Taubman Centers in Bloomfield Hills Report 2Q Results Amid Takeover Legal Battle

Taubman Centers Inc. in Bloomfield Hills, which operates one of the nation’s largest collections of upscale shopping malls and is locked in a court battle over the sale of the company to a larger competitor, has reported second-quarter sales results and provided an update on new retail center openings.
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Twelve Oaks Mall
Taubman Centers released its second quarter results. Twelve Oaks Mall (pictured) is one of its properties. // Photo courtesy of Twelve Oaks Mall

Taubman Centers Inc. in Bloomfield Hills, which operates one of the nation’s largest collections of upscale shopping malls and is locked in a court battle over the sale of the company to a larger competitor, has reported second-quarter sales results and provided an update on new retail center openings.

In early February, Simon Property Group Inc. in Indianapolis, the nation’s largest operator of shopping centers, announced plans to acquire Taubman Centers for $3.6 billion. But in June, Simon moved to cancel the deal, in part, due to the negative impact the COVID-19 pandemic has had on retail sales.

On June 10, Simon filed an action in the Circuit Court for the 6th Judicial Circuit of Oakland County against Taubman Centers and The Taubman Realty Group Limited Partnership requesting a declaration that Taubman has suffered a Material Adverse Event (MAE) under the merger agreement and has breached the covenants in the merger agreement governing the operation of Taubman’s business.

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, including Twelve Oaks Mall in Novi and Great Lakes Crossing Outlets in Auburn Hills.

Taubman’s U.S.-owned properties are the most productive in the publicly held U.S. regional mall industry. The company was founded in 1950 by the late A. Alfred Taubman. In 2005, Taubman Asia was established and is headquartered in Hong Kong.

In the midst of the ongoing legal battle, Taubman this week said its second quarter results showed adjusted revenue (consisting of rental revenue, overage rent, and revenue from management, leasing, and development services for consolidated businesses) were $113.8 million, lagging the Zacks Consensus Estimate of $143 million. Moreover, the reported figure slid from $149.6 million reported in the second quarter of 2019.

“As we’ve reopened centers, rent collections have steadily improved. We’re optimistic this trend will continue as tenants focus their operations on the best retail assets in each market,” says Robert S. Taubman, chairman, president, and CEO of Taubman Centers.

At the end of June, Taubman Centers had consolidated cash of $241 million and $119 million available on its lines of credit.

In March, the company borrowed $350 million on its $1.1-billion primary unsecured revolving line of credit to boost its liquidity and improve financial flexibility. In late June, Taubman Centers repaid $100 million, reducing the outstanding balance to $870 million as of the second-quarter end.

In turn, Taubman reported that on Sept. 25, Starfield Anseong (Gyeonggi Province, South Korea) will celebrate its grand opening, marking Taubman Asia’s fourth investment and second joint venture with Shinsegae Group. The new one million square foot shopping mall will be the first modern shopping, dining, and entertainment destination to serve Anseong, a high-growth city in Greater Seoul.

Starfield Anseong will feature about 280 tenants, including prominent international brands like Zara, Nike, Uniqlo, H&M, Vans, COS, Guess, Adidas, BMW, and more. The center will be anchored by E-Mart Traders, ElectroMart, Toy Kingdom, and Hanssem, as well as several successful entertainment concepts, including Aquafield, Sports Monster, and Megabox, an upscale cinema.

The center is opening ahead of schedule and in advance of Chuseok, an important shopping period in South Korea. Taubman said it expects the center to be more than 90 percent occupied and nearly 100 percent leased at opening.

“In our second partnership with Shinsegae we have successfully created an impressive, modern retail and entertainment experience that will serve Anseong’s rapidly growing population,” says Paul Wright, president of Taubman Asia. “We’re delighted with the collection of brands we’ve assembled and the very high-quality nature of the project we’re delivering to this community. It will be a unique experience for our customers to enjoy.”

The company’s other three Asia shopping centers – CityOn.Xi’an (Xi’an, China), CityOn.Zhengzhou (Zhengzhou, Henan, China) and Starfield Hanam (Hanam, South Korea) – have rebounded quickly after experiencing varying levels of disruption.

CityOn.Xi’an was closed for about a month and reopened on February 29. CityOn.Zhengzhou was closed for 10 days and reopened on February 27. Starfield Hanam never closed. About 90 percent of tenants had reopened by the end of April. Today nearly all tenants are open following approval for cinemas to reopen in China on July 20. Total mall tenant sales for the portfolio have recovered, as May and June sales volumes were near 2019 levels.

Due to the pending transaction with Simon Property Group and the litigation, the company did not host a conference call to review the second quarter 2020 financial results.

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