The Mall of San Juan projected to make $10M in net operating income in ’18
Taubman Centers Inc., owners and operators of The Mall of San Juan, anticipated Friday that they will generate $10 million of net operating income (NOI) from that asset in 2018, some of which may come from sources other than sales activities.
Robert Taubman, CEO of Taubman Centers Inc., told analysts during an earnings call to discuss fourth quarter 2017 results that NOI for The Mall of San Juan was “slightly negative” during the quarter ended Dec. 31. This was offset by $1.01 million of insurance recoveries which were recorded in non-operating income.
“So, that $3.5 million was our outlook for NOI contribution from Puerto Rico in the fourth quarter before the hurricane. And we knew that after the hurricane, given the extent of the damage and much more so given the extent of what the island was going through, and it continues to go through in terms of rebuilding, that number was not going to be achievable,” said Simon Leopold, CFO of Taubman Centers Inc.
The quarter’s results were affected by Hurricane María, which caused the mall to remain closed for a month — from Sept. 19 to Oct. 19 — and represented significant damage to a number of its tenants. When the center reopened, so did 42 tenants. That number grew to 55 by Thanksgiving and was 66 on Dec. 31, he said.
“In December, tenants saw strong year-over-year sales per square foot increases, up nearly 25 percent. The center and Puerto Rico certainly have a long way to go before normalcy is restored. but we are hopeful that these results are indicative of a strengthening recovery effort,” Taubman said.
The mall operator’s guidance for 2018 assumes that the sum of the NOI from The Mall of San Juan, plus the insurance proceeds related to operations, will total $10 million.
“It’s going to be lumpy as they come in but if you take it all together…the in-place rents that are being paid right now by tenants, plus business interruption insurance. We are anticipating $10 million of NOI from that asset. But it may not all come in the form of the NOI that you would see say at one of our centers that’s operating in the normal course. In fact it won’t be,” Leopold said.
Prior to the hurricanes, the center had been on “very positive trajectory,” Taubman told analysts, adding that total sales for the year were up 9.5 percent through the end of August.
“As of today, we have a total of 69 stores now open; another 12 are under reconstruction and expect to open in March or April. In addition we have 15 retail mall units operated,” he said.
“Our department store anchors Nordstrom and Saks Fifth Avenue remain closed. Nordstrom has completed its remediation and is expecting to open this summer. Saks has begun its remediation efforts but we are uncertain when they will reopen,” Leopold said. The mall operator is in court with Saks Fifth Avenue over the reopening.
“It’s very difficult for us to comment right now on what’s going to happen in Puerto Rico in 2019 given there is still a lot of things to be rebuilt there. So I don’t really want to comment on anything going forward, but the $10 million of NOI in a lot of different buckets coming in is the number we feel it’s the right number for the outlook for the company in 2018,” Leopold said.