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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: June 30, 2008
Commission File No. 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 Identification No.)	
incorporation or organization)	 	 	
 	 	 	
200 East Long Lake Road, Suite 300, Bloomfield Hills, Michigan	 	48304-2324	
 	 	 	
(Address of principal executive offices)	 	(Zip Code)	
(248) 258-6800
 
(Registrant’s telephone number, including area code)
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.
þ Yes  o No
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 	 	 	 	 	 	 	
Large accelerated filer þ	 	Accelerated filer o	 	Non-accelerated filer o	 	Smaller reporting company o	
 	 	 	 	(Do not check if a smaller reporting company)	 	 	
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes  þ No
     As of July 31, 2008, there were outstanding 52,893,428 shares of the Company’s common stock, par value $0.01 per share.

   

 

TAUBMAN CENTERS, INC.
CONTENTS
 	 	 	 	 	 	 	
 	 	PART I — FINANCIAL INFORMATION	 	 	 	 	
 	 	 	 	 	 	 	
Item 1.	 	Financial Statements (Unaudited):	 	 	 	 	
 	 	 	 	 	 	 	
 	 	Consolidated Balance Sheet — June 30, 2008 and December 31, 2007	 	 	2	 	
 	 	 	 	 	 	 	
 	 	Consolidated Statement of Operations and Comprehensive Income — Three Months Ended June 30, 2008 and 2007	 	 	3	 	
 	 	 	 	 	 	 	
 	 	Consolidated Statement of Operations and Comprehensive Income — Six Months Ended June 30, 2008 and 2007	 	 	4	 	
 	 	 	 	 	 	 	
 	 	Consolidated Statement of Cash Flows — Six Months Ended June 30, 2008 and 2007	 	 	5	 	
 	 	 	 	 	 	 	
 	 	Notes to Consolidated Financial Statements	 	 	6	 	
 	 	 	 	 	 	 	
Item 2.	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	20	 	
 	 	 	 	 	 	 	
Item 3.	 	Quantitative and Qualitative Disclosures About Market Risk	 	 	37	 	
 	 	 	 	 	 	 	
Item 4.	 	Controls and Procedures	 	 	37	 	
 	 	 	 	 	 	 	
 	 	PART II — OTHER INFORMATION	 	 	 	 	
 	 	 	 	 	 	 	
Item 1.	 	Legal Proceedings	 	 	38	 	
 	 	 	 	 	 	 	
Item 1A.	 	Risk Factors	 	 	38	 	
 	 	 	 	 	 	 	
Item 4.	 	Submission of Matters to a Vote of Security Holders	 	 	38	 	
 	 	 	 	 	 	 	
Item 5.	 	Other Information	 	 	38	 	
 	 	 	 	 	 	 	
Item 6.	 	Exhibits	 	 	39	 	
 	 	 	 	 	 	 	
SIGNATURES	 	 	 	 	 	 	
  EX-10(a)	
  EX-10(b)	
  EX-10(c)	
  EX-12	
  EX-31(a)	
  EX-31(b)	
  EX-32(a)	
  EX-32(b)	
  EX-99	
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TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
 	 	 	 	 	 	 	 	 	
 	 	June 30	 	 	December 31	 	
 	 	2008	 	 	2007	 	
Assets:	 	 	 	 	 	 	 	 	
Properties	 	$	3,785,814	 	 	$	3,781,136	 	
Accumulated depreciation and amortization	 	 	(986,366	)	 	 	(933,275	)	
 	 	 	 	 	 	 	
 	 	$	2,799,448	 	 	$	2,847,861	 	
Investment in Unconsolidated Joint Ventures (Note 4)	 	 	92,377	 	 	 	92,117	 	
Cash and cash equivalents	 	 	33,575	 	 	 	47,166	 	
Accounts and notes receivable, less provision for bad debts of $7,883 and $6,694 in 2008 and 2007	 	 	43,554	 	 	 	52,161	 	
Accounts receivable from related parties	 	 	2,024	 	 	 	2,283	 	
Deferred charges and other assets (Notes 1 and 3)	 	 	226,633	 	 	 	109,719	 	
 	 	 	 	 	 	 	
 	 	$	3,197,611	 	 	$	3,151,307	 	
 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	
Notes payable (Note 5)	 	$	2,774,156	 	 	$	2,700,980	 	
Accounts payable and accrued liabilities	 	 	248,810	 	 	 	296,385	 	
Dividends and distributions payable	 	 	21,950	 	 	 	21,839	 	
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures (Note 4)	 	 	153,344	 	 	 	100,234	 	
 	 	 	 	 	 	 	
 	 	$	3,198,260	 	 	$	3,119,438	 	
Commitments and contingencies (Notes 1, 3, 5, 7, and 8)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Preferred Equity of TRG	 	$	29,217	 	 	$	29,217	 	
 	 	 	 	 	 	 	 	 	
Minority interests in TRG and consolidated joint ventures (Notes 1 and 3)	 	$	16,345	 	 	$	18,494	 	
 	 	 	 	 	 	 	 	 	
Shareowners’ Equity:	 	 	 	 	 	 	 	 	
Series B Non-Participating Convertible Preferred Stock, $0.001 par and liquidation value, 40,000,000 shares authorized, 26,514,235 shares issued and outstanding at June 30, 2008 and December 31, 2007	 	$	27	 	 	$	27	 	
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 June 30, 2008 and December 31, 2007	 	 	 	 	 	 	 	 	
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 June 30, 2008 and December 31, 2007	 	 	 	 	 	 	 	 	
Common Stock, $0.01 par value, 250,000,000 shares authorized, 52,892,604 and 52,624,013 shares issued and outstanding at June 30, 2008 and December 31, 2007	 	 	529	 	 	 	526	 	
Additional paid-in capital	 	 	550,917	 	 	 	543,333	 	
Accumulated other comprehensive income (loss)	 	 	(7,384	)	 	 	(8,639	)	
Dividends in excess of net income (Note 1)	 	 	(590,300	)	 	 	(551,089	)	
 	 	 	 	 	 	 	
 	 	$	(46,211	)	 	$	(15,842	)	
 	 	 	 	 	 	 	
 	 	$	3,197,611	 	 	$	3,151,307	 	
 	 	 	 	 	 	 	
See notes to consolidated financial statements.
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TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except share data)
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30	 	
 	 	2008	 	 	2007	 	
Revenues:	 	 	 	 	 	 	 	 	
Minimum rents	 	$	87,583	 	 	$	79,507	 	
Percentage rents	 	 	1,325	 	 	 	997	 	
Expense recoveries	 	 	60,384	 	 	 	57,923	 	
Management, leasing, and development services	 	 	3,891	 	 	 	3,632	 	
Other	 	 	7,229	 	 	 	10,215	 	
 	 	 	 	 	 	 	
 	 	$	160,412	 	 	$	152,274	 	
 	 	 	 	 	 	 	
Expenses:	 	 	 	 	 	 	 	 	
Maintenance, taxes, and utilities	 	$	46,485	 	 	$	45,587	 	
Other operating	 	 	19,695	 	 	 	16,078	 	
Management, leasing, and development services	 	 	2,421	 	 	 	1,796	 	
General and administrative	 	 	7,943	 	 	 	7,015	 	
Interest expense	 	 	35,972	 	 	 	32,190	 	
Depreciation and amortization	 	 	36,179	 	 	 	33,568	 	
 	 	 	 	 	 	 	
 	 	$	148,695	 	 	$	136,234	 	
 	 	 	 	 	 	 	
Gains on land sales and other nonoperating income	 	$	1,456	 	 	$	723	 	

Income before income tax expense, equity in income of Unconsolidated Joint Ventures, and minority and preferred interests	 	$	13,173	 	 	$	16,763	 	
Income tax expense (Note 2)	 	 	(250	)	 	 	 	 	
Equity in income of Unconsolidated Joint Ventures (Note 4)	 	 	8,491	 	 	 	9,239	 	
 	 	 	 	 	 	 	
Income before minority and preferred interests	 	$	21,414	 	 	$	26,002	 	
Minority share of consolidated joint ventures (Note 1):	 	 	 	 	 	 	 	 	
Minority share of income of consolidated joint ventures	 	 	(1,130	)	 	 	(621	)	
Distributions in excess of minority share of income of consolidated joint ventures	 	 	(4,258	)	 	 	(1,649	)	
Minority interest in TRG (Note 1):	 	 	 	 	 	 	 	 	
Minority share of income of TRG	 	 	(4,505	)	 	 	(7,187	)	
Distributions in excess of minority share of income	 	 	(6,874	)	 	 	(3,437	)	
TRG Series F preferred distributions	 	 	(615	)	 	 	(615	)	
 	 	 	 	 	 	 	
Net income	 	$	4,032	 	 	$	12,493	 	
Series G and H preferred stock dividends	 	 	(3,659	)	 	 	(3,659	)	
 	 	 	 	 	 	 	
Net income allocable to common shareowners	 	$	373	 	 	$	8,834	 	
 	 	 	 	 	 	 	
Net income	 	$	4,032	 	 	$	12,493	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	
Unrealized gain on interest rate instruments and other	 	 	12,106	 	 	 	5,733	 	
Reclassification adjustment for amounts recognized in net income	 	 	316	 	 	 	315	 	
 	 	 	 	 	 	 	
Comprehensive income	 	$	16,454	 	 	$	18,541	 	

Basic earnings per common share (Note 9) -	 	 	 	 	 	 	 	 	
Net income	 	$	0.01	 	 	$	0.17	 	

Diluted earnings per common share (Note 9) -	 	 	 	 	 	 	 	 	
Net income	 	$	0.01	 	 	$	0.16	 	

Cash dividends declared per common share	 	$	0.415	 	 	$	0.375	 	

Weighted average number of common shares outstanding — basic	 	 	52,859,653	 	 	 	53,412,542	 	
 	 	 	 	 	 	 	
See notes to consolidated financial statements.
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TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except share data)
 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30	 	
 	 	2008	 	 	2007	 	
Revenues:	 	 	 	 	 	 	 	 	
Minimum rents	 	$	174,153	 	 	$	158,162	 	
Percentage rents	 	 	3,900	 	 	 	3,305	 	
Expense recoveries	 	 	117,848	 	 	 	108,546	 	
Management, leasing, and development services	 	 	7,585	 	 	 	8,522	 	
Other	 	 	14,343	 	 	 	18,765	 	
 	 	 	 	 	 	 	
 	 	$	317,829	 	 	$	297,300	 	
 	 	 	 	 	 	 	
Expenses:	 	 	 	 	 	 	 	 	
Maintenance, taxes, and utilities	 	$	90,025	 	 	$	83,506	 	
Other operating	 	 	37,996	 	 	 	32,874	 	
Management, leasing, and development services	 	 	4,678	 	 	 	4,586	 	
General and administrative	 	 	16,276	 	 	 	14,336	 	
Interest expense	 	 	72,954	 	 	 	61,884	 	
Depreciation and amortization	 	 	71,514	 	 	 	66,101	 	
 	 	 	 	 	 	 	
 	 	$	293,443	 	 	$	263,287	 	
 	 	 	 	 	 	 	
Gains on land sales and other nonoperating income	 	$	3,259	 	 	$	1,114	 	

Income before income tax expense, equity in income of Unconsolidated Joint Ventures, and minority and preferred interests	 	$	27,645	 	 	$	35,127	 	
Income tax expense (Note 2)	 	 	(440	)	 	 	 	 	
Equity in income of Unconsolidated Joint Ventures (Note 4)	 	 	17,725	 	 	 	17,425	 	
 	 	 	 	 	 	 	
Income before minority and preferred interests	 	$	44,930	 	 	$	52,552	 	
Minority share of consolidated joint ventures (Note 1):	 	 	 	 	 	 	 	 	
Minority share of income of consolidated joint ventures	 	 	(2,306	)	 	 	(2,534	)	
Distributions in excess of minority share of income of consolidated joint ventures	 	 	(6,395	)	 	 	(1,041	)	
Minority interest in TRG (Note 1):	 	 	 	 	 	 	 	 	
Minority share of income of TRG	 	 	(10,421	)	 	 	(14,928	)	
Distributions in excess of minority share of income	 	 	(12,341	)	 	 	(6,270	)	
TRG Series F preferred distributions	 	 	(1,230	)	 	 	(1,230	)	
 	 	 	 	 	 	 	
Net income	 	$	12,237	 	 	$	26,549	 	
Series G and H preferred stock dividends	 	 	(7,317	)	 	 	(7,317	)	
 	 	 	 	 	 	 	
Net income allocable to common shareowners	 	$	4,920	 	 	$	19,232	 	
 	 	 	 	 	 	 	
Net income	 	$	12,237	 	 	$	26,549	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	
Unrealized gain on interest rate instruments and other	 	 	624	 	 	 	5,757	 	
Reclassification adjustment for amounts recognized in net income	 	 	631	 	 	 	631	 	
 	 	 	 	 	 	 	
Comprehensive income	 	$	13,492	 	 	$	32,937	 	

Basic and diluted earnings per common share (Note 9) -	 	 	 	 	 	 	 	 	
Net income	 	$	0.09	 	 	$	0.36	 	

Cash dividends declared per common share	 	$	0.83	 	 	$	0.75	 	

Weighted average number of common shares outstanding — basic	 	 	52,767,430	 	 	 	53,418,055	 	
 	 	 	 	 	 	 	
See notes to consolidated financial statements.
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TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30	 	
 	 	2008	 	 	2007	 	
Cash Flows From Operating Activities:	 	 	 	 	 	 	 	 	
Net income	 	$	12,237	 	 	$	26,549	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Minority and preferred interests	 	 	32,693	 	 	 	26,003	 	
Depreciation and amortization	 	 	71,514	 	 	 	66,101	 	
Provision for bad debts	 	 	2,383	 	 	 	2,464	 	
Gains on sales of land and land-related rights	 	 	(2,192	)	 	 	 	 	
Other	 	 	4,498	 	 	 	4,123	 	
Increase (decrease) in cash attributable to changes in assets and liabilities:	 	 	 	 	 	 	 	 	
Receivables, deferred charges, and other assets	 	 	3,965	 	 	 	(8,037	)	
Accounts payable and other liabilities	 	 	(23,201	)	 	 	(14,975	)	
 	 	 	 	 	 	 	
Net Cash Provided By Operating Activities	 	$	101,897	 	 	$	102,228	 	

Cash Flows From Investing Activities:	 	 	 	 	 	 	 	 	
Additions to properties	 	$	(54,480	)	 	$	(99,258	)	
Acquisition of marketable equity securities and other assets	 	 	(1,936	)	 	 	(2,290	)	
Acquisition of additional interest in The Pier Shops (Note 3)	 	 	 	 	 	 	(24,504	)	
Cash transferred in upon consolidation of The Pier Shops (Note 3)	 	 	 	 	 	 	33,388	 	
Funding of The Mall at Studio City escrow (Note 3)	 	 	(54,334	)	 	 	 	 	
Proceeds from sales of land and land-related rights	 	 	5,274	 	 	 	 	 	
Contributions to Unconsolidated Joint Ventures	 	 	(5,998	)	 	 	(2,937	)	
Distributions from Unconsolidated Joint Ventures in excess of income	 	 	61,605	 	 	 	4,418	 	
 	 	 	 	 	 	 	
Net Cash Used In Investing Activities	 	$	(49,869	)	 	$	(91,183	)	

Cash Flows From Financing Activities:	 	 	 	 	 	 	 	 	
Debt proceeds	 	$	333,503	 	 	$	136,313	 	
Debt payments	 	 	(259,951	)	 	 	(7,961	)	
Debt issuance costs	 	 	(3,425	)	 	 	 	 	
Issuance of common stock and/or partnership units in connection with incentive plans	 	 	2,615	 	 	 	 	 	
Repurchase of common stock (Note 6)	 	 	 	 	 	 	(50,000	)	
Distributions to minority and preferred interests (Note 1)	 	 	(85,868	)	 	 	(27,056	)	
Cash dividends to preferred shareowners	 	 	(7,317	)	 	 	(7,317	)	
Cash dividends to common shareowners	 	 	(43,754	)	 	 	(39,950	)	
Other	 	 	(1,422	)	 	 	28	 	
 	 	 	 	 	 	 	
