UNITED STATES	
SECURITIES AND EXCHANGE COMMISSION	
WASHINGTON, D.C. 20549	
 	 	
FORM 10-K	
 	 	
x  	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	For the fiscal year ended December 31, 2006.	
 
OR
 	
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	 	
 	For the transition period from ___________________ to _________________	
 	Commission File Number 1-11530	
 	 	
TAUBMAN CENTERS, INC.	
(Exact Name of Registrant as Specified in Its Charter)	
 	 	
Michigan	38-2033632	
(State or other jurisdiction of	(I.R.S. Employer	
incorporation or organization)	Identification No.)	
 	 	
200 East Long Lake Road	 	
Suite 300, P.O. Box 200	 	
Bloomfield Hills, Michigan	48303-0200	
(Address of principal executive office)	(Zip Code)	
 	 	
Registrant's telephone number, including area code:	(248) 258-6800	
 	 	
Securities registered pursuant to Section 12(b) of the Act:	 	
 	 	
 	Name of each exchange	
Title of each class	on which registered	
Common Stock,	New York Stock Exchange	
$0.01 Par Value	 	
 	 	
8% Series G Cumulative	New York Stock Exchange	
Redeemable Preferred Stock,	 	
No Par Value	 	
 	 	
7.625% Series H Cumulative	New York Stock Exchange	
Redeemable Preferred Stock,	 	
No Par Value	 	
 	 	
Securities registered pursuant to Section 12(g) of the Act: None	
 	
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  x Yes  o No	
 	
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  o Yes  x No	
 	
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  x Yes  o No	
 	
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o	
 	
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerate filer and large accelerated filer" in Rule 12b-2 of the Exchange Act).
Large Accelerated Filer  x Accelerated Filer o Non-Accelerated Filer o  	
 	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes  x No	
 	
The aggregate market value of the 52,564,093 shares of Common Stock held by non-affiliates of the registrant as of February 26, 2007 was $2.1 billion, based upon the closing price $40.90 on the New York Stock Exchange composite tape on June 30, 2006. (For this computation, the registrant has excluded the market value of all shares of its Common Stock held by directors of the registrant and certain other shareholders; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant.) As of February 26, 2007, there were outstanding 53,594,244 shares of Common Stock.	
 	 	
DOCUMENTS INCORPORATED BY REFERENCE	
 	 	
Portions of the proxy statement for the annual shareholders meeting to be held in 2007 are incorporated by reference into Part III.	

 

TAUBMAN CENTERS, INC.
CONTENTS

PART I	
Item 1.	Business	2	
Item 1A.	Risk Factors	13	
Item 1B.	Unresolved Staff Comments	13	
Item 2.	Properties	13	
Item 3.	Legal Proceedings	17	
Item 4.	Submission of Matters to a Vote of Security Holders	17	
PART II	
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	17	
Item 6.	Selected Financial Data	19	
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20	
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	47	
Item 8.	Financial Statements and Supplementary Data	47	
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47	
Item 9A.	Controls and Procedures	47	
Item 9B.	Other Information	47	
PART III	
Item 10.	Directors, Executive Officers, and Corporate Governance	47	
Item 11.	Executive Compensation	48	
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48	
Item 13.	Certain Relationships and Related Transactions, and Director Independence	48	
Item 14.	Principal Accountant Fees and Services	48	
Item 15.	Exhibits and Financial Statement Schedules	49	

1

PART I

Item 1. BUSINESS.

The following discussion of our business contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our expectations or beliefs concerning future events. We caution that although forward-looking statements reflect our good faith beliefs and best judgment based upon current information, these statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including those risks, uncertainties, and factors detailed from time to time in reports filed with the SEC, and in particular those set forth under the headings “General Risks of the Company” and “Environmental Matters” in this Annual Report on Form 10-K.

The Company

Taubman Centers, Inc. (“we”, “us”, “our”, or "TCO " ) was incorporated in Michigan in 1973 and we had our initial public offering ("IPO") in 1992. We own a 65% managing general partner’s interest in The Taubman Realty Group Limited Partnership (the " Operating Partnership " or "TRG"), through which we conduct all of our operations.

We are engaged in the ownership, development, acquisition, and operation of regional shopping centers. Our portfolio as of December 31, 2006 included 22 urban and suburban regional and super-regional shopping centers in 10 states. In addition, The Mall at Partridge Creek (Clinton Township, Michigan) is under construction and will open on October 18, 2007. The Operating Partnership also owns certain regional retail shopping center development projects and more than 99% of The Taubman Company LLC (the "Manager"), which manages the shopping centers and provides other services to the Operating Partnership and to us. See the table on page 14 of this report for information regarding the centers.

In April 2005, we formed Taubman Asia, which is the platform for our expansion into the Asia-Pacific region. Taubman Asia is headquartered in Hong Kong and is engaged in projects that leverage our strong retail planning, design, and operational capabilities. In 2007, Taubman Asia completed the development services agreement for our involvement in a 1.2 million square foot retail and entertainment complex in New Songdo City in South Korea. Additionally, we announced our involvement in the retail component of Macao Studio City on the Cotai strip in Macao (see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) - Subsequent Events”).

We are a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended (the "Code"). In order to satisfy the provisions of the Code applicable to REITs, we must distribute to our shareholders at least 90% of our REIT taxable income prior to net capital gains and meet certain other requirements. The Operating Partnership's partnership agreement provides that the Operating Partnership will distribute, at a minimum, sufficient amounts to its partners such that our pro rata share will enable us to pay shareholder dividends (including capital gains dividends that may be required upon the Operating Partnership's sale of an asset) that will satisfy the REIT provisions of the Code.

Recent Developments

For a discussion of business developments that occurred in 2006, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations. "

The Shopping Center Business

There are several types of retail shopping centers, varying primarily by size and marketing strategy. Retail shopping centers range from neighborhood centers of less than 100,000 square feet of GLA to regional and super-regional shopping centers. Retail shopping centers in excess of 400,000 square feet of GLA are generally referred to as "regional" shopping centers, while those centers having in excess of 800,000 square feet of GLA are generally referred to as "super-regional" shopping centers. Nineteen of our centers are " super-regional " centers. In this annual report on Form 10-K, the term "regional shopping centers" refers to both regional and super-regional shopping centers. The term "GLA" refers to gross retail space, including anchors and mall tenant areas, and the term "Mall GLA" refers to gross retail space, excluding anchors. The term "anchor" refers to a department store or other large retail store. The term "mall tenants" refers to stores (other than anchors) that lease space in shopping centers.

2

Business of the Company

We, as managing general partner of the Operating Partnership, are engaged in the ownership, management, leasing, acquisition, development, and expansion of regional shopping centers.

The centers:

·  	are strategically located in major metropolitan areas, many in communities that are among the most affluent in the country, including Atlantic City, Charlotte, Dallas, Denver, Detroit, Los Angeles, Miami, New York City, Orlando, Phoenix, San Francisco, Tampa, and Washington, D.C.;	

·  	range in size between 242,000 and 1.6 million square feet of GLA and between 197,000 and 624,000 square feet of Mall GLA. The smallest center has approximately 60 stores, and the largest has over 200 stores. Of the 22 centers, 19 are super-regional shopping centers;	

·  	have approximately 3,000 stores operated by their mall tenants under approximately 1,000 trade names;	

·  	have 64 anchors, operating under 15 trade names;	

·  	lease most of Mall GLA to national chains, including subsidiaries or divisions of The Limited (The Limited, Express, Victoria's Secret, and others), Gap (Gap, Gap Kids, Banana Republic, Old Navy, and others), and Foot Locker, Inc. (Foot Locker, Lady Foot Locker, Champs Sports, and others); and	

·  	are among the most productive (measured by mall tenants' average sales per square foot) in the United States. In 2006, mall tenants had average sales per square foot of $539, which is significantly greater than the average for all regional shopping centers owned by public companies.	

The most important factor affecting the revenues generated by the centers is leasing to mall tenants (including temporary tenants and specialty retailers), which represents approximately 90% of revenues. Anchors account for less than 10% of revenues because many own their stores and, in general, those that lease their stores do so at rates substantially lower than those in effect for mall tenants.

Our portfolio is concentrated in highly productive super-regional shopping centers. Of our 22 centers, 20 had annual rent rolls at December 31, 2006 of over $10 million. We believe that this level of productivity is indicative of the centers ' strong competitive position and is, in significant part, attributable to our business strategy and philosophy. We believe that large shopping centers (including regional and especially super-regional shopping centers) are the least susceptible to direct competition because (among other reasons) anchors and large specialty retail stores do not find it economically attractive to open additional stores in the immediate vicinity of an existing location for fear of competing with themselves. In addition to the advantage of size, we believe that the centers' success can be attributed in part to their other physical characteristics, such as design, layout, and amenities.

Business Strategy And Philosophy

We believe that the regional shopping center business is not simply a real estate development business, but rather an operating business in which a retailing approach to the on-going management and leasing of the centers is essential. Thus we:

·  	offer a large, diverse selection of retail stores in each center to give customers a broad selection of consumer goods and variety of price ranges;	

·  	endeavor to increase overall mall tenants' sales by leasing space to a constantly changing mix of tenants, thereby increasing achievable rents;	

·  	seek to anticipate trends in the retailing industry and emphasize ongoing introductions of new retail concepts into our centers. Due in part to this strategy, a number of successful retail trade names have opened their first mall stores in the centers. In addition, we have brought to the centers "new to the market" retailers. We believe that the execution of this leasing strategy has been unique in the industry and is an important element in building and maintaining customer loyalty and increasing mall productivity; and	

·  	provide innovative initiatives that utilize technology and the Internet to heighten the shopping experience, build customer loyalty and increase tenant sales. Our Taubman Center website program connects shoppers and retailers through an interactive content-driven website. We also offer our shoppers a robust direct email program, which allows them to receive, each week, information featuring what’s on sale and what’s new at the stores they select.	

3

The centers compete for retail consumer spending through diverse, in-depth presentations of predominantly fashion merchandise in an environment intended to facilitate customer shopping. While some centers include stores that target high-end, upscale customers, each center is individually merchandised in light of the demographics of its potential customers within convenient driving distance.

Our leasing strategy involves assembling a diverse mix of mall tenants in each of the centers in order to attract customers, thereby generating higher sales by mall tenants. High sales by mall tenants make the centers attractive to prospective tenants, thereby increasing the rental rates that prospective tenants are willing to pay. We implement an active leasing strategy to increase the centers' productivity and to set minimum rents at higher levels. Elements of this strategy include terminating leases of under-performing tenants, renegotiating existing leases, and not leasing space to prospective tenants that (though viable or attractive in certain ways) would not enhance a center's retail mix.

In 2005, we began a new leasing strategy which offers our tenants the option to pay a fixed charge or pay their share of common area maintenance (CAM) costs. This strategy has been positive for tenant relations, as it has allowed the retailer to decide whether fixed CAM or traditional net CAM works best for them. Our research suggests this approach is unique in the industry; the retailer can choose greater predictability for a modest premium in the fixed CAM option. From a financial perspective, our analysis shows the premium will balance our additional risk. As tenants sign up for the fixed CAM option, over time there will be significantly less matching of CAM income with CAM expenditures, which can vary considerably from period to period.

Potential For Growth

Our principal objective is to enhance shareholder value. We seek to maximize the financial results of our core assets, while also pursuing a growth strategy that primarily includes an active new center development program.

Internal Growth

We expect that the majority of our future growth will come from our existing core portfolio and business. We’ve always had a culture of intensively managing our assets and maximizing the rents from tenants, and we’re committed to continue such efforts to drive even better performance.

Our core business strategy is to maintain a portfolio of properties that deliver above-market profitable growth by providing targeted retailers with the best opportunity to do business in each market and targeted shoppers with the best local shopping experience for their needs.

Development of New Centers

We are pursuing an active program of regional shopping center development. We believe that we have the expertise to develop economically attractive regional shopping centers through intensive analysis of local retail opportunities. We believe that the development of new centers is an important use of our capital and an area in which we excel. At any time, we have numerous potential development projects in various stages.

The Mall at Partridge Creek (Partridge Creek), a 640,000 square foot center, is under construction in Clinton Township, Michigan. The center will be anchored by Nordstrom, Parisian, and MJR Theatres, and is scheduled to open on October 18, 2007, with Nordstrom opening in spring 2008.

The Pier Shops at Caesars (The Pier), located in Atlantic City, New Jersey, began opening in phases in June 2006. Gordon Group Holdings LLC (Gordon), developed the center, and in January 2007, we assumed full management and leasing of the center. In addition, we are in final negotiations to increase our ownership of The Pier from 30% to 50%. We expect to complete this transaction and close on a refinancing of the property in the first quarter of 2007.

We are negotiating agreements regarding City Creek Center, a mixed-use project in Salt Lake City, Utah. Demolition of the existing structures began in November 2006. The retail component of the project is expected to open in fall 2011 and will include approximately 300,000 square feet of tenant GLA and Macy’s, Nordstrom, and Dillard’s as anchors. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Planned Capital Spending” regarding the status of this project.

In October 2006, we announced that we are seeking a final decision in the Supreme Court of the State of New York (Suffolk County) on our land use plan for our Oyster Bay project in Syosset, Long Island, New York. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Planned Capital Spending” regarding the status of this project.

4

In April 2005, we formed Taubman Asia, which is the platform for our expansion into the Asia-Pacific region. Taubman Asia is headquartered in Hong Kong and is engaged in projects that leverage our strong retail planning, design and operational capabilities. In January 2007, we completed the development services agreement for a 1.2 million square foot retail and entertainment complex in New Songdo City, Incheon, South Korea. The shopping complex is scheduled to open in early 2010, with construction beginning in 2007. We have negotiated the opportunity to invest in a portion of the broader project, which will include not only retail, but also office, hotel, and residential uses. We anticipate finalizing our decision on this investment in 2007. Also i n January 2007, Taubman Asia announced our involvement in the retail component of Macao Studio City on the Cotai Strip in Macao.

Our policies with respect to development activities are designed to reduce the risks associated with development. We generally do not intend to acquire land early in the development process. Instead, we generally acquire options on land or form partnerships with landholders holding potentially attractive development sites. We typically exercise the options only once we are prepared to begin construction. The pre-construction phase for a regional center typically extends over several years and the time to obtain anchor commitments, zoning and regulatory approvals, and public financing arrangements can vary significantly from project to project. In addition, we do not intend to begin construction until a sufficient number of anchor stores have agreed to operate in the shopping center, such that we are confident that the projected sales and rents from Mall GLA are sufficient to earn a return on invested capital in excess of our cost of capital. Having historically followed these principles, our experience indicates that, on average, less than 10% of the costs of the development of a regional shopping center will be incurred prior to the construction period. However, no assurance can be given that we will continue to be able to so limit pre-construction costs. Unexpected costs due to extended zoning and regulatory processes may cause our investment in a project to exceed this historic experience.

While we will continue to evaluate development projects using criteria, including financial criteria for rates of return, similar to those employed in the past, no assurances can be given that the adherence to these policies will produce comparable results in the future. In addition, the costs of shopping center development opportunities that are explored but ultimately abandoned will, to some extent, diminish the overall return on development projects. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital Spending" for further discussion of our development activities).

Strategic Acquisitions

Our objective is to acquire existing centers only when they are compatible with the quality of our portfolio (or can be redeveloped to that level) and if they satisfy our strategic plans and pricing requirements. We also may acquire additional interests in centers currently in our portfolio.

Expansions of the Centers

Another potential element of growth is the strategic expansion of existing properties to update and enhance their market positions, by replacing or adding new anchor stores or increasing mall tenant space. Most of the centers have been designed to accommodate expansions. Expansion projects can be as significant as new shopping center construction in terms of scope and cost, requiring governmental and existing anchor store approvals, design and engineering activities, including rerouting utilities, providing additional parking areas or decking, acquiring additional land, and relocating anchors and mall tenants (all of which must take place with a minimum of disruption to existing tenants and customers).

Construction has been completed on an expansion and renovation of tenant space at Waterside Shops at Pelican Bay (Waterside). In addition, Nordstrom will join the center as an anchor in fall 2008 and an expansion of the current anchor, Saks Fifth Avenue, will be completed in late 2007 with a full renovation of the store expected to be completed by summer 2008.

At Twelve Oaks Mall (Twelve Oaks), construction is underway on an addition of a 165,000 square foot Nordstrom. In addition, the project includes a 60,000 square foot expansion and renovation of Macy’s (previously Marshall Fields), and approximately 97,000 square feet of additional new store space. A grand opening is planned for September 28, 2007.

5

Construction is underway on a lifestyle component addition at Stamford Town Center, which is expected to open in November 2007. The project is 100% leased and will consist of a mix of signature retail and restaurant offerings.

The following table includes information regarding recent development, acquisition, and expansion and renovation activities that have been completed:

Developments:

Completion Date	Center	Location	
June 2006 (1)	The Pier Shops at Caesars	Atlantic City, New Jersey	
September 2005	Northlake Mall	Charlotte, North Carolina	

Acquisitions:

Completion Date	Center	Location	
October 2006	Land under Sunvalley	Concord, California	
July 2004	International Plaza	Tampa, Florida	
 	additional interest (2)	 	
January 2004	Beverly Center	Los Angeles, California	
 	additional interest (3)	 	

Expansions and Renovations:

Completion Date	Center	Location	
September 2006	Waterside Shops at Pelican Bay	Naples, Florida	

(1)  	Began opening in phases.	
(2)  	In July 2004, an additional 23.6% interest in the center was acquired.	
(3)  	In January 2004, the joint venture partner’s 30% interest in the center was acquired.	

Rental Rates

As leases have expired in the centers, we have generally been able to rent the available space, either to the existing tenant or a new tenant, at rental rates that are higher than those of the expired leases. In periods of increasing sales, such as those we are currently experiencing, rents on new leases will tend to rise as tenants' expectations of future growth become more optimistic. In periods of slower growth or declining sales, rents on new leases will grow more slowly or will decline for the opposite reason. However, center revenues nevertheless increase as older leases roll over or are terminated early and replaced with new leases negotiated at current rental rates that are usually higher than the average rates for existing leases.

The following tables contain certain information regarding per square foot minimum rent in our consolidated businesses and unconsolidated joint ventures at the comparable centers (centers that had been owned and open for the current and preceding year):

 	 	 	2006	 	 	2005	 	 	2004	 	 	2003	 	 	2002	 	
Average rent per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	43.20	 	$	41.41	 	$	40.98	 	$	40.06	 	$	42.31	 	
Unconsolidated Joint Ventures	 	 	41.03	 	 	42.28	 	 	42.09	 	 	42.75	 	 	42.03	 	
Opening base rent per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	42.24	 	$	42.38	 	$	44.35	 	$	43.41	 	$	45.91	 	
Unconsolidated Joint Ventures	 	 	42.98	 	 	44.90	 	 	44.67	 	 	40.06	 	 	43.03	 	
Square feet of GLA opened:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	941,163	 	 	682,305	 	 	688,020	 	 	512,105	 	 	429,705	 	
Unconsolidated Joint Ventures	 	 	306,461	 	 	400,477	 	 	337,679	 	 	498,950	 	 	344,311	 	
Closing base rent per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	39.73	 	$	40.59	 	$	44.54	 	$	40.80	 	$	43.47	 	
Unconsolidated Joint Ventures	 	 	42.49	 	 	44.26	 	 	51.40	 	 	41.28	 	 	41.63	 	
Square feet of GLA closed:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	894,770	 	 	650,701	 	 	499,098	 	 	628,626	 	 	299,234	 	
Unconsolidated Joint Ventures	 	 	246,704	 	 	366,932	 	 	280,393	 	 	470,143	 	 	362,747	 	
Releasing spread per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	2.51	 	$	1.79	 	$	(0.19	)	$	2.61	 	$	2.44	 	
Unconsolidated Joint Ventures	 	 	0.49	 	 	0.64	 	 	(6.73	)	 	(1.22	)	 	1.40	 	

6

The spread between opening and closing rents may not be indicative of future periods, as this statistic is not computed on comparable tenant spaces, and can vary significantly from period to period depending on the total amount, location, and average size of tenant space opening and closing in the period.

Lease Expirations

The following table shows scheduled lease expirations based on information available as of December 31, 2006 for the next ten years for all owned centers in operation at that date, excluding Arizona Mills and The Pier:

 
Lease
Expiration Year	 
 
Number of
Leases Expiring	 
 
Leased Area in
Square Footage	 
Annualized Base Rent
Under Expiring Leases
(in thousands of dollars)	 
Annualized Base Rent
Under Expiring Leases
  Per Square Foot	Percent of
Total Leased Square
Footage Represented
b y Expiring Leases	
     2007 (1)	140	   414,098	16,487	$39.81	    4.1%	
2008	258	   729,423	30,372	  41.64	 7.3	
2009	296	   759,318	32,170	  42.37	 7.6	
2010	224	   590,268	27,847	  47.18	 5.9	
2011	434	1,333,204	54,253	  40.69	13.3	
2012	299	1,064,200	48,056	  45.16	10.6	
2013	256	   983,699	41,179	  41.86	 9.8	
2014	197	   721,516	27,776	  38.50	 7.2	
2015	237	   934,797	34,725	  37.15	 9.3	
2016	243	   919,426	36,662	  39.87	 9.2	

(1)  	Excludes leases that expire in 2007 for which renewal leases or leases with replacement tenants have been executed as of December 31, 2006.	

We believe that the information in the table is not necessarily indicative of what will occur in the future because of several factors, but principally because of early lease terminations at the centers. For example, the average remaining term of the leases that were terminated during the period 2001 to 2006 was approximately two years. The average term of leases signed during 2006 and 2005 was approximately seven years.

In addition, mall tenants at the centers may seek the protection of the bankruptcy laws, which could result in the termination of such tenants' leases and thus cause a reduction in cash flow. In 2006, 1.0% of leases were affected compared to 0.4% in 2005. This statistic has ranged from 0.4% to 4.5% since we went public in 1992. Since 1991, the annual provision for losses on accounts receivable has been less than 2% of annual revenues.

Occupancy

Occupancy statistics include centers owned and open in the full periods presented, and value center anchors. The statistics for comparable centers exclude Northlake Mall (Northlake), which opened in 2005. The statistics for comparable centers also exclude Waterside due to the recent renovation and expansion, and Woodland, which was sold in the fourth quarter of 2005. All statistics exclude The Pier, which opened in 2006.

 	2006	2005	2004	
All Centers:	 	 	 	
Leased space	   92.5%	   91.7%	   90.7%	
Ending occupancy	91.3	90.0	89.6	
Average occupancy	89.2	88.9	87.4	
 	 	 	 	
Comparable Centers:	 	 	 	
Leased space	   92.3%	   91.5%	   90.7%	
Ending occupancy	91.2	90.2	89.6	
Average occupancy	89.1	89.1	87.4	

Major Tenants

No single retail company represents 10% or more of our revenues. The combined operations of The Limited, Inc. accounted for approximately 4.7% of Mall GLA as of December 31, 2006 and 4.3% of 2006 minimum rent. No other single retail company accounted for more than 4% of Mall GLA or 3% of 2006 minimum rent.

7

The following table shows the ten largest tenants and their square footage as of December 31, 2006:

Tenant	# of
Stores	Square
Footage	% of
Mall GLA	
Limited (The Limited, Express, Victoria's Secret, and others)	64	476,358	   4.7%	
Gap (Gap, Gap Kids, Banana Republic, Old Navy, and others)	41	338,560	3.3	
Forever 21 (Forever 21, XXI Forever, and others)	19	255,803	2.5	
Abercrombie & Fitch (Abercrombie & Fitch, Hollister, and others)	34	250,475	2.5	
Foot Locker (Foot Locker, Lady Foot Locker, Champs Sports, and others)	43	221,250	2.2	
Williams-Sonoma (Williams-Sonoma, Pottery Barn, Pottery Barn Kids)	28	215,629	2.1	
Talbots (Talbots, J. Jill)	32	185,587	1.8	
Ann Taylor	31	180,307	1.8	
The TJX Companies (Marshalls, T.J. Maxx)	 4	151,313	1.5	
Luxottica (Lenscrafters, Sunglass Hut International, Things Remembered, and others)	62	118,074	1.2	

General Risks of the Company

The Economic Performance and Value of our Shopping Centers are Dependent on Many Factors

The economic performance and value of our shopping centers are dependent on various factors. Additionally, these same factors will influence our decision whether to go forward on the development of new centers and may affect the ultimate economic performance and value of projects under construction. Adverse changes in the economic performance and value of our shopping centers would adversely affect our income and cash available to pay dividends.
 
Such factors include:
 
·  	changes in the national, regional, and/or local economic and geopolitical climates;	

·  	increases in operating costs;	

·  	the public perception of the safety of customers at our shopping centers;	

·  	legal liabilities;	

·  	availability and cost of financing;	

·  	changes in government regulations; and	

·  	changes in real estate zoning and tax laws.	

In addition, the value and performance of our shopping centers may be adversely affected by certain other factors discussed below including competition, uninsured losses, and environmental liabilities. 

We are in a competitive business.

There are numerous shopping facilities that compete with our properties in attracting retailers to lease space. In addition, retailers at our properties face continued competition from discount shopping centers, lifestyle centers, outlet malls, wholesale and discount shopping clubs, direct mail, telemarketing, television shopping networks and shopping via the Internet. Competition of this type could adversely affect our revenues and cash available for distribution to stockholders.

We compete with other major real estate investors with significant capital for attractive investment opportunities. These competitors include other REITs, investment banking firms and private institutional investors. This competition has increased prices for commercial properties and may impair our ability to make suitable property acquisitions on favorable terms in the future.

Some of our potential losses may not be covered by insurance.

We carry standard liability, fire, flood, earthquake, extended coverage and rental loss insurance on each of our properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, some types of losses, including lease and other contract claims, that generally are not insured. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. If this happens, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.

8

In November 2002, Congress passed the “Terrorism Risk Insurance Act of 2002” (TRIA), which required insurance companies to offer terrorism coverage to all existing insured companies for an additional cost. As a result, our standard property insurance policies are currently provided without a sub-limit for terrorism, eliminating the need for separate terrorism insurance policies.

In 2005, Congress extended the expiration date of TRIA to December 31, 2007. While Congress may further extend or replace TRIA , the possibility exists that TRIA may be allowed to expire at the end of 2007. There are specific provisions in our loans that address terrorism insurance. Simply stated, in most loans, we are obligated to obtain terrorism insurance, but there are limits on the amounts we could be required to spend to obtain such coverage. If Congress fails to further extend or replace TRIA or if another terrorist event occurs, we would likely pay higher amounts for terrorism insurance coverage and/or obtain less coverage than we have currently. Our inability to obtain such coverage or to do so only at greatly increased costs may also negatively impact the availability and cost of future financings.
   
We may be subject to liabilities for environmental matters.

All of the centers presently owned by us (not including option interests in certain pre-development projects ) have been subject to environmental assessments. No assurances can be given, however, that all environmental liabilities have been identified or that no prior owner, operator, or current occupant has created an environmental condition not known to us. Moreover, no assurances can be given that future laws, ordinances or regulations will not impose any material environmental liability or that the current environmental condition of the centers will not be affected by tenants and occupants of the centers, by the condition of properties in the vicinity of the centers (such as the presence of underground storage tanks) or by third parties unrelated to us.

We hold investments in joint ventures in which we do not control all decisions, and we may have conflicts of interest with our joint venture partners.

Some of our shopping centers are partially owned by non-affiliated partners through joint venture arrangements. As a result, we do not control all decisions regarding those shopping centers and may be required to take actions that are in the interest of the joint venture partners but not our best interests. Accordingly, we may not be able to favorably resolve any issues which arise with respect to such decisions, or we may have to provide financial or other inducements to our joint venture partners to obtain such resolution.

For joint ventures that we do not manage, we do not control decisions as to the design or operation of internal controls over accounting and financial reporting, including those relating to maintenance of accounting records, authorization of receipts and disbursements, selection and application of accounting policies, reviews of period-end financial reporting, and safeguarding of assets. Therefore, we are exposed to risk that such controls may not be designed or operating effectively, which could ultimately affect the accuracy of financial information related to these joint ventures as prepared by our joint venture partners.

Various restrictive provisions and rights govern sales or transfers of interests in our joint ventures. These may work to our disadvantage because, among other things, we may be required to make decisions as to the purchase or sale of interests in our joint ventures at a time that is disadvantageous to us.

The bankruptcy of our tenants, anchors or joint venture partners could adversely affect us.

We could be adversely affected by the bankruptcy of third parties. The bankruptcy of a mall tenant could result in the termination of its lease, which would lower the amount of cash generated by that mall. In addition, if a department store operating as an anchor at one of our shopping centers were to go into bankruptcy and cease operating, we may experience difficulty and delay in replacing the anchor. In addition, the anchor’s closing may lead to reduced customer traffic and lower mall tenant sales. As a result, we may also experience difficulty or delay in leasing spaces in areas adjacent to the vacant anchor space. The profitability of shopping centers held in a joint venture could also be adversely affected by the bankruptcy of one of the joint venture partners if, because of certain provisions of the bankruptcy laws, we were unable to make important decisions in a timely fashion or became subject to additional liabilities.

Our investments are subject to credit and market risk.

We occasionally extend credit to third parties in connection with the sale of land or other transactions. We have occasionally made investments in marketable and other equity securities. We are exposed to risk in the event the values of our investments and/ or our loans decrease due to overall market conditions, business failure, and/ or other nonperformance by the investees or counterparties.

9

Our real estate investments are relatively illiquid.

We may be limited in our ability to vary our portfolio in response to changes in economic or other conditions by restrictions on transfer imposed by our partners or lenders. In addition, under TRG’s partnership agreement, upon the sale of a center or TRG’s interest in a center, TRG may be required to distribute to its partners all of the cash proceeds received by TRG from such sale. If TRG made such a distribution, the sale proceeds would not be available to finance TRG’s activities, and the sale of a center may result in a decrease in funds generated by continuing operations and in distributions to TRG’s partners, including us.

We may acquire or develop new properties, and these activities are subject to various risks.

We actively pursue development and acquisition activities as opportunities arise, and these activities are subject to the following risks:

·  	the pre-construction phase for a regional center typically extends over several years, and the time to obtain anchor commitments, zoning and regulatory approvals, and public financing can vary significantly from project to project;	
 
·  	we may not be able to obtain the necessary zoning or other governmental approvals for a project, or we may determine that the expected return on a project is not sufficient; if we abandon our development activities with respect to a particular project, we may incur a loss on our investment;	
 
·  	construction and other project costs may exceed our original estimates because of increases in material and labor costs, delays and costs to obtain anchor and tenant commitments;	
 
·  	we may not be able to obtain financing or to refinance construction loans, which are generally recourse to TRG; and	
 
·  	occupancy rates and rents at a completed project may not meet our projections, and the costs of development activities that we explore but ultimately abandon will, to some extent, diminish the overall return on our completed development projects.	

We are engaged in development and service activities and are evaluating investments in international markets, and these activities are subject to risks that may reduce our financial return. In addition to the general risks related to development and acquisition activities described in the preceding section, our international activities are subject to unique risks, including:

·  	adverse effects of changes in exchange rates for foreign currencies;	
 
·  	changes in foreign political environments;	

·  	difficulties of complying with a wide variety of foreign laws including corporate governance, operations, taxes, and litigation;	

·  	changes in and/or difficulties in complying with applicable laws and regulations in the United States that affect foreign operations, including the Foreign Corrupt Practices Act;	

·  	difficulties in managing international operations, including difficulties that arise from ambiguities in contracts written in foreign languages; and	

·  	obstacles to the repatriation of earnings and cash.	

Although our international activities are currently limited in their scope, to the extent that we expand them, these risks could increase in significance and adversely affect our financial returns on international projects and services and overall financial condition. We have put in place policies, practices, and systems for mitigating these international risks, although we cannot provide assurance that we will be entirely successful in doing so.

10

We may not be able to maintain our status as a REIT.

We may not be able to maintain our status as a REIT for federal income tax purposes with the result that the income distributed to shareholders will not be deductible in computing taxable income and instead would be subject to tax at regular corporate rates. We may also be subject to the alternative minimum tax if we fail to maintain our status as a REIT. Any such corporate tax liability would be substantial and would reduce the amount of cash available for distribution to our shareholders which, in turn, could have a material adverse impact on the value of, or trading price for, our shares. Although we believe we are organized and operate in a manner to maintain our REIT qualification, many of the REIT requirements of the Internal Revenue Code of 1986, as amended, or the Code, are very complex and have limited judicial or administrative interpretations. Changes in tax laws or regulations or new administrative interpretations and court decisions may also affect our ability to maintain REIT status in the future. If we do not maintain our REIT status in any year, we may be unable to elect to be treated as a REIT for the next four taxable years.

Although we currently intend to maintain our status as a REIT, future economic, market, legal, tax, or other considerations may cause us to determine that it would be in our and our shareholders’ best interests to revoke our REIT election. If we revoke our REIT election, we will not be able to elect REIT status for the next four taxable years.

We may be subject to taxes even if we qualify as a REIT.

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. We cannot guarantee that sales of our properties would not be prohibited transactions unless we comply with certain statutory safe-harbor provisions. The need to avoid prohibited transactions could cause us to forego or defer sales of facilities that non-REITs otherwise would have sold or that might otherwise be in our best interest to sell.

In addition, any net taxable income earned directly by our taxable REIT subsidiaries will be subject to federal and state corporate income tax. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by the taxable REIT subsidiaries if the economic arrangements between the REIT, the REIT’s tenants, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income, because not all states and localities follow the federal income tax treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to our shareholders.
   
The lower tax rate on certain dividends from non-REIT “C” corporations may cause investors to prefer to hold stock in non-REIT “C” corporations.

Whereas corporate dividends have traditionally been taxed at ordinary income rates, the maximum tax rate on certain corporate dividends received by individuals through December 31, 2008, has been reduced from 35% to 15%. This change has reduced substantially the so-called “double taxation” (that is, taxation at both the corporate and shareholder levels) that had generally applied to non-REIT “C” corporations but did not apply to REITs. Generally, dividends from REITs do not qualify for the dividend tax reduction because REITs generally do not pay corporate-level tax on income that they distribute currently to shareholders. REIT dividends are only eligible for the lower capital gains rates in limited circumstances in which the dividends are attributable to income, such as dividends from a taxable REIT subsidiary, that has been subject to corporate-level tax. The application of capital gains rates to non-REIT “C” corporation dividends could cause individual investors to view stock in non-REIT “C” corporations as more attractive than shares in REITs, which may negatively affect the value of our shares.

11

Our ownership limitations and other provisions of our articles of incorporation and bylaws may hinder any attempt to acquire us.

The general limitations on ownership of our capital stock and other provisions of our articles of incorporation and bylaws could have the effect of discouraging offers to acquire us and of inhibiting a change in control, which could adversely affect our shareholders’ ability to receive a premium for their shares in connection with such a transaction.

Members of the Taubman family have the power to vote a significant number of the shares of our capital stock entitled to vote.

Based on information contained in filings made with the SEC, as of December 31, 2006, A. Alfred Taubman and the members of his family have the power to vote approximately 31% of the outstanding shares of our common stock and our Series B preferred stock, considered together as a single class, and approximately 86% of our outstanding Series B preferred stock. Our shares of common stock and our Series B preferred stock vote together as a single class on all matters generally submitted to a vote of our shareholders, and the holders of the Series B preferred stock have certain rights to nominate up to four individuals for election to our board of directors and other class voting rights. Mr. Taubman’s sons, Robert S. Taubman and William S. Taubman, serve as our Chairman of the Board, President and Chief Executive Officer, and our Chief Operating Officer, respectively. These individuals occupy the same positions with The Taubman Company, LLC, which manages all of our properties. As a result, Mr. A. Alfred Taubman and the members of his family may exercise significant influence with respect to the election of our board of directors, the outcome of any corporate transaction or other matter submitted to our shareholders for approval, including any merger, consolidation or sale of all or substantially all of our assets. In addition, because our articles of incorporation impose a limitation on the ownership of our outstanding capital stock by any person and such ownership limitation may not be changed without the affirmative vote of holders owning not less than two-thirds of the outstanding shares of capital stock entitled to vote on such matter, Mr. A. Alfred Taubman and the members of his family have the power to prevent a change in control of our company.
 
Our ability to pay dividends on our stock may be limited.

Because we conduct all of our operations through TRG, our ability to pay dividends on our stock will depend almost entirely on payments and dividends received on our interests in TRG. Additionally, the terms of some of the debt to which TRG is a party limits its ability to make some types of payments and other dividends to us. This in turn limits our ability to make some types of payments, including payment of dividends on our stock, unless we meet certain financial tests or such payments or dividends are required to maintain our qualification as a REIT. As a result, if we are unable to meet the applicable financial tests, we may not be able to pay dividends on our stock in one or more periods.  

Our ability to pay dividends is further limited by the requirements of Michigan law.

Our ability to pay dividends on our stock is further limited by the laws of Michigan. Under the Michigan Business Corporation Act, a Michigan corporation may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as the debts become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Accordingly, we may not make a distribution on our stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of any shares of our preferred stock then outstanding.
   
We may incur additional indebtedness, which may harm our financial position and cash flow and potentially impact our ability to pay dividends on our stock.

Our governing documents do not limit us from incurring additional indebtedness and other liabilities. As of December 31, 2006, we had approximately $2.3 billion of consolidated indebtedness outstanding, and our beneficial interest in both our consolidated debt and the debt of our unconsolidated joint ventures was $2.6 billion. We may incur additional indebtedness and become more highly leveraged, which could harm our financial position and potentially limit our cash available to pay dividends.

12

We cannot assure you that we will be able to pay dividends regularly although we have done so in the past.

Our ability to pay dividends in the future is dependent on our ability to operate profitably and to generate cash from our operations. Although we have done so in the past, we cannot guarantee that we will be able to pay dividends on a regular quarterly basis in the future. Furthermore, any new shares of common stock issued will increase the cash required to continue to pay cash dividends at current levels. Any common stock or preferred stock that may in the future be issued to finance acquisitions, upon exercise of stock options or otherwise, would have a similar effect.

Environmental Matters

All of the centers presently owned by us (not including option interests in certain pre-development projects) have been subject to environmental assessments. We are not aware of any environmental liability relating to the centers or any other property, in which we have or had an interest (whether as an owner or operator) that we believe, would have a material adverse effect on our business, assets, or results of operations. No assurances can be given, however, that all environmental liabilities have been identified or that no prior owner, operator, or current occupant has created an environmental condition not known to us. Moreover, no assurances can be given that (1) future laws, ordinances, or regulations will not impose any material environmental liability or that (2) the current environmental condition of the centers will not be affected by tenants and occupants of the centers, by the condition of properties in the vicinity of the centers (such as the presence of underground storage tanks), or by third parties unrelated to us.

Personnel

We have engaged the Manager to provide real estate management, acquisition, development, and administrative services required by us and our properties.

As of December 31, 2006, the Manager had 547 full-time employees. The following table provides a breakdown of employees by operational areas as of December 31, 2006:

 	Number of Employees	
Center Operations	206	
Property Management	133	
Leasing and Tenant Coordination	60	
Development	25	
Financial Services	62	
Other	61	
Total	547	

Available Information

The Company makes available free of charge through its website at www.taubman.com all reports it electronically files with, or furnishes to, the Securities Exchange Commission (the “SEC”), including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those reports, as soon as reasonably practicable after those documents are filed with, or furnished to, the SEC. These filings are also accessible on the SEC’s website at www.sec.gov .

Item 1A. RISK FACTORS.

The information required by this item is included in this report at Item 1 under the caption "Business - General Risks of the Company."

Item 1B. UNRESOLVED STAFF COMMENTS.

None.

Item 2. PROPERTIES.

Ownership

The following table sets forth certain information about each of the centers. The table includes only centers in operation at December 31, 2006. Centers are owned in fee other than Beverly Center (Beverly), Cherry Creek Shopping Center (Cherry Creek), International Plaza, and MacArthur Center, which are held under ground leases expiring between 2049 and 2083.

Certain of the centers are partially owned through joint ventures. Generally, the Operating Partnership's joint venture partners have ongoing rights with regard to the disposition of the Operating Partnership's interest in the joint ventures, as well as the approval of certain major matters.

13

Center	Anchors	Sq. Ft of GLA/Mall GLA
as of 12/31/06	Year
Opened/
Expanded	Year
Acquired	Ownership %
as of 12/31/06	
Consolidated Businesses:	 	 	 	 	 	
Beverly Center	Bloomingdales, Macy’s	   884,000	1982	 	100%	
Los Angeles, CA	 	   576,000	 	 	 	
 	 	 	 	 	 	
Cherry Creek Shopping Center	Macy’s, Neiman Marcus, Nordstrom (2007),	    1,023,000 (1)	1990/1998	 	50%	
Denver, CO	Saks Fifth Avenue	   550,000	 	 	 	
 	 	 	 	 	 	
Dolphin Mall	Bass Pro Shops Outdoor World (2007), Burlington Coat	1,315,000	2001	 	100%	
Miami, FL	Factory, Cobb Theatres, Dave & Busters, Marshalls, Neiman	  624,000	 	 	 	
 	Marcus-Last Call, Off 5 th Saks, The Sports Authority	 	 	 	 	
 	 	 	 	 	 	
Fairlane Town Center	JCPenney, Macy’s, Off 5 th Saks, Sears	   1,513,000 (2)	1976/1978/	 	100%	
Dearborn, MI	 	  623,000	1980/2000	 	 	
(Detroit Metropolitan Area)	 	 	 	 	 	
 	 	 	 	 	 	
Great Lakes Crossing	AMC Theaters, Bass Pro Shops Outdoor World, Circuit City,	1,360,000	1998	 	100%	
Auburn Hills, MI	GameWorks, Neiman Marcus-Last Call, Off 5 th Saks	  545,000	 	 	 	
(Detroit Metropolitan Area)	 	 	 	 	 	
 	 	 	 	 	 	
International Plaza	Dillard’s, Neiman Marcus, Nordstrom, Robb & Stucky	1,221,000	2001	 	50%	
Tampa, FL	 	  579,000	 	 	 	
 	 	 	 	 	 	
MacArthur Center	Dillard’s, Nordstrom	  933,000	1999	 	95%	
Norfolk, VA	 	  519,000	 	 	 	
 	 	 	 	 	 	
Northlake Mall	Belk, Dick’s Sporting Goods, Dillard’s, Macy’s	1,072,000	2005	 	100%	
Charlotte, NC	 	  466,000	 	 	 	
 	 	 	 	 	 	
Regency Square	JCPenney, Macy’s (two locations), Sears	  823,000	1975/1987	1997	100%	
Richmond, VA	 	  236,000	 	 	 	
 	 	 	 	 	 	
The Mall at Short Hills	Bloomingdale’s, Macy’s, Neiman Marcus, Nordstrom, Saks	1,340,000	1980/1994/	 	100%	
Short Hills, NJ	Fifth Avenue	  518,000	1995	 	 	
 	 	 	 	 	 	
Stony Point Fashion Park	Dick’s Sporting Goods, Dillard’s, Saks Fifth Avenue	  662,000	2003	 	100%	
Richmond, VA	 	  296,000	 	 	 	
 	 	 	 	 	 	
Twelve Oaks Mall	JCPenney, Lord & Taylor, Macy’s, Nordstrom (2007), Sears	  1,190,000 (3)	1977/1978	 	100%	
Novi, MI	 	  452,000	 	 	 	
(Detroit Metropolitan Area)	 	 	 	 	 	
 	 	 	 	 	 	
The Mall at Wellington Green	City Furniture and Ashley Furniture Home Store, Dillard’s,	1,274,000	2001/2003	 	90%	
Wellington, FL	JCPenney, Macy’s, Nordstrom	  461,000	 	 	 	
(Palm Beach County)	 	 	 	 	 	
 	 	 	 	 	 	
The Shops at Willow Bend	Dillard’s, Macy’s, Neiman Marcus, Saks Fifth Avenue	  1,388,000 (4)	2001/2004	 	100%	
Plano, TX	 	 530,000	 	 	 	
(Dallas Metropolitan Area)	 	 	 	 	 	
 	Total GLA	15,998,000	 	 	 	
 	Total Mall GLA	  6,975,000	 	 	 	
 	TRG% of Total GLA	14,702,000	 	 	 	
 	TRG% of Total Mall GLA	  6,338,000	 	 	 	
Unconsolidated Joint Ventures:	 	 	 	 	 	
Arizona Mills	GameWorks, Harkins Cinemas, JCPenney Outlet, Neiman	1,231,000	1997	 	50%	
Tempe, AZ	Marcus-Last Call, Off 5 th Saks	  527,000	 	 	 	
(Phoenix Metropolitan Area)	 	 	 	 	 	
 	 	 	 	 	 	
Fair Oaks	JCPenney, Lord & Taylor, Macy’s (two locations), Sears	1,571,000	1980/1987/	 	50%	
Fairfax, VA	 	  566,000	1988/2000	 	 	
(Washington, DC Metropolitan Area)	 	 	 	 	 	
 	 	 	 	 	 	
The Mall at Millenia	Bloomingdale’s, Macy’s, Neiman Marcus	1,115,000	2002	 	50%	
Orlando, FL	 	  515,000	 	 	 	
 	 	 	 	 	 	
The Pier Shops at Caesars	 	  303,000	2006	 	(5)	
Atlantic City, NJ	 	  303,000	 	 	 	
 	 	 	 	 	 	
Stamford Town Center	Macy’s, Saks Fifth Avenue	    852,000 (6)	1982	 	50%	
Stamford, CT	 	 359,000	 	 	 	
 	 	 	 	 	 	
Sunvalley	JCPenney, Macy’s (two locations), Sears	1,326,000	1967/1981	2002	50%	
Concord, CA	 	  486,000	 	 	 	
(San Francisco Metropolitan Area)	 	 	 	 	 	
 	 	 	 	 	 	
Waterside Shops at Pelican Bay	Nordstrom (2008), Saks Fifth Avenue	  242,000	1992/2006	2003	25%	
Naples, FL	 	  197,000	 	 	 	
 	 	 	 	 	 	
Westfarms	JCPenney, Lord & Taylor, Macy’s, Macy’s Men’s Store/	1,290,000	1974/1983/	 	79%	
West Hartford, CT	Furniture Gallery, Nordstrom	  520,000	1997	 	 	
 	 	 	 	 	 	
 	Total GLA	7,930,000	 	 	 	
 	Total Mall GLA	3,473,000	 	 	 	
 	TRG% of Total GLA	4,127,000	 	 	 	
 	TRG% of Total Mall GLA	1,687,000	 	 	 	
 	 	 	 	 	 	
 	Grand Total GLA	23,928,000	 	 	 	
 	Grand Total Mall GLA	10,448,000	 	 	 	
 	TRG% of Total GLA	18,829,000	 	 	 	
 	TRG% of Total Mall GLA	 8,025,000	 	 	 	

(1)  	Nordstrom will occupy the former Lord & Taylor space, which closed on April 2005.	
(2)  	GLA includes the former Lord & Taylor store, which closed in June 2006.	
(3)  	In addition to the 2007 Nordstrom addition, an expansion and renovation of Macy’s and additional store space will open in September 2007.	
(4)  	GLA includes the former Lord & Taylor store, which closed in April 2005.	
(5)  	The Company is in final negotiations to increase its ownership from 30% to 50%.	
(6)  	GLA includes the space formerly occupied by Filene’s, which is 100% leased and will include a mix of stores and restaurants. The expected opening date is November 2007.	

14

Anchors

The following table summarizes certain information regarding the anchors at the operating centers (excluding the value centers) as of December 31, 2006:

Name	Number of
Anchor Stores	 	12/31/06 GLA
(in thousands)	 	% of GLA	
Belk	1	 	   180	 	  0.9%	
 	 	 	 	 	 	
City Furniture and Ashley Furniture Home Store	1	 	   140	 	  0.7%	
 	 	 	 	 	 	
Dick’s Sporting Goods	2	 	   159	 	  0.8%	
 	 	 	 	 	 	
Dillard’s	6	 	1,335	 	  6.8%	
 	 	 	 	 	 	
Federated	 	 	 	 	 	
  Macy’s	17	 	3,394	 	 	
  Bloomingdale’s	3	 	   614	 	 	
  Lord & Taylor	3	 	   397	 	 	
  Macy’s Men’s Store/Furniture Gallery	1	 	    80	 	 	
    Total	24	 	4,485	 	22.7%	
 	 	 	 	 	 	
JCPenney	7	 	1,266	 	  6.4%	
 	 	 	 	 	 	
Neiman Marcus (1)	5	 	   556	 	  2.8%	
 	 	 	 	 	 	
Nordstrom (2)	5	 	   796	 	  4.0%	
 	 	 	 	 	 	
Robb & Stucky	1	 	   119	 	  0.6%	
 	 	 	 	 	 	
Saks	 	 	 	 	 	
  Saks Fifth Avenue	6	 	   467	 	 	
  Off 5 th Saks (3)	1	 	    93	 	 	
    Total	7	 	   560	 	  2.8%	
 	 	 	 	 	 	
Sears	5	 	1,104	 	  5.6 %	
 	 	 	 	 	 	
Total	64	 	10,700	 	     54.3 % (4)	

(1)  	Excludes three Neiman Marcus-Last Call stores at value centers.	
(2)  	Nordstrom will open at Cherry Creek and Twelve Oaks in Fall 2007, and Waterside in 2008.	
(3)  	Excludes three Off 5th Saks stores at value centers.	
(4)  	Percentages in table may not add due to rounding.	

15

Mortgage Debt

The following table sets forth certain information regarding the mortgages encumbering the centers as of December 31, 2006. All mortgage debt in the table below is nonrecourse to the Operating Partnership except for debt encumbering Dolphin Mall (Dolphin), Fairlane Town Center (Fairlane), and Twelve Oaks. The Operating Partnership has guaranteed the payment of all or a portion of the principal and interest on the mortgage debt of these centers. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Loan Commitments and Guarantees"). An $86 million mortgage for The Pier is excluded along with a $0.3 million note secured by certain equipment of The Mall at Millenia.

Centers Consolidated in
TCO’s Financial Statements	 	Stated
Interest
Rate	 	 	Principal Balance as
of 12/31/06
(thousands
of dollars)	 	 	Annual
Debt Service
(thousands
of dollars)	 	 	Maturity Date	 	 	Balance Due on Maturity (thousands
of dollars)	 	Earliest Prepayment Date	 	
Beverly Center	 	5.28%	 	 	343,608	 	 	23,101	(1)	 	02/11/14	 	 	303,277	 	01/16/07	(2)	
Cherry Creek Shopping Center (50%)	 	
5.24%	 	 	
280,000	 	 	
Interest Only	 	 	
06/18/16	 	 	
280,000	 	
05/11/09	
(2)(3)	
Dolphin Mall	 	LIBOR+0.70%	 	 	5,000	(4)	 	Interest Only	 	 	02/14/09	(5)	 	5,000	 	2 Days Notice	(6)	
Fairlane Town Center	 	LIBOR+0.70%	 	 	55,000	(4)	 	Interest Only	 	 	02/14/09	(5)	 	55,000	 	2 Days Notice	(6)	
Great Lakes Crossing	 	5.25%	 	 	142,908	 	 	10,006	(1)	 	03/11/13	 	 	125,507	 	30 Days Notice	(2)	
International Plaza (50.1%)	 	4.21%	(7)	 	178,719	(7)	 	11,274	(1)	 	01/08/08	(8)	 	175,150	 	30 Days Notice	(9)	
MacArthur Center (95%)	 	7.59%	(10)	 	138,243	(10)	 	12,400	(1)	 	10/01/10	 	 	126,884	 	30 Days Notice	(2)	
Northlake Mall	 	5.41%	 	 	215,500	 	 	Interest Only	 	 	02/06/16	 	 	215,500	 	3/23/08	(11)	
The Mall at Partridge Creek	 	LIBOR+1.15%	 	 	22,010	 	 	Interest Only	 	 	09/07/10	 	 	22,010	 	3 Days Notice	(6)	
Regency Square	 	6.75%	 	 	77,812	 	 	6,421	(1)	 	11/01/11	 	 	71,569	 	60 Days Notice	(12)	
The Mall at Short Hills	 	5.47%	 	 	540,000	 	 	Interest Only	 	 	12/14/15	 	 	540,000	 	01/01/11	(13)	
Stony Point Fashion Park	 	6.24%	 	 	111,864	 	 	8,488	(1)	 	06/01/14	 	 	98,585	 	08/13/06	(11)	
The Mall at Wellington Green (90%)	 	
5.44%	 	 	
200,000	 	 	
Interest Only	 	 	
05/06/15	 	 	
200,000	 	
06/24/07	
(11)	
Twelve Oaks Mall	 	LIBOR+0.70%	 	 	0	(4)	 	Interest Only	 	 	02/09/07	(5)	 	0	 	2 Days Notice	(6)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Consolidated Secured Debt	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TRG Credit Facility	 	Variable Bank Rate	(14)	 	8,075	 	 	Interest Only	 	 	02/14/08	 	 	8,075	 	At Any Time	(6)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Centers Owned by Unconsolidated Joint
Ventures/TRG’s % Ownership	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Arizona Mills (50%)	 	7.90%	 	 	137,780	 	 	12,728	(1)	 	10/05/10	 	 	130,419	 	30 Days Notice	(2)	
Fair Oaks (50%)	 	6.60%	 	 	140,000	 	 	Interest Only	 	 	04/01/08	 	 	140,000	 	30 Days Notice	(15)	
The Mall at Millenia (50%)	 	5.46%	 	 	210,000	 	 	Interest Only	(16)	 	04/09/13	 	 	195,255	 	30 Days Notice	(2)	
Sunvalley (50%)	 	5.67%	 	 	127,950	 	 	9,372	(1)	 	11/01/12	 	 	114,056	 	30 Days Notice	(2)	
Taubman Land Associates (50%)	 	LIBOR+0.90%	(17)	 	30,000	 	 	Interest Only	 	 	11/01/12	 	 	30,000	 	At Any Time	(6)	
Waterside Shops at Pelican Bay (25%)	 	
5.54%	 	 	
165,000	 	 	
Interest Only	 	 	
10/07/16	 	 	
165,000	 	
09/28/09	
(12)(18)	
Westfarms (79%)	 	6.10%	 	 	198,521	 	 	15,272	(1)	 	07/11/12	 	 	179,028	 	30 Days Notice	(2)	
 
(1)  	Amortizing principal based on 30 years.	
(2)  	No defeasance deposit required if paid within three months of maturity date.	
(3)  	Loan may be defeased earlier of 2 years from the date the final note is securitized or 5/11/09.	
(4)  	Subfacility in $350 million revolving line of credit. Facility may be increased to $650 million subject to available lender commitments and additional secured collateral.	
(5)  	The maturity date may be extended one year.	
(6)  	Prepayment can be made without penalty.	
(7)  	Debt is reduced by $0.2 million of purchase accounting discount from acquisition which increases the stated rate on the debt of 4.21% to an effective rate of 4.38%.	
(8)  	The operating partnership has entered into three forward starting swaps totaling $150 million to partially hedge the refinancing of this debt at maturity. The weighted average forward swap rate for these three swaps is 5.33% excluding the credit spread.	
(9)  	No defeasance deposit required if paid within one month of maturity date.	
(10)  	Debt includes $2.8 million of purchase accounting premium from acquisition which reduces the stated rate on the debt of 7.59% to an effective rate of 6.87%.	
(11)  	No defeasance deposit required if paid within four months of maturity date.	
(12)  	No defeasance deposit required if paid within six months of maturity date.	
(13)  	Debt may be prepaid with a prepayment penalty equal to greater of yield maintenance or 1% of principal prepaid. No prepayment penalty is due if prepaid within three months of maturity date. 30 days notice required.	
(14)  	The facility is a $40 million line of credit and is secured by an indirect interest in 40% of Short Hills.	
(15)  	Debt may be prepaid with a yield maintenance prepayment penalty. No prepayment penalty is due if prepaid within six months of maturity date.	
(16)  	Interest only through 4/9/08. Thereafter, principal will be amortized based on 30 years. Annual debt service will be $14,245.	
(17)  	Beginning 1/2/07, debt is swapped at 5.05% +0.90% credit spread. Effective rate of 5.95% from 1/2/07 to 11/1/12.	
(18)  	Loan may be defeased earlier of 2 years from the date the final note is securitized or 9/28/09.	
 
For additional information regarding the centers and their operations, see the responses to Item 1 of this report.

16

Item 3. LEGAL PROCEEDINGS.

Neither we, our subsidiaries, nor any of the joint ventures is presently involved in any material litigation, nor, to our knowledge, is any material litigation threatened against us, our subsidiaries, or any of the properties. Except for routine litigation involving present or former tenants (generally eviction or collection proceedings), substantially all litigation is covered by liability insurance.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.  

