Investors looking for profits may want to do a little window shopping in the real estate's retail sector, where companies continue to turn in improved third-quarter results.
The bellweather quarter for retail, of course, is now underway. Retail-related firms across all sectors typically see a good bounce in January after revealing merry Christmas earnings. Now may be the time for some stock bargain hunting, especially as political uncertainty drives down the financial markets.
Mall giant Taubman Centers, Inc. (NYSE: TCO) this week announced small increases in funds from operations (FFO), both for the third quarter and the year to date. FFO for the quarter went up 3.3 percent to 31 cents a share, compared to 30 cents in the third quarter of 1999. Diluted FFO for the year so far was 95 cents, compared to 92 cents last year.
A bargain at $10 ¾ per share, Taubman now trades at a pitiful price-to-earnings ratio of just over six. The company has been attempting to prop up its stock price through a repurchase program, through which it bought 1.4 million shares at an average price of $11.22. The price has hovered between $9 and $12 per share over the last year.
“We continue to show steady growth in our core portfolio,” said Robert Taubman, president and chief executive officer of Taubman Centers. “For the past several quarters, positive results from our centers have been largely offset by increased interest expense.”
The company is focusing on occupancy to drive its margins in coming quarters. Average occupancy in Taubman's shopping centers was 88.8 percent for the quarter versus 88.9 percent in the third quarter of 1999.
“We are very focused on our leasing efforts,” Taubman said. “Our leased space statistic has increased by 1.2 percent from the 90.5 percent that we reported for June 30. We continue to believe that the occupancy in our centers will remain at the top of its historical range, and we are encouraged by the continuing strong sales performance of our centers."
Shopping center powerhouse Simon Property Group, Inc. (NYSE: SPG) saw even more impressive quarterly results, with diluted FFO increasing 14 percent to 80 cents, compared to 70 cents in the third quarter of last year. For the first nine months of the year, diluted FFO rose 8 percent.
Simon Property has fared a bit better on Wall Street this year, with a share price that has ranged from nearly $20 to just over $27, and now hovers around $22. This regional shopping mall owner also has high occupancy numbers, with occupancy for mall and freestanding stores in regional malls increasing to 90.5 percent, compared to 88.5 percent at the end of the third quarter last year.
“We're pleased to report our 27th consecutive quarter of FFO growth,” said David Simon, chief executive officer. “Fundamentals in the mall business remain healthy, including strong tenant demand for space, as evidenced by our 200 basis point improvement in occupancy. And while retail sales nationally weakened somewhat in the third quarter, the year-over-year sales trends in our mall portfolio remain strong, which we believe is a testament to the quality of the Simon portfolio.”
Published: November 13, 2000
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