- 2018 Net Income Up 4.8 Percent and
Earnings Per Diluted Common Share (EPS) Up 4.4 Percent
- Comparable Center Net Operating Income
(NOI), Including Lease Cancellation Income Up 4.4 Percent for the
Year (Up 3.8 Percent Excluding Lease Cancellation Income)
- 2018 Funds from Operations (FFO) and
Adjusted FFO Up 5.7 Percent and 3.5 Percent, respectively
- Industry-leading Sales Per Square Foot
$824, Up 8.6 Percent for the Year
- Sales Per Square Foot Up 10.1 Percent
for the Quarter, Tenth Consecutive Quarter of Positive Sales
Growth
- Average Rent Per Square Foot Up 3.9
Percent for the Year
Taubman Centers, Inc. (NYSE: TCO) today reported financial
results for the quarter and full year periods ended December 31,
2018.
December 31,
December 31,
2018
2017
December 31, December 31,
Three Months
Three Months
2018 2017
Ended
Ended
Year Ended Year Ended
Net income
attributable to common shareowners, diluted (in thousands)
$3,087 $20,291
$58,037 $55,381
Growth rate
(84.8)%
4.8%
Net income attributable to common shareowners
(EPS) per diluted common share $0.05 $0.33
$0.95
$0.91
Growth rate
(84.8)%
4.4%
Funds from Operations (FFO) per diluted common
share $0.86 $1.02
$3.71 $3.51
Growth rate
(15.7)%
5.7%
Adjusted Funds from Operations (Adjusted FFO) per
diluted common share
$0.91(1)
$1.03(2)
$3.83(1)
$3.70(2)
Growth rate
(11.7)%
3.5%
(1) Adjusted FFO for the three months
and year ended December 31, 2018 excludes a restructuring charge,
costs associated with shareowner activism, and the fluctuation in
the fair value of equity securities (due to the adoption of new
accounting in 2018). Adjusted FFO for the year ended December 31,
2018 also excludes a charge recognized in connection with the
write-off of deferred financing costs related to the early payoff
of the company’s $475 million unsecured term loan. (2)
Adjusted FFO for the three months and year ended December 31, 2017
excludes a restructuring charge, costs associated with shareowner
activism, and a gain recognized upon the conversion of the
company’s investment in Simon Property Group Limited Partnership
units (SPG LP Units) to common shares of Simon Property Group.
Adjusted FFO for the year ended December 31, 2017 also excludes a
charge recognized in connection with the partial write-off of
deferred financing costs related to an amendment of the company's
primary line of credit in February 2017.
“We delivered very good results this year in a challenging
retail environment,” said Robert S. Taubman, chairman, president
and chief executive officer of Taubman Centers. “Our earnings
growth was driven by better rents and recoveries, reduced operating
expenses and positive contributions from our newest centers.”
Operating Statistics
For the year, comparable center NOI was up 4.4 percent. “We were
pleased to achieve our best annual NOI growth rate in six years,
with both our U.S. and Asia assets contributing equally,” said Mr.
Taubman. Comparable center NOI excluding lease cancellation income
was up 3.8 percent.
For the fourth quarter, comparable center NOI was down 2.6
percent (down 1.3 percent excluding lease cancellation income). “As
expected, NOI growth was lower this quarter, due to the timing of
net recoveries and the timing of two significant retail holidays in
Asia, which shifted from the fourth quarter last year to the third
quarter this year.”
Comparable center mall tenant sales per square foot were $824
for 2018, an increase of 8.6 percent from 2017. The fourth quarter
of 2018 was up 10.1 percent.
Tenant sales per square foot in the company’s U.S. comparable
centers were up 10.8 percent in the quarter, bringing 12-month
trailing U.S. sales per square foot to a record high of $875, an
increase of 8.2 percent.
“Sales per square foot growth was broad-based with nearly all
centers and categories of merchandise up this year, including
apparel which was up 8 percent,” said Mr. Taubman.
For the year, average rent per square foot in comparable centers
was $57.51, up 3.9 percent from $55.36 last year. For the fourth
quarter, average rent per square foot in comparable centers was
$57.76, up 3.3 percent.
For the year, average rent per square foot in the company’s U.S.
comparable centers reached an all-time high of $61.75, an increase
of 2.4 percent over 2017. For the quarter, average rent per square
foot in comparable U.S. centers was $61.92, up 2.2 percent.
The trailing 12-month releasing spread per square foot for the
period ended December 31, 2018 was 3.9 percent. This spread remains
impacted by a small number of spaces that have an average lease
term of less than two years. Without these leases, the spread was
nearly 10 percent.
Ending occupancy in comparable centers was 94.7 percent at
year-end, down 1.0 percent from 95.7 percent on December 31, 2017.
Ending occupancy in all centers was 94.6 percent, down 0.2 percent
from last year.
Leased space in all centers was 96.2 percent, up 0.3 percent
from last year. Leased space in comparable centers was 96.3 percent
at year-end, down 0.3 percent compared to December 31, 2017.
“The best retail assets continue to grow. This year we set new
records for sales productivity and average rents, while growing NOI
about four percent,” said Mr. Taubman. “Our high-quality portfolio
of assets is well-positioned, as customers are increasingly
selective in where they shop and retailers are very selective in
their real estate decisions.”
