Fitch Affirms Taubman Centers, Inc.'s Preferred Stock & IDR; Outlook Stable

Business Wire, Nov 12, 2007

NEW YORK -- Fitch Ratings has affirmed the following ratings on Taubman Centers, Inc. (TCO):

--Issuer Default Rating (IDR) at 'BB';

--$187 million of outstanding preferred stock at 'BB-'.

Fitch has also affirmed the 'BB' IDR on The Taubman Realty Group Limited Partnership, the operating partnership of Taubman Centers, Inc. The Rating Outlook on all the ratings is Stable.

The ratings reflect TCO's high quality and geographically diversified portfolio of regional shopping centers and malls located across 10 states. TCO has one of the most productive portfolios as measured by average sales per square foot (psf). Fitch estimates average sales have exceeded $550 psf in 2007. TCO's strong operating performance is further reflected in same-store net operating income (NOI) growth measuring 6.9% year to date through Sept. 30, 2007 compared to the first nine months of 2006. The portfolio is 93.3% leased as of Sept. 30, 2007.

The ratings are further supported by the company's solid coverage ratios. Total interest and fixed charge coverage ratios were 2.6x and 2.1x respectively for the twelve months ending Sept. 30, 2007 with fixed charge coverage defined as recurring earnings before interest, taxes, depreciation and amortization (EBITDA) less capital expenditures and straight line rent adjustments to total interest expense and preferred dividends.

Rating concerns center on the company's limited financial flexibility due to its nearly fully encumbered portfolio and its joint venture partnerships. Since the company employs an exclusively secured financing strategy, 20 of the 22 assets are encumbered by mortgage debt or collateral for the two lines of credit and 12 of the 22 are joint venture partnerships. The ratings acknowledge the significant asset concentration inherent in the portfolio as the company only has a total of 22 properties. In addition, the company's largest two properties comprise a disproportionately high total of the company NOI estimated at nearly 20%.

Additional concerns center on TCO's new development initiatives in Asia and the slowing economy's impact on retail spending in the coming year. While Fitch appreciates the benefits of international diversification and TCO's drive to seek opportunities abroad, the company's expansion overseas adds a risk premium to its development platform. The uncertainty surrounding the retail outlook in 2008 is another concern though TCO's portfolio of high-end malls is expected to fare better than other retail segments.

Taubman Centers, Inc. (TCO) is a $3.6 billion (total undepreciated book capital) Michigan-based real estate investment trust (REIT) that acquires, develops, owns, and manages regional shopping centers. As of Sept. 30, 2007, the company had interests in 22 regional and super regional shopping centers aggregating 24.1 million square feet of gross leaseable area located in ten states. Ten of the company's properties are wholly owned, five are also consolidated and 95%, 90%, 78%, 50.1% and 50% owned, respectively and seven of the properties are held in joint ventures. On Oct. 18, 2007 Taubman opened a newly developed lifestyle center called the Mall at Partridge Creek in Detroit, Michigan. It is 100% owned by Taubman.

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