Taubman Centers, Inc. 4Q09 results

TCO reported weak 4Q09 results with sagging core revenues and operating results. The rental income (minimum rents and percentage rents) declined 5.8% (y-o-y) to $92.5 mn from $98.2 mn in 4Q08. However, the decline in non-cash expenses like depreciation helped reduce the impact on bottom line from an accounting perspective with net income (excluding impairment charges and a litigation charge) declining lower 1.8% (y-o-y). Adjusted FFO which excludes the impact of non-cash items like deprecation declined 5.1% (y-o-y) to $76.6 mn from $80.8 mn in 4Q08.

Minimum rents declined 5.0% (y-o-y) to $87.1 mn from $91.6 mn in 4Q08. Average occupancy dipped to 89.5% from 90.5% in 4Q08 and average base rent declined 3.2% (y-o-y) to $42.56 PSF (per sq ft) from $43.96 PSF in 4Q08. While the tenant sales per square feet were reported to improve 3.8% (y-o-y), the percentage rents declined 17.1% (y-o-y) to $5.5 mn from $6.6 mn in 4Q08 largely owing to reduced occupancy and reduced percentage rents as % of mall tenant sales. Other revenues which include shopping centre related revenues and lease cancellation revenues dropped nearly 50% (y-o-y) to $8.4 mn from $16.8 mn in 4Q08 largely owing to negligible lease cancellation revenues of 0.5 mn against $7.5 mn in 4Q08. The decline in core revenues were offset by increase in management fees from Macao Studio City development fees as well as higher expense recoveries. Total revenues were down 1.9% (y-o-y) to $186.3 mn from $189.9 mn in 4Q08.

 

Taubman Centers, Inc. 4Q09 results

TCO reported weak 4Q09 results with sagging core revenues and operating results. The rental income (minimum rents and percentage rents) declined 5.8% (y-o-y) to $92.5 mn from $98.2 mn in 4Q08. However, the decline in non-cash expenses like depreciation helped reduce the impact on bottom line from an accounting perspective with net income (excluding impairment charges and a litigation charge) declining lower 1.8% (y-o-y). Adjusted FFO which excludes the impact of non-cash items like deprecation declined 5.1% (y-o-y) to $76.6 mn from $80.8 mn in 4Q08.

Minimum rents declined 5.0% (y-o-y) to $87.1 mn from $91.6 mn in 4Q08. Average occupancy dipped to 89.5% from 90.5% in 4Q08 and average base rent declined 3.2% (y-o-y) to $42.56 PSF (per sq ft) from $43.96 PSF in 4Q08. While the tenant sales per square feet were reported to improve 3.8% (y-o-y), the percentage rents declined 17.1% (y-o-y) to $5.5 mn from $6.6 mn in 4Q08 largely owing to reduced occupancy and reduced percentage rents as % of mall tenant sales. Other revenues which include shopping centre related revenues and lease cancellation revenues dropped nearly 50% (y-o-y) to $8.4 mn from $16.8 mn in 4Q08 largely owing to negligible lease cancellation revenues of 0.5 mn against $7.5 mn in 4Q08. The decline in core revenues were offset by increase in management fees from Macao Studio City development fees as well as higher expense recoveries. Total revenues were down 1.9% (y-o-y) to $186.3 mn from $189.9 mn in 4Q08.

 

 As a quick recap: I pointed out the illogical, self destructive, circular relationship between Goldman and its clients/customers as significant monies are lost following bad advice and purchasing trash in the form of financial and investment products. See "Reggie Middleton vs Goldman Sachs, Round 1". Goldman has recently issued a buy rating on the commercial REIT sector (of course, Goldman has started underwriting and selling REIT securities), something that I consider to be suicidal at best. Let's take some anecdotal glances into the commercial real estate world to see exactly what it is that Goldman would have us buy, and why.

