* Taubman expects most of 2010 to remain a challenge
* Rents to be down, occupancy flat
* Taubman shares up 4.4 percent
NEW YORK, Feb 10 (Reuters) - Taubman Centers Inc (TCO.N), owner luxury malls, said 2010 may be the bottom for retailers and their landlords, but it expects rents to be down and occupancy to be flat.
"There are positive signs of improvement in our business to be hopeful we maybe at or near bottom," Chairman and Chief Executive Robert Taubman said on a conference call with analysts on Wednesday. "The economy is not out of the woods yet."
After the close of the market on Tuesday, Taubman said it expected 2010 funds from operations, a key performance measure for real estate investment trusts, in the range of $2.55 to $2.75 per share compared with the average of analysts forecasts of $2.63.
FFO removes the profit-reducing effect of depreciation, a noncash accounting item.
Underlying that forecast, Taubman expects sales to be flat to up 3 to 4 percent compared to 2009, when sales were off 6.7 percent.
Year-end occupancy at the company's 26 malls is expected to be flat with 2009, although it could be down as much as 1 percent during the first three quarters of 2010. Taubman ended last year with occupancy down to 89.6 percent from 90.5 percent in 2008.
Taubman sees rents to be down 2 percent to 2.5 percent, primarily because of the rent relief it granted some struggling tenants during 2009.
For property the company has operated for at least a year, Taubman said it sees net operating income, which reflects the cash the properties generate less expenses, to be down 2 percent to 4 percent. Excluding the impact of an accounting rule change, 2010 net operating income would have been down 1 percent to 3 percent.
In early afternoon trading, Taubman shares were up 4.4 percent at $33.46. (Reporting by Ilaina Jonas; Editing by Tim Dobbyn)