Taubman Centers, Inc. Investor Presentation
August 2012 Who We Are – Over 60 Years in Business!
• We were founded by Alfred Taubman in 1950 and have developed over 80 million square feet of retail and mixed- use properties
• We have developed urban and suburban malls that have redefined the shopping experience for both customers and retailers
• Studying the great marketplaces of the world, we incorporated timeless design features and innovations that have become the industry standard, including - Earliest two-level centers - First food courts and multiplex theatres - First ring road traffic systems The Mall at Millenia (Orlando, Fla.) - First column-free store design
• We have always believed in the power of planning – every decision we make in the development and operation of our properties is guided by our commitment to break down threshold resistance
• We have always approached our business with the mindset and passion of a retailer
• We have developed exceptional relationships with the world’s great retailers – many select our centers for their first locations
• Taubman (NYSE: TCO) became the first publicly traded UPREIT in 1992, laying the groundwork for real estate companies in all sectors to access the public equity markets
• We were proud to be added to the prestigious S&P MidCap Index in January 2011
2 Our Mission and Values
The Taubman Mission
Our mission is to own, manage, develop and acquire Beverly Center (Los Angeles, Calif.) retail properties that deliver superior financial performance to our shareholders.
We distinguish ourselves by creating extraordinary retail properties where customers choose to shop, dine and be entertained; where retailers can thrive.
We foster a rewarding and empowering work environment, where we strive for excellence, encourage innovation and demonstrate teamwork.
Our Values
We Take The High Road
We Play For The Team
We Respect Everyone
We Push The Envelope
We Pursue Excellence
We Honor Tomorrow Today
We Are Accountable For Our Results
We Love What We Do
3 Our Points of Difference
• Retailing is in our DNA • We intensively manage every center - Our approach is with a deep respect for and - We continually reinvest in our assets – since knowledge of our customers – both shoppers 2000 we have renovated, expanded or built and retailers from scratch nearly 80 percent of our centers • We have an experienced, cycle-tested - Rising rent from new tenants and lease management team rollovers is the most significant element of - Members of the Operating Committee have our organic growth been with Taubman for, on average, 18 years - Income is further bolstered by “non- traditional” and innovative sources such as • We strive for quality rather than sheer size corporate sponsorships, kiosks and - Our portfolio of 27 centers is large enough to temporary tenants give us important economies of scale and solidify our relationships with the world’s best retailers - Yet not so large that we can’t maximize the Intensively Managed Portfolio potential of every property – every asset receives the attention of senior management Number of centers owned at IPO (1992) 19 Centers developed 13 • We sweat every detail of the plan Centers acquired 10 - While cultures vary from place to place, there are universal elements to the way people Centers sold/exchanged (18) shop, move through and experience retail Number of centers owned today 24 environments Number of centers managed today 1 - Getting the development planning right to Number of centers leased today 2 maximize productivity is one of Taubman’s most valuable and exportable strengths Total 27 4 National Footprint Despite Smaller Size
Great Lakes Crossing Outlets Twelve Oaks Mall The Mall at Partridge Creek
Westfarms
The Mall at Stamford Town Short Hills Center Woodfield City Creek Center Fairlane Town Sunvalley Center Cherry Creek Fair Oaks Shopping Center Stony Point Fashion Park Taubman Prestige Outlets MacArthur Center Chesterfield Crystals at CityCenter
Northlake Mall The Mall at Green Hills
Beverly Center The Gardens on El Paseo and El Paseo Village Charleston Place
Arizona Mills The Shops at Willow Bend
Ownership Type (27 Centers) The Mall at Millenia Consolidated Businesses (17) Unconsolidated Joint Ventures (7) International Plaza The Mall at The Mall at University Town Center Wellington Green Managed Center - No Ownership (1) Waterside Shops Leased Center - No Ownership (2) Dolphin Mall Development – Projects under construction The Mall of San Juan or expected to begin construction in 2012 (3) (San Juan, Puerto Rico)
