Taubman Centers CEO Discusses Q1 2012 Results - Earnings Call Transcript

Taubman Centers (TCO)

Q1 2012 Earnings Call

April 27, 2012 10:00 AM ET

Executives

Barbara Baker - VP, IR

Bobby Taubman - CEO & Chairman

Lisa Payne - Vice Chairman & CFO

Analysts

Craig Smith - Bank of America

Christy McElroy - UBS

Alexander Goldfarb - Sandler O' Neill

Paul Morgan - Morgan Stanley

Steve Sakwa - ISI Group

Todd Thomas - KeyBanc Capital

Michael Mueller - JPMorgan

Ben Yang - KBW

Ross Nussbaum - UBS

Cedrik La Chance - Green Street Advisors

Quentin Velleley - Citigroup Global Markets

Tayo Okusanya - Jefferies

Presentation

Operator

Thank you for holding and welcome to the Taubman Centers’ First Quarter Earnings conference call. The call will begin with prepared remarks and then we will open up the line for questions.

On the call today will be Robert Taubman, Taubman Centers’ Chairman, President and Chief Executive Officer; Lisa Payne, Vice Chairman and Chief Financial Officer; and Barbara Baker, Vice President of Investor Relations.

Now, I will turn the call over to Barbara for opening remarks.

Barbara Baker

Thank you, Martina and welcome everyone to our first quarter conference call. Yesterday we released our first quarter results and our supplemental information package. Both are available on our website, www.taubman.com.

As you know, during this conference call we’ll 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, 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 this 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.

When we get to questions, we ask that you limit them to two. And then if you have more, queue up again. That way everyone will have the opportunity to ask a question. Now, let me turn the call over to Bobby.

Bobby Taubman

Thanks Barbara and welcome everyone to our call. This was another excellent quarter with outstanding fundamentals. NOI up 9.3%, sales per square foot up 13.3%. Now nine quarters of double digit sales increase and trailing 12 months sales at $659 per square foot. Net income, FFO, average rents per square foot and occupancy all up and we made significant progress on our external growth initiatives.

On March 22nd, we were delighted to celebrate the grand opening of City Creek Center in Salt Lake City, Utah. It was truly a fantastic event with thousands and thousands of people present. We handed out over a 100,000 directories just in the first day and the entire community embraced this project enthusiastically. With 92 eventually a 100 tenants opening and the rest of the space either leased or committed, the center is open beyond our wildest expectations. We have invested $75 million. In 2012 the center will be accretive and will likely add about $0.05 to the year which was in our guidance. For 2013 our first full 12 months we're expecting a 12% return.

City Creek Center has captured the shopper's imagination. It's much more than just a shopping experience. People have commented, they feel like they are on a vacation at the center. The design is as much an attraction as the outstanding line up of retailers. The roof that opens, that enables an outdoor experience in Utah's amazing arid climate. The streams (inaudible) through the entire shopping center. The two 18 foot waterfalls and the (inaudible) as the center has been designed to the BMDM umbilical cord to the greater downtown. Almost universally, we are hearing from our tenants that initial sales performances well exceeded preopening expectations. Five weeks after opening, traffic continues unabated. We are really proud of this asset and speak volumes about our team and our sponsorship of similar developments around the world. We welcome all of you on this call to come to Salt Lake City and see it as we believe you will be very impressed with this product.

Our US projects continue to move forward. With construction underway in Chesterfield and imminent in Sarasota and San Juan we have now begun to capitalize our investments in these three projects. Together they represent over $600 million of capital at our share that will create NAV.

Let's talk for a moment about each project individually. In Sarasota, the zoning is complete for the mall at University Town Center. We finalized our agreements with the landowner (inaudible) Development and will each own and fund 50% of the project. We'll be responsible for development, management and leasing of the center. The $350 million two level enclosed shopping center will be anchored by Saks, Macy's and Dillard's. The site has terrific visibility and regional access as its right on interstate 75 at the interchange of university parkway. The greater Sarasota market has over 1.2 million people and nearly five million tourists a year with limited upscale shopping opportunities. We think this is a tremendously underserved market, so much so that more than half the small shop space will be new to Sarasota.

The nearly 900,000 square foot center will begin construction later this year and is expected to open in the fall of 2014. We anticipate an 18.5% unlevered return on our investment.

In San Juan we will soon begin construction on Plaza Internacional. This $405 million, 640,000 square foot center will be the first upscale mall in Puerto Rico and the first location for both Nordstrom and Saks on the island. We are expected to be in site work this summer and are targeting a late 2014 opening. We will own at least 80% and up to a 100% of this center depending on the election of the landowner later this year. The landowners developing the casino hotel that will connect to and is expected to open with the center. The anticipated unlevered return is 8.5%. For both Sarasota and San Juan, we expect tenant sales performance in the top half of our portfolio.

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