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Taubman Centers (TCO) Q3 FFO Lags Estimates, Revenues Up Y/Y

Retail real estate investment trust (REIT) Taubman Centers Inc. TCO reported third-quarter 2017 adjusted funds from operations (FFO) per share of 83 cents, which missed the Zacks Consensus Estimate of 89 cents. The figure also came 11.7% below the year-ago tally of 94 cents.

However, revenues came in at $153.2 million, beating the Zacks Consensus Estimate of $149.0 million. Revenues were also up 3.5% from the prior-year quarter.

The quarter experienced higher rent per square foot, and lower general and administrative expenses.

Taubman Centers, Inc. Price, Consensus and EPS Surprise

Taubman Centers, Inc. Price, Consensus and EPS Surprise | Taubman Centers, Inc. Quote

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share.

Quarter in Detail

Total portfolio net operating income (NOI) climbed 6.7% for the quarter. However, comparable center NOI edged down 1.3% year over year. Average rent per square foot came in at $60.61, up 0.6% year over year. For the period ended Sep 30, 2017, the trailing 12-month releasing spreads per square foot were 6.7%.

Moreover, comparable center mall tenant sales per square foot inched up 1.6% in the quarter. Further, trailing 12-month comparable center mall tenant sales per square foot was $802, marking increase of 2.8%.

As of Sep 30, 2017, leased space in comparable centers was 96.3%, which was 2.7% higher than in-place occupancy. Moreover, ending occupancy in comparable centers was 93.6% on Sep 30, 2017, reflecting a contraction of 1.4% from the prior year. However, the company anticipates ending occupancy in comparable centers to achieve 96% level by year end.


Taubman Centers exited the third quarter with cash and cash equivalents of $37.8 million, down from $40.6 million at year-end 2016.


Taubman Centers reaffirmed its prior 2017 adjusted FFO per share guidance in the range of $3.67-$3.77. However, the company revised its FFO per share guidance to $3.49-$3.59 per share from the previous range of $3.53-$3.63. The Zacks Consensus Estimate for the year is currently pegged at $3.72.

Notably, the company expects its 2017 adjusted FFO more possibly to come in the lower-end of the range. This is because the operations of The Mall of San Juan will be affected by Hurricane Maria.

Yet, the company reaffirmed its prior comparable center NOI guidance and expects it to be in the range of 1-3% for the year, including lease cancellation income.

Our Viewpoint

The company’s solid retail portfolio, high-quality retailers and diligent restructuring initiatives are likely to support its growth. However, dwindling mall traffic and store closures amid aggressive growth in online sales have kept retail REITs on tenterhooks. This has emerged as a pressing concern for Taubman. Nevertheless, the company is making concerted efforts to backfill spaces created by store closures and tenant bankruptcies. But margins are likely to remain restricted in the near term.

Currently, Taubman Centers has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has lost 14.3% of its value in the past three months, underperforming the 3.7% decline of the industry it belongs to.

Let us now look forward to the earnings releases of Welltower Inc. HCN, Mack-Cali Realty Corporation CLI and Lamar Advertising Company LAMR, all of which are expected to report quarterly figures in the next week.

Note:  FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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