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

The common stock of Taubman Centers, Inc. is listed and traded on the New York Stock Exchange (Symbol: TCO). As of February 26, 2007, the 53,594,244 outstanding shares of Common Stock were held by 607 holders of record. A substantially greater number of holders are beneficial owners whose shares are held of record by banks, brokers, and other financial institutions. The closing price per share of the Common Stock on the New York Stock Exchange on February 26, 2007 was $60.97.

The following table presents the dividends declared on our Common Stock and the range of share prices of our Common Stock for each quarter of 2006 and 2005:

 	Market Quotations	
2006 Quarter Ended	High	Low	Dividends	
March 31	$43.77	$35.61	$0.305	
 	 	 	 	
June 30	 42.01	 36.85	 0.305	
 	 	 	 	
September 30	 44.42	 39.43	 0.305	
 	 	 	 	
December 31	 50.86	 44.77	 0.375	

 	Market Quotations	
2005 Quarter Ended	High	Low	Dividends	
March 31	$29.85	$26.60	$0.285	
 	 	 	 	
June 30	 35.03	 27.83	 0.285	
 	 	 	 	
September 30	 36.04	 31.00	 0.285	
 	 	 	 	
December 31	 35.83	 28.75	 0.305	

The restrictions on our ability to pay dividends on our Common Stock are set forth in “Managements Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends.”

17

Shareholder Return Performance Graph

The following line graph sets forth the cumulative total returns on a $100 investment in each of the Company’s Common Stock, the MSCI US REIT Index, the NAREIT Equity Retail REITI Index, and the S&P Composite - 500 Stock Index for the period December 31, 2001 through December 31, 2006 (assuming in all cases, the reinvestment of dividends).

 	12/31/01	12/31/02	12/31/03	12/31/04	12/31/05	12/31/06	
Taubman Centers Inc.	$100.00	$116.86	$156.59	$237.57	$285.96	$431.11	
MSCI US REIT Index	  100.00	  103.64	  141.73	  186.35	  208.96	  284.02	
NAREIT Equity Retail REIT Index	  100.00	  121.07	  177.69	  249.18	  278.58	  359.40	
S&P 500 Index	  100.00	  77.90	  100.25	  111.15	  116.61	  135.02	

Note: the stock performance shown on the graph above is not necessarily indicative of future price performance.

Equity Purchases

We did not purchase any equity securities in the fourth quarter of 2006.

18

Item 6. SELECTED FINANCIAL DATA.

The following table sets forth selected financial data and should be read in conjunction with the financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report:

 	 	Year Ended December 31  	
 	 	 	2006	 	 	2005	 	 	2004	 	 	2003	 	 	2002	 	
 	 	(in thousands of dollars, except as noted)  	
STATEMENT OF OPERATIONS DATA:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rents, recoveries, and other shopping center revenues (1)	 	 	579,284	 	 	479,405	 	 	436,815	 	 	398,959	 	 	358,902	 	
Income before gain on disposition of interest in center,
discontinued operations, and minority and preferred interests	 	 	
95,140	 	 	
57,432	 	 	
59,970	 	 	
31,292	 	 	
42,015	 	
Gain on disposition of interest in center (2)	 	 	 	 	 	52,799	 	 	 	 	 	 	 	 	 	 	
Discontinued operations (3)	 	 	 	 	 	 	 	 	328	 	 	50,881	 	 	13,816	 	
Minority interest in TRG	 	 	(36,870	)	 	(35,869	)	 	(35,694	)	 	(35,501	)	 	(32,826	)	
TRG preferred distributions	 	 	(2,460	)	 	(2,460	)	 	(12,244	)	 	(9,000	)	 	(9,000	)	
Net income (4)	 	 	45,117	 	 	71,735	 	 	12,378	 	 	37,836	 	 	14,426	 	
Preferred dividends	 	 	(23,723	)	 	(27,622	)	 	(17,444	)	 	(16,600	)	 	(16,600	)	
Net income (loss) allocable to common shareowners	 	 	21,394	 	 	44,113	 	 	(5,066	)	 	21,236	 	 	(2,174	)	
Income (loss) from continuing operations per common share - diluted	 	 	
0.41	 	 	
0.87	 	 	
(0.11	
)	 	
(0.13	
)	 	
(0.16	
)	
Net income (loss) per common share - diluted	 	 	0.40	 	 	0.87	 	 	(0.10	)	 	0.41	 	 	(0.05	)	
Dividends declared per common share	 	 	1.290	 	 	1.160	 	 	1.095	 	 	1.050	 	 	1.025	 	
Weighted average number of common shares outstanding - basic	 	 	
52,661,024	 	 	
50,459,314	 	 	
49,021,843	 	 	
50,387,616	 	 	
51,239,237	 	
Weighted average number of common shares outstanding - diluted	 	 	
52,979,453	 	 	
50,530,139	 	 	
49,021,843	 	 	
50,387,616	 	 	
51,239,237	 	
Number of common shares outstanding at end of period	 	 	52,931,594	 	 	51,866,184	 	 	48,745,625	 	 	49,936,786	 	 	52,207,756	 	
Ownership percentage of TRG at end of period	 	 	65	%	 	64	%	 	61	%	 	61	%	 	62	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
BALANCE SHEET DATA:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Real estate before accumulated depreciation	 	 	3,398,122	 	 	3,081,324	 	 	2,936,964	 	 	2,519,922	 	 	2,393,428	 	
Total assets	 	 	2,826,622	 	 	2,797,580	 	 	2,632,434	 	 	2,186,970	 	 	2,269,707	 	
Total debt	 	 	2,319,538	 	 	2,089,948	 	 	1,930,439	 	 	1,495,777	 	 	1,463,725	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SUPPLEMENTAL INFORMATION:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations allocable to TCO (4)(5)	 	 	136,736	 	 	110,578	 	 	103,070	 	 	87,325	 	 	88,240	 	
Mall tenant sales (6)	 	 	4,348,826	 	 	4,124,534	 	 	3,728,010	 	 	3,417,572	 	 	3,113,620	 	
Sales per square foot (6)(7)	 	 	539	 	 	508	 	 	466	 	 	441	 	 	457	 	
Number of shopping centers at end of period	 	 	22	 	 	21	 	 	21	 	 	21	 	 	20	 	
Ending Mall GLA in thousands of square feet	 	 	10,448	 	 	10,029	 	 	9,982	 	 	9,988	 	 	9,850	 	
Leased space (8)(9)	 	 	92.5	%	 	91.7	%	 	90.7	%	 	89.8	%	 	90.3	%	
Ending occupancy (9)	 	 	91.3	%	 	90.0	%	 	89.6	%	 	87.4	%	 	87.0	%	
Average occupancy (9)	 	 	89.2	%	 	88.9	%	 	87.4	%	 	86.6	%	 	84.8	%	
Average base rent per square foot (7) :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
All mall tenants	 	$	43.20	 	$	41.41	 	$	40.98	 	$	40.06	 	$	42.31	 	
Stores opening during year	 	 	42.24	 	 	42.38	 	 	44.35	 	 	43.41	 	 	45.91	 	
Stores closing during year	 	 	39.73	 	 	40.59	 	 	44.54	 	 	40.80	 	 	43.47	 	
Unconsolidated Joint Ventures:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
All mall tenants	 	$	41.03	 	$	42.28	 	$	42.09	 	$	42.75	 	$	42.03	 	
Stores opening during year	 	 	42.98	 	 	44.90	 	 	44.67	 	 	40.06	 	 	43.03	 	
Stores closing during year	 	 	42.49	 	 	44.26	 	 	51.40	 	 	41.28	 	 	41.63	 	
 
(1) Certain reclassifications have been made to prior year information to conform to current year classifications.
(2) In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland for $177.4 million.
(3) Biltmore Fashion Park was sold in 2003, and La Cumbre Plaza and Paseo Nuevo were sold in 2002. Discontinued operations in 2004, 2003, and 2002 include gains on dispositions of interests in centers of $0.3 million,
      $49.6 million, and $12.3 million, respectively.
(4) Funds from Operations (FFO) is defined and discussed in MD&A - Presentation of Operating Results. Net income in 2006 includes $3.1 million in connection with the write-off of financing costs related to the respective
      pay-off and refinancing of the loans on The Shops at Willow Bend and Dolphin. In addition to these charges, FFO in 2006 includes a $4.7 million charge incurred in connection with the redemption of $113 million of the
      Series A Preferred Stock and $113 million of the Series I Preferred Stock. Net income in 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related
      to the refinancing of The Mall at Short Hills, the pay-off of the Northlake loan, and debt modifications in connection with the pay-off of the loan on The Mall at Oyster Bay. In addition to these charges, FFO in 2005 includes a
      $3.1 million charge incurred in connection with the redemption of $87 million of the Series A Preferred Stock. Net income and FFO in 2004 include insurance recoveries related to the unsolicited tender offer of $1.0 million,
      a $2.7 million charge incurred in connection with the redemption of the Series C and D Preferred Equity, and a $5.7 million restructuring loss. Net income (loss) and FFO include costs incurred in connection with the
      unsolicited tender offer, net of recoveries, of $24.8 million and $5.1 million in 2003 and 2002, respectively.
(5) Reconciliations of net income (loss) to FFO for 2006, 2005, and 2004 are provided in MD&A - Presentation of Operating Results. For 2003, net income of $21.2 million, less the gain on dispositions of interests in centers
      of $49.6 million, adding back depreciation and amortization of $137.4 million and minority interests in TRG of $35.5 million, arrives at TRG’s FFO of $144.5 million, of which TCO’s share was $87.3 million. For 2002, net
      loss of $2.2 million, less the gain on dispositions of interests in centers of $12.3 million, adding back depreciation and amortization of $124.3 million and minority interests in TRG of $32.8 million, arrives at TRG’s FFO
      of $142.6 million, of which TCO’s share was $88.2 million.
(6) Based on reports of sales furnished by mall tenants.
(7) See MD&A for information regarding this statistic.
(8) Leased space comprises both occupied space and space that is leased but not yet occupied.
(9) 2002 statistics exclude anchor spaces at value centers.

19

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our expectations or beliefs concerning future events, including the following: statements regarding future developments and joint ventures, rents and returns, statements regarding the continuation of trends, and any statements regarding the sufficiency of our cash balances and cash generated from operating and financing activities for our future liquidity and capital resource needs. We caution that although forward-looking statements reflect our good faith beliefs and best judgment based upon current information, these statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including those risks, uncertainties, and factors detailed from time to time in reports filed with the SEC, and in particular those set forth under the headings “General Risks of the Company” and “Environmental Matters” in Item 1. of this Annual Report on Form 10-K. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements of Taubman Centers, Inc. and the Notes thereto.

General Background and Performance Measurement

Taubman Centers, Inc. (“we”, “us”, “our” or “TCO”) owns a managing general partner's interest in The Taubman Realty Group Limited Partnership (the “Operating Partnership” or “TRG”), through which we conduct all of our operations. The Operating Partnership owns, develops, acquires, and operates shopping centers. The Consolidated Businesses consist of shopping centers that are controlled by ownership or contractual agreement, development projects for future regional shopping centers, variable interest entities for which we are the primary beneficiary, and The Taubman Company LLC (“Manager”). Shopping centers owned through joint ventures that are not controlled by us but over which we have significant influence (“Unconsolidated Joint Ventures”) are accounted for under the equity method.

References in this discussion to “beneficial interest” refer to our ownership or pro-rata share of the item being discussed. Also, the operations of the shopping centers are often best understood by measuring their performance as a whole, without regard to our ownership interest. Consequently, in addition to the discussion of the operations of the Consolidated Businesses, the operations of the Unconsolidated Joint Ventures are presented and discussed as a whole.

The comparability of information used in measuring performance is affected by the opening of Northlake in September 2005 and the sale of our interest in Woodland in December 2005, as well as the expansion and renovation at Waterside. The Pier began opening stores in late June 2006, and is accounted for under the equity method. The Pier has been excluded from all operating statistics. Additional “comparable center” statistics that exclude Northlake, Waterside, and Woodland are provided for 2006 and 2005 to present the performance of comparable centers in our continuing operations. Comparable centers are generally defined as centers that were owned and open for two years. As of January 1, 2006, we began consolidating the entity that owns Cherry Creek. The center is included within our consolidated results and statistics as of that date, while it continues to be presented as an Unconsolidated Joint Venture for dates and periods prior to January 1, 2006.

Overall Summary of Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our business is to lease space in our shopping centers. Generally these leases are long term, with our average lease term at approximately 7 years. Therefore general economic trends most directly impact our tenants’ sales and consequently their ability to perform under their existing lease agreements and expand into new locations as well as our ability to find new tenants for our shopping centers. Occupancy continued to increase during 2006, and we anticipate continued occupancy growth throughout 2007, although we expect more modest increases in the first half of 2007 than in the second half. Average rent per square foot increased by 1.7% in 2006 and we anticipate rent per square foot to increase in the range of 2.5% in 2007. Tenant sales trends demonstrated strong growth in 2006, increasing 6.1% and reaching a new record level of $539 per square foot for our comparable centers. This increase in sales resulted in a significant increase in percentage rent in 2006. We believe these improving tenant sales provide us an opportunity to continue to increase rents in the future (see "Mall Tenant Sales and Center Revenues" and "Rental Rates and Occupancy").

20

The rents we are able to achieve are similarly affected by economic trends and tenants’ expectations thereof, as described under “Rental Rates and Occupancy”. The spread between rents on openings and closings may not be indicative of future periods, as this statistic is not computed on comparable tenant spaces, and can vary significantly from quarter to quarter depending on the total amount, location, and average size of tenant space opening and closing in the period. Mall tenant sales, occupancy levels and our resulting revenues are seasonal in nature (see “Seasonality").

Our analysis of our financial results begins under “Results of Operations”. We have been active in developing and expanding our shopping center portfolio, and we describe the most recent center openings, including The Pier and Northlake, under “Openings, Dispositions, and Acquisitions”. In 2005, we disposed of our interest in a 50% owned unconsolidated joint venture and we acquired additional interests in two centers in 2004. Additional efforts to broaden our growth included the formation in 2005 of Taubman Asia, which is the platform for our expansion into the Asia-Pacific region. In January 2007, we completed an agreement to provide development services for a project in New Songdo City, Incheon, South Korea and were selected as the preferred retail partner for a project in Macao (see “Subsequent Events”).

We similarly have been very active in managing our balance sheet, completing a series of new financings and refinancings of existing debt, as well as a series of stock buybacks, as outlined under “Debt Transactions” and “Equity Transactions”. As a result of our financings, our floating rate debt represents less than 5% of our total debt and we believe we are well positioned if there is a rise in interest rates.

We have certain additional sources of income beyond our rental revenues, recoveries from tenants, and revenue from management, leasing, and development services. We disclose the Operating Partnership’s share of these sources of income under “Other Income”. Included in other revenue are lease cancellation income, as well as other sources of revenue derived from our shopping centers, such as parking garage and sponsorship income. Other sources of income include interest income and gains on peripheral land sales.

We then provide a discussion of our critical accounting policies, the impact of adoption of new accounting principles, and the expected impact of recently issued accounting pronouncements.

With all the preceding information as background, we have then provided insight and explanations for variances in our financial results from 2004 through 2006 under “Comparison of 2006 to 2005” and “Comparison of 2005 to 2004”. As information useful to understanding our results, we have described the presentation of our minority interest, the presentation of certain interests in centers, and the reasons for our use of non-GAAP measures such as EBITDA and Funds from Operations (FFO) under “Presentation of Operating Results”. Reconciliations from net income and net income allocable to common shareowners to these measures follow the annual comparisons.

Our discussion of sources and uses of capital resources under “Liquidity and Capital Resources” begins with a brief overview of capital activities and transactions occurring in 2006. Analysis of specific operating, investing, and financing activities is then provided in more detail. Cash flows from rents and recoveries, lease cancellation revenue, and recent center openings provide the resources for payments of interest and other operating expenses, leasing costs, and required distributions and dividends. Proceeds from the sale of a property and the completion of a major financing occurring in late 2005, in addition to financings in 2006, created significant liquidity used for the pay-off or refinancing of several existing loans and further investment in development properties in 2006.

Specific analysis of our fixed and floating rates and periods of interest rate risk exposure is provided under “Beneficial Interest in Debt”. Completing our analysis of our exposure to rates are the effects of changes in interest rates on our cash flows and fair values of debt contained under “Sensitivity Analysis”.

In conducting our business, we enter into various contractual obligations, including those for debt, capital leases for property improvements, operating leases for land and office space, purchase obligations, and other long-term commitments. Detail of these obligations, including expected settlement periods, is contained under “Contractual Obligations”. Property-level debt represents the largest single class of obligations. Described under “Loan Commitments and Guarantees” and “Cash Tender Agreement” are our significant guarantees and commitments.

Development of new malls and renovation and expansion of existing malls continues to be a significant use of our capital, as described in “Capital Spending” and “Planned Capital Spending”. Recent spending includes that related to the construction of Partridge Creek, in Clinton Township, Michigan, the expansion and renovation of Twelve Oaks and Waterside, the renovation of the former Filene’s space at Stamford Town Center, our Oyster Bay project in the Town of Oyster Bay, New York, and other development activities and capital items. Additional capital spending in 2007 is expected to continue for these and other projects.

21

Dividends and distributions are also significant uses of our capital resources. The factors considered when determining the amount of our dividends, including requirements arising because of our status as a REIT, are described under “Dividends”. We increased our quarterly dividend by 23% in the fourth quarter of 2006. Our total return to our shareholders, assuming reinvestment of dividends, was 50.8% for 2006.

Mall Tenant Sales and Center Revenues

Over the long term, the level of mall tenant sales is the single most important determinant of revenues of the shopping centers because mall tenants provide approximately 90% of these revenues and because mall tenant sales determine the amount of rent, percentage rent, and recoverable expenses (together, total occupancy costs) that mall tenants can afford to pay. However, levels of mall tenant sales can be considerably more volatile in the short run than total occupancy costs.

We believe that the ability of tenants to pay occupancy costs and earn profits over long periods of time increases as sales per square foot increase, whether through inflation or real growth in customer spending. Because most mall tenants have certain fixed expenses, the occupancy costs that they can afford to pay and still be profitable are a higher percentage of sales at higher sales per square foot.

Sales directly impact the amount of percentage rents certain tenants and anchors pay. The effects of increases or declines in sales on our operations are moderated by the relatively minor share that percentage rents represent of total rents (approximately five percent in 2006). However, a sustained trend in sales does impact, either negatively or positively, our ability to lease vacancies and negotiate rents at advantageous rates.

Tenant sales trends demonstrated strong growth in 2006, increasing 6.1% and reaching a new record level of $539 per square foot. This increase in sales resulted in a significant increase in percentage rent in 2006. We believe these improving tenant sales provide us an opportunity to increase rents in the future.

The following table summarizes occupancy costs, excluding utilities, for mall tenants as a percentage of mall tenant sales:

 	 	 	2006	 	 	2005	 	 	2004	 	
Mall tenant sales (in thousands of dollars)	 	 	4,348,826	 	 	4,124,534	 	 	3,728,010	 	
Sales per square foot (1)	 	 	539	 	 	508	 	 	466	 	
 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses:	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	9.1	%	 	9.3	%	 	10.0	%	
Percentage rents	 	 	0.4	 	 	0.4	 	 	0.2	 	
Expense recoveries	 	 	 4.9	 	 	 4.6	 	 	5.0	 	
Mall tenant occupancy costs as a percentage of mall tenant sales	 	 	
14.4	
%	 	
14.3	
%	 	
15.2	
%	
Unconsolidated Joint Ventures:	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	8.3	%	 	8.9	%	 	9.7	%	
Percentage rents	 	 	0.4	 	 	0.3	 	 	0.3	 	
Expense recoveries	 	 	 3.8	 	 	 4.0	 	 	4.4	 	
Mall tenant occupancy costs as a percentage of mall tenant sales	 	 	
12.5	
%	 	
13.2	
%	 	
14.4	
%	

(1)  	Sales per square foot is presented for the comparable centers, including value centers.	

Rental Rates and Occupancy

As leases have expired in the shopping centers, we have generally been able to rent the available space, either to the existing tenant or a new tenant, at rental rates that are higher than those of the expired leases. In a period of increasing sales, rents on new leases will tend to rise as tenants' expectations of future growth become more optimistic. In periods of slower growth or declining sales, rents on new leases will grow more slowly or will decline for the opposite reason. However, center revenues nevertheless increase as older leases roll over or are terminated early and replaced with new leases negotiated at current rental rates that are usually higher than the average rates for existing leases.

22

The following table contains certain information regarding rentals at the comparable shopping centers:

 	 	 	2006	 	 	2005	 	 	2004	 	
Average rent per square foot:	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	43.20	 	$	41.41	 	$	40.98	 	
Unconsolidated Joint Ventures	 	 	41.03	 	 	42.28	 	 	42.09	 	
Opening base rent per square foot:	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	42.24	 	$	42.38	 	$	44.35	 	
Unconsolidated Joint Ventures	 	 	42.98	 	 	44.90	 	 	44.67	 	
Square feet of GLA opened:	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	941,163	 	 	682,305	 	 	688,020	 	
Unconsolidated Joint Ventures	 	 	306,461	 	 	400,477	 	 	337,679	 	
Closing base rent per square foot:	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	39.73	 	$	40.59	 	$	44.54	 	
Unconsolidated Joint Ventures	 	 	42.49	 	 	44.26	 	 	51.40	 	
Square feet of GLA closed:	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	894,770	 	 	650,701	 	 	499,098	 	
Unconsolidated Joint Ventures	 	 	246,704	 	 	366,932	 	 	280,393	 	
Releasing spread per square foot:	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	2.51	 	$	1.79	 	$	(0.19	)	
Unconsolidated Joint Ventures	 	 	0.49	 	 	0.64	 	 	(6.73	)	
 
The spread between opening and closing rents may not be indicative of future periods, as this statistic is not computed on comparable tenant spaces, and can vary significantly from period to period depending on the total amount, location, and average size of tenant space opening and closing in the period. Rents on stores opening in 2004 were generally negotiated in a decreasing sales environment. In 2006, the releasing spread per square foot of the Unconsolidated Joint Ventures was impacted by the opening of large tenant spaces at certain centers. Additionally, average rents and releasing spreads in 2006 were impacted by the consolidation of Cherry Creek, which is included within the Consolidated Businesses as of January 1, 2006. Prior to that time, Cherry Creek was included within the Unconsolidated Joint Ventures.

Mall tenant leased space, ending occupancy, and average occupancy rates are as follows:

 	 	 	2006	 	 	2005	 	 	2004	 	
All Centers:	 	 	 	 	 	 	 	 	 	 	
Leased space	 	 	92.5	%	 	91.7	%	 	90.7	%	
Ending occupancy	 	 	91.3	 	 	90.0	 	 	89.6	 	
Average occupancy	 	 	89.2	 	 	88.9	 	 	87.4	 	
 	 	 	 	 	 	 	 	 	 	 	
Comparable Centers:	 	 	 	 	 	 	 	 	 	 	
Leased space	 	 	92.3	%	 	91.5	%	 	90.7	%	
Ending occupancy	 	 	91.2	 	 	90.2	 	 	89.6	 	
Average occupancy	 	 	89.1	 	 	89.1	 	 	87.4	 	

Occupancy continued to increase during 2006, with ending occupancy increasing to 91.3%, a 1.3% increase from 90.0% in 2005. For our comparable centers, ending occupancy was 91.2%, a 1.0% increase from 90.2% in 2005. We anticipate continued occupancy growth throughout 2007, with more modest increases in the first half than in the second half of the year. Income from temporary in-line tenants, which has become an integral part of our business, continues to augment our income. Temporary tenants, defined as those with lease terms less than 12 months, are not included in occupancy or leased space statistics. As of December 31, 2006, approximately 2.2% of space was occupied by temporary tenants. Tenant bankruptcy filings as a percentage of the total number of tenant leases was 1.0% in 2006, compared to 0.4% in 2005, and 1.7% in 2004.

23

Seasonality

The regional shopping center industry is seasonal in nature, with mall tenant sales highest in the fourth quarter due to the Christmas season, and with lesser, though still significant, sales fluctuations associated with the Easter holiday and back-to-school events. While minimum rents and recoveries are generally not subject to seasonal factors, most leases are scheduled to expire in the first quarter, and the majority of new stores open in the second half of the year in anticipation of the Christmas selling season. Additionally, most percentage rents are recorded in the fourth quarter. Accordingly, revenues and occupancy levels are generally highest in the fourth quarter. Included in revenues are gains on sales of peripheral land and lease cancellation income that may vary significantly from quarter to quarter.

 	 	 	Total
2006  	 	 	4 th
Quarter
2006	 	 	3 rd
Quarter
2006	 	 	2 nd
Quarter
2006	 	 	1 st
Quarter
2006	 	
 	 	(in thousands of dollars, except as indicated)  	
Mall tenant sales	 	 	4,348,826	 	 	1,447,188	 	 	985,224	 	 	989,275	 	 	927,139	 	
Revenues and gains on land sales and interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	588,744	 	 	163,455	 	 	140,065	 	 	144,780	 	 	140,444	 	
Unconsolidated Joint Ventures	 	 	253,486	 	 	72,584	 	 	63,772	 	 	58,554	 	 	58,576	 	
Occupancy:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending-comparable	 	 	91.2	%	 	91.2	%	 	89.2	%	 	88.7	%	 	88.3	%	
Average-comparable	 	 	89.1	 	 	90.4	 	 	88.9	 	 	88.6	 	 	88.4	 	
Ending	 	 	91.3	 	 	91.3	 	 	89.5	 	 	89.0	 	 	88.3	 	
Average	 	 	89.2	 	 	90.6	 	 	89.2	 	 	88.7	 	 	88.4	 	
Leased space:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comparable	 	 	92.3	%	 	92.3	%	 	92.1	%	 	91.6	%	 	90.7	%	
All centers	 	 	92.5	 	 	92.5	 	 	92.4	 	 	91.8	 	 	90.9	 	

Because the seasonality of sales contrasts with the generally fixed nature of minimum rents and recoveries, mall tenant occupancy costs (the sum of minimum rents, percentage rents, and expense recoveries) as a percentage of sales are considerably higher in the first three quarters than they are in the fourth quarter.

 	 	 	Total
2006  	 	 	4 th
Quarter
2006	 	 	3 rd
Quarter
2006	 	 	2 nd
Quarter
2006	 	 	1 st
Quarter
2006	 	
Consolidated Businesses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	9.1	%	 	7.1	%	 	9.9	%	 	9.9	%	 	10.5	%	
Percentage rents	 	 	0.4	 	 	0.8	 	 	0.3	 	 	0.1	 	 	0.4	 	
Expense recoveries	 	 	4.9	 	 	4.2	 	 	4.9	 	 	5.6	 	 	4.8	 	
Mall tenant occupancy costs	 	 	14.4	%	 	12.1	%	 	15.1	%	 	15.6	%	 	15.7	%	
Unconsolidated Joint Ventures:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	8.3	%	 	6.4	%	 	9.2	%	 	9.1	%	 	9.7	%	
Percentage rents	 	 	0.4	 	 	0.8	 	 	0.3	 	 	0.2	 	 	0.2	 	
Expense recoveries	 	 	3.8	 	 	3.2	 	 	4.1	 	 	4.1	 	 	3.9	 	
Mall tenant occupancy costs	 	 	12.5	%	 	10.4	%	 	13.6	%	 	13.4	%	 	13.8	%	

24

Results of Operations

Openings, Dispositions, and Acquisitions

During the three year period ended December 31, 2006, we completed the following shopping center openings, dispositions, and acquisitions:

Openings

Shopping Center	Date	Location	Ownership	
The Pier Shops at Caesars	June 2006	Atlantic City, New Jersey	(1)	
Northlake Mall	September 2005	Charlotte, North Carolina	Wholly-owned	

Dispositions

Shopping Center	  Date	Former Ownership	 	
Woodland	  December 2005	50% owned unconsolidated joint venture	 	

Acquisitions

Shopping Center	Date	Acquisition	Resulting Ownership	
International Plaza	July 2004	Additional 23.6% interest	50.1% owned consolidated joint venture	
Beverly Center	January 2004	Additional 30% interest	Wholly-owned	

(1)  	See “Planned Capital Spending-New Centers”.	

In October 2006, we purchased a 50% interest in the land under Sunvalley, which was subject to two ground leases. We placed a 6-year, $30 million interest-only, non-recourse loan on the land and swapped the rate in early January 2007 to a fixed rate of 5.95%.

In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland for $177.4 million. Our share of proceeds was $85.4 million. We recognized a gain of $52.8 million on the transaction, representing the excess of the fair value over the net book basis of our interest in the center. Our gain on the transaction differed from the $73.4 million gain recognized by the Operating Partnership due to our $20.6 million additional basis in Woodland. The cash proceeds from the sale were used in early 2006 to acquire the land for Partridge Creek, as part of a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code and the regulations thereunder ("Section 1031 like-kind exchange"). Additional proceeds were also used to purchase the land and real property improvements of the Oyster Bay development, also as part of a Section 1031 like-kind exchange, and to pay off the outstanding balance on the loan on the property.

Taubman Asia

In April 2005, we formed Taubman Asia, which is the platform for our expansion into the Asia-Pacific region. Taubman Asia is headquartered in Hong Kong and is engaged in projects that leverage our strong retail planning, design, and operational capabilities. In 2007, Taubman Asia completed the development services agreement for our involvement in New Songdo City in South Korea. Additionally, we announced our involvement in the retail component of Macao Studio City on the Cotai strip in Macao (see “Subsequent Events”).

25

Debt Transactions

We completed a series of debt financings in the three year period ended December 31, 2006, as follows:

 	Date	Initial Loan Balance/Facility	Stated Interest Rate	Maturity Date (1)	
 	(in millions of dollars)	 	
Taubman Land Associates (Sunvalley)	December 2006	 30	LIBOR+0.90% (2)	November 2012	
Waterside Shops at Pelican Bay	September 2006	165	5.54%	October 2016	
The Mall at Partridge Creek construction facility (3)	September 2006	 81	LIBOR+1.15%	September 2010	
TRG revolving credit facility (4)	August 2006	350	LIBOR+0.70%	February 2009	
Cherry Creek Shopping Center	May 2006	280	5.24%	June 2016	
Northlake Mall	February 2006	216	5.41%	February 2016	
The Mall at Short Hills	December 2005	540	5.47%	December 2015	
The Mall at Wellington Green	May 2005	200	5.44%	May 2015	
TRG revolving credit facility	October 2004	350	LIBOR+0.80%	February 2008 (4)	
Northlake Mall construction facility	July 2004	142	LIBOR+1.75%	August 2007 (5)	
Stony Point Fashion Park	June 2004	115	6.24%	June 2014	
The Mall at Oyster Bay facility	May 2004	 62	LIBOR+2.00%	March 2006 (6)	
The Mall at Wellington Green	April 2004	140	LIBOR+1.50%	May 2007 (7)	
Dolphin Mall	February 2004	145	LIBOR+2.15%	February 2007 (8)	
Beverly Center	January 2004	348	5.28%	February 2014	

(1)  	Excludes any options to extend the maturities (see the footnotes to our financial statements regarding extension options).	
(2)  	The loan is swapped at 5.95% (5.05% swap rate plus 0.90% credit spread) from January 2, 2007 through the term of the loan.	
(3)  	See "Liquidity and Capital Resources - Contractual Obligations".	
(4)  	TRG revolving credit facility was amended in August 2006.	
(5)  	The loan was repaid in December 2005.	
(6)  	The loan was repaid in February 2006.	
(7)  	The loan was repaid in May 2005.	
(8)  	The remaining balance on the loan was refinanced with the TRG revolving credit facility in August 2006.	

We paid off the remaining $144 million balance on the loans on The Shops at Willow Bend (Willow Bend) when they became prepayable without penalty in February 2006. We wrote off the remaining $2.1 million of financing costs associated with the Willow Bend loans at that time. Proceeds from the August 2006 amendment to our revolving credit facility were used to refinance the remaining $140 million balance on the loan on Dolphin when it became prepayable without penalty in August 2006. We wrote off $1.0 million of financing costs related to the Dolphin loan at that time. Under the revised terms, borrowings under the line of credit are primary obligations of the entities owning Dolphin, Fairlane, and Twelve Oaks, which are collateral for the line of credit. The Operating Partnership and the entities owning Fairlane and Twelve Oaks are guarantors under the credit agreement.

Proceeds from the December 2005 financing on The Mall at Short Hills (Short Hills) were used to pay down the existing 6.7%, $260 million loan on the center, the Northlake construction loan and our revolver. We incurred charges of $10.9 million during the fourth quarter of 2005 in connection with a prepayment premium for the existing Short Hills loan and the write-off of the remaining financing costs for the Short Hills and Northlake loans. We also wrote off $1.8 million of financing costs related to the modification of the loan on The Mall at Oyster Bay (Oyster Bay), which we repaid in February 2006.

26

Equity Transactions

We also completed a series of equity transactions in the three year period ended December 31, 2006, as follows:

# of shares/units	 
Amount	Price per share/unit	 
Date	
 	      (in millions of dollars)	 	
Redemptions and Repurchases:	 	 	 	 	
Redemption of Series I Cumulative
  Redeemable Preferred Stock (1)	 
4,520,000	 
113.0	 
$25.00	 
June 2006	
Redemption of Series A Cumulative
  Redeemable Preferred Stock (2)	 
4,520,000	 
113.0	 
  25.00	 
May 2006	
Redemption of Series A Cumulative
  Redeemable Preferred Stock (3)	 
3,480,000	 
  87.0	 
  25.00	 
July 2005	
Redemption of Series C and D Preferred
  Partnership Equity (4)	 	 
100.0	 	 
November 2004	
Stock buybacks (5)	2,447,781	  50.2	  20.50	April-May 2004	
 	 	 	 	 	
Issuances:	 	 	 	 	
Issuance of Series I Cumulative
  Redeemable Preferred Stock (6)	 
4,520,000	 
113.0	 
  25.00	 
May 2006	
Issuance of Series H Cumulative
  Redeemable Preferred Stock (7)	 
3,480,000	 
  87.0	 
  25.00	 
July 2005	
Issuance of Series G Cumulative
  Redeemable Preferred Stock (8)	 
4,000,000	 
100.0	 
  25.00	 
November 2004	
Private placement of 8.2% Series F
  Cumulative Redeemable Preferred
  Partnership Equity	 	 
 
  30.0	 	 
 
May 2004	
TRG units issued in connection with
  acquisition of additional interest in
  Beverly Center (9)	 
 
   276,724	 
 
   7.6	 
 
  27.50	 
 
January 2004	

(1)  	A $0.6 million charge was recognized upon redemption of this preferred stock, comprised of the difference between the redemption price ($113.0 million) and its book value ($112.4 million).	
(2)  	A $4.0 million charge was recognized upon redemption of this preferred stock, comprised of the difference between the redemption price ($113.0 million) and its book value ($109.0 million).	
(3)  	A $3.1 million charge was recognized upon redemption of this preferred stock, comprised of the difference between the redemption price ($87.0 million) and its book value ($83.9 million).	
(4)  	A $2.7 million charge was recognized upon redemption of this preferred equity, comprised of the difference between the redemption price ($100.0 million) and its book value ($97.3 million).	
(5)  	For each common share repurchased, a unit of TRG partnership interest is similarly redeemed.	
(6)  	Proceeds were used to redeem $113 million of our remaining 8.30% Series A Cumulative Redeemable Preferred Stock.	
(7)  	Proceeds were used to redeem $87 million of our outstanding $200 million 8.30% Series A Cumulative Redeemable Preferred Stock.	
(8)  	Proceeds were used to redeem all of the outstanding TRG 9% Series C and D Cumulative Redeemable Preferred Equity for $100 million.	
(9)  	Reflects units of partnership interest issued without any corresponding change in our common shares outstanding. With these changes in partnership units outstanding, corresponding changes may also occur in the Series B Preferred Stock (see Note 16 to our financial statements regarding this relationship).	

In December 2005, our Board of Directors authorized the purchase of up to $50 million of our common stock on the open market. As of December 31, 2006, we had not purchased any shares or redeemed any units under this program. Repurchases of common stock will be financed through general corporate funds, including equity issuances, and through borrowings under existing lines of credit.
 
Repurchases of common stock in 2004 were under a previous buyback program. As of December 31, 2004, the maximum amount authorized under this program had been repurchased.

GMPT Portfolio and Restructuring

In October 2004, The Mills Corporation finalized its acquisition of 50% interests in nine of General Motors Pension Trusts’ (GMPT) shopping centers, completing a recapitalization of GMPT’s mall portfolio. We reached an agreement with GMPT to cease management of these centers, effective November 1, 2004. We recognized a restructuring charge of $5.7 million during the fourth quarter of 2004 relating to the termination of these contracts. Substantially all of this charge represented employee severance payments.

27

Other Income

We have certain additional sources of income beyond our rental revenues, recoveries from tenants, and revenues from management, leasing, and development services, as summarized in the following table. Lease cancellation revenue is dependent on the overall economy and performance of particular retailers in specific locations and can vary significantly. Gains on peripheral land sales can also vary significantly from year-to-year, depending on the results of negotiations with tenants, counterparties, and potential purchasers of land, as well as the timing of the transactions. In 2007, we estimate our share of lease cancellation income to be approximately $6 million to $7 million and gains on land sales to be approximately $3 million to $4 million.

 	 	2006	2005	2004	
 	 	 	Consolidated Businesses  	 	 	Unconsolidated Joint Ventures	 	 	Consolidated Businesses	 	 	Unconsolidated Joint Ventures	 	 	Consolidated Businesses	 	 	Unconsolidated Joint Ventures	 	
 	 	(Operating Partnership’s share in millions of dollars)  	
Other Income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Shopping center related revenues	 	 	21.9	 	 	2.6	 	 	20.7	 	 	3.2	 	 	15.5	 	 	3.0	 	
  Lease cancellation revenue	 	 	10.5	 	 	2.8	 	 	6.5	 	 	1.4	 	 	7.5	 	 	1.7	 	
 	 	 	32.4	 	 	5.4	 	 	27.2	 	 	4.6	 	 	22.9	 	 	4.7	 	
Gains on Land Sales and Interest Income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Gains on sales of peripheral land	 	 	4.1	 	 	 	 	 	4.4	 	 	 	 	 	6.4	 	 	 	 	
  Interest income	 	 	5.2	 	 	0.6	 	 	1.6	 	 	0.4	 	 	1.1	 	 	0.1	 	
 	 	 	9.3	 	 	0.6	 	 	6.0	 	 	0.4	 	 	7.5	 	 	0.1	 	
 	 	
(1)   Amounts in this table may not add due to rounding.
 
Subsequent Events

In January 2007, we assumed full management and leasing responsibility of The Pier. We are in final negotiations to increase our ownership percentage in the center from 30% to 50% (see “Planned Capital Spending- New Centers”).

Also in January 2007, Taubman Asia completed the development services agreement for a 1.2 million square foot retail and entertainment complex in New Songdo City, Incheon, South Korea. The shopping complex is scheduled to open in early 2010, with construction beginning in 2007. We have negotiated the opportunity to invest in a portion of the broader project, which will include not only retail, but also office, hotel, and residential uses. We anticipate finalizing our decision on this investment in 2007. In January 2007, we announced our involvement in the retail component of Macao Studio City on the Cotai Strip in Macao. Taubman Asia has signed a term sheet to acquire a minority position in the retail component of the project and will provide development, leasing, and management services, subject to definitive agreements to be completed in the first half of 2007.

In addition, in January 2007, we announced our involvement as a third party leasing agent for a lifestyle center in the city of North Las Vegas, Nevada. This is a mixed use project that will include retail, dining, and entertainment of up to 1.3 million square feet and a residential component consisting of approximately 800 units. The shopping center will open in late 2008. The developer of the residential component is an affiliate of the Taubman family.

Also in January 2007, we acquired land for future development for $15.5 million.

Application of Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment, often about the effect of matters that are inherently uncertain and that may change in subsequent periods. We are required to make such estimates and assumptions when applying the following accounting policies.

28

Valuation of Shopping Centers

All properties, including those under construction and/or owned by joint ventures, are reviewed for impairment when events or changes in circumstances indicate that their carrying value may not be recoverable. Impairment of a shopping center owned by consolidated entities would be recognized when the sum of expected cash flows (undiscounted and without interest charges) is less than the carrying value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint Venture is recognized when the carrying value is not considered recoverable based on evaluation of the severity and duration of the decline in value, including the results of discontinued cash flow and other valuation techniques. The expected cash flows of a shopping center are dependent on estimates and other factors subject to change, including (1) changes in the national, regional, and/or local economic climates, (2) competition from other shopping centers, stores, clubs, mailings, and the internet, (3) increases in operating costs, (4) bankruptcy and/or other changes in the condition of third parties, including anchors and tenants, and (5) expected holding period. These factors could cause our expected future cash flows from a shopping center to change, and, as a result, an impairment could be considered to have occurred. To the extent an impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged against operations. There were no impairment charges recognized in the periods covered within this Annual Report. As of December 31, 2006, the consolidated net book value of our properties was $2.6 billion, representing over 90% of our consolidated assets. We also have varying ownership percentages in the properties of Unconsolidated Joint Ventures with a total combined net book value of $0.8 billion. These amounts include certain development costs that are described in the policy that follows.

Capitalization of Development Costs

In developing shopping centers, we typically obtain land or land options, zoning and regulatory approvals, anchor commitments, and financing arrangements during a process that may take several years and during which we may incur significant costs. We capitalize all development costs once it is considered probable that a project will reach a successful conclusion. Prior to this time, we expense all costs relating to a potential development, including payroll, and include these costs in Funds from Operations (see "Presentation of Operating Results").

Many factors in the development of a shopping center are beyond our control, including (1) changes in the national, regional, and/or local economic climates, (2) competition from other shopping centers, stores, clubs, mailings, and the internet, (3) availability and cost of financing, (4) changes in regulations, laws, and zoning, and (5) decisions made by third parties, including anchors. These factors could cause our assessment of the probability of a development project reaching a successful conclusion to change. If a project subsequently was considered less than probable of reaching a successful conclusion, a charge against operations for previously capitalized development costs would occur.

Our approximately $129.3 million balance of development pre-construction costs as of December 31, 2006 consists primarily of costs relating to our Oyster Bay project in the Town of Oyster Bay, New York. See “Liquidity and Capital Resources - Planned Capital Spending” regarding the status of this project.

Valuation of Accounts Receivable

Rents and expense recoveries from tenants are our principal source of income; they represent over 90% of our revenues. In generating this income, we will routinely have accounts receivable due from tenants. The collectibility of tenant receivables is affected by bankruptcies, changes in the economy, and the ability of the tenants to perform under the terms of their lease agreements. While we estimate potentially uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates. Also, if a tenant were not able to perform under the terms of its lease agreement, receivable balances not previously provided for may be required to be charged against operations. Bad debt expense was less than 1% of total revenues in 2006, while bankruptcy filings affected 1% of tenant leases during the year. Since 1991, the annual provision for losses on accounts receivable has been less than 2% of annual revenues.

29

Valuation of Deferred Tax Assets

Our taxable REIT subsidiaries (TRSs) currently have deferred tax assets, reflecting net operating loss carryforwards and the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Our temporary differences primarily relate to deferred compensation and depreciation. We reduce our deferred tax assets through valuation allowances to the amount where realization is more likely than not assured, considering all available evidence, including expected future taxable earnings and potential tax planning strategies. Expected future taxable earnings and the implementation of tax planning strategies require certain significant judgments and estimates, including those relating to our management company's profitability, the timing and amounts of gains on land sales, the profitability of our Asian operations, and other factors affecting the results of operations of our TRSs. Changes in any of these factors could cause our estimates of the realization of deferred tax assets to change materially. As of December 31, 2006, we had a consolidated gross deferred tax asset of $8.9 million, reduced to a net deferred tax asset of $3.3 million by a valuation allowance of $5.6 million.

Valuations for Acquired Property and Intangibles

Upon acquisition of an investment property, including that of an additional interest in an asset already partially owned, we make an assessment of the valuation and composition of assets and liabilities acquired. These assessments consider fair values of the respective assets and liabilities and are determined based on estimated future cash flows using appropriate discount and capitalization rates and other commonly accepted valuation techniques. The estimated future cash flows that are used for this analysis reflect the historical operations of the property, known trends and changes expected in current market and economic conditions which would impact the property’s operations, and our plans for such property. These estimates of cash flows and valuations are particularly important given the application of FASB Statement Nos. 141 and 142 for the allocation of purchase price between land, building and improvements, and other identifiable intangibles.

Adoption of New Accounting Pronouncements in 2006

Adoption of Staff Accounting Bulletin No. 108

In September 2006, the Securities and Exchange Commission published Staff Accounting Bulletin No. 108 (SAB 108) “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements.” The interpretations in SAB 108 express the SEC’s staff’s views regarding the process of quantifying financial statement misstatements. The staff’s interpretations resulted from their awareness of a diversity in practice as to how the effect of prior year errors were considered in relation to current year financial statements. Through SAB 108, the staff communicated its belief that allowing prior year errors to remain unadjusted on the balance sheet is not in the best interest of the users of financial statements. SAB 108 became effective for us in the fourth quarter of 2006.

In adopting SAB 108, we changed our method of evaluating financial statement misstatements from a “rollover” (income statement-oriented) approach to SAB 108’s “dual-method” (both an income statement and balance sheet-oriented) approach. In doing so, we identified three misstatements previously considered immaterial to all previous periods under the rollover method but material when evaluated together under the dual-method, as described below. These misstatements were corrected upon adoption of SAB 108.

Accounting for Cherry Creek Shopping Center Ground Rent Prior to 1999

Prior to 1999, Cherry Creek, a venture previously accounted for under the equity method, recognized ground rentals under its 99 year ground lease on a cash basis instead of the straightline method required by Statement of Financial Accounting Standards No. 13, “Accounting for Leases”. This error resulted in us overstating our cumulative equity in the net income of Cherry Creek by a total of $3.5 million from our 1992 acquisition of an interest in the Operating Partnership through December 31, 2005. The maximum misstatement of our equity in the net income of Cherry Creek in any individual year in this period under the rollover method was $0.3 million.

We began consolidating Cherry Creek on January 1, 2006 as a result of adopting EITF 04-5. As a result of the correction of the above error, the cumulative effect of a change in accounting principle upon adoption of EITF 04-5, assets, and liabilities recognized upon the consolidation of Cherry Creek were increased by $7.9 million, $8.3 million and $19.7 million, respectively. Prior to 2006, we accounted for our investment in Cherry Creek under the equity method.

30

Recognition of Payroll Costs

We previously recognized our payroll costs in a manner that corresponded to our biweekly pay periods, which do not necessarily end on the last day of the calendar year. Differences caused by not strictly recognizing payroll on a calendar year basis, while previously adjusted on a periodic basis, have resulted in overstatements of net income by a total of $1.0 million over the last decade, with the maximum misstatement in any individual year computed under the rollover method being $0.1 million.

Arizona Mills

In 2006, The Mills Corporation (Mills), which manages our 50% unconsolidated joint venture, Arizona Mills, advised us that Mills had identified errors in prior year financial statements, primarily relating to the timing of writeoffs of tenant allowances, that relate to years prior to 2006. We have not yet received audited financial statements for any period after 2004 from Mills and amounts identified as errors may change as a result of the eventual completion of the Arizona Mills 2005 audit. However, based on the information we have received from Mills, we have determined that the cumulative impact of our share of prior years’ errors identified by Mills to date is an overstatement of our equity by $1.3 million.

Cumulative Effect of Adoption of SAB 108

As a result of applying the guidance in SAB 108, during the year ended December 31, 2006, we recorded a $5.9 million reduction to our shareholders’ equity account (dividends in excess of net income) in our opening balance sheet to correct for the effect of the errors associated with the accounting for Cherry Creek’s ground rent prior to 1999, the recognition of payroll costs, and our share of Arizona Mills’s errors identified by Mills, described above.

Adoption of EITF 04-5

Under guidance in EITF 04-5 "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" and Statement of Position 78-9, "Accounting for Investments in Real Estate Ventures" (SOP 78-9) as amended by FASB Staff Position 78-9-1 and the corresponding changes and considerations surrounding control, we began consolidating the entity that owns Cherry Creek as of January 1, 2006. This entity was previously accounted for under the equity method in accordance with the provisions of SOP 78-9. As of January 1, 2006, the impact to the balance sheet was an increase in assets of approximately $136 million and liabilities of approximately $196 million, and a $60 million reduction of beginning equity representing the cumulative effect of change in accounting principle.

New Accounting Pronouncements

In December 2006, the FASB issued Staff Position No. EITF 00-19-2, “Accounting for Registration Payment Arrangements.” This Staff Position requires companies that agree to register securities recognize a liability if a payment to investors for failing to fulfill the agreement is probable and its amount can be reasonably estimated. This Staff Position is effective for fiscal years beginning after December 15, 2006. We do not anticipate that the adoption of this Staff Position will have a material effect on our results of operations or financial position.

In September 2006, the FASB issued Statement No. 157 “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies to accounting pronouncements that require or permit fair value measurements, except for share-based payments transactions under FASB Statement No. 123. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. As Statement No. 157 does not require any new fair value measurements or remeasurements of previously computed fair values, we not believe adoption of this Statement will have a material effect on our financial statements.

31

In June 2006, the FASB issued Interpretation No. 48, “Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109.” This Interpretation defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. We do not anticipate that the adoption of this Statement will have a material effect on our results of operations or financial position.

Presentation of Operating Results

The following tables contain the operating results of our Consolidated Businesses and the Unconsolidated Joint Ventures. Income allocated to the minority partners in the Operating Partnership and preferred interests is deducted to arrive at the results allocable to our common shareowners. Because the net equity of the Operating Partnership is less than zero, the income allocated to the minority partners is equal to their share of distributions. The net equity of these minority partners is less than zero due to accumulated distributions in excess of net income and not as a result of operating losses. Distributions to partners are usually greater than net income because net income includes non-cash charges for depreciation and amortization. Amounts allocable to minority partners in certain consolidated joint ventures are added back or deducted to arrive at our net results. Our average ownership percentage of the Operating Partnership was 65% in 2006, 62% in 2005, and 61% in 2004.

The results of Cherry Creek are presented within the Consolidated Businesses for periods beginning January 1, 2006, as a result of our adoption of EITF 04-5. The results of International Plaza are presented within the Consolidated Businesses for periods beginning July 1, 2004, as a result of our acquisition of a controlling interest in the center. Prior to the respective adoption date and acquisition date, these centers are included within the Unconsolidated Joint Ventures.

The accounts of The Pier, which opened in June 2006, are included within the Unconsolidated Joint Ventures beginning in 2006. As of December 31, 2006, we have a $4 million investment in The Pier. The joint venture partner has guaranteed 100% of the outstanding construction loan and is responsible for funding the completion of development and initial leasing costs of the center and all operating requirements of the center prior to stabilization of the center.

Prior year information for which errors were identified and corrected through an adjustment of beginning (January 1, 2006) shareholders’ equity pursuant to SAB 108 has not been adjusted.

Use of Non-GAAP Measures

The operating results in the following tables include the supplemental earnings measures of Beneficial Interest in EBITDA and Funds from Operations (FFO). Beneficial Interest in EBITDA represents the Operating Partnership’s share of the earnings before interest and depreciation and amortization, excluding gains on sales of depreciated operating properties of its consolidated and unconsolidated businesses. We believe Beneficial Interest in EBITDA provides a useful indicator of operating performance, as it is customary in the real estate and shopping center business to evaluate the performance of properties on a basis unaffected by capital structure.

The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (loss) (computed in accordance with Generally Accepted Accounting Principles (GAAP)), excluding gains (or losses) from extraordinary items and sales of properties, plus real estate related depreciation and after adjustments for unconsolidated partnerships and joint ventures. We believe that FFO is a useful supplemental measure of operating performance for REITs. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, we and most industry investors and analysts have considered presentations of operating results that exclude historical cost depreciation to be useful in evaluating the operating performance of REITs. We primarily use FFO in measuring performance and in formulating corporate goals and compensation.

32

Our presentations of EBITDA and FFO are not necessarily comparable to the similarly titled measures of other REITs due to the fact that not all REITs use the same definitions. These measures should not be considered alternatives to net income (loss) or as an indicator of our operating performance. Additionally, neither represents cash flows from operating, investing or financing activities as defined by GAAP. Reconciliations of Net Income (Loss) Allocable to Common Shareowners to Funds from Operations and Net Income to Beneficial Interest in EBITDA are presented following the Comparison of 2005 to 2004. See the following section regarding certain presentation changes affecting EBITDA and FFO.

Presentation Changes

As previously reported for 2005, because of a change in our business practice to offer our tenants the option to pay a fixed charge or pay their share of common area maintenance (CAM) costs and the related change to contractual terms of leases, we began adding back in the fourth quarter of 2005 all depreciation on CAM assets to calculate EBITDA and FFO. Additionally, we have reclassified depreciation on CAM assets from recoverable expenses to depreciation and amortization expense for all periods presented.

Also, as a result of this change in our business practice, we modified our estimated useful lives of CAM assets that are recoverable from tenants as of January 1, 2006. The change in useful lives better aligns the depreciation of common area assets with our lease portfolio. The change in estimate did not have a material effect on the current results of operations but could be material in future periods. The Operating Partnership's share of depreciation on CAM capital expenditures was $15.7 million, $15.7 million, and $14.2 million in 2006, 2005, and 2004, respectively.

During 2006, we began recognizing revenue for marketing and promotion services at the gross amount billed to tenants, rather than a net amount retained (that is, the amount billed to the tenants less the related costs incurred). Revenues are now included in recoveries from tenants and the related expenses in other operating expense. This presentation change was made as a result of our recent offering to tenants of an option to pay fixed amounts for marketing and promotion of the shopping centers. In evaluating the accounting for marketing and promotion services, we considered that there may no longer be a direct relationship between tenant billings and the marketing and promotion costs incurred, as well as the fact that we are the primary obligor on the costs incurred. Historically, revenues from marketing and promotion services have been equal to costs incurred.

In addition, we now separately present gains on peripheral land sales and interest income in the income statement following revenues and expenses.

Prior year revenues and expenses in the following tables have been reclassified as described above to be consistent with the 2006 presentation.

