BLOOMFIELD HILLS, Mich., Feb. 6 /PRNewswire-FirstCall/ -- Taubman Centers, Inc. today issued its financial results for the quarter and year ended December 31, 2005.
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Net Income (loss) allocable to common shareholders per diluted common share (EPS) for the year ended December 31, 2005 was $0.87 versus $(0.10) for the year ended December 31, 2004. These results include a $52.8 million gain on the sale of Woodland Mall (Grand Rapids, Mich.) that occurred in the fourth quarter of 2005. EPS for the quarter ended December 31, 2005 was $0.93 versus $(0.04) for the quarter ended December 31, 2004.
Adjusted Funds From Operations (FFO) per share was $2.36 in 2005, up 9.3 percent from $2.16 in 2004. Adjusted FFO excludes various financing costs in both years and restructuring costs in 2004. In 2005, to be consistent with industry practice when computing FFO, the company began adding back depreciation on common area maintenance (CAM) assets that were previously charged through reimbursable expenses over a period of one year. FFO for 2004 has been restated to be comparable. For the year ended December 31, 2005, FFO per diluted share was $2.17 versus $2.07 per diluted share for the year ended December 31, 2004. FFO per share for 2005 was impacted by $0.19 for previously announced debt prepayment premium, write-off of financing costs and a charge upon redemption of Series A Preferred Stock. FFO per share for 2004 included $0.09 in charges for the redemption of the Series C and D preferred equity and a restructuring loss. (For detail on these items, including the depreciation add-back, see accompanying Table 2.)
Excluding financing-related items in both periods and a restructuring loss in the fourth quarter of 2004, Adjusted FFO per share was $0.77, up 16.7 percent from $0.66 for the quarter ended December 31, 2004. For the quarter ended December 31, 2005, FFO per diluted share was $0.62 versus $0.56 for the quarter ended December 31, 2004.
"The fundamentals of our business are very strong," said Robert S. Taubman, chairman, president and chief executive officer of Taubman Centers. "This terrific performance has been reflected in our stock price -- generating a 20.4 percent total return to shareholders in 2005 and a compound annual average return of 21 percent over the last 10 years."
Taubman Achieves Record Sales Productivity, Occupancy Up
During the year the company's properties achieved record average tenant sales per square foot of $508, up 9.0 percent. This marks the first time any regional mall portfolio has averaged over the $500 level. "Breaking through this milestone is a testament to the productivity and consistency of our assets," said Mr. Taubman. "Average sales per square foot is by far the most important measure of retail success.
"Why is it so important? It demonstrates what we like to call the 'perpetuating cycle of success' in our business: The more a center's environment and merchandise mix are appealing to shoppers, the more productive the center's retailers become, the higher rents the retailers can pay, the more the landlord and its investors are rewarded, the better able the landlord is to keep the properties appealing to shoppers. In surpassing the $500 milestone, we and our retailers have raised the performance bar."
Occupancy in comparable centers reached 90.3 percent at December 31, 2005 versus 89.6 percent at December 31, 2004. "This is reflective of the current strong retail environment," said Mr. Taubman. "Sales are increasing, bankruptcies are at record lows, and the best retailers want to locate in our centers."
2005 Year in Review: Expansion and Development Activity
The company continues to build on its successful history of growth with expansions of existing centers, progress on developments and the opening of a new avenue of growth in Asia. During 2005 the company:
* Formed Taubman Asia, Ltd., the expansion platform for Taubman in the Asian Pacific region, and opened an office in Hong Kong;
* Invested in The Pier at Caesars (Atlantic City, N.J.), a casino-retail project that is slated to open in May of 2006;
* Announced five new Nordstrom stores to open in Taubman properties: Cherry Creek Shopping Center (Denver, Col.), Waterside Shops at Pelican Bay (Naples, Fla.), The Mall at Partridge Creek (Clinton Township, Mich.), The Mall at Oyster Bay (Syosset, Long Island, New York) and Twelve Oaks Mall (Novi, Mich.) -- along with 97,000 square feet of new GLA at that location;
* Announced renovation plans for Stamford Town Center (Stamford, Conn.) to transform the area once occupied by Filene's department store into new restaurant and retail space;
* Finalized a 25-year agreement to provide leasing, development and design-advisory services for about 500,000 square feet of retail space for Project CityCenter, a multi-billion dollar mixed-use urban development project of 18 million square feet in the heart of the Las Vegas Strip;
* Began construction of The Mall at Partridge Creek, a 640,000 square foot open air center anchored by Nordstrom, Parisian and MJR Theatres. The center is scheduled to open in the fall of 2007, with Nordstrom opening in spring 2008;
* In September, opened Northlake Mall in Charlotte, North Carolina, featuring five anchor stores - Belk, Dillard's, Hecht's, Dick's Sporting Goods and a 14-screen AMC movie megaplex -- and up to 145 specialty shops and eateries. At year end, the center was 95 percent leased; for 2006, the center is expected to deliver an 11 percent unlevered return.