2018 Milestones
During 2018, the company:
- Announced Nordstrom, Inc., is opening a
new, state-of-the-art, approximately 116,000-square-foot store at
Country Club Plaza, the company’s joint venture in Kansas City,
Missouri. The new store is expected to open in 2021. See Nordstrom
Announces Relocation of Oak Park Mall Store to Country Club Plaza –
February 2, 2018.
- Increased the regular quarterly
dividend by 4.8 percent to $0.655 per share of common stock. See
Taubman Centers Increases Quarterly Common Dividend 4.8 Percent to
$0.655 Per Share – March 2, 2018.
- Entered into a redevelopment agreement
for Taubman Prestige Outlets Chesterfield (Chesterfield, Mo.)
with The Staenberg Group (TSG). The building and
improvements on the property were transferred to TSG, as they work
towards a significant redevelopment of the property. See Taubman
Centers, Inc. Issues Strong First Quarter Results – April 26,
2018.
- Announced Taubman Asia’s fourth
investment and its second joint venture with Shinsegae Group to
build, lease and manage a 1.1 million square foot shopping mall in
Anseong, Gyeonggi Province, South Korea, a high growth city in the
Greater Seoul Metropolitan Area. Starfield Anseong is expected to
open in late 2020. Total project cost is expected to be between
$570 and $600 million. See Taubman Centers, Inc. Issues Solid
Second Quarter Results – July 30, 2018.
- Celebrated Beverly Center’s (Los
Angeles, Calif.) Grand Reveal following the successful $500 million
reimagination that has transformed every aspect of the iconic
shopping center. See Taubman Reveals $500 Million Reimagination of
Iconic Beverly Center Reinventing Retail & Dining in LA;
Announces Weekend of Special Events – November 2, 2018.
- Announced the appointments of Janice
(Jan) Fields and Nancy Killefer to the company’s Board of
Directors. See Taubman Announces Two New Independent Directors, Two
Director Retirements and New Committee Appointments – December 6,
2018.
Financing Activity
During 2018, the company completed over one billion dollars of
financings in 2018.
- A new $300 million, 10-year,
non-recourse financing on Twelve Oaks Mall (Novi, Mich.), with a
fixed rate of 4.85 percent. The asset was previously unencumbered –
February 28, 2018.
- A new five-year, $250 million,
unsecured term loan. The loan bears interest at a range of LIBOR
plus 1.25 to 1.90 percent, based on the company’s total leverage
ratio – March 20, 2018.
- Repaid the company’s $475 million term
loan that had a February 2019 maturity date – March 20, 2018.
- A $260 million, 5-year, non-recourse
financing on Fair Oaks Mall (Fairfax, Va.), the company’s 50
percent owned joint venture, with the proceeds used to pay off the
previous $259 million loan that was scheduled to mature in July
2018 – April 27, 2018.
- Refinanced the construction loan on
International Market Place (Waikīkī, Honolulu, Hawaii), a 93.5
percent owned joint venture. The new $250 million loan has a 3-year
term with two 1-year extension options, and bears interest at a
rate of LIBOR plus 2.15 percent – August 9, 2018.
- Entered into forward starting swap
agreements to reduce the company’s exposure to interest rate
fluctuations. The swaps fix the LIBOR rate on the company’s $250
million term loan to a rate of 3.02 percent beginning March 1, 2019
through its maturity date, resulting in an effective rate of 4.27
to 4.92 percent – October 24, 2018.
- Exercised a one-year extension option
for the $150 million loan at The Mall at Green Hills (Nashville,
Tenn.). The loan now has a maturity date of December 1, 2019 and
the company has an additional one-year extension option available –
November 29, 2018.
2019 Guidance
The company is introducing guidance for 2019. Net income
attributable to common shareholders (EPS) for the year is expected
to be in the range of $0.84 to $1.08.
The company expects FFO per diluted common share for the year to
be in the range of $3.62 to $3.74.
This guidance assumes comparable center NOI growth, excluding
lease cancellation income, of about 2 percent for the year. The
range includes the adoption of the new lease accounting standard,
resulting in an additional $5 to $7 million of operating expenses.
The company’s guidance also does not include any future costs that
may be incurred related to shareowner activism.
A summary of the all the company’s key guidance assumptions is
included on page six of the supplemental.
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:
- Earnings Press Release
- Company Overview
- Operational Statistics
- Summary of Key Guidance Measures
- Income Statements
- Changes in Funds from Operations and
Earnings Per Common Share
- Balance Sheets
- Debt Summary
- Capital Spending & Certain Balance
Sheet Information
- Owned Centers
- Redevelopments & New
Developments
- Anchors & Major Tenants in Owned
Portfolio
- Components of Other Income, Other
Operating Expense, and Nonoperating Income, Net
- Earnings Reconciliations
- Operating Statistics Glossary
Investor Conference Call
The company will host a conference call at 10:00 a.m. EST on
Thursday, February 14 to discuss these results, business conditions
and the company’s outlook for 2019. 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.