33

Comparison of 2006 to 2005

The following table sets forth operating results for 2006 and 2005, showing the results of the Consolidated Businesses and Unconsolidated Joint Ventures:

 	 	2006	2005	
 
 	 	 	CONSOLIDATED
BUSINESSES  	 	 	UNCONSOLIDATED
JOINT VENTURES
AT 100% (1)	 	 	
CONSOLIDATED
BUSINESSES	 	 	UNCONSOLIDATED
JOINT VENTURES
AT 100% (1)	 
	
                                                                        (in millions of dollars)
REVENUES:	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Minimum rents	 	 	311.2	 	 	148.8	 	 	262.1	 	 	184.5	 	
 Percentage rents	 	 	14.7	 	 	8.0	 	 	9.8	 	 	8.1	 	
 Expense recoveries	 	 	206.2	 	 	85.6	 	 	164.6	 	 	104.1	 	
 Management, leasing and development services	 	 	11.8	 	 	 	 	 	13.8	 	 	 	 	
 Other	 	 	35.4	 	 	9.7	 	 	29.0	 	 	8.7	 	
Total revenues	 	 	579.3	 	 	252.2	 	 	479.4	 	 	305.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Maintenance, taxes, and utilities	 	 	152.9	 	 	64.3	 	 	126.4	 	 	71.3	 	
  Other operating	 	 	71.6	 	 	26.3	 	 	57.7	 	 	29.6	 	
  Management, leasing and development services	 	 	5.7	 	 	 	 	 	9.1	 	 	 	 	
  General and administrative	 	 	30.3	 	 	 	 	 	27.7	 	 	 	 	
  Interest expense (2)	 	 	128.6	 	 	57.6	 	 	121.6	 	 	67.6	 	
  Depreciation and amortization (3) (4)	 	 	138.0	 	 	45.8	 	 	128.4	 	 	54.8	 	
Total operating expenses	 	 	527.1	 	 	193.9	 	 	470.9	 	 	223.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains on land sales and interest income	 	 	9.5	 	 	1.3	 	 	6.5	 	 	0.8	 	
 	 	 	61.6	 	 	59.6	 	 	15.0	 	 	82.9	 	
Equity in income of Unconsolidated Joint Ventures (4) (5)	 	 	33.5	 	 	 	 	 	42.5	 	 	 	 	
Income before gain on disposition of interest in center and
  minority and preferred interests	 	 	95.1	 	 	 	 	 	57.4	 	 	 	 	
Gain on disposition of interest in center (5)	 	 	 	 	 	 	 	 	52.8	 	 	 	 	
Minority and preferred interests:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  TRG preferred distributions	 	 	(2.5	)	 	 	 	 	(2.5	)	 	 	 	
  Minority share of consolidated joint ventures	 	 	(10.7	)	 	 	 	 	(0.2	)	 	 	 	
  Minority share of income of TRG	 	 	(22.8	)	 	 	 	 	(40.4	)	 	 	 	
  Distributions less than (in excess of) minority share of income	 	 	(14.1	)	 	 	 	 	4.5	 	 	 	 	
Net income	 	 	45.1	 	 	 	 	 	71.7	 	 	 	 	
Preferred dividends (6)	 	 	(23.7	)	 	 	 	 	(27.6	)	 	 	 	
Net income (loss) allocable to common shareowners	 	 	21.4	 	 	 	 	 	44.1	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SUPPLEMENTAL INFORMATION:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  EBITDA - 100%	 	 	328.2	 	 	162.9	 	 	265.0	 	 	205.3	 	
  EBITDA - outside partners' share	 	 	(33.2	)	 	(71.4	)	 	(14.9	)	 	(91.9	)	
  Beneficial interest in EBITDA	 	 	295.0	 	 	91.6	 	 	250.1	 	 	113.5	 	
  Beneficial interest expense	 	 	(115.8	)	 	(31.2	)	 	(116.1	)	 	(37.6	)	
  Non-real estate depreciation	 	 	(2.9	)	 	 	 	 	(2.1	)	 	 	 	
  Preferred dividends and distributions	 	 	(26.2	)	 	 	 	 	(30.1	)	 	 	 	
  Funds from Operations contribution	 	 	150.0	 	 	60.4	 	 	101.8	 	 	75.9	 	

 (1)    	With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany transactions. The Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their performance as a whole, without regard to our ownership interest. In our consolidated financial statements, we account for investments in the Unconsolidated Joint Ventures under the equity method.	
 (2)   	Interest expense for 2006 includes charges of $3.1 million in connection with the write-off of financing costs related to the respective pay off and refinancing of the loans on Willow Bend and Dolphin when the loans became prepayable without penalty, in the first and third quarters of 2006, respectively. Interest expense for 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of Short Hills, the pay-off of the Northlake loan, and the debt modifications in connection with the pay-off of the Oyster Bay loan.	
 (3)   	Included in depreciation and amortization of the Consolidated Businesses and Unconsolidated Joint Ventures (at 100%) are $13.4 million and $6.7 million, respectively, of depreciation of center replacement assets for 2006, and $11.5 million and $8.8 million, respectively, for 2005.	
 (4)   	Amortization of the additional basis included in depreciation and amortization was $4.9 million and $4.3 million in 2006 and 2005, respectively. Also, amortization of our additional basis in the Operating Partnership included in equity in income of Unconsolidated Joint Ventures was $1.9 million and $3.0 million in 2006 and 2005, respectively.	
 (5)   	During 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland. Our equity in the gain on the sale is separately presented on the income statement, and is therefore excluded from the equity in income of Unconsolidated Joint Ventures line item.	
 (6)   	Preferred dividends for 2006 include $4.7 million of charges recognized in connection with the redemption of the remaining Series A and Series I Preferred Stock. Preferred dividends for 2005 include a $3.1 million charge recognized in connection with the partial redemption of the Series A Preferred Stock.	
(7) 	Certain reclassifications have been made to prior year information to conform to current year classifications. Amounts in this table may not add due to rounding.	

34

Consolidated Businesses

Total revenues for the year ended December 31, 2006 were $579.3 million, a $99.9 million or 20.8% increase over 2005. Minimum rents increased $49.1 million, primarily due to Cherry Creek, which we began consolidating in 2006 upon our adoption of EITF 04-5, and the September 2005 opening of Northlake. Minimum rents also increased due to tenant rollovers. Percentage rents increased due to higher tenant sales and Cherry Creek. Expense recoveries increased primarily due to Cherry Creek and Northlake, and increases in recoverable costs. Management, leasing, and development revenue decreased primarily due to a reduction in reimbursable third party costs, offset by increased revenues related to services from certain contracts. We expect that management, leasing, and development revenue, less related expenses, will be in the range of $6 million to $7 million in 2007. Other income increased primarily due to Cherry Creek, Northlake, and increases in lease cancellation revenue.

Total expenses were $527.1 million, a $56.2 million or 11.9% increase from 2005. Maintenance, taxes, and utilities expense increased primarily due to Cherry Creek, Northlake, and increases in maintenance costs, property taxes, and electricity expense at certain centers. Other operating expense increased primarily due to Cherry Creek and Northlake, as well as increases in bad debt expense, pre-development costs, and professional fees. We expect that pre-development costs for both our domestic and non-U.S. projects, which were $10.1 million in 2006, will be between $10 million and $11 million in 2007. Management, leasing, and development expense decreased primarily due to a reduction in reimbursable third party costs. General and administrative expense increased primarily due to increases in compensation expenses, including bonus expense and the mark-to-market of long term grants that fluctuate with our stock price, which were partially offset by decreased severance costs. We expect that general and administrative expenses will be approximately $7.5 million for each quarter of 2007. Interest expense increased due to Cherry Creek, Northlake, the higher balance on the refinancing of Short Hills, and increases in floating interest rates. These increases were partially offset by the pay-off of the Willow Bend and Oyster Bay loans and reduced rates on refinancings. Interest expense in 2006 also included the write-off of financing costs related to the respective pay-off and refinancing of the loans on Willow Bend and Dolphin, while interest expense in 2005 included charges incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of Short Hills, the pay-off of the Northlake loan and a debt modification in connection with the pay-off of the Oyster Bay loan. Depreciation expense increased primarily due to Cherry Creek and Northlake, which were partially offset by a decrease due to fully depreciated assets at certain centers and changes in depreciable lives of tenant and anchor allowances in connection with early terminations during 2005.

Gains on land sales and interest income increased due to higher interest rates and average cash balances in 2006, which were partially offset by a decrease in gains on peripheral land sales.

Unconsolidated Joint Ventures

Total revenues for the year ended December 31, 2006 were $252.2 million, a $53.2 million or 17.4% decrease from 2005. Minimum rents decreased $35.7 million, primarily due to the consolidation of Cherry Creek in 2006 and the sale of Woodland in December 2005, which were partially offset by the opening of The Pier in June 2006, increases in occupancy, and tenant rollovers. Percentage rents remained relatively flat, with decreases due to Cherry Creek, offset by percentage rent from increased tenant sales. Expense recoveries decreased primarily due to Cherry Creek and Woodland, which were partially offset by increased recoverable costs at certain centers and The Pier. Other income increased due to increases in lease cancellation income, which were partially offset by Cherry Creek and Woodland.

Total expenses decreased by $29.4 million to $193.9 million for the year ended December 31, 2006. Maintenance, taxes, and utilities expenses decreased primarily due to Cherry Creek and Woodland, which were partially offset by The Pier and increases in maintenance costs and electricity expense at certain centers. Other operating expense decreased primarily due to Cherry Creek, Woodland, and decreases in professional fees, which were partially offset by increases related to The Pier and bad debt expense. Interest expense decreased due to Cherry Creek, which was partially offset by The Pier and the new financing of Waterside. Depreciation expense decreased primarily due to Cherry Creek and Woodland, which was partially offset by The Pier.

As a result of the foregoing, income of the Unconsolidated Joint Ventures decreased by $23.3 million to $59.6 million. Our equity in income of the Unconsolidated Joint Ventures was $33.5 million, a $9.0 million decrease from 2005.

Net Income

Our income before the gain on disposition of our interest in Woodland and minority and preferred interests increased by $37.7 million to $95.1 million for 2006. In 2005, we recognized our $52.8 million share of the gain on the disposition of Woodland. Minority share of income of consolidated joint ventures increased due to Cherry Creek (see "Presentation of Operating Results"). Preferred dividends in 2006 include $4.7 million of charges related to the redemption of the remaining Series A and Series I Preferred Stock. Preferred dividends in 2005 include a $3.1 million charge related to the partial redemption of the Series A Preferred Stock (see “Equity Transactions”). After allocation of income to minority and preferred interests, the net income allocable to common shareowners for 2006 was $21.4 million compared to $44.1 million in 2005.

35

Comparison of 2005 to 2004

The following table sets forth operating results for 2005 and 2004, showing the results of the Consolidated Businesses and Unconsolidated Joint Ventures:

 	 	2005	2004	
 
 	 	 	CONSOLIDATED
BUSINESSES	 	 	UNCONSOLIDATED
JOINT VENTURES AT 100% (1)	 
	 	
CONSOLIDATED
BUSINESSES	 	 	UNCONSOLIDATED
JOINT VENTURES
AT 100% (1)	 
	
                       (in millions of dollars)
REVENUES:	 	 	 	 	 	 	 	 	 	 	 	 	 	
 Minimum rents	 	 	262.1	 	 	184.5	 	 	235.1	 	 	195.0	 	
 Percentage rents	 	 	9.8	 	 	8.1	 	 	6.3	 	 	6.5	 	
 Expense recoveries	 	 	164.6	 	 	104.1	 	 	150.7	 	 	110.1	 	
 Management, leasing and development services	 	 	13.8	 	 	 	 	 	21.3	 	 	 	 	
 Other	 	 	29.0	 	 	8.7	 	 	23.4	 	 	9.5	 	
Total revenues	 	 	479.4	 	 	305.4	 	 	436.8	 	 	321.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Maintenance, taxes, and utilities	 	 	126.4	 	 	71.3	 	 	118.4	 	 	76.0	 	
  Other operating	 	 	57.7	 	 	29.6	 	 	51.5	 	 	30.9	 	
  Restructuring loss	 	 	 	 	 	 	 	 	5.7	 	 	 	 	
  Costs related to unsolicited tender offer, net of recoveries	 	 	 	 	 	 	 	 	(1.0	)	 	 	 	
  Management, leasing and development services	 	 	9.1	 	 	 	 	 	17.5	 	 	 	 	
  General and administrative	 	 	27.7	 	 	 	 	 	26.6	 	 	 	 	
  Interest expense (2)	 	 	121.6	 	 	67.6	 	 	95.9	 	 	74.0	 	
  Depreciation and amortization (3) (4)	 	 	128.4	 	 	54.8	 	 	110.2	 	 	60.0	 	
Total expenses	 	 	470.9	 	 	223.3	 	 	424.8	 	 	240.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains on land sales and interest income	 	 	6.5	 	 	0.8	 	 	7.9	 	 	0.2	 	
 	 	 	15.0	 	 	82.9	 	 	19.9	 	 	80.6	 	
Equity in income of Unconsolidated Joint Ventures (4) (5)	 	 	42.5	 	 	 	 	 	40.1	 	 	 	 	
Income before gain on disposition of interest in center,
discontinued operations, and minority and preferred interests	 	 	57.4	 	 	 	 	 	60.0	 	 	 	 	
Gain on disposition of interest in center (5)	 	 	52.8	 	 	 	 	 	 	 	 	 	 	
Discontinued operations-	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Net gain on disposition of interest in center	 	 	 	 	 	 	 	 	0.3	 	 	 	 	
Minority and preferred interests:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  TRG preferred distributions (6)	 	 	(2.5	)	 	 	 	 	(12.2	)	 	 	 	
  Minority share of consolidated joint ventures	 	 	(0.2	)	 	 	 	 	0.0	 	 	 	 	
  Minority share of income of TRG	 	 	(40.4	)	 	 	 	 	(14.9	)	 	 	 	
  Distributions less than (in excess of) minority share of income	 	 	4.5	 	 	 	 	 	(20.8	)	 	 	 	
Net income	 	 	71.7	 	 	 	 	 	12.4	 	 	 	 	
Preferred dividends (7)	 	 	(27.6	)	 	 	 	 	(17.4	)	 	 	 	
Net income (loss) allocable to common shareowners	 	 	44.1	 	 	 	 	 	(5.1	)	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SUPPLEMENTAL INFORMATION:	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA - 100%	 	 	265.0	 	 	205.3	 	 	226.0	 	 	214.6	 	
EBITDA - outside partners' share	 	 	(14.9	)	 	(91.9	)	 	(6.2	)	 	(99.4	)	
Beneficial interest in EBITDA	 	 	250.1	 	 	113.5	 	 	219.8	 	 	115.2	 	
Beneficial interest expense	 	 	(116.1	)	 	(37.6	)	 	(92.9	)	 	(39.9	)	
Non-real estate depreciation	 	 	(2.1	)	 	 	 	 	(2.4	)	 	 	 	
Preferred dividends and distributions	 	 	(30.1	)	 	 	 	 	(29.7	)	 	 	 	
Funds from Operations contribution	 	 	101.8	 	 	75.9	 	 	94.8	 	 	75.3	 	

    (1)  	With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany transactions and exclude the gain on the sale of Woodland (Note 5). The Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their performance as a whole, without regard to our ownership interest. In our consolidated financial statements, we account for investments in the Unconsolidated Joint Ventures under the equity method.	
    (2)  	Interest expense for 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of Short Hills, the pay-off of the Northlake loan, and the debt modifications in connection with the pay-off of the Oyster Bay loan.	
    (3)  	Included in depreciation and amortization of the Consolidated Businesses and Unconsolidated Joint Ventures (at 100%) are $11.5 million and $8.5 million, respectively, of depreciation of center replacement assets for 2005, and $9.1 million and $9.6 million, respectively, for 2004.	
    (4)  	Amortization of the additional basis included in depreciation and amortization was $4.3 million and $4.2 million in 2005 and 2004, respectively. Also, amortization of our additional basis in the Operating Partnership included in equity in income of Unconsolidated Joint Ventures was $3.0 million in both 2005 and 2004.	
    (5)  	During 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland. Our equity in the gain on the sale is separately presented on the income statement, and is therefore excluded from the equity in income of Unconsolidated Joint Ventures line item.	
 (6) 	TRG preferred distributions for 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and D preferred equity.	
(7)  	Preferred dividends in 2005 include a $3.1 million charge incurred in connection with the partial redemption of the Series A Preferred Stock.	
 (8)  	Amounts in this table may not add due to rounding. Certain reclassifications have been made to prior year information to conform to current year classifications.	

36

Consolidated Businesses

Total revenues for the year ended December 31, 2005 were $479.4 million, a $42.6 million or 9.8% increase over 2004. Minimum rents increased $27.0 million, due to International Plaza, which we began consolidating upon the acquisition of a controlling interest in the center, the September 2005 opening of Northlake and increases in occupancy, tenant rollovers, and income from temporary tenants and specialty retailers. Percentage rents increased due to International Plaza and higher tenant sales. Expense recoveries increased due to International Plaza, Northlake, and increases in recoverable costs at certain centers, which were partially offset by a decrease in revenue from marketing and promotion services. Management, leasing, and development revenue decreased primarily due to the loss of revenue from the nine GMPT management contracts, which were cancelled in November 2004, and were partially offset by revenue from the MGM Project CityCenter and Salt Lake City contracts and cost reimbursements related to Taubman Asia. Other income increased primarily due to increases in parking-related revenue and sponsorship income.

Total expenses were $470.9 million, a $46.1 million or 10.9% increase from 2004. Recoverable expenses increased primarily due to International Plaza and Northlake, as well as increases in maintenance costs, electricity expense, and property taxes at certain centers. Other operating expense increased primarily due to office and deal pursuit costs in Asia, International Plaza, and overhead no longer allocable to the GMPT management contracts, offset by a decrease in bad debt expense. During 2004, $1.0 million of insurance proceeds were received relating to costs expended in connection with an unsolicited tender offer in 2003. Also during 2004, a $5.7 million restructuring loss was recognized. Substantially all of this charge represented employee severance payments and benefits. Management, leasing, and development expense decreased primarily due to the cancellation of the GMPT management contracts, with certain overhead costs previously allocated to the contracts now being recognized as other operating expenses or general and administrative expense. This was partially offset by expenses related to the MGM Project CityCenter and Salt Lake City contracts and activities related to Taubman Asia. In addition to the increase related to expenses that were previously allocated to GMPT, general and administrative expense increased due to professional fees, travel, and severance costs, which were offset by a decrease in bonus grants outstanding that fluctuate with our stock price. Interest expense increased due to charges incurred in 2005 in connection with a prepayment premium and the write-off of financing costs related to the refinancing of Short Hills, the pay-off of the Northlake loan and a debt modification in connection with the pay-off of the Oyster Bay loan. Other interest expense increases were due to International Plaza, the refinancings of Wellington Green and Stony Point Fashion Park (Stony Point), as well as the opening of Northlake and increases in floating interest rates. Depreciation expense increased primarily due to International Plaza, Northlake, and changes in depreciable lives of tenant and anchor allowances in connection with early terminations.

Gains on land sales and interest income decreased due to decreases in gains on sales of peripheral land, which were partially offset by increased interest income.

Unconsolidated Joint Ventures

Total revenues for the year ended December 31, 2005 were $305.4 million, a $15.8 million or 4.9% decrease from 2004. Minimum rents decreased $10.5 million, primarily due to the consolidation of International Plaza, which was partially offset by increases in occupancy and tenant rollovers. Percentage rents increased due to higher tenant sales. Expense recoveries decreased due to International Plaza, offset by increases at other centers.

Total expenses decreased by $17.6 million to $223.3 million for the year ended December 31, 2005. Recoverable expenses decreased primarily due to International Plaza. Other operating expense decreased primarily due to International Plaza, partially offset by increases in professional fees and other expenses. Interest expense decreased primarily due to International Plaza and the payoff of debt on Woodland and Stamford Town Center. Depreciation expense decreased primarily due to International Plaza.

As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by $2.3 million to $82.9 million. Our equity in income of the Unconsolidated Joint Ventures was $42.5 million, a $2.4 million increase from 2004.

Net Income

As a result of the foregoing, our income before the gain on disposition of our interest in Woodland, discontinued operations and minority and preferred interests decreased by $2.6 million to $57.4 million for 2005. In 2005, we recognized our $52.8 million share of the gain on disposition of Woodland. Discontinued operations in 2004 included a $0.3 million adjustment to the gain on the disposition of Biltmore Fashion Park. Preferred dividends in 2005 include a $3.1 million charge related to the partial redemption of the Series A preferred stock, while TRG preferred distributions in 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and Series D Preferred Equity. After allocation of income to minority and preferred interests, the net income (loss) allocable to common shareowners for 2005 was $44.1 million compared to $(5.1) million in 2004.

37

Reconciliation of Net Income (Loss) Allocable to Common Shareowners to Funds from Operations

 	 	 	2006	 	 	2005	 	 	2004	 	
 	 	(in millions of dollars, except as indicated) 	
Net income (loss) allocable to common shareowners	 	 	21.4	 	 	44.1	 	 	(5.1	)	
 	 	 	 	 	 	 	 	 	 	 	
Add (less) depreciation and gains on dispositions of properties:	 	 	 	 	 	 	 	 	 	 	
 Gains on dispositions of interests in centers  	 	 	 	 	 	(52.8	)	 	(0.3	)	
 Depreciation and amortization (1) :	 	 	 	 	 	 	 	 	 	 	
  Consolidated businesses at 100%	 	 	138.0	 	 	128.4	 	 	110.2	 	
  Minority partners in consolidated joint ventures	 	 	(14.6	)	 	(9.3	)	 	(3.2	)	
  Share of unconsolidated joint ventures  	 	 	26.9	 	 	33.4	 	 	35.2	 	
  Non-real estate depreciation	 	 	(2.9	)	 	(2.1	)	 	(2.4	)	
 	 	 	 	 	 	 	 	 	 	 	
Add minority interests in TRG:	 	 	 	 	 	 	 	 	 	 	
 Minority share of income in TRG  	 	 	22.8	 	 	40.4	 	 	14.9	 	
 Distributions (less than) in excess of minority share of income of TRG	 	 	14.1	 	 	(4.5	)	 	20.8	 	
 Distributions in excess of minority share of income of consolidated joint ventures	 	 	
4.9	 	 	
0.2	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations  	 	 	210.4	 	 	177.7	 	 	170.1	 	
 	 	 	 	 	 	 	 	 	 	 	
TCO’s average ownership percentage of TRG	 	 	65.0	%	 	62.2	%	 	60.6	%	
 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations allocable to TCO  	 	 	136.7	 	 	110.6	 	 	103.1	 	
 
(1)  	Depreciation includes $10.2 million, $10.1 million, and $8.1 million of mall tenant allowance amortization for the years ended December 31, 2006, 2005, and 2004, respectively. Depreciation also includes TRG’s beneficial interest in depreciation of center replacement assets recoverable from tenants of $15.7 million, $15.7 million, and $14.2 million for the years ended December 31, 2006, 2005, and 2004, respectively.	
(2)  	Amounts in this table may not add due to rounding.	

Reconciliation of Net Income to Beneficial Interest in EBITDA

 	 	 	2006	 	 	2005	 	 	2004	 	
 	 	(in millions of dollars, except as indicated)  	
Net income	 	 	45.1	 	 	71.7	 	 	12.4	 	
 	 	 	 	 	 	 	 	 	 	 	
Add (less) depreciation and gains on dispositions of properties:	 	 	 	 	 	 	 	 	 	 	
 Gains on dispositions of interests in centers  	 	 	 	 	 	(52.8	)	 	(0.3	)	
 Depreciation and amortization:	 	 	 	 	 	 	 	 	 	 	
  Consolidated businesses at 100%	 	 	138.0	 	 	128.4	 	 	110.2	 	
  Minority partners in consolidated joint ventures	 	 	(14.6	)	 	(9.3	)	 	(3.2	)	
  Share of unconsolidated joint ventures  	 	 	26.9	 	 	33.4	 	 	35.2	 	
 	 	 	 	 	 	 	 	 	 	 	
Add (less) preferred interests and interest expense:	 	 	 	 	 	 	 	 	 	 	
 Preferred distributions  	 	 	2.5	 	 	2.5	 	 	12.2	 	
 Interest expense:	 	 	 	 	 	 	 	 	 	 	
  Consolidated businesses at 100%	 	 	128.6	 	 	121.6	 	 	95.9	 	
  Minority partners in consolidated joint ventures	 	 	(12.9	)	 	(5.5	)	 	(3.1	)	
  Share of unconsolidated joint ventures	 	 	31.2	 	 	37.6	 	 	39.9	 	
 	 	 	 	 	 	 	 	 	 	 	
Add minority interests in TRG:	 	 	 	 	 	 	 	 	 	 	
 Minority share of income in TRG  	 	 	22.8	 	 	40.4	 	 	14.9	 	
 Distributions (less than) in excess of minority share of income of TRG	 	 	14.1	 	 	(4.5	)	 	20.8	 	
 Distributions in excess of minority share of income of consolidated joint ventures	 	 	
4.9	 	 	
0.2	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Beneficial interest in EBITDA	 	 	386.5	 	 	363.5	 	 	335.0	 	
 	 	 	 	 	 	 	 	 	 	 	
TCO’s average ownership percentage of TRG	 	 	65.0	%	 	62.2	%	 	60.6	%	
 	 	 	 	 	 	 	 	 	 	 	
Beneficial interest in EBITDA allocable to TCO	 	 	251.1	 	 	226.4	 	 	202.9	 	
 
(1)  	Amounts in this table may not add due to rounding.	

38

Liquidity and Capital Resources

In the following discussion, references to beneficial interest represent the Operating Partnership’s ownership share of the results of its consolidated and unconsolidated businesses. We do not have, and have not had, any parent company indebtedness; all debt discussed represents obligations of the Operating Partnership or its subsidiaries and joint ventures.

Capital resources are required to maintain our current operations, pay dividends, and fund planned capital spending for projects under construction, future developments, and other commitments and contingencies. We believe that our net cash provided by operating activities, distributions from our joint ventures, the unutilized portions of our credit facilities, and our ability to access the capital markets assure adequate liquidity to meet current and future cash requirements and will allow us to conduct our operations in accordance with our dividend and financing policies. The following sections contain information regarding our recent capital transactions and sources and uses of cash; beneficial interest in debt and sensitivity to interest rate risk; contractual obligations; covenants, commitments, and contingencies; and historical capital spending. We then provide information regarding our anticipated future capital spending and our dividend policies.

Summaries of 2006 Capital Activities and Transactions

As of December 31, 2006, we had a consolidated cash balance of $26.3 million. Our cash balance includes $2.0 million that is restricted to specific uses stipulated by our lenders, including ground lease payments, taxes, insurance, debt service, capital improvements, leasing costs, and tenant allowances. Additionally, we have a secured $350 million line of credit. This line had $60.0 million of borrowings as of December 31, 2006. We also have available a second secured bank line of credit of up to $40 million, which had $8.1 of borrowings as of December 31, 2006. Our $350 million line of credit matures in February 2009 and has a one year extension option. The $40 million line of credit matures in February 2008.

During 2006, we:
 
·  	Completed financings of approximately $1.1 billion relating to our $350 million revolving line of credit, Cherry Creek, Northlake, Partridge Creek, the land under Sunvalley, and Waterside and paid off floating rate loans on Willow Bend and Oyster Bay.	

·  	Acquired a 50% interest in the land under Sunvalley.	

·  	Redeemed $113 million of preferred stock.	

·  	Continued to be active in construction and development activities for both existing centers and centers currently under development.	

These transactions are more fully described in “Results of Operations” and “Capital Spending”.

Operating Activities

Our net cash provided by operating activities was $223.5 million in 2006, compared to $184.6 million in 2005 and $135.5 million in 2004. In 2006, increases in cash related primarily to increases in rents, recoveries, lease cancellation revenue, the consolidation of Cherry Creek, and the full year of operations of Northlake. In 2005, increases in cash related primarily to increases in rents, the opening of Northlake, and additional operating cash flows due to International Plaza, which we began consolidating upon acquisition of a controlling interest in the center. Included in interest expense in 2005 was a prepayment premium paid in connection with the Short Hills refinancing in December 2005 (see "Debt Transactions"). In 2004, increases in cash related primarily to increases in rents and recoveries and additional operating cash flows due to the full year of operations of Stony Point, offset by payments of costs previously accrued in connection with the unsolicited tender offer, restructuring and other costs.

39

Investing Activities

Net cash used in investing activities was $131.5 million in 2006 compared to $91.1 million in 2005 and $243.6 million in 2004. Cash used in investing activities was impacted by the timing of capital expenditures, with additions to properties in 2006, 2005, and 2004 for the construction of Northlake, Partridge Creek, Stony Point, the expansion and renovation at Twelve Oaks, and our Oyster Bay Project, as well as other development activities and other capital items. A tabular presentation of 2006 capital spending is shown in “Capital Spending”. During 2004, $58.5 million, net of cash transferred in, was used to purchase an additional interest in International Plaza, and $3.3 million was used to acquire an additional interest in Beverly. Contributions to Unconsolidated Joint Ventures of $25.3 million in 2006 were made primarily to purchase land that Sunvalley is located on and to fund the expansion at Waterside (see “Capital Spending - Existing Centers”), while $30.4 million of contributions in 2005 were made primarily for the purchase of anchor spaces at Stamford Town Center and Cherry Creek, the initial contribution to The Pier (see "Capital Spending - New Centers"), and to fund construction at Waterside, while $72.3 million of contributions in 2004 were made primarily to fund the repayment of debt at Stamford and Woodland.

Sources of cash used in funding these investing activities, other than cash flows from operating activities, included distributions from Unconsolidated Joint Ventures, as well as the transactions described under Financing Activities. Distributions in excess of earnings from Unconsolidated Joint Ventures provided $57.6 million in 2006, which included $39.5 million of proceeds from the Waterside financing. Distributions in excess of earnings from Unconsolidated Joint Ventures provided $17.1 million and $20.2 million in 2005 and 2004, respectively, and included amounts for Cherry Creek which was consolidated in 2006 and Woodland which was sold in 2005. Net proceeds from sales of peripheral land were $5.4 million, $6.1 million and $11.5 million in 2006, 2005, and 2004, respectively. The timing of land sales is variable and proceeds from land sales can vary significantly from period to period. During 2005, $76.4 million of escrowed cash was received in connection with the sale of Woodland and used in 2006 for the purchase of replacement property. In addition a $9.0 million note received in connection with the sale of Woodland was collected during the first quarter of 2006.

Financing Activities

Net cash used in financing activities was $231.6 million in 2006, compared to $41.0 million of cash provided in 2005, and $106.8 million of cash used in 2004.

Net cash used in or provided by financing activities was primarily impacted by cash requirements of the investing activities described in the preceding section. Proceeds from the issuance of debt, net of payments and issuance costs, were $51.6 million in 2006, compared to $157.4 million in 2005 and $236.5 million in 2004. In 2006 we used the proceeds from the issuance of the $113 million Series I Preferred Stock to redeem the remaining outstanding Series A Preferred Stock. The Series I Preferred Stock was then redeemed using available cash. In 2005 we used $87 million in proceeds from the issuance of Series H Preferred Stock to redeem a portion of Series A Preferred Stock. In 2004, issuance of Series F Preferred Equity contributed $30 million and we used proceeds from the issuance of the $100 million Series G Preferred Stock to redeem all of the outstanding Series C and D Cumulative Redeemable Preferred Equity. Equity issuance costs were $0.6 million, $3.2 million, and $4.1 million in 2006, 2005, and 2004, respectively. Issuance of stock and partnership units related to the exercise of employee options contributed $6.7 million in 2005 and $10.4 million in 2004. The third party owner of Partridge Creek contributed $9.0 million in 2006 to fund the project (see “Contractual Obligations - The Mall at Partridge Creek Contractual Obligations” regarding the ownership structure of this project). Repurchases of common stock totaled $50.2 million in 2004. Total dividends and distributions paid were $178.6 million, $119.9 million, and $115.8 million in 2006, 2005, and 2004, respectively. Distributions to minority interests in 2006 include $45.3 million of excess proceeds from the refinancing of Cherry Creek.

Beneficial Interest in Debt

At December 31, 2006, the Operating Partnership's debt and its beneficial interest in the debt of its Consolidated and Unconsolidated Joint Ventures totaled $2,585.3 million, with an average interest rate of 5.69% excluding amortization of debt issuance costs and the effects of interest rate hedging instruments. These costs are reported as interest expense in the results of operations. Interest expense for the year ended December 31, 2006 includes $0.6 million of non-cash amortization relating to acquisitions, or 0.02% of the average all-in rate. Included in beneficial interest in debt is debt used to fund development and expansion costs. Beneficial interest in construction work in progress totaled $241.0 million as of December 31, 2006, which includes $227.1 million of assets on which interest is being capitalized. Beneficial interest in capitalized interest was $9.8 million for 2006. The following table presents information about our beneficial interest in debt as of December 31, 2006:

40

 
  	 	 
Amount	 	Interest Rate
Including Spread	 	
 	 	(in millions of dollars)	 	 	 	
Fixed rate debt	 	 	2,478.5	 	 	5.66%	(1)	
 	 	 	 	 	 	 	 	
Floating rate debt -	 	 	 	 	 	 	 	
  Floating month to month	 	 	106.8	(2)	 	6.22	(1)	
 	 	 	 	 	 	 	 	
Total beneficial interest in debt	 	 	2,585.3	 	 	5.69	(1)	
 	 	 	 	 	 	 	 	
Amortization of financing costs (3)	 	 	 	 	 	0.17	%	
Average all-in rate	 	 	 	 	 	5.86	%	

(1)  	Represents weighted average interest rate before amortization of financing costs.	
(2)  	$15 million of floating rate debt is swapped at 5.95% from January 2, 2007 to November 1, 2012.	
(3)  	Financing costs include financing fees, interest rate cap premiums, and losses on settlement of derivatives used to hedge the refinancing of certain fixed rate debt.	
(4)  	Amounts in table may not add due to rounding.	

In 2006, we entered into three forward starting swaps for $150 million to partially hedge interest rate risk associated with the planned refinancing of International Plaza in January 2008. The weighted average forward swap rate for these three swaps is 5.33%, excluding the credit spread.

Sensitivity Analysis

We have exposure to interest rate risk on our debt obligations and interest rate instruments. We use derivative instruments primarily to manage exposure to interest rate risks inherent in variable rate debt and refinancings. We routinely use cap, swap, and treasury lock agreements to meet these objectives. Based on the Operating Partnership's beneficial interest in floating rate debt in effect at December 31, 2006, a one percent increase or decrease in interest rates on this floating rate debt would decrease or increase cash flows by approximately $0.9 million and, due to the effect of capitalized interest, annual earnings by approximately $0.8 million. Based on our consolidated debt and interest rates in effect at December 31, 2006, a one percent increase in interest rates would decrease the fair value of debt by approximately $126.2 million, while a one percent decrease in interest rates would increase the fair value of debt by approximately $134.9 million.

Contractual Obligations

In conducting our business, we enter into various contractual obligations, including those for debt, capital leases for property improvements, operating leases for land and office space, purchase obligations (primarily for construction), and other long-term commitments. Detail of these obligations as of December 31, 2006 for our consolidated businesses, including expected settlement periods, is contained below:

 	 	Payments due by period	 	
 	 	 	Total  	 	Less than 1 year (2007)	 	1-3 years
(2008-2009)	 	3-5 years
(2010-2011)	 	More than 5 years (2012+)	 		
 	 	(in millions of dollars)  	
 	 	 	 	 	 	 	 	 	 	 	 	 		
Debt (1)	 	 	2,319.5	 	16.6	 	271.2	 	246.7	 	1,785.1	 		
Interest payments	 	 	923.9	 	129.7	 	237.9	 	215.2	 	341.0	 		
Capital lease obligations	 	 	8.1	 	3.9	 	4.3	 	 	 	 	 		
Operating leases	 	 	369.7	 	8.1	 	15.9	 	14.7	 	331.0	 		
Purchase obligations:	 	 	 	 	 	 	 	 	 	 	 	 		
Planned capital spending (2)	 	 	201.9	 	201.9	 	 	 	 	 	 	 		
Other purchase obligations (3)	 	 	7.8	 	2.4	 	2.9	 	1.3	 	1.2	 		
Other long-term liabilities (4)	 	 	81.9	 	8.9	 	4.6	 	1.9	 	66.5	 		
Total	 	 	3,912.8	 	371.5	 	536.8	 	479.8	 	2,524.8	 		

(1)  	The settlement periods for debt do not consider extension options. Amounts relating to interest on floating rate debt are calculated based on the debt balances and interest rates as of December 31, 2006.	
(2)  	As of December 31, 2006, we were contractually committed for $90.9 million of this planned spending. See “Planned Capital Spending” for detail regarding planned spending.	
(3)  	Excludes purchase agreements with cancellation provisions of 90 days or less.	
(4)  	Other long-term liabilities consist of various accrued liabilities, most significantly assessment bond obligations and long-term incentive compensation.	
(5)  	Amounts in this table may not add due to rounding.	

41

 
The Mall at Partridge Creek Contractual Obligations

In May 2006, we engaged the services of a third-party investor to acquire certain property associated with Partridge Creek, in order to facilitate a Section 1031 like-kind exchange to provide flexibility for disposing of assets in the future. The third-party investor became the owner of the project and leases the land from one of our subsidiaries. In turn, the owner leases the project back to us.

Funding for the project is provided by the following sources. We provide approximately 45% of the project funding under a junior subordinated financing. The owner has provided $9 million in equity. Funding for the remaining project costs is being provided by the owner’s third-party construction loan, which has a balance of $22.0 million as of December 31, 2006 (see “Debt Transactions”).

We are the construction manager for the project and have an option to purchase the property and assume the ground lease from the owner during the 30-month exchange period ending December 2008. The option, if exercised, will provide the owner a 12% cumulative return on its equity. In the event that we do not exercise our right to purchase the property from the owner, the owner will have the right to sell all of its interest in the property, provided that the purchaser shall assume all of the obligations and be assigned all of the owner's rights under the ground lease, the operating lease, and any remaining obligations under the loans.
 
We have guaranteed the lease payments on the operating lease (excluding annual supplemental rent equal to 1.67% of the owner's outstanding equity balance, commencing after the exchange period) as well as completion of the project. The lease payments are structured to cover debt service, ground rent payments, and other expenses of the lessor. We consolidate the accounts of the owner and the junior loan and other intercompany transactions are eliminated in consolidation.

Loan Commitments and Guarantees

Certain loan agreements contain various restrictive covenants, including minimum net worth requirements, minimum debt service coverage ratios, a maximum payout ratio on distributions, a maximum leverage ratio, a minimum debt yield ratio, and a minimum fixed charges coverage ratio, the latter being the most restrictive. The Operating Partnership is in compliance with all of its covenants.

Payments of principal and interest on the loans in the following table are guaranteed by the Operating Partnership as of December 31, 2006.

 

Center	 	 	

Loan balance
as of 12/31/06	 	 	TRG's
beneficial
interest in
loan balance
as of 12/31/06	 	 	Amount of
loan balance
guaranteed
by TRG
as of 12/31/06	 	 	
% of loan
balance
guaranteed
by TRG	 	 	

% of interest
guaranteed
by TRG	 	
 	 	(in millions of dollars)  	 	 	 	 	 	 	
Dolphin Mall	 	 	5.0	 	 	5.0	 	 	5.0	 	 	100	%	 	100	%	
Fairlane Town Center	 	 	55.0	 	 	55.0	 	 	55.0	 	 	100	%	 	100	%	
The Mall at Millenia	 	 	0.3	 	 	0.2	 	 	0.2	 	 	50	%	 	50	%	
Twelve Oaks Mall	 	 	-	 	 	-	 	 	-	 	 	100	%	 	100	%	

In 2006, the $350 million revolver was amended by the Operating Partnership. Under the revised terms, borrowings under the line of credit are primary obligations of the entities owning Dolphin, Fairlane, and Twelve Oaks, which are the collateral for the line of credit. The Operating Partnership and the entities owning Fairlane and Twelve Oaks are guarantors under the credit agreement.

In addition, we have guaranteed certain obligations of Partridge Creek (see “Contractual Obligations”) and the payment of $3.7 million related to the remaining development costs and certain tenant allowances for Northlake.

42

Cash Tender Agreement

A. Alfred Taubman has the annual right to tender to us units of partnership interest in the Operating Partnership (provided that the aggregate value is at least $50 million) and cause us to purchase the tendered interests at a purchase price based on a market valuation of TCO on the trading date immediately preceding the date of the tender (the Cash Tender Agreement). At A. Alfred Taubman's election, his family, and certain others may participate in tenders. We will have the option to pay for these interests from available cash, borrowed funds, or from the proceeds of an offering of our common stock. Generally, we expect to finance these purchases through the sale of new shares of our stock. The tendering partner will bear all market risk if the market price at closing is less than the purchase price and will bear the costs of sale. Any proceeds of the offering in excess of the purchase price will be for the sole benefit of TCO.

We account for the cash tender agreement between us and Mr. Taubman as a freestanding written put option. As the option put price is defined by the current price of our stock at the time of tender, the fair value of the written option defined by the cash tender agreement is considered to be zero.

Based on a market value at December 31, 2006 of $50.86 per common share, the aggregate value of interests in the Operating Partnership that may be tendered under the Cash Tender Agreement was approximately $1.3 billion. The purchase of these interests at December 31, 2006 would have resulted in our owning an additional 31% interest in the Operating Partnership.

Capital Spending

Capital spending for routine maintenance of the shopping centers is generally recovered from tenants. Capital spending during 2006, excluding acquisitions, is summarized in the following table:

 	 	2006 (1)  	

 	 	 	Consolidated
Businesses  	 	 	Beneficial Interest
in Consolidated Businesses	 	 	Unconsolidated Joint Ventures	 	 	Beneficial Interest in Unconsolidated
Joint Ventures	 	
 	 	(in millions of dollars)  	
New Development Projects:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Pre-construction development activities (2)	 	 	25.6	 	 	25.6	 	 	 	 	 	 	 	
  New centers (3)	 	 	41.4	 	 	41.4	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Existing Centers:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Renovation projects with incremental GLA and/or anchor replacement (4)	 	 	
38.8	 	 	
38.8	 	 	
33.2	 	 	
9.9	 	
  Renovations with no incremental GLA effect and other	 	 	
9.0	 	 	
8.7	 	 	
4.9	 	 	
2.4	 	
  Mall tenant allowances (5)	 	 	14.6	 	 	14.1	 	 	5.1	 	 	2.5	 	
  Asset replacement costs reimbursable by tenants	 	 	14.0	 	 	12.9	 	 	5.3	 	 	3.0	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate office improvements and equipment	 	 	8.6	 	 	8.6	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Additions to properties	 	 	151.9	 	 	150.0	 	 	48.5	 	 	17.9	 	

(1)  	Costs are net of intercompany profits and are computed on an accrual basis.	
(2)  	Primarily includes project costs of Oyster Bay.	
(3)  	Includes costs related to Partridge Creek.	
(4)  	Includes costs related to the renovation of the former Filene's space at Stamford Town Center, the expansion at Twelve Oaks, and the expansion and renovation of Waterside.	
(5)  	Excludes initial lease-up costs.	
(6)  	Amounts in this table may not add due to rounding.	

The following table presents a reconciliation of the Consolidated Businesses’ capital spending shown above (on an accrual basis) to cash additions (on a cash basis) to properties as presented in our Consolidated Statement of Cash Flows for the year ended December 31, 2006:

 	 	 	(in millions
  of dollars)  	 	
Consolidated Businesses’ capital spending	 	 	151.9	 	
Differences between cash and accrual basis	 	 	26.4	 	
Additions to properties	 	 	178.3	 	

43

Capital spending during 2005, excluding acquisitions, is summarized in the following table:

	 	2005 (1)  	

 	 	 	Consolidated
Businesses  	 	 	
Beneficial Interest
in Consolidated Businesses	 	 	

Unconsolidated Joint Ventures	 	 	Beneficial Interest in Unconsolidated
Joint Ventures	 	
 	 	(in millions of dollars)  	
New Development Projects:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pre-construction development activities (2)	 	 	31.8	 	 	31.8	 	 	 	 	 	 	 	
New centers (3)	 	 	106.3	 	 	106.3	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Existing Centers:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Renovation projects with incremental GLA and/or anchor replacement (4)	 	 	
2.6	 	 	
2.6	 	 	
49.4	 	 	
19.7	 	
Renovations with no incremental GLA effect and other	 	 	
4.2	 	 	
4.1	 	 	
3.1	 	 	
1.6	 	
Mall tenant allowances (5)	 	 	13.2	 	 	12.2	 	 	5.6	 	 	2.9	 	
Asset replacement costs reimbursable by tenants	 	 	9.8	 	 	9.2	 	 	8.0	 	 	4.6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate office improvements and equipment	 	 	5.2	 	 	5.2	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Additions to properties	 	 	173.1	 	 	171.5	 	 	66.1	 	 	28.8	 	

(1)  	Costs are net of intercompany profits and are computed on an accrual basis.	
(2)  	Primarily includes project costs of Oyster Bay.	
(3)  	Primarily includes costs related to Northlake and Partridge Creek.	
(4)  	Includes costs related to the acquisition of the former Filene's space at Stamford Town Center, the former Lord & Taylor space at Cherry Creek, and the expansion and renovation of Waterside.	
(5)  	Excludes initial lease-up costs.	
(6)  	Amounts in this table may not add due to rounding.	

The Operating Partnership's share of mall tenant allowances per square foot leased, committed under contracts during the year, excluding expansion space and new developments, was $19.05 in 2006 and $19.84 in 2005. In addition, the Operating Partnership's share of capitalized leasing and tenant coordination costs excluding new developments, was $6.6 million in both 2006 and 2005, or $5.64 and $6.09, in 2006 and 2005, respectively, per square foot leased.

Planned Capital Spending

New Centers

Partridge Creek, a 640,000 square foot center, is under construction in Clinton Township, Michigan. The center will be anchored by Nordstrom, Parisian, and MJR Theatres, and is scheduled to open on October 18, 2007, with Nordstrom opening in spring 2008. Our investment in this center will be approximately $155 million and we are expecting a stabilized return of 9.5%.

The Pier, located in Atlantic City, New Jersey and developed by Gordon Group Holdings LLC (Gordon), began opening in phases in June 2006. In January 2005, we contributed $4 million as a first payment to acquire a 30% interest in the center. We are in final negotiations to increase our ownership of The Pier from 30% to 50%. Our original agreement with Gordon specified we would purchase the 30% interest at a 7% capitalization rate based on The Pier’s 2007 net operating income (NOI). We have now negotiated that the entire 50% interest will be purchased at a 7% capitalization rate based on The Pier’s 2008 NOI. Given the phased openings at the center, we do not expect a full run rate before 2008. Therefore, the asset is not likely to contribute significantly to our earnings and FFO in 2007. We expect to close on our agreement with Gordon in the first quarter of 2007 when we also expect to close on a refinancing for The Pier, which will pay off the $86 million balance on the existing floating rate loan. We assumed full management and leasing of The Pier in January 2007. The Pier is accounted for under the equity method.

44

We are negotiating agreements regarding City Creek Center, a mixed-use project in Salt Lake City, Utah. Demolition of the existing structures began in November 2006 and the project is expected to open in 2011. The retail component of the project will include approximately 300,000 square feet of tenant GLA and three department stores, including Dillard’s, Macy’s, and Nordstrom. We have been a consultant throughout the planning process for this project and will develop, manage, lease, and own the retail space. We are currently in the final stages of refining the agreements that will govern our investment in the retail portion. When complete, we will provide the anticipated costs and returns.

A new 1.2 million square foot retail and entertainment complex in New Songdo City, Incheon, South Korea is scheduled to open in early 2010, with construction beginning in 2007. We have negotiated the opportunity to invest in a portion of the broader project, which will include not only retail, but also office, hotel, and residential uses. We anticipate finalizing our decision on this investment in 2007.

In January 2007, we announced our involvement in the retail component of Macao Studio City on the Cotai Strip in Macao. Taubman Asia has signed a term sheet to acquire a minority position in the retail component of the project and will provide development, leasing, and management services, subject to definitive agreements to be completed in the first half of 2007.

In October 2006, we announced that we are seeking a final decision in the Supreme Court of the State of New York (Suffolk County) on our land use plan for our Oyster Bay project in Syosset, Long Island, New York. Although the timing is uncertain, we believe it is likely the court ruling will occur in the next two to three months. We believe we will be successful in this litigation and we will ultimately build the mall. Depending on the timing of the construction and opening of the mall, which will be anchored by Neiman Marcus, Nordstrom, and Barneys New York, we anticipate spending as much as $500 million on this project. Assuming $500 million of cost we expect a minimum return of 7%. We expect success with the litigation, but if we are ultimately unsuccessful it is anticipated that the recovery on this asset would be significantly less than our current investment. Our cost in this project as of December 31, 2006 was $128.2 million. With capitalized interest, storage costs and ongoing expenses we expect our investment to increase $4 million to $5 million each quarter.

Existing Centers

Construction has been completed on an expansion and renovation of tenant space at Waterside at a cost of approximately $52 million. We expect a return of approximately 11% on our $13 million share of project costs. In addition, Nordstrom will join the center as an anchor in fall 2008 and an expansion of the current anchor, Saks Fifth Avenue, will be completed in late 2007 with a full renovation of the store expected to be completed by summer 2008.

At Twelve Oaks, construction is underway on an addition of a 165,000 square foot Nordstrom. In addition, the project includes a 60,000 square foot expansion and renovation of Macy’s (previously Marshall Fields), and approximately 97,000 square feet of additional new store space. A grand opening is planned for September 28, 2007. We expect a return of approximately 10% on our estimated cost of $63 million.

Construction is underway on a lifestyle component addition to Stamford Town Center, on the site once occupied by Filene's department store. The project, which is 100% leased, will consist of a mix of signature retail and restaurant offerings, creating significantly greater visibility to the city and much-needed pedestrian access to the center. We expect a 7.5% to 8% return on the $51 million project, which is expected to open in November 2007.

45

The following table summarizes planned capital spending for 2007, excluding The Pier, as well as costs related to City Creek Center, Asia projects, and other projects or expansions for which budgets have not yet been approved by the Board of Directors:

	 	2007 (1)  	
 
 	 	 	Consolidated
Businesses  	 	 	Beneficial Interest in Consolidated Businesses	 	 	
Unconsolidated Joint Ventures	 	 	Beneficial Interest in Unconsolidated Joint Ventures	 	
 	 	(in millions of dollars)  	
New development projects (2)	 	 	120.1	 	 	120.1	 	 	 	 	 	 	 	
Existing centers (3)	 	 	80.8	 	 	77.8	 	 	55.1	 	 	28.7	 	
Corporate office improvements and equipment	 	 	 1.0	 	 	 1.0	 	 	 	 	 	 	 	
Total	 	 	 201.9	 	 	 198.9	 	 	55.1	 	 	 28.7	 	

(1)  	Costs are net of intercompany profits.	
(2)  	Primarily includes costs related to Partridge Creek and Oyster Bay.	
(3)  	Primarily includes costs related to the expansion and renovation of Twelve Oaks and Stamford Town Center.	
(4)  	Amounts in this table may not add due to rounding.	

Estimates of future capital spending include only projects approved by our Board of Directors and, consequently, estimates will change as new projects are approved. Costs of potential development projects, including our exploration of development possibilities in Asia, are expensed until we conclude that it is probable that the project will reach a successful conclusion.

Disclosures regarding planned capital spending, including estimates regarding capital expenditures, occupancy, and returns on new developments presented above are forward-looking statements and certain significant factors could cause the actual results to differ materially, including but not limited to: (1) actual results of negotiations with anchors, tenants, and contractors, (2) timing and outcome of litigation and entitlement processes, (3) changes in the scope, number, and valuation of projects, (4) cost overruns, (5) timing of expenditures, (6) financing considerations, (7) actual time to complete projects, (8) changes in economic climate, (9) competition from others attracting tenants and customers, (10) increases in operating costs, (11) timing of tenant openings, and (12) early lease terminations and bankruptcies.

Dividends

We pay regular quarterly dividends to our common and Series G and Series H preferred shareowners. Dividends to our common shareowners are at the discretion of the Board of Directors and depend on the cash available to us, our financial condition, capital and other requirements, and such other factors as the Board of Directors deems relevant. To qualify as a REIT, we must distribute at least 90% of our REIT taxable income to our shareowners, as well as meet certain other requirements. Preferred dividends accrue regardless of whether earnings, cash availability, or contractual obligations were to prohibit the current payment of dividends.
 
On December 7, 2006, we declared a quarterly dividend of $0.375 per common share that was paid on January 19, 2007 to shareowners of record on December 29, 2006. We declared a quarterly dividend of $0.50 per share on our 8% Series G Preferred Stock, paid December 29, 2006 to shareowners of record on December 19, 2006. We also declared a quarterly dividend of $0.4765625 per share on our 7.625% Series H Preferred Stock, paid on December 29, 2006 to shareholders of record on December 19, 2006.

The annual determination of our common dividends is based on anticipated Funds from Operations available after preferred dividends, as well as assessments of annual capital spending, financing considerations, and other appropriate factors.

Any inability of the Operating Partnership or its Joint Ventures to secure financing as required to fund maturing debts, capital expenditures and changes in working capital, including development activities and expansions, may require the utilization of cash to satisfy such obligations, thereby possibly reducing distributions to partners of the Operating Partnership and funds available to us for the payment of dividends.

46

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information required by this Item is included in this report at Item 7 under the caption “Liquidity and Capital Resources”.

Item 8. FINANCIAL STATEMENTS   AND SUPPLEMENTARY DATA.

The Financial Statements of Taubman Centers, Inc. and the Reports of Independent Registered Public Accounting Firms thereon are filed pursuant to this Item 8 and are included in this report at Item 15.

Item 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

Item 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this annual report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined by SEC Rule 13a-15(e)). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control over Financial Reporting

Management’s Annual Report on Internal Control over Financial Reporting accompanies the Company’s financial statements included in Item 15 of this annual report.

Report of the Independent Registered Public Accounting Firm

The report issued by the Company’s independent registered public accounting firm, KPMG LLP, accompanies the Company’s financial statements included in Item 15 of this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the Company’s fourth quarter 2006 evaluation of such internal control that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. OTHER INFORMATION.

Not applicable.

PART III *

Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Proposal 1-Election of Directors—Directors and Executive Officers,” “Proposal 1-Election of Directors—The Board of Directors and Committees,” "Proposal 1-Election of Directors—Corporate Governance,” and “Additional Information—Section 16(a) Beneficial Ownership Reporting Compliance.”

47

Item 11. EXECUTIVE COMPENSATION.

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions "Proposal 1-Election of Directors—Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” and “Executive Compensation Tables.”

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information regarding the Company’s equity compensation plans as of December 31, 2006:

	 	 	Number of
Securities to be
Issued Upon
Exercise of
Outstanding Options, Warrants, and Rights  	 	 	Weighted- Average Exercise Price of Outstanding Options, Warrants,
and Rights	 	 	Number of Securities Remaining Available for Future Issuances Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))	 	
 	 	 	(a)  	 	 	(b)	 	 	(c)	 	
Equity compensation plans approved by security holders: (1) (2)	 	 	 	 	 	 	 	 	 	 	
  Incentive Option Plan	 	 	 1,115,376	 	$	32.55	 	 	1,114,611	 	
  The Taubman Company 2005 Long-Term Incentive Plan	 	 	 261,685	 	 	 	 (3)	 	1,235,061	 	
 	 	 	 1,377,061	 	$	32.55	 	 	2,349,672	 	
Equity compensation plan not approved by security holders: (4)	 	 	 	 	 	 	 	 	 	 	
  Non-Employee Directors’ Deferred Compensation Plan	 	 	 7,981	 	 	 	 (5)	 	 	 (6)	
 	 	 	 1,385,042	 	$	32.55	 	 	2,349,672	 	

(1)  	Consists of TRG's 1992 Incentive Option Plan, as amended, and The Taubman Company 2005 Long-Term Incentive Plan. Under the 1992 Incentive Option Plan, employees receive Units of Partnership Interest in TRG upon the exercise of their vested options, and each Unit can be converted into one share of Common Stock under the Continuing Offer. Under The Taubman Company 2005 Long-Term Incentive Plan, employees receive restricted stock units, which represent the right to one share of Common Stock upon vesting. The Taubman Centers, Inc. Non-Employee Directors' Stock Grant Plan was also approved by security holders, but is not included in the table above because issuances under such plan consist of stock grants with no exercise price and such plan does not have a limit on the aggregate number of shares that can be issued thereunder. Under the Taubman Centers, Inc. Non-Employee Directors' Stock Grant Plan, non-employee directors received grants of Common Stock on a quarterly basis having a value of $3,750 in 2006 and will receive in 2007 grants of Common Stock on a quarterly basis having a value of $12,500.	
(2)  	No options were exercised or granted between January 1, 2007 and February 26, 2007. In addition, no restricted stock units were granted between January 1, 2007 and February 26, 2007.	
(3)  	Excludes restricted stock units issued under The Taubman Company 2005 Long-Term Incentive Plan because they are converted into Common Stock on a one-for-one basis at no additional cost.	
(4)  	Consists of the Company's Non-Employee Directors' Deferred Compensation Plan, which was approved by the Board in May 2005. The Deferred Compensation Plan gives each non-employee director of the Company the right to defer the receipt of all or a portion of his or her annual director retainer until the termination of such director's service on the Board and for such deferred compensation to be denominated in restricted stock units. The number of restricted stock units received equals the deferred retainer fee divided by the fair market value of the common stock on the business day immediately before the date the director would otherwise have been entitled to receive the retainer fee. The restricted stock units represent the right to receive equivalent shares of Common Stock at the end of the deferral period. During the deferral period, when the Company pays cash dividends on the Common Stock, the directors' deferral accounts are credited with dividend equivalents on their deferred restricted stock units, payable in additional restricted stock units based on the then-fair market value of the Common Stock. Each Director's account is 100% vested at all times.	
(5)  	The restricted stock units are excluded because they are converted into Common Stock on a one-for-one basis at no additional cost.	
(6)  	The number of securities available for future issuance is unlimited and will reflect whether non-employee directors elect to defer all or a portion of their annual retainers.	

Additional information required by this item is hereby incorporated by reference to the table and related footnotes appearing in the Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Related Person Transactions,” and "Proposal 1-Election of Directors—The Board of Directors and Committees.”

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Audit Committee Disclosure,” and “Report of the Audit Committee.”

48

  
*   The Compensation Committee Report on Executive Compensation and the Audit Committee Report appearing in the Proxy Statement are not incorporated by reference in this Annual Report on Form 10-K or in any other report, registration statement, or prospectus of the Registrant.

