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Taubman Centers, Inc. (TCO - Analyst Report), a real estate investment trust (REIT), reported first quarter 2011 FFO (funds from operations) of 63 cents per share compared to 60 cents in the year-earlier quarter. Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income, while adjusted FFO excludes the impairment and restructuring charges.

The first quarter 2011 reported FFO beat the Zacks Consensus Estimate by 5 cents. The quarterly FFO per share included a non-cash charge of 6 cents relating to the ownership of The Pier Shops at Atlantic City, New Jersey. Excluding the non-recurring charges, adjusted FFO was 68 cents per share.

Total revenues during the reported quarter were $155.5 million compared to $151.5 million in the year-ago quarter. Occupancy of the entire portfolio decreased marginally to 87.9% at quarter-end from 88.2% in the year-earlier period.

Average rents in the overall portfolio were $45.20 per square foot, compared to $43.68 in the year-ago quarter. Mall tenant sales per square foot increased 14.3% year-over-year during the quarter. On a trailing 12-month basis, mall tenant sales were $581 per square foot.

Taubman has one of the strongest balance sheets in its sector. The company has moderate debt maturities in 2011. During first quarter 2011, the company completed the previously announced one-year extension of its $550 million line of credit with its existing 12-bank syndicate. Furthermore, Taubman had $21.0 million of cash and cash equivalents at quarter-end, providing it with additional flexibility.

Taubman has increased its earlier FFO guidance for full year 2011 in the range of $2.88 to $2.98 per share from $2.86 to $2.98. We think Taubman is better positioned than many of its competitors due to its clean balance sheet and minimal debt maturity. In addition, the current dividend at 44 cents per share appears safe and the company is covering the payout with operating cash.

We maintain our ‘Neutral’ recommendation on Taubman, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Equity One Inc. (EQY - Snapshot Report), a peer of Taubman.

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