Net Cash Provided By (Used In) Financing Activities	 	$	(65,619	)	 	$	4,057	 	

Net Increase (Decrease) In Cash and Cash Equivalents	 	$	(13,591	)	 	$	15,102	 	
 	 	 	 	 	 	 	 	 	
Cash and Cash Equivalents at Beginning of Period	 	 	47,166	 	 	 	26,282	 	

Cash and Cash Equivalents at End of Period	 	$	33,575	 	 	$	41,384	 	
 	 	 	 	 	 	 	
See notes to consolidated financial statements.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Interim Financial Statements
General
     Taubman Centers, Inc. (the Company or TCO) is a Michigan corporation that operates as a self-administered and self-managed real estate investment trust (REIT). The Taubman Realty Group Limited Partnership (Operating Partnership or TRG) is a majority-owned partnership subsidiary of TCO that owns direct or indirect interests in all of the company’s real estate properties. In this report, the term “Company” refers to TCO, the Operating Partnership, and/or the Operating Partnership’s subsidiaries as the context may require. The Company engages in the ownership, management, leasing, acquisition, disposition, development, and expansion of regional and super-regional retail shopping centers and interests therein. The Company’s owned portfolio as of June 30, 2008 included 23 urban and suburban shopping centers in ten states.
     Taubman Properties Asia LLC and its subsidiaries (Taubman Asia), which is the platform for the Company’s expansion into the Asia-Pacific region, 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) and Taubman Asia. The Company consolidates the accounts of the owner of The Mall at Partridge Creek (Partridge Creek) (Note 3), which qualifies as a variable interest entity under Financial Accounting Standards Board (FASB) Interpretation No. 46 “Consolidation of Variable Interest Entities” (FIN 46R) for which the Operating Partnership is considered to be the primary beneficiary. In April 2007, the Company increased its ownership in The Pier Shops at Caesars (The Pier Shops) to a 77.5% controlling interest and began consolidating the entity that owns The Pier Shops (Note 3). Prior to the acquisition date, the Company accounted for The Pier Shops under the equity method. 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.
Ownership
     In addition to the Company’s common stock, there are three classes of preferred stock (Series B, G, and H) outstanding as of June 30, 2008. Dividends on the 8% Series G and 7.625% Series H Preferred Stock are cumulative and are payable in arrears on or about the last day of each calendar quarter. The Company owns corresponding Series G and 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 G and Series H Preferred Stock.
     The Company also is obligated to issue to partners in the Operating Partnership other than the Company, upon subscription, one share of nonparticipating Series B Preferred Stock per each Operating Partnership unit. The Series B Preferred Stock entitles its holders to one vote per share on all matters submitted to the Company’s shareowners and votes together with the common stock on all matters as a single class. The holders of Series B Preferred Stock are not entitled to dividends or earnings. The Series B Preferred Stock is convertible into the Company’s common stock at a ratio of 14,000 shares of Series B Preferred Stock for one share of common stock.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Operating Partnership
     At June 30, 2008, 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 ownership in the Operating Partnership at June 30, 2008 consisted of a 67% managing general partnership interest, as well as the Series G and H Preferred Equity interests. The Company’s average ownership percentage in the Operating Partnership for the six months ended June 30, 2008 and 2007 was 67% and 66%, respectively. At June 30, 2008, the Operating Partnership had 79,440,048 units of partnership interest outstanding, of which the Company owned 52,892,604 units.
Minority Interests
     As of June 30, 2008 and December 31, 2007, minority interests in the Company are comprised of the ownership interests of (1) noncontrolling unitholders of the Operating Partnership and (2) the noncontrolling interests in joint ventures controlled by the Company through ownership or contractual arrangements.
     The net equity of the Operating Partnership noncontrolling unitholders is less than zero. The net equity balances of the noncontrolling partners in certain of the consolidated joint ventures are also less than zero. Therefore, the interests of the noncontrolling unitholders of the Operating Partnership and outside partners with net equity balances in the consolidated joint ventures of less than zero are recognized as zero balances within the consolidated balance sheet. The interests of the noncontrolling partners with positive equity balances in consolidated joint ventures represent the minority interests presented on the Company’s consolidated balance sheet of $16.3 million and $18.5 million at June 30, 2008 and December 31, 2007, respectively.
     The income allocated to the Operating Partnership noncontrolling unitholders is equal to their share of distributions as long as the net equity of the Operating Partnership is less than zero. Similarly, the income allocated to the noncontrolling partners with net equity balances in consolidated joint ventures of less than zero is equal to their share of operating distributions.
     The net equity balances of the Operating Partnership and certain of the consolidated joint ventures are less than zero because of 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.
     In January 2008, International Plaza refinanced its debt and distributed a portion of the excess proceeds to its partner (Note 5). The joint venture partner’s $51.3 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. As of June 30, 2008, the total of excess proceeds distributed to partners for this and the Cherry Creek consolidated joint venture included in Deferred Charges and Other Assets was $96.8 million. The Company accounts for distributions to minority partners that result from such 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 for purposes of evaluating impairment, should events or circumstances indicate that the carrying value may not be recoverable.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     In January 2008, the Company’s president of Taubman Asia (the Asia President) obtained an ownership interest in Taubman Asia, a consolidated subsidiary. The Asia President is entitled to 10% of Taubman Asia’s dividends, with 85% of his dividends being withheld as contributions to capital. These withholdings will continue until he contributes and maintains his capital consistent with a 10% ownership interest, including all capital funded by the Operating Partnership for Taubman Asia’s operating and investment activities prior and subsequent to the Asia President obtaining his ownership interest. The Asia President’s ownership interest will be reduced to 5% upon his cumulatively receiving a specified amount in dividends. The Operating Partnership will have a preferred investment in Taubman Asia to the extent the Asia President has not yet contributed capital commensurate with his ownership interest. This preferred investment will accrue an annual preferential return equal to the Operating Partnership’s average borrowing rate (with the preferred investment and accrued return together being referred to herein as the preferred interest). Taubman Asia has the ability to call at any time the Asia President’s ownership at fair value, less the amount required to return the Operating Partnership’s preferred interest. The Asia President similarly has the ability to put his ownership interest to Taubman Asia at 85% (increasing to 100% in 2013) of fair value, less the amount required to return the Operating Partnership’s preferred interest. In the event of a liquidation of Taubman Asia, the Operating Partnership’s preferred interest would be returned in advance of any other ownership interest or income. The Asia President’s noncontrolling interest in Taubman Asia is accounted for as a minority interest in the Company’s financial statements, currently at a zero balance.
     See Note 11 — “New Accounting Pronouncements” regarding future changes to the accounting for minority interests.
Finite Life Entities
     Statement of Financial Accounting Standards (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 June 30, 2008, the Company held controlling majority interests in consolidated entities with specified termination dates between 2080 and 2083. The minority owners’ interests 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 $192.9 million at June 30, 2008, compared to a book value of $(87.6) million, of which $(96.8) million was classified as Deferred Charges and Other Assets and $9.2 million was classified as Minority Interests in the Company’s consolidated balance sheet.
Other
     The unaudited interim financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.
     Dollar amounts presented in tables within the notes to the financial statements are stated in thousands, except share data or as otherwise noted.
Note 2 — Income and Other Taxes
     The Company is subject to corporate level federal, state, and foreign income taxes in its taxable REIT subsidiaries and state income taxes in certain partnership subsidiaries, which are provided for in the Company’s financial statements. The Company’s 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, if necessary, by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence. The Company’s temporary differences primarily relate to deferred compensation and depreciation. In July 2007, the State of Michigan signed into law the Michigan Business Tax Act (MBT), replacing the Michigan single business tax with a business income tax and modified gross receipts tax. These new taxes became effective on January 1, 2008, and are subject to the provisions of SFAS No. 109 “Accounting for Income Taxes.” As of June 30, 2008, the Company had a net federal, state, and foreign deferred tax asset of $3.1 million, after a valuation allowance of $7.7 million. As of December 31, 2007, the net federal, state, and foreign deferred tax asset was $3.3 million, after a valuation allowance of $6.6 million.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     The Company had no unrecognized tax benefits as defined by FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109” as of June 30, 2008. The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of June 30, 2008. The Company has no interest or penalties relating to income taxes recognized in the statement of operations for the three and six months ended June 30, 2008 or in the balance sheet as of June 30, 2008. As of June 30, 2008, returns for the calendar years 2004 through 2007 remain subject to examination by U.S. and various state and foreign tax jurisdictions.
Note 3 — Acquisition, New Development, and Services
University Town Center
     In May 2008, the Company announced it had entered into agreements to jointly develop University Town Center, a regional mall in Sarasota, Florida. The 0.9 million square foot shopping center will be part of a mixed-use development anchored by Nordstrom, Neiman Marcus, and Macy’s. The center is projected to start construction in fall 2008 and open in November 2010, contingent upon obtaining final site plan approval. The Company will own a 25% interest in the center and expects its share of development costs to be approximately $90 million.
The Mall at Studio City
     In February 2008, the Company announced that Taubman Asia is acquiring a 25% interest in The Mall at Studio City, the retail component of Macao Studio City, a major mixed-use project, which is located on the Cotai Strip in Macao, China. In addition, Taubman Asia entered into long-term agreements to perform development, management, and leasing services for the shopping center. The Company’s total investment in the project (including the initial payment, allocation of construction debt, and additional payments anticipated in years two and five after opening) is expected to be approximately $200 million. Taubman Asia’s investment is in a joint venture with Cyber One Agents Limited (Cyber One) and will be accounted for under the equity method. Macao Studio City is being developed by Cyber One, a joint venture between New Cotai, LLC and East Asia Satellite Television Holdings, a subsidiary of eSun Holdings (eSun). The Company’s $54 million initial investment has been placed into escrow until financing for the overall project is completed. The Company had previously expected that its partners in the project would have completed the financing by summer 2008; however given the current conditions in the capital markets, completion of the financing is taking longer than expected. No interest is being capitalized on this payment until the escrow is released. The $54 million escrowed payment is classified within Deferred Charges and Other Assets on the consolidated balance sheet. The Company’s services agreements were conditional upon eSun shareholder approval, which was received in March 2008, however, any payments due under the development services agreement can be delayed until financing is completed. While it does not control the construction schedule, the Company believes the project is likely to open in late 2010 or early 2011.
The Pier Shops at Caesars
     The Pier Shops, 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, the Company assumed full management and leasing responsibility for the center. In April 2007, the Company increased its ownership in The Pier Shops to a 77.5% controlling interest. The remaining 22.5% interest continues to be held by an affiliate of Gordon. The Company began consolidating The Pier Shops as of the April 2007 purchase date. At closing, the Company made a $24.5 million equity investment in the center, bringing its total equity investment to $28.5 million. At the purchase date, the book values of the center’s assets and liabilities were $229.7 million and $171.3 million, respectively. The excess of the book value of the net assets acquired over the purchase price was approximately $17 million, which was allocated principally to building and improvements. The Company is entitled to a 7% cumulative preferred return on its $133.1 million total investment, including its $104.6 million share of debt. In April 2007, The Pier Shops completed a refinancing of its existing construction loan with a $135 million 10 year, non-recourse, interest-only loan with an all-in rate of 6.1%. The Company will be responsible for any additional capital requirements, which the Company continues to estimate will be in the range of $15 million over the next two years, on which it will receive a preferred return at a minimum of 8%.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Mall at Partridge Creek
     Partridge Creek, a 0.6 million square foot center, opened in October 2007 in Clinton Township, Michigan. The center is anchored by Nordstrom, which opened in April 2008, Parisian, and MJR Theatres. In May 2006, the Company 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 Company. In turn, the owner leases the project back to the Company.
     Funding for the project was provided by the following sources. The Company provided approximately 45% of the project funding under a junior subordinated financing. The owner provided $9 million in equity. Funding for the remaining project costs was provided by the owner’s third party construction loan. The owner’s equity contribution, representing minority interest, is included within Minority Interests in TRG and Consolidated Joint Ventures in the Company’s consolidated balance sheet.
     The Company intends to exercise its option to purchase the property and assume the ground lease from the owner during the exchange period ending October 2008. The option, if exercised, will provide the owner a 12% cumulative return on its equity. In the event the Company 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 Company has guaranteed the lease payments on the operating lease (excluding monthly supplemental rent equal to 1.67% of the owner’s outstanding equity balance, commencing after the exchange period). 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 Mall at Oyster Bay
     In June 2007, the Supreme Court of the State of New York (Suffolk County) affirmed that the Town of Oyster Bay had not provided a basis to deny the Company’s application to build The Mall at Oyster Bay (Oyster Bay) in Syosset, Long Island, New York. In September 2007, the Oyster Bay town board adopted a resolution citing its reasons for denying the application for a special use permit and submitted it to the Court. The Company responded with a motion asking the Court to order the town to issue the permit. In June 2008, the Supreme Court ordered the Town of Oyster Bay to immediately issue the Company a special use permit. Subsequently in June of 2008, the Town filed a notice of appeal regarding the court’s decision. The Company has filed a motion to expedite the appeal process, which was granted in July 2008. In addition, the Company was also granted a preference for oral argument, which is also expected to shorten the appeal process. As a result, the Company is hopeful the appeal process can be concluded in early 2009, clearing the way to start the long-delayed construction of the center. From the start of construction, it is less than a two year process to build the mall. The Company continues to be confident that it is probable it will prevail and build the mall, which has over 60% of the space committed and 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 investment in Oyster Bay was $149 million as of June 30, 2008.
Songdo International Business District
     In 2007, the Company entered into an agreement to provide development services for a 1.1 million square foot retail and entertainment complex in Songdo International Business District (Songdo), Incheon, South Korea. The shopping center will be anchored by Lotte Department Store. The Company also finalized an agreement to provide management and leasing services for the retail component. Construction of the center has begun with the foundations, underground parking, and subway connections. Full construction of the center is expected to begin in fall 2008, with the shopping complex expected to open in 2011. The Company is negotiating an investment in the project and anticipates finalizing its decision on this investment in 2008.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 4 — Investments in Unconsolidated Joint Ventures
General Information
     The Company owns beneficial interests in joint ventures that own shopping centers. The Operating Partnership is the direct or indirect 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. The Company, which formerly accounted for The Pier Shops as an Unconsolidated Joint Venture, began consolidating it after acquiring a controlling interest in April 2007 (Note 3).
 	 	 	 	 	
 	 	Ownership as of	
 	 	June 30, 2008 and	
Shopping Center	 	December 31, 2007	
Arizona Mills	 	 	50	%	
Fair Oaks	 	 	50	 	
The Mall at Millenia	 	 	50	 	
Stamford Town Center	 	 	50	 	
Sunvalley	 	 	50	 	
Waterside Shops	 	 	25	 	
Westfarms	 	 	79	 	
     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. Beneficial interest is calculated based on the Operating Partnership’s ownership interest in each of the Unconsolidated Joint Ventures. Amounts related to The Pier Shops are included in the combined information of the Unconsolidated Joint Ventures through the date of the Company’s acquisition of a controlling interest in April 2007 (Note 3). The Operating Partnership’s investment in The Pier Shops represented an effective 6% interest based on relative equity contributions, prior to the Company acquiring a controlling interest. The combined information of the Unconsolidated Joint Ventures excludes the balances of University Town Center (Note 3).
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 	 	 	 	 	 	 	 	 	
 	 	June 30	 	 	December 31	 	
 	 	2008	 	 	2007	 	
Assets:	 	 	 	 	 	 	 	 	
Properties	 	$	1,067,183	 	 	$	1,056,380	 	
Accumulated depreciation and amortization	 	 	(350,487	)	 	 	(347,459	)	
 	 	 	 	 	 	 	
 	 	$	716,696	 	 	$	708,921	 	
Cash and cash equivalents	 	 	19,805	 	 	 	40,097	 	
Accounts and notes receivable, less provision for bad debts of $2,766 and $1,799 in 2008 and 2007	 	 	18,779	 	 	 	26,271	 	
Deferred charges and other assets	 	 	24,648	 	 	 	18,229	 	
 	 	 	 	 	 	 	
 	 	$	779,928	 	 	$	793,518	 	

Liabilities and accumulated deficiency in assets:	 	 	 	 	 	 	 	 	
Notes payable	 	$	1,111,158	 	 	$	1,003,463	 	
Accounts payable and other liabilities	 	 	42,024	 	 	 	55,242	 	
TRG’s accumulated deficiency in assets	 	 	(205,895	)	 	 	(151,363	)	
Unconsolidated Joint Venture Partners’ accumulated deficiency in assets	 	 	(167,359	)	 	 	(113,824	)	
 	 	 	 	 	 	 	
 	 	$	779,928	 	 	$	793,518	 	

TRG’s accumulated deficiency in assets (above)	 	$	(205,895	)	 	$	(151,363	)	
TRG’s investment in University Town Center (Note 3)	 	 	3,368	 	 	 	 	 	
TRG basis adjustments, including elimination of intercompany profit	 	 	73,948	 	 	 	74,660	 	
TCO’s additional basis	 	 	67,612	 	 	 	68,586	 	
 	 	 	 	 	 	 	
Net Investment in Unconsolidated Joint Ventures	 	$	(60,967	)	 	$	(8,117	)	
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures	 	 	153,344	 	 	 	100,234	 	
 	 	 	 	 	 	 	
Investment in Unconsolidated Joint Ventures	 	$	92,377	 	 	$	92,117	 	

 	 	Three Months Ended June 30	 	 	Six Months Ended June 30	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
Revenues	 	$	63,497	 	 	$	63,871	 	 	$	127,571	 	 	$	127,693	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Maintenance, taxes, utilities, and other operating expenses	 	 	22,470	 	 	 	21,713	 	 	$	45,130	 	 	$	46,270	 	
Interest expense	 	 	16,272	 	 	 	16,617	 	 	 	32,144	 	 	 	34,421	 	
Depreciation and amortization	 	 	9,497	 	 	 	9,180	 	 	 	18,814	 	 	 	18,908	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating costs	 	$	48,239	 	 	$	47,510	 	 	$	96,088	 	 	$	99,599	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Nonoperating income	 	 	160	 	 	 	367	 	 	 	479	 	 	 	814	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	15,418	 	 	$	16,728	 	 	$	31,962	 	 	$	28,908	 	

Net income allocable to TRG	 	$	8,461	 	 	$	9,426	 	 	$	17,719	 	 	$	17,997	 	
Realized intercompany profit, net of depreciation on TRG’s basis adjustments	 	 	516	 	 	 	299	 	 	 	979	 	 	 	400	 	
Depreciation of TCO’s additional basis	 	 	(486	)	 	 	(486	)	 	 	(973	)	 	 	(972	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in income of Unconsolidated Joint Ventures	 	$	8,491	 	 	$	9,239	 	 	$	17,725	 	 	$	17,425	 	

Beneficial interest in Unconsolidated Joint Ventures’ operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues less maintenance, taxes, utilities, and other operating expenses	 	$	22,644	 	 	$	23,536	 	 	$	45,758	 	 	$	45,420	 	
Interest expense	 	 	(8,457	)	 	 	(8,325	)	 	 	(16,719	)	 	 	(16,627	)	
Depreciation and amortization	 	 	(5,696	)	 	 	(5,972	)	 	 	(11,314	)	 	 	(11,368	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in income of Unconsolidated Joint Ventures	 	$	8,491	 	 	$	9,239	 	 	$	17,725	 	 	$	17,425	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 5 — Beneficial Interest in Debt and Interest Expense
     In May 2008, the Company amended its $40 million revolver, extending the maturity date by two years, to February 2011.
     In April 2008, Fair Oaks, a 50% owned Unconsolidated Joint Venture, completed a $250 million non-recourse refinancing that bears interest at LIBOR plus 1.40%. The loan agreement has a three-year term, with two one-year extension options. The loan is interest-only for the entire term, except during the second one-year extension period, if elected. Fair Oaks also entered into an agreement to swap the floating rate for an all-in fixed rate of 4.56% for the initial three-year term of the loan agreement. The swap agreement has been designated, and is expected to be effective, as a cash flow hedge of the interest payments on the new debt. Changes in the fair value of the swap agreement at each balance sheet date during the term of the agreement are recorded in Other Comprehensive Income (OCI). Proceeds from the refinancing were used to pay off the existing $140 million 6.6% loan, plus accrued interest and fees. Excess proceeds were distributed to the partners, and the Company’s share was used to pay down its revolving credit facilities.
     In January 2008, the Company completed a $325 million non-recourse refinancing at International Plaza that bears interest at LIBOR plus 1.15%. The loan agreement has a three-year term, with two one-year extension options. The loan is interest-only for the entire term, except during the second one-year extension period, if elected. The Company also entered into an agreement to swap the floating rate for an all-in fixed rate of 5.375% for the initial three-year term of the loan agreement. The swap agreement has been designated, and is expected to be effective, as a cash flow hedge of the interest payments on the new debt. Changes in the fair value of the swap agreement at each balance sheet date during the term of the agreement are recorded in OCI. Proceeds from the refinancing were used to pay off the existing $175.2 million 4.37% (effective rate) loan, accrued interest, and the Company’s $33.5 million preferential equity, with the remaining amount distributed based upon ownership percentages of the Company and its 49.9% joint venture partner.
     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 Cherry Creek Shopping Center (50%), International Plaza (49.9%), The Pier Shops (22.5% as of April 2007, Note 3), The Mall at Wellington Green (10%), and MacArthur Center (5%). The Operating Partnership’s beneficial interest in the Unconsolidated Joint Ventures, prior to April 2007, excludes The Pier Shops.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	At 100%	 	At Beneficial Interest	
 	 	 	 	 	 	Unconsolidated	 	 	 	 	 	Unconsolidated	
 	 	Consolidated	 	Joint	 	Consolidated	 	Joint	
 	 	Subsidiaries	 	Ventures	 	Subsidiaries	 	Ventures	
Debt as of:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
June 30, 2008	 	 	2,774,156	 	 	 	1,111,158	 	 	 	2,414,807	 	 	 	570,573	 	
December 31, 2007	 	 	2,700,980	 	 	 	1,003,463	 	 	 	2,416,292	 	 	 	517,228	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital lease obligations as of:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
June 30, 2008	 	 	4,099	 	 	 	301	 	 	 	4,088	 	 	 	150	 	
December 31, 2007	 	 	5,521	 	 	 	504	 	 	 	5,507	 	 	 	252	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capitalized interest:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Six months ended June 30, 2008	 	 	4,890	 	 	 	73	 	 	 	4,824	 	 	 	60	 	
Six months ended June 30, 2007	 	 	7,428	 	 	 	78	 	 	 	7,400	 	 	 	19	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Six months ended June 30, 2008	 	 	72,954	 	 	 	32,144	 	 	 	63,219	 	 	 	16,719	 	
Six months ended June 30, 2007	 	 	61,884	 	 	 	34,421	 	 	 	55,046	 	 	 	16,627	 	
Debt Covenants and Guarantees
     Certain loan agreements contain various restrictive covenants, including a minimum net worth requirement, minimum interest coverage ratios, a maximum payout ratio on distributions, a minimum debt yield ratio, a minimum fixed charges coverage ratio, and a maximum leverage ratio, the latter being the most restrictive. The Operating Partnership is in compliance with all of its covenants as of June 30, 2008. The maximum payout ratio on distributions covenant limits the payment of distributions generally to 95% of funds from operations, as defined in the loan agreements, except as required to maintain the Company’s tax status, pay preferred distributions, and for distributions related to the sale of certain assets.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     Payments of principal and interest on the loans in the following table are guaranteed by the Operating Partnership as of June 30, 2008.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	TRG’s	 	Amount of	 	 	 	 	
 	 	 	 	 	 	beneficial	 	loan balance	 	% of loan	 	 	
 	 	Loan	 	interest in loan	 	guaranteed	 	balance	 	% of interest	
 	 	balance as	 	balance as	 	by TRG as	 	guaranteed	 	guaranteed	
Center	 	of 6/30/08	 	of 6/30/08	 	of 6/30/08	 	by TRG	 	by TRG	
 	 	(in millions of dollars)	 	 	 	 	 	 	 	 	
Dolphin Mall	 	 	120.0	 	 	 	120.0	 	 	 	120.0	 	 	 	100	%	 	 	100	%	
Fairlane Town Center	 	 	80.0	 	 	 	80.0	 	 	 	80.0	 	 	 	100	%	 	 	100	%	
Twelve Oaks Mall	 	 	—	 	 	 	—	 	 	 	—	 	 	 	100	%	 	 	100	%	
     The Operating Partnership has also guaranteed certain obligations of Partridge Creek (Note 3).
     The Company is required to escrow cash balances for specific uses stipulated by certain of its lenders. As of June 30, 2008 and December 31, 2007, the Company’s cash balances restricted for these uses were $1.9 million and $1.0 million, respectively. Such amounts are included within cash and cash equivalents in the Company’s consolidated balance sheet.
Note 6 — Equity Transactions
Common Stock and Equity
     In July 2007, the Company’s Board of Directors authorized the repurchase of $100 million of the Company’s common stock on the open market or in privately negotiated transactions. During 2007, the Company repurchased 987,180 shares of its common stock for a total of $50 million under this authorization. In addition, in 2007 the Company repurchased an additional 923,364 shares for $50 million, representing the remaining amount under a previous program approved by the Company’s Board of Directors in December 2005. All shares repurchased have been cancelled. For each share of stock repurchased, an equal number of Operating Partnership units owned by the Company were redeemed. Repurchases of common stock were financed through general corporate funds, including borrowings under existing lines of credit. As of June 30, 2008, $50 million remained of the 2007 authorization.
     During the six months ended June 30, 2007, 839,809 shares of Series B Preferred Stock were converted to 54 shares of the Company’s common stock as a result of tenders of units under the Continuing Offer (Note 8). No shares were converted during the six months ended June 30, 2008. See Note 7 for equity issuances under share-based compensation plans.
Note 7 — Share-Based Compensation
     In May 2008, the Company’s shareowners approved The Taubman Company 2008 Omnibus Long-Term Incentive Plan (2008 Omnibus Plan). The 2008 Omnibus Plan provides for the award to directors, officers, employees, and other service providers of the Company of restricted shares, restricted units of limited partnership in the Operating Partnership, options to purchase shares or Operating Partnership units, share appreciation rights, unrestricted Shares or Operating Partnership units, and other awards to acquire up to an aggregate of 6,100,000 Company common shares or Operating Partnership units. As of June 30, 2008, there were no grants of share-based compensation under the 2008 Omnibus Plan. The Company anticipates that all future grants of share-based compensation will be made under the 2008 Omnibus Plan. In addition, non-employee directors have the option to defer their compensation, other than their meeting fees, under a deferred compensation plan.
     Prior to the adoption of the 2008 Omnibus Plan, the Company provided share-based compensation through an incentive option plan, a long-term incentive plan, and non-employee directors’ stock grant and deferred compensation plans. The compensation cost charged to income for these share-based compensation plans was $1.9 million and $4.0 million for the three and six months ended June 30, 2008, respectively, and $1.8 million and $3.4 million for the three and six months ended June 30, 2007, respectively. Compensation cost capitalized as part of properties and deferred leasing costs was $0.2 million and $0.5 million for the three and six months ended June 30, 2008, respectively, and $0.2 million and $0.4 million for the three and six months ended June 30, 2007, respectively.
     Further information regarding activities relating to the incentive option plan and long-term incentive plan during the three and six months ended June 30, 2008 is provided below.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Incentive Options
     The Company’s incentive option plan (the Option Plan), which was shareowner approved, permitted 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 8). Options for 1.4 million partnership units have been granted and are outstanding at June 30, 2008. Of the 1.4 million options outstanding, 0.9 million 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 or upon retirement or certain other events if earlier. Substantially all of the other 0.5 million options outstanding 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 or upon retirement or certain other events if earlier. The options have ten-year contractual terms.
     The Company estimated the value of the options issued during the six months ended June 30, 2008 using a Black-Scholes valuation model based on the following assumptions and resulting in the weighted average grant date fair value shown below:
 	 	 	 	 	