About Taubman
Taubman Centers is an S&P MidCap 400 Real Estate Investment
Trust engaged in the ownership, management and/or leasing of 26
regional, super-regional and outlet shopping centers in the U.S.
and Asia and one under development. Taubman’s U.S.-owned properties
are the most productive in the publicly held U.S. regional mall
industry. Founded in 1950, Taubman is headquartered in Bloomfield
Hills, Mich. Taubman Asia, founded in 2005, is headquartered in
Hong Kong. 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. Forward-looking
statements can be identified by words such as “will”, “may”,
“could”, “expect”, “anticipate”, “believes”, “intends”, “should”,
“plans”, “estimates”, “approximate”, “guidance” and similar
expressions in this press release that predict or indicate future
events and trends and that do not report historical matters. The
forward-looking statements included in this release are made as of
the date hereof. Except as required by law, the company assumes 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,
uncertainties and other factors. Such factors include, but are not
limited to: changes in market rental rates; unscheduled closings or
bankruptcies of tenants; relationships with anchor tenants; trends
in the retail industry; challenges with department stores; changes
in consumer shopping behavior; the liquidity of real estate
investments; the company’s ability to comply with debt covenants;
the availability and terms of financings; changes in market rates
of interest and foreign exchange rates for foreign currencies;
changes in value of investments in foreign entities; the ability to
hedge interest rate and currency risk; risks related to acquiring,
developing, expanding, leasing and managing properties; competitors
gaining economies of scale through M&A and consolidation
activity; changes in value of investments in foreign entities;
risks related to joint venture properties; insurance costs and
coverage; security breaches that could impact the company’s
information technology, infrastructure or personal data; costs
associated with response to technology breaches; the loss of key
management personnel; shareholder activism costs and related
diversion of management time; terrorist activities; maintaining the
company’s status as a real estate investment trust; changes in the
laws of states, localities, and foreign jurisdictions that may
increase taxes on the company’s operations; and changes in global,
national, regional and/or local economic and geopolitical climates.
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
- Income Statement For the Three Months Ended December 31,
2018 and 2017
(in thousands of dollars) 2018 2017
CONSOLIDATED UNCONSOLIDATED CONSOLIDATED
UNCONSOLIDATED BUSINESSES JOINT VENTURES
(1) BUSINESSES JOINT VENTURES (1)
REVENUES: Minimum rents 91,515 90,185 89,980 92,794 Overage
rents 9,217 10,088 9,569 8,758 Expense recoveries 51,337 44,179
57,240 48,240 Management, leasing, and development services 791 944
Other 14,629 10,212 14,451 7,028 Total
revenues 167,489 154,664 172,184 156,820
EXPENSES
(2): Maintenance, taxes, utilities, and promotion 44,086 45,678
45,510 45,146 Other operating 23,155 6,708 29,157 7,837 Management,
leasing, and development services 284 459 General and
administrative 11,629 9,369 Restructuring charge 1,019 9,785 Costs
associated with shareowner activism 2,500 2,500 Interest expense
35,955 33,353 28,498 33,141 Depreciation and amortization 54,950
33,910 44,848 33,274 Total expenses
173,578 119,649 170,126 119,398 Nonoperating income, net (3)
856 432 15,481 459 (5,233 ) 35,447
17,539 37,881 Income tax benefit (expense) (553 ) (1,450 ) 270
(1,338 ) 33,997 36,543 Equity in income of
Unconsolidated Joint Ventures 18,724 20,275 Net
income 12,938 38,084 Net income attributable to noncontrolling
interests: Noncontrolling share of income of consolidated joint
ventures (1,880 ) (2,496 ) Noncontrolling share of income of TRG
(1,595 ) (8,975 ) Distributions to participating securities of TRG
(599 ) (577 ) Preferred stock dividends (5,785 ) (5,785 ) Net
income attributable to Taubman Centers, Inc. common shareowners
3,079 20,251
SUPPLEMENTAL INFORMATION:
EBITDA - 100% 85,672 102,710 90,885 104,296 EBITDA - outside
partners' share (7,066 ) (48,711 ) (7,435 ) (49,274 ) Beneficial
interest in EBITDA 78,606 53,999 83,450 55,022 Beneficial interest
expense (32,947 ) (17,118 ) (25,494 ) (17,079 ) Beneficial income
tax (expense) benefit - TRG and TCO (495 ) (513 ) 317 (554 )
Beneficial income tax benefit - TCO (28 ) Non-real estate
depreciation (1,188 ) (1,229 ) Preferred dividends and
distributions (5,785 ) (5,785 ) Funds from Operations
attributable to partnership unitholders and participating
securities of TRG 38,191 36,368 51,231 37,389
STRAIGHTLINE AND PURCHASE ACCOUNTING
ADJUSTMENTS: Net straight-line adjustments to rental revenue,
recoveries, and ground rent expense at TRG% 997 476 784 1,031
Country Club Plaza purchase accounting adjustments - minimum rents
increase at TRG% 113 39 The Mall at Green Hills purchase accounting
adjustments - minimum rents increase 24 44 (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.
(2) Certain expenses of Starfield Hanam, which were previously
classified in "Other operating" expense, are now included in
"Maintenance, taxes, utilities and promotion" expense. Amounts for
2017 have been reclassified to conform to the 2018 classification.
(3) During the three months December 31, 2018, a net loss of
$1.3 million was recognized for the fluctuation in the fair value
of equity securities. In connection with the adoption of Accounting
Standards Update (ASU) No. 2016-01 on January 1, 2018, the Company
now measures its equity securities at fair value with changes in
value recorded through net income.
TAUBMAN CENTERS, INC.