 As a quick recap: I pointed out the illogical, self destructive, circular relationship between Goldman and its clients/customers as significant monies are lost following bad advice and purchasing trash in the form of financial and investment products. See "Reggie Middleton vs Goldman Sachs, Round 1". Goldman has recently issued a buy rating on the commercial REIT sector (of course, Goldman has started underwriting and selling REIT securities), something that I consider to be suicidal at best. Let's take some anecdotal glances into the commercial real estate world to see exactly what it is that Goldman would have us buy, and why.

As predicted by Zerohedge (see Is Goldman Preparing To Upgrade The REIT Sector?) and probably preordained by their underwriting of REIT debt a couple of weeks ago (see Reggie Middleton Personally Contragulates Goldman, but Questions How Much More Can Be Pulled Off), Goldman Sachs has upgraded the US REIT sector, and put a buy recommendation on Taubman.

If I were you I would keep my eyes open for additional Goldman underwritings in the REIT space in order to help said entities out of their bad debt dilemma, which of course doesn't exist since Goldman just recommended that we buy these companies. That is, until said analysts/strategist leave the employ of their respective bank - then all of a sudden the truth comes out.

Don't believe me, see the off Broadway version of the "Pump 'em and Dump 'em" play - "Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!." Don't forget to notice the change of heart of the head REIT analyst right after he leaves Merrill Lynch.

Of course, Wall Street analysts have absolutely nothing to do with their investment banking, broking and trading brethren, Right????

The post on Macerich that I released for a few hours yesterday had a material data input error causing some of the unconsolidated numbers to be off. It is being corrected and I will re-post it once it is fully checked.

As predicted by Zerohedge (see Is Goldman Preparing To Upgrade The REIT Sector?) and probably preordained by their underwriting of REIT debt a couple of weeks ago (see Reggie Middleton Personally Contragulates Goldman, but Questions How Much More Can Be Pulled Off), Goldman Sachs has upgraded the US REIT sector, and put a buy recommendation on Taubman.

If I were you I would keep my eyes open for additional Goldman underwritings in the REIT space in order to help said entities out of their bad debt dilemma, which of course doesn't exist since Goldman just recommended that we buy these companies. That is, until said analysts/strategist leave the employ of their respective bank - then all of a sudden the truth comes out.

Don't believe me, see the off Broadway version of the "Pump 'em and Dump 'em" play - "Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!." Don't forget to notice the change of heart of the head REIT analyst right after he leaves Merrill Lynch.

Of course, Wall Street analysts have absolutely nothing to do with their investment banking, broking and trading brethren, Right????

The post on Macerich that I released for a few hours yesterday had a material data input error causing some of the unconsolidated numbers to be off. It is being corrected and I will re-post it once it is fully checked.

The TCO reports are now available. Here is an excerpt from the Professional level report:

The following table summarizes the valuation of each property through NOI-based and CFAT-based approaches. Individual property valuations will be discussed in detail separately, and released to professional subscribers.

Click to enlarge...

tco_ltvs.png                      
The two deep underwater properties - The Piers Shops at Caesars and Regency Square were written down to the fair value by recording impairment charge in 3Q09. While the former is being handed over to the lenders for auction proceedings, the latter still remains with the Company and the Company continues to service its debt obligations.  Additionally, there are 5 more properties with LTV of more than 80%, making them highly susceptible to reach the negative equity territory in case of further declines in rentals or increase in cap rates.

It is noteworthy that properties with high LTV include a) the new developments during 2005- 2008 phase and b) the existing properties against which additional debt was raised during 2005-2008. Among the properties with LTV of more than 80%, Northlake Mall was the new development in 2005, The Piers Shops was acquired in 2007, while additional debt was raised against International Plaza, The Mall at Short Hills, The Mall at Wellington Green and Waterside Shops during 2005-2008.

Additionally, there are four properties - MacArthur Center, The Mall at Partridge Creek, Stony Point and Westfarms - with LTVs in the "immediately at risk" zone.

So, I am sure many are wondering if these properties are destined to be written off, or what??? Well, let's look at the trend...

cap_rate_trend.png

Sharply rising cap rates combined with...

mall_vacancies.png

  Dramatically increasing mall vacancies.

