"It's disappointing to announce these impairment charges," Robert S. Taubman, chairman, president and CEO of Taubman, says. "We've invested a significant amount of time and capital in these two properties. Unfortunately, the current economic environment has worked against our best efforts."
By Generally Accepted Accounting Principles (GAAP), an impairment charge must be noted in the case that the book value of a long-lived asset exceeds its fair value and is not believed to be recoverable. Taubman's decision to write down the properties was based on their expected future cash flows after capital expenditures.
Opened in 2006, the 282,000-square-foot The Pier Shops generated positive net operating income (NOI), but in an amount insufficient to cover debt service on its $135 million mortgage. As a result, Taubman's board of directors decided to discontinue its financial support of the center and will engage the lender to determine the future of the property. The company's cash investment there to date is around $35 million, and the book value of the property will now be written down by about $111 million to $52 million.
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