Table 2 - Income Statement For the
Year Ended December 31, 2018 and 2017
(in thousands of dollars)
2018 2017 CONSOLIDATED UNCONSOLIDATED
CONSOLIDATED
UNCONSOLIDATED
BUSINESSES JOINT VENTURES (1)
BUSINESSES
JOINT VENTURES (1)
REVENUES: Minimum rents 353,226 357,465 345,557 344,613
Overage rents 16,670 28,844 16,923 25,393 Expense recoveries
205,514 178,162 211,625 186,161 Management, leasing, and
development services 3,271 4,383 Other 62,189 36,246
50,677 29,872 Total revenues 640,870 600,717 629,165
586,039
EXPENSES (2): Maintenance, taxes, utilities,
and promotion 157,957 171,188 167,091 175,581 Other operating
87,308 27,327 94,513 28,227 Management, leasing, and development
services 1,470 2,157 General and administrative 37,174 39,018
Restructuring charge 596 13,848 Costs associated with shareowner
activism 12,500 14,500 Interest expense 133,197 132,669 108,572
130,339 Depreciation and amortization 179,275 134,872
167,806 130,537 Total expenses 609,477 466,056
607,505 464,684 Nonoperating income, net (3) 14,714
1,923 23,828 3,010 46,107 136,584 45,488
124,365 Income tax benefit (expense) 231 (6,924 ) (105 ) (5,837 )
129,660 118,528 Gain on disposition, net of tax (4) 3,713
129,660 122,241 Equity in income of
Unconsolidated Joint Ventures 69,404 67,374 Net
income 115,742 112,757 Net income attributable to noncontrolling
interests: Noncontrolling share of income of consolidated joint
ventures (6,268 ) (6,775 ) Noncontrolling share of income of TRG
(25,988 ) (25,277 ) Distributions to participating securities of
TRG (2,396 ) (2,300 ) Preferred stock dividends (23,138 ) (23,138 )
Net income attributable to Taubman Centers, Inc. common shareowners
57,952 55,267
SUPPLEMENTAL INFORMATION:
EBITDA - 100% 358,579 404,125 321,866 389,685 EBITDA - outside
partners' share (26,091 ) (194,382 ) (26,315 ) (184,539 )
Beneficial interest in EBITDA 332,488 209,743 295,551 205,146
Beneficial share of gain on disposition (4) (2,814 ) Beneficial
interest expense (121,166 ) (68,225 ) (96,630 ) (67,283 )
Beneficial income tax expense - TRG and TCO 423 (2,900 ) 29 (2,825
) Beneficial income tax benefit - TCO (110 ) (315 ) Non-real estate
depreciation (4,590 ) (3,596 ) Preferred dividends and
distributions (23,138 ) (23,138 ) Funds from
Operations attributable to partnership unitholders and
participating securities of TRG 183,907 138,618
171,901 132,224
STRAIGHTLINE AND PURCHASE
ACCOUNTING ADJUSTMENTS: Net straight-line adjustments to rental
revenue, recoveries, and ground rent expense at TRG% 3,079 2,073
1,087 3,391 Country Club Plaza purchase accounting adjustments -
minimum rents increase (decrease) at TRG% 1,522 34 The Mall at
Green Hills purchase accounting adjustments - minimum rents
increase 112 174 (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. (2) Certain
expenses of Starfield Hanam, which were previously classified in
"Other operating" expense, are now included in "Maintenance, taxes,
utilities and promotion" expense. Amounts for 2017 have been
reclassified to conform to the 2018 classification. (3)
During the year ended December 31, 2018, a net gain of $2.8 million
was recognized for the fluctuation in the fair value of equity
securities. In connection with the adoption of ASU No. 2016-01 on
January 1, 2018, the Company now measures its equity securities at
fair value with changes in value recorded through net income.
(4) During the year ended December 31, 2017, the joint
venture that owns the Valencia Place office tower at Country Club
Plaza recognized a $4.4 million gain ($2.8 million at TRG's share)
and $0.7 million of income tax expense ($0.7 million at TRG's
share) in connection with the sale of the office tower.
TAUBMAN CENTERS, INC.
Use of Non-GAAP Financial Measures
The Company uses certain non-GAAP operating measures, including
EBITDA, beneficial interest in EBITDA, Net Operating Income, and
Funds from Operations. These measures are reconciled to the most
comparable GAAP measures. Additional information as to the use of
these measures are as follows.
EBITDA represents earnings before interest, income taxes, and
depreciation and amortization of the Operating Partnership's
consolidated and unconsolidated businesses. 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 EBITDA and beneficial interest in EBITDA provide useful
indicators 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, and in formulating
corporate goals and compensation. The Company defines NOI as
property-level operating revenues (includes rental income excluding
straight-line adjustments of minimum rent) less maintenance,
property 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, excluding centers
impacted by significant redevelopment activity. In addition, The
Mall of San Juan has been excluded from “comparable center”
statistics as a result of Hurricane Maria and the expectation that
the center’s performance will be impacted for the foreseeable
future.
