Seeking Alpha
Debt, CFA, Portfolio Manager, preferred stocks
Profile| Send Message|
( followers)  

Joining the recent parade of REITs raising capital in the preferred stock market, Taubman Centers (NYSE:TCO) was in the market Thursday with a new $25 par cumulative redeemable preferred stock. The company is taking advantage of low rates and relatively cheap financing to redeem existing preferred stocks.

Details of the offering are:

IssuerTaubman Centers, Inc.
IssueSeries J cumulative redeemable preferred
RatingNot rated
Size$75MM (3MM shares)
Coupon
Call DateAugust 2017
DividendsQuarterly in arrears on or about the last day of March, June, September and December
Use of ProceedsTo redeem the outstanding Series G preferred stock and Series H preferred stock (aggregate amount $187 million).
Change of Control RedemptionYes
ConvertibleYes, Upon occurrence of a change of control

Prospectus

Issuer Description:

Taubman is a self-administered and self-managed REIT. Taubman Centers' ownership in the Operating Partnership as of August 1, 2012 consisted of a 69% managing general partnership interest, as well as Series G and H preferred equity interests. Taubman became the first publicly traded UPREIT in 1992.

Taubman is engaged in the ownership, management, leasing, acquisition, disposition, development and expansion of regional and super-regional retail shopping centers and interests therein. Its owned portfolio includes 24 urban and suburban shopping centers in 12 states. Taubman Properties Asia LLC and its subsidiaries, which is the platform for their expansion into China and South Korea, is headquartered in Hong Kong.

Footprint:

Although Taubman is not the largest REIT in the sector, it commands a $4.6B market capitalization and has a national property footprint.

(click to enlarge)

As well, Taubman commands some of the highest rents per square foot:

Both factors have combined to generate results:

(click to enlarge)

Which has created value for shareholders:

(click to enlarge)

While the REIT has produced favorable results for investors, they have done so while staying well within their debt covenants:

(click to enlarge)

Preferred Value:

To determine a valuation on the new Taubman preferred, the following peers have been priced:

  • Kimco Realty (NYSE:KIM),
  • Kite Realty (NYSE:KRG),
  • Excel Trust (NYSE:EXL),
  • Vornado Realty Trust (NYSE:VNO),
  • Weingarten Realty Investors (NYSE:WRI),
IssuerTickerCouponPriceYieldCall Date
Taubman JTCOPrJ7.625%$25.427.50%9/15/12
KIMCOKIMPrJ5.50%$24.695.56%7/25/17
Kite RealtyKRGPrA8.25%$25.817.99%12/7/15
Excel TrustEXLPrB8.125%$26.307.72%1/31/17
VornadoVNOPrK5.70%$24.965.71%7/18/17
WeingartenWRIPrF6.50%$25.326.41%9/15/12

Bottom Line: Taubman has an enviable record of growth and performance. As the REIT is unrated, it will have to come cheap to recent issues. I have heard that price guidance is around 6.50%, which has value relative to similar sized peers, although tighter than small peers such as Kite and Excel.

Source: Shopping For Income With A Taubman Centers Preferred

Additional disclosure: This article is for informational purposes only, it is not a recommendation to buy or sell any security and is strictly the opinion of Rubicon Associates LLC. Every investor is strongly encouraged to do their own research prior to investing.