 	 	2008	
Expected volatility	 	 	24.33	%	
Expected dividend yield	 	 	3.50	%	
Expected term (in years)	 	 	6	 	
Risk-free interest rate	 	 	3.08	%	
Weighted average grant-date fair value	 	$	9.31	 	
     Expected volatility and dividend yields are based on historical volatility and yields of the Company’s common stock, respectively, as well as other factors. In developing the assumption of expected term, the Company has considered the vesting and contractual terms as required by the simplified method of developing expected term assumptions. The risk-free interest rates used are based on the U.S. Treasury yield curves in effect at the times of grants. The Company assumes no forfeitures under the Option Plan due to the small number of participants and low turnover rate.
     A summary of option activity under the Option Plan for the six months ended June 30, 2008 is presented below:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	Weighted Average	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	Remaining	 	 	Range of	 	
 	 	Number	 	 	Weighted Average	 	 	Contractual Term	 	 	Exercise	 	
 	 	of Options	 	 	Exercise Price	 	 	(in years)	 	 	Prices	 	
Outstanding at January 1, 2008	 	 	1,330,646	 	 	$	36.54	 	 	 	7.8	 	 	$	29.38 - $55.90	 	
Granted	 	 	230,567	 	 	 	50.65	 	 	 	 	 	 	 	 	 	
Exercised	 	 	(170,431	)	 	 	31.91	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding at June 30, 2008	 	 	1,390,782	 	 	$	39.45	 	 	 	7.7	 	 	$	29.38 - $55.90	 	

Fully vested options at June 30, 2008	 	 	531,232	 	 	$	36.52	 	 	 	7.3	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-Term Incentive Plan
     The Company established The Taubman Company 2005 Long-Term Incentive Plan (LTIP) in 2005, which was shareowner approved. The LTIP allowed the Company to make grants of restricted stock units (RSU) to employees. There were RSU for 0.3 million shares outstanding at June 30, 2008. 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.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     A summary of activity for the six months ended June 30, 2008 under the LTIP is presented below:
 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Weighted Average	
 	 	Restricted Stock Units	 	Grant Date Fair Value	
Outstanding at January 1, 2008	 	 	358,297	 	 	$	41.63	 	
Granted	 	 	121,037	 	 	 	50.65	 	
Redeemed	 	 	(135,359	)	 	 	32.03	 	
Forfeited	 	 	(587	)	 	 	50.65	 	
 	 	 	 	 	 	 	 	 	
Outstanding at June 30, 2008	 	 	343,388	 	 	 	48.58	 	
 	 	 	 	 	 	 	 	 	
     RSU vest on the third year anniversary of the grant if continuous service has been provided for that period, or upon retirement or certain other events 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. None of the RSU outstanding at June 30, 2008 were vested.
Note 8 — Commitments and Contingencies
     At the time of the Company’s initial public offering and acquisition of its partnership interest in the Operating Partnership in 1992, 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. At A. Alfred Taubman’s election, his family and certain others may participate in tenders. 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. 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 June 30, 2008 of $48.65 per common share, the aggregate value of interests in the Operating Partnership that may be tendered under the Cash Tender Agreement was approximately $1.2 billion. The purchase of these interests at June 30, 2008 would have resulted in the Company owning an additional 32% 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 optionees under the Option Plan and all existing and future optionees under the 2008 Omnibus 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. Upon a tender of Operating Partnership units, the corresponding shares of Series B Preferred Stock, if any, will automatically be converted into the Company’s common stock at a rate of 14,000 shares of Series B Preferred Stock for one common share.
     In November 2007, three developers of a project called Blue Back Square (BBS) in West Hartford, Connecticut, filed a lawsuit in the Connecticut Superior Court, Judicial District of Hartford at Hartford (Case No. CV-07-5014613-S) against the Company, the Westfarms Unconsolidated Joint Venture, and its partners and its subsidiary, alleging that the defendants (i) filed or sponsored vexatious legal proceedings and abused legal process in an attempt to thwart the development of the competing BBS project, (ii) interfered with contractual relationships with certain tenants of BBS, and (iii) violated Connecticut fair trade law. The lawsuit alleges damages in excess of $30 million and seeks double and treble damages and punitive damages. Also in early November 2007, the Town of West Hartford and the West Hartford Town Council filed a substantially similar lawsuit against the same entities in the same court (Case No. CV-07-5014596-S). The second lawsuit did not specify any particular amount of damages but similarly requests double and treble damages and punitive damages. The lawsuits are in their early legal stages and the Company is vigorously defending both. The outcome of these lawsuits cannot be predicted with any certainty and management is currently unable to estimate an amount or range of potential loss that could result if an unfavorable outcome occurs. While management does not believe that an adverse outcome in either lawsuit would have a material adverse effect on the Company’s financial condition, there can be no assurance that an adverse outcome would not have a material effect on the Company’s results of operations for any particular period.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     See Note 1 regarding the put option held by the noncontrolling member in Taubman Asia, Note 3 regarding obligations and commitments related to Partridge Creek and contingencies related to Oyster Bay, Note 5 for the Operating Partnership’s guarantees of certain notes payable and other obligations, and Note 7 for obligations under existing share-based compensation plans.
Note 9 — 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 potential common stock. Potential common stock includes outstanding partnership units exchangeable for common shares under the Continuing Offer (Note 8), outstanding options for units of partnership interest under the Option Plan, RSU under the LTIP and Non-Employee Directors’ Deferred Compensation Plan (Note 7), and unissued partnership units under a unit option deferral election. In computing the potentially dilutive effect of potential common stock, 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 potential common stock are calculated using the treasury stock method.
     As of June 30, 2008, there were 8.8 million partnership units outstanding and 0.9 million unissued partnership units under unit option deferral elections that may be exchanged for common shares of the Company under the Continuing Offer. These 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. Due to the non-cash impact of depreciation and amortization, it is unlikely that income in any period will be greater than distributions, other than in a period in which the Company recognizes a gain on the disposition of an operating center or other significant, unusual income.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30	 	 	Six Months Ended June 30	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
Net income allocable to common shareowners (Numerator)	 	$	373	 	 	$	8,834	 	 	$	4,920	 	 	$	19,232	 	

Shares (Denominator) — basic	 	 	52,859,653	 	 	 	53,412,542	 	 	 	52,767,430	 	 	 	53,418,055	 	
Effect of dilutive securities	 	 	572,321	 	 	 	643,718	 	 	 	580,802	 	 	 	648,175	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares (Denominator) — diluted	 	 	53,431,974	 	 	 	54,056,260	 	 	 	53,348,232	 	 	 	54,066,230	 	

Earnings per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.01	 	 	$	0.17	 	 	$	0.09	 	 	$	0.36	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	0.01	 	 	$	0.16	 	 	$	0.09	 	 	$	0.36	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Note 10 — Fair Value Disclosures
     The Company’s valuation of marketable securities, which are considered to be available-for-sale, and an insurance deposit utilize unadjusted quoted prices determined by active markets for the specific securities the Company has invested in, and therefore fall into Level 1 of the fair value hierarchy. The Company’s valuation of its derivative instruments are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative and therefore fall into level 2 of the fair value hierarchy. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including forward curves.
     For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of the fair value for each major category of assets and liabilities is presented below:
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 	 	 	 	 	 	 	 	 	
 	 	Fair Value Measurements at June 30, 2008 Using	 	
 	 	Quoted Prices in	 	 	 	 	
 	 	Active Markets for	 	 	Significant Other	 	
 	 	Identical Assets	 	 	Observable Inputs	 	
Description	 	(Level 1)	 	 	(Level 2)	 	
Available-for-sale securities	 	$	2,174	 	 	 	 	 	
Insurance deposit	 	 	8,770	 	 	 	 	 	
Derivative assets	 	 	 	 	 	$	836	 	
 	 	 	 	 	 	 	
Total assets	 	$	10,944	 	 	$	836	 	

Derivative interest rate instruments liabilities (Note 5)	 	 	 	 	 	$	(2,859	)	
 	 	 	 	 	 	 	 	
Total liabilities	 	 	 	 	 	$	(2,859	)	
 	 	 	 	 	 	 	 	
     The insurance deposit shown above represents an escrow account maintained in connection with a property and casualty insurance arrangement for the Company’s shopping centers, and is classified within Deferred Charges and Other Assets. A corresponding deferred revenue relating to amounts billed to tenants for this arrangement has been classified within Accounts Payable and Other Liabilities. In previous periods, such amounts had been presented on a net basis and have not been reclassified as such amounts are not material to the consolidated financial statements.
Note 11 — New Accounting Pronouncements
     In May 2008, the FASB issued Statement No. 162 “The Hierarchy of Generally Accepted Accounting Principles.” The current hierarchy of generally accepted accounting principles is set forth in the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards (SAS) No. 69, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” Statement No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. This Statement is effective 60 days following the SEC’s approval of the Public Company Oversight Board Auditing amendments to SAS 69. The Company is currently evaluating the application of this Statement but does not anticipate that the Statement will have a material effect on the Company’s results of operations or financial position, as the Statement does not directly impact the accounting principles applied in the preparation of the Company’s financial statements.
     In March 2008, the FASB issued Statement No. 161 “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.” This Statement amends Statement No. 133 to provide additional information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. The Statement requires enhanced disclosures about an entity’s derivatives and hedging activities. Statement No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the application of this Statement and anticipates the Statement will not have an effect on its results of operations or financial position as the Statement only provides for new disclosure requirements.
     In December 2007, the FASB issued Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” This Statement amends Accounting Research Bulletin (ARB) 51 to establish accounting and reporting standards for the noncontrolling interest (previously referred to as a minority interest) in a subsidiary and for the deconsolidation of a subsidiary. The Statement also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of FASB Statement No. 141 (Revised) “Business Combinations.” Statement No. 160 will require noncontrolling interests to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. Statement No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. In March 2008, the SEC announced revisions to Topic No. D-98 “Classification and Measurement of Redeemable Securities” that provide interpretive guidance on the interaction between Topic No. D-98 and Statement No.160.
     The Company anticipates that upon adoption of Statement No. 160 in 2009, the noncontrolling interests in the Operating Partnership and certain consolidated joint ventures will no longer need to be carried at zero balances in the Company’s balance sheet. As a result, the income allocated to these noncontrolling interests would no longer be required to be equal to the share of distributions. See Note 1 regarding current accounting for minority interests. The Company is continuing to evaluate other effects this Statement and its interpretations, including those in Topic No. D-98, would have on the Company’s financial position and results of operations.
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     Also in December 2007, the FASB issued Statement No. 141 (Revised) “Business Combinations.” This Statement establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and any goodwill acquired in the business combination or a gain from a bargain purchase. This Statement requires most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at “full fair value.” Statement No. 141 (Revised) must be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early application is prohibited. The Company is currently evaluating the application of this Statement and its effect on the Company’s financial position and results of operations.
     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 (Revised) “Share-Based Payment.” This Statement was effective for financial statements issued for fiscal years beginning after November 15, 2007, except for non-financial assets and liabilities, for which this Statement will be effective for years beginning after November 15, 2008. The Company is evaluating the effect of implementing the Statement relating to such non-financial assets and liabilities, although the Statement does not require any new fair value measurements or remeasurements of previously reported fair values.
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Item 2. 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, returns, and earnings; statements regarding the continuation of trends; and any statements regarding the sufficiency of our cash balances and cash generated from operating, investing, 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 “Risk Factors” in our 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. (TCO) is a Michigan corporation that operates as a self-administered and self-managed real estate investment trust (REIT). The Taubman Realty Group Limited Partnership (the Operating Partnership or TRG) is a majority-owned partnership subsidiary of TCO, which owns direct or indirect interests in all of our real estate properties. In this report, the terms “we”, “us”, and “our” refer to TCO, the Operating Partnership, and/or the Operating Partnership’s subsidiaries as the context may require. We own, develop, acquire, dispose of, and operate regional and super-regional shopping centers. The Consolidated Businesses consist of shopping centers that are controlled by ownership or contractual agreements, development projects for future regional shopping centers, variable interest entities for which we are the primary beneficiary, The Taubman Company LLC (Manager), and Taubman Properties Asia LLC and its subsidiaries (Taubman Asia). 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 The Mall at Partridge Creek (Partridge Creek) in October 2007 and The Pier Shops at Caesars (The Pier Shops), which began opening in phases in June 2006. In April 2007, we increased our ownership in The Pier Shops to 77.5% (see “Results of Operations — Acquisition”). The Pier Shops’ results of operations are included within the Consolidated Businesses for periods beginning April 13, 2007 and within the Unconsolidated Joint Ventures prior to the acquisition date. Our investment in The Pier Shops represented an effective 6% interest prior to the acquisition date, based on relative equity contributions. Additional “comparable center” statistics that exclude Partridge Creek and The Pier Shops are provided to present the performance of comparable centers in our continuing operations.
Current Operating Trends
     Amid the recent softening of the U.S. economy, a number of regional and national retailers have announced store closings or filed for bankruptcy. During the six months ended June 30, 2008, 1.3% of our tenants sought the protection of the bankruptcy laws, the highest second quarter level since 2004. However, our occupancy was up modestly and rents showed strong increases compared to the prior year.
     Tenant sales and sales per square foot information are operating statistics used in measuring the productivity of the portfolio and are based on reports of sales furnished by mall tenants. 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, and may be impacted significantly, either positively or negatively, by the success or lack of success of a small number of tenants or even a single tenant.
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     Our tenant sales statistics showed modest growth for the second quarter of 2008, with sales per square foot increasing 3.3% over the second quarter of 2007. Tenant sales have increased every quarter for over five years; however, beginning in the fourth quarter of 2007, the rate of growth has slowed. 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 of total rents that percentage rents represent. While sales are critical over the long term, the diverse structure of leases in a strong regional mall portfolio results in steady, predictable, almost bond-like earnings streams that are generally resistant to economic cycles. Consequently, even if the economy continues to weaken, we continue to feel very comfortable with the performance of our centers. However, a sustained trend in sales does impact, either negatively or positively, our ability to lease vacancies and negotiate rents at advantageous rates.
     In the second quarter of 2008, ending occupancy increased slightly to 90.0% compared to 89.9% in the second quarter of 2007. We expect occupancy to be relatively flat for the second half of the year. See “Seasonality” for occupancy and leased space statistics. Temporary tenants, defined as those with lease terms less than 12 months, are not included in occupancy or leased space statistics. As of June 30, 2008, approximately 1.4% of mall tenant space was occupied by temporary tenants.
     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 may 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. Rent per square foot information for comparable centers in our Consolidated Businesses and Unconsolidated Joint Ventures follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months	 	Six Months	
 	 	Ended June 30	 	Ended June 30	
 	 	2008	 	2007	 	2008	 	2007	
Average rent per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	45.12	 	 	$	43.64	 	 	$	44.84	 	 	$	43.75	 	
Unconsolidated Joint Ventures	 	 	45.04	 	 	 	42.00	 	 	 	44.48	 	 	 	41.87	 	
Opening base rent per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	65.89	 	 	$	45.85	 	 	$	54.80	 	 	$	51.34	 	
Unconsolidated Joint Ventures	 	 	58.66	 	 	 	44.29	 	 	 	59.05	 	 	 	47.02	 	
Square feet of GLA opened:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	121,981	 	 	 	173,469	 	 	 	442,653	 	 	 	393,813	 	
Unconsolidated Joint Ventures	 	 	71,860	 	 	 	43,798	 	 	 	233,269	 	 	 	149,903	 	
Closing base rent per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	45.55	 	 	$	46.82	 	 	$	44.23	 	 	$	42.26	 	
Unconsolidated Joint Ventures	 	 	41.07	 	 	 	54.59	 	 	 	45.04	 	 	 	47.27	 	
Square feet of GLA closed:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	131,758	 	 	 	143,634	 	 	 	568,414	 	 	 	547,505	 	
Unconsolidated Joint Ventures	 	 	62,578	 	 	 	41,838	 	 	 	303,929	 	 	 	180,717	 	
Releasing spread per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	20.34	 	 	$	(0.97	)	 	$	10.57	 	 	$	9.08	 	
Unconsolidated Joint Ventures	 	 	17.59	 	 	 	(10.30	)	 	 	14.01	 	 	 	(0.25	)	
     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. In 2008, the releasing spreads per square foot of the Consolidated Businesses and Unconsolidated Joint Ventures were impacted by the opening of several tenant spaces with high rental rates at certain centers. In the six months ended June 30, 2007, average rent per square foot for the Unconsolidated Joint Ventures was adversely impacted by a $0.6 million cumulative prior year adjustment related to The Mills Corporation’s accounting for lease incentives at Arizona Mills, a 50% owned joint venture. Also in 2007, the releasing spread per square foot of the Unconsolidated Joint Ventures was impacted by the opening of several tenant spaces at a value center that had no closing spaces.
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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. Gains on sales of peripheral land and lease cancellation income may vary significantly from quarter to quarter.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2 nd	 	1 st	 	 	 	 	 	4 th	 	3 rd	 	2 nd	 	1 st	
 	 	Quarter	 	Quarter	 	Total	 	Quarter	 	Quarter	 	Quarter	 	Quarter	
 	 	2008	 	2008	 	2007	 	2007	 	2007	 	2007	 	2007	
 	 	(in thousands of dollars, except occupancy and leased space data)	
Mall tenant sales (1)	 	 	1,116,027	 	 	 	1,083,608	 	 	 	4,734,940	 	 	 	1,555,011	 	 	 	1,075,465	 	 	 	1,061,767	 	 	 	1,042,697	 	
Revenues and gains on land sales and other nonoperating income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	161,868	 	 	 	159,220	 	 	 	630,417	 	 	 	180,212	 	 	 	151,791	 	 	 	152,997	 	 	 	145,417	 	
Unconsolidated Joint Ventures	 	 	63,657	 	 	 	64,393	 	 	 	264,174	 	 	 	70,926	 	 	 	64,740	 	 	 	64,233	 	 	 	64,275	 	
Occupancy:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending-comparable	 	 	90.1	%	 	 	90.0	%	 	 	91.5	%	 	 	91.5	%	 	 	90.1	%	 	 	90.1	%	 	 	89.7	%	
Average-comparable	 	 	90.0	 	 	 	90.2	 	 	 	90.3	 	 	 	91.1	 	 	 	90.0	 	 	 	90.0	 	 	 	89.8	 	
Ending	 	 	90.0	 	 	 	89.8	 	 	 	91.1	 	 	 	91.1	 	 	 	89.9	 	 	 	89.9	 	 	 	89.7	 	
Average	 	 	89.9	 	 	 	89.9	 	 	 	90.0	 	 	 	90.7	 	 	 	89.8	 	 	 	89.7	 	 	 	89.8	 	
Leased space:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comparable	 	 	92.7	%	 	 	93.0	%	 	 	93.8	%	 	 	93.8	%	 	 	93.4	%	 	 	92.6	%	 	 	92.1	%	
All centers	 	 	92.6	 	 	 	93.0	 	 	 	93.8	 	 	 	93.8	 	 	 	93.3	 	 	 	92.4	 	 	 	92.1	 	