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 writedowns 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
months and year ended December 31, 2018, FFO and EBITDA were
adjusted to exclude costs associated with shareowner activism, the
fluctuation in the fair value of equity securities, and a
restructuring charge. For the three months and year ended December
31, 2018, FFO was also adjusted for a charge recognized in
connection with the write-off of deferred financing costs related
to the early payoff of the Company's $475 million unsecured term
loan. For the three months and year ended December 31, 2017, FFO
and EBITDA were adjusted to exclude a restructuring charge, costs
associated with shareowner activism, and a gain recognized upon
conversion of the Company's remaining investment in Simon Property
Group Limited Partnership Units (SPG LP Units) to common shares of
Simon Property Group (SPG). For the year ended December 31, 2017,
FFO was also adjusted for a charge recognized in connection with
the partial write-off of deferred financing costs related to an
amendment of the Company's primary unsecured revolving line of
credit in February 2017. For the year ended December 31, 2017,
EBITDA was also adjusted to exclude a gain recognized in connection
with the sale of the Valencia Place office tower at Country Club
Plaza.
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.
The Company provides its beneficial interest in certain
financial information of its Unconsolidated Joint Ventures. This
beneficial information is derived as the Company’s ownership
interest in the investee multiplied by the specific financial
statement item being presented. Investors are cautioned that
deriving the Company’s beneficial interest in this manner may not
accurately depict the legal and economic implications of holding a
non-controlling interest in the investee.
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 Three Months
Ended December 31, 2018 and 2017 (in thousands of dollars
except as noted; may not add or recalculate due to rounding)
2018 2017 Shares Per Share Shares Per Share
Dollars /Units /Unit Dollars /Units /Unit
Net income
attributable to TCO common shareowners - basic 3,079
61,065,282 0.05 20,251 60,737,750
0.33 Add impact of share-based compensation 8 308,898
40 367,344
Net income
attributable to TCO common shareowners - diluted 3,087
61,374,180 0.05 20,291 61,105,094
0.33 Add depreciation of TCO's additional basis 1,617 0.03
1,617 0.03 Less TCO's additional income tax benefit —
0.00 (28 ) (0.00 )
Net income attributable to TCO
common shareowners,
excluding step-up depreciation and
additional income tax benefit
4,704 61,374,180 0.08 21,880
61,105,094 0.36 Add noncontrolling share of income of
TRG and other 1,915 24,881,563 8,975 24,955,434 Add distributions
to participating securities of TRG 599 871,262
577 871,262
Net income attributable to
partnership unitholders
and participating securities of
TRG
7,218 87,127,005 0.08 31,432
86,931,790 0.36 Add (less) depreciation and
amortization: Consolidated businesses at 100% 54,950 0.63 44,848
0.52 Depreciation of TCO's additional basis (1,617 ) (0.02 ) (1,617
) (0.02 ) Noncontrolling partners in consolidated joint ventures
(2,120 ) (0.02 ) (1,888 ) (0.02 ) Share of Unconsolidated Joint
Ventures 17,324 0.20 17,114 0.20 Non-real estate depreciation
(1,188 ) (0.01 ) (1,229 ) (0.01 ) Less impact of share-based
compensation (8 ) (0.00 ) (40 ) (0.00 )
Funds from
Operations attributable to partnership unitholders
and participating securities of
TRG
74,559 87,127,005 0.86 88,620
86,931,790 1.02 TCO's average ownership percentage of
TRG - basic (1) 71.1 % 70.9 %
Funds from Operations attributable
to TCO's common shareowners,
excluding additional income tax benefit
(1)
52,974 0.86 62,812 1.02 Add TCO's
additional income tax benefit — 0.00 28 0.00
Funds from Operations attributable to TCO's common
shareowners (1) 52,974 0.86
62,840 1.02 Funds from
Operations attributable to partnership unitholders
and participating securities of TRG
74,559 87,127,005 0.86 88,620 86,931,790 1.02 Restructuring charge
1,019 0.01 9,785 0.10 Costs associated with shareowner activism
2,500 0.03 2,500 0.03 Fluctuation in fair value of equity
securities 1,272 0.01 Gains on SPG common stock conversion
(11,613 ) (0.13 )
Adjusted Funds from Operations
attributable to partnership unitholders
and participating securities of
TRG
79,350 87,127,005 0.91 89,292
86,931,790 1.03 TCO's average ownership percentage of
TRG - basic (2) 71.1 % 70.9 %
Adjusted Funds from
Operations attributable to TCO's common shareowners (2)
56,378 0.91 63,289
1.03 (1) For the three months ended December
31, 2018, Funds from Operations attributable to TCO's common
shareowners was $52,257 using TCO's diluted average ownership
percentage of TRG of 70.1%. For the three months ended December 31,
2017, Funds from Operations attributable to TCO's common
shareowners was $61,946 using TCO's diluted average ownership
percentage of TRG of 69.9%. (2) For the three months ended
December 31, 2018, Adjusted Funds from Operations attributable to
TCO's common shareowners was $55,615 using TCO's diluted average
ownership percentage of TRG of 70.1%. For the three months ended
December 31, 2017, Adjusted Funds from Operations attributable to
TCO's common shareowners was $62,387 using TCO's diluted average
ownership percentage of TRG of 69.9%.
