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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FORM
8-K
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
 
 
 
 
 
 
 
 
 
 
 
 
Date of report (date of earliest event reported):
 
February 10, 2020
 
 
 
TAUBMAN CENTERS, INC.
(Exact Name of Registrant as Specified in its Charter)
 
 
 
 
 
 
 
 
 
 
 
 
Michigan
(State of Other Jurisdiction of Incorporation)
 
 
 
1-11530
 
 
 
 
38-2033632
 
(Commission File Number)
 
 
 
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
200 East Long Lake Road
 
 
 
 
 
 
 
 
 
Suite 300
 
 
 
 
 
 
 
 
 
Bloomfield Hills,
Michigan
 
 
 
 
48304-2324
 
(Address of Principal Executive Office)
 
 
 
 
(Zip Code)
 
 
 
Registrant’s Telephone Number, Including Area Code:
 
(248)
 258-6800
 
 
 
 
None
 
(Former Name or Former Address, if Changed Since Last Report)
 
 
     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):
 
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
 
Trading
Name of each exchange
Title of each class
Symbol
on which registered
Common Stock,
$0.01 Par Value
TCO
New York Stock Exchange
 
 
 
 
 
6.5% Series J Cumulative
Redeemable Preferred Stock,
No Par Value
TCO PR J
New York Stock Exchange
 
 
 
 
 
 
 
6.25% Series K Cumulative
Redeemable Preferred Stock,
No Par Value
TCO PR K
New York Stock Exchange
 
 
 
 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.





Item 2.02.    RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

The information under this caption is furnished by Taubman Centers, Inc. (the "Company") in accordance with Securities and Exchange Commission Release No. 33-8216. This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On February 10, 2020, the Company issued a press release announcing its results of operations for the year ended December 31, 2019. A copy of the press release is attached as Exhibit 99 to this report.


Item 9.01.    FINANCIAL STATEMENTS AND EXHIBITS.

(d)    Exhibits

Exhibit
Description
 
 
99
104
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date:
February 10, 2020
TAUBMAN CENTERS, INC.
 
 
 
 
 
 
By:
/s/ Simon J. Leopold
 
 
 
Simon J. Leopold
 
 
 
Executive Vice President, Chief Financial Officer, and Treasurer









Exhibit 99
Taubman Centers, Inc.
T 248.258.6800
 
 
 
 
 
TAUBMANLOGO2019ORANGERGB.JPG
200 East Long Lake Road
www.taubman.com
 
 
Suite 300
 
 
 
Bloomfield Hills, Michigan
 
 
 
48304-2324
 
 
 
 
TAUBMAN CENTERS, INC. ISSUES FOURTH QUARTER AND FULL YEAR 2019 RESULTS

Full Year 2019 Net Income and Earnings Per Diluted Common Share (EPS) Up Primarily Due to Gains on Sales of Interests in Starfield Hanam and CityOn.Zhengzhou
Pro Rata Total Portfolio NOI, Excluding Lease Cancellation Income, Up 4.6 Percent for the Quarter and 3.9 Percent for the Year
Industry-leading Sales Per Square Foot $876, Up 3.1 Percent for the Quarter and 9.8 Percent for the Year
U.S. Comp Center Sales Per Square Foot $972, Up 11 Percent for the Year
Average Rent Per Square Foot Up 1.6 Percent for the Year

BLOOMFIELD HILLS, Mich., Feb. 10, 2020 - - Taubman Centers, Inc. (NYSE: TCO) today reported financial results for the quarter and full year periods ended December 31, 2019.

 
December 31, 2019
Three Months Ended

December 31, 2018
Three Months Ended

December 31, 2019
Year Ended

December 31, 2018
Year Ended

Net income attributable to common shareowners, diluted (in thousands)
($32,792)
$3,087
$206,753
$58,037
Net income attributable to common shareowners (EPS) per diluted common share
($0.54)(1)
$0.05
$3.32(1)
$0.95
Funds from Operations (FFO) per diluted common share
Growth rate

$0.91
5.8%
$0.86

$3.50
(5.7)%
$3.71
Adjusted Funds from Operations (Adjusted FFO) per diluted common share
Growth rate

$0.97
(3)
6.6%
$0.91(4)

$3.71
(3)
(3.1)%

$3.83
(4)

(1) EPS for the three-month period ended December 31, 2019 includes two impairment charges related to Taubman Prestige Outlets Chesterfield and Stamford Town Center totaling $1.09 per diluted common share, partially offset by gains related to the sale of 50 percent of our interest in CityOn.Zhengzhou, of $0.37 per diluted common share.
(2) EPS for the year ended December 31, 2019 was higher primarily due to the sales of 50 percent of our interests in Starfield Hanam and CityOn.Zhengzhou and a litigation settlement related to The Mall of San Juan, resulting in the recognition of gains totaling $3.73 per diluted common share, partially offset by impairment charges of $1.08 per diluted common share.
(3) Adjusted FFO for the three months and year ended December 31, 2019 excludes restructuring charges, deferred income tax expense and other costs incurred related to the Blackstone transactions, costs associated with the Taubman Asia President transition, costs associated with shareholder activism, a charge recognized in connection with the write-off of deferred financings costs and the fluctuation in the fair value of equity securities. Adjusted FFO for the year ended December 31, 2019 also excludes a promote fee (net of tax) related to Starfield Hanam.
(4) Adjusted FFO for the three months and year ended December 31, 2018 excludes restructuring charges, costs associated with shareholder activism, and the fluctuation in the fair value of equity securities. Adjusted FFO for the year ended December 31, 2018 also excludes a charge recognized in connection with the write-off of deferred financing costs.

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Taubman Centers/2

“We produced solid results in the fourth quarter concluding what was a very productive year for the company,” said Robert S. Taubman, chairman, president and chief executive officer of Taubman Centers.

“In 2019 we enhanced our portfolio through our partnership with Blackstone in Asia, the acquisition of a 48.5 percent interest in The Gardens Mall in Palm Beach and by executing on our vision for The Mall at Green Hills in Nashville, all while navigating a challenging retail environment.”

Operating Statistics

Total portfolio NOI growth at our beneficial interest, excluding lease cancellation income, was up 3.9 percent for the year and up 4.6 percent for the fourth quarter.

For the year, comparable center NOI, excluding lease cancellation income was up 0.2 percent, and was up 1.4 percent at our share. Fourth quarter, comparable center NOI, excluding lease cancellation income was down 0.1 percent, and was up 1.7 percent at our share.

“We were pleased with our NOI growth in a year where we experienced elevated tenant bankruptcies and unfavorable foreign currency exchange rates,” said Mr. Taubman. “Our high-quality portfolio of assets continues to grow, notwithstanding a volatile retail environment.”

Tenant sales per square foot in U.S. comparable centers reached a record high of $972 for 2019, an increase of 11 percent. U.S. comparable center tenant sales per square foot were up 2.7 percent in the fourth quarter.

Including Asia, comparable center tenant sales per square foot were $876 for 2019, up 9.8 percent over 2018. Fourth quarter comparable center tenant sales per square foot were up 3.1 percent.

“Sales growth was well-distributed across centers and categories,” said Mr. Taubman. “Apparel, shoes, electronics, food and jewelry all posted increases, building upon strong growth last year.”

For the year, average rent per square foot in comparable centers was $56.12, up 1.6 percent from last year. For the fourth quarter, average rent per square foot was $55.98, up 0.8 percent.

Average rent per square foot in U.S. comparable centers increased to $62.11 in 2019. In the fourth quarter average rent per square foot in U.S. comparable centers was $61.79, essentially flat compared to last year.

The trailing 12-month releasing spread per square foot for the period ended December 31, 2019 was negative 1.1 percent. This spread remains impacted by a small number of deals, concentrated within a few centers, which have an average lease term of less than two years. Without these leases, the releasing spread was 3.2 percent.




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Ending occupancy in comparable centers was 94.3 percent at year-end, down 0.6 percent from December 31, 2018. Leased space in comparable centers was 95.7 percent at year-end, down 0.7 percent from December 31, 2018. Both occupancy and leased space were impacted by Stamford Town Center, which is currently being marketed for sale, as well as the Forever 21 store at The Mall at Short Hills (Short Hills, NJ) which closed in late December.

“Although tenant turnover remains elevated, demand for space in our portfolio remains high,” said Mr. Taubman.