2005 Year in Review: Financing Activity
"During 2005 we issued over $800 million in attractively priced long term debt and preferred stock and reduced our floating rate exposure to 6 percent of our total market capitalization," said Lisa A. Payne, vice chairman and chief financial officer. "We now have one of the strongest balance sheets in the sector." This year the company:
* Completed a $200 million, 10-year non-recourse financing with an all-in rate of 5.49 percent on The Mall at Wellington Green (Wellington, Fla.);
* Issued $87 million 7.625% Series H Cumulative Redeemable Preferred Stock , using the proceeds to retire a similar amount of 8.30% Series A Cumulative Redeemable Preferred Stock ;
* Closed on a $540 million fixed-rate refinancing of The Mall at Short Hills (Short Hills, N.J.) at an all-in rate of 5.5 percent, using the proceeds to pay down the existing 6.7 percent $260 million loan on the center and other debt;
* Sold its interest in Woodland, consistent with its plan to recycle capital for growth;
* Authorized a $50 million share repurchase program; and
* Accelerated its common dividend growth rate to 7 percent, the tenth consecutive annual increase.
Financial Outlook
The company is raising its guidance for 2006. The company expects to report 2006 Adjusted FFO per diluted share in the range of $2.45 to $2.50, excluding the impact of the write-off of financing costs expected during 2006. Including this impact, 2006 FFO per diluted share is estimated to be in the range of $2.41 to $2.46. Including the financing charges, the company anticipates its 2006 Net Income allocable to common shareholders to be in the range of $0.35 to $0.55 per common share.
Supplemental Investor Information Available
The company provides supplemental investor information coincident with its earnings announcements. It is available online at http://www.taubman.com/ under "Investor Relations." This packet includes the following information:
* Income Statements
* Reconciliations of Earnings Measures to Net Income
* Changes in Funds from Operations and Earnings Per Share
* Components of Other Income and Other Operating Expense
* Balance Sheets
* Debt Summary
* Other Debt and Equity Information
* Construction and Center Openings
* Capital Spending
* Divestitures
* Operational Statistics
* Owned Centers
* Major Tenants in Owned Portfolio
* Anchors in Owned Portfolio
Investor Conference Call
The company will provide an online Web simulcast and rebroadcast of its 2005 fourth quarter earnings release conference call in which the company will review the results for the quarter and year, progress on its development and financing plans. The live broadcast of the conference call will be available online at http://www.taubman.com/ under "Investor Relations," http://www.fulldisclosure.com/ and http://www.streetevents.com/ on February 7 beginning at 11:00 a.m. EST. The online replay will follow shortly after the call and continue for approximately 90 days.
Taubman Centers, Inc., a real estate investment trust, owns, develops, acquires and operates regional shopping centers nationally. Taubman Centers currently owns and/or manages 22 urban and suburban regional and super regional shopping centers in 11 states. In addition, The Pier at Caesars is under construction and will open in May, 2006 and The Mall at Partridge Creek is under construction and will open in the fall of 2007. Taubman Centers is headquartered in Bloomfield Hills, Mich.
This press release contains forward-looking statements within the meaning of the Securities Act of 1933 as amended. These statements reflect management's current views with respect to future events and financial performance. Actual results may differ materially from those expected because of various risks and uncertainties, including, but not limited to changes in general economic and real estate conditions, changes in the interest rate environment and availability of financing, and adverse changes in the retail industry. Other risks and uncertainties are discussed in the company's filings with the Securities and Exchange Commission including its most recent Annual Report on Form 10-K.
TAUBMAN CENTERS, INC.
Table 1 - Summary of Results
For the Three Months and Year Ended December 31, 2005 and 2004
(in thousands of dollars, except as indicated)
Three Months Ended Year Ended
December 31 December 31
2005 2004 2005 2004
Income before gain on
disposition of interest
in center, discontinued
operations, and minority
and preferred interests (1) 18,237 16,713 57,432 59,970
Gain on disposition of
interest in center (2) 52,799 52,799
Discontinued operations (3) 39 328
Minority interest in
consolidated joint
ventures (191) (18) (167) 18
Minority share of income
of TRG (4) (32,247) (3,527) (40,403) (14,913)
Distributions less than
(in excess of) earnings
allocable to minority
partners (4) 23,408 (5,613) 4,534 (20,781)
TRG preferred
distributions (5) (615) (4,640) (2,460) (12,244)
Net income 61,391 2,954 71,735 12,378
Preferred dividends (6) (6,004) (4,994) (27,622) (17,444)
Net income (loss)
allocable to common
shareowners 55,387 (2,040) 44,113 (5,066)
Income (loss) from
continuing operations per
common share - basic 1.09 (0.04) 0.87 (0.11)
Income (loss) from
continuing operations per
common share - diluted 0.93 (0.04) 0.87 (0.11)
Net income per common
share - basic 1.09 (0.04) 0.87 (0.10)
Net income per common
share - diluted 0.93 (0.04) 0.87 (0.10)
Beneficial interest in
EBITDA - consolidated
businesses (7) (8) 74,977 57,418 250,089 219,765
Beneficial interest in
EBITDA - unconsolidated
joint ventures (7) (8) 33,253 32,428 113,453 115,230
