Taubman Centers Inc., the nation's busiest mall builder, has taken its lumps since opening four regional malls in the heart of a recession last summer and fall.
Two of the glitzy new malls have been duds, while a third is turning in a middle-of-the-road performance.
International Plaza in Tampa, it turns out, is the surprise best performer of the group. Despite opening three days after the Sept. 11 terrorist attacks, the company says the upscale center in Tampa is the only one of the four properties to exceed its financial performance expectations.
"After a slow start, International Plaza has just not looked back," Robert Taubman, chief executive of the Bloomfield Hills, Mich., mall developer told investors at a Salomon Smith Barney conference last week in Palm Beach. Taubman declined to be more specific in his first public remarks about all four properties.
Taubman's new Wellington Green mall in Palm Beach County so far is meeting the company's budget projections. But Taubman said fierce competition and the economic slowdown plagued the two other new malls. The Shops at Willow Bend in Plano, Texas, has had trouble competing with a rival mall that opened 5 miles away. In Miami, Dolphin Mall, an outlet mall that opened after a big cost overrun, has failed to divert enough traffic or tenants from the rival Sawgrass Mills outlet mall 20 miles north in Broward County.
Taubman has a stake in just 20 malls. So debt analysts have been listening for any teetering sounds since the company heavily mortgaged its portfolio to open four in 2001 plus two more this year, including the Mall of Millenia in Orlando.
The company's stock price has held up through the recession, trading between $15 and $16 a share since Christmas. The stock closed at $15.17 Friday, down 12 cents. On March 1, however, debt rating agencies downgraded $300-million worth of Taubman preferred shares to junk bond status. That's because two of the new malls have not filled up quickly enough and the construction loans carry floating interest rates.
Taubman remains confident all six malls eventually will be big cash generators worth far more than the $1.3-billion he poured into building them. The company also spread the risk with partners in four of the five projects.
But analysts say the ambitious mall-building schedule and current climate of rising interest rates put the company under increased pressure to find permanent financing at a reasonable cost for all the new projects. "They have a very high leasing risk," said Mark Berry, an analyst with Fitch Ratings.
Taubman manages International Plaza and owns a 25 percent stake in the mall, which is 80 percent leased. The mall continues adding tenants. Five stores opened since Christmas, including Christian Dior, Sam Goody, Surrey's, Oakley and Silver Edge. Blue Martini, a martini bar, opens later this month. Opening this spring are St. John Knits, leather goods maker Furla, shoe store Koko & Palenki, sushi and seafood buffet Todai and luxury leather goods store Lancel.
Mall officials say Adrienne Vittadini, a designer apparel boutique, and Childrens Place, a kids clothing store, open this fall.
Surrey's previously was in rival WestShore Plaza, which has remodeled and has signed many new tenants including Sears, Roebuck and Co. Inc. as a defense against new competition. WestShore adds luxury leather shop El Portal next month, apparel retailer Charlotte Russe this fall and is about to sign a third theme restaurant as large as The Palm and Maggianos Little Italy. The Saks Fifth Avenue at WestShore is adding Gucci and Prada leather boutiques.
"We ended the year down minimally," said Doug Badia, assistant manager of WestShore Plaza. "But we're not back to normal yet."
A mall developer like Taubman gets its income from specialty stores and restaurants. Rents rise as a percentage of a tenant's sales. At this point, debt analysts are concerned mainly about how many storefronts are occupied as the mall's tenant base stabilizes.
International Plaza's four department stores, which pay virtually no rent, declined to reveal the performance of their individual stores at International Plaza.
"But we've opened new stores in three of these Taubman malls, and International Plaza is doing the best of the three," said Gene Baker, vice president of stores for Dillard's Southeast Division. "We didn't meet our plan there, but that was largely because we were so aggressive. We think it's going to be a strong mall."
"We've been real pleased with the reception in Tampa," said Tracy Overby, spokeswoman for Nordstrom Inc. "Our store traffic has been good."
The mall opened when luxury merchants and department stores are having their toughest time in a decade. Neiman Marcus reported a 1.7 percent decrease in sales during the quarter that ended Jan. 27. That would have been worse, the company said, had it not been for its new store in Tampa. In stores open more than a year, Neiman reported that sales decreased 3 percent.
_ Mark Albright can be reached at albrightsptimes.com or (727) 893-8252.