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 Year Ended December 31, 2018 and 2017 (in
thousands of dollars except as noted; may not add or recalculate
due to rounding) 2018 2017 Shares Per
Share Shares Per Share Dollars /Units /Unit Dollars /Units /Unit
Net income attributable to TCO common shareowners - basic
57,952 60,994,444 0.95 55,267
60,675,129 0.91 Add impact of share-based
compensation 85 283,271 114 365,366
Net income attributable to TCO common shareowners
- diluted 58,037 61,277,715 0.95
55,381 61,040,495 0.91 Add depreciation of
TCO's additional basis 6,468 0.11 6,468 0.11 Less TCO's additional
income tax benefit (110 ) (0.00 ) (315 ) (0.01 )
Net income attributable to TCO common shareowners,
excluding step-up depreciation and
additional income tax benefit
64,395 61,277,715 1.05 61,534
61,040,495 1.01 Add noncontrolling share of income of
TRG and other 26,308 24,932,870 25,277 24,965,157 Add distributions
to participating securities of TRG 2,396 871,262
2,300 871,262
Net income
attributable to partnership unitholders
and participating securities of
TRG
93,099 87,081,847 1.07 89,111
86,876,914 1.03 Add (less) depreciation and
amortization: Consolidated businesses at 100% 179,275 2.06 167,806
1.93 Depreciation of TCO's additional basis (6,468 ) (0.07 ) (6,468
) (0.07 ) Noncontrolling partners in consolidated joint ventures
(7,600 ) (0.09 ) (7,464 ) (0.09 ) Share of Unconsolidated Joint
Ventures 68,894 0.79 66,933 0.77 Non-real estate depreciation
(4,590 ) (0.05 ) (3,596 ) (0.04 ) Less beneficial gain on
disposition, net of tax (2,083 ) (0.02 ) Less impact of share-based
compensation (85 ) (0.00 ) (114 ) (0.00 )
Funds
from Operations attributable to partnership unitholders
and participating securities of
TRG
322,525 87,081,847 3.70 304,125
86,876,914 3.50 TCO's average ownership percentage of
TRG - basic (1) 71.0 % 70.8 %
Funds from Operations attributable
to TCO's common shareowners,
excluding additional income tax benefit
(1)
228,936 3.70 152,659 3.50 Add TCO's
additional income tax benefit 110 0.00 315
0.00
Funds from Operations attributable to TCO's common
shareowners (1) 229,046 3.71
152,974 2.49 Funds from
Operations attributable to partnership unitholders
and participating securities of TRG
322,525 87,081,847 3.70 304,125 86,876,914 3.50 Restructuring
charge 596 0.01 13,848 0.16 Costs associated with shareowner
activism 12,500 0.14 14,500 0.17 Fluctuation in fair value of
equity securities (2,801 ) (0.03 ) Gain on SPG common stock
conversion
(11,613 ) (0.13 ) Partial write-off of deferred financing costs 382
0.00 413 0.00
Adjusted
Funds from Operations attributable to partnership unitholders
and participating securities of
TRG
333,202 87,081,847 3.83 321,273
86,876,914 3.70 TCO's average ownership percentage of
TRG - basic (2) 71.0 % 70.8 %
Adjusted Funds from
Operations attributable to TCO's common shareowners (2)
236,513 3.83 227,619
3.70 (1) For the year ended December 31, 2018,
Funds from Operations attributable to TCO's common shareowners was
$226,013 using TCO's diluted average ownership percentage of TRG of
70.0%. For the year ended December 31, 2017, Funds from Operations
attributable to TCO's common shareowners was $212,715 using TCO's
diluted average ownership percentage of TRG of 69.8%. (2)
For the year ended December 31, 2018, Adjusted Funds from
Operations attributable to TCO's common shareowners was $233,376
using TCO's diluted average ownership percentage of TRG of 70.0%.
For the year ended December 31, 2017, Adjusted Funds from
Operations attributable to TCO's common shareowners was $224,374
using TCO's diluted average ownership percentage of TRG of 69.8%.
TAUBMAN CENTERS, INC. Table 5
- Reconciliation of Net Income to Beneficial Interest in EBITDA and
Adjusted Beneficial Interest in EBITDA For the Periods Ended
December 31, 2018 and 2017 (in
thousands of dollars; amounts attributable to TCO may not
recalculate due to rounding) Three Months
Ended Year Ended 2018 2017 2018
2017 Net income 12,938 38,084
115,742 112,757 Add (less) depreciation and
amortization: Consolidated businesses at 100% 54,950 44,848 179,275
167,806 Noncontrolling partners in consolidated joint ventures
(2,120 ) (1,888 ) (7,600 ) (7,464 ) Share of Unconsolidated Joint
Ventures 17,324 17,114 68,894 66,933 Add (less) interest expense
and income tax (benefit) expense: Interest expense: Consolidated
businesses at 100% 35,955 28,498 133,197 108,572 Noncontrolling
partners in consolidated joint ventures (3,008 ) (3,004 ) (12,031 )
(11,942 ) Share of Unconsolidated Joint Ventures 17,118 17,079
68,225 67,283 Income tax (benefit) expense: Consolidated businesses
at 100% 553 (270 ) (231 ) 105 Noncontrolling partners in