Funds from Operations -
Operating Partnership (7) 50,727 45,886 177,684 170,117
Funds from Operations
allocable to TCO (7) 31,842 27,744 110,578 103,070
Funds from Operations per
common share - basic (7) 0.63 0.57 2.19 2.10
Funds from Operations per
common share - diluted (7) 0.62 0.56 2.17 2.07
Weighted average number of
common shares
outstanding-basic 50,891,067 48,654,657 50,459,314 49,021,843
Weighted average number of
common shares outstanding
-diluted 63,332,717 48,654,657 50,530,139 49,021,843
Common shares outstanding
at end of period 51,866,184 48,745,625
Weighted average units -
Operating Partnership -
basic 81,074,559 80,469,068 81,064,628 80,929,755
Weighted average units -
Operating Partnership -
diluted 82,017,514 81,710,766 82,006,498 82,320,486
Units outstanding at end
of period - Operating
Partnership 81,074,633 80,514,605
Ownership percentage of
the Operating Partnership
at end of period 64.0% 60.6%
Number of owned shopping
centers at end of period 21 21
Operating Statistics:
Mall tenant sales 1,393,006 1,268,144 4,124,534 3,728,010
Mall tenant sales -
comparable (9) 1,338,086 1,230,191 3,991,197 3,618,981
Ending occupancy 90.0% 89.6% 90.0% 89.6%
Ending occupancy -
comparable (9) 90.3% 89.6% 90.3% 89.6%
Average occupancy 89.7% 89.2% 88.9% 87.4%
Average occupancy -
comparable (9) 90.1% 89.2% 89.1% 87.4%
Leased space at end of
period 91.7% 90.7% 91.7% 90.7%
Leased space at end of
period - comparable (9) 91.6% 90.7% 91.6% 90.7%
Mall tenant occupancy
costs as a percentage of
tenant sales-consolidated
businesses (8) 11.6% 12.2% 14.3% 15.2%
Mall tenant occupancy
costs as a percentage of
tenant sales-
unconsolidated joint
ventures (8) 11.0% 11.7% 13.2% 14.4%
Rent per square foot -
consolidated businesses (8) 41.16 41.72 41.41 40.98
Rent per square foot -
unconsolidated joint
ventures (8) 41.76 40.52 42.11 42.09
(1) Income before gain on disposition of interest in center, discontinued operations, and minority and preferred interests for the three months and year ended December 31, 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills, the pay-off of the Northlake Mall loan, and debt modifications in connection with the planned pay-off of the Oyster Bay loan.
(2) In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland for $177.4 million.
(3) During the three months and year ended December 31, 2004, the Company recognized adjustments to the gain on disposition of Biltmore Fashion Park, which was sold in 2003.
(4) Because the Operating Partnership's balance of net equity allocable to partnership unitholders is less than zero, the income allocated to minority partners during the three months and year ended December 31, 2005 and 2004 is equal to the minority partners' share of distributions. The Operating Partnership's net equity allocable to partnership unitholders is less than zero due to accumulated distributions in excess of net income and not as a result of operating losses. In 2005, the Operating Partnership's net income was greater than distributions due to the gain on the disposition of Woodland. In this case, the excess of the minority interest's percentage ownership share of net income over distributions is allocated to the Company.
(5) TRG preferred distributions for the three months and year ended December 31, 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and D Preferred Equity.
(6) Preferred dividends for the year ended December 31, 2005 include a $3.1 million charge incurred in connection with the redemption of $87 million of the Series A Preferred Stock.
(7) Beneficial Interest in EBITDA represents the Operating Partnership's share of the earnings before interest and depreciation and amortization, excluding gains on sales of depreciated operating properties of its consolidated and unconsolidated businesses. The Company believes Beneficial Interest in EBITDA provides a useful indicator of operating performance, as it is customary in the real estate and shopping center business to evaluate the performance of properties on a basis unaffected by capital structure. In addition, the Company uses a comparable measure to EBITDA, net operating income (revenues less operating expenses, excluding depreciation and amortization, "NOI"), as an alternative measure to evaluate the operating performance of centers, both on an individual and stabilized portfolio basis.
The National Association of Real Estate Investment Trusts (NAREIT) defines Funds from Operations (FFO) as net income (loss) (computed in accordance with Generally Accepted Accounting Principles (GAAP)), excluding gains (or losses) from extraordinary items and sales of properties, plus real estate related depreciation and after adjustments for unconsolidated partnerships and joint ventures. The Company believes that FFO is a useful supplemental measure of operating performance for REITs. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, the Company and most industry investors and analysts have considered presentations of operating results that exclude historical cost depreciation to be useful in evaluating the operating performance of REITs. FFO is primarily used by the Company in measuring performance and in formulating corporate goals and compensation. FFO as presented by the Company is not necessarily comparable to the FFO of other REITs due to the fact that not all REITs use the NAREIT definition. FFO should not be considered an alternative to net income as an indicator of the Company's operating performance. Additionally, FFO does not represent cash flows from operating, investing or financing activities as defined by GAAP.