(1)	 	Based on reports of sales furnished by mall tenants.	
     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.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2 nd	 	1 st	 	 	 	 	 	4 th	 	3 rd	 	2 nd	 	1 st	
 	 	Quarter	 	Quarter	 	Total	 	Quarter	 	Quarter	 	Quarter	 	Quarter	
 	 	2008	 	2008	 	2007	 	2007	 	2007	 	2007	 	2007	
 	 	 	
Consolidated Businesses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	9.9	%	 	 	10.2	%	 	 	8.9	%	 	 	7.1	%	 	 	9.5	%	 	 	9.7	%	 	 	10.0	%	
Percentage rents	 	 	0.2	 	 	 	0.3	 	 	 	0.4	 	 	 	0.7	 	 	 	0.3	 	 	 	0.1	 	 	 	0.3	 	
Expense recoveries	 	 	5.3	 	 	 	5.3	 	 	 	4.9	 	 	 	4.2	 	 	 	5.0	 	 	 	5.8	 	 	 	5.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Mall tenant occupancy costs	 	 	15.4	%	 	 	15.8	%	 	 	14.2	%	 	 	12.0	%	 	 	14.8	%	 	 	15.6	%	 	 	15.4	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unconsolidated Joint Ventures:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	9.3	%	 	 	9.2	%	 	 	8.0	%	 	 	6.1	%	 	 	9.1	%	 	 	8.8	%	 	 	8.8	%	
Percentage rents	 	 	0.0	 	 	 	0.4	 	 	 	0.4	 	 	 	0.7	 	 	 	0.3	 	 	 	0.3	 	 	 	0.2	 	
Expense recoveries	 	 	4.4	 	 	 	4.2	 	 	 	4.2	 	 	 	3.6	 	 	 	4.7	 	 	 	4.5	 	 	 	4.0	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Mall tenant occupancy costs	 	 	13.7	%	 	 	13.8	%	 	 	12.6	%	 	 	10.4	%	 	 	14.1	%	 	 	13.6	%	 	 	13.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Results of Operations
     The following sections discuss certain 2008 and 2007 transactions that affected operations in the three and six month periods ended June 30, 2008 and 2007, or are expected to impact operations in the future.
New Development
     Partridge Creek opened on October 18, 2007 in Clinton Township, Michigan. The 0.6 million square foot center is anchored by Nordstrom, which opened on April 18, 2008, Parisian, and MJR Theatres. See “Liquidity and Capital Resources – Contractual Obligations – The Mall at Partridge Creek Contractual Obligations” regarding this center.
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     In September 2007, a 165,000 square foot Nordstrom opened at Twelve Oaks Mall (Twelve Oaks) along with approximately 97,000 square feet of additional new store space. In addition, Macy’s has renovated its store and added 60,000 square feet of store space.
     In November 2007, Stamford Town Center (Stamford) opened a new lifestyle wing, including a mix of signature retail and restaurant offerings. In addition, we renovated the seventh level, adding a 450-seat food court and interactive children’s play area. The food court opened in early 2008.
     See also “Taubman Asia” and “Third-Party Management, Leasing, and Development Services” for other development and service arrangements.
Acquisition
     The Pier Shops, 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 responsibility for the center. In April 2007, we increased our ownership in The Pier Shops to a 77.5% controlling interest. The remaining 22.5% interest continues to be held by an affiliate of Gordon. We began consolidating The Pier Shops as of the April 2007 purchase date. At closing, we made a $24.5 million equity investment in the center, bringing our total equity investment to $28.5 million. We are entitled to a 7% cumulative preferred return on our $133.1 million total investment, including our $104.6 million share of debt (see “Debt and Equity Transactions”). We will be responsible for any additional capital requirements, estimated to be in the range of $15 million over the next two years, on which we will receive a preferred return at a minimum of 8%. While sales at the center continue to be good, the timing of final lease up is at a slower pace than we previously anticipated. A major factor is the lease up of the few remaining large spaces on the third and fourth levels of the center which are intended to be restaurants, night clubs, and entertainment uses. Consequently, we expect to see modest improvement in The Pier Shops’ operations in 2008. We continue to believe as the asset stabilizes we will see significant growth in net operating income.
Potential Disposition
     In April 2008, we announced that Stamford, a 50% owned Unconsolidated Joint Venture, is being marketed for sale. The primary impetus for the sale is from our joint venture partner, as part of the normal execution of its portfolio strategy. We both agree that this is a good time to capitalize on the value that has been added to this asset with its recent renovation. The sale of assets is consistent with our strategy to recycle capital when appropriate. We can not currently estimate any impact for the possible sale of Stamford due to the uncertainty as to the price, timing, and use of proceeds or whether in fact the center will be sold.
Taubman Asia
     In February 2008, we announced that Taubman Asia is acquiring a 25% interest in The Mall at Studio City, the retail component of Macao Studio City, a major mixed-use project, which has begun construction on the Cotai Strip in Macao, China. In addition, Taubman Asia entered into long-term agreements to perform development, management, and leasing services for the shopping center. Our total investment in the project (including the initial payment, allocation of construction debt and additional payments anticipated in years two and five after opening) is expected to be approximately $200 million, with an anticipated after-tax return of about 10%. Taubman Asia’s investment is in a joint venture with Cyber One Agents Limited (Cyber One) and will be accounted for under the equity method. Macao Studio City is being developed by Cyber One, a joint venture between New Cotai, LLC and East Asia Satellite Television Holdings, a subsidiary of eSun Holdings (eSun). Our $54 million initial cash payment has been placed into escrow until financing for the overall project is completed. We had previously expected that our partners in the project would have completed the financing by summer 2008; however given the current conditions in the capital markets, completion of the financing is taking longer than expected. No interest is being capitalized on this payment until the escrow is released. Our services agreements were conditional upon eSun shareholder approval, which was received in March 2008, however, any payments due under the development services agreement can be delayed until financing is completed. While we do not control the construction schedule, we believe the project is likely to open in late 2010 or early 2011.
     In 2007, we entered into an agreement to provide development services for a 1.1 million square foot retail and entertainment complex in Songdo International Business District (Songdo), Incheon, South Korea. The shopping center will be anchored by Lotte Department Store. We also finalized an agreement to provide management and leasing services for the retail component. Construction of the center has begun with the foundations, underground parking, and subway connections. Full construction of the center is expected to begin in fall 2008, with the shopping complex expected to open sometime in 2011. We are negotiating an investment in the project and anticipate finalizing our decision on this investment in 2008.
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Third-Party Management, Leasing, and Development Services
     In addition to the services described in “Taubman Asia”, we have several current and potential projects that are expected to contribute significant amounts of third-party revenue to our results in the future. The actual amounts of revenue in any future period are subject to various factors affecting recognition of income as described below. In addition, our estimates of future income may vary considerably from actual results due to the timing of completion of contractual arrangements and the actual timing of construction starts and opening dates of the various projects. In light of the current capital markets, the timing of construction starts may be delayed until the completion of financing. In addition, the amount of revenue we recognize is reduced by any ownership interest we may have in a project.
     We have a management agreement for Woodfield Mall, which is owned by a third-party. This contract is renewable year-to-year and is cancelable by the owner with 90 days written notice.
     We also have an agreement for retail leasing and development and design advisory services for CityCenter, a mixed-use urban development project scheduled to open in late 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 us of a cancellation fee.
     We are finalizing a development agreement regarding City Creek Center, a mixed-use project in Salt Lake City, Utah. In April 2008, we received approval for the important pedestrian bridge that links the retail component and encourages circulation throughout the project. This was a significant step toward final design approval, and the project is now expected to open in spring 2012. We are also finalizing agreements to be an investor in this project under a participating lease structure.
     We continue to negotiate an agreement to provide initial leasing services 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 is estimated to open in 2010. The developer of the residential component is a joint venture which includes an affiliate of the Taubman family. The Taubman family affiliate also participates in the project’s non-residential component.
     Subject to many assumptions, our best estimate is that during the 2009 to 2011 timeframe, we will earn an aggregate of about $35 million of net margin from management, leasing, and development fees, depending on opening dates and the various factors discussed above and assuming no current ownership in the Songdo project. Net margin for these projects means total revenue less related expenses and taxes. The timing of revenue recognition is very difficult to predict due to a number of factors. For development, revenue is recognized when the work is performed. For leasing, it is recognized when the leases are signed or when stores open, depending on the agreement. Of the approximately $35 million, we expect this third-party margin could peak in 2010 when the level of activity is expected to be the greatest. Although this activity is highly profitable, it is very volatile and a substantial portion of this increased activity represents non-recurring income. Once the significant development and initial leasing effort is complete for these projects, fees will be much more modest. As we have discussed in the past, we would generally prefer to own as much equity in a project as possible. However, each of these projects met a series of criteria – including profitability and synergy with our ongoing activities – that made them attractive for us to pursue. We would expect that some level of this activity will always be present in our business.
Debt and Equity Transactions
     In April 2008, Fair Oaks, a 50% owned Unconsolidated Joint Venture, completed a $250 million non-recourse refinancing that bears interest at LIBOR plus 1.40%. The loan agreement has a three-year term, with two one-year extension options. The loan is interest-only for the entire term, except during the second one-year extension period, if elected. Fair Oaks also entered into an agreement to swap the floating rate for an all-in fixed rate of 4.56% for the initial three-year term of the loan agreement. Proceeds from the refinancing were used to pay off the existing $140 million 6.6% loan, plus accrued interest and fees. Excess proceeds were distributed to the partners, and our share was used to pay down our revolving credit facilities.
     In January 2008, we completed a $325 million non-recourse refinancing at International Plaza that bears interest at LIBOR plus 1.15%. The loan agreement has a three-year term, with two one-year extension options. The loan is interest-only for the entire term, except during the second one-year extension period, if elected. We also entered into an agreement to swap the floating rate for an all-in fixed rate of 5.375% for the initial three-year term of the loan agreement. Proceeds from the refinancing were used to pay off the existing $175.2 million 4.37% (effective rate) loan, accrued interest, and our $33.5 million preferential equity, with the remaining amount distributed on ownership percentages with our 49.9% joint venture partner.
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     In 2007, we completed financings of approximately $335 million comprised of a $200 million increase in our revolving line of credit and the refinancing of The Pier Shops.
     In 2007, our Board of Directors authorized the repurchase of $100 million of our common stock on the open market or in privately negotiated transactions. During 2007, we repurchased 987,180 shares of our common stock for a total of $50 million under this authorization. In addition, in 2007 we repurchased an additional 923,364 shares for $50 million, representing the remaining amount under a previous program approved by our Board of Directors in December 2005. All shares repurchased have been cancelled. For each share of stock repurchased, an equal number of Operating Partnership units owned by TCO were redeemed. Repurchases of common stock were financed through general corporate funds, including borrowings under existing lines of credit. As of June 30, 2008, $50 million remained of the 2007 authorization.
New Accounting Pronouncements
     See “Note 11 – New Accounting Pronouncements” to our consolidated financial statements regarding certain new accounting pronouncements that we expect to adopt in 2008 and 2009.
Presentation of Operating Results
Income Allocation
     The following table contains 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 balances of the Operating Partnership and the outside partners in certain consolidated joint ventures are less than zero, the income allocated to these minority and outside partners is equal to their share of operating distributions. The net equity of these minority and outside 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. Our average ownership percentage of the Operating Partnership was 67% during the three and six months ended June 30, 2008 and 66% during the three and six months ended June 30, 2007.
     The results of The Pier Shops are presented within the Consolidated Businesses beginning April 13, 2007, as a result of our acquisition of a controlling interest in the center. The results of The Pier Shops prior to the acquisition date are included within the Unconsolidated Joint Ventures.
Use of Non-GAAP Measures
     The operating results in the following table include the supplemental earnings measures of Beneficial Interest in EBITDA and Funds from Operations (FFO). Beneficial Interest in EBITDA represents our share of the earnings before interest, income taxes, and depreciation and amortization of our 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.
     Our presentations of Beneficial Interest in 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 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 Allocable to Common Shareowners to Funds from Operations and Net Income to Beneficial Interest in EBITDA are presented following the Comparison of the Six Months Ended June 30, 2008 to the Six Months Ended June 30, 2007.
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      Comparison of the Three Months Ended June 30, 2008 to the Three Months Ended June 30, 2007
     The following table sets forth operating results for the three months ended June 30, 2008 and June 30, 2007, showing the results of the Consolidated Businesses and Unconsolidated Joint Ventures:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Three Months Ended	
 	 	June 30, 2008	 	June 30, 2007	
 	 	 	 	 	 	UNCONSOLIDATED	 	 	 	 	 	UNCONSOLIDATED	
 	 	CONSOLIDATED	 	JOINT VENTURES	 	CONSOLIDATED	 	JOINT VENTURES	
 	 	BUSINESSES	 	AT 100% (1)	 	BUSINESSES	 	AT 100% (1)	
 	 	(in millions of dollars)	
REVENUES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	87.6	 	 	 	38.8	 	 	 	79.5	 	 	 	37.1	 	
Percentage rents	 	 	1.3	 	 	 	0.5	 	 	 	1.0	 	 	 	1.6	 	
Expense recoveries	 	 	60.4	 	 	 	21.7	 	 	 	57.9	 	 	 	22.8	 	
Management, leasing, and development services	 	 	3.9	 	 	 	 	 	 	 	3.6	 	 	 	 	 	
Other	 	 	7.2	 	 	 	2.6	 	 	 	10.2	 	 	 	2.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	 	 	160.4	 	 	 	63.5	 	 	 	152.3	 	 	 	63.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Maintenance, taxes, and utilities	 	 	46.5	 	 	 	16.1	 	 	 	45.6	 	 	 	16.0	 	
Other operating	 	 	19.7	 	 	 	5.6	 	 	 	16.1	 	 	 	4.8	 	
Management, leasing, and development services	 	 	2.4	 	 	 	 	 	 	 	1.8	 	 	 	 	 	
General and administrative	 	 	7.9	 	 	 	 	 	 	 	7.0	 	 	 	 	 	
Interest expense	 	 	36.0	 	 	 	16.3	 	 	 	32.2	 	 	 	16.6	 	
Depreciation and amortization (2)	 	 	36.2	 	 	 	9.8	 	 	 	33.6	 	 	 	9.8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	148.7	 	 	 	47.8	 	 	 	136.2	 	 	 	47.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains on land sales and other nonoperating income	 	 	1.5	 	 	 	0.2	 	 	 	0.7	 	 	 	0.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	13.2	 	 	 	15.9	 	 	 	16.8	 	 	 	17.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	(0.3	)	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in income of Unconsolidated Joint Ventures (2)	 	 	8.5	 	 	 	 	 	 	 	9.2	 	 	 	 	 	

Income before minority and preferred interests	 	 	21.4	 	 	 	 	 	 	 	26.0	 	 	 	 	 	
Minority and preferred interests:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TRG preferred distributions	 	 	(0.6	)	 	 	 	 	 	 	(0.6	)	 	 	 	 	
Minority share of income of consolidated joint ventures	 	 	(1.1	)	 	 	 	 	 	 	(0.6	)	 	 	 	 	
Distributions in excess of minority share of income of consolidated joint ventures	 	 	(4.3	)	 	 	 	 	 	 	(1.6	)	 	 	 	 	
Minority share of income of TRG	 	 	(4.5	)	 	 	 	 	 	 	(7.2	)	 	 	 	 	
Distributions in excess of minority share of income of TRG	 	 	(6.9	)	 	 	 	 	 	 	(3.4	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	4.0	 	 	 	 	 	 	 	12.5	 	 	 	 	 	
Preferred dividends	 	 	(3.7	)	 	 	 	 	 	 	(3.7	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income allocable to common shareowners	 	 	0.4	 	 	 	 	 	 	 	8.8	 	 	 	 	 	

SUPPLEMENTAL INFORMATION:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA — 100%	 	 	85.3	 	 	 	42.0	 	 	 	82.5	 	 	 	43.5	 	
EBITDA — outside partners’ share	 	 	(10.0	)	 	 	(19.3	)	 	 	(8.3	)	 	 	(20.0	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beneficial interest in EBITDA	 	 	75.4	 	 	 	22.6	 	 	 	74.2	 	 	 	23.5	 	
Beneficial interest expense	 	 	(31.1	)	 	 	(8.5	)	 	 	(28.6	)	 	 	(8.3	)	
Beneficial income tax expense	 	 	(0.3	)	 	 	 	 	 	 	 	 	 	 	 	 	
Non-real estate depreciation	 	 	(0.7	)	 	 	 	 	 	 	(0.7	)	 	 	 	 	
Preferred dividends and distributions	 	 	(4.3	)	 	 	 	 	 	 	(4.3	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations contribution	 	 	39.0	 	 	 	14.2	 	 	 	40.7	 	 	 	15.2	 	

			
(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)	 	Amortization of our additional basis in the Operating Partnership included in depreciation and amortization was $1.2 million in both 2008 and 2007. Also, amortization of our additional basis included in equity in income of Unconsolidated Joint Ventures was $0.5 million in both 2008 and 2007.	
 		
(3)	 	Amounts in this table may not add due to rounding.	
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Consolidated Businesses
     Total revenues for the quarter ended June 30, 2008 were $160.4 million, an $8.1 million or 5.3% increase over the comparable period in 2007. Minimum rents increased $8.1 million, primarily due to the October 2007 opening of Partridge Creek and the September 2007 expansion at Twelve Oaks, as well as tenant rollovers and increases in occupancy. Minimum rents also increased due to The Pier Shops, which we began consolidating in April 2007 upon the acquisition of a controlling interest in the center. Expense recoveries increased primarily due to Partridge Creek and Twelve Oaks. Other income decreased primarily due to a decrease in lease cancellation revenue, which was partially offset by increases in parking-related revenue.
     Total expenses were $148.7 million, a $12.5 million or 9.2% increase over the comparable period in 2007. Maintenance, taxes, and utilities expense increased primarily due to Partridge Creek. Other operating expense increased due to increased pre-development costs, Partridge Creek, and an increase in the provision for bad debts. General and administrative expense increased primarily due to increases in compensation and travel. We expect that general and administrative expense will continue to average approximately $8 million for each remaining quarter of 2008. Interest expense increased primarily due to Partridge Creek and the January 2008 refinancing at International Plaza. Interest expense also increased due to the repurchase of common stock in 2007, the expansion at Twelve Oaks, and the escrowed Macao payment. These increases were partially offset by decreases in floating interest rates. Depreciation expense increased due to Partridge Creek and The Pier Shops.
     Gains on land sales and other nonoperating income increased primarily due to $1.0 million of gains on land sales and land-related rights in the second quarter of 2008. There were no land sales in the second quarter of 2007.
Unconsolidated Joint Ventures
     Total revenues for the three months ended June 30, 2008 were $63.5 million, a $0.4 million or 0.6% decrease from the comparable period in 2007. Minimum rents increased by $1.7 million due to tenant rollovers and the November 2007 expansion at Stamford, which were partially offset by decreases due to frictional vacancy on spaces that are expected to open in the second half of the year. Percentage rents decreased primarily due to a true-up adjustment at a center in the prior year. Expense recoveries decreased due to The Pier Shops.
     Total expenses increased by $0.7 million or 1.5%, to $47.8 million for the three months ended June 30, 2008. Generally, increases related to the Stamford expansion were offset by reductions due to The Pier Shops.
     As a result of the foregoing, income of the Unconsolidated Joint Ventures decreased by $1.2 million to $15.9 million for the three months ended June 30, 2008. Our equity in income of the Unconsolidated Joint Ventures was $8.5 million, a $0.7 million decrease from the comparable period in 2007.
Net Income
     Our income before minority and preferred interests was $21.4 million for the three months ended June 30, 2008, compared to $26.0 million for the three months ended June 30, 2007. After allocation of income to minority and preferred interests, net income allocable to common shareowners for 2008 was $0.4 million compared to $8.8 million in the comparable period in 2007.
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      Comparison of the Six Months Ended June 30, 2008 to the Six Months Ended June 30, 2007
     The following table sets forth operating results for the six months ended June 30, 2008 and June 30, 2007, showing the results of the Consolidated Businesses and Unconsolidated Joint Ventures:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended	 	Six Months Ended	
 	 	June 30, 2008	 	June 30, 2007	
 	 	 	 	 	 	UNCONSOLIDATED	 	 	 	 	 	UNCONSOLIDATED	
 	 	CONSOLIDATED	 	JOINT VENTURES	 	CONSOLIDATED	 	JOINT VENTURES	
 	 	BUSINESSES	 	AT 100% (1)	 	BUSINESSES	 	AT 100% (1)	
 	 	(in millions of dollars)	
REVENUES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	174.2	 	 	 	77.2	 	 	 	158.2	 	 	 	75.6	 	
Percentage rents	 	 	3.9	 	 	 	1.9	 	 	 	3.3	 	 	 	2.6	 	
Expense recoveries	 	 	117.8	 	 	 	44.1	 	 	 	108.5	 	 	 	45.4	 	
Management, leasing, and development services	 	 	7.6	 	 	 	 	 	 	 	8.5	 	 	 	 	 	
Other	 	 	14.3	 	 	 	4.4	 	 	 	18.8	 	 	 	4.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	 	 	317.8	 	 	 	127.6	 	 	 	297.3	 	 	 	127.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Maintenance, taxes, and utilities	 	 	90.0	 	 	 	31.4	 	 	 	83.5	 	 	 	33.7	 	
Other operating	 	 	38.0	 	 	 	12.1	 	 	 	32.9	 	 	 	11.2	 	
Management, leasing, and development services	 	 	4.7	 	 	 	 	 	 	 	4.6	 	 	 	 	 	
General and administrative	 	 	16.3	 	 	 	 	 	 	 	14.3	 	 	 	 	 	
Interest expense	 	 	73.0	 	 	 	32.2	 	 	 	61.9	 	 	 	34.4	 	
Depreciation and amortization (2)	 	 	71.5	 	 	 	19.5	 	 	 	66.1	 	 	 	20.0	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	293.4	 	 	 	95.2	 	 	 	263.3	 	 	 	99.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains on land sales and other nonoperating income	 	 	3.3	 	 	 	0.5	 	 	 	1.1	 	 	 	0.8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	27.6	 	 	 	32.9	 	 	 	35.1	 	 	 	29.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	(0.4	)	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in income of Unconsolidated Joint Ventures (2)	 	 	17.7	 	 	 	 	 	 	 	17.4	 	 	 	 	 	