consolidated joint ventures (58 ) (47 ) (192 ) (134 ) Share of
Unconsolidated Joint Ventures 833 554 3,220 2,825 Share of income
tax expense on disposition 731 Less noncontrolling share of income
of consolidated joint ventures (1,880 ) (2,496 ) (6,268 ) (6,775 )
Beneficial interest in EBITDA 132,605 138,472
542,231 500,697 TCO's average ownership percentage of
TRG - basic 71.1 % 70.9 % 71.0 % 70.8 %
Beneficial interest in
EBITDA attributable to TCO 94,216 98,146
384,895 354,740
Beneficial interest in EBITDA 132,605 138,472 542,231 500,697 Add
(less): Restructuring charge 1,019 9,785 596 13,848 Costs
associated with shareowner activism 2,500 2,500 12,500 14,500
Fluctuation in fair value of equity securities 1,272 (2,801 ) Gains
on SPG common stock conversion (11,613 ) (11,613 ) Beneficial share
of gain on disposition (2,814 )
Adjusted
Beneficial interest in EBITDA 137,396 139,144
552,526 514,618 TCO's average ownership percentage of
TRG - basic 71.1 % 70.9 % 71.0 % 70.8 %
Adjusted Beneficial
interest in EBITDA attributable to TCO 97,620
98,623 392,200 364,603
TAUBMAN CENTERS, INC. Table 6 - Reconciliation of
Net Income to Net Operating Income (NOI) For the Three
Months Ended December 31, 2018, 2017, and 2016
(in thousands of dollars)
Three Months Ended Three Months Ended 2018
2017 2017 2016 Net income 12,938
38,084 38,084 50,894 Add (less) depreciation
and amortization: Consolidated businesses at 100% 54,950 44,848
44,848 38,040 Noncontrolling partners in consolidated joint
ventures (2,120 ) (1,888 ) (1,888 ) (1,826 ) Share of
Unconsolidated Joint Ventures 17,324 17,114 17,114 17,013 Add
(less) interest expense and income tax expense (benefit): Interest
expense: Consolidated businesses at 100% 35,955 28,498 28,498
24,440 Noncontrolling partners in consolidated joint ventures
(3,008 ) (3,004 ) (3,004 ) (2,945 ) Share of Unconsolidated Joint
Ventures 17,118 17,079 17,079 15,665 Income tax expense (benefit):
Consolidated businesses at 100% 553 (270 ) (270 ) 1,462
Noncontrolling partners in consolidated joint ventures (58 ) (47 )
(47 ) (30 ) Share of Unconsolidated Joint Ventures 833 554 554 307
Income tax expense on SPG common stock conversion 466 Less
noncontrolling share of income of consolidated joint ventures
(1,880 ) (2,496 ) (2,496 ) (2,292 ) Add EBITDA attributable to
outside partners: EBITDA attributable to noncontrolling partners in
consolidated joint ventures 7,066 7,435 7,435 7,093 EBITDA
attributable to outside partners in Unconsolidated Joint Ventures
48,711 49,274 49,274 47,138
EBITDA
at 100% 188,382 195,181 195,181
195,425 Add (less) items excluded from shopping center NOI:
General and administrative expenses 11,629 9,369 9,369 13,405
Management, leasing, and development services, net (507 ) (485 )
(485 ) (728 ) Restructuring charge 1,019 9,785 9,785 Costs
associated with shareowner activism 2,500 2,500 2,500 3,000
Straight-line of rents (2,722 ) (3,600 ) (3,600 ) (1,908 )
Fluctuation in fair value of equity securities 1,272 Gains on SPG
common stock conversions (11,613 ) (11,613 ) (11,069 ) Insurance
recoveries - The Mall of San Juan (108 ) (1,101 ) (1,101 ) Dividend
income (580 ) (1,091 ) (1,091 ) (974 ) Interest income (2,187 )
(2,202 ) (2,202 ) (2,309 ) Other nonoperating (income) expense 315
67 67 (4 ) Unallocated operating expenses and other 8,809
12,443 12,443 12,574
NOI at 100% - total
portfolio 207,822 209,253 209,253
207,412 Less NOI of non-comparable centers (13,523 ) (1)
(9,777 ) (1) (39,669 ) (2) (37,984 ) (3)
NOI at 100% -
comparable centers 194,299 199,476
169,584 169,428 NOI - growth %
(2.6 )% 0.1 % NOI at 100% -
comparable centers 194,299 199,476 169,584 169,428 Lease
cancellation income (337 ) (2,890 ) (2,699 ) (3,325 )
NOI at
100% - comparable centers excluding lease cancellation income
193,962 196,586 166,885
166,103 NOI at 100% excluding lease cancellation
income - growth % (1.3 )% (4)
0.5 %
(1 ) Includes Beverly Center, CityOn.Zhengzhou, The
Mall of San Juan, and Taubman Prestige Outlets Chesterfield.
(2 ) Includes Beverly Center, CityOn.Xi'an, CityOn.Zhengzhou,
Country Club Plaza, International Market Place, The Mall of San
Juan, and Starfield Hanam. (3 ) Includes Beverly Center,
CityOn.Xi'an, Country Club Plaza, International Market Place, The
Mall of San Juan, Starfield Hanam, and certain post-closing
adjustments relating to the portfolio of centers sold to Starwood.
(4 ) The NOI of the Company’s centers in China and South
Korea have been translated using their respective average exchange
rates for the periods presented. Using constant currency exchange
rates, the growth in NOI at 100%, excluding lease cancellation
income, presented would have been (1.2%) for the three months ended
December 31, 2018.