Blackstone Transactions

In December, the company completed the sale of 50 percent of Taubman Asia’s interest in CityOn.Zhengzhou (Zhengzhou, China) to real estate funds managed by the Blackstone Group Inc. (Blackstone) for $89 million, retaining a 24.5 percent ownership interest in the center. The company received net proceeds of $47.5 million, following the allocation of property-level debt, taxes and transaction costs, which were used to pay down debt. The company recognized a gain on disposition of $14.3 million and a gain on remeasurement of $17.8 million related to the sale.

The company expects to complete the sale of Taubman Asia’s 50 percent interest in CityOn.Xi’an (Xi’an, China) to Blackstone in the first quarter of 2020. The sale price is $91 million and net proceeds are expected to be about $50 million, following the allocation of property-level debt, taxes and transaction costs. This represents the third and final asset sale associated with the Blackstone transactions announced last year.

The sales are consistent with Taubman’s announcement to sell 50 percent of its three Asia-based shopping centers to Blackstone. See Taubman to Sell 50 Percent of its Interests in its Three Asia Shopping Centers to Blackstone - February 14, 2019.

Portfolio Activity

In May 2018, the operations, buildings, and improvements of Taubman Prestige Outlets Chesterfield (Chesterfield, Mo.) were transferred to The Staenberg Group (TSG), as part of a redevelopment agreement. See Taubman Centers, Inc. Issues Strong First Quarter Results - April 26, 2018. The company has deferred recognition of a sale until the company’s termination right is no longer available, with the right ceasing upon TSG commencing construction of a redevelopment. TSG has made significant progress on their redevelopment plans and the commencement of construction is probable within the year, leading to an expected sale of the property in 2020. Accordingly, the center was classified as held for sale as of December 31, 2019 and an impairment charge of $72.2 million was recognized in the fourth quarter. The company has no future capital obligation related to the redevelopment and remains entitled to ground lease payments and a share of the property’s future revenues above a specified level.

The company also recognized an impairment charge of $18.0 million related to its equity investment in its 50 percent owned Stamford Town Center (Stamford, Conn.). The shopping center is currently being marketed for sale.


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Taubman Centers/4

2019 Milestones, Events and Financings

During 2019, the company:

Announced agreements to sell 50 percent of Taubman Asia’s interests in three Asia-based shopping centers to funds managed Blackstone. See Taubman to Sell 50 Percent of its Interests in its Three Asia Shopping Centers to Blackstone - February 14, 2019.
Increased the regular quarterly dividend by 3.1 percent to $0.675 per share of common stock. See Taubman Centers Increases Quarterly Common Dividend 3.1 Percent to $0.675 Per Share - March 4, 2019.
Completed a new 1.2 billion Chinese Yuan Renminbi (RMB) (approximately $156 million using December 31, 2019 exchange rate), 10-year, fully-amortizing, non-recourse financing at CityOn.Xi’an (Xi’an, China), with an all-in fixed rate of 6 percent. - March 14, 2019.
Announced the nomination of Michelle Goldberg to the company’s Board of Directors, who was appointed to the Board on May 30, 2019. Ms. Goldberg, along with Janice (Jan) Fields and Nancy Killefer, was one of three new independent directors who joined the Taubman Board in 2019. See Taubman Nominates Michelle J. Goldberg to Board of Directors - April 22, 2019.
Acquired a 48.5 percent interest in The Gardens Mall (Palm Beach Gardens, Fla.) in an off-market, non-cash transaction for 1.5 million Taubman Realty Group Limited Partnership (TRG) units and the assumption of its pro rata share of debt. See Taubman Centers, Inc. Issues Solid First Quarter Results - April 30, 2019.
Completed the sale of 50 percent of Taubman Asia’s interest in Starfield Hanam (Hanam, South Korea) to funds managed by Blackstone. See Taubman Completes Sales of Interest in Starfield Hanam to Blackstone - September 19, 2019.
Announced Paul Wright’s promotion to president, Taubman Asia, effective January 1, 2020. See Peter Sharp Resigns as President of Taubman Asia; Paul Wright to be Promoted into Role - October 11, 2019.
Amended and extended the company’s primary revolving line of credit and one of two unsecured term loans. The $1.1 billion revolving line of credit was extended to February 2024, with two six-month extension options. The term loan, which has a principal balance of $275 million, was extended to February 2025. - October 28, 2019.
Resolved the litigation with Hudson’s Bay Company regarding the former Saks Fifth Avenue location at The Mall of San Juan (San Juan, Puerto Rico), which resulted in a $10.1 million net gain. See Taubman Centers, Inc. Issues Third Quarter Results - October 29, 2019.









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Taubman Centers/5

Simon Property Group to Acquire Taubman

Earlier today the company announced a definitive agreement for Simon Property Group, Inc. (NYSE: SPG) (Simon) to acquire an 80% ownership interest in The Taubman Realty Group Limited Partnership (TRG). Simon, through its operating partnership, Simon Property Group, L.P., will acquire all of Taubman’s common stock for $52.50 per share in cash and the Taubman family will sell approximately one-third of its ownership interest at the transaction price and remain a 20% partner in TRG. See the press release issued separately today by Simon Property Group, Inc. and Taubman Centers, Inc.

Supplemental Investor Information Available

The company provides supplemental investor information along with its earnings announcements, available online at www.taubman.com under “Investors.” This includes the following:

Earnings Press Release
Company Overview
Operational Statistics
Summary of Key Guidance Measures
Income Statements
Changes in Funds from Operations and Earnings Per Common Share
Balance Sheets
Debt Summary
Capital Spending & Certain Balance Sheet Information
Owned Centers
New Development, Acquisition and Partial Dispositions of Ownership Interests
Anchors & Major Tenants in Owned Portfolio
Components of Rental Revenues
Components of Other Income, Other Operating Expense, and Nonoperating Income, Net
Earnings Reconciliations
Glossary

Investor Conference Call

The company, along with Simon, will conduct a live conference call and webcast to discuss Simon’s agreement to acquire Taubman today, February 10, 2020 at 8:30 a.m. EST. The live webcast will be available at investors.simon.com. Within the United States, the call may be accessed by dialing 1-888-528-4228. Callers outside the U.S. can dial 1-704-935-3408. The conference ID for the call is "9456226."





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Taubman Centers/6

An audio replay will be available from approximately 11:30 a.m. EST on February 10, 2020 until 11:00 a.m. Eastern Time on February 17, 2020. The replay can be accessed within the U.S. by dialing 1-855-859-2056. Callers outside the U.S. can access the replay at 404-537-3406. The replay passcode is "9456226." The call will also be archived on investors.simon.com for approximately 90 days.

The company is cancelling its conference call that was scheduled for 10:00 a.m. EST on Thursday, February 13.

About Taubman
Taubman Centers is an S&P MidCap 400 Real Estate Investment Trust engaged in the ownership, management and/or leasing of 26 regional, super-regional and outlet shopping centers in the U.S. and Asia. Taubman’s U.S.-owned properties are the most productive in the publicly held U.S. regional mall industry. Founded in 1950, Taubman is headquartered in Bloomfield Hills, Mich. Taubman Asia, founded in 2005, is headquartered in Hong Kong. www.taubman.com.


For ease of use, references in this press release to “Taubman Centers,”, “we”, “us”, “our”, “company,” “Taubman” or an operating platform mean Taubman Centers, Inc. and/or one or more of a number of separate, affiliated entities. Business is actually conducted by an affiliated entity rather than Taubman Centers, Inc. itself or the named operating platform.

This press release contains certain “forward-looking” statements as that term is defined by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are predictive in nature, that depend on or relate to future events or conditions, or that include words such as “believes”, “anticipates”, “expects”, “may”, “will”, “would,” “should”, “estimates”, “could”, “intends”, “plans” or other similar expressions are forward-looking statements. Forward-looking statements involve significant known and unknown risks and uncertainties that may cause actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of, but not limited to, the following factors: the failure to receive, on a timely basis or otherwise, the required approvals by Taubman’s shareholders; the risk that a condition to closing of the transaction may not be satisfied; Simon’s and Taubman’s ability to consummate the transaction; the possibility that the anticipated benefits from the transaction will not be fully realized; the ability of Taubman to retain key personnel and maintain relationships with business partners pending the consummation of the transaction; and the impact of legislative, regulatory and competitive changes and other risk factors relating to the industries in which Simon and Taubman operate, as detailed from time to time in each of Simon’s and Taubman’s reports filed with the SEC. There can be no assurance that the transaction will in fact be consummated.