5 Highest Quality Portfolio in the Mall Industry
Highest Portfolio Sales Per Square Foot1 Highest Quality Centers Located in the Best Markets
Taubman¹ $672 Bank of America Merrill Lynch Mall Industry Assessment (June 8, 2012) and Simon $554 Macquarie Equities Research Retail Quality Matrix (October 14, 2011) General Growth $533 Taubman vs. Peers
• Highest overall quality by combining tenant quality with Macerich $513 demographics, competitive moat, housing prices and supply analysis • Highest median household income versus U.S. mall peers Glimcher $434 ($59,900) – 15% higher than peer average • Highest household density versus U.S. mall peers – 55% higher than peer average Penn REIT $378 • Highest degree of educated portion of the population in a seven mile radius surrounding our centers versus U.S. mall peers CBL $341 • Highest major market penetration – ranked by exposure to top 50 national markets $0 $200 $400 $600 $800 • 86% of our centers are located in the fifty largest markets Reported Sales Per Square Foot (June 30, 2012)1 in the United States • Highest anchor quality determined by productivity of mall anchors and superior-drawing anchor penetration
Note: (1) Typically excludes all anchors, temporary tenants and 10,000+ sf tenants Source: Company Supplementals, Bank of America, Macquarie Equities Research, Taubman analysis
6 We are a Developer, Not a Consolidator
Taubman Developments (2001-2012) • Our U.S. developments since 2001 have delivered robust returns1 Opening Investment in $MM - On a total capital investment of about $2 billion, the Project Year Through 2011 50% leveraged IRR is approximately 21% based on a terminal cap rate of 5.3% Dolphin Mall 2001 315 - On an unlevered basis, the IRR would have been The Shops at Willow Bend 2001 265 approximately 15% International Plaza 2001 337 - On average, these centers are at least equal in The Mall at Wellington Green 2001 214 quality to our portfolio average The Mall at Millenia 2002 205 • We have fostered close relationships with the Stony Point Fashion Park 2003 116 upscale fashion department stores, becoming their Northlake Mall 2005 171 developer of choice when they pursue expansion - Most of our centers are anchored by at least one of The Mall at Partridge Creek 2007 148 these department store concepts – nearly half have City Creek Center2 2012 75 two or more - Since 2001, Taubman has developed almost 40% of Close Relationships With Upscale Dept. Stores all ground up projects anchored by a full-line upscale fashion department store
• We are one of the few regional mall developers that possesses a full set of development capabilities internally - City Creek Center opened on March 22, 2012; it is the only regional mall slated to open in the U.S. this year and the first of its size and type since 2006 - We have 3 new projects in the U.S. that are under construction or expected to begin construction in 2012
Note: (1) Development Returns Analysis Notes: Includes all pre-development expenses and costs related to Sarasota and Oyster Bay and excludes 2012 pre-development expenses; terminal values based on 2012 budgeted NOI for all centers except City Creek which is based on 2013 budgeted NOI, its first full year of operations (2) The Company paid $75 to City Creek Reserve, Inc., an affiliate of the LDS Church, for leasehold improvements upon opening of the retail center in March 2012 Source: Literature Research, Taubman analysis, Company Filings 7 Industry’s Premier Leasing Team
Industry Leading Economics (June 30, 2012) Unique-to-Market Tenants Opening Rents and Average Rent Examples of Tenants Whose First U.S. Mall Per Square Foot1 Location Was at a Taubman Center
$60
$53.43 $52.29
$50 $47.47 $46.52 $46.34
$42.47 $39.99 $40 $35.70 $34.77 $31.74 $29.31 $30 $24.86
$20
$10
Est. Portfolio Opening Rents and Avg. Rent Per Square Foot Per Square Avg. Rent and Rents Opening Est. Portfolio $0 Taubman Simon Macerich CBL Glimcher Penn REIT Opening Rents Per Square Foot Average Rent Per Square Foot Note: (1) General Growth excluded as they do not report Opening Rents or Avg. Rent Per Square Foot on a comparable basis. Source: Company Filings and Supplementals, Company Quarterly Earnings Conference Call, Taubman analysis
8 Fiscally Disciplined Property Management With the Industry’s Highest Standards
The Mall at Short Hills (Short Hills, N.J.)
