Taubman Centers Inc. set a new record for FFO per share growth in the third quarter and year-to-date periods ended September 30, 2002, news which bodes well for retail REITs.
For the quarter ended September 30, 2002, diluted Funds from Operations (FFO) per share for Bloomfield Hills, Mich.-based Taubman Centers increased by 35.3% to $0.46 compared to $0.34 per share in the third quarter of 2001. Diluted FFO per share for the nine months ended September 30, 2002 increased 20.6% to $1.23 from $1.02 per share in the first nine months of 2001.
"This quarter's record FFO per share increase was a result of strength across our business," said Robert S. Taubman, president and CEO of Taubman Centers. "The major components of our growth included a strong performance from our core, the contributions of our new centers and the impact of lower interest rates. In addition, we recognized a $0.025 per share increase from land sale gains in the quarter due to a transaction that had been anticipated for the fourth quarter."
Comparable center end of period occupancy was 89.1% on September 30, 2002, up 1.7% from 87.4% on September 30, 2001. Occupancy for all centers was 85.2% on September 30, 2002, up 2.2% from September 30, 2001. Comparable center leased space was 92.2% at September 30, 2002, up 0.8% from 91.4% on September 30, 2001. Leased space for all centers was 88.5% at September 30, 2002, an increase of 0.5% from September 30, 2001. Average rents were $42.04 for the quarter, up 1.4% from the third quarter of 2001.
Sales per square foot, though, declined 1.4% for the quarter.
"Significant occupancy gains along with modest rental rate increases led to a 3% core NOI growth for the quarter," said Taubman. "While sales per square foot improved slightly from the second quarter's performance, the retail environment remains difficult. However, we are encouraged by the lower level of retail bankruptcies and unscheduled lease terminations this year, both of which have contributed to our occupancy gains."
Taubman has been especially busy with new projects this year.
"We are delighted with the quality of the merchandising and the pace of our leasing efforts at Stony Point Fashion Park, opening on September 18, 2003, in Richmond, Virginia," said Taubman. "Currently, we have executed leases on 50% of the available tenant space, an additional 30% is committed with leases out for signature, and all of the remaining space is under negotiation. "We also completed the construction financing for the center," added Taubman. The $105 million facility, led by Dresdner Bank, bears interest at a rate of LIBOR plus 1.85% and has an initial maturity of August 2005 with two one-year extension options.
On October 18, The Mall at Millenia opened in Orlando. Anchored by Central Florida's only Neiman Marcus, Bloomingdale's and Macy's, the center opened 96% leased. Eighty of The Mall at Millenia's 150 stores and restaurants are new to the Orlando market. By the holidays 147 stores are expected to be open. Taubman is a 50% partner in the center with The Forbes Company of Southfield, Mich.
In late October, Taubman completed its acquisition of Dolphin Mall in Miami, Fla., bringing its ownership position in this 1.3 million-sq.-ft. value regional shopping center to 100%. Concurrently the $10 million note that Swerdlow owed Taubman was repaid and all lawsuits between Taubman and Swerdlow were settled.
Taubman provided an optimistic forecast for the remainder of 2002 and positive guidance for 2003. "Based on the third quarter results we expect 2002 FFO per share to be in the range of $1.66 to $1.68, a 15% to 17% increase over last year's $1.44 per share," said Taubman. "While there is uncertainty regarding the retail environment and interest rates, we are estimating 2003 FFO per share to be in the range of $1.73 to $1.77."