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

15(a)(1)	The following financial statements of Taubman Centers, Inc. and the Reports of Independent Registered Public Accounting Firm thereon are filed with this report:	

TAUBMAN CENTERS, INC.	Page	
Management's Annual Report on Internal Control Over Financial Reporting	F-2	
Reports of Independent Registered Public Accounting Firm	F-3	
Consolidated Balance Sheet as of December 31, 2006 and 2005	F-5	
Consolidated Statement of Operations for the years ended December 31, 2006, 2005, and 2004	F-6	
Consolidated Statement of Shareowners' Equity for the years ended December 31, 2006, 2005, and 2004	F-7	
Consolidated Statement of Cash Flows for the years ended December 31, 2006, 2005, and 2004	F-8	
Notes to Consolidated Financial Statements	F-9	

15(a)(2)	The following is a list of the financial statement schedules required by Item 15(d):	

TAUBMAN CENTERS, INC.	 	
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2006, 2005, and 2004	F-34	
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2006	F-35	

15(a)(3)	 	

3(a)	--	Restated By-Laws of Taubman Centers, Inc. (incorporated herein by reference to Exhibit 3 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (“2005 Second Quarter Form 10-Q”)).	
 	 	 	
3(b)	--	Restated Articles of Incorporation of Taubman Centers, Inc. (incorporated herein by reference to Exhibit 3 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).	
 	 	 	
4(a)	--	Loan Agreement dated as of January 15, 2004 among La Cienega Associates, as Borrower, Column Financial, Inc., as Lender (incorporated herein by reference to Exhibit 4 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 ("2004 First Quarter Form 10-Q"))	
 	 	 	
4(b)	--	Assignment of Leases and Rents, La Cienega Associates, Assignor, and Column Financial, Inc., Assignee, dated as of January 15, 2004 (incorporated herein by reference to Exhibit 4 filed with the 2004 First Quarter Form 10-Q).	

4(c)	--	Leasehold Deed of Trust, with Assignment of Leases and Rents, Fixture Filing, and Security Agreement, dated as of January 15, 2004, from La Cienega Associates, Borrower, to Commonwealth Land Title Company, Trustee, for the benefit of Column Financial, Inc., Lender (incorporated herein by reference to Exhibit 4 filed with the 2004 First Quarter Form 10-Q).	

4(d)	--	Amended and Restated Promissory Note A-1, dated December 14, 2005, by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	
 	 	 	
4(e)	--	Amended and Restated Promissory Note A-2, dated December 14, 2005, by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	

49

4(f)	--	Amended and Restated Promissory Note A-3, dated December 14, 2005, by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.3 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	
 	 	 	
4(g)	--	Amended and Restated Mortgage, Security Agreement and Fixture Filings, dated December 14, 2005 by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.4 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	
 	 	 	
4(h)	--	Amended and Restated Assignment of Leases, dated December 14, 2005, by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.5 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	
 	 	 	
4(i)	--	Amended and Restated Secured Revolving Credit Agreement, dated as of August 9, 2006, by and among Dolphin Mall Associates Limited Partnership, Fairlane Town Center LLC and Twelve Oaks Mall, LLC, as Borrowers, Eurohypo AG, New York Branch, as Administrative Agent and Lead Arranger, and the various lenders and agents on the signature pages thereto (incorporated herein by reference to Exhibit 4.1 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	
 	 	 	
4(j)	--	Second Amended and Restated Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of August 9, 2006, by and between Dolphin Mall Associates Limited Partnership and Eurohypo AG, New York Branch, as Administrative Agent (incorporated herein by reference to Exhibit 4.5 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	

4(k)	--	Amended and Restated Mortgage, dated as of August 9, 2006, by and between Fairlane Town Center LLC and Eurohypo AG, New York Branch, as Administrative Agent (incorporated herein by reference to Exhibit 4.3 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	
 	 	 	
4(l)	--	Amended and Restated Mortgage, dated as of August 9, 2006, by and between Twelve Oaks Mall, LLC and Eurohypo AG, New York Branch, as Administrative Agent (incorporated herein by reference to Exhibit 4.4 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	
 	 	 	
4(m)	--	Guaranty of Payment, dated as of August 9, 2006, by and among The Taubman Realty Group Limited Partnership, Fairlane Town Center LLC and Twelve Oaks Mall, LLC (incorporated herein by reference to Exhibit 4.2 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	
 	 	 	
*10(a)	--	The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan, as Amended and Restated Effective as of September 30, 1997 (incorporated herein by reference to Exhibit 10(b) filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1997).	
 	 	 	
*10(b)	--	First Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan as Amended and Restated Effective as of September 30, 1997, effective January 1, 2002 (incorporated herein by reference to Exhibit 10(b) filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001 (“2001 Form 10-K”)).	

*10(c)	--	Second Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive Plan as Amended and Restated Effective as of September 30, 1997 (incorporated herein by reference to Exhibit 10(c) filed with the 2004 Form 10-K).	
 	 	 	
*10(d)	--	Third Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive Plan as Amended and Restated Effective as of September 30, 1997 (incorporated herein by reference to Exhibit 10(d) filed with the 2004 Form 10-K).	
 	 	 	
*10(e)	--	The Form of The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan Option Agreement (incorporated herein by reference to Exhibit 10(e) filed with the 2004 Form 10-K).	

50

 
10(f)	--	Master Services Agreement between The Taubman Realty Group Limited Partnership and the Manager (incorporated herein by reference to Exhibit 10(f) filed with the 1992 Form 10-K).	
 	 	 	
10(g)	--	Amended and Restated Cash Tender Agreement among Taubman Centers, Inc., The Taubman Realty Group Limited Partnership, and A. Alfred Taubman, A. Alfred Taubman, acting not individually but as Trustee of the A. Alfred Taubman Restated Revocable Trust, and TRA Partners, (incorporated herein by reference to Exhibit 10 (a) filed with the 2000 Second Quarter Form 10-Q).	
 	 	 	
*10(h)	--	Supplemental Retirement Savings Plan (incorporated herein by reference to Exhibit 10(i) filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994).	
 	 	 	
*10(i)	--	The Taubman Company Long-Term Compensation Plan (as amended and restated effective January 1, 2000) (incorporated herein by reference to Exhibit 10 (c) filed with the 2000 Second Quarter Form 10-Q).	
 	 	 	
*10(j)	--	First Amendment to the Taubman Company Long-Term Compensation Plan (as amended and restated effective January 1, 2000) (incorporated herein by reference to Exhibit 10(m) filed with the 2004 Form 10-K).	
 	 	 	
*10(k)	--	Second Amendment to the Taubman Company Long-Term Performance Compensation Plan (as amended and restated effective January 1, 2000).	
 	 	 	
*10(l)	--	The Taubman Company 2005 Long-Term Incentive Plan (incorporated herein by reference to the Form DEF14A filed with the Securities and Exchange Commission on April 5, 2005).	
 	 	 	
*10(m)	--	Employment Agreement between The Taubman Company Limited Partnership and Lisa A. Payne (incorporated herein by reference to Exhibit 10 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997).	
 	 	 	
*10(n)	--	Change of Control Agreement, dated July 17, 2006, by and among the Company, Taubman Realty Group Limited Partnership, and Lisa A. Payne (incorporated herein by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K dated July 17, 2006).	
 	 	 	
*10(o)	--	Form of Change of Control Agreement (incorporated herein by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K dated July 17, 2006).	

10(p)	--	Second Amended and Restated Continuing Offer, dated as of May 16, 2000. (incorporated herein by reference to Exhibit 10 (b) filed with the 2000 Second Quarter Form 10-Q).	
 	 	 	
10(q)	--	The Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership dated September 30, 1998 (incorporated herein by reference to Exhibit 10 filed with the Registrant’s Quarterly Report on Form 10-Q dated September 30, 1998).	

10(r)	--	Annex II to Second Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of The Taubman Realty Group Limited Partnership. (incorporated herein by reference to Exhibit 10(p) filed with Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999 (“1999 Form 10-K”)).	
 	 	 	
10(s)	--	Annex III to The Second Amendment and Restatement of Agreement of Limited Partnership of The Taubman Realty Group Limited Partnership, dated as of May 27, 2004 (incorporated by reference to Exhibit 10(c) filed with the 2004 Second Quarter Form 10-Q).	

51

10(t)	--	First Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership dated September 30, 1998 (incorporated herein by reference to Exhibit 10(b) filed with the Registrant’s Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2002 (“2002 Second Quarter Form 10-Q/A”)).	
 	 	 	
10(u)	--	Second Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of The Taubman Realty Group Limited Partnership effective as of September 3, 1999 (incorporated herein by reference to Exhibit 10(a) filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (“1999 Third Quarter Form 10-Q”)).	
 	 	 	
10(v)	--	Third Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership, dated May 2, 2003 (incorporated herein by reference to Exhibit 10(a) filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (“2003 Second Quarter Form 10-Q”)).	
 	 	 	
10(w)	--	Fourth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership, dated December 31, 2003 (incorporated herein by reference to Exhibit 10(x) filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003).	
 	 	 	
10(x)	--	Fifth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership, dated February 1, 2005 (incorporated herein by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on February 7, 2005).	
 	 	 	
10(y)	--	Sixth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership, dated March 29, 2006 (incorporated herein by reference to Exhibit 10 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006).	
 	 	 	
10(z)	--	Amended and Restated Shareholders' Agreement dated as of October 30, 2001 among Taub-Co Management, Inc., The Taubman Realty Group Limited Partnership, The A. Alfred Taubman Restated Revocable Trust, and Taub-Co Holdings LLC (incorporated herein by reference to Exhibit 10(q) filed with the 2001 Form 10-K).	
 	 	 	
*10(aa)	--	The Taubman Realty Group Limited Partnership and The Taubman Company LLC Election and Option Deferral Agreement (incorporated herein by reference to Exhibit 10(r) filed with the 2001 Form 10-K).	
 	 	 	
10(ab)	--	Operating Agreement of Taubman Land Associates, a Delaware Limited Liability Company, dated October 20, 2006.	

10(ac)	  --	Amended and Restated Agreement of Partnership of Sunvalley Associates, a California general partnership (incorporated herein by reference to Exhibit 10(a) filed with the 2002 Second Quarter Form 10-Q/A).	

*10(ad)	--	Summary of Compensation for the Board of Directors of Taubman Centers, Inc. (incorporated herein by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K dated December 7, 2004).	
 	 	 	
*10(ae)	--	Summary of Compensation for the Board of Directors of Taubman Centers, Inc.	
 	 	 	
*10(af)	--	The Form of The Taubman Company Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10 of the Registrant’s Current Report on Form 8-K dated May 18, 2005).	
 	 	 	
*10(ag)	--	The Taubman Centers, Inc. Non-Employee Directors' Deferred Compensation Plan (incorporated by reference to Exhibit 10 of the Registrant’s Current Report on Form 8-K dated May 18, 2005).	

52

*10(ah)	--	The Form of The Taubman Centers, Inc. Non-Employee Directors' Deferred Compensation Plan (incorporated by reference to Exhibit 10 of the Registrant’s Current Report on Form 8-K dated May 18, 2005).	
 	 	 	
12	--	Statement Re: Computation of Taubman Centers, Inc. Ratio of Earnings to Combined Fixed Charges and Preferred Dividends.	
 	 	 	
21	--	Subsidiaries of Taubman Centers, Inc.	
 	 	 	
24	--	Powers of Attorney.	
 	 	 	
31(a)	  --	Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
31(b)	  --	Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32(a)	  --	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32(b)	  --	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
99(a)	  --	Debt Maturity Schedule.	
 	 	 	
99(b)	  --	Real Estate and Accumulated Depreciation Schedule of the Unconsolidated Joint Ventures of The Taubman Realty Group Limited Partnership.	

*	A management contract or compensatory plan or arrangement required to be filed.	

15(b)	The list of exhibits filed with this report is set forth in response to Item 15(a)(3). The required exhibit index has been filed with the exhibits.	

15(c)	The financial statement schedules of the Company listed at Item 15(a)(2) are filed pursuant to this Item 15(c).	

53

 

TAUBMAN CENTERS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statements and consolidated financial statement schedules are included in Item 8 of this Annual Report on Form 10-K:

CONSOLIDATED FINANCIAL STATEMENTS	
 	Management’s Annual Report on Internal Control Over Financial Reporting	F-2	
 	Reports of Independent Registered Public Accounting Firm	F-3	
 	Consolidated Balance Sheet as of December 31, 2006 and 2005	F-5	
 	Consolidated Statement of Operations for the years ended December 31, 2006, 2005, and 2004	F-6	
 	Consolidated Statement of Shareowners’ Equity for the years ended December 31, 2006, 2005 and 2004	F-7	
 	Consolidated Statement of Cash Flows for the years ended December 31, 2006, 2005 and 2004	F-8	
 	Notes to Consolidated Financial Statements	F-9	
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES	
 	Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2006, 2005, and 2004	F-35	
 	Schedule III - Real Estate and Accumulated Depreciation	F-36	

F-1

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Taubman Centers, Inc. is responsible for the preparation and integrity of the financial statements and financial information reported herein. This responsibility includes the establishment and maintenance of adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance that assets are safeguarded, transactions are properly authorized and recorded, and that the financial records and accounting policies applied provide a reliable basis for the preparation of financial statements and financial information that are free of material misstatement.

The management of Taubman Centers, Inc. is required to assess the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. Management bases this assessment of the effectiveness of its internal control on recognized control criteria, the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has completed its assessment as of December 31, 2006.

Based on its assessment, management believes that Taubman Centers, Inc. maintained effective internal control over financial reporting as of December 31, 2006. The independent registered public accounting firm, KPMG LLP, that audited the 2006 financial statements included in this annual report have issued an attestation report on management’s assessment of the Company’s system of internal controls over financial reporting, also included herein.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareowners
Taubman Centers, Inc.:

We have audited the accompanying consolidated balance sheets of Taubman Centers, Inc. (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareowners’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedules listed in the Index at Item 15 (a) (2). These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of quantifying errors in 2006 pursuant to Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” Also, as discussed in Note 1 to the consolidated financial statements, the Company began consolidating as of January 1, 2006, the entity that owns Cherry Creek Shopping Center, pursuant to the transition methodology provided in Emerging Issues Task Force Issue No. 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership of Similar Entity When the Limited Partners Have Certain Rights.”

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

KPMG LLP
Chicago, Illinois
February 26, 2007

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareowners
Taubman Centers, Inc.:

We have audited management's assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Taubman Centers, Inc. (the Company) maintained effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareowners’ equity, and cash flows, and related financial statement schedules for each of the years in the three-year period ended December 31, 2006, and our report dated February 26, 2007 expressed an unqualified opinion on those consolidated financial statements and related financial statement schedules.

KPMG LLP
Chicago, Illinois
February 26, 2007

F-4

TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
 
 	 	December 31   	
 	 	 	2006	 	 	2005	 	
Assets:	 	 	 	 	 	 	 	
  Properties (Notes 7 and 11)	 	$	3,398,122	 	$	3,081,324	 	
  Accumulated depreciation and amortization (Note 7)	 	 	(821,384	)	 	(651,665	)	
 	 	$	2,576,738	 	$	2,429,659	 	
  Investment in Unconsolidated Joint Ventures (Note 8)	 	 	86,493	 	 	106,117	 	
  Cash and cash equivalents	 	 	26,282	 	 	163,577	 	
  Accounts and notes receivable, less allowance for doubtful accounts of $7,581 and $5,497 in 2006 and 2005 (Note 9)	 	 	
36,650	 	 	
41,717	 	
  Accounts and notes receivable from related parties (Note 14)	 	 	2,444	 	 	2,400	 	
  Deferred charges and other assets (Note 10)	 	 	98,015	 	 	54,110	 	
 	 	$	2,826,622	 	$	2,797,580	 	
Liabilities:	 	 	 	 	 	 	 	
  Notes payable (Note 11)	 	$	2,319,538	 	$	2,089,948	 	
  Accounts payable and accrued liabilities	 	 	247,432	 	 	235,410	 	
  Dividends and distributions payable	 	 	19,849	 	 	15,819	 	
  Distributions in excess of investments in and net income of Unconsolidated	 	 	 	 	 	 	 	
  Joint Ventures (Note 8)	 	 	101,944	 	 	101,028	 	
 	 	$	2,688,763	 	$	2,442,205	 	
Commitments and contingencies (Notes 2, 7,11, 13, 15, and 17)	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Preferred Equity of TRG (Note 16)	 	$	29,217	 	$	29,217	 	
 	 	 	 	 	 	 	 	
Partners' Equity of TRG allocable to minority partners (Note 1)	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Shareowners' Equity (Note 16):	 	 	 	 	 	 	 	
  Series A Cumulative Redeemable Preferred Stock, $0.01 par value, 8,000,000 shares authorized, $113 million liquidation preference,  
    4,520,000 shares issued and outstanding at December 31, 2005. No shares outstanding or authorized at December 31, 2006	 	 	 	 	

$	

45	 	
  Series B Non-Participating Convertible Preferred Stock, $0.001 par and liquidation value, 40,000,000 shares authorized,
    28,113,897 and 29,175,240 shares issued and outstanding at December 31, 2006 and 2005	 	

$	

28	 	 	

29	 	
  Series G Cumulative Redeemable Preferred Stock, 4,000,000 shares authorized, no par, $100 million liquidation preference,
    4,000,000 shares issued and outstanding at December 31, 2006 and 2005	 	 	 	 	 	 	 	
  Series H Cumulative Redeemable Preferred Stock, 3,480,000 shares authorized, no par, $87 million liquidation preference,
    3,480,000 shares issued and outstanding at December 31, 2006 and 2005	 	 	 	 	 	 	 	
  Common Stock, $0.01 par value, 250,000,000 shares authorized, 52,931,594 and 51,866,184 shares issued and outstanding at
    December 31, 2006 and 2005	 	 	
529	 	 	
519	 	
  Additional paid-in capital	 	 	635,304	 	 	739,090	 	
  Accumulated other comprehensive income (loss) (Note 12)	 	 	(9,560	)	 	(9,051	)	
  Dividends in excess of net income	 	 	(517,659	)	 	(404,474	)	
 	 	$	108,642	 	$	326,158	 	
 	 	$	2,826,622	 	$	2,797,580	 	

 
See notes to consolidated financial statements.

F-5

TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
 
 	 	Year Ended December 31   	
 	 	 	2006	 	 	2005	 	 	2004	 	
 	 	 	 	 	 	 	 	 	 	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	
  Minimum rents	 	$	311,187	 	$	262,106	 	$	235,114	 	
  Percentage rents	 	 	14,700	 	 	9,835	 	 	6,288	 	
  Expense recoveries	 	 	206,190	 	 	164,614	 	 	150,699	 	
  Management, leasing, and development services	 	 	11,777	 	 	13,818	 	 	21,333	 	
  Other	 	 	35,430	 	 	29,032	 	 	23,381	 	
 	 	$	579,284	 	$	479,405	 	$	436,815	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	
  Maintenance, taxes, and utilities	 	$	152,885	 	$	126,395	 	$	118,442	 	
  Other operating	 	 	71,643	 	 	57,678	 	 	51,462	 	
  Restructuring loss (Note 4)	 	 	 	 	 	 	 	 	5,662	 	
  Costs related to unsolicited tender offer, net of recoveries (Note 3)	 	 	 	 	 	 	 	 	(1,044	)	
  Management, leasing, and development services (Note 4)	 	 	5,730	 	 	9,072	 	 	17,533	 	
  General and administrative	 	 	30,290	 	 	27,746	 	 	26,617	 	
  Interest expense (Note 11)	 	 	128,643	 	 	121,612	 	 	95,934	 	
  Depreciation and amortization	 	 	137,957	 	 	128,377	 	 	110,180	 	
 	 	$	527,148	 	$	470,880	 	$	424,786	 	
Gains on land sales and interest income	 	$	9,460	 	$	6,457	 	$	7,871	 	
 	 	 	 	 	 	 	 	 	 	 	
Income before equity in income of Unconsolidated Joint Ventures, gain on disposition of interest in center,
  discontinued operations, and minority and preferred interests	 	

$	

61,596	 	
$

14,982	 	
$

19,900	 	
Equity in income of Unconsolidated Joint Ventures (Note 8)	 	 	33,544	 	 	42,450	 	 	40,070	 	
Income before gain on disposition of interest in center, discontinued operations, and minority and preferred
  interests	 	
$	
95,140	 	$	
57,432	 	$	
59,970	 	
Gain on disposition of interest in center (Note 2)	 	 	 	 	 	52,799	 	 	 	 	
Discontinued operations (Note 2)	 	 	 	 	 	 	 	 	328	 	
Income before minority and preferred interests	 	$	95,140	 	$	110,231	 	$	60,298	 	
Minority share of consolidated joint ventures	 	 	(10,693	)	 	(167	)	 	18	 	
Minority interest in TRG:	 	 	 	 	 	 	 	 	 	 	
  Minority share of income of TRG	 	 	(22,816	)	 	(40,403	)	 	(14,913	)	
  Distributions less than (in excess of) minority share of income	 	 	(14,054	)	 	4,534	 	 	(20,781	)	
TRG Series C, D, and F preferred distributions (Note 16)	 	 	(2,460	)	 	(2,460	)	 	(12,244	)	
Net income	 	$	45,117	 	$	71,735	 	$	12,378	 	
Series A, G, H, and I preferred stock dividends (Note 16)	 	 	(23,723	)	 	(27,622	)	 	(17,444	)	
Net income (loss) allocable to common shareowners	 	$	21,394	 	$	44,113	 	$	(5,066	)	
 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per common share (Note 18):	 	 	 	 	 	 	 	 	 	 	
  Income (loss) from continuing operations	 	$	.41	 	$	.87	 	$	(.11	)	
  Net income (loss)	 	$	.41	 	$	.87	 	$	(.10	)	
Diluted earnings per common share (Note 18):	 	 	 	 	 	 	 	 	 	 	
  Income (loss) from continuing operations	 	$	.40	 	$	.87	 	$	(.11	)	
  Net income (loss)	 	$	.40	 	$	.87	 	$	(.10	)	
 	 	 	 	 	 	 	 	 	 	 	
Cash dividends declared per common share	 	$	1.290	 	$	1.160	 	$	1.095	 	
 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding-basic	 	 	52,661,024	 	 	50,459,314	 	 	49,021,843	 	

See notes to   consolidated financial statements.

F-6

TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
(in thousands, except share data)

 	 	Preferred Stock 	Common Stock	 	Additional
Paid -In	 	 	Accumulated
Other
Comprehensive	 	 	Dividends in Excess of	 	 	 	 	
	 	 	Shares 	 	 	Amount	 	 	Shares	 	 	Amount	 	 	Capital	 	 	Income (Loss)	 	 	Net Income	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, January 1, 2004	 	 	37,819,738	 	$	110	 	 	49,936,786	 	$	499	 	$	664,362	 	$	(12,593	)	$	(330,879	)	$	321,499	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of stock pursuant to Continuing Offer (Notes 15
  and 17)	 	 	
(565,575	
)	 	 	 	 	
1,256,620	 	 	
12	 	 	
7,716	 	 	 	 	 	 	 	 	
7,728	 	
Issuance of Series G Preferred Stock, net of issuance costs	 	 	
4,000,000	 	 	 	 	 	 	 	 	 	 	 	
96,729	 	 	 	 	 	 	 	 	
96,729	 	
Release of units (Note 16)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	510	 	 	 	 	 	 	 	 	510	 	
Purchases of stock (Note 16)	 	 	 	 	 	 	 	 	(2,447,781	)	 	(24	)	 	(50,154	)	 	 	 	 	 	 	 	(50,178	)	
Partnership units issued (Note 16)	 	 	460,774	 	 	 	 	 	 	 	 	 	 	 	10,318	 	 	 	 	 	 	 	 	10,318	 	
Cash dividends declared	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(71,002	)	 	(71,002	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12,378	 	 	12,378	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Realized loss on interest rate instruments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(6,054	)	 	 	 	 	(6,054	)	
  Reduction of loss on interest rate instruments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
5,999	 	 	 	 	 	
5,999	 	
  Reclassification adjustment for amounts recognized in
    net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
1,261	 	 	 	 	 	
 1,261	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 $	 13,584	 	
Balance, December 31, 2004	 	 	41,714,937	 	$	110	 	 	48,745,625	 	$	487	 	$	729,481	 	$	(11,387	)	$	(389,503	)	$	329,188	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of stock pursuant to Continuing Offer
  (Notes 15 and 17)	 	 	
(1,932,134	
)	 	
(1	
)	 	
3,120,103	 	 	
32	 	 	
7	 	 	 	 	 	 	 	 	
38	 	
Issuance of Series B Preferred Stock (Note 16)	 	 	
836,921	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of Series H Preferred Stock, net of issuance costs	 	 	
3,480,000	 	 	 	 	 	 	 	 	 	 	 	
83,842	 	 	 	 	 	 	 	 	
83,842	 	
Redemption of Series A Preferred Stock	 	 	(3,480,000	)	 	(35	)	 	 	 	 	 	 	 	(83,850	)	 	 	 	 	 	 	 	(83,885	)	
Release of units (Note 16)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	500	 	 	 	 	 	 	 	 	500	 	
Partnership units issued (Note 16)	 	 	555,516	 	 	 	 	 	 	 	 	 	 	 	6,663	 	 	 	 	 	 	 	 	6,663	 	
Share-based compensation under employee and
  director benefit plans (Note 15)	 	 	 	 	 	 	 	 	
456	 	 	 	 	 	
2,447	 	 	 	 	 	
82	 	 	
2,529	 	
Dividend equivalents (Note 15)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(165	)	 	(165	)	
Cash dividends declared	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(86,623	)	 	(86,623	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	71,735	 	 	71,735	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Unrealized gain on interest rate instruments and  other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
894	 	 	 	 	 	
894	 	
  Reclassification adjustment for amounts recognized in
    net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
1,442	 	 	 	 	 	
 1,442	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 $	 74,071	 	
Balance, December 31, 2005	 	 	41,175,240	 	 $	 74	 	 	51,866,184	 	$	519	 	$	739,090	 	 $	 (9,051	 )	$	(404,474	)	$	326,158	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cumulative effect of adopting EITF 04-5 (Note 1)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(60,226	
)	 	
(60,226	
)	
Cumulative effect of adopting SAB 108 (Note 1)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(5,876	
)	 	
(5,876	
)	
Issuance of stock pursuant to  Continuing Offer
  (Notes 15 and 17)	 	 	
(1,061,343	
)	 	
(1	
)	 	
1,061,414	 	 	
10	 	 	
(9	
)	 	 	 	 	 	 	 	 	 	
Issuance of Series I Preferred Stock, net of issuance  costs	 	 	
4,520,000	 	 	 	 	 	 	 	 	 	 	 	
109,229	 	 	 	 	 	 	 	 	
109,229	 	
Redemption of Series A Preferred Stock	 	 	(4,520,000	)	 	(45	)	 	 	 	 	 	 	 	(108,910	)	 	 	 	 	 	 	 	(108,955	)	
Redemption of Series I Preferred Stock	 	 	(4,520,000	)	 	 	 	 	 	 	 	 	 	 	(109,229	)	 	 	 	 	 	 	 	(109,229	)	
Share-based compensation under employee and director
  benefit plans (Note 15)	 	 	 	 	 	 	 	 	
3,996	 	 	 	 	 	
5,133	 	 	 	 	 	 	 	 	
5,133	 	
Dividend equivalents (Note 15)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(297	)	 	(297	)	
Cash dividends declared	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(91,903	)	 	(91,903	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	45,117	 	 	45,117	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Unrealized loss on interest rate instruments and  other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(1,900	
)	 	 	 	 	
(1,900	
)	
  Reclassification adjustment for amounts recognized  in
    net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
1,391	 	 	 	 	 	
 1,391	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 $	 44,608	 	
Balance, December 31, 2006	 	 	 35,593,897	 	 $	 28	 	 	 52,931,594	 	 $	 529	 	 $	 635,304	 	 $	(9,560	 )	 $	 (517,659	 )	 $	 108,642	 	
 
See notes to consolidated financial statements.

F-7

TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

 	 	Year Ended December 31   	
 	 	 	2006	 	 	2005	 	 	2004	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash Flows From Operating Activities:	 	 	 	 	 	 	 	 	 	 	
  Net income	 	$	45,117	 	$	71,735	 	$	12,378	 	
  Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	
    Minority and preferred interests	 	 	50,023	 	 	38,496	 	 	47,920	 	
    Depreciation and amortization	 	 	137,957	 	 	128,377	 	 	110,180	 	
    Provision for losses on accounts receivable	 	 	5,110	 	 	2,512	 	 	4,103	 	
    Gains on sales of land	 	 	(4,084	)	 	(4,833	)	 	(6,758	)	
    Gains on dispositions of interests in centers (Note 2)	 	 	 	 	 	(52,799	)	 	(328	)	
    Other	 	 	7,037	 	 	5,224	 	 	(1,754	)	
    Increase (decrease) in cash attributable to changes in assets and liabilities:	 	 	 	 	 	 	 	 	 	 	
      Receivables, deferred charges, and other assets	 	 	(7,610	)	 	(4,349	)	 	(9,802	)	
      Accounts payable and other liabilities	 	 	(10,070	)	 	214	 	 	(20,404	)	
Net Cash Provided by Operating Activities	 	$	223,480	 	$	184,577	 	$	135,535	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash Flows From Investing Activities:	 	 	 	 	 	 	 	 	 	 	
  Additions to properties	 	$	(178,304	)	$	(160,266	)	$	(141,323	)	
  Net proceeds from dispositions of interests in centers (Note 2)	 	 	9,000	 	 	76,400	 	 	 	 	
  Proceeds from sales of land	 	 	5,423	 	 	6,082	 	 	11,539	 	
  Acquisition of interests in centers, net of cash transferred in (Note 2)	 	 	 	 	 	 	 	 	(61,774	)	
  Contributions to Unconsolidated Joint Ventures	 	 	(25,251	)	 	(30,350	)	 	(72,257	)	
  Distributions from Unconsolidated Joint Ventures in excess of income	 	 	57,583	 	 	17,073	 	 	20,180	 	
Net Cash Used In Investing Activities	 	$	(131,549	)	$	(91,061	)	$	(243,635	)	
 	 	 	 	 	 	 	 	 	 	 	
Cash Flows From Financing Activities:	 	 	 	 	 	 	 	 	 	 	
  Debt proceeds	 	$	585,584	 	$	830,818	 	$	819,527	 	
  Debt payments	 	 	(530,522	)	 	(670,709	)	 	(571,156	)	
  Debt issuance costs	 	 	(3,475	)	 	(2,756	)	 	(11,902	)	
  Redemption of preferred stock and repurchase of preferred equity in TRG	 	 	
(226,000	
)	 	
(87,000	
)	 	
(100,000	
)	
  Issuance of preferred stock and equity in TRG	 	 	113,000	 	 	87,000	 	 	130,000	 	
  Equity issuance costs	 	 	(607	)	 	(3,158	)	 	(4,054	)	
  Issuance of common stock and/or partnership units in connection with Incentive Option Plan
    (Notes 15 and 17)	 	 	 	 	 	
6,701	 	 	
10,372	 	
  Contribution from minority interest (Note 2)	 	 	9,000	 	 	 	 	 	 	 	
  Repurchase of common stock (Note 16)	 	 	 	 	 	 	 	 	(50,178	)	
  Distributions to minority and preferred interests	 	 	(95,359	)	 	(38,329	)	 	(45,213	)	
  Cash dividends to preferred shareowners	 	 	(19,071	)	 	(24,507	)	 	(17,444	)	
  Cash dividends to common shareowners	 	 	(64,130	)	 	(57,080	)	 	(53,174	)	
Net Cash Provided By (Used In) Financing Activities	 	$	(231,580	)	$	40,980	 	$	106,778	 	
 	 	 	 	 	 	 	 	 	 	 	
Net Increase (Decrease) In Cash and Cash Equivalents	 	$	(139,649	)	$	134,496	 	$	(1,322	)	
 	 	 	 	 	 	 	 	 	 	 	
Cash and Cash Equivalents at Beginning of Year	 	 	163,577	 	 	29,081	 	 	30,403	 	
 	 	 	 	 	 	 	 	 	 	 	
Effect of consolidating Cherry Creek Shopping Center (Note 1)
  (Cherry Creek Shopping Center's cash balance at beginning of year)	 	 	
2,354	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash and Cash Equivalents at End of Year	 	$	26,282	 	$	163,577	 	$	29,081	 	

See notes to consolidated financial statements.

F-8

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Years Ended December 31, 2006

Note 1 - Summary of Significant Accounting Policies

Organization and Basis of Presentation

General

Taubman Centers, Inc. (the Company or TCO), a real estate investment trust, or REIT, is the managing general partner of The Taubman Realty Group Limited Partnership (the Operating Partnership or TRG). The Operating Partnership is an operating subsidiary that engages in the ownership, management, leasing, acquisition, development, and expansion of regional and super-regional retail shopping centers and interests therein. The Operating Partnership's owned portfolio as of December 31, 2006 included 22 urban and suburban shopping centers in ten states. One new center is under construction in Michigan.

In 2005, the Company formed Taubman Asia, which is the platform for its expansion into the Asia-Pacific region. Taubman Asia is headquartered in Hong Kong.

Consolidation

The consolidated financial statements of the Company include all accounts of the Company, the Operating Partnership, and its consolidated subsidiaries, including The Taubman Company LLC (the Manager). The Company consolidates the accounts of the owner of The Mall at Partridge Creek (Partridge Creek) (Note 2), which qualifies as a variable interest entity under FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (FIN 46R) for which the Operating Partnership is considered to be the primary beneficiary. All intercompany transactions have been eliminated.

Investments in entities not controlled but over which the Company may exercise significant influence (Unconsolidated Joint Ventures) are accounted for under the equity method. The Company has evaluated its investments in the Unconsolidated Joint Ventures and has concluded that the ventures are not variable interest entities as defined in FIN 46R. Accordingly, the Company accounts for its interests in these ventures under the guidance in Statement of Position 78-9 "Accounting for Investments in Real Estate Ventures," (SOP 78-9), as amended by FASB Staff Position 78-9-1, and Emerging Issues Task Force Issue No. 04-5 "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" (EITF 04-5). The Company’s partners or other owners in these Unconsolidated Joint Ventures have substantive participating rights, as contemplated by paragraphs 16 through 18 of EITF 04-5, including approval rights over annual operating budgets, capital spending, financing, admission of new partners/members, or sale of the properties and the Company has concluded that the equity method of accounting is appropriate for these interests. Specifically, the Company’s 79% investment in Westfarms is through a general partnership in which the other general partners have approval rights over annual operating budgets, capital spending, refinancing, or sale of the property.

With the issuance of EITF 04-5 and the amendment of SOP 78-9, the Company began consolidating, as of January 1, 2006, the entity that owns Cherry Creek Shopping Center (Cherry Creek), a 50% owned joint venture, pursuant to the transition methodology provided in EITF 04-5. The impact to the balance sheet was an increase in assets of approximately $136 million and liabilities of approximately $199 million, and a $63 million reduction of beginning equity representing the cumulative effects of changes in accounting principles related to Cherry Creek (see also “Adoption of Staff Accounting Bulletin No. 108”). The reduction in beginning equity was the result of the Company's venture partner's $52 million deficit capital account as of December 31, 2005 and the adoption of Staff Accounting Bulletin No. 108 (SAB 108), which increased the venture partner’s deficit capital account to $60 million. The venture partner’s deficit account was recorded at zero in the consolidated balance sheet as of January 1, 2006. The Company’s $3.5 million cumulative impact of adopting SAB 108 that is attributable to Cherry Creek is included in the total cumulative effect of adopting SAB 108 in the Company’s Consolidated Statement of Shareholders’ Equity.

F-9

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Operating Partnership

At December 31, 2006, the Operating Partnership’s equity included three classes of preferred equity (Series F, G, and H) and the net equity of the partnership unitholders. Net income and distributions of the Operating Partnership are allocable first to the preferred equity interests, and the remaining amounts to the general and limited partners in the Operating Partnership in accordance with their percentage ownership. The Series G and Series H Preferred Equity are owned by the Company and are eliminated in consolidation. The Series F Preferred Equity is owned by an institutional investor. The Company's Series B Preferred Stock is currently held by partners in TRG other than the Company. The Series B Preferred Stock entitles its holders to one vote per share on all matters submitted to the Company’s shareholders and votes together with the common stock on all matters as a single class.

Because the net equity balance (accumulated distributions from operations in excess of net income) of the outside partners in certain of the Company’s consolidated joint ventures is less than zero, $(313) million as of December 31, 2006, the interest of these outside partners is presented as a zero balance in the consolidated balance sheet as of December 31, 2006 and December 31, 2005. The income allocated to these noncontrolling partners is equal to their share of operating distributions as long as the net equity of the partners is less than zero.

The Company accounts for distributions to minority partners that result from financing transactions as a debit balance minority interest upon determination that (1) the distribution was the result of appreciation in the fair value of the property above the book value, (2) the financing was provided at a loan to value ratio commensurate with non-recourse real estate lending, and (3) the excess of the property value over the financing provides support for the eventual recovery of the debit balance minority interest upon sale or disposal of the property. Debit balance minority interests are considered as part of the carrying value of a property, should events or circumstances indicate that the carrying value may not be recoverable.

In May 2006, Cherry Creek refinanced its debt and distributed the excess proceeds to the partners. The joint venture partner's $45 million share of the distributed excess proceeds is classified as minority interest and included in Deferred Charges and Other Assets in the Company's consolidated balance sheet.

Revenue Recognition

Shopping center space is generally leased to tenants under short and intermediate term leases which are accounted for as operating leases. Minimum rents are recognized on the straight-line method. Percentage rent is accrued when lessees' specified sales targets have been met. Most expense recoveries, which include an administrative fee, are recognized as revenue in the period applicable costs are chargeable to tenants. Management, leasing, and development revenue is recognized as services are rendered, when fees due are determinable, and collectibility is reasonably assured. Fees for management, leasing, and development services are established under contracts and are generally based on negotiated rates, percentages of cash receipts, and/or actual costs incurred. Profits on real estate sales are recognized whenever (1) a sale is consummated, (2) the buyer has demonstrated an adequate commitment to pay for the property, (3) the Company’s receivable is not subject to future subordination, and (4) the Company has transferred to the buyer the risks and rewards of ownership. Other revenues, including fees paid by tenants to terminate their leases, are recognized when fees due are determinable, no further actions or services are required to be performed by the Company, and collectibility is reasonably assured. The Company records a provision for losses on accounts receivable to reduce them to the amount estimated to be collectible. Taxes assessed by government authorities on revenue-producing transactions, such as sales, use, and value-added taxes are primarily accounted for on a net basis on the Company’s income statement.

Depreciation and Amortization

Buildings, improvements and equipment are depreciated on straight-line or double-declining balance bases over the estimated useful lives of the assets, which generally range from 3 to 50 years. Capital expenditures that are recoverable from tenants are depreciated over the estimated recovery period. Intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. Tenant allowances and deferred leasing costs are amortized on a straight-line basis over the lives of the related leases. In the event of early termination of such leases, the unrecoverable net book values of the assets are recognized as depreciation and amortization expense in the period of termination.

F-10

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Capitalization

Direct and indirect costs that are clearly related to the acquisition, development, construction and improvement of properties are capitalized under guidelines of SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.” Compensation costs are allocated based on actual time spent on a project. Costs incurred on real estate for ground leases, property taxes and insurance are capitalized during periods in which activities necessary to get the property ready for its intended use are in progress. Interest costs determined under guidelines of SFAS No. 34, “Capitalization of Interest Cost” are capitalized during periods in which activities necessary to get the property ready for its intended use are in progress.

All properties, including those under construction or development and/or owned by Unconsolidated Joint Ventures, are reviewed for impairment on an individual basis whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Impairment of a shopping center owned by consolidated entities is recognized when the sum of expected cash flows (undiscounted and without interest charges) is less than the carrying value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint Venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value, including the results of discounted cash flow and other valuation techniques. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income.

In leasing a shopping center space, the Company may provide funding to the lessee through a tenant allowance. In accounting for a tenant allowance, the Company determines whether the allowance represents funding for the construction of leasehold improvements and evaluates the ownership, for accounting purposes, of such improvements. If the Company is considered the owner of the leasehold improvements for accounting purposes, the Company capitalizes the amount of the tenant allowance and depreciates it over the shorter of the useful life of the leasehold improvements or the lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue. Factors considered during this evaluation usually include (1) who holds legal title to the improvements, (2) evidentiary requirements concerning the spending of the tenant allowance, and (3) other controlling rights provided by the lease agreement (e.g. unilateral control of the tenant space during the build-out process). Determination of the accounting for a tenant allowance is made on a case-by-case basis, considering the facts and circumstances of the individual tenant lease.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity of 90 days or less at the date of purchase.

Acquisition of Interests in Centers

The cost of acquiring an ownership interest or an additional ownership interest in a center is allocated to the tangible assets acquired (such as land and building) and to any identifiable intangible assets based on their estimated fair values at the date of acquisition. The fair value of the property is determined on an “as-if-vacant” basis. Management considers various factors in estimating the "as-if-vacant" value including an estimated lease up period, lost rents and carrying costs. The identifiable intangible assets would include the estimated value of “in place” leases, above and below market “in place” leases, and tenant relationships. The portion of the purchase price that management determines should be allocated to identifiable intangible assets is amortized over the estimated life of the associated intangible asset (for instance, the remaining life of the associated tenant lease).

Deferred Charges and Other Assets

Direct financing costs are deferred and amortized on a straight-line basis, which approximates the effective interest method, over the terms of the related agreements as a component of interest expense. Direct costs related to successful leasing activities are capitalized and amortized on a straight-line basis over the lives of the related leases. All other deferred charges are amortized on a straight-line basis over the terms of the agreements to which they relate.

F-11

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Share-Based Compensation Plans

On January 1, 2006, the Company adopted Statement No. 123 (Revised) “Share-Based Payment.” As part of its adoption of the Statement with respect to any grant for which vesting accelerates upon retirement, the Company has begun recognizing compensation cost from the date of the grant through the date the employee first becomes eligible to retire, if this period is shorter than the stated vesting period of the grant. In prior periods, the Company recognized compensation cost using the stated vesting period, regardless of retirement eligibility. As the Company had previously applied the fair value recognition provisions of Statement No. 123, the adoption of Statement No. 123 (Revised) did not have a material effect on the Company's results of operations.

Interest Rate Hedging Agreements

All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If a derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (OCI) and are recognized in the income statement when the hedged item affects income. Ineffective portions of changes in the fair value of a cash flow hedge are recognized in the Company’s income as interest expense.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items.

Income Taxes

The Company operates in such a manner as to qualify as a REIT under the provisions of the Internal Revenue Code; therefore, applicable taxable income is included in the taxable income of its shareowners, to the extent distributed by the Company. To qualify as a REIT, the Company must distribute at least 90% of its REIT taxable income prior to net capital gains to its shareowners and meet certain other requirements. Additionally, no provision for income taxes for consolidated partnerships has been made, as such taxes are the responsibility of the individual partners.

In connection with the Tax Relief Extension Act of 1999, the Company made Taxable REIT Subsidiary elections for all of its corporate subsidiaries pursuant to section 856(I) of the Internal Revenue Code. The Company’s Taxable REIT Subsidiaries are subject to corporate level income taxes which are provided for in the Company’s financial statements.

Deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence, including expected taxable earnings and potential tax planning strategies. The Company’s temporary differences primarily relate to deferred compensation and depreciation.

Finite Life Entity

SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. At December 31, 2006, the Company held controlling majority interests in consolidated entities with specified termination dates in 2080 and 2083. The minority owners’ interest in these entities are to be settled upon termination by distribution or transfer of either cash or specific assets of the underlying entity. The estimated fair value of these minority interests were approximately $186.9 million at December 31, 2006, compared to a book value of $(45.5) million, which is classified as Deferred Charges and Other Assets in the Company’s consolidated balance sheet.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-12

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of financial instruments:

The carrying value of cash and cash equivalents, accounts and notes receivable, and accounts payable and accrued liabilities approximates fair value due to the short maturity of these instruments.

The carrying value of variable-rate mortgages and other loans represents their fair values. The fair value of fixed rate mortgage notes and other notes payable is estimated based on quoted market prices, if available. If no quoted market prices are available, the fair value of fixed-rate mortgages and other notes payable are estimated using cash flows discounted at current market rates. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The fair value of interest rate hedging instruments is the amount that the Company would receive or pay to terminate the agreement at the reporting date.

Segments and Related Disclosures

The Company has one reportable operating segment: it owns, develops, and manages regional shopping centers. The Company has aggregated its shopping centers into this one reportable segment, as the shopping centers share similar economic characteristics and other similarities. The shopping centers are located in major metropolitan areas, have similar tenants (most of which are national chains), are operated using consistent business strategies, and are expected to exhibit similar long-term financial performance. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is often used by the Company's chief operating decision makers in assessing segment performance. EBITDA is believed to be a useful indicator of operating performance as it is customary in the real estate and shopping center business to evaluate the performance of properties on a basis unaffected by capital structure.

No single retail company represents 10% or more of the Company's revenues. Although the Company operates a subsidiary headquartered in Hong Kong, there are not yet any material revenues from customers attributable to a country other than the United States of America.

Adoption of Staff Accounting Bulletin No. 108

In September 2006, the Securities and Exchange Commission published SAB No. 108 “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements.” The interpretations in SAB 108 express the SEC’s staff’s views regarding the process of quantifying financial statement misstatements. The staff’s interpretations resulted from their awareness of a diversity in practice as to how the effect of prior year errors were considered in relation to current year financial statements. Through SAB 108, the staff communicated its belief that allowing prior year errors to remain unadjusted on the balance sheet is not in the best interest of the users of financial statements. SAB 108 became effective for the Company for the year ended December 31, 2006.

In adopting SAB 108, the Company changed its methods of evaluating financial statement misstatements from a “rollover” (income statement-oriented) approach to SAB 108’s “dual-method” (both an income statement and balance sheet-oriented) approach. In doing so, the Company identified three misstatements previously considered immaterial to all previous periods under the rollover method but material when evaluated together under the dual-method, as described below. These misstatements were corrected upon adoption of SAB 108.

Accounting for Cherry Creek Ground Rent Prior to 1999

Prior to 1999, Cherry Creek, a venture previously accounted for under the equity method, recognized ground rentals under its 99 year ground lease on a cash basis instead of the straightline method required by Statement of Financial Accounting Standards No. 13, “Accounting for Leases.” This error resulted in the Company overstating its cumulative equity in the net income of Cherry Creek by a total of $3.5 million from the Company’s 1992 acquisition of an interest in the Operating Partnership through December 31, 2005. The maximum misstatement of the Company’s equity in the net income of Cherry Creek in any individual year in this period under the rollover method was $0.3 million.

F-13

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Company began consolidating Cherry Creek on January 1, 2006 as a result of adopting EITF 04-5 (Note 1). As a result of the correction of the above error, the cumulative effect of a change in accounting principle upon adoption of EITF 04-5, assets, and liabilities recognized by the Company upon the consolidation of Cherry Creek were increased by $7.9 million, $8.3 million and $19.7 million, respectively. Prior to 2006, the Company accounted for its investment in Cherry Creek under the equity method.

Recognition of Payroll Costs

The Company previously recognized its payroll costs in a manner that corresponded to its biweekly pay periods, which do not necessarily end on the last day of the calendar year. Differences caused by not strictly recognizing payroll on a calendar year basis, while previously adjusted on a periodic basis, have resulted in overstatements of net income by a total of $1.0 million over the last decade, with the maximum misstatement in any individual year computed under the rollover method being $0.1 million.

Arizona Mills

In 2006, The Mills Corporation (Mills), which manages the 50% unconsolidated joint venture, Arizona Mills, advised the Company that Mills had identified errors in prior year financial statements, primarily relating to the timing of writeoffs of tenant allowances, that relate to years prior to 2006. The Company has not yet received audited financial statements for any period after 2004 from Mills and amounts identified as errors may change as a result of the eventual completion of the Arizona Mills 2005 audit. However, based on the information received from Mills, the Company has determined that the cumulative impact of its share of prior years’ errors identified by Mills to date is an overstatement of the Company's equity by $1.3 million.

Cumulative Effect of Adopting SAB 108

As a result of applying the guidance in SAB 108, during the year ended December 31, 2006, the Company recorded a $5.9 million reduction to its shareholder’s equity account (dividends in excess of net income) in its opening balance sheet to correct for the effect of the errors associated with the accounting for Cherry Creek’s ground rent prior to 1999, the recognition of payroll costs, and its share of Arizona Mills’s errors identified by Mills, described above.

Modified Useful Lives and Income Statement Reclassifications

During 2006, the Company modified its estimated useful lives of capital assets that are recoverable from its tenants. This change in estimate was a result of the Company's initiative of offering its tenants the option to pay for common area maintenance costs through fixed payments versus the historical practice of a tenant paying an amount equal to its proportionate share of common area costs. The change in useful lives better aligns the depreciation of common area assets with the Company's lease portfolio. This change in estimate did not have a material effect on the current results of operations but could be material in future periods. Beginning in 2006, depreciation on these assets, which was previously included in recoverable expenses, is included in depreciation and amortization.

Also during 2006, the Company began recognizing revenue for marketing and promotion services at the gross amount billed to tenants, rather than a net amount retained (that is, the amount billed to the tenants less the related costs incurred). Revenues are now included in recoveries from tenants and the related expenses in other operating expense. This presentation change was made as a result of the Company’s recent offering to tenants of an option to pay fixed amounts for marketing and promotion of the shopping centers. In evaluating the accounting for marketing and promotion services, the Company considered that there may no longer be a direct relationship between tenant billings and the marketing and promotion costs incurred, as well as the fact that the Company is the primary obligor on the costs incurred. Historically, revenues from marketing and promotion services have been equal to costs incurred.

In addition, the Company now classifies gains on peripheral land sales and interest income separately in its income statement.

Prior year revenues and expenses in the consolidated financial statements and in the combined financial information in Note 8 have been reclassified as described above to be consistent with the 2006 presentation.

F-14

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Other

Dollar amounts presented in tables within the notes to the consolidated financial statements are stated in thousands, except share data or as otherwise noted. Certain reclassifications have been made to 2005 and 2004 amounts to conform to current year classifications.

Note 2 - New Center Development, Disposition, and Acquisitions

New Center Development

Northlake Mall

Northlake Mall (Northlake), a wholly-owned regional center, opened on September 15, 2005 in Charlotte, North Carolina.

The Mall at Partridge Creek

Partridge Creek, a 640,000 square foot center, is under construction in Clinton Township, Michigan. The center will be anchored by Nordstrom, Parisian, and MJR Theatres, and is scheduled to open in October 2007, with Nordstrom opening in spring 2008. In May 2006, the Operating Partnership engaged the services of a third party investor to acquire certain property associated with the project, in order to facilitate a Section 1031 like-kind exchange to provide flexibility for disposing of assets in the future. The third party investor became the owner of the project and leases the land from a subsidiary of the Operating Partnership. In turn, the owner leases the project back to the Operating Partnership.

Funding for the project is provided by the following sources. The Operating Partnership provides approximately 45% of the project funding under a junior subordinated financing. The owner has provided $9 million in equity. Funding for the remaining project costs are being provided by the owner’s third party construction loan (Note 11). The owner's equity contribution, representing minority interest, is included within Accounts Payable and Accrued Liabilities in the Company's consolidated balance sheet.

The Operating Partnership is the construction manager for the project and has an option to purchase the property and assume the ground lease from the owner during the 30-month exchange period ending December 2008. The option, if exercised, will provide the owner a 12% cumulative return on its equity. In the event the Operating Partnership does not exercise its right to purchase the property from the owner, the owner will have the right to sell all of its interest in the property, provided that the purchaser shall assume all of the obligations and be assigned all of the owner's rights under the ground lease, the operating lease, and any remaining obligations under the loans.

The Operating Partnership has guaranteed the lease payments on the operating lease (excluding annual supplemental rent equal to 1.67% of the owner's outstanding equity balance, commencing after the exchange period) as well as completion of the project. The lease payments are structured to cover debt service, ground rent payments, and other expenses of the lessor. The Company consolidates the accounts of the owner. The junior loan and other intercompany transactions are eliminated in consolidation.

The Pier Shops at Caesars

The Pier Shops at Caesars (The Pier) was developed by Gordon Group Holdings LLC (Gordon) and began opening in phases in June 2006. In January 2005, the Company contributed $4 million as a first payment to acquire a 30% interest in the center. The Company is in final negotiations to increase its ownership of The Pier from 30% to 50%. The Company’s original agreement with Gordon specified that the Company would purchase the 30% interest at a 7% capitalization rate based on The Pier’s 2007 net operating income (NOI). The Company has now negotiated that the entire 50% interest will be purchased at a 7% capitalization rate based on 2008 NOI. The Company expects to close on its agreement with Gordon in the first quarter of 2007 when the Company also expects to close on a financing for The Pier, which will pay off the $86 million balance on the existing floating rate loan. The Company assumed full management and leasing of The Pier in January 2007. The Pier is accounted for under the equity method and the Company’s $4 million investment represented an effective 6% interest in 2006 based on relative equity contributions.

F-15

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Disposition

In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland for $177.4 million. The Company's $85.4 million share of proceeds was received in cash with the exception of a $9 million 5.40% note receivable, which was repaid in the first quarter of 2006. The cash proceeds from the sale were used in January 2006 to acquire the land for Partridge Creek, as part of a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code and the regulations thereunder ("Section 1031 like-kind exchange"). Additional proceeds were used in February 2006 to purchase the land and real property improvements of The Mall at Oyster Bay (Oyster Bay) development, also as part of a Section 1031 like-kind exchange, and to pay off the outstanding balance on the loan on the property (Note 11). In connection with the sale, the Company entered into a tax indemnification agreement with its joint venture partner (Note 17).

Acquisitions

In July 2004, the Company acquired an additional 23.6% interest in International Plaza for $60.2 million in cash, increasing its ownership in the center to 50.1%. As a result of the acquisition, the Company has a controlling interest in the center and began consolidating its results as of the purchase date. Prior to the acquisition date, the Company accounted for International Plaza under the equity method. As of December 31, 2006, the Operating Partnership has a preferred investment in International Plaza of $22 million, on which an annual preferential return of 8.25% will accrue. In addition to the preferred return on its investment, the Operating Partnership is entitled to receive the balance of its preferred investment before any available cash will be utilized for distribution to the non-preferred partner.

In January 2004, the Company purchased the additional 30% ownership of Beverly Center (Beverly). Consideration of approximately $11 million for this interest consisted of $3.3 million in cash and 276,724 of newly issued partnership units valued at $27.50 per unit. The price of the acquisition was determined pursuant to a 1988 option agreement. The Company had carried the $11 million net exercise price as a liability on its balance sheet. The Company already recognized 100% of the financial results of the center in its financial statements.

Note 3 - Unsolicited Tender Offer

In the fall of 2002, the Company received an unsolicited tender offer seeking to acquire control of the Company. The Company’s Board of Directors rejected the proposal and recommended that the Company’s shareholders not tender their shares pursuant to the tender offer. In October 2003, the tender offer was withdrawn, and the related litigation ended. During 2004, the Company recovered through its insurance $1.0 million relating to the unsolicited tender offer and related litigation.

Note 4 - Management, Leasing, and Development Services

The majority of the Company's third party management, leasing, and development revenue in 2006 and 2005 was derived from two agreements. The first, a management agreement for a shopping center owned by a third party, is renewable year-to-year, and is cancelable by the owner with 90 days written notice. The second is an agreement for retail leasing and development and design advisory services for a mixed-use urban development project scheduled to open in 2009 on the strip in Las Vegas, Nevada. The term of this fixed-fee contract is approximately 25 years, effective June 2005, and is generally cancelable for cause and by the project owner upon payment to the Company of a cancellation fee. In 2007, the Company entered into additional agreements (Note 22) .
 
In October 2004, the Mills Corporation finalized its acquisition of 50% interests in nine of General Motors Pension Trusts’ (GMPT) shopping centers, completing a recapitalization of GMPT’s mall portfolio. The Company ceased management of these centers on November 1, 2004, subject to an agreement with GMPT. The Company recognized a restructuring charge of $5.7 million during the fourth quarter of 2004 relating to the termination of these management contracts. The restructuring charge is classified in the line item Restructuring loss in the income statements. Substantially all of this charge represented employee severance payments and benefits and were paid as of December 31, 2005.