• Since 2005, an increased number of our tenants are paying a fixed Common Area Maintenance (CAM) charge rather than the traditional net lease structure. This allows the retailer greater predictability of their costs. Our analysis shows premiums will balance our additional risk.
• Our centralized management Westfarms (West Hartford, Conn.) structure yields economies of scale in purchasing, which often result in significant cost savings that fall to the bottom line in a fixed CAM system. At June 30, 2012, approximately 72% of our tenants effectively pay a fixed charge for CAM.
9 Judicious Monetization of Common Areas – Specialty Leasing and Sponsorship - 11% of NOI
Illustrative Examples of Innovative Sponsorship Programs
Ice Palace Destination Holiday Experience – Customer Service Programs – e.g., Ticketmaster, AmEx Gift Cards Twentieth Century Fox and Walden Media
Sponsored Play Areas – e.g., Warner Bros. & Turnkey Attractions – e.g., Wicked The Musical Rocky Mountain Hospital for Children
10 Superior Operating Results1
Core NOI Growth Adjusted Funds from Operations Per Diluted Share
6%
5% $3.08 $3.06 $2.84 $2.88 $2.86 4% $2.65
3% Taubman 5-Yr. Avg. = 2.6%2 $2.36 $2.16 2% $2.00 Peer 5-Yr. Avg. = 1.0%3 1% $1.75
0%
-1%
-2%
-3%
-4% 2007 2008 2009 2010 2011 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Taubman Peer Weighted Avg. (by In-Line GLA) Note: (1) See page 29 regarding reconciliations to the most comparable GAAP measures. (2) Excludes lease termination income, The Pier Shops for all years and Regency Square for 2009, 2010 and 2011. (3) Simple average calculated using NOI’s of Taubman Peers (Simon, Penn REIT, Macerich, Glimcher, General Growth, and CBL). Source: Company Filings and Supplementals, Taubman SEC Filings, Taubman analysis
11 Operational Excellence Complemented by Prudent Financial Management
Debt Maturities by Year • Completed $219 million common equity offering 1 (As of 6/30/12, In Millions) in August 2012, enhancing our liquidity for future $1,000 investments $750 $748 $797 $800 • Completed $193 million 6.5% preferred stock $600 $466 offering in August 2012; proceeds were used to $350 $400 redeem previously outstanding $187 million preferred stock with a weighted average rate of $200 $85 7.83% $0 • Healthy coverage ratios, as of June 30, 2012 - Interest coverage ratio: 2.7 - Fixed charge coverage ratio: 2.2 • Refinanced secured lines of credit July 2011: Debt to Total Market Capitalization - Availability: $404 million (as of June 30, 2012) of (As of 6/30/12) $715 million Taubman 32% - The primary line of credit ($650 million) matures in Simon 33% January 2015 Macerich 40% • Property-specific secured debt carries lower risk Glimcher 48% compared to peers GGP 50% - Use of moderate leverage historically mitigates future re-financing risk CBL 56% - Typically non-recourse loans to the parent Penn REIT 70% - No cross collateralization 0% 20% 40% 60% 80% • Successfully completed long-term refinancing of Westfarms during 2012 Note: (1) Maturities assume that all extension options have been exercised and no pay downs are required upon extension; at TRG share.
