accounts payable and accrued liabilities

239,357

247,895

Distributions in excess of investments in and net income of

Unconsolidated Joint Ventures

172,458

170,329

3,048,487

3,074,784

Equity:

Taubman Centers, Inc. Shareowners' Equity:

Series B Non-Participating Convertible Preferred Stock

25

26

Series G Cumulative Redeemable Preferred Stock

Series H Cumulative Redeemable Preferred Stock

Common Stock

559

547

Additional paid-in capital

586,714

589,881

Accumulated other comprehensive income (loss)

(12,734)

(14,925)

Dividends in excess of net income

(953,053)

(939,290)

(378,489)

(363,761)

Noncontrolling interests:

Noncontrolling interests in consolidated joint ventures

(70,004)

(100,355)

Noncontrolling interests in partnership equity of TRG

(93,567)

(93,012)

Preferred Equity of TRG

29,217

29,217

(134,354)

(164,150)

(512,843)

(527,911)

2,535,644

2,546,873

Combined Balance Sheet of Unconsolidated Joint Ventures :

Assets:

Properties

1,092,796

1,092,916

Accumulated depreciation and amortization

(424,949)

(417,712)

667,847

675,204

Cash and cash equivalents

16,555

21,339

Accounts and notes receivable

22,036

26,288

Deferred charges and other assets  

17,525

18,891

723,963

741,722

Liabilities:

Notes payable

1,122,597

1,125,618

Accounts payable and other liabilities, net

30,761

37,292

1,153,358

1,162,910

Accumulated Deficiency in Assets:

Accumulated deficiency in assets - TRG

(227,072)

(222,109)

Accumulated deficiency in assets - Joint Venture Partners

(199,687)

(194,438)

Accumulated other comprehensive income (loss) - TRG

(1,490)

(2,527)

Accumulated other comprehensive income (loss) - Joint Venture Partners

(1,146)

(2,114)

(429,395)

(421,188)

723,963

741,722

TAUBMAN CENTERS, INC.

Table 7 -  Annual Guidance

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

Guidance for 2011

(Excluding The Pier Shops & Regency Square)

(Including The Pier Shops & Regency Square)

Funds from Operations per common share (1)

2.88

2.98

2.64

2.74

Real estate depreciation - TRG

(1.63)

(1.62)

(1.73)

(1.72)

Distributions on participating securities of TRG

(0.02)

(0.02)

(0.02)

(0.02)

Depreciation of TCO's additional basis in TRG

(0.12)

(0.12)

(0.12)

(0.12)

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

1.11

1.23

0.77

0.89

(1)

The noncash impact of owning The Pier Shops and Regency Square (including anticipated default interest) is expected to result in an incremental FFO charge of approximately $(0.20) per diluted share for The Pier Shops and $(0.04) per diluted share for Regency Square in 2011. Including the impact of depreciation and amortization, the impact on EPS for the two centers is expected to be a charge of $(0.34) in 2011.

Significant noncash accounting gains will be recognized when the respective loan obligations are extinguished upon transfer of title to the properties.  These gains have been excluded from EPS and FFO per diluted share estimates.