Taubman writes off 'disappointing' Pier Shops at Caesars A.C. (Updated)

Taubman Centers Inc., Bloomfield, Mich., has written off more than $100 million from the value of its investment in The Pier Shops at Ceasars, its fancy three-year-old retail shopping center on the Atlantic City Boardwalk, and will "discontinue its financial support" of the stores. Taubman statement here. NEW: Inquirer story here.

"There should be no immediate impact on employees, retailers, shoppers, or day-to-day business operations," said Taubman spokeswoman Karen MacDonald  "A lot of our tenants are doing well, but not enough to cover across the debt. Some are doing better than others."  

The 85 retailers at Pier Shops include high-end shops like Baccarat crystal, Gucci and Hugo Boss accessories, Louis Vitton luggage, Tiffany jewelry, as well as middle-class clothing brands like Banana Republic and Guess. Restaurants include branches of Philadelphia's Buddakan and Continental.

"It's disappointing to announce these impairment charges," said ceo Robert S. Taubman in the statement. "The current economic environment has worked against our best efforts."

Pier Shops was part of the gambling center's attempt to diversify by attracting free-spending shoppers. But, Taubman noted, "in the past year, traffic has not met expectations due to a weakened economy and the challenges of the significant new gaming competition in Pennsylvania."

Also: "Net Operating Income generated from The Pier Shops at Caesars, although positive, is insufficient to cover debt service on the asset's $135 million non-recourse mortgage. Given long term prospects for the property, Taubman Centers' Board of Directors concluded that it is in the best interest of the company to discontinue its financial support of the center.

"The company intends to immediately begin discussions with the lender and, subject to the lender's future decisions, will continue management... The book value of The Pier will be written down by $106 to $111 million (the company's share of which is $100 to $105 million) to approximately $52 million."

ADDED: Taubman bought its 77.5% interest in Pier Shops from developer Gordon Group back in 2007. The company invested $35 million; the rest was borrowed, with the debt re-sold as Collateralized Mortgage Obligation securities (CMOs), whose value has fallen with the real estate markets.