F-16

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 5 - Income Taxes

During the years ended December 31, 2006, 2005, and 2004, the Company's federal income tax expense was zero as a result of net operating losses incurred by the Company’s Taxable REIT Subsidiaries, except as follows related to the sale of Woodland. During 2005, the Company recognized deferred federal income tax expense of $0.5 million in connection with the sale of Woodland. The Company has a net operating loss carryforward from its Taxable REIT Subsidiaries of $0.8 million from 2002 that expires in 2022, and a net operating loss carryforward of $4.6 million ($3.0 million from 2004 that will expire in 2024 and $1.6 million from 2005 that will expire in 2025). The net operating loss carryforward reflects the amount available after utilization of losses to offset the Company’s Taxable REIT Subsidiaries’ federal taxable income of $2.9 million in 2005 and estimated federal taxable income of $3.0 million in 2006. As of December 31, 2006 and 2005 the Company had net deferred tax assets of $3.3 million and $3.2 million, after valuation allowances of $5.6 million and $9.6 million, respectively. The $4.0 million decrease in the valuation allowance for the year ended December 31, 2006 related to tax deductions realized in the current year for the payout of certain deferred compensation that was previously reserved with a valuation allowance and to a reversal of deferred tax assets that have now been determined will not be utilized or recognized by the Company’s Taxable REIT Subsidiaries in the future. The ultimate realization of the net deferred tax asset is dependent upon the Manager’s profitability, the timing and amounts of gains on land sales, the profitability of the Company’s Asian operations, and other factors affecting the results of operations of the Taxable REIT Subsidiaries. During 2006, the Manager was recapitalized with the result that a larger share of its taxable income will be allocated to the Operating Partnership instead of the Company’s Taxable REIT Subsidiaries.

Dividends declared on the Company’s common and preferred stock and their tax status are presented in the following tables. The tax status of the Company’s dividends in 2006, 2005, and 2004 may not be indicative of future periods. The portion of dividends paid in 2005 shown below as capital gains and unrecaptured Section 1250 capital gains are designated as capital gain dividends for tax purposes.

 
Year	 	 	Dividends
per common
share declared	 	 	
Return
of capital	 	 	
Ordinary
income	 	 	15% Rate
long term
capital gain	 	 	
Unrecaptured Section
1250 capital gains	 	
2006	 	$	1.290	 	$	0.0687	 	$	1.2006	 	$	0.0207	 	 	 	 	
2005	 	 	1.160	 	 	0.3179	 	 	0.7282	 	 	0.0404	 	$	0.0735	 	
2004	 	 	1.095	 	 	0.6932	 	 	0.3835	 	 	0.0183	 	 	 	 	

 
Year	 	 	Dividends per
Series A Preferred
share declared	 	 	
Ordinary
income	 	 	15% Rate
long term
capital gain	 	 	
Unrecaptured Section
1250 capital gains	 	
2006	 	$	0.790	 	$	0.7770	 	$	0.0130	 	 	 	 	
2005	 	 	2.075	 	 	1.8712	 	 	0.0723	 	$	0.1315	 	
2004	 	 	2.075	 	 	2.0403	 	 	0.0347	 	 	 	 	

 
Year	 	 	Dividends per
Series G Preferred
share declared	 	 	
Ordinary
income	 	 	15% Rate
long term
capital gain	 	 	
Unrecaptured Section
1250 capital gains	 	
2006	 	$	2.000	 	$	1.9679	 	$	0.0321	 	 	 	 	
2005	 	 	2.000	 	 	1.8036	 	 	0.0697	 	$	0.1267	 	
2004	 	 	0.211	 	 	0.2076	 	 	0.0035	 	 	 	 	

 
Year	 	 	Dividends per
Series H Preferred
share declared	 	 	
Ordinary
income	 	 	15% Rate
long term
capital gain	 	 	
Unrecaptured Section
1250 capital gains	 	
2006	 	$	1.906	 	$	1.8757	 	$	0.0303	 	 	 	 	
2005	 	 	0.953	 	 	0.8595	 	 	0.0332	 	$	0.0604	 	

The Company redeemed the remaining 4,520,000 shares of its outstanding Series A Preferred Shares in May 2006 for $25 per share and paid all holders of the Series A Preferred Shares $0.27 per share in accrued dividends, which are reported separately above as a 2006 dividend payment.

F-17

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 6 - Investment in the Operating Partnership

The partnership equity of the Operating Partnership and the Company's ownership therein are shown below:

 
Year	TRG units
outstanding at
December 31	TRG units
owned by TCO at
December 31   (1)	TCO's % interest
in TRG at
December 31	 
TCO's average
interest in TRG	
2006	81,078,700	52,931,594	   65%	   65%	
2005	81,074,633	51,866,184	64	62	
2004	80,514,605	48,745,625	61	61	

(1)  	There is a one-for-one relationship between TRG units owned by TCO and TCO common shares outstanding; amounts in this column are equal to TCO’s common shares outstanding as of the specified dates.	

Net income and distributions of the Operating Partnership are allocable first to the preferred equity interests (Note 16), and the remaining amounts to the general and limited Operating Partnership partners in accordance with their percentage ownership.

Note 7 - Properties

Properties at December 31, 2006 and December 31, 2005 are summarized as follows:

 	 	 	2006	 	 	2005	 	
Land	 	 $	 252,716	 	 $	 248,582	 	
Buildings, improvements, and equipment	 	 	 2,915,504	 	 	 2,709,215	 	
Construction in process	 	 	 100,627	 	 	 19,855	 	
Development pre-construction costs	 	 	 129,275	 	 	 103,672	 	
 	 	 $	 3,398,122	 	 $	 3,081,324	 	
Accumulated depreciation and amortization	 	 	 (821,384	 )	 	 (651,665	 )	
 	 	 $	 2,576,738	 	 $	 2,429,659	 	

Buildings and improvements under capital leases were $7.5 million and $13.0 million at December 31, 2006 and 2005, respectively. Amortization of assets under capital leases are included within depreciation expense.

Depreciation expense for 2006, 2005, and 2004 was $128.5 million, $120.7 million, and $102.3 million, respectively.

The charge to operations in 2006, 2005, and 2004 for domestic and non-U.S. pre-development activities was $10.1 million, $8.5 million, and $4.0 million, respectively.

In October 2006, the Company announced that it is seeking a final decision in the Supreme Court of the State of New York (Suffolk County) on the Company’s land use plan to build a mall in Syosset, Long Island, New York. The Company believes it will be successful in this litigation and will ultimately build the mall, which will be anchored by Neiman Marcus, Nordstrom, and Barneys New York. However, if the Company is ultimately unsuccessful it is anticipated that the recovery on this asset would be significantly less than its current investment. The Company’s $128.2 million investment in Oyster Bay as of December 31, 2006 is included in development pre-construction costs.

One shopping center pays annual special assessment levies of a Community Development District (CDD), which provided certain infrastructure assets and improvements. As the amount and period of the special assessments were determinable, the Company capitalized the infrastructure assets and improvements and recognized an obligation for the future special assessments to be levied. At December 31, 2006, the book value of the infrastructure assets and improvements, net of depreciation, was $52.8 million. The related obligation is classified as an accrued liability and had a balance of $64.8 million at December 31, 2006. The fair value of this obligation, derived from quoted market prices, was $70.7 million at December 31, 2006.

F-18

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 8 - Investments in Unconsolidated Joint Ventures

General Information

The Company has investments in joint ventures that own shopping centers. The Operating Partnership is the managing general partner or managing member of these Unconsolidated Joint Ventures, except for the ventures that own Arizona Mills, The Mall at Millenia, and Waterside Shops at Pelican Bay (Waterside). The Company began providing certain management services upon the opening of The Pier in June 2006 and assumed full management and leasing responsibility in January 2007 (Note 22).

Shopping Center	Ownership as of
December 31, 2006 and 2005	
Arizona Mills	   50%	
Fair Oaks Mall	50	
The Mall at Millenia	50	
The Pier Shops at Caesars	(Note 2)	
Stamford Town Center	50	
Sunvalley	50	
Waterside Shops at Pelican Bay	25	
Westfarms	79	

In October 2006, Taubman Land Associates LLC, a 50% unconsolidated joint venture owned by the Company and an affiliate of the Taubman family, acquired for $42.5 million the land on which Sunvalley is situated. Sunvalley is owned by Sunvalley Associates, a 50% joint venture with a Taubman family affiliate.

The Company's carrying value of its Investment in Unconsolidated Joint Ventures differs from its share of the partnership or members equity reported in the combined balance sheet of the Unconsolidated Joint Ventures due to (i) the Company's cost of its investment in excess of the historical net book values of the Unconsolidated Joint Ventures and (ii) the Operating Partnership’s adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the Unconsolidated Joint Ventures. The Company's additional basis allocated to depreciable assets is recognized on a straight-line basis over 40 years. The Operating Partnership’s differences in bases are amortized over the useful lives of the related assets.

In its consolidated balance sheet, the Company separately reports its investment in joint ventures for which accumulated distributions have exceeded investments in and net income of the joint ventures. The net equity of certain joint ventures is less than zero because distributions are usually greater than net income, as net income includes non-cash charges for depreciation and amortization.

Combined Financial Information

Combined balance sheet and results of operations information is presented in the following table for the Unconsolidated Joint Ventures, followed by the Operating Partnership's beneficial interest in the combined information. In 2006, amounts related to The Pier were included in the combined information of the Unconsolidated Joint Ventures. Beneficial interest is calculated based on the Operating Partnership's ownership interest in each of the Unconsolidated Joint Ventures. The accounts of Woodland, formerly a 50% Unconsolidated Joint Venture sold in 2005, are included in these results through the date of the sale (Note 2). The Company's equity in the gain on the sale of Woodland is separately presented on the Company's income statement, and is therefore excluded from the equity in income of Unconsolidated Joint Ventures line item. The Company began consolidating the entity that owns Cherry Creek in 2006 (Note 1). The accounts of Cherry Creek, previously accounted for under the equity method, are included in these results through December 31, 2005.

F-19

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 	 	December 31  	
 	 	 	2006	 	 	2005	 	
Assets:	 	 	 	 	 	 	 	
Properties	 	 $ 	 1,157,872 	 	 $	 1,076,743	 	
Accumulated depreciation and amortization	 	 	 (320,256	 )	 	 (363,394	 )	
 	 	 $ 	 837,616 	 	 $	 713,349	 	
Cash and cash equivalents	 	 	 35,504	 	 	 33,498	 	
Accounts and notes receivable, less allowance for doubtful accounts of $2,032 and $1,822 in 2006 and 2005	 	 	
 26,769	 	 	
 23,189	 	
Deferred charges and other assets	 	 	 23,417	 	 	 24,458	 	
 	 	 $	 923,306	 	 $	 794,494	 	
 	 	 	 	 	 	 	 	
Liabilities and accumulated deficiency in assets:	 	 	 	 	 	 	 	
Notes payable	 	 $	 1,097,347	 	 $	 999,545	 	
Accounts payable and other liabilities	 	 	 84,177	 	 	 59,322	 	
TRG's accumulated deficiency in assets	 	 	 (163,778	 )	 	 (172,554	 )	
Unconsolidated Joint Venture Partners' accumulated deficiency in assets	 	 	
 (94,440	
 )	 	
 (91,819	
 )	
 	 	 $ 	 923,306 	 	 $	 794,494	 	
 	 	 	 	 	 	 	 	
TRG's accumulated deficiency in assets (above)	 	 $	 (163,778	 )	 $	 (172,554	 )	
TRG's investment in The Pier Shops at Caesars	 	 	 	 	 	 4,663	 	
TRG basis adjustments, including elimination of intercompany profit	 	 	 77,797	 	 	 80,424	 	
TCO's additional basis	 	 	 70,530 	 	 	 92,556	 	
Net Investment in Unconsolidated Joint Ventures	 	 $	 (15,451	 )	 $	 5,089	 	
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures	 	 	
 101,944	 	 	
 101,028	 	
Investment in Unconsolidated Joint Ventures	 	 $	 86,493	 	 $	 106,117	 	

 	 	Year Ended December 31  	
 	 	 	2006	 	 	2005	 	 	2004	 	
Revenues	 	 $	 253,418	 	 $	 306,239	 	 $	 321,355	 	
Maintenance, taxes, utilities, and other operating expenses	 	 $	 93,452	 	 $	 105,956	 	 $	 113,035	 	
Interest expense	 	 	 57,563	 	 	 67,590	 	 	 74,033	 	
Depreciation and amortization	 	 	 43,124	 	 	 51,939	 	 	 57,385	 	
Total operating costs	 	 $	 194,139	 	 $	 225,485	 	 $	 244,453	 	
Gain on disposition of interest in center	 	 	 	 	 $	 145,881	 	 	 	 	
Net income	 	 $	 59,279	 	 $	 226,635	 	 $	 76,902	 	
 	 	 	 	 	 	 	 	 	 	 	
Net income allocable to TRG	 	 $	 34,101	 	 $	 114,680	 	 $	 39,147	 	
Realized intercompany profit, net of depreciation on TRG’s basis adjustments	 	 	
 1,387	 	 	
 4,370	 	 	
 3,963	 	
TCO's additional basis in Woodland	 	 	 	 	 	 (20,764	 )	 	 	 	
Depreciation of TCO's additional basis	 	 	 (1,944	 )	 	 (3,037	 )	 	 (3,040	 )	
Equity in income of Unconsolidated Joint Ventures	 	 $	 33,544	 	 $	 95,249	 	 $	 40,070	 	
TRG's share of gain on disposition of interest in center	 	 	 	 	 	 (52,799	 )	 	 	 	
Equity in income of Unconsolidated Joint Venture excluding gain on disposition of interest in center	 	 	 	 	
 $	
 42,450	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Beneficial interest in Unconsolidated Joint Ventures' operations:	 	 	 	 	 	 	 	 	 	 	
  Revenues less maintenance, taxes, utilities, and other operating expenses	 	
 $	
 91,559	 	
$ 	
 113,453	 	
 $	
 115,230	 	
  Interest expense	 	 	 (31,151	 )	 	 (37,594	 )	 	 (39,913	 )	
  Depreciation and amortization	 	 	 (26,864	 )	 	 (33,409	)	 	 (35,247	)	
  Equity in income of Unconsolidated Joint Ventures	 	 $	 33,544	 	 $	 42,450	 	 $	 40,070	 	

F-20

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Other Information

The provision for losses on accounts receivable of the Unconsolidated Joint Ventures was $1.2 million, $0.2 million, and $1.4 million for the years ended December 31, 2006, 2005, and 2004, respectively.

Deferred charges and other assets of $23.4 million at December 31, 2006 were comprised of leasing costs of $24.6 million, before accumulated amortization of $(10.4) million, net deferred financing costs of $5.1 million, and other net charges of $4.1 million. Deferred charges and other assets of $24.5 million at December 31, 2005 were comprised of leasing costs of $34.2 million, before accumulated amortization of $(14.9) million, net deferred financing costs of $3.3 million, and other net charges of $1.8 million.

The estimated fair value of the Unconsolidated Joint Ventures’ notes payable was $1.1 million and $1.0 million at December 31, 2006 and 2005, respectively.

Depreciation expense on properties for 2006, 2005 and 2004 was $40.2 million, $47.4 million and $53.1 million.

Note 9 - Accounts and Notes Receivable

Accounts and notes receivable at December 31, 2006 and December 31, 2005 are summarized as follows:

 	 	 	2006	 	 	2005	 	
Trade	 	 $	 25,418	 	 $	 21,052	 	
Notes	 	 	 6,044	 	 	 15,244	 	
Straight-line rent	 	 	 12,120	 	 	 10,159	 	
Other	 	 	 649	 	 	 759	 	
 	 	 $	 44,231	 	 $	 47,214	 	
Less: allowance for doubtful accounts	 	 	 (7,581	 )	 	 (5,497	 )	
 	 	 $	 36,650	 	 $	 41,717	 	

Notes receivable as of December 31, 2006 provide interest at a range of interest rates from 6.5% to 8% (with a weighted average interest rate of 7.8% at December 31, 2006) and mature at various dates from July 2007 to June 2009.

Note 10 - Deferred Charges and Other Assets

Deferred charges and other assets at December 31, 2006 and December 31, 2005 are summarized as follows:

 	 	 	2006	 	 	2005	 	
Leasing costs	 	 $	 38,196	 	 $	 30,951	 	
Accumulated amortization	 	 	 (18,825	 )	 	 (13,992	 )	
 	 	 $	 19,371	 	 $	 16,959	 	
Minority interest (Note 1)	 	 	 45,332	 	 	 	 	
Deferred financing costs, net	 	 	 8,126	 	 	 10,191	 	
Intangibles, net	 	 	 6,085	 	 	 8,457	 	
Investments	 	 	 3,480	 	 	 3,704	 	
Deferred tax asset, net	 	 	 3,311	 	 	 3,151	 	
Other, net	 	 	 12,310	 	 	 11,648	 	
 	 	 $	 98,015	 	 $	 54,110	 	

Intangible assets are primarily comprised of the fair value of in-place leases recognized in connection with acquisitions (Note 2).

F-21

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 11 - Notes Payable  

Notes payable at December 31, 2006 and December 31, 2005 consist of the following:  

2006	 	 	
2005	 	 	Stated
Interest Rate	 	Maturity Date	 	 	Balance Due
on Maturity	 	 	Facility
Amount	 	
Beverly Center	 	$	343,608	 	$	347,500	 	 	5.28%	 	02/11/14	 	$	303,277	 	 	 	 	
Cherry Creek Shopping Center	 	 	280,000	 	 	 	(1)	 	5.24%	 	06/08/16	 	 	280,000	 	 	 	 	
Cherry Creek Shopping Center	 	 	800	 	 	 	(1)	 	Prime	 	Various	(2)	 	800	 	 $	 2,000	 	
Dolphin Mall	 	 	5,000	 	 	 	 	 	LIBOR + 0.70%	 	02/14/09	 	 	5,000	 	 	139,938	(3)	
Dolphin Mall	 	 	 	 	 	141,311	 	 	LIBOR + 2.15%	 	 	 	 	 	 	 	 	 	
Fairlane Town Center	 	 	55,000	 	 	 	 	 	LIBOR + 0.70%	 	02/14/09	 	 	55,000	 	 	80,000	(3)	
Great Lakes Crossing	 	 	142,908	 	 	145,239	 	 	5.25%	 	03/11/13	 	 	125,507	 	 	 	 	
International Plaza	 	 	178,719	 	 	182,135	 	 	4.21%	 	01/08/08	 	 	175,150	 	 	 	 	
MacArthur Center	 	 	138,243	 	 	140,895	 	 	7.59%	 	10/01/10	 	 	126,884	 	 	 	 	
Northlake Mall	 	 	215,500	 	 	 	 	 	5.41%	 	02/06/16	 	 	215,500	 	 	 	 	
The Mall at Oyster Bay	 	 	 	 	 	56,241	 	 	LIBOR + 2.00%	 	 	 	 	 	 	 	 	 	
The Mall at Partridge Creek	 	 	22,010	 	 	 	 	 	LIBOR + 1.15%	 	09/07/10	 	 	22,010	 	 	81,000	 	
Regency Square	 	 	77,812	 	 	78,792	 	 	6.75%	 	11/01/11	 	 	71,569	 	 	 	 	
The Mall at Short Hills	 	 	540,000	 	 	540,000	 	 	5.47%	 	12/14/15	 	 	540,000	 	 	 	 	
Stony Point Fashion Park	 	 	111,864	 	 	113,228	 	 	6.24%	 	06/01/14	 	 	98,585	 	 	 	 	
Twelve Oaks Mall	 	 	 	 	 	 	 	 	LIBOR + 0.70%	 	02/09/07	 	 	 	 	 	130,062	(3)	
The Mall at Wellington Green	 	 	200,000	 	 	200,000	 	 	5.44%	 	05/06/15	 	 	200,000	 	 	 	 	
The Shops at Willow Bend	 	 	 	 	 	96,405	 	 	LIBOR + 1.50%	 	 	 	 	 	 	 	 	 	
The Shops at Willow Bend	 	 	 	 	 	48,202	 	 	LIBOR + 3.75%	 	 	 	 	 	 	 	 	 	
Line of Credit	 	 	8,074	 	 	 	 	 	Variable Bank Rate	 	02/14/08	 	 	8,074	 	 	40,000	 	
 	 	$	2,319,538	 	$	2,089,948	 	 	 	 	 	 	 	 	 	 	 	 	

(1)  	Cherry Creek was consolidated as of January 1, 2006 (Note 1).	
(2)  	Loans mature at various dates through 2009.	
(3)  	Subfacility in $350 million revolving credit facility. Sublimits may be reallocated quarterly but not more often than twice a year.	

Notes payable are collateralized by properties with a net book value of $2.1 billion at December 31, 2006 and $2.2 billion at December 31, 2005.

Interest expense for the year ended December 31, 2006 includes a $1.0 million charge for the write-off of financing costs related to the refinancing of the loan on Dolphin Mall (Dolphin) prior to maturity and a $2.1 million charge from the write-off of financing costs related to the pay-off of the loans on The Shops at Willow Bend (Willow Bend) prior to their maturity date. Interest expense for the year ended December 31, 2005 includes a $10.0 million charge in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills (Short Hills), a $0.9 million Northlake loan pay-off, and a $1.8 million debt modification related to the pay-off of an Oyster Bay loan.

The following table presents scheduled principal payments on notes payable as of December 31, 2006:

2007	 	 $ 	 16,556 	 	
2008	 	 	 196,746	 	
2009	 	 	 74,433	 	
2010	 	 	 163,057	 	
2011	 	 	 83,686	 	
      Thereafter	 	 	 1,785,060 	 	
 	 	 $	 2,319,538	 	

F-22

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Fair Value of Financial Instruments Related to Debt

The estimated fair values of financial instruments at December 31, 2006 and December 31, 2005 are as follows:

 	 	2006	2005	
 	 	 	Carrying Value  	 	 	Fair Value	 	 	Carrying Value	 	 	Fair Value	 	
Notes payable	 	$	2,319,538	 	$	2,322,828	 	$	2,089,948	 	$	2,092,034	 	
Interest rate instruments:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  in a receivable position	 	 	 	 	 	 	 	 	71	 	 	71	 	
  in a payable position	 	 	1,854	 	 	1,854	 	 	 	 	 	 	 	

Debt Covenants and Guarantees

Certain loan agreements contain various restrictive covenants, including minimum net worth requirements, minimum debt service coverage ratios, a maximum payout ratio on distributions, a maximum leverage ratio, a minimum debt yield ratio, and a minimum fixed charges coverage ratio, the latter being the most restrictive. The Operating Partnership is in compliance with all of its covenants. The maximum payout ratio on distributions covenant limits the payment of distributions generally to 95% of funds from operations, as defined in the loan agreement except as required to maintain the Company's tax status, pay preferred distributions, and for distributions related to the sale of certain assets.

Payments of principal and interest on the loans in the following table are guaranteed by the Operating Partnership as of December 31, 2006.

 

Center	 	 	

Loan balance as of 12/31/06	 	 	TRG's
beneficial interest in loan balance as
of 12/31/06	 	 	Amount of loan balance guaranteed by TRG as of 12/31/06	 	 	
% of loan
balance
guaranteed
by TRG	 	 	

% of interest guaranteed by TRG	 	
 	 	(in millions of dollars)  	 	 	 	 	 	 	
Dolphin Mall	 	 	5.0	 	 	5.0	 	 	5.0	 	 	100	%	 	100	%	
Fairlane Town Center	 	 	55.0	 	 	55.0	 	 	55.0	 	 	100	%	 	100	%	
The Mall at Millenia	 	 	0.3	 	 	0.2	 	 	0.2	 	 	50	%	 	50	%	
Twelve Oaks Mall	 	 	-	 	 	-	 	 	-	 	 	100	%	 	100	%	

In 2006, the $350 million revolver was amended by the Company. Under the revised terms, borrowings under the line of credit are primary obligations of the entities owning Dolphin, Fairlane Town Center (Fairlane), and Twelve Oaks Mall (Twelve Oaks), which are the collateral for the line of credit. The Operating Partnership and the entities owning Fairlane and Twelve Oaks are guarantors under the credit agreement.

In addition, the Operating Partnership has guaranteed certain obligations of Partridge Creek (Note 2) and the payment of $3.7 million related to the remaining development costs and certain tenant allowances for Northlake.

The Company is required to escrow cash balances for specific uses stipulated by its lenders, including ground lease payments, taxes, insurance, debt service, capital improvements, leasing costs, and tenant allowances. As of December 31, 2006 and December 31, 2005, the Company’s cash balances restricted for these uses were $2.0 million and $8.5 million, respectively. Such amounts are included within cash and cash equivalents in the Company’s consolidated balance sheet.

Beneficial Interest in Debt and Interest Expense

The Operating Partnership's beneficial interest in the debt, capital lease obligations, capitalized interest, and interest expense of its consolidated subsidiaries and its Unconsolidated Joint Ventures is summarized in the following table. The Operating Partnership's beneficial interest in the Consolidated Subsidiaries excludes debt and interest related to the minority interests in International Plaza (49.9%), MacArthur Center (5%), The Mall at Wellington Green (10%), and Cherry Creek (a 50% consolidated subsidiary as of January 2006). Unconsolidated Joint Venture amounts at the beneficial interest level exclude The Pier.

F-23

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 	 	At 100%  	At Beneficial Interest	
 
 	 	 	Consolidated
Subsidiaries  	 	 	Unconsolidated
Joint
Ventures	 	 	
Consolidated
Subsidiaries	 	 	Unconsolidated
Joint
Ventures	 	
Debt as of:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  December 31, 2006	 	$	2,319,538	 	$	1,097,347	 	$	2,063,111	 	$	522,180	 	
  December 31, 2005	 	 	2,089,948	 	 	999,545	 	 	1,972,046	 	 	558,443	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital lease obligations as of:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  December 31, 2006	 	$	7,501	 	$	676	 	$	7,336	 	$	338	 	
  December 31, 2005	 	 	13,014	 	 	1,966	 	 	12,510	 	 	983	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capitalized interest:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Year ended December 31, 2006	 	$	9,803	 	$	4,087	 	$	9,797	 	 	 	 	
  Year ended December 31, 2005	 	 	9,940	 	 	3	 	 	9,940	 	$	1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Year ended December 31, 2006	 	$	128,643	 	$	57,563	 	$	115,790	 	$	31,151	 	
  Year ended December 31, 2005	 	 	121,612	 	 	67,590	 	 	116,082	 	 	37,594	 	

Note 12 - Derivatives

The Company uses derivative instruments primarily to manage exposure to interest rate risks inherent in variable rate debt and refinancings. The Company routinely uses cap, swap, and treasury lock agreements to meet these objectives. None of the Company’s derivatives are designated as fair value hedges. Derivatives not designated as hedges are not speculative and were entered into to manage the Company’s exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements of FASB Statement No. 133 “Accounting for Derivative Instruments and Hedging Activities.”

The following table presents the effect that derivative instruments had on interest expense and equity in income of Unconsolidated Joint Ventures during the three years ended December 31, 2006:

 	 	 	2006	 	 	2005	 	 	2004	 	
Payments under swap agreements	 	 	 	 	$	883	 	$	5,462	 	
Receipts under swap agreements	 	 $	 (121	 )	 	 	 	 	 	 	
Adjustment of accumulated other comprehensive income for amounts recognized in net income	 	 	
1,391	 	 	
1,442	 	 	
1,262	 	
Change in fair value of cap agreements not designated as hedges	 	 	 59	 	 	 5	 	 	 	 	
Net reduction to income	 	 $	 1,329	 	$	2,330	 	$	6,724	 	

As of December 31, 2006, the Company had $7.7 million of net realized losses included in Accumulated OCI, related to terminated derivative instruments, that are being recognized as interest expense over the term of the hedged debt, as follows:

Hedged Items	 	 	OCI Amounts	 	 	Recognition Period	 	
Beverly Center refinancing	 	 $	 4,238	 	 	January 2004 through December 2013	 	
Regency Square financing	 	 	1,356	 	 	November 2001 through October 2011	 	
Westfarms refinancing	 	 	 2,066	 	 	July 2002 through July 2012	 	
 	 	 $	 7,660	 	 	 	 	

Additionally, as of December 31, 2006, the Company had $1.9 million of net unrealized losses included in Accumulated OCI that will be recognized as interest expense over the effective periods of the derivative agreements, as follows:  

Hedged Items	 	 	OCI Amounts	 	 	Recognition Period	 	
International Plaza forecasted refinancing	 	 $	 1,854	 	 	January 2008 through December 2017	 	
Taubman Land Associates financing	 	 	 46	 	 	January 2007 through October 2012	 	
 	 	 $	 1,900	 	 	 	 	

The Company expects that approximately $1.2 million of the $9.6 million in Accumulated OCI at December 31, 2006 will be reclassified from Accumulated OCI and recognized as a reduction of income during 2007.

F-24

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Note 13 - Leases

Shopping center space is leased to tenants and certain anchors pursuant to lease agreements. Tenant leases typically provide for minimum rent, percentage rent, and other charges to cover certain operating costs. Future minimum rent under operating leases in effect at December 31, 2006 for operating centers, assuming no new or renegotiated leases or option extensions on anchor agreements, is summarized as follows:

2007	 $ 298,168	
2008	   283,198	
2009	   262,079	
2010	   242,393	
2011	   204,436	
       Thereafter	    719,968  	

Certain shopping centers, as lessees, have ground leases expiring at various dates through the year 2083. In addition, one center has the option to extend the lease term for five 10 year periods. Ground rent expense is recognized on a straight-line basis over the lease terms. The Company also leases its office facilities and certain equipment. Office facility leases expire at various dates through the year 2015. Additionally, two of the leases have 5 year extension options. The Company’s U.S. headquarters is rented from an affiliate of the Taubman family under a 10 year lease, with a 5 year extension option. Rental expense on a straight-line basis under operating leases was $8.3 million in 2006, $6.6 million in 2005, and $7.7 million in 2004. Included in these amounts are related party office rental expense of $2.3 million in both 2006 and 2005, and $2.4 million in 2004. Payables representing straightline rent adjustments under lease agreements were $32.3 million and $30.9 million as of December 31, 2006 and 2005, respectively.

The following is a schedule of future minimum rental payments required under operating leases:

2007	 $  8,125	
2008	     8,045	
2009	     7,857	
2010	     7,831	
2011	     6,848	
       Thereafter	   330,803  	

The table above includes $2.4 million in each year from 2007 through 2009, $2.5 million in 2010, and $2.6 million in each year from 2011 through 2014 of related party amounts. Also included in the table above are rentals to a joint venture partner of $0.6 million in 2007, $0.7 million in each year from 2008 through 2011, and $158.4 million thereafter.

Certain shopping centers have entered into lease agreements for property improvements that qualify as capital leases. As of December 31, 2006, future minimum lease payments for these capital leases are as follows:

2007	 	 $	 3,865	 	
2008	 	 	 2,818	 	
2009	 	 	 1,462	 	
Total minimum lease payments	 	 $	 8,145	 	
Less amount representing interest	 	 	 (644	 )	
Capital lease obligations	 	 $	 7,501	 	

Note 14 - Transactions with Affiliates

The Taubman Company LLC (the Manager), which is 99% beneficially owned by the Operating Partnership, provides property management, leasing, development, and other administrative services to the Company, the shopping centers, Taubman affiliates, and other third parties. Accounts receivable from related parties include amounts due from Unconsolidated Joint Ventures or other affiliates of the Company, primarily relating to services performed by the Manager. These receivables include certain amounts due to the Manager related to reimbursement of third party (non-affiliated) costs.

F-25

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

During 1997, the Operating Partnership acquired an option from a related party to purchase certain real estate on which the Operating Partnership was exploring the possibility of developing a shopping center. Through December 31, 2000, the Operating Partnership had made payments of $450,000. In 2000, the Operating Partnership decided not to go forward with the project and reached an agreement with the optionor to be reimbursed, at the time of the sale or lease of the real estate, for an amount equal to the lesser of 50% of the project costs to date or $350,000. The Company received $140,000 in 2005 and the remaining $210,000 in 2006.

A. Alfred Taubman and certain of his affiliates receive various property management services from the Manager. For such services, Mr. Taubman and affiliates paid the Manager approximately $1.9 million, $1.6 million, and $1.7 million in 2006, 2005, and 2004, respectively.

Other related party transactions are described in Notes 8, 13, 15, 16, 17, and 22.

Note 15 - Share-Based Compensation and Other Employee Plans

The Company provides certain share-based compensation through an incentive option plan, a long-term incentive plan, and non-employee directors' stock grant and deferred compensation plans. All of the plans were designed to provide additional incentive for the achievement of financial goals and offer additional alignment of the interests of management and/or the directors with those of shareholders. Additionally, the non-employee directors' plans are intended to provide incentives for directors to continue to serve on the board and to attract new directors with outstanding qualifications.

On January 1, 2006, the Company adopted Statement No. 123 (Revised) “Share-Based Payment.” As part of its adoption of the Statement with respect to any grant for which vesting accelerates upon retirement, the Company has begun recognizing compensation cost from the date of the grant through the date the employee first becomes eligible to retire, if this period is shorter than the stated vesting period of the grant. In prior periods, the Company recognized compensation cost using the stated vesting period, regardless of retirement eligibility. As the Company had previously applied the fair value recognition provisions of Statement No. 123, the adoption of Statement No. 123 (Revised) did not have a material effect on the Company's results of operations.

The compensation cost charged to income for the above-mentioned share-based compensation plans was $4.6 million and $2.4 million for the years ended December 31, 2006 and 2005, respectively. Compensation cost capitalized as part of properties and deferred leasing costs for the years ended December 31, 2006 and 2005 was $0.6 million and $0.4 million, respectively. There was no compensation cost charged to income or capitalized in 2004 for the above mentioned plans as all outstanding options were fully vested.

The Company currently recognizes no tax benefits from the recognition of compensation cost or tax deductions incurred upon the exercise or vesting of share-based awards. Any allocations of compensation cost or deduction to the Company’s corporate taxable REIT subsidiaries from the Company's Manager, which is treated as a partnership for federal income tax purposes, have resulted in a valuation allowance being recorded against its net deferred tax asset associated with the temporary differences related to share-based compensation. This is primarily due to prior year cumulative tax net operating losses incurred through the year ended December 31, 2006.

Incentive Options

The Company’s incentive option plan (the Option Plan), which is shareholder approved, permits the grant of options to employees. The Operating Partnership's units issued in connection with the Option Plan are exchangeable for new shares of the Company's common stock under the Continuing Offer (Note 17). Options for 1.1 million partnership units have been granted and are outstanding at December 31, 2006. Of the 1.1 million options outstanding, 0.6 million have vesting schedules with one-third vesting at each of the third, fifth, and seventh years of the grant anniversary, if continuous service has been provided and certain conditions dependent on the Company’s market performance in comparison to its competitors have been met. Substantially all of the other 0.5 million options outstanding have vesting schedules with one-third vesting at each of the first, second, and third years of the grant anniversary, if continuous service has been provided. The options have ten-year contractual terms. As of December 31, 2006, options for 1.1 million Operating Partnership units remain available for grant under the Option Plan.

F-26

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Company has estimated the value of the options issued during the years ended December 31, 2006 and 2005 using a Black-Scholes valuation model based on the following assumptions:

 	2006	2005	
Expected volatility	20.87%-21.14%	21.00%	
Expected dividend yield	3.50%	4.00%	
Expected terms (in years)	7	7	
Risk-free interest rate	4.74%-5.08%	3.83%-4.15%	

Expected volatility and dividend yields are based on historical volatility and yields of the Company’s stock, respectively, as well as other factors. In developing the assumption of expected term, the Company has considered the vesting and contractual terms as well as the expected terms of options disclosed by members of its peer group. The risk-free rates used are based on the U.S. Treasury yield curves in effect at the times of grants. For the options for which vesting is dependent on the Company's market performance in comparison to its competitors, the Company used a Monte Carlo simulation to estimate the probability of the vesting conditions being met. The Company assumes no forfeitures under the Option Plan due to the small number of participants and low turnover rate. The weighted-average grant-date fair value of all options granted, including those dependent on market performance, during the years ended December 31, 2006 and 2005 was $8.11 and $3.80 per option, respectively.

A summary of option activity under the Option Plan for the years ended December 31, 2006, 2005, and 2004 is presented below:

 
 	 	 	Number
of Options  	 	 	

Weighted Average Exercise Price	 	 	Weighted Average Remaining
Contractual Term
(in years)	 	
Range of
Exercise Prices	 	
Outstanding at January 1, 2004	 	 	1,405,209	 	$	12.15	 	 	4.0	 	$9.69 - $13.14	 	
  Exercised	 	 	(845,767	)	 	12.26	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding at December 31, 2004	 	 	559,442	 	$	11.98	 	 	3.7	 	$9.69 - $12.25	 	
  Granted	 	 	902,139	 	 	30.09	 	 	9.2	 	 	 	
  Exercised	 	 	(559,442	)	 	11.98	 	 	 	 	 	 	
  Forfeited	 	 	(50,000	)	 	29.38	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding at December 31, 2005	 	 	852,139	 	$	30.13	 	 	9.2	 	$29.38 - $31.31	 	
  Granted	 	 	263,237	 	 	40.37	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding at December 31, 2006	 	 	1,115,376	 	$	32.55	 	 	8.5	 	$29.38 - $40.39	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Fully vested options at December 31, 2006	 	 	100,434	 	$	31.31	 	 	8.3	 	 	 	

There were 90,852 options that vested during the year ended December 31, 2006.

The aggregate intrinsic value (the difference between the period end stock price and the option strike price) of options outstanding as of December 31, 2006 was $20.4 million. The aggregate intrinsic value of options fully vested as of December 31, 2006 was $2.0 million.

The total intrinsic value of options exercised during the years ended December 31, 2005 and 2004 was $9.5 million and $10.8 million, respectively. Cash received from option exercises under the Option Plan for the years ended December 31, 2005 and 2004 was $6.7 million and $10.4 million, respectively. No options were exercised in 2006.

As of December 31, 2006 there were 1.0 million nonvested options outstanding, and $2.4 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.4 years.

F-27

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Under the Option Plan, vested unit options can be exercised by tendering mature units with a market value equal to the exercise price of the unit options. In 2002, Robert S. Taubman, the Company’s chief executive officer, exercised options for 3.0 million units by tendering 2.1 million mature units and deferring receipt of 0.9 million units under the unit option deferral election. As the Company declares distributions, the deferred option units receive their proportionate share of the distributions in the form of cash payments. These deferred option units will remain in a deferred compensation account until Mr. Taubman's retirement or ten years from the date of exercise. Beginning with the ten year anniversary of the date of exercise, the deferred partnership units will be paid in ten annual installments.

Long-Term Incentive Plan

In May 2005, the Company’s shareholders approved the adoption of The Taubman Company 2005 Long-Term Incentive Plan (LTIP). The LTIP allows the Company to make grants of restricted stock units (RSU) to employees. An aggregate of 1.2 million shares of the Company’s common stock remain available for issuance under the LTIP. There were RSU for 0.3 million shares outstanding at December 31, 2006. Each RSU represents the right to receive upon vesting one share of the Company’s common stock plus a cash payment equal to the aggregate cash dividends that would have been paid on such share of common stock from the date of grant of the award to the vesting date. Each RSU is valued at the closing price of the Company's common stock on the grant date.

A summary of activity under the LTIP is presented below:

 	 	 	Restricted Stock Units  	 	 	Weighted-Average
Grant Date Fair Value	 	
Outstanding at January 1, 2005	 	 	 	 	 	 	 	
  Granted	 	 	140,440	 	 	$31.31	 	
  Forfeited	 	 	(1,536	)	 	31.31	 	
Outstanding at December 31, 2005	 	 	138,904	 	 	31.31	 	
  Granted	 	 	131,698	 	 	40.38	 	
  Forfeited	 	 	(4,999	)	 	33.84	 	
  Redeemed	 	 	(3,918	)	 	33.53	 	
Outstanding at December 31, 2006	 	 	261,685	 	 	35.79	 	

The total intrinsic value of RSU redeemed during the year ended December 31, 2006 was $0.1 million. No options were redeemed during the year ended December 31, 2005.

These RSU vest on the third year anniversary of the grant if continuous service has been provided for that period, or upon retirement if earlier. Based on an analysis of historical employee turnover, the Company has made an annual forfeiture assumption of 2.4% of grants when recognizing compensation costs relating to the RSU.

All of the RSU outstanding at December 31, 2006 were nonvested. As of December 31, 2006, there was $5.0 million of total unrecognized compensation cost related to nonvested RSU outstanding under the LTIP. This cost is expected to be recognized over an average period of 1.9 years.

  Non-Employee Directors’ Stock Grant and Deferred Compensation Plans

In May 2005, the Company’s shareholders approved the adoption of the Taubman Centers, Inc. Non-Employee Directors’ Stock Grant Plan (SGP). The SGP provides for the annual grant to each non-employee director of the Company shares of the Company’s common stock having an annual fair market value of $15,000 in 2006 and determined based on the fair value of the Company's common stock on the last business day of the preceding quarter. The Company has authorized 50,000 shares of the Company's common stock for issuance under the SGP. As of December 31, 2006, 1,198 shares have been issued under the SGP. Certain directors have elected to defer receipt of their shares as described below. In December 2006, the annual grant to each non-employee director for 2007 was increased to shares of the Company’s common stock having a fair market value of $50,000.

F-28

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Also in May 2005, the Board of Directors of the Company approved the adoption of the Taubman Centers, Inc. Non-Employee Directors’ Deferred Compensation Plan (DCP). The DCP allows each non-employee director of the Company the right to defer the receipt of all or a portion of his or her annual director retainer until the termination of his or her service on the Company’s Board of Directors and for such deferred compensation to be denominated in restricted stock units, representing the right to receive shares of the Company’s common stock at the end of the deferral period. The Company has authorized 175,000 shares of common stock for issuance under the DCP. During the deferral period, when the Company pays cash dividends on its common stock, the directors’ deferral accounts will be credited with dividend equivalents on their deferred restricted stock units, payable in additional restricted stock units based on the then-fair market value of the Company’s common stock. There were 7,981 restricted stock units outstanding under the DCP at December 31, 2006.

Other Employee Plans

As of December 31, 2006 and 2005 the Company had fully vested awards outstanding for 77,610 and 89,938 notional shares of stock, respectively, under a previous long-term performance compensation plan. These awards will be settled in cash based on a twenty day average of the market value of the Company's common stock. The cash payment on these cumulative units remaining has been deferred by employees until retirement or termination. The liability for the eventual payout of these awards is marked to market quarterly based on the twenty day average of the Company's stock price. The Company recorded compensation costs of $1.1 million, $0.6 million, and $2.6 million relating to these awards for the years ended December 31, 2006, 2005, and 2004, respectively. The Company paid $0.5 million, $6.0 million, and $0.3 million of this deferred liability during the years ended December 31, 2006, 2005, and 2004, respectively.

The Company has a voluntary retirement savings plan established in 1983 and amended and restated effective January 1, 2001 (the Plan). The Plan is qualified in accordance with Section 401(k) of the Internal Revenue Code (the Code). The Company contributes an amount equal to 2% of the qualified wages of all qualified employees and matches employee contributions in excess of 2% up to 7% of qualified wages. In addition, the Company may make discretionary contributions within the limits prescribed by the Plan and imposed in the Code. Costs relating to the Plan were $1.7 million in 2006, $1.6 million in 2005, and $1.9 million in 2004.

Note 16 - Common and Preferred Stock and Equity of TRG

Outstanding Preferred Stock and Equity

The Company is obligated to issue to the minority interest, upon subscription, one share of Series B Non-Participating Convertible Preferred Stock (Series B Preferred Stock) for each of the Operating Partnership units held by the minority interest. Each share of Series B Preferred Stock entitles the holder to one vote on all matters submitted to the Company's shareholders. The holders of Series B Preferred Stock, voting as a class, have the right to designate up to four nominees for election as directors of the Company. On all other matters, including the election of directors, the holders of Series B Preferred Stock will vote with the holders of common stock. The holders of Series B Preferred Stock are not entitled to dividends or earnings of the Company. Under certain circumstances, the Series B Preferred Stock is convertible into common stock at a ratio of 14,000 shares of Series B Preferred Stock for one share of common stock. During the years ended December 31, 2006, 2005, and 2004, 1,061,343 shares, 1,932,134 shares, and 565,575 shares, respectively, of Series B Preferred Stock were converted to 71 shares, 130 shares, and 38 shares, respectively, of the Company’s common stock as a result of tenders of units under the Continuing Offer (Note 17).

The Operating Partnership’s $30 million 8.2% Cumulative Redeemable Preferred Partnership Equity (Series F Preferred Equity) is owned by institutional investors, and has no stated maturity, sinking fund, or mandatory redemption requirements. The Company, beginning in May 2009 can redeem the Series F Preferred Equity. The holders of Series F Preferred Equity have the right, beginning in 2014, to exchange $100 in liquidation value of such equity for one share of Series F Preferred Stock. The terms of the Series F Preferred Stock are substantially similar to those of the Series F Preferred Equity. The Series F Preferred Stock is non-voting.

F-29

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The 8.0% Series G Cumulative Redeemable Preferred Stock (Series G Preferred Stock), which was issued in 2004, has no stated maturity, sinking fund, or mandatory redemption requirements and is not convertible into any other security of the Company. The Series G Preferred Stock has liquidation preferences of $100 million ($25 per share). Dividends are cumulative and are payable in arrears on or before the last day of each calendar quarter. All accrued dividends have been paid. The Series G Preferred Stock will be redeemable by the Company at $25 per share, plus accrued dividends, beginning in November 2009. The Company owns corresponding Series G Preferred Equity interests in the Operating Partnership that entitle the Company to income and distributions (in the form of guaranteed payments) in amounts equal to the dividends payable on the Company's Series G Preferred Stock. The Series G Preferred Stock is non-voting.

The $87 million 7.625% Series H Cumulative Redeemable Preferred Stock (Series H Preferred Stock), which was issued in 2005, has no stated maturity, sinking fund, or mandatory redemption requirements and are not convertible into any other security of the Company. Dividends are cumulative and are payable in arrears on or before the last day of each calendar quarter. All accrued dividends have been paid. The Series H Preferred Stock will be redeemable by the Company at $25 per share (par), plus accrued dividends, beginning in July 2010. The Company owns corresponding Series H Preferred Equity interests in the Operating Partnership that entitle the Company to income and distributions (in the form of guaranteed payments) in amounts equal to the dividends payable on the Company’s Series H Preferred Stock. The Series H Preferred Stock is non-voting.

In connection with the Company’s 1999 acquisition of Lord Associates, a retail leasing firm, partnership units and Series B Preferred stock were being released over a five-year period ending in January 2005, with $0.5 million having been released in both 2005 and 2004. Such amounts were recognized as compensation expense.

Redemption of Preferred Stock and Equity

In May 2006, the Company redeemed all of the remaining 8.3% Series A Preferred Stock (Series A Preferred Stock) at a price of $25.27 per share, which included accrued and unpaid dividends. The Company previously had $113 million or 4,520,000 shares of its Series A Preferred Stock outstanding. Emerging Issues Task Force Topic D-42, “The Effect on the Calculation of Earnings Per Share for the Redemption or Induced Conversion of Preferred Stock,” provides that any excess of the fair value of the consideration transferred to the holders of preferred stock redeemed over the carrying amount of the preferred stock should be subtracted from net earnings to determine net earnings available to common stockholders. As a result of application of Topic D-42, the Company recognized a charge of $4.0 million in the second quarter of 2006, representing the difference between the carrying value and the redemption price of the Series A Preferred Stock.

This Series A Preferred Stock was redeemed with the proceeds of a $113 million private preferred stock issuance, the Series I Cumulative Redeemable Preferred Stock (Series I Preferred Stock). The Series I Preferred Stock paid dividends at a floating rate equal to 3-month LIBOR plus 1.25%, an effective rate of 6.4225% for the period the shares were outstanding. The Company redeemed the Series I Preferred Stock on June 30, 2006, using available cash. The Company recognized a charge of $0.6 million at that time, representing the difference between the carrying value, which includes original issuance costs, and the redemption price of the Series I Preferred Stock.

In July 2005, the Company redeemed 3,480,000 shares of its 8,000,000 outstanding Series A Preferred Stock for $87 million. As a result of application of Topic D-42, the Company recognized a charge of $3.1 million in 2005, representing the difference between the carrying value and the redemption price of the shares of Series A Preferred Stock.

During November 2004, the Operating Partnership's Series C and Series D Preferred Equity were redeemed by the Company. The excess of the $100 million redemption value over the $97.3 million book value was recorded as a preferred distribution in the Company's results of operations for 2004.

Common Stock and Equity

In December 2005, the Company's Board of Directors authorized the purchase of up to $50 million of the Company's common stock on the open market. For each share of stock repurchased, an equal number of Operating Partnership units will be redeemed. There were no purchases under this program in 2006 or 2005. Repurchases of common stock will be financed through general corporate funds and through borrowings under existing lines of credit. During 2004 the Company repurchased shares of its common stock under a previous buyback program.

F-30

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

In January 2004, 276,724 additional partnership units were issued in connection with the acquisition of the 30% interest in Beverly (Note 2).

Note 17 - Commitments and Contingencies

At the time of the Company's initial public offering and acquisition of its partnership interest in the Operating Partnership, the Company entered into an agreement (the Cash Tender Agreement) with A. Alfred Taubman, who owns an interest in the Operating Partnership, whereby he has the annual right to tender to the Company units of partnership interest in the Operating Partnership (provided that the aggregate value is at least $50 million) and cause the Company to purchase the tendered interests at a purchase price based on a market valuation of the Company on the trading date immediately preceding the date of the tender. The Company will have the option to pay for these interests from available cash, borrowed funds, or from the proceeds of an offering of the Company's common stock. Generally, the Company expects to finance these purchases through the sale of new shares of its stock. The tendering partner will bear all market risk if the market price at closing is less than the purchase price and will bear the costs of sale. Any proceeds of the offering in excess of the purchase price will be for the sole benefit of the Company. At A. Alfred Taubman's election, his family and certain others may participate in tenders.

The Company accounts for the Cash Tender Agreement between the Company and Mr. Taubman as a freestanding written put option. As the option put price is defined by the current market price of the Company's stock at the time of tender, the fair value of the written option defined by the Cash Tender Agreement is considered to be zero.

Based on a market value at December 31, 2006 of $50.86 per common share, the aggregate value of interests in the Operating Partnership that may be tendered under the Cash Tender Agreement was approximately $1.3 billion. The purchase of these interests at December 31, 2006 would have resulted in the Company owning an additional 31% interest in the Operating Partnership.

The Company has made a continuing, irrevocable offer to all present holders (other than certain excluded holders, including A. Alfred Taubman), assignees of all present holders, those future holders of partnership interests in the Operating Partnership as the Company may, in its sole discretion, agree to include in the continuing offer, and all existing and future optionees under the Operating Partnership's incentive option plan to exchange shares of common stock for partnership interests in the Operating Partnership (the Continuing Offer). Under the Continuing Offer agreement, one unit of the Operating Partnership interest is exchangeable for one share of the Company's common stock.

The disposition of Woodland in 2005 by one of the Company's Unconsolidated Joint Ventures was structured in a tax efficient manner to facilitate the investment of the Company's share of the sales proceeds in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code and the regulations thereunder. The structuring of the disposition has included the continued existence and operation of the partnership that previously owned the shopping center. In connection with the disposition, the Company entered into a tax indemnification agreement with the Woodland joint venture partner, a life insurance company. Under this tax indemnification agreement, the Company has agreed to indemnify the joint venture partner in the event an unfavorable tax determination is received as a result of the structuring of the sale in the tax efficient manner described. The maximum amount that the Company could be required to pay under the indemnification is equal to the taxes incurred by the joint venture partner as a result of the unfavorable tax determination by the IRS or the state of Michigan within their respective three and four year statutory assessment limitation periods, in excess of those that would have otherwise been due if the Unconsolidated Joint Venture had sold Woodland, distributed the cash sales proceeds, and liquidated the owning entities. The Company cannot reasonably estimate this maximum amount of the indemnity, as the Company is not privy to or does not have knowledge of its joint venture partner's tax basis or tax attributes in the Woodland entities or its life insurance-related assets. However, the Company believes that the probability of having to perform under the tax indemnification agreement is remote. The Company and the Woodland joint venture partner have also indemnified each other for their shares of costs or revenues of operating or selling the shopping center in the event additional costs or revenues are subsequently identified.

F-31

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Neither the Company, its subsidiaries, nor any of its joint ventures is presently involved in any material litigation, nor, to its knowledge, is any material litigation threatened against the Company, its subsidiaries, or any of the properties. Except for routine litigation involving present or former tenants (generally eviction or collection proceedings), substantially all litigation is covered by liability insurance. See also Notes 3 and 7.

See Note 2 regarding obligations and commitments related to Partridge Creek and The Pier and Note 11 for the Operating Partnership's guarantees of certain notes payable and other obligations.
 
Note 18 - Earnings Per Share

Basic earnings per share amounts are based on the weighted average of common shares outstanding for the respective periods. Diluted earnings per share amounts are based on the weighted average of common shares outstanding plus the dilutive effect of common stock equivalents. Common stock equivalents include outstanding partnership units exchangeable for common shares under the Continuing Offer (Note 17), outstanding options for units of partnership interest under the Operating Partnership’s incentive option plan, RSU under the LTIP and DCP (Note 15), and unissued partnership units under unit option deferral elections. In computing the potentially dilutive effect of these common stock equivalents, partnership units are assumed to be exchanged for common shares under the Continuing Offer, increasing the weighted average number of shares outstanding. The potentially dilutive effects of partnership units outstanding and/or issuable under the unit option deferral elections are calculated using the if-converted method, while the effects of other common stock equivalents are calculated using the treasury stock method.

As of December 31, 2006, there were 10.4 million partnership units outstanding and 0.9 million unissued partnership units under unit option deferral elections, which may be exchanged for common shares of the Company under the Continuing Offer (Note 17). Outstanding partnership units and unissued units were excluded from the computation of diluted earnings per share as they were anti-dilutive in all periods presented. These outstanding units and unissued units could only be dilutive to earnings per share if the minority interests' ownership share of the Operating Partnership's income was greater than their share of distributions.
 
 	 	Year Ended December 31  	
 	 	 	2006	 	 	2005	 	 	2004	 	
Income (loss) from continuing operations allocable to common shareowners (Numerator):	 	 	 	 	 	 	 	 	 	 	
Net income (loss) allocable to common shareowners	 	 $	 21,394	 	 $	 44,113	 	 $	 (5,066	 )	
Common shareowners' share of discontinued operations	 	 	 	 	 	 	 	 	 (199	 )	
Basic/diluted income (loss) from continuing operations	 	 $	 21,394	 	 $	 44,113	 	 $	 (5,265	 )	
 	 	 	 	 	 	 	 	 	 	 	
Shares (Denominator) - basic	 	 	52,661,024	 	 	50,459,314	 	 	49,021,843	 	
Effect of dilutive securities	 	 	 318,429	 	 	 70,825	 	 	 	 	
Shares (Denominator) - diluted	 	 	 52,979,453	 	 	 50,530,139	 	 	49,021,843	 	
 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations per common share:	 	 	 	 	 	 	 	 	 	 	
  Basic	 	 $	 0.41	 	 $	 0.87	 	 $	 (0.11	 )	
  Diluted	 	 $	 0.40	 	 $	 0.87	 	 $	 (0.11	 )	
 	 	 	 	 	 	 	 	 	 	 	
Discontinued operations per common share:	 	 	 	 	 	 	 	 	 	 	
  Basic	 	 	 	 	 	 	 	 $	 0.00	 	
  Diluted	 	 	 	 	 	 	 	 $	 0.00	 	

Note 19 - Cash Flow Disclosures and Non-Cash Investing and Financing Activities

Interest paid in 2006, 2005, and 2004, net of amounts capitalized of $9.8 million, $9.9 million, and $6.0 million, respectively, approximated $119.8 million, $112.0 million, and $93.7 million, respectively. The following non-cash investing and financing activities occurred during 2006, 2005, and 2004:

 	 	 	2006	 	 	2005	 	 	2004	 	
Non-cash additions to properties	 	$	24,051	 	$	50,844	 	$	38,020	 	
Note receivable on Woodland sale (Note 2)	 	 	 	 	 	9,000	 	 	 	 	
Capital lease obligations	 	 	 	 	 	91	 	 	4,559	 	
Issuance of partnership units in connection with acquisition (Note 2)	 	 	 	 	 	 	 	 	7,674	 	

F-32

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

    Non-cash additions to properties primarily represent accrued construction and tenant allowance costs of new centers and development projects.   Additionally, consolidated assets increased upon consolidation of the accounts of Cherry Creek in 2006 (Note 1) and the accounts of International Plaza in 2004 (Note 2).
 