Income before minority and preferred interests	 	 	44.9	 	 	 	 	 	 	 	52.6	 	 	 	 	 	
Minority and preferred interests:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TRG preferred distributions	 	 	(1.2	)	 	 	 	 	 	 	(1.2	)	 	 	 	 	
Minority share of income of consolidated joint ventures	 	 	(2.3	)	 	 	 	 	 	 	(2.5	)	 	 	 	 	
Distributions in excess of minority share of income of consolidated joint ventures	 	 	(6.4	)	 	 	 	 	 	 	(1.0	)	 	 	 	 	
Minority share of income of TRG	 	 	(10.4	)	 	 	 	 	 	 	(14.9	)	 	 	 	 	
Distributions in excess of minority share of income of TRG	 	 	(12.3	)	 	 	 	 	 	 	(6.3	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	12.2	 	 	 	 	 	 	 	26.5	 	 	 	 	 	
Preferred dividends	 	 	(7.3	)	 	 	 	 	 	 	(7.3	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income allocable to common shareowners	 	 	4.9	 	 	 	 	 	 	 	19.2	 	 	 	 	 	

SUPPLEMENTAL INFORMATION:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA — 100%	 	 	172.1	 	 	 	84.5	 	 	 	163.1	 	 	 	83.6	 	
EBITDA — outside partners’ share	 	 	(19.5	)	 	 	(38.7	)	 	 	(17.1	)	 	 	(38.2	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beneficial interest in EBITDA	 	 	152.6	 	 	 	45.8	 	 	 	146.0	 	 	 	45.4	 	
Beneficial interest expense	 	 	(63.2	)	 	 	(16.7	)	 	 	(55.0	)	 	 	(16.6	)	
Beneficial income tax expense	 	 	(0.4	)	 	 	 	 	 	 	 	 	 	 	 	 	
Non-real estate depreciation	 	 	(1.4	)	 	 	 	 	 	 	(1.3	)	 	 	 	 	
Preferred dividends and distributions	 	 	(8.5	)	 	 	 	 	 	 	(8.5	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations contribution	 	 	78.9	 	 	 	29.0	 	 	 	81.1	 	 	 	28.8	 	

			
(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)	 	Amortization of our additional basis in the Operating Partnership included in depreciation and amortization was $2.5 million in both 2008 and 2007. Also, amortization of our additional basis included in equity in income of Unconsolidated Joint Ventures was $1.0 million in both 2008 and 2007.	
 		
(3)	 	Amounts in this table may not add due to rounding.	
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Consolidated Businesses
     Total revenues for the six months ended June 30, 2008 were $317.8 million, a $20.5 million or 6.9% increase over the comparable period in 2007. Minimum rents increased $16.0 million, primarily due to the October 2007 opening of Partridge Creek, The Pier Shops, which we began consolidating in April 2007 upon the acquisition of a controlling interest in the center, and the September 2007 expansion at Twelve Oaks. Minimum rents also increased due to tenant rollovers and increases in occupancy. Expense recoveries increased primarily due to Partridge Creek, The Pier Shops, and Twelve Oaks. Management, leasing, and development revenue decreased primarily due to lower revenue on the Songdo development contract, which in the first quarter of 2007 included revenue related to 2006 services. We expect that management, leasing, and development revenues, less taxes and other related expenses, will be between $6 million and $7 million in 2008. Other income decreased primarily due to a decrease in lease cancellation revenue, which was partially offset by increases in parking-related revenue. During the six months ended June 30, 2008, we recognized our approximately $1.7 million and $0.9 million share of the Consolidated Businesses’ and Unconsolidated Joint Ventures’ lease cancellation revenue. For 2008, we continue to estimate that our share of lease cancellation revenue will be approximately $7 million to $8 million, although there is a risk that we may not be able to achieve these amounts.
     Total expenses were $293.4 million, a $30.1 million or 11.4% increase over the comparable period in 2007. Maintenance, taxes, and utilities expense increased primarily due to Partridge Creek and The Pier Shops, as well as increases in maintenance costs at certain centers. These increases were partially offset by a decrease in utilities expense. Other operating expense increased due to increased pre-development and property management costs and Partridge Creek. We expect that pre-development costs for both our domestic and Asia projects will be about $15 million to $16 million in 2008. General and administrative expense increased primarily due to increased compensation, professional fees, and travel. Interest expense increased primarily due to Partridge Creek, The Pier Shops, and the January 2008 refinancing at International Plaza. Interest expense also increased due to the repurchase of common stock in 2007, the expansion at Twelve Oaks, and the escrowed Macao payment. These increases were partially offset by decreases in floating interest rates. Depreciation expense increased due to Partridge Creek, The Pier Shops, and Twelve Oaks, which were partially offset by changes in depreciable lives of tenant allowances and other assets in connection with early terminations in 2007.
     Gains on land sales and other nonoperating income increased primarily due to $2.2 million of gains on land sales and land-related rights in the six months ended June 30, 2008. There were no land sales in the six months ended June 30, 2007. We expect gains on land sales to be $3 million to $4 million in 2008, although there is a risk that we may not be able to achieve these amounts.
Unconsolidated Joint Ventures
     Total revenues for the six months ended June 30, 2008 were $127.6 million, a $0.1 million or 0.1% decrease from the comparable period in 2007. Minimum rents increased by $1.6 million, primarily due to tenant rollovers, the November 2007 expansion at Stamford, and prior year adjustments at Arizona Mills in 2007, which were partially offset by the reduction due to the consolidation of The Pier Shops and decreases due to frictional vacancy on spaces that are expected to open in the second half of the year. Expense recoveries decreased primarily due to The Pier Shops, which was partially offset by increased recoverable costs at certain centers.
     Total expenses decreased by $4.1 million or 4.1%, to $95.2 million for the six months ended June 30, 2008. Maintenance, taxes, and utilities expense decreased due to The Pier Shops, which was partially offset by Stamford and increases in maintenance costs at certain centers. Other operating expense increased due to increases in the provision for bad debts, professional fees, and Stamford, which were partially offset by The Pier Shops. Interest expense decreased due to The Pier Shops, which was partially offset by the refinancing at Fair Oaks. Depreciation expense decreased due to The Pier Shops, which was partially offset by Stamford.
     As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by $3.6 million to $32.9 million for the six months ended June 30, 2008. We had an effective 6% interest in The Pier Shops based on relative equity contributions, prior to our acquisition of a controlling interest in April 2007 (see “Results of Operations – Acquisition”). Our equity in income of the Unconsolidated Joint Ventures was $17.7 million, a $0.3 million increase from the comparable period in 2007.
Net Income
     Our income before minority and preferred interests was $44.9 million for the six months ended June 30, 2008, compared to $52.6 million for the six months ended June 30, 2007. After allocation of income to minority and preferred interests, net income allocable to common shareowners for 2008 was $4.9 million compared to $19.2 million in the comparable period in 2007.
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Reconciliation of Net Income Allocable to Common Shareowners to Funds from Operations
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30	 	Six Months Ended June 30	
 	 	2008	 	2007	 	2008	 	2007	
 	 	(in millions of dollars)	
Net income allocable to common shareowners	 	 	0.4	 	 	 	8.8	 	 	 	4.9	 	 	 	19.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) depreciation and amortization: (1)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	36.2	 	 	 	33.6	 	 	 	71.5	 	 	 	66.1	 	
Minority partners in consolidated joint ventures	 	 	(3.9	)	 	 	(4.0	)	 	 	(7.5	)	 	 	(7.7	)	
Share of unconsolidated joint ventures	 	 	5.7	 	 	 	6.0	 	 	 	11.3	 	 	 	11.4	 	
Non-real estate depreciation	 	 	(0.7	)	 	 	(0.7	)	 	 	(1.4	)	 	 	(1.3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add minority interests:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minority share of income of TRG	 	 	4.5	 	 	 	7.2	 	 	 	10.4	 	 	 	14.9	 	
Distributions in excess of minority share of income of TRG	 	 	6.9	 	 	 	3.4	 	 	 	12.3	 	 	 	6.3	 	
Distributions in excess of minority share of income of consolidated joint ventures	 	 	4.3	 	 	 	1.6	 	 	 	6.4	 	 	 	1.0	 	

Funds from Operations	 	 	53.2	 	 	 	56.0	 	 	 	108.0	 	 	 	109.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TCO’s average ownership percentage of TRG	 	 	66.6	%	 	 	66.1	%	 	 	66.5	%	 	 	66.0	%	

Funds from Operations allocable to TCO	 	 	35.4	 	 	 	37.0	 	 	 	71.8	 	 	 	72.5	 	

			
(1)	 	Depreciation includes $3.5 million and $2.9 million of mall tenant allowance amortization for the three months ended June 30, 2008 and 2007, respectively, and $6.7 million and $5.5 million for the six months ended June 30, 2008 and 2007, respectively.	
 		
(2)	 	Amounts in this table may not recalculate due to rounding.	
Reconciliation of Net Income to Beneficial Interest in EBITDA
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30	 	Six Months Ended June 30	
 	 	2008	 	2007	 	2008	 	2007	
 	 	(in millions of dollars)	
Net income	 	 	4.0	 	 	 	12.5	 	 	 	12.2	 	 	 	26.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) depreciation and amortization:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	36.2	 	 	 	33.6	 	 	 	71.5	 	 	 	66.1	 	
Minority partners in consolidated joint ventures	 	 	(3.9	)	 	 	(4.0	)	 	 	(7.5	)	 	 	(7.7	)	
Share of unconsolidated joint ventures	 	 	5.7	 	 	 	6.0	 	 	 	11.3	 	 	 	11.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) preferred interests, interest expense, and income tax expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred distributions	 	 	0.6	 	 	 	0.6	 	 	 	1.2	 	 	 	1.2	 	
Interest expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	36.0	 	 	 	32.2	 	 	 	73.0	 	 	 	61.9	 	
Minority partners in consolidated joint ventures	 	 	(4.9	)	 	 	(3.6	)	 	 	(9.7	)	 	 	(6.8	)	
Share of unconsolidated joint ventures	 	 	8.5	 	 	 	8.3	 	 	 	16.7	 	 	 	16.6	 	
Income tax expense	 	 	0.3	 	 	 	 	 	 	 	0.4	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add minority interests:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minority share of income of TRG	 	 	4.5	 	 	 	7.2	 	 	 	10.4	 	 	 	14.9	 	
Distributions in excess of minority share of income of TRG	 	 	6.9	 	 	 	3.4	 	 	 	12.3	 	 	 	6.3	 	
Distributions in excess of minority share of income of consolidated joint ventures	 	 	4.3	 	 	 	1.6	 	 	 	6.4	 	 	 	1.0	 	

Beneficial interest in EBITDA	 	 	98.0	 	 	 	97.8	 	 	 	198.3	 	 	 	191.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TCO’s average ownership percentage of TRG	 	 	66.6	%	 	 	66.1	%	 	 	66.5	%	 	 	66.0	%	

Beneficial interest in EBITDA allocable to TCO	 	 	65.2	 	 	 	64.6	 	 	 	131.9	 	 	 	126.3	 	

			
(1)	 	Amounts in this table may not recalculate due to rounding.	
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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, 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.
     As of June 30, 2008, we had a consolidated cash balance of $33.6 million, of which $1.9 million is restricted to specific uses stipulated by our lenders. We also have secured lines of credit of $550 million and $40 million. As of June 30, 2008, the total amounts borrowed on the $550 million and $40 million lines of credit were $200.0 million and $12.4 million, respectively. Both lines of credit mature in February 2011. The $550 million line of credit has a one-year extension option. With over $300 million available under our lines of credit we have a significant amount of liquidity. In addition, we have no maturities on our debt until 2010.
Operating Activities
     Our net cash provided by operating activities was $101.9 million in 2008, compared to $102.2 million in 2007. See also “Results of Operations” for descriptions of 2008 and 2007 transactions affecting operating cash flows.
Investing Activities
     Net cash used in investing activities was $49.9 million in 2008 compared to $91.2 million in 2007. Cash used in investing activities was impacted by the timing of capital expenditures, with additions to properties in 2008 and 2007 for the construction of Partridge Creek, the expansion and renovation at Twelve Oaks, the acquisition of land for future development, and our Oyster Bay project, as well as other development activities and capital items. A tabular presentation of 2008 capital spending is shown in “Capital Spending.” In 2008 and 2007, $1.9 million and $2.3 million, respectively, were used to acquire marketable equity securities and other assets. In 2007, we purchased a controlling interest in The Pier Shops for $24.5 million, and upon its consolidation we included its $33.4 million balance of cash on our balance sheet. In 2008, a $54.3 million contribution was made related to our acquisition of a 25% interest in The Mall at Studio City. The contribution will be held in escrow until financing for the project is complete (see “Results of Operations – Taubman Asia”). Contributions to Unconsolidated Joint Ventures of $6.0 million and $2.9 million in 2008 and 2007, respectively, were made primarily to fund our initial contribution to University Town Center (see “Planned Capital Spending – New Centers”) and the expansions at Stamford and Waterside.
     Sources of cash used in funding these investing activities, other than cash flow from operating activities, included distributions from Unconsolidated Joint Ventures as well as transactions described under “Financing Activities.” Distributions in excess of earnings from Unconsolidated Joint Ventures provided $61.6 million in 2008 and $4.4 million in 2007. The amount in 2008 included excess proceeds from the Fair Oaks refinancing. Net proceeds from the sale of peripheral land and land-related rights were $5.3 million in 2008. There were no land sales in the first half of 2007. The timing of land sales is variable and proceeds from land sales can vary significantly from period to period.
Financing Activities
     Net cash used in financing activities was $65.6 million in 2008, compared to $4.1 million provided by financing activities in 2007. Proceeds from the issuance of debt, net of payments and issuance costs, were $70.1 million in 2008, compared to $128.4 million in 2007. In 2008, a net $2.6 million was received in connection with incentive plans. Repurchases of common stock totaled $50.0 million in 2007. Total dividends and other distributions paid were $136.9 million and $74.3 million in 2008 and 2007, respectively. Distributions to minority and preferred interests in 2008 include $51.3 million of excess proceeds from the refinancing of International Plaza.
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Beneficial Interest in Debt
     At June 30, 2008, the Operating Partnership’s debt and its beneficial interest in the debt of its Consolidated and Unconsolidated Joint Ventures totaled $2,985.4 million with an average interest rate of 5.37% excluding amortization of debt issuance costs and the effects of interest rate cap premiums, and losses on settlement of derivatives used to hedge the refinancing of certain fixed rate debt. These costs are reported as interest expense in the results of operations. Interest expense for the six months ended June 30, 2008 includes $0.4 million of non-cash amortization relating to acquisitions, or 0.03% of the average all-in rate. Beneficial interest in debt includes debt used to fund development and expansion costs. Beneficial interest in construction work in process totaled $188.2 million as of June 30, 2008, which includes $185.6 million of assets on which interest is being capitalized. Beneficial interest in capitalized interest was $4.9 million for the six months ended June 30, 2008. The following table presents information about our beneficial interest in debt as of June 30, 2008:
 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Interest Rate	
 	 	Amount	 	Including Spread	
 	 	(in millions of dollars)	 	 	 	 	
Fixed rate debt	 	 	2,398.7	 	 	 	5.70	%  (1)	
 	 	 	 	 	 	 	 	 	
Floating rate debt:	 	 	 	 	 	 	 	 	
Swapped through December 2010	 	 	162.8	 	 	 	5.01	%	
Swapped through March 2011	 	 	125.0	 	 	 	4.22	%	
Swapped through October 2012	 	 	15.0	 	 	 	5.95	%	
 	 	 	 	 	 	 	 	 	
 	 	 	302.8	 	 	 	4.73	%  (1)	
Floating month to month	 	 	283.8	 	 	 	3.29	%  (1)	
 	 	 	 	 	 	 	 	 	
Total floating rate debt	 	 	586.6	 	 	 	4.03	%  (1)	

Total beneficial interest in debt	 	 	2,985.4	 	 	 	5.37	%  (1)	

Amortization of financing costs (2)	 	 	 	 	 	 	0.19	%	
 	 	 	 	 	 	 	 	 	
Average all-in rate	 	 	 	 	 	 	5.56	%	

			
(1)	 	Represents weighted average interest rate before amortization of financing costs.	
 		
(2)	 	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.	
 		
(3)	 	Amounts in table may not add due to rounding.	
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, treasury lock, and rate lock agreements to meet these objectives. Based on the Operating Partnership’s beneficial interest in debt subject to floating rates in effect at June 30, 2008 and 2007, a one percent increase or decrease in interest rates on this floating rate debt would decrease or increase annual cash flows by approximately $2.8 million and $2.3 million, respectively, and, due to the effect of capitalized interest, annual earnings by approximately $2.6 million and $2.0 million, respectively. Based on our consolidated debt and interest rates in effect at June 30, 2008 and 2007, a one percent increase in interest rates would decrease the fair value of debt by approximately $119.9 million and $123.3 million, respectively, while a one percent decrease in interest rates would increase the fair value of debt by approximately $128.1 million and $132.6 million, respectively.
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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. Disclosure of these items is contained in our Annual Report on Form 10-K. Updates of the 10-K disclosures for debt obligations and planned capital spending, which can vary significantly from period to period, as of June 30, 2008 are provided in the table below:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Payments Due by Period	
 	 	 	 	 	 	Less than	 	1-3 years	 	3-5 years	 	More than 5	
 	 	Total	 	1 year (2008)	 	(2009-2010)	 	(2011-2012)	 	years (2013+)	
 	 	(in millions of dollars)	
Debt (1)	 	 	2,774.2	 	 	 	6.9	 	 	 	226.1	 	 	 	632.5	 	 	 	1,908.6	 	
Interest payments	 	 	861.1	 	 	 	75.3	 	 	 	295.6	 	 	 	217.7	 	 	 	272.5	 	
Purchase obligations - Planned capital spending (2)	 	 	60.9	 	 	 	60.9	 	 	 	 	 	 	 	 	 	 	 	 	 	

(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 June 30, 2008.	
 		
(2)	 	As of June 30, 2008, we were contractually liable for $22.2 million of this planned spending. See “Planned Capital Spending” for detail regarding planned funding.	
 		
