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NAREIT REIT Week Live Blog: Taubman Centers

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Robert Taubman, chairman, president & CEO, and, Lisa Payne, vice chairman & CFO, are reporting for Taubman Centers at NAREIT's REIT Week.

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Below are notes from the session.

9:33: Taubman: In 2010, tenant sales reached $564 per square foot—well above our previous high of $555 in 2007. In first quarter, the 12-month trailing average reached $581 per square foot. … These sales increases have significantly improved retailer expectations. … Retailers across categories and price points are (expanding). … We are once again able to push rents. … For full year, NOI will be up 2 percent. With the positive shift in the economy and the rebound in retail sales, 2011 will be the year that external growth will resume. … We have four prongs of growth mall development, acquisitions, development in Asia and outlet developments in the U.S. … We believe 15 to 20 new regional malls will be built in the next decade and we hope to build four or five of these.

9:35: Taubman: The mall sector is extremely consolidated. We are always watching and have capital available for selective opportunities. We are also looking in Asia and think we … may have more opportunities there. … We are also bullish on outlets. … We are scouring the country for potential sites. … I've been saying for a while that I would be disappointed if we weren't in a position to announce at least one by the end of 2011 and … should be able to build five to 10 in the (coming) years.

9:40: Taubman: Better sales create better retailer expectations and create better rents over time. Five quarters in a row of double-digit growth is unprecedented. … Obviously we were down tremendously in the 12 months post-Lehman. … We were up 12 percent for the whole of 2010. We were forecasting 3 percent to 4 percent for the year. … What retailers have actually done is to that their good locations they are filling with greater inventory and putting more sales people on the floor. I don't know how long it can last, but we're thrilled with what we've got. … If we have any kind of continuation of this trend, we will achieve $600 per square foot in 2011.

9:48: Taubman: (In response to question about the outlook for the outlet business.) It's clearly a very active space, with a number of new entrants. … Steve Tanger, who is long in this space, has said publicly that in the next 10 years that 100 outlet malls can be build in the United States. We have much more modest goals. We would like to be high-quality assets. A premium regional mall starts at $500 per square foot. We think in the outlet mall, a similar quality asset would start at $400 per square foot. … We would like to start at (that sales level). … We also have said that in the next decade, we would be disappointed if we couldn't find at least five assets and hope to do 10. … We already have two. … At this point with Great Lakes Crossing we have 100 (tenants) and Dolphin Mall has (80 tenants). … We believe we have a place in the industry. We believe our knowledge of retail real estate and these two assets as a base give us a different position than others trying to get into this space.

9:50: Taubman: There's lot of people that cross-shop all the time. It's a different kind of experience. One tends to be open-air. One tends to be much further from an urban area—although start-up development is becoming much closer. … But if you look at brands, much of them tend to be the same (between regional malls and outlet centers). … Part of the reason we've been encouraged to go into the business is that the senior executives of retailers want more locations in the outlet sector. … We looked at the top 30 markets in the U.S. and we do believe there are good opportunities to be built. The only question is who is going to build them?

9:57: Taubman: (In response to question about its Asia strategy.) About 6.5 years ago, we made a determination that the opportunities in the U.S. for regional malls had declined. There were about 40 malls built in the last 10 years. We say there will be 15 to 20. We built 9 in the last decade. We're saying we will build four to five in the next decade. … As we looked at other places, in Asia we felt our skill sets would be valued and there was … enormous building new demand for new supply. … Our strategy was to be pan-Asia. … We would be a service provider with equity ownership—generally minority—in retail components. We had two under construction. Our partners blew up. And the projects are just sitting there right now. We ended up not accomplishing a lot, but learning a lot. … We made a determination through the Great Recession that we should reexamine our strategy, vet it through the company and through the board. We hired a consultant. … We decided to focus on China and focus on Korea. … Provide services and get our feet wet more. We're excited with Renee (Tremblay). … He wanted to build something and we offered him that opportunity. … If there's one thing to focus on, if an Asian owner of land or developer is looking for a partner, it's the global relation with retailers we have. It's going to be a local decision, but it's also going to be an international decision as it moves up the chain. … So when we're talking to Louis Vuitton about 10 different things in our portfolio and we meet with the CEO twice a year in Paris, this is something that's on the agenda.

10:00: Payne: (In response to its debt strategy.) In 1998, we ended up converted from unsecured to secured. We feel very, very strongly that for our company with large, high-quality and consistent assets, we are able to achieve better financing and consistent costs of capital with secured financings. … The kind of rating our company can achieve with a rating agency, doesn't match the quality of our assets. So it's kind of a no-brainer. … We've accessed insurance companies. We've accessed CMBS. Banks are now out doing seven-to-10 year money, with which you can then do an interest-rate swap.

Session ends.

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Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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