- Net Income and Earnings Per Diluted Common Share (EPS) Higher Due to Sale of Interest in CityOn.Xi’an

- Adjusted Funds from Operations (AFFO) of $0.88 per Diluted Common Share

- Pro Rata Comparable Center NOI, Excluding Lease Cancellation Income at Constant Currency Exchange Rates, Down 1.5 Percent

- Trailing 12-Month U.S. Comp Center Sales Per Square Foot $955, Up 2 Percent

- Completed Financings of Starfield Anseong and CityOn.Zhengzhou

BLOOMFIELD HILLS, Mich.--(BUSINESS WIRE)--Taubman Centers, Inc. (NYSE: TCO) today reported financial results for the first quarter of 2020.

For the quarter ended March 31, 2020, AFFO per diluted share was $0.88, down $0.07 for the quarter ended March 31, 2019. Notably, the company’s first quarter 2019 AFFO included $0.045 per diluted share of insurance proceeds related to the business interruption claim at The Mall of San Juan (San Juan, Puerto Rico). In addition, first quarter 2020 AFFO was unfavorably impacted by the 2019 bankruptcy filing of Forever 21.

Operating Statistics

For the quarter, comparable center NOI (comp center NOI) at our beneficial interest, excluding lease cancellation income and using constant currency exchange rates, was down 1.5 percent. Including lease cancellation income, it was down 0.4 percent. Comp center NOI was primarily down due to lower rents from Forever 21. Excluding the impact of the bankruptcy filing of Forever 21 and the subsequent restructuring of leases, comp center NOI would have been up.

Trailing 12-month sales in U.S. sales comparable centers were $955 per square foot, up 2 percent over the 12-months ended March 31, 2019. U.S comparable center sales per square foot were down 11.6 percent in the first quarter. The COVID-19 pandemic and resulting center closures, occurring in March, significantly impacted first quarter sales. In addition, as reported a year ago, Tesla model 3 deliveries substantially benefited 2019 first quarter sales. For the two-month period ended February 29, 2020, sales per square foot in U.S. comparable centers, excluding Tesla, were up 4.5 percent. Apparel sales at U.S. comparable centers were up 9.2 percent over the same period.

Average rent per square foot for the quarter in U.S. comparable centers was $62.12, down 2 percent from $63.41 in the comparable period last year. Excluding Forever 21, average rent per square foot growth would have been flat.

Ending occupancy in U.S. comparable centers was 91.9 percent on March 31, 2020, down 1.1 percent from March 31, 2019, which is primarily related to frictional vacancy at three large spaces. Leased space in U.S. comparable centers was 94.6 percent on March 31, 2020, down 0.9 percent from March 31, 2019.

Financing Activity

In February, the construction loan financing for Starfield Anseong (Anseong, South Korea), which will fund the remaining development cost, was completed. The five-year, non-recourse, Korean Won denominated loan has a capacity of approximately $246 million U.S. dollars using the March 31, 2020 exchange rate. The loan bears interest at the Korea Financial Investment Association (KOFIA) Five-Year Bond Yield plus 0.76 percent and is fixed upon each draw. The weighted average rate of the amount drawn as of March 31, 2020 was 2.25 percent. As of March 31, 2020, $44 million had been drawn on the facility. The company owns a 49 percent interest in the project, which is scheduled to open in late 2020.

In March, we completed a 1.2 billion Chinese Yuan Renminbi (RMB) (approximately $169 million U.S. dollars using the March 31, 2020 exchange rate) 12-year, fully-amortizing, non-recourse mortgage financing at CityOn.Zhengzhou (Zhengzhou, Henan, China). The company owns a 24.5 percent interest in the joint venture. The loan bears interest at the Five-Year China Loan Prime Rate plus 0.85 percent, resulting in an effective rate of 5.6 percent, as of March 31, 2020. The interest rate is fixed upon each draw and there were not any draws on this facility as of March 31, 2020. Proceeds of the loan will be used to repay the existing other financing arrangements of the joint venture and are ultimately expected to result in the repatriation of approximately $42 million later this year.