Note 20 - Quarterly Financial Data (Unaudited)

The following is a summary of quarterly results of operations for 2006 and 2005:

 	 	2006 (1)  	
	 	 	First
Quarter  	 	 	Second
Quarter	 	 	Third
Quarter	 	 	Fourth
Quarter	 	
Revenues	 	$	138,021	 	$	139,276	 	$	138,913	 	$	163,074	 	
Equity in income of Unconsolidated Joint Ventures	 	 	8,471	 	 	7,412	 	 	7,082	 	 	10,579	 	
Income before minority and preferred interests	 	 	21,408	 	 	20,972	 	 	17,561	 	 	35,199	 	
Net income	 	 	11,434	 	 	7,791	 	 	5,024	 	 	20,868	 	
Net income (loss) allocable to common shareowners	 	 	5,431	 	 	(2,612	)	 	1,366	 	 	17,209	 	
Basic earnings per common share -	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Net income (loss)	 	 $	 0.10	 	 $	 (0.05	 )	 $	 0.03	 	 $	 0.33	 	
Diluted earnings per common share -	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Net income (loss)	 	 $	 0.10	 	 $	 (0.05	 )	 $	 0.03	 	 $	 0.32	 	

	 	2005 (2)  	
 	 	 	First
Quarter  	 	 	Second
Quarter	 	 	Third
Quarter	 	 	Fourth
Quarter	 	
Revenues	 	$	112,157	 	$	117,206	 	$	114,159	 	$	135,883	 	
Equity in income of Unconsolidated Joint Ventures	 	 	9,070	 	 	9,372	 	 	9,268	 	 	14,740	 	
Income before minority and preferred interests	 	 	18,216	 	 	11,227	 	 	9,752	 	 	71,036	 	
Net income	 	 	8,420	 	 	1,636	 	 	288	 	 	61,391	 	
Net income (loss) allocable to common shareowners	 	 	2,270	 	 	(4,514	)	 	(9,030	)	 	55,387	 	
Basic earnings per common share -	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Net income (loss)	 	$	0.05	 	$	(0.09	)	$	(0.18	)	$	1.09	 	
Diluted earnings per common share -	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Net income (loss)	 	$	0.05	 	$	(0.09	)	$	(0.18	)	$	0.93	 	

(1)  	Amounts include a $2.1 million charge incurred in the first quarter of 2006 in connection with the write-off of financing costs related to the refinancing of the loan on Willow Bend prior to maturity, charges of $4.6 million from the second quarter of 2006 associated with the redemption of the remaining $113 million of the Series A Preferred Stock and the redemption of the Series I Preferred Stock, and a $1.0 million charge from the third quarter of 2006 incurred due to the write-off of financing costs related to the refinancing of the loan on Dolphin prior to maturity.	
(2)  	Amounts include a $3.1 million charge incurred in connection with the redemption of $87 million of Series A stock in the third quarter of 2005, and $12.7 million of charges incurred during the fourth quarter of 2005 in connection with a prepayment premium and the write-off of financing costs related to the refinancing of Short Hills, the pay-off of the Northlake loan, and debt modifications in connection with the pay-off of the Oyster Bay loan. The fourth quarter of 2005 also includes a $52.8 million gain on the sale of Woodland (Note 2).	

Note 21 - New Accounting Pronouncements

In December 2006, the FASB issued Staff Position No. EITF 00-19-2, “Accounting for Registration Payment Arrangements.” This Staff Position requires companies that agree to register securities recognize a liability if a payment to investors for failing to fulfill the agreement is probable and its amount can be reasonably estimated. This Staff Position is effective for fiscal years beginning after December 15, 2006. The Company does not anticipate that the adoption of this Staff Position will have a material effect on its results of operations or financial position.

In September 2006, the FASB issued Statement No. 157 “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies to accounting pronouncements that require or permit fair value measurements, except for share-based payments transactions under FASB Statement No. 123. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. As Statement No. 157 does not require any new fair value measurements or remeasurements of previously computed fair values, the Company does not believe adoption of this Statement will have a material effect on its financial statements.

F-33

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

In June 2006, the FASB issued Interpretation No. 48, “Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109.” This Interpretation defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. The Company does not anticipate that the adoption of this Statement will have a material effect on its results of operations or financial position.

Note 22 - Subsequent Events

In January 2007, the Company assumed full management and leasing responsibility for The Pier. The Company is in final negotiations to increase its ownership interest in the center from 30% to 50%. The Company expects to complete this transaction and close on a refinancing of the property in the first quarter of 2007 .

Also in January 2007, Taubman Asia completed the development services agreement for a 1.2 million square foot retail and entertainment complex in New Songdo City, Incheon, South Korea. The shopping complex is scheduled to open in early 2010, with construction beginning in 2007. Also, in January 2007, Taubman Asia was selected as the preferred retail partner of Macao Studio City, a resort property located on the Cotai Strip in Macao. Taubman Asia has signed a term sheet to acquire a minority position in the retail component of the project and will provide development, leasing and management services, subject to definitive agreements to be completed in the first half of 2007.

In addition, in January 2007, the Company announced its involvement as a third party leasing agent for a lifestyle center in the city of North Las Vegas, Nevada. This is a mixed use project that will include retail, dining, and entertainment of up to 1.3 million square feet and a residential component consisting of approximately 800 units. The shopping center will open in late 2008. The developer of the residential component is an affiliate of the Taubman family.

Also in January 2007, the Company acquired land for future development for $15.5 million.

F-34

Schedule II
TAUBMAN CENTERS, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2006, 2005, and 2004
(in thousands)

	 	 	 	 	Additions  	 	 	 	 	 	 	 	 	 	
 	 	 	Balance at beginning of year  	 	 	Charged to costs and expenses	 	 	Charged to
other accounts	 	 	
Write-offs	 	 	
Transfers, net	 	 	Balance at
end of year	 	
Year ended December 31, 2006	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance for doubtful receivables	 	$	5,497	 	$	5,110	 	 	 	 	$	(3,055	)	$	29	(1)	$	7,581	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Year ended December 31, 2005	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance for doubtful receivables	 	$	8,661	 	 	2,512	 	 	 	 	 	(5,676	)	 	 	 	$	5,497	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Year ended December 31, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance for doubtful receivables	 	$	7,403	 	 	4,103	 	 	 	 	 	(4,039	)	 	1,194	(2)	$	8,661	 	

(1)  	Represents the transfer in of Cherry Creek. Prior to January 1, 2006, the Company accounted for its interest in Cherry Creek under the equity method.	
(2)  	Represents the transfer in of International Plaza. Prior to July 2004, the Company accounted for its interest in International Plaza under the equity method.	

F-35

Schedule III
TAUBMAN CENTERS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2006
(in thousands)

 	 	Initial Cost to Company 	 	 	 	Gross Amount at Which
Carried at Close of Period	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Land 	 	 	Buildings, Improvements, and Equipment	 	 	Cost Capitalized Subsequent to Acquisition	 	 	Land	 	 	BI&E	 	 	Total	 	 	Accumulated Depreciation(A/D)	 	 	Total Cost Net of A/D	 	 	Encumbrances	 	 	Date of Completion of Construction
or Acquisition	 	 	Depreciable Life	 	
Shopping Centers:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beverly Center, Los Angeles, CA	 	 	 	 	 $	 209,149	 	 $	 40,417	 	 	 	 	$	249,566	 	$	249,566	 	 $	 105,053	 	$	144,513	 	$	343,608	 	 	1982	 	 	40 Years	 	
Cherry Creek Shopping Center, Denver, CO	 	 	 	 	 	
99,260	 	 	
107,611	 	 	 	 	 	
206,871	 	 	
206,871	 	 	
87,600	 	 	
119,271	 	 	
280,000	 	 	
1990	 	 	
40 Years	 	
Dolphin Mall, Miami, FL	 	$	34,881	 	 	240,261	 	 	14,684	 	 $	 34,881	 	 	254,945	 	 	289,826	 	 	48,791	 	 	241,035	 	 	5,000	(1)	 	2001	 	 	50 Years	 	
Fairlane Town Center, Dearborn, MI	 	 	17,330	 	 	104,668	 	 	31,876	 	 	17,330	 	 	136,544	 	 	153,874	 	 	45,439	 	 	108,435	 	 	55,000	(1)	 	1996	 	 	40 Years	 	
Great Lakes Crossing, Auburn Hills, MI	 	 	15,506	 	 	194,584	 	 	21,524	 	 	15,506	 	 	216,108	 	 	231,614	 	 	73,533	 	 	158,081	 	 	142,908	 	 	1998	 	 	50 Years	 	
International Plaza, Tampa, FL	 	 	 	 	 	309,784	 	 	8,971	 	 	 	 	 	318,755	 	 	318,755	 	 	58,684	 	 	260,071	 	 	178,719	 	 	2001	 	 	50 Years	 	
MacArthur Center, Norfolk, VA	 	 	 	 	 	146,204	 	 	10,836	 	 	 	 	 	157,040	 	 	157,040	 	 	36,617	 	 	120,423	 	 	138,243	 	 	1999	 	 	50 Years	 	
Northlake Mall, Charlotte, NC	 	 	22,540	 	 	148,098	 	 	3,197	 	 	22,540	 	 	151,295	 	 	173,835	 	 	14,139	 	 	159,696	 	 	215,500	 	 	2005	 	 	50 Years	 	
Regency Square, Richmond, VA	 	 	18,635	 	 	101,600	 	 	9,595	 	 	18,635	 	 	111,195	 	 	129,830	 	 	33,292	 	 	96,538	 	 	77,812	 	 	1997	 	 	40 Years	 	
The Mall at Short Hills, Short Hills, NJ	 	 	25,114	 	 	169,204	 	 	119,485	 	 	25,114	 	 	288,689	 	 	313,803	 	 	106,871	 	 	206,932	 	 	540,000	 	 	1980	 	 	40 Years	 	
Stony Point Fashion Park, Richmond, VA	 	 	10,677	 	 	101,797	 	 	1,058	 	 	10,677	 	 	102,855	 	 	113,532	 	 	20,735	 	 	92,797	 	 	111,864	 	 	2003	 	 	50 Years	 	
Twelve Oaks Mall, Novi, MI	 	 	25,410	 	 	191,185	 	 	7,109	 	 	25,410	 	 	198,294	 	 	223,704	 	 	71,266	 	 	152,438	 	 	-	(1)	 	1977	 	 	50 Years	 	
The Mall at Wellington Green, Wellington, FL	 	 	18,967	 	 	192,370	 	 	8,508	 	 	21,439	 	 	198,406	 	 	219,845	 	 	47,654	 	 	172,191	 	 	200,000	 	 	2001	 	 	50 Years	 	
The Shops at Willow Bend, Plano, TX	 	 	26,192	 	 	229,523	 	 	7,706	 	 	26,192	 	 	237,229	 	 	263,421	 	 	46,922	 	 	216,499	 	 	 	 	 	2001	 	 	50 Years	 	
Other:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Office Facilities	 	 	 	 	 	 	 	 	25,143	 	 	 	 	 	25,143	 	 	25,143	 	 	11,552	 	 	13,591	 	 	 	 	 	 	 	 	 	 	
Peripheral Land	 	 	30,828	 	 	 	 	 	 	 	 	30,828	 	 	 	 	 	30,828	 	 	 	 	 	30,828	 	 	 	 	 	 	 	 	 	 	
Construction in Process and
  Development Pre-Construction Costs	 	 	 	 	 	188,840	 	 	41,062	 	 	 	 	 	229,902	 	 	229,902	 	 	 	 	 	229,902	 	 	22,010	 	 	 	 	 	 	 	
Assets under CDD obligations	 	 	4,164	 	 	61,411	 	 	 	 	 	4,164	 	 	61,411	 	 	65,575	 	 	12,732	 	 	52,843	 	 	 	 	 	 	 	 	 	 	
Other	 	 	 	 	 	 1,158	 	 	 	 	 	 	 	 	 1,158	 	 	 1,158	 	 	 504	 	 	654	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	$	250,244	 	$	2,689,096	 	$	458,782	 	$	252,716	 	$	3,145,406	 	$	3,398,122	(2)	 $	 821,384	 	$	2,576,738	 	 	 	 	 	 	 	 	 	 	

The changes in total real estate assets and accumulated depreciation for the years ended December 31, 2006, 2005, and 2004 are as follows:

	 	 	Total Real Estate Assets  	 	 	Total Real Estate Assets	 	 	Total Real Estate Assets	 	 	 	 	 	Accumulated Depreciation	 	 	Accumulated
Depreciation (5)	 	 	Accumulated
Depreciation (5)	 	
 	 	 	2006	 	 	2005	 	 	2004	 	 	 	 	 	2006	 	 	2005	 	 	2004	 	
Balance, beginning of year	 	$	3,081,324	 	$	2,936,964	 	$	2,519,922	 	 	Balance, beginning of year	 	$	(651,665	)	$	(558,891	)	$	(450,515	)	
New development and improvements	 	 	151,428	 	 	173,297	 	 	112,995	 	 	Depreciation for year	 	 	(128,488	)	 	(120,673	)	 	(102,330	)	
Disposals/Write-offs	 	 	 (39,672	) 	 	(27,905	) 	 	(15,997	) 	 	Disposals/Write-offs	 	 	39,195	 	 	27,782	 	 	24,314	 	
Transfers In/(Out)	 	 	205,042	(3)	 	(1,032	)	 	320,044	(4)	 	Transfers In/(Out)	 	 	(80,426	)	 	 117	 	 	 (30,360	 )	
Balance, end of year	 	$	3,398,122	 	$	3,081,324	 	$	2,936,964	 	 	Balance, end of year	 	$	(821,384	)	$	(651,665	)	$	(558,891	)	

(1)  	These centers are collateral for the Company’s $350 million line of credit. Borrowings under the line of credit are primary obligations of the entities owning these centers.	
(2)  	The unaudited aggregate costs for federal income tax purposes as of December 31, 2006 was $3.220 billion.	
(3)  	Includes costs related to Cherry Creek, which became a consolidated center in 2006.	
(4)  	Includes costs relating to International Plaza, which became a Consolidated Joint Venture in 2004.	
(5)  	Does not include depreciation of assets recoverable from tenants.	

F-36

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 	 	TAUBMAN CENTERS, INC.	
 	 	 	
Date: February 27, 2007	By:	/s/ Robert S. Taubman          	
 	 	Robert S. Taubman, Chairman of the Board, President,
and Chief Executive Officer	

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signature	Title	Date	
 	 	 	
/s/ Robert S. Taubman	Chairman of the Board, President,	February 27, 2007	
Robert S. Taubman	Chief Executive Officer, and Director	 	
 	 	 	
/s/ Lisa A. Payne    	Vice Chairman, Chief Financial	February 27, 2007	
Lisa A. Payne	Officer, and Director (Principal Financial Officer)	 	
 	 	 	
/s/ William S. Taubman    	Chief Operating Officer,	February 27, 2007	
William S. Taubman	and Director	 	
 	 	 	
/s/ Esther R. Blum  	Senior Vice President, Controller, and	February 27, 2007	
Esther R. Blum	Chief Accounting Officer	 	
 	 	 	
*    	Director	February 27, 2007	
Graham Allison	 	 	
 	 	 	
*    	Director	February 27, 2007	
Jerome A. Chazen	 	 	
 	 	 	
*    	Director	February 27, 2007	
Craig M. Hatkoff	 	 	
 	 	 	
*    	Director	February 27, 2007	
Peter Karmanos, Jr.	 	 	
 	 	 	
*    	Director	February 27, 2007	
William U. Parfet	 	 	

*By:	/s/ Lisa A. Payne  	
 	Lisa A. Payne,
as Attorney-in-Fact	

EXHIBIT INDEX

 Exhibit Number

3(a)	--	Restated By-Laws of Taubman Centers, Inc. (incorporated herein by reference to Exhibit 3 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (“2005 Second Quarter Form 10-Q”)).	
 	 	 	
3(b)	--	Restated Articles of Incorporation of Taubman Centers, Inc. (incorporated herein by reference to Exhibit 3 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).	
 	 	 	
4(a)	--	Loan Agreement dated as of January 15, 2004 among La Cienega Associates, as Borrower, Column Financial, Inc., as Lender (incorporated herein by reference to Exhibit 4 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 ("2004 First Quarter Form 10-Q"))	
 	 	 	
4(b)	--	Assignment of Leases and Rents, La Cienega Associates, Assignor, and Column Financial, Inc., Assignee, dated as of January 15, 2004 (incorporated herein by reference to Exhibit 4 filed with the 2004 First Quarter Form 10-Q).	

4(c)	--	Leasehold Deed of Trust, with Assignment of Leases and Rents, Fixture Filing, and Security Agreement, dated as of January 15, 2004, from La Cienega Associates, Borrower, to Commonwealth Land Title Company, Trustee, for the benefit of Column Financial, Inc., Lender (incorporated herein by reference to Exhibit 4 filed with the 2004 First Quarter Form 10-Q).	
 	 	 	
4(d)	--	Amended and Restated Promissory Note A-1, dated December 14, 2005, by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	
 	 	 	
4(e)	--	Amended and Restated Promissory Note A-2, dated December 14, 2005, by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	

4(f)	--	Amended and Restated Promissory Note A-3, dated December 14, 2005, by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.3 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	
 	 	 	
4(g)	--	Amended and Restated Mortgage, Security Agreement and Fixture Filings, dated December 14, 2005 by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.4 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	
 	 	 	
4(h)	--	Amended and Restated Assignment of Leases, dated December 14, 2005, by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.5 of the Registrant’s Current Report on Form 8-K dated December 16, 2005).	

4(i)	--	Amended and Restated Secured Revolving Credit Agreement, dated as of August 9, 2006, by and among Dolphin Mall Associates Limited Partnership, Fairlane Town Center LLC and Twelve Oaks Mall, LLC, as Borrowers, Eurohypo AG, New York Branch, as Administrative Agent and Lead Arranger, and the various lenders and agents on the signature pages thereto (incorporated herein by reference to Exhibit 4.1 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	
 	 	 	
4(j)	--	Second Amended and Restated Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of August 9, 2006, by and between Dolphin Mall Associates Limited Partnership and Eurohypo AG, New York Branch, as Administrative Agent (incorporated herein by reference to Exhibit 4.5 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	

4(k)	--	Amended and Restated Mortgage, dated as of August 9, 2006, by and between Fairlane Town Center LLC and Eurohypo AG, New York Branch, as Administrative Agent (incorporated herein by reference to Exhibit 4.3 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	

4(l)	--	Amended and Restated Mortgage, dated as of August 9, 2006, by and between Twelve Oaks Mall, LLC and Eurohypo AG, New York Branch, as Administrative Agent (incorporated herein by reference to Exhibit 4.4 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	

4(m)	--	Guaranty of Payment, dated as of August 9, 2006, by and among The Taubman Realty Group Limited Partnership, Fairlane Town Center LLC and Twelve Oaks Mall, LLC (incorporated herein by reference to Exhibit 4.2 filed with the Registrant’s Current Report on Form 8-K dated August 9, 2006).	
 	 	 	
*10(a)	--	The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan, as Amended and Restated Effective as of September 30, 1997 (incorporated herein by reference to Exhibit 10(b) filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1997).	
 	 	 	
*10(b)	--	First Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan as Amended and Restated Effective as of September 30, 1997, effective January 1, 2002 (incorporated herein by reference to Exhibit 10(b) filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001 (“2001 Form 10-K”)).	
 	 	 	
*10(c)	--	Second Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive Plan as Amended and Restated Effective as of September 30, 1997 (incorporated herein by reference to Exhibit 10(c) filed with the 2004 Form 10-K).	
 	 	 	
*10(d)	--	Third Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive Plan as Amended and Restated Effective as of September 30, 1997 (incorporated herein by reference to Exhibit 10(d) filed with the 2004 Form 10-K).	
 	 	 	
*10(e)	--	The Form of The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan Option Agreement (incorporated herein by reference to Exhibit 10(e) filed with the 2004 Form 10-K).	

10(f)	--	Master Services Agreement between The Taubman Realty Group Limited Partnership and the Manager (incorporated herein by reference to Exhibit 10(f) filed with the 1992 Form 10-K).	
 	 	 	
10(g)	--	Amended and Restated Cash Tender Agreement among Taubman Centers, Inc., The Taubman Realty Group Limited Partnership, and A. Alfred Taubman, A. Alfred Taubman, acting not individually but as Trustee of the A. Alfred Taubman Restated Revocable Trust, and TRA Partners, (incorporated herein by reference to Exhibit 10 (a) filed with the 2000 Second Quarter Form 10-Q).	

*10(h)	--	Supplemental Retirement Savings Plan (incorporated herein by reference to Exhibit 10(i) filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994).	
 	 	 	
*10(i)	--	The Taubman Company Long-Term Compensation Plan (as amended and restated effective January 1, 2000) (incorporated herein by reference to Exhibit 10 (c) filed with the 2000 Second Quarter Form 10-Q).	

*10(j)	--	First Amendment to the Taubman Company Long-Term Compensation Plan (as amended and restated effective January 1, 2000) (incorporated herein by reference to Exhibit 10(m) filed with the 2004 Form 10-K).	
 	 	 	
*10(k)	--	Second Amendment to the Taubman Company Long-Term Performance Compensation Plan (as amended and restated effective January 1, 2000).	
 	 	 	
*10(l)	--	The Taubman Company 2005 Long-Term Incentive Plan (incorporated herein by reference to the Form DEF14A filed with the Securities and Exchange Commission on April 5, 2005).	

  

*10(m)	--	Employment Agreement between The Taubman Company Limited Partnership and Lisa A. Payne (incorporated herein by reference to Exhibit 10 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997).	
 	 	 	
*10(n)	--	Change of Control Agreement, dated July 17, 2006, by and among the Company, Taubman Realty Group Limited Partnership, and Lisa A. Payne (incorporated herein by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K dated July 17, 2006).	
 	 	 	
*10(o)	--	Form of Change of Control Agreement (incorporated herein by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K dated July 17, 2006).	
 
10(p)	--	Second Amended and Restated Continuing Offer, dated as of May 16, 2000. (incorporated herein by reference to Exhibit 10 (b) filed with the 2000 Second Quarter Form 10-Q).	
 	 	 	
10(q)	--	The Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership dated September 30, 1998 (incorporated herein by reference to Exhibit 10 filed with the Registrant’s Quarterly Report on Form 10-Q dated September 30, 1998).	
 	 	 	
10(r)	--	Annex II to Second Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of The Taubman Realty Group Limited Partnership. (incorporated herein by reference to Exhibit 10(p) filed with Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999 (“1999 Form 10-K”)).	
 	 	 	
10(s)	--	Annex III to The Second Amendment and Restatement of Agreement of Limited Partnership of The Taubman Realty Group Limited Partnership, dated as of May 27, 2004 (incorporated by reference to Exhibit 10(c) filed with the 2004 Second Quarter Form 10-Q).	
 
10(t)	--	First Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership dated September 30, 1998 (incorporated herein by reference to Exhibit 10(b) filed with the Registrant’s Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2002 (“2002 Second Quarter Form 10-Q/A”)).	
 	 	 	
10(u)	--	Second Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of The Taubman Realty Group Limited Partnership effective as of September 3, 1999 (incorporated herein by reference to Exhibit 10(a) filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (“1999 Third Quarter Form 10-Q”)).	

10(v)	--	Third Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership, dated May 2, 2003 (incorporated herein by reference to Exhibit 10(a) filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (“2003 Second Quarter Form 10-Q”)).	
 	 	 	
10(w)	--	Fourth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership, dated December 31, 2003 (incorporated herein by reference to Exhibit 10(x) filed with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003).	
 	 	 	
10(x)	--	Fifth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership, dated February 1, 2005 (incorporated herein by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on February 7, 2005).	
 	 	 	
10(y)	--	Sixth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited Partnership, dated March 29, 2006 (incorporated herein by reference to Exhibit 10 filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006).	

10(z)	--	Amended and Restated Shareholders’ Agreement dated as of October 30, 2001 among Taub-Co Management, Inc., The Taubman Realty Group Limited Partnership, The A. Alfred Taubman Restated Revocable Trust, and Taub-Co Holdings LLC (incorporated herein by reference to Exhibit 10(q) filed with the 2001 Form 10-K).	
 	 	 	
*10(aa)	--	The Taubman Realty Group Limited Partnership and The Taubman Company LLC Election and Option Deferral Agreement (incorporated herein by reference to Exhibit 10(r) filed with the 2001 Form 10-K).	
 	 	 	
10(ab)	--  	Amended and Restated Agreement of Partnership of Sunvalley Associates, a California general partnership (incorporated herein by reference to Exhibit 10(a) filed with the 2002 Second Quarter Form 10-Q/A).	
 
10(ac)	--	Operating Agreement of Taubman Land Associates, a Delaware Limited Liability Company, dated October 20, 2006.	
 	 	 	
*10(ad)	--	Summary of Compensation for the Board of Directors of Taubman Centers, Inc. (incorporated herein by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K dated December 7, 2004).	
 	 	 	
*10(ae)	--	Summary of Compensation for the Board of Directors of Taubman Centers, Inc.	
 	 	 	
*10(af)	--	The Form of The Taubman Company Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10 of the Registrant’s Current Report on Form 8-K dated May 18, 2005).	
*10(ag)	--	The Taubman Centers, Inc. Non-Employee Directors’ Deferred Compensation Plan (incorporated by reference to Exhibit 10 of the Registrant’s Current Report on Form 8-K dated May 18, 2005).	

*10(ah)	--	The Form of The Taubman Centers, Inc. Non-Employee Directors' Deferred Compensation Plan (incorporated by reference to Exhibit 10 of the Registrant’s Current Report on Form 8-K dated May 18, 2005).	
 	 	 	
12	--	Statement Re: Computation of Taubman Centers, Inc. Ratio of Earnings to Combined Fixed Charges and Preferred Dividends.	
 	 	 	
21	--	Subsidiaries of Taubman Centers, Inc.	

23	--	Consent of KPMG LLP.	
 	 	 	
24	--	Powers of Attorney.	

31(a)	--  	Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
31(b)	--  	Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32(a)	--  	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32(b)	--  	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
99(a)	--  	Debt Maturity Schedule.	
 	 	 	
99(b)	--  	Real Estate and Accumulated Depreciation Schedule of the Unconsolidated Joint Ventures of The Taubman Realty Group Limited Partnership.	

 

 
Exhibit 10 (ab)

OPERATING AGREEMENT OF

TAUBMAN LAND ASSOCIATES LLC

a Delaware limited liability company

OPERATING AGREEMENT OF

TAUBMAN LAND ASSOCIATES LLC

TABLE OF CONTENTS

ARTICLE I ORGANIZATION  
 
1.1   Formation  
 
1.2   Name  
 
1.3   Purposes and Powers  
 
1.4   Term  
 
1.5   Principal Place of Business; Agent For Service of Process  
 
1.6   Filing of Certificates  
 
1.7   Nature of Membership Interests  
 
1.8   Liability of Members  
 
1.9   Taxation as a Partnership  
 
1.10   Representations, Warranties, and Covenants
 
1.11   Authority and Liability of Members
 
ARTICLE II DEFINITIONS  
 
ARTICLE III CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS  
 
3.1   Members’ Capital Accounts  
 
3.2   Percentage Interests  
 
3.3   Capital Contributions  
 
3.4   Additional Funds; Anticipated Financing  
 
3.5   Restrictions Relating to Capital  
 
ARTICLE IV ALLOCATIONS OF PROFIT AND LOSS AND DISTRIBUTION OF AVAILABLE CASH
 
4.1   Members’ Shares of Profits  
 
4.2   Members’ Shares of Losses  
 
4.3   Special Allocations  
 
4.4   Allocation for Federal Income Tax Purposes  
 
4.5   Distributions of Available Cash  
 
4.6   Bank Acounts
 
4.7   Books of Account and Reports
 
4.8   Tax Returns and Audits

i

4.9   Company Fiscal Year
 
ARTICLE V MANAGEMENT; EXECUTION OF LEGAL INSTRUMENTS; OTHER VENTURES  
 
5.1   Management; Authority of the Managing Member; Limitations on Authority  
 
5.2   Response of the Members
 
5.3   Compensation of Members and Affiliates
 
5.4   Authority for Execution of Instruments
 
5.5   Management Agreement
 
5.6   Indemnification of the Members; Limit on Liability
 
5.7   Bank Accounts
 
5.8   Activities and Competing Ventures of the Members and Affiliates
 
5.9   Tax Matters Member
 
5.10   Specific Provisions Relating to Real Estate Investment Trust Status
 
ARTICLE VI TRANSFERS OF MEMBERSHIP INTERESTS  
 
6.1   General Restrictions on Dispositions
 
6.2   Subsitution of Members
 
6.3   Intentionally Omitted
 
6.4   Right of First Refusal
 
6.5   Buy-Sell
 
6.6   Sale of the Property
 
6.7   Closings
 
6.8   Pledge of Membership Interests
 
ARTICLE VII DISABLING EVENT IN RESPECT OF A MEMBER; SUCCESSION OF INTERESTS
 
7.1   Disabling Event in Respect of a Member
 
7.2   Single Respresentative to Act on Behalf of Successors
 
7.3   Succession by Individuals to Membership Interests of Members
 
7.4   References to "Member" and "Members" in the Event of Successors
 
7.5   Waiver of Dissolution if Transfer is in full Compliance with Agreement; Negation of Right to Dissolve Except as Herein Provided; No Withdrawal
 
7.6   Determination of Fair Market Value of Membership Interests
 
ARTICLE VIII WINDING UP, LIQUIDATION, AND TERMINATION OF THE COMPANY
 
8.1   Liquidation of the Assets of the Company and Disposition of the Proceeds Thereof
 
8.2   Cancellation of Certificates
 
ARTICLE IX MISCELLANEOUS

ii

9.1   Exculpation
 
9.2   Notices
 
9.3   Applicable Law
 
9.4   Word Meanings; Gender
 
9.5   Section Titles
 
9.6   Entire Agreement
 
9.7   Waiver
 
9.8   Separability of Provisions
 
9.9   Binding Agreement
 
9.10   Equitable Remedies
 
9.11   Partition
 
9.12   Amendment
 
9.13   No Third Party Rights Created Hereby
 
9.14   Liability of Members
 
9.15   Additional Acts and Instruments
 
9.16   Organization Expenses
 
9.17   Agreement in Counterparts
 
9.18   Attorneys-in-Fact
 
9.19   Consents, Approval, Etc.

 
 Exhibit A   Property Description
 Exhibit B   Members of Taubman

 

iii

OPERATING AGREEMENT OF

TAUBMAN LAND ASSOCIATES LLC

a Delaware limited liability company

 THIS OPERATING AGREEMENT (this “ Agreement ”) is made and entered into effective as of October 20, 2006, by and between TRG SUNVALLEY LLC, a Delaware limited liability company (“ TRG LLC ”), and TILC-SV, LLC, a Michigan limited liability company (“ Taubman ”) (individually a “ Member ” and together the “ Members ”).

ARTICLE I  
ORGANIZATION
 
1.1    Formation . The Company was formed pursuant to the applicable laws of the State of Delaware including the Delaware Limited Liability Company Act as in effect in the State of Delaware, as the same may be amended from time to time (all of such laws being hereinafter referred to as the “ Limited Liability Company Law ”), by the filing of a Certificate of Formation of the Company with the Secretary of State of the State of Delaware on October 5, 2006. The Company shall continue upon the terms and conditions herein set forth.

1.2    Name . The name of the Company is “Taubman Land Associates LLC.” The Company may also conduct its business under one or more assumed names if so authorized by the Members.

1.3    Purposes and Powers . The Company has been organized pursuant to the Limited Liability Company Law and in accordance with this Agreement solely in order to (i) acquire, hold, own, develop, improve, lease, finance, refinance, sell, transfer, exchange, and encumber the fee simple interest in that certain property consisting of approximately sixty-eight (68) acres located in Concord, California, which has been ground leased in part to SunValley Shopping Center LLC, as successor-in-interest, by various assignments, of Del E. Webb Corporation, an Arizona corporation, and ground leased in part to Sears, Roebuck and Co., and which has been developed as a regional retail shopping center known as “SunValley Shopping Center” (as more particularly described on Exhibit A hereto, the “ Property ”), and any other property that the Company shall acquire, directly or indirectly, that is related to the Property, and (ii) engage in any other activities in respect of any Company assets as the Members shall determine in accordance with the Limited Liability Company Law or as otherwise set forth in this Agreement. The Company shall have all such powers as are necessary or appropriate to carry out its purposes as described in this Section 1.3. Except as expressly and specifically provided in this Agreement, no Member shall have any authority to act for, bind, commit, or assume any obligation or responsibility on behalf of the Company, its properties, or the other Member.

1.4    Term . The term of the Company commenced on the date of the initial filing of the Certificate of Formation of the Company and shall end, and the Company shall dissolve, on the first to occur of (i) the occurrence of any event which would, under the Limited Liability Company Law (notwithstanding the provisions of this Agreement) or under the terms of this Agreement, result in the dissolution of the Company; provided, however, that the term of the Company shall not end upon the occurrence of such an event if the Company is reconstituted

1

or otherwise continues as provided in this Agreement, (ii) cessation of the business of the Company in the ordinary course, or (iii) the determination by the Members to dissolve the Company. No Member shall have the unilateral right to terminate and dissolve the Company prior to the end of its term as provided in this Section 1.4.

1.5    Principal Place of Business; Agent For Service of Process . The principal office of the Company shall be located at 200 East Long Lake Road, Bloomfield Hills, Michigan 48304, and/or such other address(es) as may be designated from time to time by the Managing Member with written notice thereof to the Non-Managing Member. The name and address of the registered agent for service of process on the Company in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, or such other Person and address as shall be designated by the Managing Member, with written notice to the Non-Managing Member.

1.6    Filing of Certificates . The Members hereby agree to execute, file and record all such other certificates and documents, including amendments to the Certificate of Formation of the Company and applications to qualify as a foreign limited liability company, and to do such other acts as the Managing Member deems appropriate to comply with all legal requirements necessary for the formation, continuation, and operation of a limited liability company, the ownership of property, and the conduct of business under the laws of the State of Delaware, the State of California, and any other jurisdiction in which the Company may own property or conduct business.

1.7    Nature of Membership Interests . Membership Interests in the Company shall be personal property for all purposes. All property owned by the Company, whether real or personal, tangible or intangible, shall be deemed to be owned by the Company as an entity. No Member, individually, shall have ownership of such property.

1.8    Liability of Members . Unless otherwise provided by law or expressly assumed in writing, a Person who is a Member shall not be liable for the acts, debts or liabilities of the Company.

1.9    Taxation as a Partnership . The Members intend that the Company shall be taxed as a partnership, pursuant to Subchapter K of the Code, for federal, state, and local income tax purposes, and agree to report all Company items of income, gain, loss, deduction and credit in accordance with that Subchapter.

 1.10   Representations, Warranties, and Covenants .

 (a)   TRG LLC hereby represents and warrants to Taubman as follows:
(i)   TRG LLC is a Delaware limited liability company, duly formed, validly   existing and in good standing under the laws of the State of Delaware.

(ii)   This Agreement has been duly authorized, validly executed, and   constitutes the binding obligation of and is enforceable against TRG LLC in   accordance with its terms. TRG LLC has full power, authority, and capacity to enter   into this Agreement and to carry out its obligations as described in this Agreement.

2

(iii)   No litigation or proceedings, including, without limitation arbitration   proceedings, are pending or, to the best knowledge of TRG LLC, threatened against   TRG LLC or any of its Affiliates which, if adversely determined, could individually or in the aggregate have   an adverse effect on the consummation and the performance of this Agreement by   TRG LLC.
 
(iv)   TRG LLC is not a "foreign person” within the meaning of the Foreign Investment in Real Property Tax Act of 1980. as amended.
 
(v)   TRG LLC is wholly owned by TRG.
 
 (b)   Taubman hereby represents, warrants, and covenants to TRG LLC as follows:

(i)   Taubman is a Delaware limited liability company, duly formed, validly existing and in good standing under the laws of the State of Delaware.
 
(ii)   This Agreement has been duly authorized, validly executed, and constitutes the binding obligation of and is enforceable against Taubman in accordance with its terms. Taubman has full power, authority, and capacity to enter into this Agreement, and to carry out its obligations as described in this Agreement.
 
(iii)   No litigation or proceedings, including, without limitation arbitration proceedings, are pending or, to the best knowledge of Taubman, threatened against Taubman or any of its Affiliates which, if adversely determined, could individually or in the aggregate have an adverse effect on the consummation and the performance of this Agreement by Taubman.
 
(iv)   Taubman is not a "foreign person" within the meaning of the Foreign Investment in Real Property Tax Act of 1980, as amended.
 
 (v)   The current members of Taubman are identified on Exhibit B attached hereto.

 (c)   The representations, warranties, and covenant in this Section 1.10 shall survive the formation and the termination of the Company.

 Section1.11     Authority and Liability of Members.   Except as otherwise provided in this Agreement, no Member shall have any authority to act for, bind, commit, or assume any obligation or responsibility on behalf of the Company, its properties, or the other Member. No Member, in its capacity as a Member under this Agreement, shall be responsible or liable for any indebtedness or obligation of the other Member, nor shall the Company be responsible or liable for any indebtedness or obligation of any Member, incurred either before or after the execution and delivery of this Agreement by such Member.

ARTICLE II   
DEFINITIONS
 
“ Accountant ” is defined in Section 4.8 hereof.

“ Adjustments ” is defined in Section 7.6 hereof.

3

“ Adjustment Notice ” is defined in Section 7.6 hereof.

“ Affiliate” means (i) with respect to any individual, any member of such individual’s Immediate Family and/or a Family Trust with respect to such individual, and any entity in which such individual and/or his Affiliate(s) own, directly or indirectly, twenty-five percent (25%) or more of any class of Equity Security or of the aggregate Beneficial Interest of all beneficial owners, or in which such individual or his Affiliate is a managing general partner or a managing member, or which is Controlled By such individual and/or his Affiliates, directly or indirectly; and (ii) with respect to any Person (other than an individual), any Person (other than an individual) which Controls, is Controlled By, or is Under Common Control With, such Person, and any individual who is a general partner, or managing member, or who directly or indirectly Controls such Person.

“ Agreement ” is defined in the Preamble hereto.

“ Auditor ” is defined in Section 4.8 hereof.

" Available Cash " means the excess of the Company's cash and cash equivalents over the amount of cash needed by the Company, as reasonably determined by the Managing Member, to (1) service its debts and obligations to Third Parties, (2) service its debts and obligations to the Members and their Affiliates as provided in this Agreement, (3) maintain adequate capital and reserves for, by way of example and not limitation, working capital and reasonably foreseeable needs of the Company, and (3) conduct its business and carry out its purposes.

" Bankruptcy " as to any Person means (i) applying for or consenting to the appointment of, or the taking of possession by, a receiver, custodian, trustee, administrator, liquidator, or the like of itself or of all or a substantial portion of its assets, (ii) admitting in writing its inability, or being generally unable or deemed unable under any applicable law, to pay its debts as such debts become due, (iii) convening a meeting of creditors for the purpose of consummating an out-of-court arrangement, or entering into a composition, extension, or similar arrangement, with creditors in respect of all or a substantial portion of its debts, (iv) making a general assignment for the benefit of its creditors, (v) placing itself or allowing itself to be placed, voluntarily or involuntarily, under the protection of the law of any jurisdiction relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, (vi) taking any action for the purpose of effecting any of the foregoing, or (vii) if a proceeding or case shall be commenced against such Person in any court of competent jurisdiction, seeking (a) the liquidation, reorganization, dissolution, winding-up, or composition or readjustment of debts, of such Person, (b) the appointment of a trustee, receiver, custodian, administrator, liquidator, or the like of such Person or of all or a substantial portion of such Person's assets, or (c) similar relief in respect of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed or unstayed for a period of ninety (90) Days, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect for a period of sixty (60) Days, or an order for relief or other legal instrument of similar effect against such Person shall be entered in an involuntary case under such law and shall continue unstayed for a period of sixty (60) Days.

“ Beneficial Interest ”   means an interest, whether as partner, joint venturer, member, stockholder, cestui que trust , beneficiary of a trust, or otherwise, a contract right or a legal or equitable position under or by which the possessor participates in the economic or other results of the business organization to which such interest, contract right, or position relates.

4

“ Best Efforts ” means that the obligated party shall make a diligent, commercially reasonable, and good faith effort to accomplish the applicable objective. Such obligation, however, does not require the expenditure of funds or the incurrence of any liability on the part of the obligated party, nor does it require that the obligated party act in a manner which would otherwise be contrary to prudent business judgment or normal commercial practices in order to accomplish the objective. The fact that the objective is not actually accomplished is no indication that the obligated party did not in fact utilize its Best Efforts in attempting to accomplish the objective.

“ Book Value ” is defined in Section 3.1(e) hereof.

“ Business Day ” means any day except a Saturday, a Sunday, or a legal holiday in San Francisco, California, and on which commercial banks are open for business in San Francisco, California.

“ Buyer ” is defined in Section 6.4(a) hereof.

“ Buy-Sell Offer ” is defined in Section 6.5(a) hereof.

“ Capital Account ” is defined in Section 3.1 hereof.

“ Capital Contribution ” means the initial amount of cash or the net fair market value of property contributed to the capital of the Company by a Member, increased by any additional contributions of cash or the net fair market value of property made to the capital of the Company by such Member in accordance with the provisions of this Agreement. Any reference to the Capital Contribution of a Member shall include the Capital Contributions made by a predecessor-in-interest of such Member.

" Change of Control Event " means (i) any loss of the right of A. Alfred Taubman, any member of his Immediate Family, any heir of the foregoing, any trust for the benefit of the foregoing and any partnership or limited liability company or corporation Controlled By some or all of the foregoing (for any reason other than a voluntary sale of shares of Taubman Centers, Inc. by one (1) or more of the foregoing Persons) to nominate at least three (3) members of the Board of Directors, or (ii) the acquisition by any person or group or persons (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934. as amended, other than A. Alfred Taubman, any members of his Immediate Family, any heir of the foregoing, any trust for the benefit of any of the foregoing, any private charitable foundation, or any partnership, limited liability company or corporation owned or Controlled By some or all of the foregoing, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of forty percent (40%) or more of the outstanding voting capital stock of Taubman Centers, Inc.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provision of succeeding law).

“ Communication ” and “ Communications ” are defined in Section 9.2(a) hereof.

“ Company ” means Taubman Land Associates LLC, a Delaware limited liability company.

“ Contribution Notice ” is defined in Section 3.4(d) hereof.

5

“ Control ” means (and its correlative terms “ Controlled By ” and “ Under Common Control With ”) with respect to any corporation, partnership, limited liability company, trust, or other business organization, possession, directly or indirectly, by the applicable individual or individuals, entity or entities, of the power to direct or cause the direction of the management and policies thereof, whether through the ownership of voting securities, by contract, or otherwise.

“ Day ” or “ Days ” means each calendar day, including Saturdays, Sundays, and legal holidays; provided, however, that if the Day on which a period of time for consent or approval or other action ends is not a Business Day, such period shall end on the next Business Day.
 
“ Defaulting Member ” is defined in Section 3.4(e) hereof.

“ Deficit Member ” is defined in Section 3.4(b) hereof.

“ Depreciation ” means for each Fiscal Year of the Company or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable under the Code with respect to an asset for such year or other period, except that if the Book Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Book Value using any reasonable method selected by the Managing Member.

“ Disabled Member ” is defined in Section 7.1(a)(ii) hereof.

“ Disabling Event ” is defined in Section 7.1(a)(i) hereof.

“ Equity Security ”   has the meaning ascribed to it in the Securities Exchange Act of 1934, as amended to the date hereof, and the rules and regulations thereunder (and any successor laws, rules, and regulations of similar import).

“ Event of Withdrawal ” is defined in Section 7.1(a)(iv) hereof.

“ Excess Member ” is defined in Section 3.4(b) hereof.

“ Exercise Notice ” is defined in Section 6.4(a) hereof.

“ Exercise Period ” is defined in Section 6.4(a) hereof.

“ Excess Payment ” is defined in Section 3.4(b) hereof.

“ Family Trust ” means, with respect to any individual, a trust for the benefit of such individual or for the benefit of any member or members of such individual’s Immediate Family (for the purpose of determining whether or not a trust is a Family Trust, the fact that one or more of the beneficiaries (but not the sole beneficiary) of the trust includes a Person or Persons, other than a member of such individual’s Immediate Family, entitled to a distribution after the death of the settlor if he, she, it, or they shall have survived the settlor of such trust, which distribution is to be made of something other than a Membership Interest, directly or indirectly, in the Company and/or includes an organization or organizations exempt from federal income tax pursuant to the

6

provisions of Sections 501(a) of the Code and described in Section 501(c)(3) of the Code shall be disregarded); provided, however, that in respect of transfers by way of testamentary or inter vivos trust the trustee or trustees shall be solely such individual, a member or members of such individual’s Immediate Family, a responsible financial institution, an attorney that is a member of the Bar of any State in the United States, or an individual or individuals approved by that Member or those Members then holding an aggregate Percentage Interest of at least eighty percent (80%).

“ Fiscal Year ” means (i) the period commencing on the effective date of this Agreement and ending on the following December 31, (ii) any subsequent twelve (12) month period commencing on January 1 and ending on December 31, or (iii) any portion of any period described in clause (ii) for which the Company is required to allocate Profits, Losses, and other items of Company income, gain, loss or deduction pursuant to Article IV of this Agreement.

“ Gross Income ” means the income of the Company and the net gain from sales of Company property before deduction of items of expense or deduction.

“ Guarantor ” is defined in Section 3.4(b) hereof.

“ Immediate Family ”   means with respect to any individual such individual’s spouse (past or then current), descendants (natural or adoptive), grandparents, parents, siblings of the whole or half blood, and descendants of parents of such individual’s spouse (past or then current).

“ Initiating Member ” is defined in Section 6.5(a) hereof.

“ Limited Liability Company Law ” is defined in Section 1.1 hereof.

“ Liquidator ” is defined in Section 8.1(a) hereof.

“ Losses ” means the losses of the Company as determined in accordance with the method of accounting followed by the Company for federal income tax purposes, including any separately stated items under Code Section 702(a).

“ Major Decision ” is defined in Section 5.1(c) hereof.

“ Management Agreement ” is defined in Section 5.5 hereof.

“ Managing Member ” is defined in Section 5.1(a) hereof.

“ Member ” and “ Members ” are defined in the Preamble hereto.

“ Membership Interest ”   as to each Member means all of the rights of a Member in the Company and shall include, but not be limited to, a Member’s (i) right to inspect the Company’s books and records, (ii) right to participate in the management and affairs of, and vote on matters presented to, the Company, and (iii) right to share in allocations of Profits and Losses and distributions of Available Cash, all as and to the extent provided in this Agreement.
 
“ Member Nonrecourse Debt Minimum Gain ” is defined in Section 4.3(d) hereof.

7

“ Minimum Gain ” means an amount determined in accordance with Regulations Section 1.704-2(b)(2), by computing with respect to each nonrecourse liability (as defined in Regulations Section 1.704-2(b)(3)) of the Company, the amount of gain (of whatever character), if any, that would be realized by the Company if (in a taxable transaction) it disposed of property subject to such liability in full satisfaction thereof, and by then aggregating the amounts so computed.

“ Net Value ” is defined in Section 7.6 hereof.

“ Non-Defaulting Member ” is defined in Section 3.4(e) hereof.

“ Non-Initiating Member ” is defined in Section 6.5(a) hereof.

“ Non-Managing Member ” means the Member that is not the Managing Member.

“ Non-Pledging Member ” is defined in Section 6.8(iii) hereof.

“ Non-Triggering Member ” is defined in Section 6.6(a) hereof.

“ Offer ” is defined in Section 6.4(a) hereof.

“ Ownership Requirement ” is defined in Section 1.10(b)(vi) hereof.

“ Percentage Interest ” is defined in Section 3.2 hereof.

" Person " means an individual, a partnership (general or limited), limited liability company, corporation, joint venture, business trust, cooperative, association, or other form of business organization, whether or not regarded as a legal entity under applicable law, a trust (inter vivos and testamentary), an estate of a deceased, insane, or incompetent Person, a quasi-governmental entity, a government or any agency, authority, political subdivision, or other instrumentality thereof, or any other entity.

" Pledge " means any pledge, encumbrance, hypothecation, or other assignment of a Membership Interest or any proceeds thereof as collateral for a loan to or for the benefit of the Member whose Membership Interest or the proceeds thereof has been pledged.

“ Pledge Documents ” is defined in Section 6.8(iii) hereof.

“ Pledgee ” is defined in Section 6.8(a)(i) hereof.

“ Pledgee Rights ” means any of a Pledgee’s rights under a loan or pledge agreement, including, without limitation, foreclosure, a transfer in lieu of foreclosure, or sale pursuant to the applicable commercial code.

“ Pledging Member ” is defined in Section 6.8 hereof.

“ Prime ” shall mean that rate of interest equal to the prime rate of interest published from time to time by the Company’s principal bank, or if such bank ceases to announce such a rate, the average of the prime rates prevailing from time to time at the two (2) national banks in the State of California having the largest deposits for the calendar quarter immediately preceding the date that the prime rate is to be determined.

8

“ Profits ” means the income of the Company as determined in accordance with the method of accounting followed by the Company for federal income tax purposes, including any separately stated items under Code Section 702(a).

“ Property ” is defined in Section 1.3 hereof.

“ Regulations ” means the permanent and temporary regulations of the United State’s Department of the Treasury under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“ Regulatory Allocations ” is defined in Section 4.3(h) hereof.

“ REIT ” means a real estate investment trust.

“ REIT Member ” is defined in Section 5.10 hereof.

“ Required Funds ” is defined in Section 3.4(b) hereof.

“ Return ” means a variable return, recalculated and compounded monthly, equal to Prime plus one percent (1%).

“ Sale Offer ” is defined in Section 6.6(a) hereof.

“ Sale Price ” is defined in Section 6.6(a) hereof.

“ Seller ” is defined in Section 6.4(a) hereof.

“ Subject Interest ” is defined in Section 6.4(a) hereof.

“ Successor ” is defined in Section 7.1(a)(iii) hereof.

“ Taubman ” is defined in the Preamble to this Agreement.

“ Tax Matters Member ” is defined in Section 5.9(a) hereof.

" Third Party " or " Third Parties " means one (1) or more Persons who are neither Members nor Affiliates of a Member.

“ Total Price ” is defined in Section 6.5(a) hereof.

“ Transfer ” means any assignment, sale, transfer, conveyance, encumbrance, Pledge, granting of an option or proxy, or other disposition or act of alienation.

“ TRG ” means The Taubman Realty Group Limited Partnership, a Delaware limited partnership.

“ TRG Excess Contributions ” is defined in Section 3.4(c) hereof.

“ TRG LLC ” is defined in the Preamble to this Agreement.

“ Triggering Member ” is defined in Section 6.6(a) hereof.

9

“ Trigger Notice ” is defined in Section 6.6(a) hereof.

“ TTC ” means The Taubman Company LLC, a Delaware limited liability company.

“ Valuation Date ” is defined in Section 7.6 hereof.

ARTICLE III  
CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS
 
3.1    Members’ Capital Accounts . The Company shall establish and maintain a separate capital account (“ Capital Account ”) for each Member, in accordance with the following provisions:

(a)    To each Member’s Capital Account there shall be credited such Member’s Capital Contributions, such Member’s distributive share of Profits and any items in the nature of income or gain that are specially allocated pursuant to Article IV hereof, and the amount of any Company liabilities assumed by such Member or which are secured by any property distributed to such Member.

(b)    To each Member’s Capital Account there shall be debited an amount of cash and the agreed-upon fair market value of any property distributed to such Member pursuant to any provisions of this Agreement, such Member’s distributive share of Losses and any items in the nature of expenses or losses that are specially allocated pursuant to Article IV hereof, and the amount of any liabilities of such Member that the Company assumes or takes subject to that have not been taken into account in determining the amount of such Member’s Capital Contributions.

(c)    Except as provided in this Agreement with respect to the Return, no interest or other fixed return shall accrue or be paid on any Capital Contributions.
(d)    It is intended that Capital Accounts be maintained in accordance with the provisions of Regulations Section 1.704-1(b) and shall be interpreted and applied as provided in the Regulations. In the event that the Managing Member reasonably determines that the manner in which the Capital Accounts, or any debits or credits thereto, are maintained or computed under the Regulations should be further reflected in an amendment hereto, the Members shall enter into an appropriate amendment to this Agreement.
 
(e)    In the event that the Book Values of Company assets are adjusted as described below in this Section 3.1(e), the Capital Accounts of the Members shall be adjusted simultaneously to reflect the aggregate net adjustments as if the Company recognized gain or loss for federal income tax purposes equal to the amount of such aggregate net adjustment. For the purpose of this Agreement, the term “ Book Value ” means, with respect to any asset, such asset’s adjusted basis for federal income tax purposes, except:
 
(i)    the initial Book Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset;
 
(ii)    the Book Value of all Company assets may be adjusted, as determined by the Members to be necessary or appropriate to reflect the relative economic interests of the Members, to equal their respective gross fair market values as of the following

10

times: (1) the acquisition from the Company, in exchange for more than a de minimis capital contribution, of a Membership Interest by an additional member or of an additional Membership Interest by an existing Member; (2) the distribution by the Company to a Member of more than a de minimis amount of Company property (including money) as consideration for an interest in the Company; and (3) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)( g );
 
(iii)    if the Book Value of an asset has been determined or adjusted as provided in paragraphs (i) or (ii) above, the Book Value of such asset shall thereafter be adjusted by the Depreciation (as defined below) taken into account with respect to such asset for purposes of computing Profits and Losses; and

(iv)    the Book Value of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution.
 
 In the event that any provision of this Section 3.1 or Section 3.3 hereof requires the determination of the fair market value of any asset, such fair market value shall be as determined by the mutual agreement of the Members provided that (x) such value is reasonably agreed to by the Members in arm’s-length negotiations and (y) the Members have sufficiently adverse interests as provided in Regulations Section 1.704-1(b)(2)(iv)( h ). In the event that the requirements of clauses (x) and (y) of this Section 3.1(e) are not met, then the fair market value shall be determined by an appraiser selected by the Members, and the cost of such appraisal shall be an expense of the Company.

3.2    Percentage Interests . For the purpose of this Agreement, the term “ Percentage Interest ” means with respect to each Member, fifty percent (50%), as the same may be adjusted pursuant to Section 3.4 (e) hereof.

3.3    Capital Contributions.   To acquire the fee interest in the Property, the Members will each contribute funds in an amount equal to fifty percent (50%) of the purchase price and the anticipated immediate working capital needs of the Company.

3.4    Additional Funds; Anticipated Financing .

(a)    In order to carry on the business of the Company, the Members acknowledge that funds may be required in addition to the Capital Contributions reflected in Section 3.3   hereof. All such additional funds shall be obtained as provided in this Section 3.4.

 (b)   It is the intent of the Members to obtain, and the Managing Member shall use its Best Efforts to obtain, all funds required to pay for costs, expenses, and fees of the Company (the " Required Funds ") from the proceeds of loans from Third Parties, pursuant to such terms, provisions, and conditions and in such manner (including the engagement of brokers and/or investment bankers to assist in providing such financing) as the Managing Member shall determine. The Managing Member shall seek to obtain Company financing on a basis that is without recourse to the Members. Such financing may be secured by a mortgage or mortgages on all or any portion of the Property and/or the Company’s interest therein. In the event that a Member or its Affiliate (a " Guarantor ") is required to make any payment under any guaranty or indemnity executed by such Guarantor in connection with any Company financing, then in such event, (i) if each Member, or its Affiliate, is a Guarantor and if such payments are made by all

11

Guarantors and are in the same ratio as the respective Percentage Interests of their affiliated Members, such payments shall be treated as additional Capital Contributions by the Members and shall be credited to their respective Capital Accounts, and (ii) if any Member, or its Affiliate, who is a Guarantor makes a payment that is greater than its pro rata share of the aggregate amount of the total payments made by both Members (or their Affiliates) under, or in respect of, such guaranty or indemnity based upon its (or its affiliated Member’s) Percentage Interest (the Member affiliated with such paying Guarantor being referred to herein as the " Excess Member ", and the amount of the disproportionate payment, the " Excess Payment ") and within ten (10) Days after receipt of notice from the Excess Member, the Member (or its Affiliate) that has made a payment that is less than (including making no payment at all) such Member’s pro rata share of such total payment based on its Percentage Interest (the " Deficit Member ") has not paid the Excess Member an amount (up to the Deficit Member’s pro rata share) equal to the Excess Payment, the Excess Payments shall be treated as an additional Capital Contribution by the Excess Member and shall be credited to its Capital Account, and the Excess Member, as its sole remedy, shall have the right to dilute the Percentage Interest of the Deficit Member in accordance with Section 3.4(e) hereof. If a Deficit Member pays the Excess Member an amount equal to the Excess Payment within the prescribed ten (10) Day period, then the total payments made by the Excess Member under the guaranty or indemnity (excluding an amount equal to the reimbursed Excess Payment), and the total payments made by the Deficit Member under such guaranty or indemnity as well as any Excess Payment made by the Deficit Member to the Excess Member, shall be treated as an additional Capital Contribution by the paying Member and shall be credited to its Capital Account. Each Member hereby waives any and all rights it may have against the Company to recover any payment made by such Member (or its Affiliate) as a Guarantor.
 
