Taubman Centers (TCO)

Q2 2010 Earnings Call

July 28, 2010 09:00 pm ET


Barbara Baker - VP, IR

Robert Taubman - Chairman, President and CEO

Lisa Payne - Vice Chairman and CFO


David Wigginton - Macquarie Research Equities

Paul Morgan - Morgan Stanley

Jay Habermann - Goldman Sachs

Quentin Velleley - Citi

Michael Bilerman - Citi

Craig Schmidt - Bank of America/Merrill Lynch

Ian Weissman - ISI Group

Ben Yang - Keefe, Bruyette & Woods

Cedrik Lachance - Green Street Advisors

Christy McElroy - UBS

Tayo Okusanya



Good morning, my name is Tabitha and I will be your conference operator today. At this time, I would like to everyone to the Taubman Centers second 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. Baker you may begin your conference.

Barbara Baker

Thank you Tabitha and welcome everyone to Taubman Centers’ second quarter conference call. I’m Barbara Baker, Taubman’s Vice President of Investor Relations. Joining me on the call today are Robert Taubman, our Chairman, President and CEO, and Lisa Payne, our Vice Chairman and Chief Financial Officer. Yesterday we issued our results for the second quarter in our supplemental on 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 meaning of the Federal Securities Laws. These statements reflect our current views with respect to future events and financial performance although actual results may differ materially. Please see our SEC filings including our latest 10-K and subsequent reports for a discussion of various risks and uncertainties underlying our forward-looking-statements.

During this call, we will also suggest and 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. 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 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 will be available for your questions. And with that let me turn the call over to Bobby.

Robert Taubman

Good morning everyone. Thank you Barbara and thank you all for joining us. This was an encouraging quarter. We are delighted to report the continued strength in our tenant sales. We politely lead the industry. Sales per square foot which increased 10.8% in the first quarter continue to surge, up 12.1% in the second quarter. All three months were strong with each month up double digit.

As we said in the press release we are especially pleased that Michigan and Florida continue to lead the sales per square foot increases. In fact Realty Trust and Partridge were our two fastest growing centers each with increases of about 25%. On a trailing 12 month basis this brings us to $523 per square foot moving us closer to our peak of $555 for the calendar year 2007.

Women’s Apparel, which until this year has not shown real strength for several years, did well in the first half. This was led by concepts such as Ann Taylor, J. Jill, and Chico's. Victoria’s Secret and Aerie were standouts in the Women’s Specialty category. Top performing luxury tenants were Louis Vuitton, Coach and Cartier. Family Shoes were also strong with Foot Locker and Skechers up in the double digits.

Electronics was led by Sony and of course Apple with its very successful iPad launch in early April. Home Furnishings was also strong. Pottery Barn, William-Sonoma and Restoration Hardware were all up significantly. We signed some terrific leases. At Beverly, Superdry, an apparel concept from England (inaudible) a trendy, casual dining concept to be located in Center Court and D&G flagship modeled after the prototype in Milan, this 65,000 square foot store would be the first flagship in a mall in US. At Cherry Creek, (inaudible) one of the two new openings in the country now set for August. At Dolphin, Bloomingdale’s outlets, we have only four in the country. At Great Lakes Crossing, four outstanding outlets to open later this year, Banana Republic outlet, Chico's outlet, Polo Ralph Lauren outlet and Taubman Aerie outlet at Sun Valley, Safeway for their new upscale prototype in the former moving space next to the center.

At Willow Bend, Ocean Blue, and a sea food restaurant opening this year. At Shoreview, Rugby which is the newer concept by Ralph Lauren and four new luxury tenants, Miu Miu, Prada, Van Cleef and Dolce & Gabbana. And throughout our portfolio, 16 American Eagle leases, including four of the newest concept stores 77 kids ours will be among the first group of stores to open. We are still trending up now for nine months. Rents are beginning to strengthen. The retails are still sensitive to occupancy costs and are continually negotiating tough challenging ways. Opening rents were $46.55 for the second quarter, that's up from $44.80 in the first quarter.

We continue to believe that our opening rents will improve during 2010. We are confident that we will end the year measurably above 2009 levels of $46.63. Average rents for the quarter were $43.20, that’s down half a percent from last year. For the full year, we expect average rent will be down about 1.5%, that's an improvement from our original guidance of down 2% to 2.5%. Our ending occupancy was 87.9%, 90 basis points below last year. This is consistent with our guidance and we continue to expect to end of the year even with 2009 which was 89.6%.

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