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Taubman Centers/7

Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found under Item 1.A in Taubman’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Taubman cautions that the foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-looking statements to make decisions with respect to the proposed transaction, shareholders and others should carefully consider the foregoing factors and other uncertainties and potential events. All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to Taubman or any other person acting on their behalf are expressly qualified in their entirety by the cautionary statements referenced above. The forward-looking statements contained herein speak only as of the date of this communication. Taubman does not undertake any obligation to update or revise any forward-looking statements for any reason, even if new information becomes available or other events occur in the future, except as may be required by law.

Additional Information and Where to Find It

This communication is being made in respect of the proposed transaction involving Taubman and Simon. In connection with the proposed transaction, Taubman intends to file relevant materials with the Securities and Exchange Commission (the “SEC”), including a preliminary proxy statement on Schedule 14A. Promptly after filing its definitive proxy statement with the SEC, Taubman will mail the definitive proxy statement and a proxy card to each shareholder of Taubman entitled to vote at the special meeting relating to the proposed transaction. This communication is not a substitute for the proxy statement or any other document that Taubman may file with the SEC or send to its shareholders in connection with the proposed transaction. BEFORE MAKING ANY VOTING DECISION, SHAREHOLDERS OF TAUBMAN ARE URGED TO READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE PROPOSED TRANSACTION THAT TAUBMAN WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT TAUBMAN AND THE PROPOSED TRANSACTION. The definitive proxy statement, the preliminary proxy statement and other relevant materials in connection with the proposed transaction (when they become available), and any other documents filed by TAUBMAN with the SEC, may be obtained free of charge at the SEC’s website (http://www.sec.gov) or at Taubman’s website (www.taubman.com).

Participants in the Solicitation

Taubman and certain of its directors, executive officers and employees may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the shareholders of Taubman in connection with the transaction, including a description of their respective direct or indirect interests, by security holdings or otherwise, is included in the Proxy Statement described above filed with the SEC. Additional information regarding Taubman’s directors and executive officers is also included in the Taubman’s proxy statement on Schedule 14A for its 2019 Annual Meeting of Shareholders, which was filed with the SEC on April 30, 2019, or its Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 28, 2019. These documents are available free of charge as described above.


CONTACTS:    
Erik Wright, Taubman, Manager, Investor Relations, 248-258-7390
ewright@taubman.com

Maria Mainville, Taubman, Director, Strategic Communications, 248-258-7469
mmainville@taubman.com
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Taubman Centers/8

TAUBMAN CENTERS, INC.
 
 
 
 
 
 
 
 
Table 1 - Income Statement
 
 
 
 
 
 
 
 
For the Three Months Ended December 31, 2019 and 2018
 
 
 
 
 
 
 
 
(in thousands of dollars)
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
 
CONSOLIDATED
 
UNCONSOLIDATED
 
CONSOLIDATED
 
UNCONSOLIDATED
 
 
BUSINESSES
 
JOINT VENTURES (1)
 
BUSINESSES
 
JOINT VENTURES (1)
REVENUES:
 
 
 
 
 
 
 
 
Rental revenues (2)
 
149,247

 
146,397

 
 
 
 
Minimum rents (2)
 
 
 
 
 
91,515

 
90,185

Overage rents
 
10,491

 
10,955

 
9,217

 
10,088

Expense recoveries (2)
 
 
 
 
 
51,337

 
44,179

Management, leasing, and development services
 
811

 
 
 
791

 
 
Other (2)
 
16,187

 
12,216

 
14,629

 
10,212

Total revenues
 
176,736

 
169,568

 
167,489

 
154,664

 
 
 
 
 
 
 
 
 
EXPENSES:
 
 
 
 
 
 
 
 
Maintenance, taxes, utilities, and promotion
 
45,032

 
56,285

 
44,086

 
45,678

Other operating (2)
 
22,278

 
7,124

 
23,155

 
6,708

Management, leasing, and development services
 
665

 
 
 
284

 
 
General and administrative
 
13,804

 
 
 
11,629

 
 
Impairment charges
 
72,232

 
20,600

 
 
 
 
Restructuring charges
 
1,958

 
 
 
1,019

 
 
Costs associated with shareholder activism
 
630

 
 
 
2,500

 
 
Interest expense
 
35,817

 
34,597

 
35,955

 
33,353

Depreciation and amortization
 
51,343

 
35,430

 
54,950

 
33,910

Total expenses
 
243,759

 
154,036

 
173,578

 
119,649

 
 
 
 
 
 
 
 
 
Nonoperating income, net
 
981

 
710

 
856

 
432

 
 
(66,042
)
 
16,242

 
(5,233
)
 
35,447

Income tax expense
 
(1,408
)
 
(4,102
)
 
(553
)
 
(1,450
)
 
 
 
 
 
 
 
 
 
Equity in income of UJVs
 
(580
)
 
 
 
18,724

 
 
Gains on partial dispositions of ownership interests in UJVs, net of tax
 
15,770

 
 
 
 
 
 
Gains on remeasurements of ownership interests in UJVs
 
19,629

 
 
 
 
 
 
Net income
 
(32,631
)
 
12,140

 
12,938

 
33,997

Net income attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Noncontrolling share of income of consolidated joint ventures
 
(1,795
)
 
 
 
(1,880
)
 
 
Noncontrolling share of income of TRG
 
8,015

 
 
 
(1,595
)
 
 
Distributions to participating securities of TRG
 
(596
)
 
 
 
(599
)
 
 
Preferred stock dividends
 
(5,785
)
 
 
 
(5,785
)
 
 
Net income attributable to Taubman Centers, Inc. common shareholders
 
(32,792
)
 
 
 
3,079

 
 
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL INFORMATION:
 
 
 
 
 
 
 
 
EBITDA - 100%
 
58,926

 
86,269

 
85,672

 
102,710

EBITDA - outside partners' share
 
(6,589
)
 
(50,976
)
 
(7,066
)
 
(48,711
)
Beneficial interest in EBITDA
 
52,337

 
35,293

 
78,606

 
53,999

Gains on partial dispositions of ownership interests in UJVs
 
(18,179
)
 
 
 
 
 
 
Gains on remeasurements of ownership interests in UJVs
 
(19,629
)
 
 
 
 
 
 
Beneficial share of impairment charges
 
72,232

 
17,951

 
 
 
 
Beneficial interest expense
 
(33,002
)
 
(17,170
)
 
(32,947
)
 
(17,118
)
Beneficial income tax expense - TRG and TCO
 
(1,408
)
 
(928
)
 
(495
)
 
(513
)
Non-real estate depreciation
 
(1,155
)
 
 
 
(1,188
)
 
 
Preferred dividends and distributions
 
(5,785
)
 
 
 
(5,785
)
 
 
Funds from Operations attributable to partnership unitholders and participating securities of TRG
 
45,411

 
35,146

 
38,191

 
36,368

 
 
 
 
 
 
 
 
 
STRAIGHTLINE AND PURCHASE ACCOUNTING ADJUSTMENTS:
 
 
 
 
 
 
 
Net straight-line adjustments to rental revenues, recoveries, and ground rent expense at TRG%
 
1,245

 
295

 
997

 
476

Country Club Plaza purchase accounting adjustments - rental revenues at TRG%
 
 
 
118

 
 
 
113

The Mall at Green Hills purchase accounting adjustments - rental revenues
 
16

 
 
 
24

 
 
The Gardens Mall purchase accounting adjustments - rental revenues at TRG%
 
 
 
(170
)
 
 
 
 
The Gardens Mall purchase accounting adjustments - interest expense at TRG%
 
 
 
(528
)
 
 
 
 
 
 
 
(1) With the exception of the Supplemental Information, amounts include 100% of the UJVs. Amounts are net of intercompany transactions. The UJVs are presented at 100% in order to allow for measurement of their performance as a whole, without regard to our ownership interest.
(2) Upon adoption of ASC Topic 842, minimum rents and expense recoveries are now presented within a single revenue line item, Rental Revenues; the presentation of lease cancellation income has changed from Other income to Rental Revenues; the presentation of uncollectible tenant revenues has changed from Other Operating expense to Rental Revenues as a contra-revenue; and Other Operating expense includes certain indirect leasing costs, which were capitalizable under the previous lease accounting standard. As a result of the accounting change, an additional $1.0 million of leasing costs were expensed during the three months ended December 31, 2019. Comparative periods presented were not adjusted to reflect the change in accounting.




