Taubman Centers, Inc. ( TCO)

Q3 2010 Earnings Call

October 27, 2010 11:00 am ET

Executives

Barbara Baker - VP, IR

Robert Taubman - Chairman, President & CEO

Lisa Payne - CFO

Analysts

Craig Schmidt - Bank of America Merrill Lynch

Quentin Velleley - Citi

Jay Habermann - Goldman Sachs

Christy McElroy - UBS

Michael Mueller - JPMorgan

Cedrik Lachance - Green Street Advisors

Ben Yang - Keefe, Bruyette & Woods

Alex Goldfarb - Sandler O’Neill

Paul Morgan - Morgan Stanley

Tayo Okusanya - Jefferies & Company

Presentation

Operator

Good morning. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Taubman Centers Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]

Thank you. I will now turn today’s call over to Barbara Baker. Please go ahead.

Barbara Baker

Thank you. Hello everyone and welcome to our third quarter conference call. 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 released our results for the third quarter and our supplemental information package. Both are available on our website, www.taubman.com. If you would like to have them sent to you automatically each quarter, please sign up under Request Information on our website.

As you know, during this conference call we’ll 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’ll also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and 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 our 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 remarks and then we’ll be available for your questions. We ask that you limit your questions to two and then if you have more, queue up again. That way everyone has the opportunity to ask a question.

And with that, let me turn over the call to Bobby.

Robert Taubman

Thank you, Barbara and good morning, everyone and thank you all for joining us. This was a solid quarter. We’re delighted with our tenant sales which continue to be very strong. Tenant sales per square foot were up over 13% in the quarter. That brings our year-to-date increase to more than 12%. And our tenant sales per square foot for the trailing 12 months are now up to $539 a square foot.

With a strong fourth quarter, we’ll be very close to our 2007 peak productivity of $555 per square foot. Sales were up across the board with 13 centers up double digits. This included nearly all our centers in Michigan and Florida.

Luxury was particularly strong with concepts such as Cartier, Louis Vuitton, Gucci, Fendi and Dior among our top performers. Other retailers in many categories posted double-digit increases. They included Abercrombie & Fitch, Hollister, Ann Taylor, Justice, H&N and Victoria’s Secret in apparel, Champ Sports in sports, Foot Locker in shoes, Apple and Sony in electronics, Bath and Body in beauty, Oakley in eyeware and accessories and Pottery Barn Kids and Restoration Hardware in home furnishings. Remember, each of these tenants was up in double digits.

As sales increase, the leasing environment gets better and better. Retailers clearly have opened to buy for expansion in 2011 and 2012. The luxury component at Beverly Center continues to grow. We just signed another expansion of Louis Vuitton, now the second time they have expanded in the center.

Prada is under construction and opening soon. They join Gucci, Burberry, Ferragamo, Fendi and the recently expanded Dolce & Gabbana store. At Short Hills, we just leased Prada and Miu Miu.

At Dolphin, we’ve recently signed three new outlet stores including Movado outlet, True Religion outlet and Lord & Taylor outlet stores. This is only one of three Lord & Taylor stores that has opened.

At Willow Bend, we’ve added Bailey Banks & Biddle under a new owner who is opening several new stores.

And finally, at Great Lakes Crossing Outlets, this center has been renamed and rebranded as an outlet mall. Its drawing shoppers from throughout southeastern Michigan and from across the river in Canada, the center sales reflecting this popularity. We’ve recently signed a number of new outlet stores there. They include Lord & Taylor, aerie, HUGO BOSS, Lacoste, Movado and Talbots. Most were ready for business when we celebrated the center’s rebranding in early October.

These new stores joined a host of other outlets such as Polo Ralph Lauren, Banana Republic, Chico’s, Calvin Klein, Coach, Michael Kors, BCBGMAXAZRIA and Nike. We’re anticipating a very strong holiday season at this center.

Moving to rent, we’re encouraged by the 1% increase in our opening rents for the trailing 12 months. We expect to be up as much as 5% for the full year. This is positively impacting our average rent per square foot, now modestly up for the quarter.

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