Source: Company Quarterly Supplementals, Taubman analysis
12 History of Delivering Superlative Performance for Shareholders
Shareholder Returns Dividend Payout Per Share1
700
Taubman $1.76 $1.68 600 $1.66 $1.66 $1.54
500 $1.29 $1.16 $1.10 400 FTSE NAREIT $1.03 $1.05 All REIT Index, Property Sector: Retail 300 MSCI US REIT Index S&P 400 200 Midcap Index
S&P 500 Cumulative Total Return Since Dec. 31, 2001 Total Cumulative Return 100
0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 • We have never reduced our dividend since our IPO in 1992 Note: (1) 2010 excludes special dividend of $0.1834 per share paid in December, 2010. The • In 2009, we were the only mall REIT among our annualized amount of the 2011 fourth quarter, regular dividend is $1.80; the annualized 2 amount of the second quarter 2012 regular dividend is $1.85. peers not to reduce our dividend – we also (2) Peer group includes CBL, Glimcher, Macerich, Penn REIT and Simon maintained an all-cash dividend throughout the year Source: Company SEC Filings, Taubman analysis
13 Creating Shareholder Value1
• In a 10-year analysis, we ranked second among all 38 publicly traded REITs followed by Green Street Advisors during this time frame and first among the five companies within the mall sector using a measure called CVNI - CVNI is the combination of Net Asset Value growth and Dividends Per Share as calculated by Green Street Advisors(2) • CVNI is an important component of measuring the success of a company’s ability to create value to shareholders as assets are added to the company’s portfolio and core properties are managed • As you can see, shareholder value is not created by simply adding assets; rather value is created by adding shareholder value every step of the way(3) Undepreciated Assets 10-Year CAGR (%)
Current Value Net Income (CVNI) 10-Year CAGR (%)
Note: (1) See page 29 at the end of this presentation for a discussion of CVNI and related components that are non-GAAP measures. (2) Mall REITs GRT and PEI are excluded from this analysis as they were not covered by Green Street Advisors over the entire 10-year period. (3) TCO does not include two recent acquisitions in CA & TN from Davis Street Properties. Source: Green Street Advisors, CapIQ, SNL Financial, Morgan Stanley, and Company Filings
14 Future Growth
Client Name | Lorem Ipsum | Month 12, 2010 Internal Growth – Poised for Sustained Growth with Sales at New Highs
Taubman’s Sales Rebounding Luxury Sales Projected to Continue Growth
20 15% 13% 15 14.314.1 14.2 13.212.9 13.3 12.1 11.7 10.8 10% 10% 9% 8-10% 10 9.0 8.4 7-8% 6.0 7% 6-7% 4.0 3.8 5 3.6 3.0 3.3
0.5 5% 0
(5) 0% 0%
(10) (8.0)
Year-Over-Year Sales Growth (%) Growth Sales Year-Over-Year (11.2) (15) (13.7)(13.5) -5% Bain & Co.’s Luxury Market Forecast (Y-o-Y Bain & Growth) Market Forecast Co.’s Luxury (20) -8% -10% 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 2006 2007 2008 2009 2010 2011 2012 2013 2014
Actual May12 Estimate May12 Forecast
Source: Bain & Company Worldwide Luxury Goods Worldwide Markets Monitor Spring 2012 Update, as reported in Company Filings, Thomson Reuters, Taubman analysis
16 Internal Growth – NOI Growth Levers
Positive Releasing Rent Spreads1 Other NOI Growth Levers
$55 • Increase in percentage rent
$50 • Increase in sponsorship
) revenue 2
$45 • Increase in occupancy
• Reduction in CAM costs $40 (Trailing Three Years (Trailing Three Avg. Rent Per Square Foot Per Square Avg. Rent • Reduction in rent relief
$35 - Current tenant receiving rent relief resumes paying full rent - Current tenant receiving rent $30 2008 2009 2010 2011 2012 YTD relief is replaced with a tenant Opening Rent Per Square Foot (Left Axis) paying full rent Closing Rent Per Square Foot (Left Axis)
Note: (1) Excludes The Pier Shops for all years and Regency Square for 2009, 2010 and 2011. (2) Trailing three years metrics are used to smooth year-to-year volatility in the quality and quantity of the opening and closing space; data is a weighted average of the consolidated and unconsolidated properties. Source: Company Filings, Taubman analysis
17 External Growth – Four Prongs of External Growth
We believe that outlet centers are a natural extension of our existing capabilities and anticipate that outlet development opportunities will outnumber traditional ones in the coming years. Our goal is to build a handful of outlet centers over the next ten years. Outlet Centers
Acquisitions U.S. Traditional Development With respect to U.S. acquisitions, Steady population growth in the mall sector is extremely America will lead to U.S. consolidated, especially the better Four Prongs development opportunities. Since assets we find attractive. We’re of External 2001, we have developed 9 always watching and have capital Growth properties totaling 9.2 million sf of available for selective oppor- GLA. We expect to build four to tunities. We’re also open to five projects over the next ten acquisition opportunities in Asia years. and think the markets there may provide more for us to consider. Asia We are pursuing opportunities in Asia, with our efforts currently focused on South Korea and China. We have generated fees from our involvement in projects in Macao, Seoul and New Songdo, South Korea. Taubman TCBL will serve as the platform that will allow us to accelerate our investments in China.