(3)	 	Amounts in this table may not add due to rounding.	
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 was provided by the following sources. We provided approximately 45% of the project funding under a junior subordinated financing. The owner provided $9 million in equity. Funding for the remaining project costs was provided by the owner’s third-party construction loan, which has a balance of $70.6 million as of June 30, 2008.
     We intend to exercise our option to purchase the property and assume the ground lease from the owner during the exchange period ending October 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 monthly supplemental rent equal to 1.67% of the owner’s outstanding equity balance, commencing after the exchange period). 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. The junior loans and other intercompany transactions are eliminated in consolidation.
Loan Commitments and Guarantees
     Certain loan agreements contain various restrictive covenants, including a minimum net worth requirement, minimum interest coverage ratios, a maximum payout ratio on distributions, a minimum debt yield ratio, a minimum fixed charges coverage ratio, and a maximum leverage ratio, the latter being the most restrictive. We are in compliance with all of our covenants as of June 30, 2008. The maximum payout ratio on distributions covenant limits the payment of distributions generally to 95% of funds from operations, as defined in the loan agreements, except as required to maintain our tax status, pay preferred distributions, and for distributions related to the sale of certain assets.
     See “Note 5 – Beneficial Interest in Debt and Interest Expense – Debt Covenants and Guarantees” to the consolidated financial statements for more details.
Cash Tender Agreement
     A. Alfred Taubman has the annual right to tender units of partnership interest in the Operating Partnership 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. See “Note 8 – Commitments and Contingencies” to the consolidated financial statements for more details.
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Capital Spending
     Capital spending for routine maintenance of the shopping centers is generally recovered from tenants. Capital spending through June 30, 2008 is summarized in the following table:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2008 (1)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Beneficial	
 	 	 	 	 	 	Beneficial Interest	 	 	 	 	 	Interest in	
 	 	Consolidated	 	in Consolidated	 	Unconsolidated	 	Unconsolidated	
 	 	Businesses	 	Businesses	 	Joint Ventures	 	Joint Ventures	
 	 	(in millions of dollars)	
New Development Projects:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pre-construction development activities (2)	 	 	7.9	 	 	 	7.9	 	 	 	 	 	 	 	 	 	
New centers (3)	 	 	2.6	 	 	 	2.6	 	 	 	5.0	 	 	 	3.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Existing Centers:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Renovation projects with incremental GLA and/or anchor replacement	 	 	3.0	 	 	 	2.7	 	 	 	14.8	 	 	 	5.6	 	
Renovations with no incremental GLA effect and other	 	 	0.2	 	 	 	0.1	 	 	 	3.0	 	 	 	2.2	 	
Mall tenant allowances (4)	 	 	3.2	 	 	 	3.1	 	 	 	3.8	 	 	 	2.5	 	
Asset replacement costs reimbursable by tenants	 	 	1.6	 	 	 	1.4	 	 	 	3.3	 	 	 	1.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate office improvements and equipment (5)	 	 	3.1	 	 	 	3.1	 	 	 	 	 	 	 	 	 	

Additions to properties	 	 	21.7	 	 	 	21.0	 	 	 	29.8	 	 	 	15.1	 	

			
(1)	 	Costs are net of intercompany profits and are computed on an accrual basis.	
 		
(2)	 	Primarily includes costs related to Oyster Bay. Excludes $54 million escrow deposit paid in 2008 relating to the Macao project.	
 		
(3)	 	Includes costs related to Partridge Creek and University Town Center.	
 		
(4)	 	Excludes initial lease-up costs.	
 		
(5)	 	Includes U.S. and Asia offices.	
 		
(6)	 	Amounts in this table may not add due to rounding.	
     For the six months ended June 30, 2008, in addition to the costs above, we incurred our $3.2 million share of Consolidated Businesses’ and $0.7 million share of Unconsolidated Joint Ventures’ capitalized leasing costs.
     The following table presents a reconciliation of the Consolidated Businesses’ capital spending shown above (on an accrual basis) to additions to properties (on a cash basis) as presented in our Consolidated Statement of Cash Flows for the six months ended June 30, 2008:
 	 	 	 	 	
 	 	(in millions of dollars)	
Consolidated Businesses’ capital spending	 	 	21.7	 	
Differences between cash and accrual basis	 	 	32.8	 	
 	 	 	 	 	
Additions to properties	 	 	54.5	 	
 	 	 	 	 	
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Planned Capital Spending
     The following table summarizes planned capital spending for 2008, excluding acquisitions as well as costs related to City Creek Center, Taubman Asia projects, and other projects or expansions for which budgets have not yet been approved by the Board of Directors:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2008 (1)	
 	 	 	 	 	 	Beneficial Interest	 	 	 	 	 	Beneficial Interest	
 	 	Consolidated	 	in Consolidated	 	Unconsolidated	 	in Unconsolidated	
 	 	Businesses	 	Businesses	 	Joint Ventures	 	Joint Ventures	
 	 	 	 	 	 	(in millions of dollars)	 	 	 	 	
New development projects (2)	 	 	18.2	 	 	 	18.2	 	 	 	17.0	 	 	 	6.0	 	
Existing centers (3)	 	 	60.6	 	 	 	54.1	 	 	 	53.1	 	 	 	37.5	 	
Corporate office improvements and equipment (4)	 	 	3.8	 	 	 	3.8	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	82.6	 	 	 	76.1	 	 	 	70.1	 	 	 	43.5	 	

			
(1)	 	Costs are net of intercompany profits.	
 		
(2)	 	Primarily includes costs related to Oyster Bay and University Town Center. Excludes $54 million escrow deposit paid in 2008 relating to the Macao project.	
 		
(3)	 	Primarily includes costs related to the renovation at Fairlane, mall tenant allowances, and asset replacement costs reimbursable by tenants.	
 		
(4)	 	Includes U.S. and Asia offices.	
 		
(5)	 	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. Given the high probability of our moving forward on projects in Salt Lake City and Macao, we are capitalizing our costs, although it may be some time before the contingency of completing the financing on the Macao project is met and the final agreements on the City Creek Center project are executed due to their complexity. As of June 30, 2008, the combined capitalized costs of these projects were $3.6 million. Costs of these projects, excluding the $54 million initial Macao payment and related interest expense, will continue to be relatively modest until full construction of the centers begins.
     Disclosures regarding planned capital spending, including estimates regarding capital expenditures, occupancy, and returns on new developments presented below 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.
New Centers
     In May 2008, we announced that we had entered into agreements to jointly develop University Town Center, a regional mall in Sarasota, Florida. The 0.9 million square foot shopping center will be part of a mixed-use development anchored by Nordstrom, Neiman Marcus, and Macy’s. The center is projected to start construction in fall 2008 and open in November 2010, contingent upon obtaining final site plan approval. We will own a 25% interest in the center and we expect our share of development costs to be approximately $90 million, with a stabilized return on our investment of 8.5% to 9%.
     We are finalizing a development agreement regarding City Creek Center, a mixed-use project in Salt Lake City, Utah. In April 2008, we received approval for the important pedestrian bridge that links the retail component and encourages circulation throughout the project. This was a significant step toward final design approval, and the project is now expected to open in spring 2012. The 0.7 million square foot retail component of the project will include Macy’s and Nordstrom as anchors. We have been a consultant throughout the planning process for this project and are finalizing agreements to develop, manage, lease, and own the retail space under a participating lease. When we have finalized these complex agreements, we will provide the anticipated costs and returns.
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     In June 2007, the Supreme Court of the State of New York (Suffolk County) affirmed that the Town of Oyster Bay had not provided a basis to deny our application to build our Oyster Bay project in Syosset, Long Island, New York. In September 2007, the Oyster Bay Town Board adopted a resolution citing its reasons for denying our application for a special use permit and submitted it to the Court. We responded with a motion asking the Court to order the town to issue the permit. In June 2008, the Supreme Court ordered the Town of Oyster Bay to immediately issue a special use permit. Subsequently in June of 2008, the Town filed a notice of appeal regarding the court’s decision. We have filed a motion to expedite the appeal process, which was granted in July 2008. In addition, we were also granted a preference for oral argument, which is also expected to shorten the appeal process. As a result, we are hopeful the appeal process can be concluded in early 2009, clearing the way to start the long-delayed construction of the center. From the start of construction, it is less than a two year process to build the mall. We continue to be confident that it is probable we will prevail and build the mall, which has over 60% of the space committed and will be anchored by Neiman Marcus, Nordstrom, and Barneys New York. However, if we are ultimately unsuccessful, it is anticipated that the recovery on this asset would be significantly less than our current investment. Depending on the timing of the construction and opening of the center, we anticipate spending approximately $500 million on the project and receiving an approximate 7% return. Our investment in this project as of June 30, 2008 was $149 million. With capitalized interest, storage costs, leasing, and other ongoing expenditures, we expect our investment to increase $3 million to $4 million each quarter. If we were to determine for any period that sufficient development activities were not underway to permit capitalization of interest and other carrying costs, these costs, which comprise the majority of the quarterly spending, would be expensed as incurred.
     In January 2007, we acquired land for future development in North Atlanta, Georgia. We are making progress on the development of this land and an adjoining parcel, which is currently under our option, as a significant mixed use project. The project would include about 1.4 million square feet of retail, 900,000 square feet of office, 875 residential units, and 500 hotel rooms. We are working closely with the department stores in hope of achieving a 2011 opening.
     See “Results of Operations – Taubman Asia” regarding the status of our involvement in The Mall at Studio City and Songdo.
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 prior to net capital gains to our shareowners, as well as meet certain other requirements. We must pay these distributions in the taxable year the income is recognized or in the following taxable year if they are declared during the last three months of the taxable year, payable to shareowners of record on a specified date during such period and paid during January of the following year. Such distributions are treated as paid by us and received by our shareowners on December 31 of the year in which they are declared. In addition, at our election, a distribution for a taxable year may be declared in the following taxable year if it is declared before we timely file our tax return for such year and if paid on or before the first regular dividend payment after such declaration. These distributions qualify as dividends paid for the 90% REIT distribution test for the previous year and are taxable to holders of our capital stock in the year in which paid. Preferred dividends accrue regardless of whether earnings, cash availability, or contractual obligations were to prohibit the current payment of dividends.
     The annual determination of our common dividends is based on anticipated Funds from Operations available after preferred dividends and our REIT taxable income, 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.
     On May 29, 2008 we declared a quarterly dividend of $0.415 per common share that was paid on July 21, 2008 to shareowners of record on June 30, 2008. The Board of Directors also declared a quarterly dividend of $0.50 per share on our 8% Series G Cumulative Redeemable Preferred Stock and a quarterly dividend of $0.4765625 per share on our 7.625% Series H Cumulative Redeemable Preferred Stock, each paid on June 30, 2008 to shareowners of record on June 20, 2008.
Additional Information
     We provide supplemental investor information coincident with our earning announcements that can be found online at www.taubman.com under “Investor Relations.”
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
     The information required by this item is included in this report at Item 2 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources – Sensitivity Analysis.”
Item 4. Controls and Procedures
     As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2008, our disclosure controls and procedures were effective to ensure the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods prescribed by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
     There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
     Refer to “Note 8 – Commitments and Contingencies” to our consolidated financial statements relating to the Blue Back Square project. There were no material developments regarding this litigation during the quarter ended June 30, 2008.
Item 1A. Risk Factors
     There were no material changes in our risk factors previously disclosed in Part I, Item 1A. of our Form 10-K for the year ended December 31, 2007.
Item 4. Submission of Matters to a Vote of Security Holders
     On May 29, 2008, we held our annual meeting of shareowners. The matters on which shareowners voted were: the election of four directors, the ratification of the Audit Committee’s appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2008, approval of the 2008 Omnibus Long-Term Incentive Plan, and the shareowner proposal requesting that the Board of Directors take the necessary steps to declassify the Board of Directors. Robert S. Taubman, Lisa A. Payne, and William U. Parfet were re-elected at the meeting. Ronald W. Tysoe was also elected at the meeting, following his appointment in December 2007 to fill the existing vacancy in the class of directors whose term will expire in 2010. The five remaining incumbent directors, William S. Taubman, Graham T. Allison, Jerome A. Chazen, Craig M. Hatkoff, and Peter Karmanos, Jr., continued to hold office after the meeting. The shareowners ratified the appointment of KPMG LLP as our independent registered public accounting firm. The shareowners approved the 2008 Omnibus Long-Term Incentive Plan. The shareowners did not approve the shareowner proposal requesting that the Board of Directors take the necessary steps to declassify the Board of Directors. The results of the voting are shown below:
Proposal 1 – Election of Directors
 	 	 	 	 	 	 	
NOMINEES	 	TERM	 	VOTES FOR	 	VOTES WITHHELD	
Ronald W. Tysoe	 	2 Years	 	72,715,445	 	1,615,851	
Robert S. Taubman	 	3 Years	 	72,283,395	 	2,047,901	
Lisa A. Payne	 	3 Years	 	69,919,592	 	4,411,703	
William U. Parfet	 	3 Years	 	72,208,943	 	2,122,353	
Proposal 2 – Ratification of Appointment of KPMG LLP as
our Independent Registered Public Accounting Firm
 	 	 	
74,237,244	 	Votes were cast for ratification;	
73,330	 	Votes were cast against ratification; and	
20,719	 	Votes abstained.	
Proposal 3 – Approval of the 2008 Omnibus Long-Term Incentive Plan
 	 	 	
69,160,701	 	Votes were cast for;	
3,031,053	 	Votes were cast against; and                	
266,871	 	Votes abstained.	
Proposal 4 – Shareowner Proposal
 	 	 	
39,111,766	 	Votes were cast for;	
33,072,553	 	Votes were cast against; and               	
274,306	 	Votes abstained.	
 
*       For Proposal 1, the four nominees receiving the most votes cast were elected as directors. Proposals 2, 3, and 4 required the affirmative vote of 66 2 / 3 % of the outstanding voting shares for approval; the total outstanding voting shares as of the record date, April 7, 2008, were 79,332,767 shares.
Item 5. Other Information
     Refer to “Note 7 – Share-Based Compensation” to our consolidated financial statements relating to the shareholder approval in May 2008 of The Taubman Company 2008 Omnibus Long-Term Incentive Plan, as well as our definitive proxy statement for the 2008 annual meeting of shareholders, filed April 15, 2008, which contained a summary of the material terms of such plan.
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Table of Contents
Item 6. Exhibits
 	 	 	 	 	
10(a)	 	—	 	Amended and Restated Limited Liability Company Agreement of Taubman Properties Asia LLC, a Delaware Limited Liability Company	
 	 	 	 	 	
10(b)	 	—	 	Employment Agreement between The Taubman Company Asia Limited and Morgan Parker	
 	 	 	 	 	
10(c)	 	—	 	First Amendment to the Taubman Centers, Inc. Non-Employee Directors’ Deferred Compensation Plan	
 	 	 	 	 	
10(d)	 	—	 	The Taubman Company 2008 Omnibus Long-Term Incentive Plan (incorporated herein by reference to Appendix A to the Registrant’s Proxy Statement on Schedule 14A, filed with the Commission on April 15, 2008)	
 	 	 	 	 	
12	 	—	 	Statement Re: Computation of Taubman Centers, Inc. Ratio of Earnings to Combined Fixed Charges and Preferred Dividends	
 	 	 	 	 	
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	 	—	 	Debt Maturity Schedule	
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Table of Contents
SIGNATURES
     Pursuant to the requirements of the Securities Exchange 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: August 1, 2008 	By:  	/s/ Lisa A. Payne  	 	
 	Lisa A. Payne 	 	
 	Vice Chairman, Chief Financial Officer, and Director
(Principal Financial Officer) 	 	
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Exhibit 10 (a)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
TAUBMAN PROPERTIES ASIA LLC
A DELAWARE LIMITED LIABILITY COMPANY
      THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) is effective as of the 23rd day of January, 2008, by and between Taubman Asia Management II LLC, a Delaware limited liability company (“T-Asia”), whose address is 200 East Long Lake Road, P. O. Box 200, Bloomfield Hills, MI 48303-0200, and Morgan Parker (“Parker”), whose address is Unit 5, 179 Baroona Road, Rosalie, QLD 4046, Australia.
RECITALS :
     A. The Taubman Realty Group Limited Partnership, a Delaware limited partnership (“TRG”), formed a limited liability company (the “Company”) under the name “Taubman Properties Asia LLC,” by filing, on April 21, 2005, a Certificate of Formation (the “Certificate”) with Delaware Secretary of State in accordance with the Delaware Limited Liability Company Act (the “Act”). TRG, as the Company’s sole member, entered into and adopted an Operating Agreement of Taubman Properties Asia LLC dated as of April 21, 2005 (the “Original Agreement”). TRG subsequently assigned its entire interest in the Company to T-Asia, which became the sole member of the Company in TRG’s place and stead.
     B. The parties desire that (i) Parker be admitted to the Company as an additional member on the terms and conditions hereinafter set forth and (ii) the Original Agreement be amended and restated in order to memorialize the understandings of the parties with respect to their relationship as members of, and their respective interests in, the Company.
     C. Capitalized terms used herein shall have the meanings given to such terms in Article XI hereof unless otherwise defined herein.
          Accordingly, the parties hereto agree as follows:

 