Taubman Centers/9

TAUBMAN CENTERS, INC.
 
 
 
 
 
 
 
 
Table 2 - Income Statement
 
 
 
 
 
 
 
 
For the Year Ended December 31, 2019 and 2018
 
 
 
 
 
 
 
 
(in thousands of dollars)
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
 
CONSOLIDATED
 
UNCONSOLIDATED
 
CONSOLIDATED
 
UNCONSOLIDATED
 
 
BUSINESSES
 
JOINT VENTURES (1)
 
BUSINESSES
 
JOINT VENTURES (1)
REVENUES:
 
 
 
 
 
 
 
 
Rental revenues (2)
 
581,755

 
557,010

 
 
 
 
Minimum rents (2)
 
 
 
 
 
353,226

 
357,465

Overage rents
 
19,210

 
29,234

 
16,670

 
28,844

Expense recoveries (2)
 
 
 
 
 
205,514

 
178,162

Management, leasing, and development services
 
4,846

 
 
 
3,271

 
 
Other (2)
 
55,243

 
32,995

 
62,189

 
36,246

Total revenues
 
661,054

 
619,239

 
640,870

 
600,717

 
 
 
 
 
 
 
 
 
EXPENSES:
 
 
 
 
 
 
 
 
Maintenance, taxes, utilities, and promotion
 
163,538

 
188,698

 
157,957

 
171,188

Other operating (2)
 
82,488

 
25,910

 
87,308

 
27,327

Management, leasing, and development services
 
3,582

 
 
 
1,470

 
 
General and administrative
 
40,566

 
 
 
37,174

 
 
Impairment charges
 
72,232

 
20,600

 
 
 
 
Restructuring charges
 
3,543

 
 
 
596

 
 
Costs associated with shareholder activism
 
17,305

 
 
 
12,500

 
 
Interest expense
 
148,407

 
138,178

 
133,197

 
132,669

Depreciation and amortization
 
188,407

 
138,607

 
179,275

 
134,872

Total expenses
 
720,068

 
511,993

 
609,477

 
466,056

 
 
 
 
 
 
 
 
 
Nonoperating income, net
 
27,449

 
7,691

 
14,714

 
1,923

 
 
(31,565
)
 
114,937

 
46,107

 
136,584

Income tax (expense) benefit
 
(6,332
)
 
(10,737
)
 
231

 
(6,924
)
 
 
 
 
 
 
 
 
 
Equity in income of UJVs
 
49,166

 
 
 
69,404

 
 
Gains on partial dispositions of ownership interests in UJVs, net of tax
 
154,466

 
 
 
 
 
 
Gains on remeasurements of ownership interests in UJVs
 
164,639

 
 
 
 
 
 
Net income
 
330,374

 
104,200

 
115,742

 
129,660

Net income attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Noncontrolling share of income of consolidated joint ventures
 
(5,014
)
 
 
 
(6,268
)
 
 
Noncontrolling share of income of TRG
 
(95,884
)
 
 
 
(25,988
)
 
 
Distributions to participating securities of TRG
 
(2,413
)
 
 
 
(2,396
)
 
 
Preferred stock dividends
 
(23,138
)
 
 
 
(23,138
)
 
 
Net income attributable to Taubman Centers, Inc. common shareholders
 
203,925

 
 
 
57,952

 
 
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL INFORMATION:
 
 
 
 
 
 
 
 
EBITDA - 100%
 
626,763

 
391,722

 
358,579

 
404,125

EBITDA - outside partners' share
 
(25,064
)
 
(197,616
)
 
(26,091
)
 
(194,382
)
Beneficial interest in EBITDA
 
601,699

 
194,106

 
332,488

 
209,743

Gain on insurance recoveries - The Mall of San Juan
 
(1,418
)
 
 
 
 
 
 
Gain on Saks settlement - The Mall of San Juan
 
(10,095
)
 
 
 
 
 
 
Gains on partial dispositions of ownership interests in UJVs
 
(156,875
)
 
 
 
 
 
 
Gains on remeasurements of ownership interests in UJVs
 
(164,639
)
 
 
 
 
 
 
Beneficial share of impairment charges
 
72,232

 
17,951

 
 
 
 
Beneficial interest expense
 
(136,694
)
 
(69,749
)
 
(121,166
)
 
(68,225
)
Beneficial income tax expense - TRG and TCO
 
(6,143
)
 
(3,608
)
 
423

 
(2,900
)
Beneficial income tax benefit - TCO
 
 
 
 
 
(110
)
 
 
Non-real estate depreciation
 
(4,602
)
 
 
 
(4,590
)
 
 
Preferred dividends and distributions
 
(23,138
)
 
 
 
(23,138
)
 
 
Funds from Operations attributable to partnership unitholders and participating securities of TRG
 
170,327

 
138,700

 
183,907

 
138,618

 
 
 
 
 
 
 
 
 
STRAIGHTLINE AND PURCHASE ACCOUNTING ADJUSTMENTS:
 
 
 
 
 
 
 
Net straight-line adjustments to rental revenues, recoveries, and ground rent expense at TRG%
 
5,672

 
476

 
3,079

 
2,073

Country Club Plaza purchase accounting adjustments - rental revenues at TRG%
 
 
 
375

 
 
 
1,522

The Mall at Green Hills purchase accounting adjustments - rental revenues
 
77

 
 
 
112

 
 
The Gardens Mall purchase accounting adjustments - rental revenues at TRG%
 
 
 
(986
)
 
 
 
 
The Gardens Mall purchase accounting adjustments - interest expense at TRG%
 
 
 
(1,584
)
 
 
 
 
 
 
 
(1) With the exception of the Supplemental Information, amounts include 100% of the UJVs. Amounts are net of intercompany transactions. The UJVs are presented at 100% in order to allow for measurement of their performance as a whole, without regard to our ownership interest.
(2) Upon adoption of ASC Topic 842, minimum rents and expense recoveries are now presented within a single revenue line item, Rental Revenues; the presentation of lease cancellation income has changed from Other income to Rental Revenues; the presentation of uncollectible tenant revenues has changed from Other Operating expense to Rental Revenues as a contra-revenue; and Other Operating expense includes certain indirect leasing costs, which were capitalizable under the previous lease accounting standard. As a result of the accounting change, an additional $4.4 million of leasing costs were expensed during the year ended December 31, 2019. Comparative periods presented were not adjusted to reflect the change in accounting.



Taubman Centers/10

TAUBMAN CENTERS, INC.
Use of Non-GAAP Financial Measures

In this press release, the terms "we", "us", and "our" refer to Taubman Centers, Inc. (TCO), The Taubman Realty Group Limited Partnership (TRG), and/or TRG's subsidiaries as the context may require.

We use certain non-GAAP operating measures, including EBITDA, beneficial interest in EBITDA, Net Operating Income (NOI), beneficial interest in NOI, and Funds from Operations (FFO). These measures are reconciled to the most comparable GAAP measures. Additional information as to the use of these measures are as follows.

EBITDA represents earnings before interest, income taxes, and depreciation and amortization of our consolidated and unconsolidated businesses. Beneficial interest in EBITDA represents our share of the earnings before interest, income taxes, and depreciation and amortization of our consolidated and unconsolidated businesses. We believe EBITDA and beneficial interest in EBITDA provide useful indicators 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.

We use Net Operating Income as an alternative measure to evaluate the operating performance of centers, both on individual and stabilized portfolio bases, and in formulating corporate goals and compensation. We define NOI as property-level operating revenues (includes rental income excluding straight-line adjustments of minimum rent) less maintenance, property taxes, utilities, promotion, ground rent (including straight-line adjustments), and other property operating expenses. Beneficial interest in NOI represents our share of NOI (as previously defined) of our consolidated and unconsolidated businesses. Since NOI excludes general and administrative expenses, pre-development charges, interest income and expense, depreciation and amortization, impairment charges, restructuring charges, and gains from peripheral land and property dispositions, it provides a performance measure that, when compared period over period, reflects the revenues and expenses most directly associated with owning and operating rental properties, as well as the impact on their operations from trends in tenant sales, occupancy and rental rates, and operating costs. We also use NOI excluding lease cancellation income as an alternative measure because this income may vary significantly from period to period, which can affect comparability and trend analysis. We generally provide separate projections for expected comparable center NOI growth and lease cancellation income. Comparable centers are generally defined as centers that were owned and open for the entire current and preceding period presented, excluding centers impacted by significant redevelopment activity. In addition, The Mall of San Juan has been excluded from comparable center statistics as a result of Hurricane Maria given that the center's performance has been and is expected to continue to be materially impacted for the foreseeable future. We also use NOI excluding lease cancellation income using constant currency exchange rates as an alternative measure because exchange rates may vary significantly from period to period, which can affect comparability and trend analysis.