Prior to the fourth quarter of 2004, the Company did not include an add- back for depreciation of center replacement assets when computing its Beneficial Interest in EBITDA or FFO. As of the fourth quarter of 2004, the Company began to include such an add-back for depreciation on assets whose cost was recovered from tenants over a period of more than one year and restated previously reported EBITDA and FFO amounts. The Company did this both to be consistent with industry practice and because it has begun offering its tenants the option to pay a fixed charge or pay their share of common area maintenance (CAM) costs. As more tenants elect the fixed CAM option, over time there will be significantly less matching of CAM income with CAM capital- related expenses, which was the basis for the Company's prior reporting practice.
Because of this change in the Company's business practice and related contractual terms of leases, the Company has reviewed its history of expenditures on center replacement assets, including assets recovered over a one year period, in order to appropriately set pricing for its fixed CAM option and to provide information for planning future expenditures. As a result of this review of expenditures the Company has quantified the amount of CAM assets which were recovered from tenants and depreciated over one year. This additional amount of depreciation has been added back to calculate EBITDA and FFO and the Company has restated previously reported amounts. The Company's share of depreciation on CAM capital expenditures, which is included as a component of recoverable expenses, was $15.7 million and $14.2 million in 2005 and 2004, respectively. EBITDA and FFO for 2004 have been restated to include an add-back for depreciation on CAM assets which were reimbursed in the year of acquisition.
(8) The results of International Plaza are presented within the Consolidated Businesses for periods beginning July 1, 2004, as a result of the Company's acquisition of a controlling interest in the center. Results of International Plaza prior to the acquisition date are included within the Unconsolidated Joint Ventures.
(9) Comparable centers exclude Northlake Mall, which opened in September 2005, and Woodland, which was sold in December 2005.
TAUBMAN CENTERS, INC.
Table 2 - Reconciliation of Funds from Operations per Share to Adjusted
Funds from Operations per Share (1)
For the Periods Ended December 31, 2005 and 2004
(per share amounts on a diluted basis, rounded to nearest penny, and may
not add due to rounding)
Three
Months Ended Year Ended
2005:
Funds from Operations (2) 0.62 2.17
Debt prepayment premium and write-
off of financing costs 0.16 0.16
Charge upon redemption of Series A
Preferred Stock - 0.04
Adjusted Funds from Operations 0.77 2.36
2004:
Funds from Operations - as
originally reported (2) 0.52 1.99
Beneficial interest in depreciation
included in recoverable expenses 0.04 0.07
Funds from Operations 0.56 2.07
Charge upon redemption of Series C
and D Preferred Equity 0.03 0.03
Restructuring loss 0.07 0.07
Insurance recoveries related to
unsolicited tender offer - (0.01)
Adjusted Funds from Operations 0.66 2.16
(1) Supplementally, the Company discloses an Adjusted FFO, which excludes the following unusual and/or nonrecurring items: $10.9 million of charges incurred during the fourth quarter of 2005 in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills and the pay-off of the Northlake Mall loan, as well as $1.8 million of additional financing costs written off related to debt modifications in connection with the planned pay-off of the Oyster Bay loan; a third quarter 2005 charge of $3.1 million incurred in connection with the redemption of $87 million of the Series A Preferred Stock; a $2.7 million charge incurred in the fourth quarter 2004 in connection with the redemption of the Series C and D Preferred Equity; a $5.7 million restructuring loss recognized in the fourth quarter of 2004; and $1.0 million of insurance recoveries in 2004 related to an unsolicited tender offer. The Company discloses this Adjusted FFO due to the significance and infrequent nature of these costs and recoveries. The insurance recoveries relate to the only hostile takeover attempt against the Company in its history and the costs to resist this attempt were clearly not a part of the Company's normal operating results. Given the significance of these costs and recoveries, the Company believes it is essential to a reader's understanding of the Company's results of operations to emphasize the impact on the Company's earnings measures. The adjusted measures are not and should not be considered alternatives to net income or cash flows from operating, investing, or financing activities as defined by GAAP.
(2) Prior to the fourth quarter of 2004, the Company did not include an add-back for depreciation of center replacement assets when computing its Beneficial Interest in EBITDA or FFO. As of the fourth quarter of 2004, the Company began to include such an add-back for depreciation on assets whose cost was recovered from tenants over a period of more than one year and restated previously reported EBITDA and FFO amounts. The Company did this both to be consistent with industry practice and because it has begun offering its tenants the option to pay a fixed charge or pay their share of common area maintenance (CAM) costs. As more tenants elect the fixed CAM option, over time there will be significantly less matching of CAM income with CAM capital- related expenses, which was the basis for the Company's prior reporting practice. Because of this change in the Company's business practice and related contractual terms of leases, the Company has reviewed its history of expenditures on center replacement assets, including assets recovered over a one year period, in order to appropriately set pricing for its fixed CAM option and to provide information for planning future expenditures. As a result of this review of expenditures the Company has quantified the amount of CAM assets which were recovered from tenants and depreciated over one year. This additional amount of depreciation has been added back to calculate EBITDA and FFO and the Company has restated previously reported amounts. For the three months ended December 31, 2005, TRG's beneficial interest in the depreciation of center replacement assets which were reimbursed in the year of acquisition for its Consolidated Businesses and Unconsolidated Joint Ventures was $2.0 million and $1.3 million, respectively (in total, $0.04 per share). For the year ended December 31, 2005, TRG's beneficial interest in the depreciation of center replacement assets which were reimbursed in the year of acquisition for its Consolidated Businesses and Unconsolidated Joint Ventures was $5.2 million and $2.7 million, respectively (in total, $0.10 per share). TRG's restated FFO for the first, second, and third quarters of 2005 was $46.6 million ($0.57 per share), $42.6 million ($0.52 per share), and $37.8 million ($0.46 per share), respectively. The Company's share of depreciation on all CAM capital expenditures, which is included as a component of recoverable expenses, was $15.7 million and $14.2 million in 2005 and 2004, respectively. EBITDA and FFO for 2004 have been restated to include an add-back for depreciation on CAM assets which were reimbursed in the year of acquisition. See Note 7 to Table 1 of this release.