TAUBMAN CENTERS, INC. Table 7 -
Reconciliation of Net Income to Net Operating Income (NOI)
For the Year Ended December 31, 2018, 2017, and 2016
(in
thousands of dollars)
Year Ended
Year Ended
2018 2017 2017 2016 Net income
115,742 112,757 112,757 188,151 Add
(less) depreciation and amortization: Consolidated businesses at
100% 179,275 167,806 167,806 138,139 Noncontrolling partners in
consolidated joint ventures (7,600 ) (7,464 ) (7,464 ) (5,844 )
Share of Unconsolidated Joint Ventures 68,894 66,933 66,933 53,012
Add (less) interest expense and income tax expense (benefit):
Interest expense: Consolidated businesses at 100% 133,197 108,572
108,572 86,285 Noncontrolling partners in consolidated joint
ventures (12,031 ) (11,942 ) (11,942 ) (10,331 ) Share of
Unconsolidated Joint Ventures 68,225 67,283 67,283 54,674 Income
tax expense (benefit): Consolidated businesses at 100% (231 ) 105
105 1,746 Noncontrolling partners in consolidated joint ventures
(192 ) (134 ) (134 ) (49 ) Share of Unconsolidated Joint Ventures
3,220 2,825 2,825 622 Share of income tax expense on disposition
731 731 Income tax expense on SPG common stock conversion 466 Less
noncontrolling share of income of consolidated joint ventures
(6,268 ) (6,775 ) (6,775 ) (8,105 ) Add EBITDA attributable to
outside partners: EBITDA attributable to noncontrolling partners in
consolidated joint ventures 26,091 26,315 26,315 24,329 EBITDA
attributable to outside partners in Unconsolidated Joint Ventures
194,382 184,539 184,539 140,208
EBITDA at 100% 762,704 711,551 711,551
663,303 Add (less) items excluded from shopping center NOI:
General and administrative expenses 37,174 39,018 39,018 48,056
Management, leasing, and development services, net (1,801 ) (2,226
) (2,226 ) (24,017 ) (1) Restructuring charge 596 13,848 13,848
Costs associated with shareowner activism 12,500 14,500 14,500
3,000 Straight-line of rents (12,428 ) (10,718 ) (10,718 ) (7,620 )
Fluctuation in fair value of SPG common shares investment (2,801 )
Gain on SPG common stock conversions (11,613 ) (11,613 ) (11,069 )
Insurance recoveries - The Mall of San Juan (1,234 ) (1,101 )
(1,101 ) Gain on disposition (4,445 ) (4,445 ) Gains on sales of
peripheral land (1,034 ) (2,613 ) (2,613 ) (1,828 ) Dividend income
(4,062 ) (4,219 ) (4,219 ) (3,836 ) Interest income (7,797 ) (7,251
) (7,251 ) (6,488 ) Other nonoperating income 291 (41 ) (41 ) (362
) Unallocated operating expenses and other 33,463 39,256
39,256 44,576
NOI at 100% - total
portfolio 815,571 773,946 773,946
703,715 Less NOI of non-comparable centers (57,786 ) (2)
(47,878 ) (2) (149,950 ) (3) (90,229 ) (4)
NOI at 100% -
comparable centers 757,785 726,068
623,996 613,486 NOI - growth %
4.4 % 1.7 % NOI at 100% -
comparable centers 757,785 726,068 623,996 613,486 Lease
cancellation income (17,122 ) (12,838 ) (12,669 ) (6,200 )
NOI
at 100% - comparable centers excluding lease cancellation
income 740,663 713,230
611,327 607,286 NOI at 100%
excluding lease cancellation income - growth % 3.8
% (5)
0.7 % (1 ) Amount includes
the lump sum payment of $21.7 million received in May 2016 in
connection with the termination of the Company's third party
leasing agreement for Crystals due to a change in ownership of the
center. (2 ) Includes Beverly Center, CityOn.Zhengzhou, The
Mall of San Juan, and Taubman Prestige Outlets Chesterfield.
(3 ) Includes Beverly Center, CityOn.Xi'an, CityOn.Zhengzhou,
Country Club Plaza, International Market Place, The Mall of San
Juan, and Starfield Hanam. (4 ) Includes Beverly Center,
CityOn.Xi'an, Country Club Plaza, International Market Place, The
Mall of San Juan, Starfield Hanam, and certain post-closing
adjustments relating to the portfolio of centers sold to Starwood.
(5 ) The NOI of the Company’s centers in China and South
Korea have been translated using their respective average exchange
rates for the periods presented. Using constant currency exchange
rates, the growth in NOI at 100%, excluding lease cancellation
income, presented would have been 3.5% for the year ended December
31, 2018.
TAUBMAN CENTERS, INC. Table 8 - 2019 Annual
Guidance (all dollar amounts per common share on a diluted
basis; amounts may not add due to rounding)
Range for the Year Ended December 31, 2019
Funds from Operations per common share $
3.62 $ 3.74 Real estate depreciation - TRG
(2.64 ) (2.53 ) Distributions to participating securities of TRG
(0.03 ) (0.03 ) Depreciation of TCO's additional basis in TRG (0.11
) (0.11 )
Net income attributable to common shareowners, per
common share (EPS) $ 0.84 $
1.08
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190213005815/en/
Erik Wright, Taubman, Manager, Investor Relations,
248-258-7232ewright@taubman.com
Maria Mainville, Taubman, Director, Strategic Communications,
248-258-7469mmainville@taubman.com
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