The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (calculated in accordance with Generally Accepted Accounting Principles (GAAP)), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. We believe 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, we 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. We primarily use FFO in measuring performance and in formulating corporate goals and compensation.

We may also present adjusted versions of NOI, beneficial interest in EBITDA, and FFO when used by management to evaluate operating performance when certain significant items have impacted results that affect comparability with prior or future periods due to the nature or amounts of these items. We believe the disclosure of the adjusted items is similarly useful to investors and others to understand management's view on comparability of such measures between periods. The following table summarizes adjustments to FFO and EBITDA for the three months and years ended December 31, 2019 and 2018:
 
FFO
 
EBITDA
 
Three Months Ended
 
Year Ended
 
Three Months Ended
 
Year Ended
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Costs associated with shareholder activism
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
Restructuring charges
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
Costs related to Blackstone transactions
Ÿ
 
 
 
Ÿ
 
 
 
 
 
 
 
Ÿ
 
 
Taubman Asia President transition costs
Ÿ
 
 
 
Ÿ
 
 
 
Ÿ
 
 
 
Ÿ
 
 
Write-off of deferred financing costs
Ÿ
 
 
 
Ÿ
 
Ÿ
 
 
 
 
 
Ÿ
 
 
Promote fee - Starfield Hanam
 
 
 
 
Ÿ
 
 
 
 
 
 
 
Ÿ
 
 
Fluctuation in fair value of equity securities
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
 
Ÿ
Gains on partial dispositions of ownership interests in UJVs
 
 
 
 
 
 
 
 
Ÿ
 
 
 
Ÿ
 
 
Gains on remeasurements of ownership interests in UJVs
 
 
 
 
 
 
 
 
Ÿ
 
 
 
Ÿ
 
 
Beneficial share of impairment charges
 
 
 
 
 
 
 
 
Ÿ
 
 
 
Ÿ
 
 
Gain on Saks settlement - The Mall of San Juan
 
 
 
 
 
 
 
 
 
 
 
 
Ÿ
 
 
Gain on insurance recoveries - The Mall of San Juan
 
 
 
 
 
 
 
 
 
 
 
 
Ÿ
 
 
These non-GAAP measures as presented by us are not necessarily comparable to similarly titled measures used by other REITs due to the fact that not all REITs use the same definitions. These measures should not be considered alternatives to net income or as an indicator of our operating performance. Additionally, these measures do not represent cash flows from operating, investing, or financing activities as defined by GAAP.

We also provide our beneficial interest in certain financial information of our UJVs. This beneficial information is derived as our ownership interest in the investee multiplied by the specific financial statement item being presented. Investors are cautioned that deriving our beneficial interest in this manner may not accurately depict the legal and economic implications of holding a noncontrolling interest in the investee.



Taubman Centers/11

TAUBMAN CENTERS, INC.
 
 
 
 
 
 
 
 
 
 
 
Table 3 - Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareholders to Funds From Operations and Adjusted Funds From Operations
For the Three Months Ended December 31, 2019 and 2018
 
 
 
 
 
 
 
 
 
 
 
(in thousands of dollars except as noted; may not add or recalculate due to rounding)
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
 
 
Shares
 
Per Share
 
 
 
Shares
 
Per Share
 
Dollars
 
/Units
 
/Unit
 
Dollars
 
/Units
 
/Unit
Net income attributable to TCO common shareholders - basic
(32,792
)
 
61,219,679

 
(0.54
)
 
3,079

 
61,065,282

 
0.05

Add impact of share-based compensation
 
 
 
 
 
 
8

 
308,898

 
 
Net income attributable to TCO common shareholders - diluted
(32,792
)
 
61,219,679

 
(0.54
)
 
3,087

 
61,374,180

 
0.05

Add depreciation of TCO's additional basis
1,617

 
 
 
0.03

 
1,617

 
 
 
0.03

Add impairment of TCO's additional basis
12,606

 
 
 
0.21

 
 
 
 
 
 
Net income attributable to TCO common shareholders,
excluding step-up depreciation and impairment of additional basis
(18,569
)
 
61,219,679

 
(0.30
)
 
4,704

 
61,374,180

 
0.08

Add (less) noncontrolling share of income of TRG
(8,015
)
 
26,424,964

 
 
 
1,915

 
24,881,563

 
 
Add distributions to participating securities of TRG
596

 
871,262

 
 
 
599

 
871,262

 
 
Net income attributable to partnership unitholders and
participating securities of TRG
(25,988
)
 
88,515,905

 
(0.29
)
 
7,218

 
87,127,005

 
0.08

Add (less) depreciation and amortization:
 
 
 
 
 
 
 
 
 
 
 
Consolidated businesses at 100%
51,343

 
 
 
0.58

 
54,950

 
 
 
0.63

Depreciation of TCO's additional basis
(1,617
)
 
 
 
(0.02
)
 
(1,617
)
 
 
 
(0.02
)
Noncontrolling partners in consolidated joint ventures
(1,979
)
 
 
 
(0.02
)
 
(2,120
)
 
 
 
(0.02
)
Share of UJVs
17,775

 
 
 
0.20

 
17,324

 
 
 
0.20

Non-real estate depreciation
(1,155
)
 
 
 
(0.01
)
 
(1,188
)
 
 
 
(0.01
)
Less gains on partial dispositions of ownership interests in UJVs, net of tax
(15,770
)
 
 
 
(0.18
)
 
 
 
 
 
 
Less gains on remeasurements of ownership interests in UJVs
(19,629
)
 
 
 
(0.22
)
 
 
 
 
 
 
Add beneficial share of impairment charges
90,183

 
 
 
1.02

 
 
 
 
 
 
Less impairment of TCO's additional basis
(12,606
)
 
 
 
(0.14
)
 
 
 
 
 
 
Add (less) impact of share-based compensation

 
164,912

 

 
(8
)
 
 
 
(0.00
)
Funds from Operations attributable to partnership unitholders
and participating securities of TRG
80,557

 
88,680,817

 
0.91

 
74,559

 
87,127,005

 
0.86

TCO's average ownership percentage of TRG - basic (1)
69.8
%
 
 
 
 
 
71.1
%
 
 
 
 
Funds from Operations attributable to TCO's common shareholders (1)
56,269

 
 
 
0.91

 
52,974

 
 
 
0.86

 
 
 
 
 
 
 
 
 
 
 
 
Funds from Operations attributable to partnership unitholders
and participating securities of TRG
80,557

 
88,680,817

 
0.91

 
74,559

 
87,127,005

 
0.86

Costs associated with shareholder activism
630

 
 
 
0.01

 
2,500

 
 
 
0.03

Restructuring charges
1,958

 
 
 
0.02

 
1,019

 
 
 
0.01

Costs related to Blackstone transactions (2)
1,160

 
 
 
0.01

 
 
 
 
 
 
Taubman Asia President transition costs
1,211

 
 
 
0.01

 
 
 
 
 
 
Write-off of deferred financing costs
259

 
 
 
0.00

 

 
 
 

Fluctuation in fair value of equity securities
(146
)
 
 
 
(0.00
)
 
1,272

 
 
 
0.01

Adjusted Funds from Operations attributable to partnership unitholders
and participating securities of TRG
85,629

 
88,680,817

 
0.97

 
79,350

 
87,127,005

 
0.91

TCO's average ownership percentage of TRG - basic (3)
69.8
%
 
 
 
 
 
71.1
%
 
 
 
 
Adjusted Funds from Operations attributable to TCO's common shareholders (3)
59,812

 
 
 
0.97

 
56,378

 
 
 
0.91

 
 
 
 
 
 
 
 
 
 
 
 
(1) For the three months ended December 31, 2019, Funds from Operations attributable to TCO's common shareholders was $55,612 using TCO's diluted average ownership percentage of TRG of 69.0%. For the three months ended December 31, 2018, Funds from Operations attributable to TCO's common shareholders was $52,257 using TCO's diluted average ownership percentage of TRG of 70.1%.
(2) Includes $1.2 million of deferred income tax expense related to the Blackstone transactions, which has been recorded within Income Tax Expense in our Statement of Operations and Comprehensive Income (Loss).
(3) For the three months ended December 31, 2019, Adjusted Funds from Operations attributable to TCO's common shareholders was $59,113 using TCO's diluted average ownership percentage of TRG of 69.0%. For the three months ended December 31, 2018, Adjusted Funds from Operations attributable to TCO's common shareholders was $55,615 using TCO's diluted average ownership percentage of TRG of 70.1%.



