UPDATE 2-Taubman Q4 FFO beats Wall St forecast

Thu Feb 10, 2011 6:52pm EST

* Fourth-quarter FFO $1.06 vs. Wall St estimate 97 cents

* Sets 2011 FFO $2.86 to $2.98 per share vs est $2.77

* Forms joint venture for outlet center development

* Sales per square foot sets industry record

* Shares up slightly after hours

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By Ilaina Jonas

NEW YORK, Feb 10 (Reuters) - Luxury mall operator Taubman Centers Inc (TCO.N) reported higher-than-expected earnings, helped by lower property expenses, a rise in sales, and improved occupancy and rental income.

Luxury retailers, hobbled during the financial crisis and recession, have staged a comeback. Saks Inc SKS.N, Nordstrom Inc (JWN.N) and Polo Ralph Lauren Corp (RL.N) enjoyed some of the biggest sales gains of all retailers in 2010 as the stock market rally gave well-off shoppers the confidence to splurge on luxury again. French luxury goods maker LVMH Moet Hennessy Louis Vuitton SA (LVMH.PA) racked up a double-digit sales increase as it enjoyed a robust holiday sales.

A portion of those sales become part of Taubman's revenue, but more importantly they indicate where rents are headed.

Sales at the company's malls rose 12.4 percent in the quarter, resulting in sales per square foot of $564 for 2010, an industry record, the company said.

"They upgraded the mix of their portfolio, bringing in more luxury tenants into certain malls," Keefe, Bruyette & Woods analyst Ben Yang said. "That certainly helps raise the price point of merchandising."

Taubman reported fourth-quarter funds from operations (FFO) of $59.6 million, or $1.06 per share, compared with $31.1 million, or 56 cents per share, a year earlier when the company incurred litigation charges.

Analysts on average had expected quarterly FFO of 97 cents per share, according to Thomson Reuters I/B/E/S.

FFO is a real estate investment trust performance measure that removes the profit-reducing effect of depreciation from earnings.

The company, based in Bloomfield Hills, Michigan set a 2011 full-year FFO forecast in a range of $2.86 to $2.98 per share, excluding The Pier Shops in Atlantic City and Regency Square in Richmond, Virginia, both of which the company plans to return to lenders.

Analysts had forecast FFO of $2.77 per share.

Including the effects of those two malls, the company sees FFO in the range of $2.62 to $2.74 per share.

The mall owner also stepped up progress on its entry into the outlet center business, forming a joint venture with a company headed by Bruce Zalaznick, a former executive vice president of Prime Outlets and Chelsea Property Group, two companies bought by Simon Property Group Inc (SPG.N), the largest U.S. mall owner.

Taubman will hold a 90 percent stake in the joint venture for any of the outlet centers they build.

Taubman shares closed down 0.4 percent, or 19 cents, at $52.91 before its results were released and traded at $52.95 after hours. (Reporting by Ilaina Jonas; Editing by Phil Berlowitz)

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