Taubman Centers, Inc. (TCO), a real estate investment trust (REIT), reported strong fourth quarter 2009 results with FFO (fund from operations) of 56 cents per share compared to an FFO loss of 57 cents in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income, while adjusted FFO excludes the impairment and restructuring charges.
For full year 2009, FFO was 68 cents per share compared to $1.51 in the previous year. Adjusted FFO (which excludes litigation, restructuring and impairment charges) was $0.93 per share during the quarter versus $1.00 in the year-ago quarter. For full year 2009, adjusted FFO was down 0.6% to $3.06 per share from $3.08 in the previous year.
Most of the operating metrics decreased marginally during the quarter due to the continued softening of the credit market and decline in consumer spending. Occupancy of the entire portfolio decreased to 89.6%, down from 90.5% in the year-earlier period, primarily due to bankruptcy and related store closings of large retailers like Linen N’ Things and One Circuit City.
Average rents in the consolidated portfolio were $42.56 per square foot during the quarter, compared to $43.96 in the year-ago quarter. For full year 2009, average rents in the consolidated portfolio were $43.31 per square foot, compared to $43.95 in the previous year. Mall tenant sales per square foot increased 3.8% year-over-year during the fourth quarter. At year-end 2009, mall tenant sales decreased 6.7% year-over-year to $498 per square foot.
Taubman has one of the strongest balance sheets in its sector. The company has moderate debt maturities in 2010. Furthermore, Taubman had $19.6 million of cash and cash equivalents at year-end 2009, providing it with additional flexibility to tide over the storm.
With improved performance and early signs of market stabilization, Taubman expects FFO for full year 2010 in the range of $2.55 to $2.75 per share. We think Taubman is better positioned than many of its competitors due to its clean balance sheet and minimal debt maturity. In addition, the current dividend at 42 cents per share appears safe and the company is covering the payout with operating cash.
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