Taubman Centers/12

TAUBMAN CENTERS, INC.
 
 
 
 
 
 
 
 
 
 
 
Table 4 - Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations and Adjusted Funds from Operations
For the Year Ended December 31, 2019 and 2018
 
 
 
 
 
 
 
 
 
 
 
(in thousands of dollars except as noted; may not add or recalculate due to rounding)
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
 
 
Shares
 
Per Share
 
 
 
Shares
 
Per Share
 
Dollars
 
/Units
 
/Unit
 
Dollars
 
/Units
 
/Unit
Net income attributable to TCO common shareholders - basic
203,925

 
61,181,983

 
3.33

 
57,952

 
60,994,444

 
0.95

Add distributions to participating securities of TRG
2,413

 
871,262

 
 
 
 
 
 
 
 
Add impact of share-based compensation
415

 
185,194

 
 
 
85

 
283,271

 
 
Net income attributable to TCO common shareholders - diluted
206,753

 
62,238,439

 
3.32

 
58,037

 
61,277,715

 
0.95

Add depreciation of TCO's additional basis
6,468

 
 
 
0.10

 
6,468

 
 
 
0.11

Add impairment of TCO's additional basis
12,606

 
 
 
0.20

 
 
 
 
 
 
Less TCO's additional income tax benefit
 
 
 
 
 
 
(110
)
 
 
 
(0.00
)
Net income attributable to TCO common shareholders, excluding step-up
depreciation, impairment of additional basis, and additional income tax benefit
225,827

 
62,238,439

 
3.63

 
64,395

 
61,277,715

 
1.05

Add noncontrolling share of income of TRG
95,884

 
26,053,498

 
 
 
26,308

 
24,932,870

 
 
Add distributions to participating securities of TRG
 
 
 
 
 
 
2,396

 
871,262

 
 
Net income attributable to partnership unitholders and
participating securities of TRG
321,711

 
88,291,937

 
3.64

 
93,099

 
87,081,847

 
1.07

Add (less) depreciation and amortization:
 
 
 
 
 
 
 
 
 
 
 
Consolidated businesses at 100%
188,407

 
 
 
2.13

 
179,275

 
 
 
2.06

Depreciation of TCO's additional basis
(6,468
)
 
 
 
(0.07
)
 
(6,468
)
 
 
 
(0.07
)
Noncontrolling partners in consolidated joint ventures
(8,148
)
 
 
 
(0.09
)
 
(7,600
)
 
 
 
(0.09
)
Share of UJVs
71,583

 
 
 
0.81

 
68,894

 
 
 
0.79

Non-real estate depreciation
(4,602
)
 
 
 
(0.05
)
 
(4,590
)
 
 
 
(0.05
)
Less gain on insurance recoveries - The Mall of San Juan
(1,418
)
 
 
 
(0.02
)
 
 
 
 
 
 
Less gain on Saks settlement - The Mall of San Juan
(10,095
)
 
 
 
(0.11
)
 
 
 
 
 
 
Less gains on partial dispositions of ownership interests in UJVs, net of tax
(154,466
)
 
 
 
(1.75
)
 
 
 
 
 
 
Less gains on remeasurements of ownership interests in UJVs
(164,639
)
 
 
 
(1.86
)
 
 
 
 
 
 
Add beneficial share of impairment charges
90,183

 
 
 
1.02

 
 
 
 
 
 
Less impairment of TCO's additional basis
(12,606
)
 
 
 
(0.14
)
 
 
 
 
 
 
Less impact of share-based compensation
(415
)
 
 
 
(0.00
)
 
(85
)
 
 
 
(0.00
)
Funds from Operations attributable to partnership unitholders
and participating securities of TRG
309,027

 
88,291,937

 
3.50

 
322,525

 
87,081,847

 
3.70

TCO's average ownership percentage of TRG - basic (1)
70.1
%
 
 
 
 
 
71.0
%
 
 
 
 
Funds from Operations attributable to TCO's common shareholders,
excluding additional income tax benefit (1)
216,813

 
 
 
3.50

 
228,936

 
 
 
3.70

Add TCO's additional income tax benefit
 
 
 
 
 
 
110

 
 
 
0.00

Funds from Operations attributable to TCO's common shareholders (1)
216,813

 
 
 
3.50

 
229,046

 
 
 
3.71

 
 
 
 
 
 
 
 
 
 
 
 
Funds from Operations attributable to partnership unitholders
and participating securities of TRG
309,027

 
88,291,937

 
3.50

 
322,525

 
87,081,847

 
3.70

Costs associated with shareholder activism
17,305

 
 
 
0.20

 
12,500

 
 
 
0.14

Restructuring charges
3,543

 
 
 
0.04

 
596

 
 
 
0.01

Costs related to Blackstone transactions (2)
3,226

 
 
 
0.04

 
 
 
 
 
 
Taubman Asia President transition costs
1,211

 
 
 
0.01

 
 
 
 
 
 
Write-off of deferred financing costs
259

 
 
 
0.00

 
382

 
 
 
0.00

Promote fee, net of tax - Starfield Hanam (3)
(3,961
)
 
 
 
(0.04
)
 
 
 
 
 
 
Fluctuation in fair value of equity securities
(3,492
)
 
 
 
(0.04
)
 
(2,801
)
 
 
 
(0.03
)
Adjusted Funds from Operations attributable to partnership unitholders
and participating securities of TRG
327,118

 
88,291,937

 
3.70

 
333,202

 
87,081,847

 
3.83

TCO's average ownership percentage of TRG - basic (4)
70.1
%
 
 
 
 
 
71.0
%
 
 
 
 
Adjusted Funds from Operations attributable to TCO's common shareholders (4)
229,460

 
 
 
3.71

 
236,513

 
 
 
3.83

 
 
 
 
 
 
 
 
 
 
 
 
(1) For the year ended December 31, 2019, Funds from Operations attributable to TCO's common shareholders was $214,195 using TCO's diluted average ownership percentage of TRG of 69.3%. For the year ended December 31, 2018, Funds from Operations attributable to TCO's common shareholders was $226,013 using TCO's diluted average ownership percentage of TRG of 70.0%.
(2) Includes $0.5 million of disposition costs incurred prior to the completion of the sales of our ownership interests and $2.7 million of income tax expense related to the pending Blackstone transactions, which have been recorded within Nonoperating Income, Net and Income Tax Expense, respectively, in our Statement of Operations and Comprehensive Income (Loss).
(3) Includes $4.8 million of promote fee income related to Starfield Hanam less $0.9 million of income tax expense, which have been recorded within Equity in Income of UJVs and Income Tax Expense, respectively, in our Statement of Operations and Comprehensive Income (Loss).
(4) For the year ended December 31, 2019, Adjusted Funds from Operations attributable to TCO's common shareholders was $226,691 using TCO's diluted average ownership percentage of TRG of 69.3%. For the year ended December 31, 2018, Adjusted Funds from Operations attributable to TCO's common shareholders was $233,376 using TCO's diluted average ownership percentage of TRG of 70.0%.



Taubman Centers/13

TAUBMAN CENTERS, INC.
 