TAUBMAN CENTERS, INC.
Table 3 - Income Statement
For the Quarters Ended December 31, 2005 and 2004
(in thousands of dollars)
2005
UNCONSOLIDATED
CONSOLIDATED JOINT
BUSINESSES VENTURES (1)
REVENUES:
Minimum rents 71,865 47,898
Percentage rents 6,099 5,303
Expense recoveries 41,407 29,273
Management, leasing and
development services 4,894
Other 7,887 1,994
Total revenues 132,152 84,468
OPERATING EXPENSES:
Recoverable expenses (2) 35,482 23,611
Other operating 10,239 4,619
Restructuring loss
Management, leasing and
development services 3,308
General and administrative 7,477
Interest expense (3) 42,361 17,087
Depreciation and amortization 29,788 11,567
Total operating expenses 128,655 56,884
3,497 27,584
Equity in income of Unconsolidated
Joint Ventures (4) 14,740
Income before gain on disposition of
interest in center,
discontinued operations and
minority and preferred interests 18,237
Gain on disposition of interest in
center (4) 52,799
Discontinued operations (5) -
Net gain on disposition of
interest in center
Minority and preferred interests:
TRG preferred distributions (6) (615)
Minority share of consolidated
joint ventures (191)
Minority share of income of TRG (32,247)
Distributions less than (in
excess of) minority share of income 23,408
Net income 61,391
Preferred dividends (6,004)
Net income (loss) allocable to
common shareowners 55,387
SUPPLEMENTAL INFORMATION (7):
EBITDA - 100% 79,489 59,593
EBITDA - outside partners' share (4,512) (26,340)
Beneficial interest in EBITDA 74,977 33,253
Beneficial interest expense (40,895) (9,499)
Non-real estate depreciation (490)
Preferred dividends and
distributions (6,619)
Funds from Operations
contribution 26,973 23,754
Net straightline adjustments to
rental revenue, recoveries,
and ground rent expense at TRG % 413 (32)
2004
UNCONSOLIDATED
CONSOLIDATED JOINT
BUSINESSES VENTURES (1)
REVENUES:
Minimum rents 65,603 48,529
Percentage rents 4,006 3,844
Expense recoveries 38,470 27,804
Management, leasing and
development services 4,994
Other 7,210 3,511
Total revenues 120,283 83,688
OPERATING EXPENSES:
Recoverable expenses (2) 36,259 22,775
Other operating 11,885 6,094
Restructuring loss 5,662
Management, leasing and
development services 2,862
General and administrative 7,233
Interest expense (3) 25,557 17,096
Depreciation and amortization 27,519 11,114
Total operating expenses 116,977 57,079
3,306 26,609
Equity in income of Unconsolidated
Joint Ventures (4) 13,407
Income before gain on disposition of
interest in center,
discontinued operations and
minority and preferred interests 16,713
Gain on disposition of interest in
center (4)
Discontinued operations (5) -
Net gain on disposition of
interest in center 39
Minority and preferred interests:
TRG preferred distributions (6) (4,640)
Minority share of consolidated
joint ventures (18)
Minority share of income of TRG (3,527)
Distributions less than (in
excess of) minority share of income (5,613)
Net income 2,954
Preferred dividends (4,994)
Net income (loss) allocable to
common shareowners (2,040)
SUPPLEMENTAL INFORMATION (7):
EBITDA - 100% 60,194 59,024
EBITDA - outside partners' share (2,776) (26,596)
Beneficial interest in EBITDA 57,418 32,428
Beneficial interest expense (24,276) (9,511)
Non-real estate depreciation (539)
Preferred dividends and
distributions (9,634)
Funds from Operations
contribution 22,969 22,917
Net straightline adjustments to
rental revenue, recoveries,
and ground rent expense at TRG % (376) 51
(1) With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany transactions. The Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their performance as a whole, without regard to the Company's ownership interest. In its consolidated financial statements, the Company accounts for its investments in the Unconsolidated Joint Ventures under the equity method.
(2) Included in recoverable expenses of the Consolidated Businesses and Unconsolidated Joint Ventures (both at 100%) are $3.8 million and $3.4 million, respectively, of depreciation of center replacement assets for the three months ended December 31, 2005, and $3.8 million and $4.2 million, respectively, for the three months ended December 31, 2004.
