Taubman Centers Inc. (TCO)

Q1 2010 Earnings Call Transcript

April 23, 2010 11:00 am ET

Executives

Barbara Baker – VP, IR

Robert Taubman – Chairman, President and CEO

Lisa Payne – Vice Chairman and CFO

Analysts

Christy McElroy – UBS

Craig Schmidt – Banc of America

Quentin Velleley – Citi

Michael Bilerman – Citi

Ian Weissman – ISI Group

Jay Habermann – Goldman Sachs

Michael Mueller – JP Morgan

Cedric Lachance – Green Street Advisors

Tayo Okusanya – Jefferies & Company

Ben Yang – Keefe, Bruyette & Woods

Andrew Simpson – Credit Suisse

David Wigginton – Macquarie

Presentation

Operator

Good morning. My name is Robin and I will be your conference operator today. At this time, I would like to welcome everyone to the Taubman Centers first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Ms. Barbara Baker, you may begin your conference.

Barbara Baker

Thank you, Robin and welcome everyone to our first quarter conference call. Joining me today on the call are Robert Taubman, our Chairman, President and CEO and Lisa Payne, our Vice Chairman and Chief Financial Officer. Yesterday, we released our first quarter’s results and our supplemental information package. Both are available on our website www.taubman.com. As you know during this conference call, we will be making forward-looking statements within the meanings of the federal securities laws. These statements reflect our current views with respect to future events and financial performance of our actual results may differ materially. Please see our SEC filings including our latest Form 10-K and subsequent reports for discussion of various risks and uncertainties underlining our forward-looking statements.

During this call, we’ll also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and in our supplemental information. In addition, a replay of the call is provided through a link on the Investor Relations section of our website. If you haven’t been to our website lately or if you didn’t receive an earnings release in your e-mail this quarter, I would encourage you to take a look at our new investor room and sign up for our broaden menu of investor alerts. We’ve added many new options including SEC filings and stock price alerts as well as our press releases and supplementals.

For our agenda today, first Bobby will be providing an overview of the quarter followed by a discussion of the company’s operating statistics and internal growth – external growth. Then Lisa will discuss our financial performance and our balance sheet. Bobby will return to discuss guidance and provide closing comments. Then we’ll be available for your questions.

With that, let me turn the call over to Bobby.

Robert Taubman

Thanks, Barbara and thank you all for joining us today. This quarter we reported assets as per share of $0.60, compared to $0.70 last year. This is fully consistent with our original annual guidance. But the big news was the strength in tenant sales.

Last quarter, we expressed cautious optimism, the retail sales hit bottom. This quarter they came roaring back – up 10.8%. All three months were strong. January up 8, February up 10 and March up 14%. Most retailers believe the early Easter accounted for 3% to 5% of March, about 1% to 1.5% of quarter. As we said in the press release, we were especially pleased that Michigan and Florida lead the sales increases. The increases were broad based and for the first time in years, our core Women’s Ready Wear concept showed real strength. This bodes well for the future.

Other strong categories included Home Furnishings, Accessories, Men’s, Unisex and Children’s Apparel. Many tenants with multiple locations had exceptional increases across our portfolio. These include Abercrombie & Fitch, Aeropostale, Aerie, American Eagle, Brooks Brothers, Burberry, Chico’s, Express, Foot Locker, Gap, Justice, Louis Vuitton, Restoration Hardware, Pottery Barn, Victoria’s Secret and William-Sonoma. All of these increased more than 15%, many over 20% and some more than 30%.

Leasing has continued to be active. The number of deals signed was up 13% from the first quarter of ‘09. We recently signed a 5-store for every 21 package that upsizes the stores at Beverly, Dolphin, Great Lakes, Sunvalley and Twelve Oaks. While larger, the stores are not anchors and will occupy space within the mall.

Scheduled openings are from July of this year through early 2011. At International Plaza, Urban Outfitters is moving from another location in the area. At Twelve Oaks, we signed a White House/Black Market deal.

At Sunvalley, we just signed a 20,000 square foot Odyssey store and at Beverly we signed Prada which joins Fendi under construction and Burberry, Gucci, Bergamo, Louis Vuitton and Mont Blanc open at the center. We’ve successfully moved the top end of merchandising at Beverly to a true luxury price point as the retail community has now accepted as a luxury venue. We anticipate a number of similar deals.

All these deals that were signed by March 31 are showing up in our leased-space statistic which includes tenants with signed leases that are not yet open. Lease space was 91.2% at March 31, up 50 basis points from last year. Consistent with our guidance our ending occupancy was 88.2%, 60 basis points below last year. We continue to expect midyear occupancy can be down about 100 basis from prior year and to end the year even with 2009.

Our temporary tenant leasing continues to be strong ending the quarter at 3.2% of tenant area. Given the seasonal nature of this business this is very high, in fact the highest first quarter we’ve seen in seven years we’ve been keeping this statistic. Keep in mind this 3.2% is additive for occupancy but not additive for lease space. It is an additive to lease space because some of the spaces we have leased to permanent tenants will open future periods and are currently occupied by temporary tenants.

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