18 External Growth – Four Prongs of External Growth Outlet Centers – Taubman Prestige Outlets Chesterfield
CeremonialCity Creek Groundskybridge Breaking and retractable July 25, 2012roof Taubman Prestige Outlets Chesterfield – Chesterfield, Missouri • Opening: October 24, 2013
• 49-acre shopping center will feature 450,000 square feet of retail space with more than 100 stores
• Attributes include an open-air design, dog-friendly hospitality, access to the levee-fitness trail and a food court
• Will include a mix of high-end fashion focused designer outlets and popular favorites
• Announced first group of 40 tenants on July 25, 2012, including: - Gap, Banana Republic, J.Crew, Furla, and Brooks Brothers View of City CreekFall from 2013 Main opening Street • The superior site in the entire St. Louis metro area - Unobstructed freeway visibility for retailers - Convenience for shoppers with simple on-and-off access from the region’s central interstate - Close proximity to Chesterfield Commons, an already established thriving retail destination
• Have received all of our federal, state, county, and local approvals to build the shopping center and have begun construction
• Projected return: 8%-8.5% on our 90% share of the $150 million center
19 External Growth – Four Prongs of External Growth U.S. Traditional Development – The Mall at University Town Center and The Mall of San Juan
The Mall at University Town Center The Mall at University Town Center – Sarasota, Florida
• Opening: October 2014
• Project cost: $315 million
• Projected return and ownership: 8%-8.5% on our 50% share of the project
• Size/Mall GLA (Sq. Ft.): 880,000 / 460,000
• Anchors: Dillard’s, Macy’s, Saks Fifth Avenue
• We will be responsible for development, management and leasing of the center
View of City CreekThe Mallfrom of Main San Street Juan The Mall of San Juan – San Juan, Puerto Rico
• Opening: Fall 2014
• Project cost: $405 million
• Projected return and ownership: 8%-8.5% on our 80% share of the project
• Size/Mall GLA (Sq. Ft.): 640,000 / 402,000
• Anchors: Nordstrom, Saks Fifth Avenue
• The landowner is developing a casino/hotel that will connect to, and is expected to open with, the center
20 External Growth – Four Prongs of External Growth U.S. Traditional Development – City Creek Center
City Creek skybridge and retractable roof
City Creek Center – Salt Lake City, Utah
• Opened: March 22, 2012
• Owned under a lease structure with City Creek Reserve, Inc., an affiliate of the LDS Church
• Centerpiece of a 20-acre mixed-use development in downtown Salt Lake City - Retail portion of the complex includes 634,000 sf of retail and restaurant space, anchored by a 124,000 sf Nordstrom and 150,000 sf Macy’s - Other uses include 1.4 million sf of office space, 540 residential units, a newly renovated 510-room View ofCity City Creek Creek fountains from Main and Street arch Marriott Hotel and a 50,000 sf Harmon’s Gourmet Grocery
• Unique shopping environment features a retractable roof, a creek that runs through the property, a pedestrian skybridge and more
• Represents the next generation of retail development in the U.S. and beyond
• Projected return: 12% on our investment of $76 million
21 External Growth – Four Prongs of External Growth Acquisitions – Davis Street Properties
The Mall at Green Hills The Mall at Green Hills – Nashville, Tennessee The Gardens on El Paseo/El Paseo Village – Palm Desert, California
• In December 2011, Taubman acquired The Mall at Green Hills and The Gardens on El Paseo/El Paseo Village from Davis Street Properties
• High quality assets that are dominant in their respective marketplaces make them an excellent strategic fit
• Sales per square foot average projected to exceed $700 in 2012
• Significantly under-leased at less than 10 percent total occupancy cost
The Gardens on El Paseo • The Mall at Green Hills - 887,000 sf of total GLA and 375,000 sf of mall tenant GLA after its most recent expansion in September 2011 - Anchored by Dillard’s, Macy’s and the only Nordstrom in Nashville
• The Gardens on El Paseo/El Paseo Village - Dominates the high-end retail for the entire Coachella Valley, a growing affluent market with significant tourism - Together the center includes 236,000 sf of total GLA and 186,000 sf of mall tenant GLA - Anchored by Saks Fifth Avenue