(3) Interest expense for the three months ended December 31, 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills, the pay-off of the Northlake Mall loan, and debt modifications in connection with the planned pay-off of the Oyster Bay loan.
(4) In December 2005, a 50% owned joint venture sold its interest in Woodland. The Company's equity in the gain on the sale is separately presented on the income statement, and is therefore excluded from the Equity in income of Unconsolidated Joint Ventures line item.
(5)During the three months ended December 31, 2004, an adjustment to the gain on disposition of Biltmore Fashion Park was recognized.
(6) TRG preferred distributions for the three months ended December 31, 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and D Preferred Equity.
(7) EBITDA and FFO for the three months ended December 31, 2004 have been restated from amounts previously reported to include an add-back of depreciation of center replacement assets recoverable from tenants. See Note 7 to Table 1 of this release.
TAUBMAN CENTERS, INC.
Table 4 - Income Statement
For the Years Ended December 31, 2005 and 2004
(in thousands of dollars)
2005
UNCONSOLIDATED
CONSOLIDATED JOINT
BUSINESSES VENTURES (1)
REVENUES:
Minimum rents 262,106 184,528
Percentage rents 9,835 8,112
Expense recoveries 151,950 95,209
Management, leasing and
development services 13,818
Other 35,729 9,496
Total revenues 473,438 297,345
OPERATING EXPENSES:
Recoverable expenses (2) 137,915 80,088
Other operating 45,014 20,740
Costs related to unsolicited
tender offer, net of recoveries
Restructuring loss
Management, leasing and
development services 9,072
General and administrative 27,986
Interest expense (3) 121,612 67,591
Depreciation and amortization 116,857 46,025
Total operating expenses 458,456 214,444
14,982 82,901
Equity in income of Unconsolidated
Joint Ventures (4) 42,450
Income before gain on disposition of
interest in center,
discontinued operations and
minority and preferred interests 57,432
Gain on disposition of interest in
center (4) 52,799
Discontinued operations (5) -
Net gain on disposition of
interest in center
Minority and preferred interests:
TRG preferred distributions (6) (2,460)
Minority share of consolidated
joint ventures (167)
Minority share of income of TRG (40,403)
Distributions less than (in
excess of) minority share of income 4,534
Net income 71,735
Preferred dividends (7) (27,622)
Net income (loss) allocable to
common shareowners 44,113
SUPPLEMENTAL INFORMATION (8):
EBITDA - 100% 264,971 205,305
EBITDA - outside partners' share (14,882) (91,852)
Beneficial interest in EBITDA 250,089 113,453
Beneficial interest expense (116,082) (37,594)
Non-real estate depreciation (2,100)
Preferred dividends and
distributions (30,082)
Funds from Operations
contribution 101,825 75,859
Net straightline adjustments to
rental revenue, recoveries,
and ground rent expense at TRG % 1,680 92
2004
UNCONSOLIDATED
CONSOLIDATED JOINT
BUSINESSES VENTURES (1)
REVENUES:
Minimum rents 235,114 195,017
Percentage rents 6,288 6,534
Expense recoveries 137,466 101,467
Management, leasing and
development services 21,333
Other 31,252 9,771
Total revenues 431,453 312,789
OPERATING EXPENSES:
Recoverable expenses (2) 127,563 85,563
Other operating 38,229 22,193
Costs related to unsolicited
tender offer, net of recoveries (1,044)
Restructuring loss 5,662
Management, leasing and
development services 17,533
General and administrative 26,617
Interest expense (3) 95,934 74,033
Depreciation and amortization 101,059 50,448
Total operating expenses 411,553 232,237
19,900 80,552
Equity in income of Unconsolidated
Joint Ventures (4) 40,070
Income before gain on disposition of
interest in center,
discontinued operations and
minority and preferred interests 59,970
Gain on disposition of interest in
center (4)
Discontinued operations (5) -
Net gain on disposition of
interest in center 328
Minority and preferred interests:
TRG preferred distributions (6) (12,244)
Minority share of consolidated
joint ventures 18
Minority share of income of TRG (14,913)
Distributions less than (in
excess of) minority share of income (20,781)
Net income 12,378
Preferred dividends (7) (17,444)
Net income (loss) allocable to
common shareowners (5,066)
SUPPLEMENTAL INFORMATION (8):
EBITDA - 100% 226,014 214,617
EBITDA - outside partners' share (6,249) (99,387)
Beneficial interest in EBITDA 219,765 115,230
Beneficial interest expense (92,874) (39,913)
Non-real estate depreciation (2,403)
Preferred dividends and
distributions (29,688)
Funds from Operations
contribution 94,800 75,317
Net straightline adjustments to
rental revenue, recoveries,
and ground rent expense at TRG % 1,262 241
(1) With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany transactions. The Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their performance as a whole, without regard to the Company's ownership interest. In its consolidated financial statements, the Company accounts for its investments in the Unconsolidated Joint Ventures under the equity method. The results of International Plaza are presented within the Consolidated Businesses for periods beginning July 1, 2004, as a result of the Company's acquisition of a controlling interest in the center. Results of International Plaza prior to the acquisition date are included within the Unconsolidated Joint Ventures.