 
 
 
 
 
 
Table 5 - Reconciliation of Net Income to Beneficial Interest in EBITDA and Adjusted Beneficial Interest in EBITDA
 
 
 
 
For the Periods Ended December 31, 2019 and 2018
 
 
 
 
 
 
 
(in thousands of dollars; amounts attributable to TCO may not recalculate due to rounding)
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
2019
 
2018
 
2019
 
2018
Net income
(32,631
)
 
12,938

 
330,374

 
115,742

 
 
 
 
 
 
 
 
Add (less) depreciation and amortization:
 
 
 
 
 
 
 
Consolidated businesses at 100%
51,343

 
54,950

 
188,407

 
179,275

Noncontrolling partners in consolidated joint ventures
(1,979
)
 
(2,120
)
 
(8,148
)
 
(7,600
)
Share of UJVs
17,775

 
17,324

 
71,583

 
68,894

 
 
 
 
 
 
 
 
Add (less) interest expense and income tax expense (benefit):
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
Consolidated businesses at 100%
35,817

 
35,955

 
148,407

 
133,197

Noncontrolling partners in consolidated joint ventures
(2,815
)
 
(3,008
)
 
(11,713
)
 
(12,031
)
Share of UJVs
17,170

 
17,118

 
69,749

 
68,225

Income tax expense (benefit):
 
 
 
 
 
 
 
Consolidated businesses at 100%
1,408

 
553

 
6,332

 
(231
)
Noncontrolling partners in consolidated joint ventures
 
 
(58
)
 
(189
)
 
(192
)
Share of UJVs
928

 
833

 
3,608

 
3,220

Share of income tax expense on dispositions of ownership interests
2,409

 
 
 
2,409

 
 
 
 
 
 
 
 
 
 
Less noncontrolling share of income of consolidated joint ventures
(1,795
)
 
(1,880
)
 
(5,014
)
 
(6,268
)
 
 
 
 
 
 
 
 
Beneficial interest in EBITDA
87,630

 
132,605

 
795,805

 
542,231

 
 
 
 
 
 
 
 
Add impairment of TCO's additional basis
12,606

 
 
 
12,606

 
 
 
 
 
 
 
 
 
 
Beneficial interest in EBITDA, before impairment of TCO's additional basis
100,236

 
 
 
808,411

 
 
 
 
 
 
 
 
 
 
TCO's average ownership percentage of TRG - basic
69.8
%
 
71.1
%
 
70.1
%
 
71.0
%
 
 
 
 
 
 
 
 
Beneficial interest in EBITDA attributable to TCO, before impairment of TCO's additional basis
70,015

 


 
566,298

 


 
 
 
 
 
 
 
 
Less impairment of TCO's additional basis
(12,606
)
 
 
 
(12,606
)
 
 
 
 
 
 
 
 
 
 
Beneficial interest in EBITDA attributable to TCO
57,409

 
94,216

 
553,692

 
384,895

 
 
 
 
 
 
 
 
Beneficial interest in EBITDA
87,630

 
132,605

 
795,805

 
542,231

 
 
 
 
 
 
 
 
Add (less):
 
 
 
 
 
 
 
Costs associated with shareowner activism
630

 
2,500

 
17,305

 
12,500

Restructuring charges
1,958

 
1,019

 
3,543

 
596

Disposition costs related to Blackstone transactions
 
 
 
 
487

 
 
Taubman Asia President transition costs
1,211

 
 
 
1,211

 
 
Promote fee - Starfield Hanam
 
 
 
 
(4,820
)
 
 
Fluctuation in fair value of equity securities
(146
)
 
1,272

 
(3,492
)
 
(2,801
)
Gains on partial dispositions of ownership interests in UJVs
(18,179
)
 
 
 
(156,875
)
 
 
Gains on remeasurments of ownership interests in UJVs
(19,629
)
 
 
 
(164,639
)
 
 
Beneficial share of impairment charges
90,183

 
 
 
90,183

 
 
Gain on Saks settlement - The Mall of San Juan
 
 
 
 
(10,095
)
 
 
Gain on insurance recoveries - The Mall of San Juan
 
 
 
 
(1,418
)
 
 
 
 
 
 
 
 
 
 
Adjusted Beneficial interest in EBITDA
143,658

 
137,396

 
567,195

 
552,526

 
 
 
 
 
 
 
 
TCO's average ownership percentage of TRG - basic
69.8
%
 
71.1
%
 
70.1
%
 
71.0
%
 
 
 
 
 
 
 
 
Adjusted Beneficial interest in EBITDA attributable to TCO
100,345

 
97,620

 
397,841

 
392,200





Taubman Centers/14

TAUBMAN CENTERS, INC.
 
 
 
 
 
 
 
 
Table 6 - Reconciliation of Net Income to Net Operating Income (NOI)
 
 
 
 
 
 
 
 
For the Three Months Ended December 31, 2019, 2018, and 2017
 
 
 
 
 
 
 
 
(in thousands of dollars)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
 
2019
 
2018
 
2018
 
2017
 
Net income
(32,631
)
 
12,938

 
12,938

 
38,084

 
Add (less) depreciation and amortization:
 
 
 
 
 
 
 
 
 
Consolidated businesses at 100%
51,343

 
54,950

 
54,950

 
44,848

 
 
Noncontrolling partners in consolidated joint ventures
(1,979
)
 
(2,120
)
 
(2,120
)
 
(1,888
)
 
 
Share of UJVs
17,775

 
17,324

 
17,324

 
17,114

 
Add (less) interest expense and income tax expense (benefit):
 
 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
 
 
Consolidated businesses at 100%
35,817

 
35,955

 
35,955

 
28,498

 
 
Noncontrolling partners in consolidated joint ventures
(2,815
)
 
(3,008
)
 
(3,008
)
 
(3,004
)
 
 
Share of UJVs
17,170

 
17,118

 
17,118

 
17,079

 
 
Income tax expense (benefit):
 
 
 
 
 
 
 
 
 
Consolidated businesses at 100%
1,408

 
553

 
553

 
(270
)
 
 
Noncontrolling partners in consolidated joint ventures
 
 
(58
)
 
(58
)
 
(47
)
 
 
Share of UJVs
928

 
833

 
833

 
554

 
 
Share of income tax expense on disposition
2,409

 
 
 
 
 
 
 
Less noncontrolling share of income of consolidated joint ventures
(1,795
)
 
(1,880
)
 
(1,880
)
 
(2,496
)
 
Add EBITDA attributable to outside partners:
 
 
 
 
 
 
 
 
 
EBITDA attributable to noncontrolling partners in consolidated joint ventures
6,589

 
7,066

 
7,066

 
7,435

 
 
EBITDA attributable to outside partners in UJVs
50,976

 
48,711

 
48,711

 
49,274

 
EBITDA at 100%
145,195

 
188,382

 
188,382

 
195,181

 
Add (less) items excluded from shopping center NOI:
 
 
 
 
 
 
 
 
 
General and administrative expenses
13,804

 
11,629

 
11,629

 
9,369

 
 
Management, leasing, and development services, net
(146
)
 
(507
)
 
(507
)
 
(485
)
 
 
Restructuring charges
1,958

 
1,019

 
1,019

 
9,785

 
 
Costs associated with shareholder activism
630

 
2,500

 
2,500

 
2,500

 
 
Straight-line of rents
(2,461
)
 
(2,722
)
 
(2,722
)
 
(3,600
)
 
 
Nonoperating income, net
(1,691
)
 
(1,288
)
 
(1,288
)
 
(15,940
)
 
 
Impairment charges
92,832

 
 
 
 
 
 
 
 
Gains on partial dispositions of ownership interests in UJVs
(18,179
)
 
 
 
 
 
 
 
 
Gains on remeasurements of ownership interests in UJVs
(19,629
)
 
 
 
 
 
 
 
 
Unallocated operating expenses and other (1)
7,636

 
8,809

 
8,809

 
12,443

 
NOI at 100% - total portfolio
219,949

 
207,822

 
207,822

 
209,253

 
Less NOI of non-comparable centers
(19,955
)
(2
)
(9,302
)
(2
)
(13,523
)
(3
)
(9,777
)
(3)
NOI at 100% - comparable centers
199,994

 
198,520

 
194,299

 
199,476

 
NOI at 100% - comparable centers growth %
0.7
 %
 
 
 
(2.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI at 100% - comparable centers
199,994

 
198,520

 
194,299

 
199,476

 
Less lease cancellation income - comparable centers
(1,973
)
 
(337
)
 
(337
)
 
(2,890
)
 
NOI at 100% - comparable centers excluding lease cancellation income
198,021

 
198,183

 
193,962

 
196,586

 
NOI at 100% - comparable centers excluding lease cancellation income growth %
(0.1
)%
 
 
 
(1.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI at 100% - comparable centers excluding lease cancellation income
198,021

 
198,183

 
193,962

 
196,586

 
Foreign currency exchange rate fluctuation adjustment
684

 
 
 
306

 
 
 
NOI at 100% - comparable centers excluding lease cancellation income using constant currency exchange rates
198,705

 
198,183

 
194,268

 
196,586

 
NOI at 100% - comparable centers excluding lease cancellation income using constant currency exchange rates growth %
0.3
 %
 
 
 
(1.2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI at 100% - total portfolio
219,949