In late March, the company borrowed $350 million on its $1.1 billion primary unsecured revolving line of credit, resulting in a total of $970 million outstanding as of March 31, 2020. The facility has a maturity date of February 2024, with two six-month extension options, and currently bears interest at a rate of LIBOR plus 1.375 percent. The company increased its borrowings as a precautionary measure to increase liquidity and preserve financial flexibility due to uncertainty resulting from the COVID-19 pandemic and is available to be used for temporary working capital needs and general corporate purposes in the near future. As of March 31, 2020, the company had $395 million in cash on its consolidated balance sheet.

In April, the company completed a one-year extension of its $65 million secured revolving line of credit. This revolving line of credit, which is typically renewed every April, had a maturity date of April 25, 2020. The facility continues to bear interest at a rate of LIBOR plus 1.4 percent and all other key terms remain unchanged. As of May 5, there had not been any borrowings on this line of credit.

CityOn.Xi’an

In February, the company completed the sale of 50 percent of Taubman Asia’s interest in CityOn.Xi’an (Xi’an, China) to real estate funds managed by the Blackstone Group, Inc. (Blackstone) for $91 million. The company now has a 25 percent ownership interest in the center. See Taubman Completes Sale of Interest in CityOn.Xi’an to Blackstone – February 28, 2020.

Net proceeds were approximately $48 million, following the allocation of property-level debt, taxes and transaction costs, which were used to pay down the company’s primary line of credit. During the quarter, the company recognized a gain on disposition of $10.6 million and a gain on remeasurement of $13.2 million related to the sale. This sale represents the third and final asset sale associated with the Blackstone transactions announced last year. See Taubman to Sell 50 Percent of its Interests in its Three Asia Shopping Centers to Blackstone – February 14, 2019.

COVID-19 Update

In response to the COVID-19 pandemic, the company closed all but two of its U.S. shopping centers on March 19. The other two centers closed soon thereafter. The company is preparing to reopen its centers, using enhanced protocols, as soon as possible in compliance all local, state and federal laws and mandates to help ensure the health and safety of communities we serve.

In Asia, the company’s three centers experienced varying levels of disruption due to COVID-19. 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 (Hanam, South Korea) never closed. In China, only theatres and children’s entertainment tenants, representing on average about 10 percent of the space, remains restricted. Since reopening, both CityOn.Xi’an and CityOn.Zhengzhou have increased their traffic and sales. Total mall tenant sales and customer traffic at both centers upon reopening were down nearly 90 percent year-over-year. Now, two months later, both are approaching 2019 levels. At Starfield Hanam, both traffic and sales have fully recovered.

In early March, the company began implementing several liquidity enhancement initiatives in anticipation of potential disruption related to the COVID-19 pandemic. The company has decided to defer between $100 and $110 million of planned capital expenditures, at beneficial interest. About half of the remaining planned capital spending for the year, at beneficial interest, is related to the completion of the Starfield Anseong development, which will be funded using the recently obtained construction financing. Operating expenses, at beneficial interest, are also expected to be reduced by approximately $10 million for the year. These actions have materially lowered expected cash outflows and, in combination with the additional borrowing on the company’s line of credit, are expected to provide ample liquidity for the company’s near-term operations.

Investor Conference Call

Due to the pending transaction with Simon Property Group, the company will not host a conference call to review the first quarter 2020 financial results.

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; the COVID-19 pandemic and related challenges, risks and uncertainties which have had, and may continue to have, direct and indirect adverse impacts on the general economy, retail environment, tenants, customers, and employees, as well as occupancy, sales, rent collection and center development activities; 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.

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, 2019, as amended, and subsequent reports filed with the Securities and Exchange Commission. 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”). On April 28, 2020, Taubman filed its 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

[email protected]

Maria Mainville, Taubman, Director, Strategic Communications, 248-258-7469

[email protected]

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