(2) Included in recoverable expenses of the Consolidated Businesses and Unconsolidated Joint Ventures (both at 100%) are $11.5 million and $8.8 million, respectively, of depreciation of center replacement assets for the year ended December 31, 2005, and $9.1 million and $9.6 million, respectively, for the year ended December 31, 2004.
(3) Interest expense for the year ended December 31, 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write- off of financing costs related to the refinancing of The Mall at Short Hills, the pay-off of the Northlake Mall loan, and debt modifications in connection with the planned pay-off of the Oyster Bay loan.
(4) In December 2005, a 50% owned joint venture sold its interest in Woodland. The Company's equity in the gain on the sale is separately presented on the income statement, and is therefore excluded from the Equity in income of Unconsolidated Joint Ventures line item.
(5) During the year ended December 31, 2004, a $0.3 million adjustment to the gain on disposition of Biltmore Fashion Park was recognized.
(6) TRG preferred distributions for the year ended December 31, 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and D Preferred Equity.
(7) Preferred dividends for the year ended December 31, 2005 include a $3.1 million charge incurred in connection with the redemption of $87 million of the Series A Preferred Stock.
(8) EBITDA and FFO for the year ended December 31, 2004 have been restated from amounts previously reported to include an add-back of depreciation of center replacement assets recoverable from tenants. See Note 7 to Table 1 of this release.
TAUBMAN CENTERS, INC.
Table 5 - Reconciliation of Net Income (Loss) to Funds from
Operations and Adjusted Funds from Operations
For the Periods Ended December 31, 2005 and 2004
(in thousands of dollars)
Three Months Ended Year Ended
2005 2004 2005 2004
Net income (loss) allocable to
common shareowners 55,387 (2,040) 44,113 (5,066)
Add (less) depreciation and gain on
disposition of property:
Gain on disposition of interest in
center (52,799) (39) (52,799) (328)
Depreciation and amortization (1):
Consolidated businesses at 100% 33,631 31,331 128,377 110,180
Minority partners in
consolidated joint ventures (2,855) (1,477) (9,185) (3,207)
Share of unconsolidated joint
ventures 9,014 9,510 33,409 35,247
Non-real estate depreciation (490) (539) (2,100) (2,403)
Add minority interests in TRG:
Minority share of income of TRG 32,247 3,527 40,403 14,913
Distributions (less than) in
excess of minority share of
income of TRG (23,408) 5,613 (4,534) 20,781
Funds from Operations - TRG 50,727 45,886 177,684 170,117
Funds from Operations - TCO (2) 31,842 27,744 110,578 103,070
Funds from Operations - TRG (1) (2) 50,727 45,886 177,684 170,117
Debt prepayment premium and write-
off of financing costs 12,702 12,702
Charge upon redemption of Series A
Preferred Stock 3,115
Charge upon redemption of Series C
and D Preferred Equity 2,725 2,725
Restructuring loss 5,662 5,662
Insurance recoveries related to
unsolicited tender offer (1,044)
Adjusted Funds from Operations -
TRG (3) 63,429 54,273 193,501 177,460
Adjusted Funds from Operations -
TCO (2)(3) 39,815 32,815 120,501 107,503
(1) Depreciation and amortization includes depreciation of center replacement assets recoverable from tenants, classified as recoverable expenses in the Company's financial statements. TRG's beneficial interest in these amounts are $5.5 million and $6.1 million for the three months ended December 31, 2005 and 2004, respectively, and $15.7 million and $14.2 million for the year ended December 31, 2005 and 2004, respectively. 2004 amounts have been restated to include such depreciation. See Note 7 to Table 1 of this release.
(2) TCO's share of TRG's FFO is based on an average ownership of 63% and 60% during the three months ended December 31, 2005 and 2004, respectively, and 62% and 61% during the year ended December 31, 2005 and 2004, respectively.
(3) Adjusted FFO excludes the following unusual and/or nonrecurring items: charges incurred during the fourth quarter of 2005 in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills, the pay-off of the Northlake Mall loan, and debt modifications in connection with the planned pay-off of the Oyster Bay loan; a third quarter 2005 charge incurred in connection with the redemption of $87 million of the Series A Preferred Stock; a fourth quarter 2004 charge incurred in connection with the redemption of the Series C and D Preferred Equity; a restructuring loss recognized in the fourth quarter of 2004; and insurance recoveries in 2004 related to an unsolicited tender offer.
TAUBMAN CENTERS, INC.