22 External Growth – Four Prongs of External Growth Asia – Taubman TCBL and IFC Mall
Thomas Tam and René Tremblay Taubman TCBL – Beijing, China
• Acquired a controlling interest in Beijing-based TCBL Consulting Limited in December 2011
• Dramatically increases our execution capability, our knowledge base, and our confidence to accelerate investments in China
• Our investment in TCBL brings us critical first-hand knowledge, as they have provided services in over 55 cities across China
• Their diversified client base includes local property developers, retailers and institutional investors including HSBC, RBS, JP Morgan, Morgan Stanley Real Estate and Angelo Gordon
• Staff currently serving five offices in China, including Beijing, Chengdu, Chongqing, Shanghai, and Shenzhen
IFC Mall Strategy and Progress
• Investing in high quality substantial projects in major markets
• Leasing and managing about 430,000 sf retail component of 5 million sf IFC Center, a mixed use development in Seoul, South Korea, opening in August 2012, 100% leased
• Announced first project in China and are currently awaiting government approvals for a second project in China
• Pursuing investment in partnership with Shinsegae Group to build a center in Hanam, South Korea
23 External Growth – Four Prongs of External Growth Asia – Xi’an, China
Exterior rendering Shopping Center to be located at Xi’an Saigao City Plaza – Xi’an, China
• Opening: Third Quarter of 2015
• Joint venture partnership with Wangfujing, one of China’s largest and most respected department stores; the joint venture will own a controlling interest in and manage the shopping center
• Part of the 5.9 million sf large-scale mixed-use development, Xi’an Saigao City Plaza - Retail component of the development includes approximately 1 million sf of retail and restaurant space, anchored by a 273,000 sf Wangfujing department store (including a supermarket) - Other uses include an international five star hotel, a Holiday Inn Express, a SOHO residential tower, two towers of serviced Shopping center to be locatedInterior at Xi’an rendering Saigo apartments and an office building City Plaza - Features up to 300 international and local, moderate to high- end brands, with restaurants and a movie cinema • Xi’an is an important cultural, industrial and educational center of the central-northwest region of China, with facilities for research and development, national security and China's space exploration program
• Xi’an is now one of the most populous metropolitan areas in regional China with more than 8 million inhabitants
• Xi’an’s economy has been performing strongly achieving GDP and per capita GDP growth of +20% annually since 2007, the 4th highest economic growth in China
• Disposable income in Xi’an is one of the highest among Chinese cities in the western region
24 External Growth – Four Prongs of External Growth U.S. Traditional Development versus China Development
• For many years the Asian economies have been growing at a much faster pace than in the U.S.
• In many Asian markets there is a shortage of well-designed and well-managed retail space
• We believe there is a very attractive opportunity for our core competencies in design, leasing and management, which are value-added points of difference for us
U.S. Development China Development Lease structure1 Minimum rent Significant amount of % rent marks leases to market Lease term1 10 year initial roll 3-5 year initial roll Sales Growth1 Historically 3.5 – 4% In excess of 10% Unleveraged after-tax return1 Initial stabilized 8–8½% 6–7% Reaches 10% 9th –10th year 7th –8th year By 10th year 10 – 11% 13 – 14% Income tax? No Yes
(1) Anticipated lease structure and terms, sales growth, and after-tax returns for centers under development exclude the impact of foreign currency fluctuations and are subject to adjustment as a result of factors inherent in the development process, some of which may not be under the direct control of the company. Refer to the company’s filings with the Securities and Exchange Commission on Form 10-K and Form 10-Q for other risk factors.