ARTICLE I
CONTINUATION, NAME,
PURPOSE, PRINCIPAL OFFICE,
TERM OF THE COMPANY AND RELATED MATTERS
     1.1 Continuation . Parker is hereby admitted to the Company as a member along with T-Asia. The parties shall continue the Company on the terms and for the purposes hereinafter set forth.
     1.2 Name . The name of the Company shall be Taubman Properties Asia LLC. The Company may also conduct its business under one or more assumed names.
     1.3 Purpose . The purpose of the Company is to engage, indirectly through subsidiaries and ventures with others, in (i) the acquisition, development, financing, management, leasing and/or selling or exchanging of interests in commercial real properties, and properties having a significant commercial component, in the Territory, (ii) any other activities in which the Members by Majority Vote may resolve to engage and (iii) any other activities incidental or related to any of the foregoing.
     1.4 Term .
     (a) The term of the Company commenced upon the filing of the Certificate.
     (b) The term of the Company shall end, and the Company shall dissolve, on the first to occur of the following events:
     (i) the decision of the Manager to dissolve the Company; or
     (ii) any other event which, under this Agreement or the Act, results in dissolution of the Company.
     1.5 Office and Resident Agent .
     (a) The registered agent and office of the Company in the State of Delaware shall be The Corporation Service Company, having an address at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, or such other agent and address as may be designated from time to time by the Manager.
     (b) The address of the principal office of the Company shall be 200 East Long Lake Road, P. O. Box 200, Bloomfield Hills, MI 48303-0200. The Company’s resident agent in the State of Michigan shall be Chris B. Heaphy, Esq., whose address is 200 East Long Lake Road, P. O. Box 200, Bloomfield Hills, MI 48303-0200.
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ARTICLE II
CAPITAL CONTRIBUTIONS
AND RELATED MATTERS
     2.1 Capital Contributions of the Members .
     (a) T-Asia shall contribute such cash to the capital of the Company as the Manager may determine from time to time to be necessary or appropriate, less any such cash that Parker chooses to contribute pursuant to Section 2.1(b) below.
     (b) Parker is, on or about the date of this Agreement, contributing $1,000 to the capital of the Company. At any time the Manager determines that additional contributions from the Members are necessary or appropriate, Parker shall be permitted to make such additional contributions to the Company up to any amount as will reduce T-Asia’s Preferred Capital to, and/or maintain T-Asia’s Preferred Capital at, zero. Specifically, if Parker gives written notice, within the ten (10) day period ending the day before the first day of a month, that he desires to contribute some share of any capital that is contributed to the Company during such month (based on the Manager’s determination that the contribution of such capital is necessary or appropriate), and the maximum amount of capital that he is willing to contribute to the Company during such month, then he shall be entitled (and required) to contribute such share of any capital contributed during such month, up to such maximum amount. In the absence of any such written notice, Parker shall be deemed to have elected not to contribute any share of any capital contributed during such month. Except as aforesaid, Parker shall not be required to make any additional contribution to the capital of the Company, although certain distributions otherwise to be made to Parker will be withheld by the Company until T-Asia’s Preferred Capital has been reduced to zero, all in accordance with Sections 3.1 and 8.1 of this Agreement.
     2.2 Capital Accounts . The parties acknowledge that, as a limited liability company with a single member, the Company has previously been classified, for U.S. income tax purposes, as an entity disregarded as separate from its owner but, on account of the admission of Parker to the Company, has become classified, for U.S. income tax purposes, as a partnership and, more particularly, the following is, by reason of Parker’s admission to the Company, deemed to have occurred (as set forth in IRS Revenue Ruling 99-5, I.R.B. 1999-6, Situation 2): (i) Parker has contributed cash to such partnership in the amount of his contribution of cash to the capital of the Company and (ii) T-Asia is deemed to have contributed all of the Company’s other assets, subject to the Company’s liabilities, to such partnership. The Company shall maintain a separate Capital Account for each Member, which shall be (i) increased by the Member’s capital contributions from and after the date of this Agreement (including, in the case of T-Asia, the contribution deemed made by T-Asia pursuant to the preceding sentence, the net agreed-upon value of which is equal to $13,857,416 plus the amount of any contributions made by T-Asia after 2007 and on or before the date of this Agreement), the Member’s share of any Profits of the Company, and any items of income or gain allocated to the Member under Section 3.2 below, and (ii) shall be decreased by distributions made to the Member, the Member’s share of any Losses of the Company, and any items of expense or loss allocated to the Member under Section 3.2 below. Upon the happening of an event described in Section 1.704-1(b)(2)(iv)(f) of the Regulations, the Manager may, in accordance with such Regulations, mark-to-market the Company’s assets on the balance sheet as computed for book purposes, and adjust the Members’
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Capital Accounts as though the net adjustment to the values at which the assets are carried on such balance sheet were gain or loss allocable under Section 3.2. In accordance with Section 1.704-1(b)(2)(iv)(q) of the Regulations, each Member’s Capital Account shall be adjusted in a manner that maintains equality between the aggregate of all of the Members’ Capital Accounts and the amount of capital reflected on the Company’s balance sheet as computed for book purposes.
     2.3 Loans . With the approval of the Manager, the Members may, in lieu of contributing additional cash to the capital of the Company pursuant to Section 2.1 above, advance or cause any of their affiliates to advance such cash to the Company as a loan. Any such loan shall be made on such terms as are mutually agreeable to the Manager and the Member (or affiliate of a Member) making such loan.
ARTICLE III
DISTRIBUTIONS AND ALLOCATIONS
     3.1 Distributions .
     (a) Distributions shall be made as, when and to the extent that the Manager determines that the Company’s cash on hand exceeds the current and anticipated needs of the Company to fulfill its business purposes. Distributions shall be made in the following manner and order of priority:
     (i) Distributions which do not represent a return of capital shall be made to the Members pro rata, based on their Sharing Percentages at the time of such distribution, provided, however, that if, at the time of such distribution, any Preferred Capital of T-Asia is outstanding, then 85% (or such greater percentage as Parker may specify) of the distribution otherwise to be made to Parker shall be withheld and treated as a contribution by him to the Company’s capital until no Preferred Capital of T-Asia is outstanding (i.e., until T-Asia’s Preferred Capital has been reduced to zero); and
     (ii) Distributions which do represent a return of capital shall be made to the Members pro rata, based on their Sharing Percentages at the time of such distribution, provided, however, that if, at the time of such distribution, any Preferred Capital of T-Asia is outstanding, then 85% (or such greater percentage as Parker may specify) of the amount otherwise to be distributed to Parker shall be retained by the Company until distributions under this clause (ii) can be made to Parker without causing there to be (or to continue to be) any outstanding Preferred Capital of T-Asia.
     For purposes of the foregoing, a distribution shall be deemed to represent a return of capital except to the extent that, following such distribution, the aggregate balance in the Members’ Capital Accounts exceeds (i) the aggregate amount of the Members’ cash and property contributions (including any amount treated as a contribution by Parker under the preceding provisions of this Section 3.1) to the Company over (ii) any prior distribution(s) deemed to be a return of capital under this sentence. For this purpose, the Members’ Capital Accounts shall, if the Manager so elects, be determined by closing the Company’s books and records immediately prior to such distribution.
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     An example of the foregoing is appended as Exhibit A.
     (b) The Company is authorized to withhold from distributions to a Member, or with respect to allocations to a Member, and to pay over to a federal, state, local or foreign government, any amounts required to be so withheld pursuant to the Code, or any provisions of any other federal, state, local or foreign law. Any amounts so withheld shall be treated as having been distributed to such Member pursuant to this Article III for all purposes of this Agreement, and shall be offset against the amounts otherwise distributable to such Member. In the event the Company is required to withhold from or in respect of any income allocated but not currently distributed to Parker, the amount so withheld shall be treated as an interest-free loan from the Company to Parker, and shall be repaid from any and all distributions subsequently to be made to Parker, which the Company shall withhold and apply against the balance of such loan until such balance is reduced to zero.
     (c) The Company shall have the right to set-off, against any amount otherwise to be distributed to a Member, any amount owed by such Member to the Company (whether under another provision of this Agreement or otherwise) or to any affiliate of the Company.
     (d) No distribution shall be declared or made if, after giving it effect, the Company would not be able to pay its debts as they become due in the usual course of business or the Company’s total assets would be less than the sum of its total liabilities.
     3.2 Allocation of the Profits and Losses of the Company .
     (a) After giving effect to the allocations set forth in Section 3.2(b) below, the items of income, gain, loss and deduction entering into the computation of Profit or Loss of the Company for each fiscal year of the Company shall be allocated between the Members in such proportions as will cause the Capital Account of each Member to equal, as nearly as possible, the amount such Member would receive if an amount equal to both Members’ Capital Accounts (computed prior to the allocation of such Profit or Loss), increased by the amount of such Profit or reduced by the amount of such Loss, were distributed to the Members in accordance with Section 8.1(a)(4); provided, however, that no Member shall be allocated any Loss to the extent such allocation would create or increase a deficit in such Member’s Adjusted Capital Account.
     (b) In the event any Member receives any distribution which creates or increases a deficit (negative balance) in such Member’s Adjusted Capital Account, items of income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such deficit as quickly as possible. This Section 3.2(b), and the proviso of Section 3.2(a), are intended to comply, and shall be interpreted consistently, with the “alternate test for economic effect” of Section 1.704-1(b)(ii)(2)(d) of the Regulations.
     (c) For purposes of this Agreement:
     (i) “Adjusted Capital Account” means, with respect to any Member, such Member’s Capital Account, reduced by those anticipated distributions described in Section 1.704-l(b)(2)(ii)(d) of the Regulations, and increased by the amount of any deficit
 5 

 

in such Member’s Capital Account that such Member is deemed obligated to restore under Section 1.704-l(b)(2)(ii)(c) of the Regulations.
     (ii) “Profit” and “Loss” each means, for each fiscal year of the Company or other period, the Company’s profit or loss for Federal income tax purposes, adjusted as follows:
     (A) add any tax-exempt income of the Company described in Section 705(a)(1)(B) of the Code;
     (B) subtract any nondeductible expenditures of the Company described in Section 705(a)(2)(B) of the Code;
     (C) if the value at which any property is carried on the Company’s balance sheet as computed for book (capital accounting) purposes differs from the adjusted tax basis of such property (because such property is contributed (or deemed to have been contributed) to, rather than purchased by, the Company, or because the value of such property on such books is adjusted pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations), then items of income, gain, loss or deduction attributable to the disposition of such property shall be computed by reference to its value on such books, and items of depreciation, amortization and other cost recovery deductions with respect to such property shall be computed by reference to such value in accordance with Section 1.704-1(b)(2)(iv)( g ) of the Regulations, and
     (D) any preceding provision of this Section 3.2(c)(ii) to the contrary notwithstanding, disregard any items of income, gain, expense or loss specially allocated pursuant to Section 3.2(b) hereof.
     (iii) “Regulations” mean the regulations promulgated by the U.S. Department of Treasury under Section 704(b) of the Code.
     (iv) All items set off in quotation marks and not otherwise defined shall have the meanings ascribed to them in the Regulations.
     3.3 Allocations Solely for Tax Purposes . Items of income, gain, deduction, loss and credit for federal income tax purposes shall be allocated among the Members in the same proportions as the corresponding book items are allocated, but if there is a book/tax difference in the determination of any such items by reason of a Member’s contribution (or deemed contribution) of property having a value which varies from its adjusted tax basis, or by reason of any event on account of which assets are marked-to-market on the Company’s book under the principles of Section 1.704-1(b)(2)(iv)(f) of the Regulations, then such difference shall be reconciled in accordance with the principles of Section 704(c) of the Code and the regulations thereunder using any permissible method selected by the Manager. Allocation pursuant to this Section 3.3 are solely for tax purposes, and shall not affect the Members’ Capital Accounts.
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     3.4 No Deficit Capital Account Restoration Requirement . If the Capital Account of any Member has a deficit balance (after giving effect to all contributions, distributions, and allocations for all taxable years), such Member shall not be obligated to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other person or entity for any purpose whatsoever.
ARTICLE IV
BOOKS, RECORDS AND ACCOUNTING
     4.1 Books and Records . The Company shall maintain complete and accurate books and records of its business and affairs as required by the Act and such books and records shall be kept at Company’s principal office. All books and records of the Company required to be maintained under this Section 4.1, as well as complete and accurate information regarding the Company’s business, financial condition and other information regarding the affairs of the Company as is just and reasonable and any other information described in Section 18-305(a) of the Act, shall be made available upon reasonable demand by any Member for any purpose reasonably related to such Member’s interest as a Member, for inspection and copying at the expense of the Company, and, if such Member so requests, copies of such information shall be sent to such Member by facsimile transmission.
     4.2 Fiscal Year . The Company’s fiscal year shall be the calendar year.
     4.3 Tax Information and Financial Statements . As soon as practicable following the end of each fiscal year, the Company shall prepare and furnish to the Members (i) all information relating to the Company that is necessary for the preparation of the Members’ Federal income tax returns for such fiscal year, and (ii) such financial statements as the Manager shall decide to have prepared.
     4.4 Bank Accounts . All funds of the Company shall be deposited in such bank account(s) as shall be determined by the Manager. All withdrawals therefrom shall be made upon checks signed by any person authorized to do so by the Manager.
     4.5 Tax Matters Partner . T-Asia is hereby designated as Tax Matters Partner for the Company, with full power and authority to act as such for the Company and the Members, and all the rights and responsibilities of that position described in Sections 6222 through 6232 of the Code. The duties of the Tax Matters Partner shall be limited to those prescribed by the Code and regulations promulgated thereunder.
ARTICLE V
ASSIGNMENT OF MEMBERSHIP INTERESTS
     5.1 General . A Member may not sell, assign, transfer, exchange, mortgage, pledge, grant, hypothecate or otherwise dispose of any of its Membership Interest without the consent of the Manager. Any attempted disposition of a Member’s Membership Interest, or any portion thereof, in violation of this provision is null and void ab initio and the Company shall not be obligated to recognize any such attempted disposition.
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     5.2 Admission of Substitute Members . An assignee of a Member’s Membership Interest shall be admitted as a substitute member and shall be entitled to all the rights and powers of the assignor (to the extent assigned), provided that (i) the Manager approves in writing the substitution of the assignee for the assignor as a member and (ii) the assignee accepts, adopts, approves and agrees, in writing, to be bound by all of the terms and provisions of this Agreement. If admitted, the assignee, as a substitute member, shall have, to the extent assigned, all of the rights and powers, and shall be subject to all of the restrictions and liabilities, of the assigning Member. The assignor shall not thereby be relieved of any of its unperformed obligations to the Company.
     5.3 Withdrawal . No Member may withdraw from the Company, except in connection with a permitted assignment of such Member’s Membership Interest and the admission of such Member’s assignee to the Company in such Member’s place and stead in accordance with Section 5.2 above; provided, however, that this Section 5.3 is subject to the provisions of Section 5.5 below.
     5.4 Dissolution, etc . In the event of the dissolution, termination, bankruptcy or insolvency of a Member (such event and such Member being hereinafter referred to as the “Disabling Event” and “Disabled Member,” respectively), the Company shall not dissolve, but shall continue. The Disabled Member’s successor in interest (“Successor”) shall be admitted as a Member in the place and stead of the Disabled Member, provided that the Successor agrees in writing to be bound by this Agreement. If the Successor refuses to agree in writing to be bound by this Agreement, then the Successor shall not be admitted to the Company, in which case the Membership Interest of the Disabled Member shall be forfeited, and the Successor shall have no interest in, or rights with respect to, the Company. The provisions of this Section 5.4 are subject in all respects to the provisions of Section 5.5 below.
     5.5 Redemption of Parker’s Interest .
     (a) The Company shall have the right at any time, and Parker shall have the right at any time to require the Company, upon ninety (90) days’ notice (“Redemption Notice”), to purchase and redeem Parker’s entire Membership Interest for an amount (the “Redemption Price”) equal to a percentage (“Applicable Percentage”) of the liquidation value (determined under Section 5.5(b) below) of his Membership Interest at such time (“Liquidation Value”); provided that the Redemption Price shall be reduced by any amount distributed to Parker after the date of the Redemption Notice. The Redemption Price shall be payable according to the following schedule: (i) up to US $10 million of the Redemption Price shall be paid in cash at the Closing, and (ii) any balance shall be paid, without interest, in three equal installments, on each succeeding anniversary of the date of the Redemption Notice. In the event that Parker puts his Membership Interest to the Company, the Applicable Percentage shall be eighty-five percent (85%) if Parker gives the Redemption Notice prior to January 1, 2013; and shall be one hundred percent (100%) if Parker gives the Redemption Notice on or after January 1, 2013. In the event that the Company calls Parker’s Membership Interest, the Applicable Percentage shall be one hundred percent (100%).
     (b) The Liquidation Value shall be such amount as Parker would have received on liquidation of the Company if the Company had liquidated all its assets at fair market value
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(exclusive of any value attributable to the name “Taubman”), net of the Company’s liabilities, as of the date of the Redemption Notice and immediately distributed the proceeds of such liquidation in accordance with Section 8.1(a) below. In the event agreement cannot be reached by the parties as to the Liquidation Value within forty (40) days of the date of the Redemption Notice, then the Liquidation Value shall be determined by an appraiser (the “Appraiser”) mutually agreed by the Company and Parker. Failing agreement on an Appraiser within thirty (30) days after the date of the Redemption Notice, the Appraiser shall be an individual who is (i) a principal from one of the “Big Four” accounting firms and (ii) designated by the Secretary General of the HKIAC. In the event none of the “Big Four” accounting firms is willing to allow one of its principals to serve as the Appraiser, then the Liquidation Value shall be determined by the HKIAC. The Appraiser shall act as expert and not as arbitrator, and his decision as to the Liquidation Value shall, absent manifest error, be final and conclusive.
     (c) The closing of the purchase and redemption of Parker’s Membership Interest pursuant to this Section 5.5 (the “Closing”) shall take place on the business day which is (or is nearest to) ninety (90) days from the date of the Redemption Notice or, if later (and to the extent applicable), the business day which is (or is nearest to) five (5) days after the date of the Appraiser’s determination of the Liquidation Value in accordance with Section 5.5(b). At the Closing, the following shall occur:
          (i) The Company shall pay the cash portion of the Redemption Price to Parker by certified check or wire transfer, and shall deliver to Parker a note, in commercially reasonable form, payable as set forth in Section 5.5(a) above, for the balance of the purchase price.
          (ii) Parker shall execute and deliver to the Company an assignment of his Membership Interest, free and clear of all liens and encumbrances, and such other documents, in form and substance satisfactory to the Company, as may be necessary to assign and transfer his Membership Interest to the Company free and clear of all liens and encumbrances.
     (d) Notwithstanding the foregoing, the Redemption Price shall not exceed any excess (determined as of the date of the Redemption Notice) of Parker’s contributions of cash to the capital of the Company over any prior distributions of cash to Parker if, within the period commencing thirty (30) days prior to date of the Redemption Notice and ending on the date of the Closing:
          (i) Parker has either been convicted in court in relation to his personal dishonesty or negligent or willful professional misconduct, or following submission to the HKIAC by the Company, an arbitral tribunal determines that Parker could be convicted in court in relation to his personal dishonesty or negligent or willful professional misconduct; or
          (ii) the Manager, acting in good faith, determines that Parker has violated any law, rule or regulation which would have a material adverse impact on the Company or has committed a crime (other than minor traffic violations or similar offenses).
The parties acknowledge and agree that material damage and injury would result to the Company and its assets, including its reputation and goodwill, from any act of misconduct listed in this
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Section 5.5(d), that such damages would be difficult to estimate or quantify, and that, accordingly, the redress provided in this Section 5.5(d) is fair, reasonable and appropriate.
ARTICLE VI
MANAGEMENT
     6.1 Management of Business .
     (a) The business and affairs of the Company shall be managed exclusively by a manager (the “Manager”). T-Asia shall be the Manager until T-Asia’s resignation or removal, whereupon the Members, acting by Majority Vote, shall select a replacement Manager. The Manager may resign as such at any time. The Manager shall not be subject to removal, except by Majority Vote of the Members. Neither the resignation nor removal of a Manager who or which is also a Member shall affect the Membership Interest of such Member.
     (b) The Manager is authorized and empowered to act for and manage the Company to the fullest extent permitted by law. The Manager may, without the consent of any Member or other person, bind the Company in any manner whatsoever. Without limiting the foregoing, the Manager shall have the power, on behalf of the Company, to: (i) acquire any property or asset that the Manager deems necessary or appropriate to conduct the business or promote the purpose of the Company, (ii) hold, manage, maintain, mortgage, grant a security interest in, pledge, lease, exchange, sell, convey, or otherwise dispose, encumber or deal with any such property or asset; (iii) open one or more depository accounts and make deposits into and checks and withdrawals against such accounts; (iv) borrow money and incur liabilities and other obligations; (v) enter into any and all agreements and execute any and all contracts, documents and instruments; (vi) engage employees and agents, define their respective duties, and establish their compensation or remuneration; (vii) obtain insurance covering the business and affairs of the Company and its property and the lives and well being of its employees and agents; (viii) commence, prosecute or defend any proceeding in the Company’s name, and (ix) participate with others in partnerships or joint ventures. Without the consent of all of the Members, however, the Manager shall not cause or permit the transfer of any significant asset of the Company or any subsidiary of the Company to any Member or affiliate of a Member at less than the fair market value of such asset; provided that this sentence shall not limit transfers of assets to companies in which neither a Member nor any affiliate of a Member has an interest other than indirectly through (by reason of the ownership of an interest in) the Company (and, without limitation, transfers of assets at less than fair value among wholly-owned subsidiaries of the Company shall not be in any way restricted).
     (c) No person dealing with the Company shall be required to investigate or inquire into the Manager’s authority to execute agreements, instruments or documents, or to take actions, on behalf of the Company, and any person dealing with the Company shall be entitled to rely upon any agreement, instrument or document executed, and any action taken, by the Manager on behalf of the Company, and the Company shall be bound thereby.
     6.2 Limitations on Members .
     (a) Except as otherwise expressly set forth herein, or as provided by any non-waivable provision of the Act, the Members, as such, shall have no authority to act for the
 10 

 

Company, or to vote upon, consent to or otherwise approve any Company transaction, act or event. Without limiting the foregoing, no Member, as such, shall have (i) any power to sign or act on behalf of the Company in any manner whatsoever or (ii) any voice or participation in the management of the Company’s business, except as otherwise expressly set forth herein, or as provided by any non-waivable provision of the Act.
     (b) No consent or approval of any Member to any action of the Manager for or on behalf of the Company shall be required except to the extent that any other provision of this Agreement or non-waivable provision of the Act may expressly provide otherwise and, as to any such action as to which the consent or approval of the Members may be expressly required by any other provision of this Agreement or non-waivable provision of the Act, the consent or approval of the Members acting by Majority Vote shall be both necessary and sufficient, except as the Act may otherwise provide.
     6.3 Compensation of Manager . The Manager shall not be compensated for serving as the Manager. The Manager shall, however, be reimbursed by the Company for all out-of-pocket costs and expenses incurred by the Manager on the Company’s behalf.
     6.4 Duties; Liability . The Manager shall not be required to devote the Manager’s (and no employee of the Manager shall be required to devote his or her) full time to the Company’s affairs. The Manager shall have a duty of due care, but shall not be liable to the Company or to any of the Members by reason of any act performed for or on behalf of the Company or in furtherance of the Company’s business, except that this provision does not eliminate or limit the liability of the Manager to the extent such elimination or limitation is not permitted by the Act.
     6.5 Indemnification . The Company shall, to the fullest extent authorized or permitted by the Act, (i) indemnify any person, and such person’s successors and legal representatives, if and insofar as such person was, is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that such person is or was a Manager or Member of the Company, or is or was serving at the request of the Company as a manager, director, officer, employee or agent of another company, partnership, joint venture, trust, employee benefit plan or other enterprise, whether or not for profit, or by reason of anything done by such person in such capacity (collectively, “Covered Matters”); and (ii) pay or reimburse the reasonable expenses incurred by such person and such person’s successors and legal representatives in connection with any Covered Matter in advance of final disposition of such Covered Matter. The Company may provide such other indemnification to managers, officers, employees and agents by insurance, contract or otherwise as is permitted by law and authorized by the Manager.
     6.6 Limitation on Member’s Duties . Each Member may cast such Member’s vote on any matter, and give or withhold such Member’s consent to or approval of any action or proposed action, in any manner deemed by such Member to be in such Member’s own best interest, and no Member shall have any duty to the Company or any other Member except for a duty of fair dealing.
 11 

 