Table 6 - Reconciliation of Net Income (Loss) to Beneficial Interest
in EBITDA
For the Periods Ended December 31, 2005 and 2004
(in thousands of dollars)
Three Months Ended Year Ended
2005 2004 2005 2004
Net income (loss) allocable to common
shareowners 55,387 (2,040) 44,113 (5,066)
Add (less) depreciation and gain on
disposition of property:
Gain on disposition of interest in
center (52,799) (39) (52,799) (328)
Depreciation and amortization (1):
Consolidated businesses at 100% 33,631 31,331 128,377 110,180
Minority partners in consolidated
joint ventures (2,855) (1,477) (9,185) (3,207)
Share of unconsolidated joint
ventures 9,014 9,510 33,409 35,247
Add minority interests in TRG:
Minority share of income of TRG 32,247 3,527 40,403 14,913
Distributions (less than) in excess
of minority share of income of TRG (23,408) 5,613 (4,534) 20,781
Add (less) preferred interests and
interest expense:
Preferred dividends and distributions 6,619 9,634 30,082 29,688
Interest expense for all businesses 59,448 42,653 189,203 169,967
Interest expense allocable to
minority partners in consolidated
joint ventures (1,466) (1,281) (5,530) (3,060)
Interest expense allocable to outside
partners in unconsolidated joint
ventures (7,588) (7,585) (29,997) (34,120)
Beneficial Interest in EBITDA - TRG 108,230 89,846 363,542 334,995
(1) Depreciation and amortization includes depreciation of center replacement assets recoverable from tenants, classified as recoverable expenses in the Company's financial statements. 2004 amounts have been restated to include such depreciation. See Note 7 to Table 1 of this release.
TAUBMAN CENTERS, INC.
Table 7 - Balance Sheets
As of December 31, 2005 and 2004
(in thousands of dollars)
As of
December 31, 2005 December 31, 2004
Consolidated Balance Sheet of Taubman
Centers, Inc. (1):
Assets:
Properties 3,081,324 2,936,964
Accumulated depreciation and
amortization (651,665) (558,891)
2,429,659 2,378,073
Investment in Unconsolidated Joint
Ventures 106,117 129,934
Cash and cash equivalents 163,577 29,081
Accounts and notes receivable, net 41,717 32,124
Accounts and notes receivable from
related parties 2,400 1,636
Deferred charges and other assets 54,110 61,586
2,797,580 2,632,434
Liabilities:
Notes payable 2,089,948 1,930,439
Accounts payable and accrued
liabilities 235,410 223,331
Dividends and distributions payable 15,819 13,892
Distributions in excess of
investments in and net income of
Unconsolidated Joint Ventures 101,028 106,367
2,442,205 2,274,029
Preferred Equity of TRG 29,217 29,217
Shareowners' Equity:
Series A Cumulative Redeemable
Preferred Stock 45 80
Series B Non-Participating
Convertible Preferred Stock 29 30
Series G Cumulative Redeemable
Preferred Stock
Series H Cumulative Redeemable
Preferred Stock
Common Stock 519 487
Additional paid-in capital 739,090 729,481
Accumulated other comprehensive
income (loss) (9,051) (11,387)
Dividends in excess of net income (404,474) (389,503)
326,158 329,188
2,797,580 2,632,434
Combined Balance Sheet of
Unconsolidated Joint Ventures (2):
Assets:
Properties 1,076,743 1,080,482
Accumulated depreciation and
amortization (363,394) (360,830)
713,349 719,652
Cash and cash equivalents 33,498 25,173
Accounts and notes receivable 23,189 22,866
Deferred charges and other assets 24,458 26,213
794,494 793,904
Liabilities:
Notes payable 999,545 1,008,604
Accounts payable and other
liabilities 59,322 53,706
1,058,867 1,062,310
Accumulated Deficiency in Assets:
Accumulated deficiency in assets -
TRG (170,124) (173,579)
Accumulated deficiency in assets -
Joint Venture Partners (91,179) (91,259)
Accumulated other comprehensive
income (loss) - TRG (2,430) (2,817)
Accumulated other comprehensive
income (loss) - Joint Venture
Partners (640) (751)
(264,373) (268,406)
794,494 793,904
(1) Certain reclassifications have been made to prior year information to conform to current year classifications.
(2) Amounts exclude The Pier at Caesars, a center under construction, which TRG made a $4 million contribution to in January 2005. Amounts as of December 31, 2005 also exclude the unconsolidated joint venture that previously owned Woodland, which was sold in December 2005.
TAUBMAN CENTERS, INC.
Table 8 - 2006 Annual Outlook
(all dollar amounts per common share on a diluted basis; amounts may not
add due to rounding)
Range for
Year Ended
December 31,
2006 Range for
Before Financing Year Ended
Financing Costs December 31,
Costs (1) 2006
Funds from Operations per common share 2.45 2.50 (0.04) 2.41 2.46
Real estate depreciation - TRG (1.66) (1.59) (1.66) (1.59)
Depreciation of TCO's additional basis
in TRG (0.13) (0.13) (0.13) (0.13)
Distributions in excess of earnings
allocable to minority interest (0.25) (0.18) (0.02) (0.27) (0.20)
Net income (loss) allocable to common
shareholders, per common share 0.41 0.61 (0.06) 0.35 0.55
(1) The Company expects to recognize a charge of approximately $2 million during the first quarter of 2006 in connection with the write-off of financing costs related to the pay-off of the loans on The Shops at Willow Bend. The Company also expects to recognize a charge of approximately $1 million during the third quarter of 2006 in connection with the write-off of financing costs related to the pay-off of the loan on Dolphin Mall, when it becomes prepayable in August 2006.
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