 (c)   To the extent Required Funds are not available from Third Parties as provided in Section 3.4(b) hereof, the Managing Member may elect to contribute the Required Funds to the capital of the Company. All funds (" TRG Excess Contributions ”) contributed to the capital of the Company by the Managing Member pursuant to this Section 3.4(c) shall bear the Return from and after the date of contribution to the Company until distributed in full to the Managing Member pursuant to this Agreement.
 
 (d)   To the extent Required Funds are not available from Third Parties as provided in Section 3.4(b) hereof, and the Managing Member elects not to contribute the Required Funds to the capital of the Company pursuant to Section 3.4(c) hereof, upon the request of the Managing Member, the Members shall contribute all such Required Funds to the capital of the Company in proportion to their respective Percentage Interests. The Managing Member shall make any such request by written notice (a " Contribution Notice ") to the Members, identifying the amount of the Required Funds, each Member’s share of the Required Funds, and the date on which the Required Funds are to be contributed, which date shall be not less than thirty (30) Days after the date of the Contribution Notice.
 
 (e)   In the event that any Member (a " Defaulting Member ”) fails to contribute timely its proportionate share determined in accordance with its Percentage Interest, of any Required Funds pursuant to Section 3.4(d) hereof or reimburse timely an Excess Member pursuant to Section 3.4(b) hereof, the other Member (the " Non-Defaulting Member ") may give the Defaulting Member written notice of such default. The Defaulting Member shall then have ten (10) Business Days after receipt of such notice to cure its default. If the Defaulting Member fails to cure its default within such ten (10) Business Day period, such default shall constitute an event of default whereupon the Non-Defaulting Member, as its sole and exclusive remedy, may reduce the Defaulting Member’s Percentage Interest to a percentage equal to the ratio (expressed as a percentage) that the Defaulting Member’s total contributions to the capital of the Company

12

(excluding TRG Excess Contributions, if any) bears to the total contributions of both Members to the capital of the Company (excluding TRG Excess Contributions, if any). The amount of the reduction of the Defaulting Member’s Percentage Interest shall be added to the Percentage Interest of the Non-Defaulting Member, and the adjustments shall become effective as of the last Day of the ten (10) Business Day period referred to above.
 
Notwithstanding anything set forth in this Agreement to the contrary, if the Percentage Interest of a Member falls below twenty-five percent (25%), such Member will lose its consent rights with respect to Company decisions.

 (f)   The provisions of this Section 3.4 are intended to serve only for the benefit of the Members, inter se , and no Third Party shall have any right whatsoever to benefit from the provisions hereof. None of the provisions of this Agreement shall be construed as existing for the benefit of any creditor of the Company or of any creditor of any of the Members, and none of such provisions shall be enforceable by any Person who is not a Member.

3.5    Restrictions Relating to Capital . No Member shall have the right to withdraw or reduce its Capital Contributions, and no Member shall have the right to a partition of any property owned by the Company or to receive property other than cash, if any, in return for its Capital Contributions.

ARTICLE IV
ALLOCATIONS OF PROFIT AND LOSS AND DISTRIBUTION OF AVAILABLE CASH

4.1    Members’ Shares of Profits . After giving effect to the special allocations set forth in Section 4.3 hereof, Profits (and each item thereof) for each Fiscal Year or other period shall be allocated as follows:

(a)   First, to the Members until the aggregate amount of Profits allocated to the Members pursuant to this Section 4.1(a) for such Fiscal Year and all prior Fiscal Years is equal to the aggregate amount of Losses allocated to the Members for all prior Fiscal Years pursuant to Section 4.2(c) hereof (in proportion to such amounts);

(b)   Second, to the Members in accordance with the ratio in which any Losses for all prior Fiscal Years were allocated pursuant to Section 4.2(b) hereof, until the aggregate amount of Profits allocated pursuant to this Section 4.1(b) for such Fiscal Year and all prior Fiscal Years is equal to the aggregate amount of Losses allocated pursuant to Section 4.2(b) hereof for all prior Fiscal Years; and

(c)   Thereafter, to the Members in accordance with their respective Percentage Interests.

4.2    Members’ Shares of Losses . After giving effect to the special allocations set forth in Section 4.3 hereof, Losses (and each item thereof) for each Fiscal Year or other period shall be allocated as follows:

 (a)   First, to the Members until the aggregate amount of Losses allocated pursuant to this Section 4.2(a) for such Fiscal Year and all prior Fiscal Years is equal to the aggregate

13

amount of Profits allocated pursuant to Section 4.1(c) hereof for all prior Fiscal Years (in proportion to such amounts);

(b)   Second, to the Members in proportion to and to the extent of the positive balances in their Capital Accounts;

 (c)   Thereafter, the balance, if any, to the Members in accordance with their respective Percentage Interests.

4.3    Special Allocations . The following special allocations shall be made in the following order of priority:

 (a)   Gross Income Allocation . For each Fiscal Year of the Company, Gross Income shall be allocated (prior to any allocations pursuant to Section 4.1 and Section 4.2 hereof) to TRG LLC to the extent, if any, of the Return distributed to TRG LLC pursuant to Section 4.5(a)(1) hereof for the current Fiscal Year and distributable to TRG LLC pursuant to Section 8.1(a)(5) hereof if such Fiscal Year is the year in which the Company is to be liquidated. In addition, to the extent that the cumulative amount of the Return distributed to TRG LLC for all prior Fiscal Years exceeds the cumulative amount of Gross Income allocated to TRG LLC pursuant to this Section 4.3(a), then, in the current Fiscal Year, Gross Income shall be allocated to the TRG LLC to the extent of the cumulative amount of the Return distributed to TRG LLC as to which TRG LLC did not receive a Gross Income allocation pursuant to this Section 4.3(a).

(b)   Qualified Income Offset . In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Sections 1.704-1(b)(2)(ii) (d)(4) , 1.704-1(b)(2)(ii) (d)(5) or 1.704-1(b)(2)(ii) (d)(6) of the Regulations, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Capital Account deficit of the Member as quickly as possible, provided that an allocation pursuant to this Section 4.3(a) shall be made only if and to the extent that the Member would have a Capital Account deficit after all other allocations provided for in this Article IV have been tentatively made as if this Section 4.3(a) were not in the Agreement.

(c)   Minimum Gain Chargeback . If, for any Fiscal Year of the Company, there is a net decrease in Company Minimum Gain, each Member who has previously been allocated any nonrecourse deductions or received distributions of proceeds attributable to any nonrecourse borrowing of the Company in any Fiscal Year of the Company shall be allocated items of Company income and gain for the Fiscal Year in which there is a net decrease in Company Minimum Gain in proportion to such prior allocations equal to that Member’s share of the net decrease in Company Minimum Gain consistently with the requirements of Regulations Section 1.704-2. The items to be allocated pursuant to this Section 4.3(b) shall be determined in accordance with Regulations Section 1.704-2(f) and (j).

(d)   Member Minimum Gain Chargeback . In the event that there is a net decrease in Minimum Gain attributable to a Member Nonrecourse Debt (as defined in Regulations Section 1.704-2(b)(4) and hereinafter referred to as “ Member Nonrecourse Debt Minimum Gain ”) for a Company Fiscal Year, then, subject to the exceptions set forth in Regulations Section 1.704-2(i)(4), each Member with a share of Member Nonrecourse Debt Minimum Gain at the beginning of such Company Fiscal Year shall be allocated items of income and gain for such Company Fiscal Year (and, if necessary, for subsequent Company Fiscal Years) equal to such

14

Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain as determined in a manner consistent with the provisions of Regulations Section 1.704-2(g)(2). The items to be allocated pursuant to this Section 4.3(d) shall be determined in accordance with Regulations Section 1.704-2(i)(4) and (j).

(e)   Nonrecourse and Recourse Deductions . If, for any Fiscal Year of the Company, the Company shall have any losses, deductions, or Code Section 705(a)(2)(B) expenditures attributable to Company recourse or nonrecourse liabilities (including nonrecourse liabilities for which a Member bears the economic risk of loss), such items shall be allocated in accordance with Regulations Section 1.704-2 and Section 752 of the Code.
 
 (f)   Excess Nonrecourse Liabilities . For the purpose of determining each Member’s share of excess nonrecourse liabilities of the Company, and solely for such purpose, each Member’s interest in Company profits shall be reasonably determined by the Managing Member in accordance with Internal Revenue Service authority interpreting Regulations Section 1.752-3(a)(3).

(g)   Limitation on Deductions . No Member shall receive an allocation of any Company deduction or Loss that would cause the total allocations of Loss or items thereof to such Member to exceed the amount of its Capital Account balance increased by its share of Company Minimum Gain, Member Nonrecourse Debt Minimum Gain, and any other amount a Member is unconditionally obligated to restore on liquidation of the Company.

 (h)   Curative Allocations.   The allocations set forth in Sections 4.3(a), (b), (c), (d, (e), (f) and (g) hereof (the " Regulatory Allocations ") are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 4.3(h). Therefore, notwithstanding any other provision of this Section 4.3 (other than the Regulatory Allocations), the Managing Member shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines to be reasonably appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Sections 4.1 and 4.2 hereof.

 4.4   Allocations for Federal Income Tax Purposes . The following allocations shall be made solely for federal income tax purposes:

(a)   Code Section 704(c) . In accordance with Sections 704(b) and 704(c) of the Code and the Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for federal income tax purposes, be allocated between the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and the initial Book Value of such property. If the Book Value of any Company property is adjusted pursuant to Section 3.1(e) hereof, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and the Book Value of such asset in the manner prescribed under Sections 704(b) and 704(c) of the Code and the Regulations thereunder.

15

(b)   Section 754 Adjustments . In the event of a sale or exchange of a Member’s Membership Interest or a portion thereof or upon the death of a Member, if the Company has not theretofore elected, pursuant to Section 754 of the Code, to adjust the basis of Company property, the Managing Member shall cause the Company to elect, if the Person acquiring such Membership Interest or portion thereof so requests, pursuant to Section 754 of the Code, to adjust the basis of Company property. In addition, in the event of a distribution referred to in Section 734(b) of the Code, if the Company has not theretofore elected, the Members may, in the exercise of their discretion, cause the Company to elect, pursuant to Section 754 of the Code, to adjust the basis of Company property. Except as provided in Regulations Section 1.704-1(b)(2)(iv) (m) , such adjustment shall not be reflected in the Members’ Capital Accounts and shall be effective solely for federal and (if applicable) state and local income tax purposes. Each Member hereby agrees to provide the Company with all information necessary to give effect to such election with respect to such election.
 
 (c)   Miscellaneous . Except as provided in Sections 4.4(a) and 4.4(b) hereof, for federal income tax purposes, each item of income, gain, loss, or deduction shall be allocated among the Members in the same manner as its correlative item of “book” income, gain, loss, or deduction has been allocated pursuant to Sections 4.1, 4.2, and 4.3 hereof.
 
 4.5   Distributions of Available Cash .

 (a)   Subject to Section 4.5(b) hereof and Section 8.1(a) hereof, Available Cash shall be distributed, as and when the Managing Member shall determine, but not less frequently than quarterly, as follows:

 (i)   First, to TRG LLC in an amount equal to its accrued but undistributed Return on the TRG Excess Contributions;

 (ii)   Second, to TRG LLC in an amount equal to the TRG Excess Contributions to the extent not previously distributed to TRG LLC pursuant to this clause (ii); and
 
  (iii)   Thereafter, to the Members in accordance with their respective   Percentage Interests.
 
 (b)   Notwithstanding Section 4.5(a) hereof and irrespective of the order of priorities therein set forth and subject to the provisions of Section 8.1(a) hereof, to the extent that for any Fiscal Year of the Company while all or any portion of TRG’s Excess Contributions remain outstanding, Taubman receives an allocation of net taxable income from the Company without a concomitant distribution of Available Cash (taking into account the cumulative distributions of Available Cash previously made to Taubman pursuant to the provisions of Section 4.5(a)(iii) hereof, and by taking into account on a cumulative basis any losses (of the same character) of the Company for prior Fiscal Years of the Company), the Company shall, within ninety (90) Days after the end of such Fiscal Year, make a distribution of Available Cash to Taubman such that Taubman is distributed an amount equal to its combined federal and state tax liability determined by multiplying the Company’s taxable income by the highest marginal federal and State of Michigan income tax rates applicable to individuals in effect for such Fiscal Year. The amount of any distribution pursuant to this Section 4.5(b) shall be credited, on a cumulative basis, against any other distributions of Available Cash to be made to Taubman pursuant to Section 4.5(a)(iii) hereof and/or Section 8.1(a)(7) hereof .

16

 4.6   Bank Accounts . One or more accounts in the name of the Company shall be maintained in such bank or banks as the Managing Member may from time to time select. Any checks of the Company may be signed by any Person(s) designated, from time to time, by the Managing Member.

 4.7   Books of Account and Reports.
 (a)   The Company shall maintain at its principal office and in accordance with generally accepted accounting principles, complete and accurate books of account and records of its operations showing the assets, liabilities, costs, expenditures, receipts, profits, and losses of the Company and which shall include provision for separate Capital Accounts for the Members and shall provide for such other matters and information as a Member shall reasonably request, together with copies of all documents executed on behalf of the Company. Each Member and its representatives, duly authorized in writing, shall have the right to inspect and examine, at all reasonable times, at the principal office of the Company, all such books of account, records, and documents.
 
 (b)   The Managing Member shall deliver, or cause to be delivered, to the Non-Managing Member within ninety (90) Days after the end of each Fiscal Year of the Company, unaudited financial statements prepared in accordance with generally accepted accounting principles. In the event the Managing Member causes audited financial statements to be prepared for itself or others, it shall deliver a copy of such audited financial statements to the Non-Managing Member.
 
 (c)   To the extent the Managing Member prepares, or causes to be prepared, for itself or others, unaudited quarterly financial statements, the Managing Member shall deliver, or cause to be delivered, to the Non-Managing Member within forty-five (45) Days after the end of each calendar quarter, such unaudited financial statements prepared in accordance with accounting principles consistently applied on an historical basis and with such additional details reasonably requested by the Non-Managing Member to convert such financial statements into ones consistent with generally accepted accounting principles.
 
 (d)   The Managing Member shall also prepare, or cause to be prepared, on behalf of the Company, such financial statements, reports, and other information as may be required by any Third Party lender of the Company.
 
 (e)   The cost of all reporting provided for or authorized in this Section 4.7 shall be paid by the Company. Any Member may, at any time, and at its sole expense, cause an audit of the Company’s books to be made by a certified public accountant of such Member’s own selection.

 4.8   Tax Returns and Audits . The initial accountant for the Company (the " Accountant ") shall be Deloitte Tax LLP. The Accountant shall prepare all applicable tax returns, including any schedules or additional information reasonably required by any Member in order to file its tax returns, all of the foregoing at the expense of the Company. The Managing Member shall provide the Accountant such information as is reasonably necessary to permit the Accountant to prepare such tax returns within ninety (90) Days after the end of each Fiscal Year of the Company, and the Managing Member shall timely file such tax returns, subject to its right to file an extension. In the event, the Managing Member determines, in its sole discretion, to appoint an auditor for the Company, the initial auditor for the Company (the “ Auditor ”) shall be KPMG. The expense of the Auditor will be borne by the Company.

17

 4.9   Company Fiscal Year. The Company’s fiscal and taxable year shall be the calendar year.

ARTICLE V
MANAGEMENT; EXECUTION OF
LEGAL INSTRUMENTS; OTHER VENTURES
 
5.1   Management; Authority of the Managing Member; Limitations on Authority.  

 (a)   Except as otherwise provided herein regarding Major Decisions, the Company shall be managed solely and exclusively by the Managing Member (the " Managing Member "). TRG LLC is hereby designated as the Managing Member. The Managing Member shall use its Best Efforts to carry out the purposes of the Company and shall have, in respect of its management of the Company, all of the powers of the Company and shall devote such time and attention to the Company as is reasonably necessary for the proper management of the Company and its properties; it being acknowledged however that the Managing Member shall not be required to devote its time exclusively to the operation of the Company. Except as otherwise provided herein regarding Major Decisions, all actions, decisions, determinations, designations, directions. appointments, consents, approvals, selections, and the like, to be taken, made, or given by and/or with respect to the Company, its business and property as well as management of all Company affairs, shall in each and every case be made by. and only by, the Managing Member, and all such actions, decisions, determinations, designations. directions, appointments, consents, approvals, selections, and the like shall be controlling and binding upon the Company and the Members.
 
 Accordingly, the Managing Member shall have the exclusive right, power, and authority, on behalf of the Company, subject only to the limitations set forth in this Agreement, including Section 5.1(c) hereof, and subject to carrying out the purposes of the Company, to negotiate, enter into, perform, amend, and take all actions in respect of any and all agreements, instruments, and documents; to acquire, assets of any nature; to borrow money, incur and repay debts and liabilities and obligations, issue evidences of indebtedness, and secure such indebtedness by granting mortgage(s), liens, or charges upon any property of the Company; to cause the Managing Member, in the event that it decides to contribute Required Funds to the capital of the Company pursuant to Section 3.2(c) hereof, to receive the Return thereon; to maintain and lease the Property, to enter into one or more leases, subleases, and similar related and ancillary documents in respect of the Property; to retain Third Parties on behalf of the Company including, without limitation, engineers, auditors, attorneys, consultants, and brokers; to maintain insurance; to obtain through contract or otherwise, goods and services; and to perform all acts that a Member may legally do pursuant to the Limited Liability Company Law that are consistent with the terms of this Agreement.
 
 (b)   The Managing Member shall consult with and inform the Non-Managing Member from time to time as shall be reasonably requested by the Non-Managing Member. The Non-Managing Member shall have no right or authority to act on behalf of or bind the Company in any manner except as may otherwise be agreed to by the Managing Member in writing.
 
 (c)   Notwithstanding Sections 5.1(a) and 5.1(b) hereof, without the prior written consent of the Non-Managing Member, the Managing Member shall not have the power to bind the Company in connection with any of the following (each a " Major Decision "):

18

 (i)   the financing or refinancing of the Property, including the mortgaging or the placing or suffering of any other encumbrance on the Property or any portion thereof or the guaranty of any such financing or refinancing;

 (ii)   the sale, ground leasing, or other transfer of the Property (or any portion thereof) other than in accordance with Section 6.6 hereof, or the development of the Property (or any portion thereof);

 (iii)   other than as provided in Section 1.4 hereof, the dissolution and liquidation of the Company;
 
 (iv)   other than in accordance with Article VI hereof, the admission of additional Members to the Company;
 
 (v)   the entering into of contracts or agreements with any Member or any Affiliate of a Member on behalf of the Company other than the lease of all or any portion of the Property to SunValley Shopping Center LLC and the material amendment of any such contracts or agreements;
 
 (vi)   the acquisition of any real property or interest therein including any interest in any Person owning real property other than the Property or the expansion of the purposes of the Company beyond those specified in Section 1.3 hereof;

 (vii)   the making of any investment in, or any advance to, any Person;
 
 (viii)   the decision to call for capital from the Members or to require a guaranty of Company financing by the Members;
 
 (ix)   the filing of any request or suit or the entering into of any agreement of extension requiring the consent of the Members pursuant to Section 5.8 hereof;
 
 (x)   the conduct of Company operations in a manner inconsistent with the provisions of Section 5.9 hereof;

 (xi)   the confession of any judgment against the Company;
 
 (xii)   the execution and delivery of any assignment for the benefit of creditors of the Company;

 (xiii)   the filing of any petition seeking reorganization, readjustment, arrangement. composition, or similar relief for the Company under the federal bankruptcy laws or any similar law;

 (xiv)   the merger or other business combination or division of the Company; and

 (xviii)   the amendment of this Agreement.

 (d)   TRG LLC shall serve as the Managing Member for the Company unless and until its Percentage Interest is reduced to less than twenty-five percent (25%), or it has suffered a Disabling Event or an Event of Withdrawal. In the event that TRG LLC’s Percentage Interest is

19

reduced to less than twenty-five percent (25%), or it has suffered a Disabling Event or an Event of Withdrawal, Taubman (provided that Taubman’s Percentage Interest has not been reduced to less than twenty-five percent (25%) and Taubman has not suffered a Disabling Event or an Event of Withdrawal) may notify TRG LLC in writing that Taubman will assume all rights and all obligations of the Managing Member under this Agreement. If Taubman assumes the rights and obligations of the Managing Member pursuant to this Section 5.1(d) and thereafter Taubman’s Percentage Interest is reduced to less than twenty-five percent (25%) or Taubman suffers a Disabling Event or an Event of Withdrawal, the Managing Member shall be that Member designated by Members holding in excess of fifty percent (50%) of the Percentage Interests.

 (e)   The Members, by their execution and delivery of this Agreement, irrevocably authorize the Managing Member to do any act that the Managing Member has the right, power, and authority to do under the provisions of this Agreement and under the Limited Liability Company Law (but only to the extent not inconsistent with the terms of this Agreement), without any other or subsequent authorizations or consents of any kind. Except in the case of a Major Decision, no Person dealing with the Company shall be required to investigate or inquire as to the authority of the Managing Member to exercise the rights, powers, and authority herein conferred upon it. Any Person dealing with the Company shall, except in the case of a Major Decision, be entitled to rely upon any action taken and/or any document or instrument executed and delivered by the Managing Member or a Person designated by the Managing Member, and the Company shall be bound thereby. Except in the case of a Major Decision, no purchaser of any property or interest owned by the Company, or lender, shall be required to determine the sole and exclusive authority of the Managing Member to execute and deliver on behalf of the Company any such instrument of transfer or security, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith.

 5.2     Response of the Members . Unless otherwise specifically provided in this Agreement, whenever any Member is requested by any other Member to cast a vote, grant an approval, or execute a consent of any nature whatsoever in connection with the Company, such request shall be made in writing to the other Member at its address set forth herein, and such Member shall respond to such request with reasonable promptness by means of a written response signed by such Member and sent to the requesting Member, which shall be binding on the responding Member, and in any event not more than ten (10) Business Days after the receipt of the request, unless such request identifies an emergency situation, in which event not more than three (3) Business Days after the receipt of the request. The response shall indicate any reasons for withholding consent. The failure of a Member to respond in writing within the applicable time period shall constitute a ratification and approval by such Member of the matter requested.

 5.3     Compensation of Members and Affiliates .     The Managing Member shall not be entitled to any fees to act as Managing Member hereunder. The Managing Member shall be entitled to reimbursement for any reasonable or necessary expenses incurred or expenditures made by it (to the extent not otherwise reimbursed) for or on behalf of the Company.

5.4   Authority for Execution of Instruments . All contracts of the Company, leases, promissory notes, deeds of trust, mortgages, and other evidences of indebtedness of the Company, and other Company instruments or documents, need be executed, signed, or endorsed only by the Managing Member or that Person or those Persons (who need not be Members) designated in writing by the Managing Member, and such designated Person's(s') signature(s) shall be sufficient to bind the Company and its properties.

20

 5.5   Management Agreement . The Company has entered into a management agreement with TTC, dated the date hereof, (the “ Management Agreement ”), which will provide for certain services with respect to the Property, including, without limitation, financing. Notwithstanding anything to the contrary contained herein, in the event of a Change of Control Event, the Company shall solicit bona fide, arms-length proposals from Persons other than TTC that have management experience and a reputation comparable to TTC’s, to provide the management, administrative, and other services in respect of the Property then provided by TTC. In the event that the terms of any such proposal are more favorable to the Company than the terms of the current Management Agreement, then unless TTC agrees to provide the required services upon the same terms and conditions as are contained in the proposal, the Company shall terminate the Management Agreement, and shall enter into a new management agreement with such other Person for the provision of such services. In the event that the terms of any such proposal are not more favorable to the Company than the terms of the current Management Agreement, then the Company shall retain TTC as the manager.

5.6   Indemnification of the Members; Limit on Liability . Without duplication of amounts reimbursed to a Member pursuant to Section 5.3 hereof, the Company shall and does hereby, to the fullest extent permitted by law, indemnify and hold harmless each Member (including the Managing Member), its successors, and assigns, from and against any and all losses, liabilities, obligations, claims, causes of action, demands, costs and expenses (including reasonable attorneys’ fees), incurred by the Member with respect to any act or omission performed by such Member within the scope of the authority conferred upon it by this Agreement, except for acts or omissions that constitute fraud, willful misconduct, gross negligence, or a material breach of this Agreement. Except for acts that constitute fraud, willful misconduct, gross negligence, or a material breach of this Agreement, a Member shall not be liable to the Company or to the other Member (and the interest of each Member in the Company, and in its property and assets, shall be free of any claims by the Company or the other Member) by reason of any act performed for or on behalf of the Company, or in furtherance of the Company business, or by reason of any omission. Any indemnity under this Section 5.6 shall be provided out of and to the extent of Company assets only, and no Member shall have any personal liability on account thereof. The indemnity and the limit on liability provided in this Section 5.5 shall survive the dissolution and termination of the Company and the termination of this Agreement.

5.7   Bank Accounts . The bank account or accounts of the Company shall be maintained in the banking institution or institutions selected by the Managing Member. All funds of the Company shall be deposited into account(s) of the Company and any and all checks or other instruments used to draw funds of the Company shall require the signature of the Managing Member or those individuals authorized by the Managing Member.
 
5.8   Activities and Competing Ventures of the Members and Affiliates . The Members acknowledge that each of them and their Affiliates may have interests in other present or future ventures, including ventures that are competitive with the Company, and that, notwithstanding its status as a Member in the Company, a Member and its Affiliates shall be entitled to obtain and/or continue their respective individual participation in all such ventures without (i) accounting to the Company or the other Members for any profits with respect thereto,

21

(ii) any obligation to advise the other Members of business opportunities for the Company which may come to its or its Affiliate’s attention as a result of its or its Affiliate’s participation in such other ventures or in the Company, and (iii) being subject to any claims whatsoever on account of such participation.

5.9   Tax Matters Member .
 
(a)   As used in this Agreement, “ Tax Matters Member ” has the meaning ascribed to “tax matters partner” in Section 6231(a)(7) of the Code. The Managing Member is hereby designated Tax Matters Member for the Company. The Tax Matters Member shall comply with the requirements of Sections 6221 through 6231 of the Code applicable to a Tax Matters Member.

(b)   The Tax Matters Member shall have the continuing obligation to provide the Internal Revenue Service with sufficient information so that proper notice can be mailed to all Members as provided in Section 6223 of the Code, provided that each Member shall furnish the Tax Matters Member with all such information (including information specified in Section 6230(e) of the Code) as is required with respect to such Member for such purpose.
 
(c)   The Tax Matters Member shall keep each Member informed on a current and on-going basis of all administrative and/or judicial proceedings for the adjustment of partnership items (as defined in Section 6231(a)(3) of the Code) at the Company level. Without limiting the generality of the foregoing sentence, within five (5) Business Days after receiving any written or oral notice of the time and place of a meeting or other administrative or judicial proceeding from the Internal Revenue Service regarding a proceeding (and in any event, within a reasonable time prior to such meeting or proceeding), the Tax Matters Member shall furnish a copy of such written communication or notice to each Member or inform each Member of the substance of any such oral communication. The foregoing obligation of the Tax Matters Member to inform the other Member shall extend to routine and minor events.

 (d)   Each Member shall promptly notify the Tax Matters Member of its treatment of any Company item on its federal income tax return which is or may be inconsistent with the treatment of that item on the Company’s return. In addition, if any Member intends to file a request for administrative adjustment with the Internal Revenue Service, such Member shall notify the Tax Matters Member (who shall notify any unaffiliated Member) of such fact and its terms at least thirty (30) Days prior to such filing.
 
 (e)   If any Member intends to enter into a settlement agreement with the Secretary of the Treasury (or his authorized delegate) with respect to any Company item, such Member shall notify the Tax Matters Member (who shall notify any unaffiliated Member) of such fact and its terms at least twenty (20) Days prior to such settlement agreement and shall notify the Tax Matters Member (who shall notify any unaffiliated Member) of any such settlement agreement and its terms within thirty (30) Days after the date of settlement.
 
 (f)   If the Tax Matters Member elects not to file suit under Section 6226 or Section 6228 of the Code concerning an administrative adjustment or request for administrative adjustment and any other Member elects to file such a suit, such Member shall notify the Tax Matters Member (who shall notify any unaffiliated Member) of such intention, and the forum or forums in which such suit shall be filed shall be determined by such Member.

22

(g)   Without the approval of the other Member, the Tax Matters Member shall not enter into any written correspondence with the Internal Revenue Service, extend the statute of limitations with respect to the Company, file a request for administrative adjustment, file suit concerning any tax refund or deficiency relating to any Company administrative adjustment or enter into any settlement agreement relating to any Company adjustment or enter into any settlement agreement relating to any item of income, gain, loss, deduction or credit for any taxable year of the Company. Further, any and all communications with the Internal Revenue Service, including, without limitation, the calling of meetings with the Internal Revenue Service, shall be only with the participation of the other Member.

(h)   Each Member shall be entitled to participate in all administrative proceedings with the Internal Revenue Service, as provided in Section 6224(a) of the Code.

(i)   The Tax Matters Member shall not make any available election pursuant to the Code without the prior approval of the other Member, such approval not to be unreasonably withheld.

(j)   The obligations imposed on the Tax Matters Member and the participation rights afforded the other Member by this Section 5.9 and the Code may not be restricted or limited in any fashion by the Tax Matters Member without the prior written consent of the other Member.

 (k)   The Tax Matters Member shall be responsible for representing the Company in all dealings with any state, local, or foreign tax authority, subject to the requirement that the provisions of this Section 5.9 shall apply with equal force to all dealings with any such tax authority.

 5.10   Specific Provisions Relating to Real Estate Investment Trust Status.   Anything herein to the contrary notwithstanding, so long as any Member is, or is owned, directly or indirectly, to the extent of at least ten percent (10%) by a Person who is a REIT (hereinafter each a " REIT Member "), the Managing Member shall cause the Company to conduct operations in a manner consistent with the following provisions and any variance from the following shall require the written consent of all of the REIT Members:
 
 (a)   To the extent required for any rents from all or any part of the Property to qualify as "rents from real property’ within the meaning of Section 856 of the Code and the Regulations thereunder, any Person rendering services to a lessee or sublessee of all or any part of the Property shall be a taxable REIT subsidiary within the meaning of Section 856(l) of the Code and any Regulations thereunder or an "independent contractor" within the meaning of Section 856(d)(3) of the Code and the Regulations thereunder from whom the Company does not derive or receive any income, except as permitted by Section 856(d)(7)(C)(ii) of the Code;
 
 (b)   To the extent required for any rents from all or any part of the Property to qualify as "rents from real property" within the meaning of Section 856 of the Code and the Regulations thereunder, any manager or advisor to the Company shall be a taxable REIT subsidiary (or an entity in which a taxable REIT subsidiary owns a substantial interest) within the meaning of Section 856(l) of the Code and any Regulations thereunder or an "independent contractor within the meaning of Section 856(d)(3) of the Code and the Regulations thereunder;

23

 (c)   To the extent required for any rents from all or any part of the Property to qualify as "rents from real property" within the meaning of Section 856 of the Code and the Regulations thereunder, the Company shall not manage the Property other than through a taxable REIT subsidiary (or an entity principally owned by a taxable REIT subsidiary) within the meaning of Section 856(l) of the Code and any Regulations thereunder or an independent contractor within the meaning of Section 856(d)(3) of the Code and the Regulations thereunder;
 
 (d)   The Company shall not enter into any lease with any Person, other than Sun Valley Shopping Center LLC, who is directly or indirectly related (within the meaning of Section 856(d)(2)(B) of the Code) to any real estate investment trust which owns, directly or indirectly, a REIT Member;
 
 (e)   The Company shall not (i) form an association taxable as a corporation other than a taxable REIT subsidiary within the meaning of Section 856(l) of the Code, (ii) form a trust, or (iii) acquire securities in any issuer, except for the acquisition of government securities;

 (f)   No lease or sublease of all or any part of the Property shall provide for any rents that are contingent, in whole or in part, on the net income or profits derived by the lessee or sublessee;
 
 (g)   The Company shall not enter into any lease of personal property, under or in connection with the lease of real property, if the rent attributable to such personal property exceeds ten percent (10%) of the total rent for the taxable year attributable to both the real and personal property leased under or in connection with such lease;

 (h)   The Company shall not enter into any lending transaction if any amount received or accrued, directly or indirectly, therewith by the Company, depends in whole or in part on the income or profits of any Person; nor shall the Company enter into any lending transaction if the loan by the Company does not meet the “straight debt” safe harbor of Section 856(m)(1)(A) of the Code; and

 (i)   The Company shall not engage in any “prohibited transaction" within the meaning of Section 857(b)(6) of the Code (for purposes hereof, the determination of whether a transaction constitutes a "prohibited transaction" shall not take into account the provisions of Section 857(b)(6)(C) of the Code).
 
Any attempted action that violates any of the foregoing shall be null and void and ineffective for all purposes; provided, however, that any such attempted action shall constitute a material breach of this Agreement.
 
ARTICLE VI
TRANSFERS OF MEMBERSHIP INTERESTS

 6.1     General Restrictions on Dispositions .

 (a)   Except as expressly provided in this Article VI or Section 7.3 hereof, no Member may Transfer all or any part of its Membership Interest (including the right to distributions) without the prior written consent of the other Member, provided that no Member may, under any

24

circumstances, Transfer all or any part of its Membership Interest if such Transfer would constitute a default under any indebtedness or other Third-Party obligations or agreements of the Company.

 (b)   In the event a Member desires to Transfer its Membership Interest in accordance with and as permitted by the provisions of this Article VI, such Member shall give the non-transferring Member thirty (30) Days prior written notice of its desire to Transfer and shall disclose the identity of the transferee and, if an entity, its beneficial ownership.

 (c)   An assignment of all or a part of a Membership Interest occurring by operation of law ( e.g., bankruptcy, attachment, etc. ) shall not entitle the successor to participate in the management and affairs of the Company or to exercise any rights of a Member, including the right to vote on or consent to any matter requiring a vote or a consent of the Members, unless and until such transferee is admitted as a Member in accordance with Section 6.2 hereof. In the event of an assignment occurring by operation of law, the assignor Member shall be entitled to continue to exercise the rights of a Member under this Agreement, and such assignor Member and its transferee shall be jointly and severally liable to the Company for such Member’s obligations to the Company under this Agreement or under the Limited Liability Company Law.

 (d)   For purposes of this Agreement, any Transfer of any direct or indirect membership interest, partnership interest, stock or other equity interest in any Member shall be deemed to be a Transfer by such Member of its Membership Interest in the Company, except for any direct or indirect Transfer of direct or indirect interests in (a) TRG or (b) Taubman, so long as at all times after any such Transfer at least fifty-one percent (51%) of the direct and indirect ownership interests in Taubman, as applicable, are owned by, and Taubman is solely Controlled By, members of A. Alfred Taubman’s Immediate Family and/or their respective estates and/or a Family Trust in respect of any of the foregoing.
 
 6.2     Substitution of Members . Regardless of compliance with any of the provisions hereof (including, without limitation, the provisions of Article VII hereof) permitting a Transfer of a Membership Interest, no Transfer of a Membership Interest shall be recognized by or be binding upon the Company unless:

(i)   such instruments as may be required by the Limited Liability Company Law or other applicable law or to effect the continuation of the Company and the Company’s ownership of its properties are executed and delivered and/or filed;
 
 (ii)   the instrument of assignment binds the assignee to all of the terms and conditions of this Agreement as if the assignee were a signatory party hereto and does not release the assignor from any liability or obligation, accruing prior to the date of the Transfer, of or in respect of the Membership Interest which is the subject of the Transfer;
 
 (iii)   the instrument of assignment is manually signed by the assignee and assignor and is otherwise reasonably acceptable in form and substance to the non-transferring Member;
 
(iv)   if there is more than a single assignee (or successor-in-interest), the assignees or successors shall have complied with the provisions of Section 7.2 hereof;
 
 (v)   such Transfer or Pledge shall not be prohibited by, or cause a breach of, or cause events, including, without limitation, by reason of the nature of the transferee or pledgee ( e.g. tax-exempt status), that are unacceptable to the non-transferring or non-

25

pledging Member in the exercise of its reasonable discretion to occur pursuant to, any agreement, obligation, or understanding by which the assignor or the assignee or any properties of the Company or the Company itself is bound or affected;
 
(vi)   the non-transferring Member shall receive such evidence (including opinions of counsel) of the due authorization, execution and delivery of instruments by, and the validity and enforceability of such instruments against, such transferee as the non-transferring Member shall reasonably request;

  (vii)   any required consent of the mortgagee or beneficiary under any mortgage or deed of trust or lease of the Property to such Transfer and substitution or Pledge shall have been obtained;
 
  (viii)   the assignee shall pay all expenses incurred by the Company in admitting the assignee as a Member, and
 
(ix)   in the event of a Pledge of a Member’s Membership Interest, the provisions of Section 6.8 hereof are complied with.
 
 An assignee of a Membership Interest pursuant to a Transfer permitted in this Agreement who is admitted as a member in the Company in the place and stead of the assignor Member in respect of the Membership Interest acquired from the assignor Member shall have all of the rights, powers, obligations, and liabilities, and be subject to all of the restrictions, of the assignor Member, including, without limitation, but without release of the assignor Member, the liability of the assignor Member for any existing unperformed obligations of the assignor Member. Each of the Members, on behalf of itself and its permitted successors and assigns, HEREBY AGREES AND CONSENTS to the admission of any such additional members as herein provided.

 6.3   Intentionally Omitted.  

 6.4   Right of First Refusal.  

 (a)   If any Member desires to Transfer all or any portion of its Membership Interest (the " Subject Interest ") to any Person (other than pursuant to a Pledge), and such Transfer is not otherwise permitted by Sections 6.1 or 6.3 hereof, then, such Member (the " Seller ") shall submit to the other Member (the " Buyer ") a true copy of a bona tide written offer to purchase the Subject Interest (the " Offer "), which Offer shall in any event (i) provide for (x) an all cash at closing purchase price that provides for no contingent payments, participation features or other payments other than as are customary to a Transfer for an all cash at closing purchase price, or (y) a purchase price that can be paid with cash, marketable securities, and/or units in an operating partnership which are convertible into marketable securities, and that can, strictly for purposes of this provision and the calculation hereinafter referenced, be converted to an all cash at closing purchase price equivalent, and (ii) disclose the price and terms of such proposed sale and the name, address, and beneficial ownership of the proposed purchaser. The Buyer shall have the absolute right to purchase the Subject Interest upon the terms and conditions set forth in the Offer, or if such Offer provides for a purchase price to be paid in other than all cash at the closing, the Buyer may purchase the Subject Interest for an all cash at closing purchase equivalent; provided, however, that, regardless of such terms and conditions, the date, time, and place for the consummation of such purchase shall be as designated by the Buyer, provided that the date so designated shall be a Business Day within seventy-five (75) Days after the Exercise Notice (as defined below) with at least ten (10) Days’ advance written notice thereof to the Seller. The Buyer

26

shall, within forty-five (45) Days after receipt of the Offer (the " Exercise Period "), specify in a notice (an " Exercise Notice ") to the Seller whether or not it desires to purchase the Subject Interest. Such Exercise Notice shall be accompanied by a cash earnest money deposit equal to five percent (5%) of the purchase price if the Buyer elects to purchase the Subject Interest. If the Buyer fails to give an Exercise Notice (and deposit) within the Exercise Period as to the Subject Interest, such failure shall constitute an election to reject the Offer. The closing of a purchase by a Buyer shall be held in accordance with the provisions of Section 6.7 hereof. At the closing, the Buyer’s earnest money deposit, together with interest thereon, shall be credited against the purchase price for the Subject Interest (or returned in the event that the purchase price is to be paid in other than cash); provided, however, that if the closing shall fail to occur because of a default by the Buyer, the Buyer may not submit an Offer, a Buy-Sell Notice, or a Sale Notice, for a period of twelve (12) months after the scheduled closing date, and the Seller shall have the right, as its exclusive remedy, to retain the Buyer’s deposit, together with interest thereon, as liquidated damages, it being agreed that in such instance, the Seller’s damages would be difficult, if not impossible, to ascertain.
 
 (b)   The Seller may sell the Subject Interest, if the Offer was not so accepted, to the proposed purchaser whose name and address were disclosed in the Offer but only (i) upon the same terms and conditions set forth therein (except that the purchase price for the Subject Interest may be ninety-five percent (95%) or more of the purchase price for the Subject Interest as set forth in the Offer), (ii) within seventy-five (75) Days after the expiration of the Exercise Period, and (iii) after the Seller has obtained any Third Party consents necessary to effectuate the sale; otherwise, any such sale shall be null and void and of no force or effect whatsoever.

 Notwithstanding anything to the contrary contained herein, a Member may not submit an Offer in accordance with this Section 6.4 if (x) a Member has given a Buy-Sell Offer in accordance with Section 6.5 hereof or a Sale Offer in accordance with Section 6.6 hereof, in either case, that is outstanding or pursuant to which a purchase has not yet been consummated, or (y) a Member is marketing the Property as provided in Section 6.6 hereof.
 
 6.5   Buy-Sell .
 
 (a)   TRG LLC or Taubman (the " Initiating Member ") shall have the right, at any time, to initiate a termination of the Company in accordance with this Section 6.5. The Initiating Member shall deliver to whichever of TRG LLC or Taubman is not the Initiating Member (the " Non-Initiating Member ") an offer (the " Buy-Sell Offer ") in writing stating a cash purchase price (the " Total Price ") attributable to one hundred percent (100%) of the Company’s assets. The Non-Initiating Member then shall have the option either:

 (i)   to purchase the Membership Interest of the Initiating Member in the Company for cash at a price equal to the amount that the Initiating Member would receive under Section 8.1(a) hereof if the Company’s assets were sold for the Total Price and all of the liabilities of the Company were satisfied; or

 (ii)   to sell to the Initiating Member the Membership Interest of the Non- Initiating Member in the Company for cash at a price equal to the amount that the Non-Initiating Member would receive under Section 8.1(a) hereof if the Company’s assets were sold for the Total Price and all of the liabilities of the Company were satisfied.
 
 The Non-Initiating Member shall give written notice of such election to the Initiating Member within forty-five (45) Days after receipt of the Buy-Sell Offer. Such notice shall be

27

accompanied by a cash earnest money deposit equal to five percent (5%) of the purchase price if the Non-Initiating Member elects to purchase the Membership Interest of the Initiating Member. Failure of the Non-Initiating Member to give the Initiating Member notice that the Non-Initiating Member has elected under Section 6.5(a)(i) hereof (and to deliver the required deposit) within the foregoing forty-five (45) Day period shall be conclusively deemed to be an election to sell under Section 6.5(a)(ii) hereof. In the event that the Non-Initiating Member does not elect to purchase the Membership Interest of the Initiating Member, the Initiating Member shall give the Non-Initiating Member, a cash earnest money deposit equal to five percent (5%) of the purchase price of the Non-Initiating Member’s Membership Interest, within ten (10) Days after (i) the receipt of the Non-Initiating Member’s election to sell under Section 6.5(a)(i) hereof, or (ii) if no election is made by the Non-Initiating Member, the expiration of the forty-five (45) Day period within which the Non-Initiating Member could have sent its election, as applicable.
 
 (b)   The closing of a purchase pursuant to Section 6.5(a) hereof shall be held in accordance with the provisions of Section 6.7 hereof at the principal office of the Company on a Business Day agreed to by the Initiating Member and the Non-Initiating Member that is not more than seventy-five (75) Days after receipt of the written notice of the election of the Non-Initiating Member or not more than one hundred five (105) Days after receipt of the Buy-Sell Offer if the Non-Initiating Member fails to give such notice. At the closing, the Initiating Member’s or Non-Initiating Member’s, as applicable, earnest money deposit, together with interest thereon, shall be credited against the purchase price of the Membership Interest being purchased; provided, however, that if the closing shall fail to occur because of a default by the purchasing Member, the purchasing Member may not submit a Buy-Sell Offer, an Offer, or a Sale Offer, for a period of twelve (12) months after the scheduled closing date, and the selling Member shall have the right, as its exclusive remedies, to (i) retain the purchasing Member’s earnest money deposit, together with interest thereon, as liquidated damages, it being agreed that in such instance, the selling Member’s damages would be difficult, if not impossible, to ascertain, and/or (ii) elect, within sixty (60) Days after such default, to purchase the purchasing Member’s Membership Interest for a cash purchase price equal to the amount that such purchasing Member would receive under clause (i) or clause (ii) of Section 6.5(a) hereof, as applicable, provided that such Member includes a cash earnest money deposit equal to five percent (5%) of such purchase price with its election. Notwithstanding anything to the contrary contained herein, a Member may not submit a Buy-Sell Offer in accordance with this Section 6.5 if (x) a Member has given an Offer in accordance with Section 6.4 hereof or a Sale Offer in accordance with Section 6.6 hereof, in either case, that is outstanding or pursuant to which a purchase has not yet been consummated, or (y) a Member is marketing the Property as provided in Section 6.6 hereof.

 6.6   Sale of the Property .  

 (a)   If TRG LLC or Taubman desires to market and sell the Property to a Third Party, TRG LLC or Taubman as applicable (the " Triggering Member ”) shall deliver to whichever of TRG LLC and Taubman is not the Triggering Member (the “ Non-Triggering Member ”) an irrevocable offer (the " Sale Offer” ) in writing stating a cash purchase price attributable to one hundred percent (100%) of the Company’s assets. The Non-Triggering Member shall then have the option to purchase the Membership Interest of the Triggering Member for cash at a price equal to the amount (the " Sale Price ") that the Triggering Member would receive under Section 8.1(a) hereof, if the Company’s assets were sold for the purchase price set forth in the Sale Offer and all of the liabilities of the Company were satisfied.
 
 The Non-Triggering Member shall specify in a notice (a “ Trigger Notice ”) to the Triggering Member, within forty-five (45) Days after receipt of the Sale Offer, whether or not it desires to

28

accept the Sale Offer and purchase the Membership Interest of the Triggering Member for the Sale Price. Such Trigger Notice shall be accompanied by a cash earnest money deposit equal to five percent (5%) of the purchase price of the Triggering Member’s Membership Interest if the Non-Triggering Member has elected to purchase the Triggering Member’s Membership Interest. Failure to give a Trigger Notice that the Non-Triggering Member has elected to purchase the Membership Interest of the Triggering Member (and to deliver the required deposit) within such forty-five (45) Day period, shall constitute an election to reject the Sale Offer.

 If the Sale Offer was not so accepted by the Non-Triggering Member, the Triggering Member may sell the Property and all other assets of the Company to a Third Party for an all cash at closing purchase price that is equal to (or greater than) ninety-five (95%) of the purchase price for one hundred percent (100%) of the Company’s assets as set forth in the Sale Offer and that provides for no contingent payments, participation features or other payments other than are customary to a Transfer for an all cash at closing purchase price. The closing of any such sale to a Third Party shall occur within two hundred ten (210) Days after the expiration of the forty-five (45) Day period within which the Non-Triggering Member could have sent the Trigger Notice; otherwise, any such sale shall be null and void and of no force or effect whatsoever.

 (b)   The closing of a sale by a Triggering Member to a Non-Triggering Member pursuant to Section 6.6(a) hereof shall be held in accordance with the provisions of Section 6.7 hereof at the principal office of the Company on a Business Day agreed to by the Triggering Member and the Non-Triggering Member that is not more than one hundred five (105) Days after receipt of a Trigger Notice. At the closing, the Non-Triggering Member’s earnest money deposit, together with interest thereon, shall be credited against the purchase price of the Triggering Member’s Membership Interest; provided, however, that if the closing shall fail to occur because of a default by the Non-Triggering Member, the Non-Triggering Member may not submit a Sale Offer, an Offer, or a Buy-Sell Offer, for a period of twelve (12) months after the scheduled closing date, and the Triggering Member shall have the right, as its exclusive remedy, to retain the Non-Triggering Member’s earnest money deposit, together with interest thereon, as liquidated damages, it being agreed that in such instance, the Triggering Member’s damages would be difficult, if not impossible, to ascertain. Notwithstanding anything to the contrary contained herein, a Member may not submit a Sale Offer in accordance with this Section 6.6 if a Member has given an Offer in accordance with Section 6.4 hereof or a Buy-Sell Offer in accordance with Section 6.5 hereof, in either case, that is outstanding or pursuant to which a purchase has not yet been consummated.
 
 6.7   Closings . At the closing of the purchase of a Member’s Membership Interest pursuant to this Agreement, the selling Member shall transfer to the Purchasing Member such Membership Interest (including, without limitation, any rights of the selling Member to receive (i) repayment of any loans (other than those secured by the Property) made by it to the Company, with any accrued and unpaid interest thereon, (ii) repayment of such Member’s Capital Contributions, if any, including, in the case of TRG LLC, any TRG Excess Contributions and any accrued but unpaid Return thereon, (iii) distributions of Available Cash, and (iv) distributions on termination or dissolution, free and clear of all liens, security interests, and claims of others, and shall deliver to the purchasing Member such instruments of transfer with respect to the assets of the Company and such evidence of due authorization, execution and delivery, and of the absence of any liens, security interests, or claims of others as the purchasing Member shall reasonably request. The instruments of transfer shall be without representations or warranties except as to the absence of any liens, security interests or claims of others. The selling Member shall be responsible for any stamp, recording, transfer, and similar transactional taxes (including any state or local taxes measured by the gain to such selling Member) payable upon such transfer.

29

 At such closing, the purchasing Member shall pay the purchase price payable by it, at the option of the purchasing Member, by good certified or official bank check payable to the order of the selling Member or by Fedwire transfer of immediately available funds. The purchasing Member shall be responsible for obtaining all Third Party consents necessary to effectuate the purchase and shall also deliver or cause to be delivered to the selling Member a release or releases from all recourse obligations and liabilities of the Company. Notwithstanding anything to the contrary contained herein, in the event that the purchasing Member is unable to obtain Third Party consents necessary to effectuate a sale hereunder (having used its Best Efforts to do so), it shall send written notice thereof to the selling Member who may then seek to obtain such Third Party consents. In the event that one or more Third Party consents necessary to effectuate the sale has not been obtained by the date of the closing, any such sale shall be null and void and of no force of effect. The selling Member shall be entitled to Available Cash allocable to its Membership Interest through the date of closing.

 6.8   Pledge of Membership Interests . Each Member (each being hereinafter referred to as a " Pledging Member” ) may Pledge all or any portion of its Membership Interest or any of the proceeds thereof, at any time subject to the following conditions:

 (i)   the Person (the " Pledgee ") to whom the Pledging Member’s Membership Interest or the proceeds thereof have been pledged in accordance with the provisions of this Section 6.8 shall not have the right to become a substitute Member in the Company;

 (ii)   in the event that the Pledgee begins to effect any of its Pledgee Rights under the loan and/or pledge agreement, including, without limitation, foreclosure or sale pursuant to the applicable commercial code, the Pledging Member shall no longer have any management, approval, or consent rights provided in this Agreement;
 
 (iii)   the documents governing the Pledge of all or any portion of the Pledging Member’s Membership Interest pursuant to this Section 6.8 (the “ Pledge Documents ") shall contain a provision reasonably acceptable to the other Member (the " Non-Pledging Member ") providing that upon the exercise of any of its Pledgee Rights, in no event shall the Pledgee be entitled to realize an amount in excess of an amount approved by the Non-Pledging Member (in its sole discretion) as set forth in the Pledge Documents; and

 (iv)   the Pledge Documents shall contain a provision reasonably acceptable to the Non-Pledging Member acknowledging and providing that, notwithstanding anything in this Agreement or in the Pledge Documents to the contrary, upon a Transfer of the Pledging Member’s Membership Interest pursuant to the exercise of any of the Pledgee Rights, the right of first refusal in respect of the Pledging Member’s Membership Interest provided to the Buyer in Section 6.4 hereof shall apply. In the event that the Pledgee Right effected by the Pledgee does not entail a cash sale of the Pledging Member’s Membership Interest, the purchase price of the Pledging Member’s Membership Interest pursuant to Section 6.4 shall equal the outstanding principal amount of the Pledging Member’s indebtedness to the Pledgee and any other amounts owed to the Pledgee with respect thereto, including, without limitation, any and all accrued but unpaid interest thereon. In the event that the Non-Pledging Member exercises its right of first refusal, upon payment of the purchase price, the Pledgee (or any other Person acquiring the Pledging Member’s Membership Interest as a result of the exercise of the Pledgee Rights) shall Transfer the pledged Membership Interest to the Non-Pledging Member, free and clear of any lien, pledge, or other encumbrance associated with the Pledge or the Pledging Member’s

30

obligation secured thereby. The Pledgee, the Pledging Member, and the Non- Pledging Member shall have executed an agreement, in form and substance reasonably satisfactory to the Non-Pledging Member, in order to implement the provisions of this Section 6.8. Any Pledge of a Pledging Member’s Membership Interest that violates the requirements of this Section 6.8 shall be null and void ab initio.

ARTICLE VII
DISABLING EVENT IN RESPECT OF A MEMBER;
SUCCESSION OF INTERESTS

 7.1   Disabling Event in Respect of a Member .  
 (a)   For purposes hereof:
(i)   a " Disabling Event " means, with respect to a Member, such Member’s (A) in the case of a Member that is a natural Person, death, (B) Bankruptcy, (C) in the case of a Member who is a natural Person, the entry by a court of competent jurisdiction adjudicating him incompetent to manage his Person or his property, (D) in the case of a Member who is acting as a Member by virtue of being a trustee of a trust, the termination of the trust (but not merely the substitution of a new trustee), (E) in the case of a Member that is a separate partnership or limited liability company, the dissolution and commencement of winding up of the separate partnership or limited liability company, or (F) in the case of a Member that is a corporation, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter and the expiration of ninety (90) Days after the date of notice to the corporation of revocation without a reinstatement of its charter;

(ii)   a " Disabled Member” shall be a Member who has suffered a Disabling Event or an Event of Withdrawal; and
 
  (iii)   a " Successor " shall be, with respect to a Disabled Member, such Disabled Member’s successor(s) in interest, personal representative(s), heirs at law, legatee(s), or estate; and

  (iv)   " Event of Withdrawal " means, with respect to a Member, such Member’s retirement, resignation, other withdrawal from the Company pursuant to the Limited Liability Company Law or any other event (which is not a Disabling Event) that causes a Member to cease to be a member under the Limited Liability Company Law.

 (b)   Upon the occurrence of a Disabling Event or an Event of Withdrawal in respect of a Member, the Company shall not be dissolved, but shall be continued, and the Successor to such Disabled Member, subject to Section 6.2 hereof, shall have the rights of such Disabled Member in the Company subject to the terms and provisions of this Agreement.

 7.2   Single Representative to Act on Behalf of Successors . In the event that a Member’s Membership Interest is, at any time during the term of this Agreement (including any period of dissolution and winding up of the Company), held by more than one Person, then all of the Persons holding such Member’s original Membership Interest shall forthwith, but in any event within thirty (30) Days after the date on which the Membership Interest of such Member is held by more than a single Person, designate one or more individuals as their collective authorized

31

representative(s) for purposes of Section 5.2 hereof, who shall each have the power and authority, acting alone, to represent and bind and act on behalf of all of the Members so joined together and represented in connection with all matters relating to this Agreement or the Company. An authorized representative designated as required herein shall act at the direction of that Member or those Members, represented by such authorized representative, who at the relevant time holds or collectively hold, as the case may be, a Percentage Interest which is in excess of fifty percent (50%) of the total Percentage Interest held by all the Members represented by such authorized representative.
 
 7.3   Succession by Individuals to Membership Interests of Members . In the event that any individual succeeds to the interest of any Member in accordance with the terms of this Agreement, then the interest of such individual Member in the Company, subject to the provisions of Section 7.2 hereof, may be:
 
  (i)   Transferred or disposed of by will or intestacy to or for the benefit of   any member or members of the deceased Member’s Immediate Family; or

  (ii)   Transferred during his lifetime or at his death to a Family Trust for such   individual.

 7.4   References to "Member" and "Members" in the Event of Successors . In the event that a Member’s Membership Interest is held by one or more successors to such Member, references in this Agreement to "Member" and "Members" shall refer, as applicable and except as otherwise provided herein, to the collective Membership Interests of all successors to the Membership Interest of such Member; and all decisions, consents, approvals, determinations, actions, and selections of the Members (to the extent any such decisions, consents, approvals, determinations, actions, and selections of the Members are provided for in this Agreement) and the Company shall, as herein provided but subject to the provisions of Article VII hereof, require the decision, consent, approval, determination, action, or selection of such Member or an authorized representative of all of the successors to the Membership Interest of such Member (acting in the manner provided in Section 7.2 hereof).