25 2012 Guidance1, 2
Summary of key guidance measures 2011 Actual 2012 Guidance Earnings Per Share $3.03 $1.20 - $1.30 FFO per share $4.86 $3.13 - $3.18 Adjusted FFO per share, excluding The Pier Shops and Regency Square(3) $3.05 $3.22 - $3.27 Core NOI Growth (100%), excluding lease cancellation income 4.9% Up 5 - 6% Ending occupancy, all centers 90.7% Up ≈ 1.5% Rent PSF (Combined) $45.22 3% growth Recoveries ratio (Combined) 110% Down modestly Revenue from management, leasing, and development, net (our share) $13.6 million ≈ $6 million Pre-development expense, our share $22.7 million ≈ $21 million Lease cancellation income, our share $2.6 million $3 - $5 million
(1) Guidance is current as of August 8, 2012, see Taubman Centers Issues Updated 2012 Guidance To Reflect Recent Equity Transactions – August 8, 2012. (2) See page 29 and 30 regarding reconciliations to the most comparable GAAP measures. (3) 2011 Adjusted FFO excludes acquisitions costs related to the acquisitions of The Mall at Green Hills, The Gardens on El Paseo/El Paseo Village, and TCBL, gains on the extinguishment of debt obligations at The Pier Shops at Caesars and Regency Square, and the excess of the book value over the redemption amount of the Series F Preferred Equity. 2012 Adjusted FFO excludes a charge relating to the early refinancing of the loan on The Mall at Millenia and a charge relating to the redemption of the company’s $100 million 8% Series G Cumulative Redeemable Preferred Stock and $87 million 7.625% Series H Cumulative Redeemable Preferred Stock.
26 Investment Summary
• Highest Quality Portfolio
• Superior Operating Results: Accelerating NOI
• Developer, Not a Consolidator
• Strong Balance Sheet: Prudent Financial Management
• History of Dividend Growth: Maintained Cash Payout During Recession
• Strong Historical Shareholder Returns
27 Forward Looking Language
For ease of use, references in this presentation to “Taubman Centers”, “company,” “Taubman Asia”, “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 presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements reflect management's current views with respect to future events and financial performance. The forward-looking statements included in this presentation are made as of the date hereof. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future. Actual results may differ materially from those expected because of various risks and uncertainties, including, but not limited to the global credit environment and the continuing impacts of the recent U.S. recession, other changes in general economic and real estate conditions, changes in the interest rate environment and the availability of financing, adverse changes in the retail industry, general development risks, and integration and other acquisition risks. 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.
28 Reconciliation of Net Income (Loss) to Net Operating Income1
29 Reconciliation of Net Income attributable to common shareowners to Funds from Operations1
Year Ended Range for Year Ended December 31, 2011 December 31, 2012
Adjusted Funds from Operations per common share, excluding The Pier Shops and Regency Square 3.05 3.22 3.27
The Pier Shops' negative Adjusted FFO (0.18) 0.00 0.00 Regency Square's negative Adjusted FFO (0.03) 0.00 0.00
Adjusted Funds from Operations per common share 2.84 3.22 3.27
Acquisition costs (0.06) 0.00 0.00 Series F redemption 0.03 0.00 0.00 Gains on extinguishment of debt 2.06 0.00 0.00 Early extinguishment of debt charge (2) 0.00 (0.02) (0.02) Preferred stock redemption charge 0.00 (0.07) (0.07)
Funds from Operations per common share 4.86 3.13 3.18
Real estate depreciation - TRG (1.71) (1.80) (1.75)
Distributions on participating securities of TRG (0.02) (0.02) (0.02)
Depreciation of TCO's additional basis in TRG (0.12) (0.11) (0.11)
Net income attributable to common shareowners, per common share (EPS) 3.03 1.20 1.30
(1) All dollar amounts per common share on a diluted basis; amounts may not add due to rounding. (2) In October 2012, we expect to refinance the existing $197.8 million, 5.46% loan on The Mall at Millenia, a 50 percent owned joint venture. Since this is earlier than allowed under the current loan, the partnership is expected to incur approximately $3.2 million in defeasance charges, of which $1.6 million is our share. The new 12 year, non-recourse $350 million loan will bear interest at a fixed rate of 4%.
30