 
207,822

 
207,822

 
209,253

 
Less lease cancellation income - total portfolio
(2,454
)
 
(399
)
 
(399
)
 
(3,768
)
 
Less NOI attributable to noncontrolling partners in consolidated joint ventures and outside partners in UJVs excluding lease cancellation income - total portfolio
(60,160
)
 
(57,044
)
 
(57,044
)
 
(57,164
)
 
Beneficial interest in NOI - total portfolio excluding lease cancellation income
157,335

 
150,379

 
150,379

 
148,321

 
Beneficial interest in NOI - total portfolio excluding lease cancellation income growth %
4.6
 %
 
 
 
1.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Beneficial interest in NOI - total portfolio excluding lease cancellation income
157,335

 
150,379

 
 
 
 
 
Less beneficial interest in NOI of non-comparable centers
(15,719
)
 
(11,193
)
 
 
 
 
 
Beneficial interest in NOI - comparable centers excluding lease cancellation income
141,616

 
139,186

 
 
 
 
 
Beneficial interest in NOI - comparable centers excluding lease cancellation income growth %
1.7
 %
 
 
 
 
 
 
 
 
 
(1)
Upon adoption of ASC Topic 842, Other Operating expense includes certain indirect leasing costs, which were capitalizable under the previous lease accounting standard. As a result of the accounting change, an additional $1.0 million of leasing costs were expensed during the three months ended December 31, 2019. Comparative periods presented were not adjusted to reflect the change in accounting.
(2)
Includes Beverly Center, The Gardens Mall, The Mall of San Juan, and Taubman Prestige Outlets Chesterfield.
(3)
Includes Beverly Center, CityOn.Zhengzhou, The Mall of San Juan, and Taubman Prestige Outlets Chesterfield.



Taubman Centers/15

TAUBMAN CENTERS, INC.
 
 
 
 
 
 
 
 
Table 7 - Reconciliation of Net Income to Net Operating Income (NOI)
 
 
 
 
 
 
 
 
For the Year Ended December 31, 2019, 2018, and 2017
 
 
 
 
 
 
 
 
(in thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
Year Ended
 
Year Ended
 
 
 
 
2019
 
2018
 
2018
 
2017
 
Net income
330,374

 
115,742

 
115,742

 
112,757

 
Add (less) depreciation and amortization:
 
 
 
 
 
 
 
 
 
Consolidated businesses at 100%
188,407

 
179,275

 
179,275

 
167,806

 
 
Noncontrolling partners in consolidated joint ventures
(8,148
)
 
(7,600
)
 
(7,600
)
 
(7,464
)
 
 
Share of UJVs
71,583

 
68,894

 
68,894

 
66,933

 
Add (less) interest expense and income tax expense (benefit):
 
 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
 
 
 
Consolidated businesses at 100%
148,407

 
133,197

 
133,197

 
108,572

 
 
 
Noncontrolling partners in consolidated joint ventures
(11,713
)
 
(12,031
)
 
(12,031
)
 
(11,942
)
 
 
 
Share of UJVs
69,749

 
68,225

 
68,225

 
67,283

 
 
Income tax expense (benefit):
 
 
 
 
 
 
 
 
 
 
Consolidated businesses at 100%
6,332

 
(231
)
 
(231
)
 
105

 
 
 
Noncontrolling partners in consolidated joint ventures
(189
)
 
(192
)
 
(192
)
 
(134
)
 
 
 
Share of UJVs
3,608

 
3,220

 
3,220

 
2,825

 
 
 
Share of income tax expense on disposition
2,409

 
 
 
 
 
731

 
Less noncontrolling share of income of consolidated joint ventures
(5,014
)
 
(6,268
)
 
(6,268
)
 
(6,775
)
 
Add EBITDA attributable to outside partners:
 
 
 
 
 
 
 
 
 
EBITDA attributable to noncontrolling partners in consolidated joint ventures
25,064

 
26,091

 
26,091

 
26,315

 
 
EBITDA attributable to outside partners in UJVs
197,616

 
194,382

 
194,382

 
184,539

 
EBITDA at 100%
1,018,485

 
762,704

 
762,704

 
711,551

 
Add (less) items excluded from shopping center NOI:
 
 
 
 
 
 
 
 
 
General and administrative expenses
40,566

 
37,174

 
37,174

 
39,018

 
 
Management, leasing, and development services, net
(1,264
)
 
(1,801
)
 
(1,801
)
 
(2,226
)
 
 
Restructuring charges
3,543

 
596

 
596

 
13,848

 
 
Costs associated with shareholder activism
17,305

 
12,500

 
12,500

 
14,500

 
 
Straight-line of rents
(8,454
)
 
(12,428
)
 
(12,428
)
 
(10,718
)
 
 
Nonoperating income, net
(35,140
)
 
(16,637
)
 
(16,637
)
 
(26,838
)
 
 
Impairment charges
92,832

 
 
 
 
 
 
 
 
Gains on partial dispositions of ownership interests in UJVs
(156,875
)
 
 
 
 
 
 
 
 
Gains on remeasurements of ownership interests in UJVs
(164,639
)
 
 
 
 
 
 
 
 
Gain on disposition
 
 
 
 
 
 
(4,445
)
 
 
Unallocated operating expenses and other (1)
30,507

 
33,463

 
33,463

 
39,256

 
NOI at 100% - total portfolio
836,866

 
815,571

 
815,571

 
773,946

 
Less NOI of non-comparable centers
(68,617
)
(2
)
(41,316
)
(2
)
(57,786
)
(3
)
(47,878
)
(3
)
NOI at 100% - comparable centers
768,249

 
774,255

 
757,785

 
726,068

 
NOI at 100% - comparable centers growth %
(0.8
)%
 
 
 
4.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI at 100% - comparable centers
768,249

 
774,255

 
757,785

 
726,068

 
Less lease cancellation income - comparable centers
(9,453
)
 
(17,122
)
 
(17,122
)
 
(12,838
)
 
NOI at 100% - comparable centers excluding lease cancellation income
758,796

 
757,133

 
740,663

 
713,230

 
NOI at 100% - comparable centers excluding lease cancellation income growth %
0.2
 %
 
 
 
3.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI at 100% - comparable centers excluding lease cancellation income
758,796

 
757,133

 
740,663

 
713,230

 
Foreign currency exchange rate fluctuation adjustment
5,256

 
 
 
(2,666
)
 
 
 
NOI at 100% - comparable centers excluding lease cancellation income using constant currency exchange rates
764,052

 
757,133

 
737,997

 
713,230

 
NOI at 100% - comparable centers excluding lease cancellation income using constant currency exchange rates growth %
0.9
 %
 
 
 
3.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI at 100% - total portfolio
836,866

 
815,571

 
815,571

 
773,946

 
Less lease cancellation income - total portfolio
(12,861
)
 
(20,066
)
 
(20,066
)
 
(15,601
)
 
Less NOI attributable to noncontrolling partners in consolidated joint ventures and outside partners in UJVs excluding lease cancellation income - total portfolio
(225,467
)
 
(219,228
)
 
(219,228
)
 
(207,968
)
 
Beneficial interest in NOI - total portfolio excluding lease cancellation income
598,538

 
576,277

 
576,277

 
550,377

 
Beneficial interest in NOI - total portfolio excluding lease cancellation income growth %
3.9
 %
 
 
 
4.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Beneficial interest in NOI - total portfolio excluding lease cancellation income
598,538

 
576,277

 
 
 
 
 
Less beneficial interest in NOI of non-comparable centers
(61,100
)
 
(46,436
)
 
 
 
 
 
Beneficial interest in NOI - comparable centers excluding lease cancellation income
537,438

 
529,841

 
 
 
 
 
Beneficial interest in NOI - comparable centers excluding lease cancellation income growth %
1.4
 %
 
 
 
 
 
 
 
 
 
(1)
Upon adoption of ASC Topic 842, Other Operating expense includes certain indirect leasing costs, which were capitalizable under the previous lease accounting standard. As a result of the accounting change, an additional $4.4 million of leasing costs were expensed during the year ended December 31, 2019. Comparative periods presented were not adjusted to reflect the change in accounting.
(2)
Includes Beverly Center, The Gardens Mall, The Mall of San Juan, and Taubman Prestige Outlets Chesterfield.
(3)
Includes Beverly Center, CityOn.Zhengzhou, The Mall of San Juan, and Taubman Prestige Outlets Chesterfield.