 	7.5	Waiver of Dissolution if Transfer is in Full Compliance with Agreement; Negation of Right to Dissolve Except as Herein Provided; No Withdrawal .	

 (a)   Each of the Members hereby waives its right to terminate or cause the dissolution of the Company (as such right is provided under the Limited Liability Company Law) upon the Transfer of any Member’s Membership Interest, provided that any such Transfer is permitted by and completed fully in accordance with the terms of this Agreement.

 (b)   Except as provided in this Agreement, no Member shall have the right to terminate this Agreement or dissolve the Company by such Member’s express will.

 (c)   No Member shall have any right to retire, resign, or otherwise withdraw from the Company and have the value of such Member’s Membership Interest ascertained and receive an amount equal to the value of such Membership Interest.

 (d)   In the event that a Member withdraws from the Company in breach of this Agreement but pursuant to such Member’s statutory rights under the Limited Liability Company Law, to the extent that such rights exist in the face of a prohibition against withdrawal in this Agreement, then the value of such Member’s Membership Interest shall be ascertained in

32

accordance with Section 7.6 hereof and the Limited Liability Company Law, and such Member shall receive from the Company in exchange for the relinquishment of such Member’s Membership Interest an amount equal to the value of such Member’s Membership Interest as so determined less twenty-five percent (25%) of such value as liquidated damages and not as a penalty. In no event shall a Member be considered to have withdrawn from the Company solely as a result of such Member having suffered a Disabling Event.

 7.6   Determination of Fair Market Value of Membership Interests . Solely for purposes of Section 7.5(d) hereof, if it shall be necessary to determine the fair market value of a Member’s Membership Interest, fair market value shall be equal to the amount, determined as hereinafter set forth in this Section 7.6, that would be distributed to such Member pursuant to Section 8.1(a) hereof, assuming no reserves have been established by the Managing Member and that there are no costs attendant upon such liquidation, but taking into account any and all allocations pursuant to Section 4.1, Section 4.2, and Section 4.3 hereof and distributions pursuant to Section 4.5 hereof through the date of such determination, if all of the assets of the Company were sold for their fair market value; provided, however, that (i) the fair market value of such Membership Interest shall be reduced by the amount of any distributions made to the Member whose Membership Interest is being sold subsequent to the date of the balance sheet to be prepared pursuant to this Section 7.6, (ii) the fair market value of such Membership Interest shall be further reduced by the fees of the Auditor and appraisers for the services rendered by them in accordance with this Section 7.6, and (iii) any indebtedness to the Company of the Member whose Membership Interest is to be sold at the date of the consummation of the purchase shall be paid to the Company in repayment of such indebtedness (such repayment to be treated as having occurred immediately prior to the sale).

 To determine the fair market value of the Company’s assets, the Auditor shall prepare a balance sheet for the Company as of the last Day of the month preceding the date of the event giving rise to the necessity to determine fair market value (the " Valuation Date "). Such balance sheet shall be prepared in the manner in which prior balance sheets of the Company have been consistently prepared. The Auditor shall then determine the excess of the total assets of the Company over the total liabilities of the Company (the " Net Value "). Net Value shall be adjusted to reflect (1) the actual value of any negotiable securities included in the Company’s assets on the Valuation Date, and (2) the fair market value of all the Company’s real property (taking into account any participation features of any debt encumbering such property), including all improvements thereon and thereto, and other assets of the Company based upon an appraisal of the Company’s real property by a member of the American Institute of Real Estate Appraisers and an appraisal of the other assets of the Company by a qualified appraiser, each such appraiser to be selected jointly by the Members. If the Members are unable to agree upon an appraiser, then each Member shall appoint an appraiser. The appraisals shall be averaged to calculate the appraised fair market value of the Company’s property unless such appraisals differ by more than five percent (5%) of the lower appraisal, in which event, the two (2) appraisers shall select a third appraiser who shall independently appraise the Company’s property. The appraised fair market value of the Company’s property shall then be the average of those appraisals which differ from the middle appraisal by less than five percent (5%) of the lowest appraisal. If none of the appraisals differ from the middle appraisal by less than five percent (5%) of the lowest appraisal, then the value of the middle appraisal shall be the appraised fair market value of the Company’s property. The fee of each of the appraisers shall be borne by the selling Member.
 
 Ninety (90) Days after the preparation of any such balance sheet, the Auditor shall prepare an adjusted balance sheet, in the manner set forth above, for the Company, to reflect disputed and/or unknown operating income and expense items and real estate tax increases for the current

33

year if actual real estate taxes are unknown at the time the initial balance sheet is prepared (the " Adjustments "). The Managing Member shall provide the Non-Managing Member with written notice (an " Adjustment Notice ") of the Adjustments within ten (10) Days after the Auditor’s determination thereof. The fair market value of the Company’s assets and the fair market value of a Member’s Membership Interest shall be adjusted to reflect the Adjustments. The selling Member or the acquiring Member, as the case may be, shall pay to the other, within ten (10) Days after the receipt of the Adjustment Notice, the net amount due such Member, based upon the Adjustments. The provisions of this Section 7.6 shall survive the dissolution and termination of the Company.

ARTICLE VIII
WINDING UP, LIQUIDATION, AND
TERMINATION OF THE COMPANY

 8.1   Liquidation of the Assets of the Company and Disposition of the Proceeds   Thereof .  

 (a)   Upon the dissolution of the Company, the Managing Member (unless the Managing Member shall have suffered a Disabling Event in which event the Non-Managing Member) (herein referred to as the " Liquidator ") shall proceed to wind up the affairs of the Company, liquidate the property and assets of the Company, and terminate the Company, and the proceeds of such liquidation shall be applied and distributed in the following order of priority:
 
(1)   to the expenses of liquidation: and then
 
(2)   to the payment of the debts and liabilities of the Company owing to Persons other than Members and their Affiliates; and then
 
(3)   to the establishment of any reserves that the Liquidator deems necessary or appropriate to provide for any contingent or unforeseen liabilities or obligations of the Company (other than those owing to Members) or of the Members arising out of or in connection with the Company (which reserves may be held by a liquidating trust established for the benefit of the Members for the purpose of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities of the Company); provided, however, that after the expiration of a one year period, any excess reserves remaining shall be distributed in the manner hereinafter provided in this Section 8.1(a); and then
 
(4)   to the satisfaction of any obligations of the Company to Members and/or their Affiliates not otherwise provided for in this Section 8.1(a); and then
 
(5)   to TRG LLC in an amount equal to any accrued but unpaid Return on the TRG Excess Contributions; and then
 
(6)   to TRG LLC in an amount equal to the TRG Excess Contributions to the extent that the TRG Excess Contributions have not been previously distributed to TRG LLC; and then
 
(7)   to the Members in proportion to and to the extent of their positive Capital Account balances. For this purpose, the determination of the Members’ Capital Account balances shall be made after adjustment to reflect the allocation of all Profits, Losses, and items in the nature of income, gain, expense, or loss under Section 4.1, Section 4.2, and Section 4.3 hereof and distributions pursuant to Section 4.5 hereof and clauses (5) and (6) of this

34

Section 8.1(a) through the Fiscal Year of liquidation of the Company. Subject to the provisions of clause (3) of this Section 8.1(a), all distributions pursuant to this Section 8.1 shall be made by the end of the fiscal year of liquidation (or, if later, within ninety (90) Days after the date of such liquidation).

 (b)   Subject to the requirements of Regulations Section 1.704-1(b)(2)(ii)(b)(2) a reasonable time shall be allowed for the orderly liquidation of the property and assets of the Company and the payment of the debts and liabilities of the Company in order to minimize the losses normally attendant upon a liquidation.
 
 (c)   Each Member hereby appoints the Liquidator as its true and lawful attorney-in-fact to hold, collect, and disburse, in accordance with this Agreement, the applicable requirements of Regulations Section 1.704-1(b), and the terms of any receivables existing at the time of the termination of the Company and the proceeds of the collection of such receivables, including those arising from the sale of Company property and assets. Notwithstanding anything to the contrary in this Agreement, the foregoing power of attorney shall terminate upon the distribution of the proceeds of all such receivables in accordance with the provisions of this Agreement.

 (d)   Notwithstanding anything to the contrary contained in this Section 8.1, but subject to Section 5.1(c) hereof, if the Liquidator shall determine not to liquidate the property and assets of the Company because the property and assets are not assignable to other than the Members or because a complete liquidation of all of the property and assets of the Company would involve substantial losses or be impractical under the circumstances or for any other reason or for no given reason, the Liquidator shall liquidate that portion of the assets of the Company sufficient to pay the expenses of liquidation and the debts and liabilities of the Company (excluding the debts and liabilities of the Company to the extent that they are adequately secured by mortgages on, or security interests in, assets of the Company or to the extent adequate provision is made for such debts and liabilities), and the remaining assets shall be distributed to the Members as tenants-in-common or partitioned in accordance with applicable statutes or apportioned in accordance with the provisions of Section 8.1(a) hereof, or distributed in such other reasonable manner, not inconsistent with the economic effect of Section 8.1(a) hereof and applicable requirements of Regulations Section 1.704-1 and within the time period therein set forth, as shall be reasonably determined by the Liquidator. The distribution of such remaining assets to the Members shall be made subject to any mortgages or security interests encumbering such assets.
 
 8.2   Cancellation of Certificates . After the affairs of the Company have been wound up, the property and assets of the Company have been liquidated, and the proceeds thereof have been applied and distributed as provided in Section 8.1(a) hereof (and/or, if applicable, there has been a distribution of property and assets, as provided in Section 8.1(d) hereof), and the Company has been terminated, the Members shall execute, deliver, and file a certificate of cancellation of the Certificate of Formation.
 
ARTICLE IX
MISCELLANEOUS

 9.1   Exculpation . Except in the case of fraud, willful misconduct, gross negligence, or a material breach of this Agreement, the doing of any act or the failure to do any act by a Member, the effect of which may cause or result in loss or damage to the Company, if done in good faith to promote the interests of the Company and if not done in material violation of the provisions of this Agreement, shall not subject such Member to any personal liability.

35

 9.2   Notices .  

 (a)   Any and all notices, consents, offers, elections, and other communications (hereinafter referred to collectively as the " Communications " and individually as a " Communication ") required or permitted under this Agreement shall be deemed adequately given only if in writing.
 
 (b)   All Communications to be sent hereunder shall be given or served only if addressed to a Member at its address set forth in the records of the Company, and if delivered by hand (with delivery receipt required) or delivered by certified mail, return receipt requested, or Federal Express or similar expedited overnight commercial carrier. All such notices, demands, and requests shall be deemed to have been properly given or served, if delivered by hand, or mailed, on the date of receipt or of refusal to accept shown on the delivery receipt or return receipt, and, if delivered by Federal Express or similar expedited overnight commercial carrier, on the date that is one Day after the date upon which the same shall have been delivered to Federal Express or similar expedited overnight commercial carrier, addressed to the recipient, with all shipping charges prepaid, provided that the same is actually received (or refused) by the recipient in the ordinary course. The time to respond to any Communication given pursuant to this Agreement shall run from the date of receipt or confirmed delivery.

 (c)   All Communications shall be addressed:

If to TRG LLC, to:

The Taubman Company
200 East Long Lake Road
Bloomfield Hills, Michigan 48304
Attn: Chris B. Heaphy, Esq.

If to Taubman, to:

The Taubman Asset Group
200 East Long Lake Road
Bloomfield Hills, Michigan 48304
Attn: Robert S. Taubman and William S. Taubman
 
 (d)   By giving to the other parties written notice thereof, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change the Person(s) to receive notice and their respective addresses effective upon receipt by the other parties of such notice, and each shall have the right to specify as its address any other address within the United States of America.
 
 9.3   Applicable Law . This Agreement shall be governed by, and construed in accordance with, the laws (other than the law governing choice of law) of the State of California. In the event of a conflict between any provision of this Agreement and any non-mandatory provision of the Limited Liability Company Law, the provision of this Agreement shall control and take precedence.

 9.4     Word Meanings; Gender . The words such as "herein," "hereinafter," "hereof," and "hereunder" refer to this Agreement as a whole and not merely to a subdivision in which such

36

words appear unless the context otherwise requires. The singular shall include the plural and the masculine gender shall include the feminine and neuter, and vice versa, unless the context otherwise requires.
 
 9.5     Section Titles . Section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text.
 
 9.6   Entire Agreement . This Agreement contains the entire agreement between the parties hereto relative to the Company.

 9.7   Waiver . No consent or waiver, express or implied, by a Member to or of any breach or default by another Member in the performance by such other Member of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other Member of the same or any other obligation of such Member hereunder. A consent or waiver by a Member to any breach or default by the other Member under this Agreement shall be effective only if in writing and signed by the Member against whom enforcement of the consent or waiver is sought. Failure on the part of a Member to object to any act or failure to act of another Member or to declare another Member in default, irrespective of how long such failure continues, shall not constitute a waiver by such Member of its rights hereunder.

 9.8   Separability of Provisions . Each provision of this Agreement shall be considered separable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable, or illegal under any existing or future law, such invalidity, unenforceability, or illegality shall not impair the operation of or affect those portions of this Agreement that are valid, enforceable, and legal.

 9.9   Binding Agreement . Subject to the restrictions on Transfers set forth herein, this Agreement shall inure to the benefit of and be binding upon the undersigned Members and their respective successors and assigns. Whenever, in this Agreement, a reference to any party or Member is made, such reference shall be deemed to include a reference to the permitted successors and assigns of such party or Member.

 9.10   Equitable Remedies . Except as otherwise provided in this Agreement, the rights and remedies of the Members hereunder shall not be mutually exclusive, i.e., the exercise of a right or remedy under any given provision hereof shall not preclude or impair exercise of any other right or remedy hereunder. Each of the Members confirms that damages at law may not always be an adequate remedy for a breach or threatened breach of this Agreement and agrees that, in the event of a breach or threatened breach of any provision hereof, the respective rights and obligations hereunder shall be enforceable by specific performance, injunction, or other equitable remedy, but nothing herein contained is intended to, nor shall it, limit or affect any rights at law or by statute or otherwise of any party aggrieved as against the other for a breach or threatened breach of any provision hereof.
 
 9.11   Partition . No Member nor any successor-in-interest to a Member shall have the right while this Agreement remains in effect to have any property of the Company partitioned, or to file a complaint or institute any proceeding at law or in equity to have such property of the Company partitioned, and each Member, on behalf of itself and its successors and assigns, hereby waives any such right. It is the intention of the Members that the rights of the parties hereto and their successors-in-interest to Company property, as among themselves, shall be governed by the terms of this Agreement, and that the rights of the Members and their successors-in-

37

interest to Transfer any interest in the Company shall be subject to the limitations and restrictions set forth in this Agreement.
 
 9.12   Amendment . Except as provided in Section 3.1(d) hereof, a proposed amendment to this Agreement may be adopted and effective as an amendment hereto only upon the written agreement of all of the Members.
 
 9.13   No Third Party Rights Created Hereby . The provisions of this Agreement are solely for the purpose of defining the interests of the Members, inter se ; and no other Person, firm, or entity ( i.e., a party who is not a signatory hereto or a permitted successor to such signatory hereto) shall have any right, power, title, or interest by way of subrogation or otherwise, in and to the rights, powers, titles, and provisions of this Agreement.
 
 9.14   Liability of Members . Except as otherwise provided in this Agreement, any liability or debt of the Company shall first be satisfied out of the assets of the Company, including the proceeds of any liability insurance which the Company may recover, and thereafter, in accordance with the applicable provisions of the Limited Liability Company Law.
 
 9.15   Additional Acts and Instruments . Each Member hereby agrees to do such’ further acts and things and to execute any and all instruments necessary or desirable and as reasonably required in the future to carry out the full intent and purpose of this Agreement.
 
9.16   Organization Expenses . The Members authorize the Company to elect, pursuant to Section 709(b) of the Code, to deduct in the taxable year the Company began business amounts paid or incurred to organize the Company to the extent, if any, permitted by Section 709(b) of the Code and to amortize the balance of the organizational expenses over a period of one hundred eighty (180) months beginning in the taxable year the Company began business.

 9.17   Agreement in Counterparts . This Agreement may be executed in two (2) or more counterparts, all of which as so executed shall constitute one Agreement, binding on all of the parties hereto, notwithstanding that all the parties are not signatory to the original or the same counterpart; provided, however, that no provision of this Agreement shall become effective and binding unless and until all parties hereto have duly executed this Agreement, at which time this Agreement shall then become effective and binding as of the date first-above written. Any executed counterpart of this Agreement that is delivered by facsimile transmission or other electronic transmission shall be deemed to have been fully and properly executed and delivered for all purposes of this Agreement.

 9.18   Attorneys-in-Fact. Any Member may execute a document or instrument or take any action required or permitted to be executed or taken under the terms of this Agreement by and through an attorney-in-fact duly appointed for such purpose (or for purposes including such purpose) under the terms of a written power of attorney (including any power of attorney granted herein).
 
 9.19   Consents, Approval, Etc. Whenever the consent or approval of a Member is required under any provision of this Agreement or a matter is subject to the satisfaction of a Member, then, except as otherwise specifically provided in this Agreement, such Member shall not unreasonably withhold or delay such consent or approval and shall not be unreasonable or delay in deciding whether such matter is satisfactory.

38

 
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first-above written.
 
TRG SUNVALLEY LLC, a Delaware limited liability company

 	By:	The Taubman Realty Group Limited Partnership, a Delaware limited partnership	

 By:  /s/ Chris B. Heaphy           _____  
 Chris B. Heaphy, Authorized Signatory

AND:

TILC-SV, LLC, a Michigan limited liability company

 	By:	The Robert S. Taubman Revocable Trust dated August 9, 1982, as amended, a manager	

 By :/s/ Robert S. Taubman            
  Robert S. Taubman, Trustee

 

39

EXHIBIT A
 
Legal Description
 
The land referred to is situated in the County of Contra Costa, City of Concord, State of California, and is described as follows:

PARCEL ONE:

All that portion of the Rancho Monte Del Diablo designated “Parcel One” in that certain Decree Quieting Title, entered in Contra Costa County Superior Court, Case No. 69596, a certified copy of which was recorded November 29, 1957 in Book 3082 of Official Records, Page 495, being the portion thereof designated “Parcel Three” in the Deed from Johnne Burnett to Hope Bartnett Belloc recorded November 15, 1961 in Book 3995 of Official Records, Page 262, which portion is more particularly described as follows:

BEGINNING at the most Southerly corner of said “Parcel One” (3082-OR-495); thence, along the exterior boundary thereof North 07° 14’ 34” West 2860.93 feet (to the South line of the parcel of land firstly described in the Deed from Antonio A. Lucos, et ux, to Eugenia Gianelli, et al, recorded February 5, 1925 in Book 482 of Deeds, at Page 372); thence (along the South line of Gianelli) North 79° 59’ 40” East 722.04 feet (to the Eastern line of the land described secondly in 482-Dds-372); thence North 09° 55’ 06” West 318.24 feet to the intersection thereof with the Southwesterly line of the land designated “Parcel One” in the Deed to the State of California recorded March 29, 1962 in Book 4086 of Official Records, at Page 235; thence, along the Southwesterly line of said State land: South 32° 17’ 20” East 1240.77 feet; South 26° 54’ 09” East 1001.11 feet; Southwesterly along the arc of a curve to the Right, with a radius of 125.00 feet, tangent to the last mentioned course, 159.09 feet; South 42° 48’ 36” West, tangent to the last mentioned curve, 205.65 feet; and South 38° 44’ 22” East 30.05 feet to the Southeasterly line of “Parcel One” of said Decree Quieting Title (3082-OR-495); thence South 51° 16’ 07” West, along said Southeasterly line, to the Point of Beginning.

EXCEPT the portion of the aforesaid land described in Deed to City of Concord, a California general law city, recorded February 27, 1963 in Book 4311 of Official Records, at Page 647, to wit: BEGINNING on the East line of the State Highway leading from Pacheco to Walnut Creek, at the Southern corner of the tract of land described as “Parcel One” in the Decree of Distribution (in the Matter of the Estate of Peter Bartnett), a certified copy of which was recorded April 7, 1959 in Book 3350 of Official Records, at Page 100; thence North 07° 18’ 20” West, along said East line, 700.00 feet; thence North 82° 41’ 40” East 20.00 feet; thence South 08° 22’ 00” East 270.05 feet to a point, hereinafter referred to as Station “A”; thence South 12° 00’ 00” East 292.71 feet to a point on the arc of a tangent curve to the Left, having a radius of 30.00 feet; thence Southerly and Easterly on said curve, through an angle of 113°00’ 00”, an arc distance of 59.17 feet; thence North 55° 00’ 00” East 292.47 feet to a line drawn parallel with and 30.00 feet Northwesterly, measured at right angles, from the Southeast line of said Decree’s “Parcel One” (3350-OR-100); thence North 51° 16’ 07” East, along said parallel line, 1197.84 feet; thence South 38° 43’ 06” East 30.00 feet to said Southeast line (“Parcel One” 3350-OR-100); thence South 51° 16’ 07” West, along said Southeast line, 1628.39 feet to the Point of Beginning.

AND EXCEPT the interest of the City of Pleasant Hill, a California municipal corporation, by Deed recorded January 1, 1966 in Book 5062 of Official Records, at Page 8, as to that portion of the foregoing land described as follows: BEGINNING at the Northwestern corner of the parcel

of land described as Parcel Two-C in the Lis Pendens recorded July 29, 1960 in Book 3671 of Official Records, at Page 76 (being the same parcel of land described in Deed to the City of Concord recorded in Book 4311 of Official Records, at Page 647); thence North 07° 14’ 34” West 2160.88 feet to the Southerly line of the 22.16 acre parcel of land described in Deed to Eugenia Gianelli, et al, recorded February 5, 1925 in Book 482 of Deeds, at Page 372; thence North 80° 00’ 11” East 16.89 feet; thence South 07° 18’ 19” East 2161.65 feet; thence South 82° 41’ 40” West 20.00 feet to the Point of Beginning.

ALSO EXCEPT the portion of the aforesaid land designated “Parcel One” in the Deed to the State of California recorded August 21, 1978 in Book 8975 of Official Records, at Page 108, being more particularly described as follows: COMMENCING at the Southeasterly terminus of that certain course described as “N. 26° 54’ 09” W., 1001.11 feet” in “Parcel 1” of the Deed to the State of California recorded March 29, 1962 in Book 4086 of Official Records, at Page 235; thence, along the general Southwesterly line of said “Parcel 1”, from a tangent that bears South 26° 54’ 09” East, along a curve to the Right, with a radius of 125.00 feet, through an angle of 69° 42’ 45”, an arc length of 152.00 feet and South 42° 48’ 36” West 176.22 feet; thence North 25° 53’ 01” West 44.94 feet; thence North 37° 19’ 32” West 136.13 feet; thence along a tangent curve to the Right, with a radius of 250.00 feet, through an angle of 59° 40’ 50”, an arc length of 260.41 feet to a point of reverse curvature; thence, along a tangent curve to the Left, with a radius of 550.00 feet, through an angle of 43° 18’ 04”, an arc length of 415.66 feet to said general Southwesterly line of “Parcel 1” (4086-OR-235); thence, along last said line, South 26° 54’ 09” East 594.74 feet to the Point of Commencement.

AND ALSO EXCEPT the interest dedicated to the City of Concord by that certain Offer recorded September 28, 1978 in Book 9030 of Official Records, at Page 665, and accepted by Resolution recorded November 19, 1979 in Book 9085 of Official Records, at Page 354, the affected land being more particularly described as follows: BEGINNING at the most Westerly corner of the land described as “Parcel 1” in the Deed from Burnett, et al, to the State of California recorded March 29, 1962 in Book 4086 of Official Records, at Page 235, being the “True Point of Commencement” described in said Deed and lying on the Northwesterly line of Willow Pass Road, 110.00 feet in width; thence, along the Northwesterly line of Willow Pass Road, South 51° 15’ 38” West 314.00 feet; thence leaving said line, at right angles, North 38° 44’ 22” West 29.00 feet; thence North 51° 15’ 38” East 12.00 feet; thence South 83° 44’ 10” East 31.12 feet to a point 7.00 feet (measured at right angles) from said Northwesterly line of Willow Pass Road; thence, parallel to said line, North 51° 15’ 38” East 327.12 feet to a point on the Northwesterly line the aforementioned State Parcel (4086-OR-235); thence, along said line, South 42° 48’ 36” West 47.63 feet to the Point of Beginning.
AND FURTHER EXCEPT all of the aforesaid land encompassed with the boundaries of the land shown and designated Parcels “A” and “B” on Parcel Map MSC 36-80 filed January 27, 1981 in Book 92 of Parcel Maps, at Page 7, in the Office of the Contra Costa County Recorder.

APN(s): 153-230-023, 024 and 025

PARCEL TWO:

Parcel “A” as shown on Parcel Map MSC 36-80, filed January 27, 1981 in Book 92 of Parcel Maps, at Page 7, in the Office of the Contra Costa County Recorder.

APN(s): 153-230-007 and 022

PARCEL THREE:

Parcel “B” as shown on the Parcel Map MSC 36-80, filed January 27, 1981 in Book 92 of Parcel Maps, at Page 7, in the Office of the Contra Costa County Recorder.
EXCEPT all that real property interest contained or created in those certain Quitclaim Deeds to Carter Hawley Hale Stores, Inc., a California corporation, recorded January 29, 1982 in Book 10660 of Official Records, at Pages 114 and 118, under respective Recorder’s Serial Numbers 82-10034 and 82-10035, being more particularly described as:

All buildings, structures and other improvements, together with all fixtures located and to be located in or on Parcel “B” as shown on the Map of MSC 36-80, filed January 27, 1981 in Book 92 of Parcel Maps, at Page 7, in the Office of the Contra Costa County Recorder, which buildings, structures, improvements and fixtures are and shall remain real property.

APN: 153-230-021

Exhibit B
Members of Taubman

Name of Member	Membership Interest	
The Robert S. Taubman Revocable Trust dated August 9, 1982, as amended	16.66666666%	
The William S. Taubman Revocable Trust dated June 10, 1993	16.66666666%	
The Gayle Taubman Kalisman Revocable Trust dated March 22, 1981, as amended.	1.0%	
The Alexander Taubman Irrevocable Trust, under the Robert S. Taubman Irrevocable Trust Agreement dated May 2, 2006	4.16666666%	
The Ghislaine Taubman Irrevocable Trust, under the Robert S. Taubman Irrevocable Trust Agreement dated May 2, 2006	4.16666666%	
The Theodore Taubman Irrevocable Trust, under the Robert S. Taubman Irrevocable Trust Agreement dated May 2, 2006	4.16666666%	
The Sebastian Taubman Irrevocable Trust, under the Robert S. Taubman Irrevocable Trust Agreement dated May 2, 2006	4.16666666%	
The Abigail Taubman Irrevocable Trust, under the William S. Taubman Irrevocable Trust Agreement dated December 14, 2006	8.33333333%	
The Oliver Taubman Irrevocable Trust, under the William S. Taubman Irrevocable Trust Agreement dated December 14, 2006	8.33333333%	
The PTK 2000 Trust, under Trust Agreement dated May 26, 2004	16.16666666%	
The JTK Trust, under Trust Agreement dated May 26, 2004	16.16666666%	

 
 
Exhibit 10 (ae)
 
SUMMARY OF COMPENSATION FOR
THE BOARD OF DIRECTORS OF
TAUBMAN CENTERS, INC.

 
 
Non-employee directors receive the following compensation:

Compensation
 	 
Amount

Annual Cash Retainer (1)
 	 
$35,000 in aggregate, paid quarterly in advance

Annual Equity Retainer (1)
 	 
Taubman Centers, Inc. (the “Company”) common stock having a fair market value (as of the last business day of the preceding quarter) of $50,000 in aggregate, granted quarterly in advance

Meeting Fee (board or committee meetings):
 	 
$1,500 per meeting attended

Annual Fee for Audit Committee Chair:
 	 
$12,500

Annual Fee for Compensation Committee Chair:
 	 
$7,500

Annual Fee for Nominating and Corporate Governance Committee Chair:
 	 
$5,000
 	
________________________
(1) In accordance with the Taubman Centers, Inc. Non-Employee Directors’ Deferred Compensation Plan, non-employee directors are permitted to defer the receipt of all or a portion of the annual cash retainer and annual equity retainer until the termination of his or her service on the Board of Directors and for such deferred compensation to be denominated in restricted stock units, representing the right to receive shares of the Company’s common stock at the end of the deferral period. During the deferral period, when the Company pays cash dividends on its common stock, the directors’ deferral accounts will be credited with dividend equivalents on their deferred restricted stock units, payable in additional restricted stock units based on the then-fair market value of the Company’s common stock. Each director's account is 100% vested at all times.

The Company also reimburses members of the Board of Directors for all expenses incurred in attending meetings or performing their duties as directors.

Members of the Board of Directors who are employees or officers of the Company or any of its subsidiaries do not receive any compensation for serving on the Board of Directors or any committees thereof.

Effective January 1, 2007.

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	  Exhibit 12  	 	

TAUBMAN CENTERS, INC.	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Dividends	
(in thousands, except ratios)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Year Ended December 31  	 	
 	 	 	2006	 	 	2005	 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations before income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  from equity investees	 	$	61,596	 	$	14,982	 	$	19,900	 	$	(5,448	)	$	14,103	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add back:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Fixed charges	 	 	146,103	 	 	137,837	 	 	116,584	 	 	104,626	 	 	95,280	 	
  Amortization of previously capitalized interest	 	 	4,329	 	 	3,843	 	 	3,612	 	 	3,256	 	 	2,601	 	
  Distributed income of Unconsolidated Joint	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
    Ventures (1)	 	 	33,544	 	 	95,249	 	 	40,070	 	 	36,740	 	 	27,912	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Deduct:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Capitalized interest	 	 	(9,803	)	 	(9,940	)	 	(5,995	)	 	(9,134	)	 	(6,317	)	
  Preferred distributions	 	 	(2,460	)	 	(2,460	)	 	(12,244	)	 	(9,000	)	 	(9,000	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings available for fixed charges and	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  preferred dividends	 	$	233,309	 	$	239,511	 	$	161,927	 	$	121,040	 	$	124,579	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fixed Charges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Interest expense (2)	 	$	128,643	 	$	121,612	 	$	95,934	 	$	84,194	 	$	77,479	 	
  Capitalized interest	 	 	9,803	 	 	9,940	 	 	5,995	 	 	9,134	 	 	6,317	 	
  Interest portion of rent expense	 	 	5,197	 	 	3,825	 	 	2,411	 	 	2,298	 	 	2,484	 	
  Preferred distributions (3)	 	 	2,460	 	 	2,460	 	 	12,244	 	 	9,000	 	 	9,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
    Total Fixed Charges	 	$	146,103	 	$	137,837	 	$	116,584	 	$	104,626	 	$	95,280	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred dividends (4)	 	 	23,723	 	 	27,622	 	 	17,444	 	 	16,600	 	 	16,600	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total fixed charges and preferred dividends	 	$	169,826	 	$	165,459	 	$	134,028	 	$	121,226	 	$	111,880	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to fixed charges and	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  preferred dividends	 	 	1.4	 	 	1.4	 	 	1.2	 	 	1.0	  (5)	 	1.1	 	
 
(1)	In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland. The Company's $52.8 million equity in the gain on the sale is separately presented on the face of the income statement.	
(2)	Interest expense for the year ended December 31, 2006 includes charges of $3.1 million in connection with the write-off of financing costs related to the respective pay-off and refinancing of the loans on The Shops at Willow Bend and Dolphin Mall when the loans became prepayable without penalty. Interest expense for the year ended December 31, 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills and the pay-off of the the Northlake Mall Loan, and debt modifications in connection with the pay-off of the Oyster Bay loan.	
(3)	TRG preferred distributions for the year ended December 31, 2004 include a $2.7 million charge relating to the redemption of the Series C and D Preferred Equity.	
(4)	Preferred dividends for the year ended December 31, 2006 include $4.7 million of charges recognized in connection with the redemption of the Series A and I Preferred Stock. Preferred dividends for the year ended December 31, 2005 include a $3.1 million charge related to the partial redemption of the Series A Preferred Stock.	
(5)	Earnings available for fixed charges and preferred dividends were less than total fixed charges and preferred dividends by $0.2 million.	 	 	 	

 

Exhibit 21

TAUBMAN CENTERS, INC.
LIST OF SUBSIDIARIES

NAME	JURISDICTION
OF FORMATION	 
DOING BUSINESS AS	
Beverly Associates L.P. 1	Delaware	N/A	
Beverly Partners 1, Inc.	Delaware	N/A	
Biltmore Holdings Associates 1 LLC	Arizona	N/A	
Biltmore Holdings Associates 2 LLC	Arizona	N/A	
Cherry Creek Holdings LLC	Delaware	N/A	
Dolphin Mall Associates LLC	Delaware	Dolphin Mall	
Fairlane Town Center LLC	Michigan	Fairlane Town Center	
Great Lakes Crossing, L.L.C.	Delaware	N/A	
International Plaza Holding Company, LLC	Delaware	N/A	
La Cienega Partners Limited Partnership	Delaware	Beverly Center	
Lakeside/Novi Land Partnership LLC	Michigan	N/A	
LCA Holdings, LLC	Delaware	N/A	
MacArthur Holdings, Inc.	Delaware	N/A	
MacArthur Shopping Center LLC	Delaware	MacArthur Center	
Mall Financing, Inc.	Michigan	N/A	
Millenia SPE, L.L.C.	Delaware	N/A	
Mountain Ventures Oysterbay One, LLC	Delaware	N/A	
Northlake Land LLC	Delaware	N/A	
Oyster Bay Associates Limited Partnership	Delaware	N/A	
Oyster Bay Holdings LLC	Delaware	N/A	
Partridge Creek Fashion Park LLC	Delaware	The Mall at Partridge Creek (under construction)	
Partridge Creek Land LLC	Delaware	N/A	
Plano Holdings, LLC	Delaware	N/A	
Short Hills Associates, L.L.C.	Delaware	The Mall at Short Hills	
Short Hills Holdings LLC	Delaware	N/A	
Short Hills SPE LLC	Delaware	N/A	
Stony Point Associates LLC	Delaware	N/A	
Stony Point Fashion Park Associates, L.L.C.	Delaware	Stony Point Fashion Park	
Stony Point Land LLC	Delaware	N/A	
Tampa Westshore Associates Limited Partnership	Delaware	International Plaza	
Taub-Co Asia Management, Inc.	Michigan	N/A	
Taub-Co Biltmore, Inc.	Delaware	N/A	
Taub-Co Fairfax, Inc.	Delaware	N/A	
Taub-Co Finance LLC	Delaware	N/A	
Taub-Co Finance II, Inc.	Michigan	N/A	
Taub-Co Kemp, Inc.	Michigan	N/A	
Taub-Co Land Holdings, Inc.	Michigan	N/A	
Taub-Co Landlord LLC	Delaware	N/A	
Taub-Co License LLC	Delaware	N/A	
Taub-Co Management, Inc.	Michigan	N/A	
Taub-Co Management IV, Inc.	Michigan	N/A	
Taub-Co Oyster Bay LLC	Delaware	N/A	
Taub-Co TRS Services, Inc.	Michigan	N/A	
Taub-Co Woodland LLC	Delaware	N/A	
Taubman Asia Holdings, Inc.	Michigan	N/A	
Taubman Asia Limited	Cayman Islands	N/A	
Taubman Asia Management Limited	Cayman Islands	N/A	
Taubman Auburn Hills Associates Limited Partnership	Delaware	Great Lakes Crossing  	
Taubman-Cherry Creek Limited Partnership	Colorado	N/A	
Taubman Cherry Creek Shopping Center, L.L.C.	Delaware	Cherry Creek Shopping Center	
Taubman-Ivanhoe LLC	Delaware	N/A	
Taubman MacArthur Associates Limited Partnership	Delaware	N/A	
Taubman Palm Beach LLC	Delaware	N/A	
Taubman Properties Asia LLC	Delaware	N/A	
Taubman Regency Square Associates, LLC	Delaware	Regency Square	
The Taubman Company Asia Limited	Cayman Islands	N/A	
The Taubman Company LLC	Delaware	The Taubman Company	
The Taubman Realty Group Limited Partnership	Delaware	N/A	
T-I 2002 SPE, LLC	Delaware	N/A	
T-I REIT, Inc.	Delaware	N/A	
TJ Palm Beach Associates Limited Partnership	Delaware	The Mall at Wellington Green	
TRG Auburn Hills LLC	Delaware	N/A	
TRG Charlotte, LLC	Delaware	Northlake Mall	
TRG Charlotte Land LLC	Delaware	N/A	
TRG-Fairfax L.L.C.	Delaware	N/A	
TRG Holdings, LLC	Michigan	N/A	
TRG Net Investors, LL C	Delaware	N/A	
TRG Properties - Orlando L.L.C.	Delaware	N/A	
TRG Properties-Waterside L.L.C.	Delaware	N/A	
TRG Realcom LLC	Delaware	N/A	
TRG Regency Corporation	Delaware	N/A	
TRG Regency SPE, LLC	Delaware	N/A	
TRG Short Hills LLC	Delaware	N/A	
TRG Stamford Holdings LLC	Delaware	N/A	
TRG SunValley LLC	Delaware	N/A	
TRG-Tampa LLC	Delaware	N/A	
TRG Telecom LLC	Delaware	N/A	
TRG The Pier LLC	Delaware	N/A	
TRG Trust	Michigan	N/A	
TTC Transportation, LLC	Delaware	N/A	
Twelve Oaks Mall, LLC	Michigan	Twelve Oaks Mall	
Willow Bend Associates Limited Partnership	Delaware	N/A	
Willow Bend Holdings 1 LLC	Delaware	N/A	
Willow Bend Holdings 2 LLC	Delaware	N/A	
Willow Bend Kemp Limited Partnership	Delaware	N/A	
Willow Bend Realty Limited Partnership	Delaware	N/A	
Willow Bend Shopping Center Limited Partnership	Delaware	The Shops at Willow Bend	
Willow Bend SPE LLC	Delaware	N/A	
Woodland Holdings Investments LLC	Delaware	N/A	
Woodland Investment Associates Limited Partnership	Delaware	N/A	

 

Exhibit 23
Consent of Independent Registered Public Accounting Firm

The Board of Directors
Taubman Centers, Inc.:

We consent to the incorporation by reference in the registration statements, including amendments thereto, on Form S-8 (Nos. 33-65934, 333-81577 and 333-125066) and on Form S-3 (Nos. 33-99636, 333-19503, 333-16781, 333-35433, 33-73038, 333-117225 and 333-125065) of Taubman Centers, Inc. of our reports dated February 26, 2007, with respect to (i) the consolidated balance sheets of Taubman Centers, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareowners’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006, and related financial statement schedules, and (ii) management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 annual report on Form 10-K of Taubman Centers, Inc.

Our report on the Company’s consolidated financial statements and related financial statement schedules refers to the Company’s change in method of quantifying errors in 2006 pursuant to Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” and the consolidation of the entity that owns Cherry Creek Shopping Center, pursuant to the transition methodology provided in Emerging Issues Task Force Issue No. 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership of Similar Entity When the Limited Partners Have Certain Rights.”

KPMG LLP

Chicago, Illinois
February 27, 2007

 
Exhibit 24

POWER OF ATTORNEY

 The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
 IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 14 th day of February, 2007.

       /s/ Graham T. Allison  
       Graham T. Allison

POWER OF ATTORNEY

 The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
 IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 10 th day of February, 2007.

       /s/ J erome A. Chazen
       Jerome A. Chazen

POWER OF ATTORNEY

 The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
 IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 15 th day of February, 2007.

       /s/ Craig M. Hatkoff  
       Craig M. Hatkoff

POWER OF ATTORNEY

 The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
 IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 9 th  day of February, 2007.

  /s/ Peter Karmanos, Jr.    
  Peter Karmanos, Jr.

POWER OF ATTORNEY

 The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
 IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 18 th day of February, 2007.

       /s/ William U. Parfet      
       William U. Parfet

 
 
Exhibit 31 (a)

 Certification of Chief Executive Officer
Pursuant to 15 U.S.C. Section 10A, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Robert S. Taubman, certify that:
 
1.	I have reviewed this annual report on Form 10-K of Taubman Centers, Inc.;	
 
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	

 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and	

 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

 Date: February 27, 2007	/s/ Robert S. Taubman          	
 	Robert S. Taubman	
 	Chairman of the Board of Directors, President, and Chief Executive Officer	

Exhibit 31 (b)

Certification of Chief Financial Officer
Pursuant to 15 U.S.C. Section 10A, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Lisa A. Payne, certify that:
 
1.	I have reviewed this annual report on Form 10-K of Taubman Centers, Inc.;	
 
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	

 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and	

 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

Date: February 27, 2007	/s/ Lisa A. Payne          	
 	Lisa A. Payne	
 	Vice Chairman, Chief Financial Officer, and Director (Principal Financial Officer)	

Exhibit 32 (a)  

Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, Robert S. Taubman, Chief Executive Officer of Taubman Centers, Inc. (the "Registrant"), certify that based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2006 (the "Report"):

 	(i)	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and	

 	(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.	

 Date: February 27, 2007	/s/ Robert S. Taubman          	
 	Robert S. Taubman	
 	Chairman of the Board of Directors, President, and Chief Executive Officer	

Exhibit 32 (b)

Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, Lisa A. Payne, Chief Financial Officer of Taubman Centers, Inc. (the "Registrant"), certify that based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2006 (the "Report"):

 	(i)	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and	

 	(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.	

Date: February 27, 2007	/s/ Lisa A. Payne          	
 	Lisa A. Payne	
 	Vice Chairman, Chief Financial Officer, and Director (Principal Financial Officer)	

 	 	 	 	 	 	 	 	 	 	 	   Exhibit 99 (a)	 	 	
MORTGAGE AND OTHER NOTES PAYABLE	
INCLUDING WEIGHTED AVERAGE INTEREST RATES AT DECEMBER 31, 2006	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
 	 	 	 	Beneficial	Effective	 	LIBOR	 	 	 	 	 	 	 	 	 	 	 		
 	 	 	100%	Interest	Rate	(a)	Rate	 	 	 	 	 	 	 	 	 	 	 		
 	 	 	12/31/06	12/31/06	12/31/06	 	Spread	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	Total		
Consolidated Fixed Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Beverly Center	 	343.6	343.6	5.28%	 	 	4.8	5.0	5.4	5.7	6.0	6.3	6.6	303.8	 	 	343.6		
Cherry Creek Shopping Center	50.00%	280.0	140.0	5.24%	 	 	 	 	 	 	 	 	 	 	 	140.0	140.0		
Great Lakes Crossing	 	142.9	142.9	5.25%	 	 	2.5	2.6	2.7	2.9	3.0	3.2	126.0	 	 	 	142.9		
International Plaza (b)	50.10%	178.7	89.5	4.38%	(c)	 	1.7	87.8	(b)	 	 	 	 	 	 	 	89.5		
MacArthur Center	95.00%	138.2	131.5	6.87%	(d)	 	2.7	2.8	3.0	122.9	 	 	 	 	 	 	131.5		
Northlake Mall	 	215.5	215.5	5.41%	 	 	 	 	 	 	 	 	 	 	 	215.5	215.5		
Regency Square	 	77.8	77.8	6.75%	 	 	1.1	1.2	1.3	1.4	72.8	 	 	 	 	 	77.8		
Stony Point Fashion Park	 	111.9	111.9	6.24%	 	 	1.5	1.5	1.6	1.8	1.9	2.0	2.1	99.5	 	 	111.9		
The Mall at Short Hills	 	540.0	540.0	5.47%	 	 	 	 	 	 	 	 	 	 	540.0	 	540.0		
The Mall at Wellington Green	90.00%	200.0	180.0	5.44%	 	 	 	 	 	 	 	 	 	 	180.0	 	180.0		
Total Consolidated Fixed	 	2,228.7	1,972.6	 	 	 	14.3	100.9	14.1	134.6	83.7	11.4	134.8	403.3	720.0	355.5	1,972.6		
Weighted Rate	 	5.47%	5.53%	 	 	 	5.68%	4.57%	5.86%	6.76%	6.58%	5.44%	5.27%	5.52%	5.46%	5.34%	 		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Consolidated Floating Rate Debt:  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Dolphin Mall (e)	 	5.0	5.0	6.05%	(f)	0.70%	 	 	5.0	(g)	 	 	 	 	 	 	5.0		
Fairlane Town Center (e)	 	55.0	55.0	6.05%	(f)	0.70%	 	 	55.0	(g)	 	 	 	 	 	 	55.0		
The Mall at Partridge Creek	 	22.0	22.0	6.50%	(f)	1.15%	 	 	 	22.0	 	 	 	 	 	 	22.0		
TRG Revolving Credit	 	8.1	8.1	6.31%	(h)	 	 	8.1	 	 	 	 	 	 	 	 	8.1		
Twelve Oaks Mall (e)	 	0.0	0.0	 	(f)	0.70%	 	 	 	 	 	 	 	 	 	 	0.0		
Other  	 	0.8	0.4	8.25%	 	 	0.2	0.1	0.1	 	 	 	 	 	 	 	0.4		
Total Consolidated Floating	 	90.9	90.5	 	 	 	0.2	8.2	60.1	22.0	0.0	0.0	0.0	0.0	0.0	0.0	90.5		
Weighted Rate	 	6.20%	6.19%	 	 	 	8.25%	6.34%	6.05%	6.50%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	 		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Total Consolidated	 	2,319.5	2,063.1	 	 	 	14.4	109.1	74.2	156.6	83.7	11.4	134.8	403.3	720.0	355.5	2,063.1		
Weighted Rate	 	5.50%	5.56%	 	 	 	5.71%	4.70%	6.02%	6.72%	6.58%	5.44%	5.27%	5.52%	5.46%	5.34%	 		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Joint Ventures Fixed Rate Debt:  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Arizona Mills	50.00%	137.8	68.9	7.90%	 	 	0.9	0.9	1.0	66.0	 	 	 	 	 	 	68.9		
Fair Oaks	50.00%	140.0	70.0	6.60%	 	 	 	70.0	 	 	 	 	 	 	 	 	70.0		
The Mall at Millenia	50.00%	210.0	105.0	5.46%	 	 	 	0.9	1.4	1.5	1.6	1.6	98.1	 	 	 	105.0		
Sunvalley	50.00%	128.0	64.0	5.67%	 	 	1.0	1.1	1.2	1.2	1.3	58.2	 	 	 	 	64.0		
Waterside Shops at Pelican Bay	25.00%	165.0	41.3	5.54%	 	 	 	 	 	 	 	 	 	 	 	41.3	41.3		
Westfarms	78.94%	198.5	156.7	6.10%	 	 	2.4	2.6	2.7	2.9	3.1	142.9	 	 	 	 	156.7		
Total Joint Venture Fixed	 	979.3	505.8	 	 	 	4.3	75.5	6.3	71.7	6.0	202.7	98.1	0.0	0.0	41.3	505.8		
Weighted Rate	 	6.14%	6.18%	 	 	 	6.36%	6.57%	6.17%	7.73%	5.84%	5.97%	5.46%	0.00%	0.00%	5.54%	 		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Joint Ventures Floating Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Taubman Land Associates    	  50.00%	 30.0	15.0	6.21%	(i)	 	 	 	 	 	 	 15.0	 	 	 	 	 15.0		
Other	 	 	2.1	1.4	8.12%	 	 	0.6	0.3	0.3	0.1	 	 	 	 	 	 	1.4		
Total Joint Venture Floating (j)	32.1	16.4	 	 	 	0.6	0.3	0.3	0.1	0.00	15.0	0.0	0.0	0.0	0.0	16.4		
Weighted Rate	 	6.34%	6.37%	 	 	 	8.12%	8.12%	8.12%	8.12%	0.00%	6.21%	0.00%	0.00%	0.00%	0.00%	 		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Total Joint Venture	 	1,011.4	522.2	 	 	 	5.0	75.8	6.6	71.8	6.0	217.7	98.1	0.0	0.0	41.3	522.2		
Weighted Rate	 	6.14%	6.19%	 	 	 	6.58%	6.58%	6.26%	7.73%	5.84%	5.99%	5.46%	0.00%	0.00%	5.54%	 		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
TRG Beneficial Interest Totals	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Fixed Rate Debt	 	3,207.9	2,478.5	 	 	 	18.6	176.4	20.4	206.3	89.7	214.1	232.9	403.3	720.0	396.8	2,478.5		
 	 	 	5.73%	5.66%	 	 	 	5.84%	5.43%	5.96%	7.10%	6.53%	5.94%	5.35%	5.52%	5.46%	5.36%	 		
Floating Rate Debt	 	123.0	106.8	 	 	 	0.8	8.5	60.4	22.1	0.00	15.0	0.0	0.0	0.0	0.0	106.8		
 	 	 	6.24%	6.22%	 	 	 	8.14%	6.41%	6.06%	6.51%	0.00%	6.21%	0.00%	0.00%	0.00%	0.00%	 		
Total	 	 	3,330.9	2,585.3	 	 	 	19.4	184.9	80.8	228.4	89.7	229.1	232.9	403.3	720.0	396.8	2,585.3		
 	 	 	5.75%	5.69%	 	 	 	5.93%	5.47%	6.04%	7.04%	6.53%	5.96%	5.35%	5.52%	5.46%	5.36%	 		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
 	 	  Average Maturity Fixed Debt	 	 	7	 	 	 	 	 	 	 	 	 	 	 	
 	 	  Average Maturity Total Debt	 	 	7	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
(a)	Includes the impact of interest rate swaps, if any, but does not include effect of amortization of debt issuance costs, losses on settlement of derivatives used to hedge the refinancing of certain fixed rate debt, or interest rate cap premiums.	
(b)	The Company has entered into three forward starting swaps totaling $150 million (beneficial interest $75 million) to partially hedge the planned refinancing of International Plaza in January 2008.  The weighted average forward swap rate for these three swaps is 5.33%, excluding the credit spread.	
(c)	Debt is reduced by $0.2 million of purchase accounting discount from acquisition which increases the stated rate on the debt of 4.21% to an effective rate of 4.38%.	
(d)	Debt includes $2.8 million of purchase accounting premium from acquisition which reduces the stated rate on the debt of 7.59% to an effective rate of 6.87%.	
(e)	TRG's $350 million revolving credit facility was amended in August 2006.  Dolphin, Fairlane, and Twelve Okas are now direct borrowers under this facility.	
(f)	The debt is floating month to month at LIBOR plus spread.	
(g)	One year extension option available.	
(h)	Rate floats daily.	
(i)	Debt is swapped to an effective rate of 5.95% from January 2, 2007 to maturity.	
(j)	Excludes The Pier Shops at Caesars' mortgage of $86.0 million at 100%.  The loan has an effective rate of 8% at December 31, 2006 and matures in 2007 with two one-year extension options available.  The debt floats month to month at LIBOR plus 2.65% spread.  The debt is guaranteed 100% by the joint venture partner.	
 
Exhibit 99 (b)
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2006
(in thousands)

 	Initial Cost to Company	 	 	 	Gross Amount at Which
Carried at Close of Period	 	 	 	 	 	 	 	 	 	 	 	
 	 	Land 	 	 	Buildings, Improvements, and Equipment	 	 	Cost Capitalized Subsequent to Acquisition	 	 	Land	 	 	BI&E	 	 	Total	 	 	Accumulated Depreciation(A/D)	 	 	Total Cost Net of A/D	 	 	Encumbrances	 	Date of Completion of Construction
or Acquisition	Depreciable Life	
Shopping Centers:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Arizona Mills, Tempe, AZ	$	22,017	 	 $	 161,664	 	 $	 4,063	 	$	22,017	 	 $	 165,727	 	 $	 187,744	 	 $	 51,911	 	$	135,833	 	$	137,780	 	1997	50 Years	
Fair Oaks, Fairfax, VA	 	7,667	 	 	36,043	 	 	58,811	 	 	7,667	 	 	94,854	 	 	102,521	 	 	46,472	 	 	56,049	 	 	140,000	 	1980	55 Years	
The Mall at Millenia, Orlando, FL	 	18,516	 	 	179,847	 	 	5,554	 	 	18,516	 	 	185,401	 	 	203,917	 	 	32,852	 	 	171,065	 	 	210,305	(1)	  
2002	50 Years	
The Pier Shops at Caesars,
  Atlantic City, NJ	 	 	 	 	176,470	 	 	 	 	 	 	 	 	176,470	 	 	176,470	 	 	2,410	 	 	174,060	 	 	85,957	 	2006	50 Years	
Stamford Town Center, Stamford, CT	 	9,538	 	 	42,316	 	 	25,845	 	 	9,538	 	 	68,161	 	 	77,699	 	 	41,960	 	 	35,739	 	 	 	 	1982	40 Years	
Sunvalley, Concord, CA	 	354	 	 	65,714	 	 	9,154	 	 	354	 	 	74,868	 	 	75,222	 	 	47,923	 	 	27,299	 	 	127,950	 	1967	40 Years	
Waterside Shops at Pelican Bay
  Naples, FL	 	8,531	 	 	67,387	 	 	52,272	 	 	12,604	 	 	115,586	 	 	128,190	 	 	29,031	 	 	99,159	 	 	165,000	 	2003	40 Years	
Westfarms, Farmington, CT	 	5,287	 	 	38,638	 	 	108,776	 	 	5,287	 	 	147,414	 	 	152,701	 	 	67,697	 	 	85,004	 	 	198,521	 	1974	34 Years	
Other:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Taubman Land Associates (Sunvalley), 
  Concord, CA	 	
42,697	 	 	 	 	 	 	 	 	
42,697	 	 	 	 	 	
42,697	 	 	 	 	 	
42,697	 	 	
30,000	 	
2006		
Peripheral Land	 	1,547	 	 	 	 	 	 	 	 	1,547	 	 	 	 	 	1,547	 	 	 	 	 	1,547	 	 	 	 	 	 	
Construction in Process and
  Development Pre-Construction Costs	 	 	 	 	 	 	 	
 9,164	 	 	 	 	 	
 9,164	 	 	
 9,164	 	 	 	 	 	
9,164	 	 	 	 	 	 	
TOTAL	$	116,154	 	$	768,079	 	$	273,639	 	$	120,227	 	$	1,037,645	 	$	1,157,872	(2)	 $	 320,256	 	$	837,616	 	 	 	 	 	 	

The changes in total real estate assets and accumulated depreciation for the years ended December 31, 2006, 2005, and 2004 are as follows:

 	 	Total Real
Estate Assets 	 	 	Total Real
Estate Assets	 	 	Total Real
Estate Assets	 	 	 	Accumulated Depreciation	 	 	Accumulated Depreciation	 	 	Accumulated Depreciation	 	
 	 	2006	 	 	2005	 	 	2004	 	 	 	2006	 	 	2005	 	 	2004	 	
Balance, beginning of year	$	1,076,743	 	$	1,080,482	 	$	1,250,964	 	Balance, beginning of year	 $	 (363,394	 )	 $	 (360,830	 )	 $	 (331,321	 )	
New development and improvements	 	48,800	 	 	67,023	 	 	23,117	 	Depreciation for year	 	(40,224	)	 	 (47,403	 )	 	 (53,070	 )	
Acquisitions	 	42,697	  (3)  	 	 	 	 	75,918 	   (4)	Acquisitions	 	 	 	 	 	 	 	(22,634	)  (4)	
Disposals/Write-offs	 	(8,272	)	 	(18,251	)	 	(6,916	) 	Disposals/Write-offs	 	8,270	 	 	 18,247	 	 	 16,500	 	
Transfers In/(Out)	 	(2,096	) (5)	 	 (52,511	) (6)	 	 (262,601	)  (7)	Transfers In/(Out)	 	 75,092	  (5)	 	 26,592	  (6)	 	29,695	   (7)	
Balance, end of year	$	1,157,872	 	$	1,076,743	   (8)	$	1,080,482	   (8)	Balance, end of year	 $	 (320,256	 )	 $	 (363,394	 )	 $	 (360,830	 )	

(1)  	Includes a term loan of $1,004, secured by certain equipment.	
(2)  	The unaudited aggregate cost for federal income tax purposes as of December 31, 2006 was $1.231 billion.	
(3)  	Includes costs related to the purchase of the land under Sunvalley, acquired by a 50% owned joint venture.	
(4)  	Includes costs relating to Waterside Shops at Pelican Bay, a 25% owned joint venture.	
(5)  	Primarily includes a $174.8 million transfer out of costs relating to Cherry Creek Shopping Center, which became a consolidated center in 2006, offset by a $176.5 million transfer in of costs relating to The Pier Shops at Caesars.	
(6)  	Includes costs relating to Woodland, which was sold in 2005.	
(7)  	Includes costs relating to International Plaza, which became a consolidated center in 2004.	
(8)  	Excludes costs related to the investment in The Pier Shops at Caesars, which was under construction.