Subscribers can download the full reports here:

TCO Report - Retail TCO Report - Retail 2009-11-27 11:41:15 355.95 Kb

TCO Report - Professional TCO Report - Professional 2009-11-27 11:42:05 663.14 Kb

I will probably be releasing the lenders to these properties in the upcoming week. Any banks that have economic interests in these properties, or others should feel free to reach out to me via phone or email to discuss my research.

The TCO reports are now available. Here is an excerpt from the Professional level report:

The following table summarizes the valuation of each property through NOI-based and CFAT-based approaches. Individual property valuations will be discussed in detail separately, and released to professional subscribers.

Click to enlarge...

tco_ltvs.png                      
The two deep underwater properties - The Piers Shops at Caesars and Regency Square were written down to the fair value by recording impairment charge in 3Q09. While the former is being handed over to the lenders for auction proceedings, the latter still remains with the Company and the Company continues to service its debt obligations.  Additionally, there are 5 more properties with LTV of more than 80%, making them highly susceptible to reach the negative equity territory in case of further declines in rentals or increase in cap rates.

It is noteworthy that properties with high LTV include a) the new developments during 2005- 2008 phase and b) the existing properties against which additional debt was raised during 2005-2008. Among the properties with LTV of more than 80%, Northlake Mall was the new development in 2005, The Piers Shops was acquired in 2007, while additional debt was raised against International Plaza, The Mall at Short Hills, The Mall at Wellington Green and Waterside Shops during 2005-2008.

Additionally, there are four properties - MacArthur Center, The Mall at Partridge Creek, Stony Point and Westfarms - with LTVs in the "immediately at risk" zone.

So, I am sure many are wondering if these properties are destined to be written off, or what??? Well, let's look at the trend...

cap_rate_trend.png

Sharply rising cap rates combined with...

mall_vacancies.png

  Dramatically increasing mall vacancies.

Subscribers can download the full reports here:

TCO Report - Retail TCO Report - Retail 2009-11-27 11:41:15 355.95 Kb

TCO Report - Professional TCO Report - Professional 2009-11-27 11:42:05 663.14 Kb

I will probably be releasing the lenders to these properties in the upcoming week. Any banks that have economic interests in these properties, or others should feel free to reach out to me via phone or email to discuss my research.

gs_congrats.jpg

The world's most handsome and charismatic blogger stands outside his beloved friends at Goldman Sachs to congratulate them on the outstanding CMBS offering made through TALF government leveraging for Developers Diversified Realty (notice the funny looks that I am getting from the women in the background, haven't they seen a handsome and charismatic blogger before??? Cool). I have a few questions about follow on offerings and what that may portend for REITs who are in a even better situation than DDR, but let's read up on why I walked past GS headquarters in the first place. After the article excerpted below, we will discuss some tidbits of data and info that neither Goldman nor the REIT prolific Merrill Lynch, or anyone within a bonus' throw or subway distance from 85 Broad will bother to tell you about the REITs, save that handsome and charismatic guy who dares poke fun at the "Almighty at 85"!

From WSJ.com:

Demand is expected to be strong Monday for the first sale of commercial-mortgage-backed securities under a government rescue program designed, in part, to ease the mounting stress in the commercial-property sector.

But the strong demand is partly a reflection of the conservative underwriting of the $400 million in bonds backed by 28 Developers Diversified Realty Corp. shopping centers, in terms of the quality of the assets underlying the loan and the loan amount relative to the value of the properties. [If BoomBustBloggers remember, DDR is the company which was part and parcel of what appears to be (but only if you were to really use your imagination) a "pump'em, dump'em, double tax'em" plan with Merrill Lynch/BofA, see "Here's a Big Company Bailout by the Taxpayer That Even the Taxpayer's Missed!"]  While the deal may help reopen a vital funding source for some commercial-property investors, it will likely provide little solace to owners of tens of billions of dollars of office buildings, shopping centers and other commercial real estate that are now worth less than their mortgages. [more on this in a minute]