ARTICLE VII
REPRESENTATIONS AND WARRANTIES
     7.1 Each party hereto represents to the other as follows:
          (a) Such party has the authorization, power and right to execute, deliver and fully perform its obligations hereunder in accordance with the terms hereof.
          (b) This Agreement does not require any authorization, consent, approval, exemption or other action by any other party that has not been obtained and does not conflict with or result in the breach of the terms, conditions or provisions of, constitute a default under, or result in a violation of any agreement, instrument, order, judgment or decree to which such party is subject.
     7.2 T-Asia and the Company represent to Parker that, as of the date of this Agreement, (i) the Company is the owner, beneficially and of record, of the entire issued and outstanding capital stock of Taubman Asia Holdings, Inc., a Michigan corporation, Taubman Asia Investment Limited, a Cayman Islands company (“Taubman Asia”) and Taub-Co Asia Management, Inc, a Michigan corporation (“Taub-Co”), (ii) Taubman Asia’s direct and indirect subsidiares, and the equity holdings therein, are as set forth on Exhibit B, (iii) Taub-Co is the owner, beneficially and of record, of the entire issued and outstanding capital stock of Taubman Asia Limited, a Cayman Islands company and The Taubman Company Asia Limited, a Cayman Islands company (“Taubman Company Asia”), (iv) Taubman Company Asia is the owner, beneficially and of record, of the entire issued and outstanding capital stock of Taubman Asia Management Limited, a Cayman Islands company, and (v) except as set forth in the foregoing, the Company does not directly or indirectly hold any share, capital stock, partnership, membership or similar interest in any entity. Parker acknowledges that the Manager may, at any time and from time to time after the date of this Agreement, effect changes to the foregoing without prior notice to or any approval of Parker.
ARTICLE VIII
DISSOLUTION AND WINDING UP;
CONTINUATION OF BUSINESS
     8.1 Winding Up and Liquidation of the Company .
     (a) Upon the dissolution of the Company, the Manager shall proceed to wind up the affairs and liquidate the property and assets of the Company, and shall apply and distribute the proceeds of such liquidation in the following priority:
     (1) to the expenses of liquidation;
     (2) to the payment of all debts and liabilities of the Company;
     (3) to the establishment of such reserves as the Manager deems necessary or advisable to provide for any contingent or unforeseen liabilities or obligations of the Company, provided, however, that after the expiration of such period of time as the
 12 

 

Manager deems appropriate, the balance of such reserves remaining after payment of such contingencies shall be distributed in the manner hereinafter set forth; and
     (4) the balance of such proceeds shall be distributed as follows: (i) first, to T-Asia, to the extent of T-Asia’s Preferred Capital, and (ii) any remaining proceeds shall be distributed to the Members pro rata, based on their Sharing Percentages (taking into account the reduction in Parker’s Sharing Percentage from 10% to 5% once distributions to him (including any made under this Section 8.1(a)(4)) exceed US $30 million).
     (b) 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 normal losses attendant upon a liquidation.
     (c) Anything contained in this Section 8.1 to the contrary notwithstanding, if the Manager shall determine that a complete liquidation of all the property and assets of the Company would involve substantial losses or be impractical or ill-advised under the circumstances, the Manager 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 the assets of the Company), and the remaining property and assets shall be distributed to the Members as tenants-in-common or partitioned in accordance with applicable statutes or distributed in such other reasonable manner as shall be determined by the Manager. If any assets are distributed in kind, such assets shall be distributed in a manner which is consistent with the order of priority set forth in Section 8.1 hereof.
     8.2 Certificate of Dissolution . After the affairs of the Company have been wound up and the Company terminated, a certificate of dissolution shall be executed and filed in the office of the Delaware Secretary of State.
ARTICLE IX
MISCELLANEOUS PROVISIONS
     9.1 Notices . Any notice or other communication required or permitted to be delivered to any party under or in connection with this Agreement shall be shall be in writing and sent to such party at the address indicated in the introductory paragraph of this Agreement. Each such notice or other communication shall be effective (i) if delivered personally to the party to whom the same is directed, then when actually delivered, (ii) if sent by first class mail, postage and charges prepaid, addressed to the party to whom the same is directed, then three days after such notice or other communication is deposited in the mail, or (iii) if sent by facsimile transmission, then when transmitted to the following number (as the same may be changed pursuant to this Section 9.1) and an appropriate confirmation of transmission is received:
 	 	 	
If to T-Asia:	 	+1-248-258-7601 Attn: Chief Executive Officer	
 	 	 	
with copy to:	 	Chris B. Heaphy, Esq.	
 	 	200 East Long Lake Road	
 	 	P. O. Box 200	
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 	 	Bloomfield Hills, MI 48303-0200	
 	 	+1-248 258-7586	
 	 	 	
If to Parker:	 	Morgan Parker	
 	 	Unit 5	
 	 	179 Baroona Road	
 	 	Rosalie QLD 4064	
 	 	AUSTRALIA	
 	 	+61 7 3876 3036	
Any Member may change its address for purposes of this Agreement by giving the other Members notice of such change in the manner hereinabove provided for the giving of notices.
     9.2 Article and Section Headings . The headings in this Agreement are inserted for convenience and identification only, and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any of the provisions hereof.
     9.3 Construction . Whenever the singular number is used herein, the same shall include the plural, and any one gender (including the neuter) shall include the others. If any language is stricken or deleted from this Agreement, such language shall be deemed never to have appeared herein and no other implication shall be drawn therefrom.
     9.4 Severability . If any provision hereof shall be judicially determined to be illegal, or if the application thereof to any person or in any circumstance shall, to any extent, be judicially determined to be invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or in circumstances other than those to which it has been judicially determined to be invalid or unenforceable, shall not be affected thereby, and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
     9.5 Governing Law . This Agreement shall be construed in accordance with, and governed by, the laws of the State of Delaware applicable to contracts made and performed in such jurisdiction and without regard to choice of law principles, to the extent permitted by law.
     9.6 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall, for all purposes, constitute an original and all of which, taken together, shall constitute one and the same Agreement.
     9.7 Entire Agreement . This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof. All prior agreements among the parties hereto with respect to the subject matter hereof, whether written or oral, are merged herein and shall be of no force or effect. This Agreement supersedes the Original Agreement.
     9.8 Amendments . This Agreement may be amended or modified with the express written consent of all of the Members, provided, however, that no Member shall unreasonably withhold or delay his written consent to any such amendment or modification proposed by Members acting by Majority Vote if such amendment or modification neither enlarges the obligations, nor reduces the rights, of such Member in a material way.
 14 

 

     9.9 Benefits Limited to Members . Except as otherwise provided in this Agreement, nothing in this Agreement is intended to confer, and nothing in this Agreement shall confer, any rights or benefits of any kind on any person who is not a Member.
     9.10 Successors and Assigns . Subject to the restrictions on transferability contained herein, this Agreement shall be binding upon, and shall inure to the benefit of, the successors and assigns of the respective parties hereto.
     9.11 Waiver . No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.
     9.12 Arbitration . Any dispute, controversy or claim arising out of or in respect of this Agreement (or its validity, interpretation, enforcement or subject matter) shall, at the request of any party hereto, be submitted to and settled by arbitration conducted, in the English language, before a single arbitrator in Hong Kong under the auspices of the HKIAC. The arbitration tribunal shall apply the Rules of Arbitration of the United Nations Commission on International Trade Law. The arbitration of such issues, including the determination of any amount of damages suffered, shall be final and binding upon the parties to the maximum extent permitted by law. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. Each party shall bear its own expenses, and T-Asia and Parker shall respectively bear one-half the aggregate amount of arbitration costs.
     9.13 Representation By Counsel; Interpretation . T-Asia and Parker each acknowledge that each party to this Agreement has been represented by counsel in connection with this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the parties.
ARTICLE X
DEFINITIONS
     The terms set forth below shall have the following meanings when used in this Agreement:
          “Act” has the meaning specified in Recital A. to this Agreement.
          “Adjusted Capital Account” has the meaning specified in Section 3.2(c)(i) hereof.
          This “Agreement” means this Amended and Restated Limited Liability Company Agreement of Taubman Properties Asia LLC, a Delaware limited liability company.
          “Applicable Percentage” has the meaning specified in Section 5.5(a) hereof.
          “Appraiser” has the meaning specified in Section 5.5(b) hereof.
 15 

 

          “Capital Account” has the meaning specified in Section 2.2 hereof.
          “Certificate” has the meaning specified in Recital A. to this Agreement.
          “Closing” has the meaning specified in Section 5.5(c) hereof.
          “Code” means the Internal Revenue Code of 1986, as amended.
          “Company” has the meaning specified in Recital A. to this Agreement.
          “Covered Matter” has the meaning specified in Section 6.5 hereof.
          “Disabled Member” and “Disabling Event” have the respective meanings specified in Section 5.4 hereof.
          “HKIAC” means the Hong Kong International Arbitration Centre.
          “Liquidation Value” has the meaning specified in Section 5.5(a) hereof.
          “Majority Vote” of the Members means the vote of those Members whose interests in the Company exceed 50% of all Members’ interests in the Company, treating, for this purpose, Parker’s interest at any time as equal to his Sharing Percentage at such time, and T-Asia’s interest at any time as equal to 100% minus Parker’s Sharing Percentage at such time.
          “Manager” has the meaning specified in Section 6.1(a).
          “Member” means each of T-Asia and Parker, and any other person who hereafter may be admitted to the Company as a member, each for so long as it or he is a member of the Company.
          “Membership Interest” shall mean all of the right, title and interest of a Member (in his or her capacity as a member of the Company within the meaning of the Act) in and to the Company.
          “Original Agreement” has the meaning specified in Recital B. to this Agreement.
          “Parker” has the meaning specified in the introductory paragraph of this Agreement.
          “Preferred Capital” means, as of December 31, 2007, $14,798,017 (which is the $13,857,416 of capital contributed by T-Asia, plus a preferred return on such capital determined in the same manner as interest at the Preferred Return Rate consistent with clause (5) below from the date(s) of actual contribution of such capital (rather than from date of this Agreement, on which such capital is deemed to be contributed for certain accounting purposes pursuant to Section 2.2 above) minus the product of Parker’s capital contribution of $1,000 and the
 16 

 

Applicable Gross-Up Fraction). This Preferred Capital of T-Asia shall be adjusted from and after December 31, 2007, as follows:
          (1) any additional contribution of cash by T-Asia to the capital of the Company after December 31, 2007, will increase the Preferred Capital;
          (2) any distribution of cash to T-Asia from the Company as a return of capital under Section 3.1(a)(ii) will reduce the Preferred Capital;
          (3) any cash which Parker actually contributes, or is deemed to have contributed under Section 3.1(a)(i) (relating to distributions of profit), to the Company will reduce the Preferred Capital by the product of (A) the amount of such cash and (B) the Applicable Gross-Up Fraction (defined below) at the time of such contribution;
          (4) any cash which is distributed to Parker under Section 3.1(a)(ii) (relating to distributions of capital) will increase the Preferred Capital by the product of (A) the amount of such cash and (B) the Applicable Gross-Up Fraction (defined below) at the time of such distribution; and
          (5) there shall be added to the Preferred Capital, on December 31 of each year and on any other date on which any adjustment to the Preferred Capital is made under any of the foregoing clauses (1) through (4), a preferred return determined in the same manner as interest at the Preferred Return Rate from the date of the most-recent prior adjustment to the Preferred Capital under this clause (5).
     For purposes of the foregoing, the Applicable Gross-Up Fraction at any time means a fraction, the numerator of which is one (1) minus Parker’s Sharing Percentage at such time, and the denominator of which is Parker’s Sharing Percentage at such time.
     In no event shall T-Asia’s Preferred Capital be reduced below zero.
          “Preferred Return Rate” means a rate equal to TRG’s blended cost of debt from time to time, compounded quarterly, but in no event less than 6% nor greater than 10% per annum.
          “Profit” and “Loss” each has the meaning specified in Section 3.2(c)(ii) hereof.
          “Redemption Notice” has the meaning specified in Section 5.5(a) hereof.
          “Redemption Price” has the meaning specified in Section 5.5 hereof.
          “Regulations” has the meaning specified in Section 3.2(c)(iii) hereof.
          “Sharing Percentage” means, with respect to Parker, (i) 10% until such time as the aggregate distributions to Parker (including distributions in or upon liquidation of the Company)
 17 

 

exceed US $30,000,000 and (ii) 5% thereafter, and means, with respect to T-Asia, one hundred percent (100%) less the Sharing Percentage of Parker.
          “Successor” has the meaning specified in Section 5.4 hereof.
          “T-Asia” has the meaning specified in the introductory paragraph of this Agreement.
          “Tax Matters Partner” has the meaning specified in Section 4.5 hereof.
          “Territory” means the People’s Republic of China, the Hong Kong Special Administrative Region, the Macau Special Administrative Region, the Republic of China, the Republic of Korea, Japan, Singapore, Malaysia, Indonesia, Thailand, Cambodia, Vietnam, Australia and India.
          “TRG” has the meaning specified in Recital A. to this Agreement.
      IN WITNESS WHEREOF, the parties hereto make and execute this Agreement as of the date first above written.
 	 	 	 	 	
 	TAUBMAN ASIA MANAGEMENT II
LLC, a Delaware limited liability company
 	 	
 	By:  	/s/ Robert S. Taubman  	 	
 	 	Robert S. Taubman, Authorized Signatory 	 	

 	 	 	
 	By:  	/s/ Morgan B. Parker  	 	
 	 	MORGAN PARKER 	 	
 	 	 	 	
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EXHIBIT A
TO AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF TAUBMAN PROPERTIES ASIA LLC
Year One:
     Assume that, on the first day of a year, T-Asia contributes $20 million, and Parker contributes $20,000, to the capital of the Company. Parker’s Sharing Percentage at the time is 10% and T-Asia’s is 90%. The Preferred Capital of T-Asia is therefore $20 million minus ($20,000 x .9/.1), or $19,820,000.
     During the year, the Company realizes no net income or loss. The Company borrows, however, $5 million and distributes the proceeds on the last day of the year. Because such distribution will reduce the aggregate amount of the Members’ Capital Accounts below the aggregate amount of their capital contributions, such distribution is a return of capital. As such, the distribution is to be made 90% (or $4,500,000) to T-Asia and 10% (or $500,000) to Parker; however, of Parker’s $500,000, only 15%, or $75,000 is to be distributed, while the balance, or $425,000, is to be retained by the Company (assuming that Parker does not elect to have the Company retain a larger share). Accordingly, $75,000 is distributed to Parker, and $4,500,000 is distributed to T-Asia.
     T-Asia’s Preferred Capital is reduced to $17,580,600, which is $19,820,000 minus $4,500,000 plus ($75,000 x .9/.1) plus ($19,820,000 x .08, assuming that TRG’s blended cost of capital for the year is 8%).
Year Two:
     In the following year, the Company earns net income of $3 million. On the last day of the year, the Company distributes $4 million. The Members’ Capital Accounts immediately before the distribution, taking into account the $3 million of net income, aggregate $18,445,000 (i.e., $20,020,000 of original capital, minus a $4,575,000 distribution, plus $3 million of income). The Members’ contributions exceed prior returns of capital by $15,445,000. Therefore, of the $4 million distribution, an amount equal to the excess of $18,445,000 over $15,445,000, or $3,000,000, is considered a distribution of profit and the balance is considered a return of capital.
     The $3 million distribution of profit is to be made $300,000 (which is 10%) to Parker and $2.7 million (which is 90%) to T-Asia, but 85% (assuming Parker does not specify a higher percentage) of the distribution to Parker, or $255,000, is to be withheld and treated as having been contributed by Parker to the Company’s capital. Of the $1 million distribution representing a return of capital, 90% (or $900,000) is made to T-Asia and 10% (or $100,000) is to be made Parker; however, of Parker’s $100,000, only 15%, or $15,000 is to be distributed, while the balance, or $85,000, is to be retained by the Company (assuming that Parker does not elect to have the Company retain a larger share).
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     T-Asia’s Preferred Capital is reduced to $15,927,048, which is $17,580,600 minus $900,000 minus ($255,000 x .9/.1) plus ($15,000 x .9/.1) plus ($17,580,600 x .08, assuming that TRG’s blended cost of capital for the year is 8%).
Third Year :
     On the last day of the succeeding year, the Company’s assets are sold at a $4 million profit, yielding proceeds for distribution of $18,785,000. This amount is distributed first to T-Asia to the extent of T-Asia’s Preferred Capital which, by the end of such year, would have grown to $15,927,048 x 1.08, or $17,201,212. The balance of $1,583,788 is distributed 90% to T-Asia and 10% to Parker. Parker therefore receives $158,379.
     Following is a reconciliation:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Profits:	 	Year 1	 	Year 2	 	Year 3	 	Total	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	0	 	 	 	3,000,000	 	 	 	4,000,000	 	 	 	7,000,000	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred Returns	 	 	1,585,600	 	 	 	1,406,448	 	 	 	1,274,164	 	 	 	4,266,212	 	 	 	 	 	

Profits >Preferred Returns on Capital	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	2,733,788	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Parker’s Share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	.10	 	

Distributions of Profit to Parker	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	273,379	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Return of Parker’s Original Contribution	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	20,000	 	

Total Distributions to Parker	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	293,379	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Distributions to Parker by Year	 	 	75,000	 	 	 	60,000	 	 	 	158,379	 	 	 	293,379	 	 	 	 	 	
     If, in the third year, profit had been $304 million, then distributions in such year would have amounted to $318,785,000. In such case, the first $17,201,212 would have been distributed to T-Asia as Preferred Capital; the balance of $301,583,788 would have distributed 90% to T-Asia and 10% to Parker until total distributions to Parker amounted to $30 million, and then 95% to T-Asia and 5% to Parker. Parker would therefore have received $30,011,689 in the third year.
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Exhibit B

 

   

Exhibit 10 (b)
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (this “ Agreement ”) is entered into as of the 11th day of April, 2008, by and between THE TAUBMAN COMPANY ASIA LIMITED, a Cayman Islands company (“ Employer ”), and MORGAN PARKER, of Unit 5, 179 Baroona Road, Rosalie, QLD 4064, Australia (“ Executive ”).
SECTION 1. SERVICES; TERM
     1.1 Engagement . Employer has employed and, subject to the provisions of this Agreement, shall continue to employ Executive, and Executive shall serve Employer as President. In such capacity, Executive shall be responsible for the day-to-day operations of Employer and its subsidiaries and affiliates in Asia, and shall seek out and, at the direction and subject to the approval of Employer’s Board of Directors (the “ Board ”) and Chief Executive Officer (the “ CEO ”), negotiate transactions, and shall perform such other services for and on behalf of Employer as directed from time to time by the CEO or the Board, all in accordance with the business purposes of Employer. Executive shall have such corporate power and authority as shall reasonably be required to enable the discharge of his duties in office. For the term of this Agreement, Executive shall report to the CEO.
     1.2 Duty to Employer . For so long as Executive shall be employed hereunder, Executive shall devote all of’ his business time, energy and ability to the business, affairs and interests of Employer and its subsidiaries and to matters related thereto, shall faithfully and diligently promote Employer’s interests and shall perform the services contemplated by this Agreement. Executive agrees to observe and comply with the rules and regulations of Employer as adopted by the Board respecting the performance of Executive’s duties and agrees to carry out and perform all such reasonable orders, directions and policies of Employer, its Board and its CEO as they may be, from time to time, stated either orally or in writing.
     1.3 Board Seat . Employer’s sole shareholder, Taub-Co Asia Management, Inc., a Cayman Islands company, has appointed Executive to serve on the Board as a director and agrees to continue such appointment for the Term. Executive has accepted such appointment and agrees to continue to serve on the Board as a director for the Term.
     1.4 Affiliates . Executive agrees to serve, without additional remuneration, on the board of directors or in such executive capacity for one or more Asian affiliates of Employer, including, without limitation, direct or indirect subsidiaries of Employer, as the Board or the CEO may from time to time request. In such capacity, Executive agrees to faithfully and diligently promote the business, affairs and interests of Employer and such affiliates.
     1.5 Term . Unless earlier terminated, Employer shall employ Executive, and Executive shall serve Employer, in accordance with the provisions of this Agreement (i) for the term (the “ Initial Term ”) commencing on the Effective Date (as defined below) and continuing through to the date which is thirty-six (36) months after the Effective Date and (ii) thereafter, on the expiration of the Initial Term or any renewal term, Executive’s employment hereunder will be automatically renewed for an additional period of twelve (12) months commencing immediately following such expiration unless either Employer or Executive gives written notice at least

 

ninety (90) days prior to the expiration of the Initial Term or such renewal term declining to renew Executive’s employment hereunder. For purposes of this Agreement, the Initial Term, together with all renewal terms, shall be referred to as the “ Term. ” “ Effective Date ” means April 11, 2008.
SECTION 2. COMPENSATION
     2.1 Salary . Executive will be paid a salary of US$1,100,000.00 per annum, in equal installments at the end of each month, until the end of the Initial Term, or if sooner, until Executive’s termination of employment for other than “good reason,” or termination of Executive’s employment for “good cause” or termination of Executive’s employment for death or disability. Employer and Executive agree to review the salary annually to determine whether any increase is appropriate; however, Employer will make the final decision in its sole discretion. In addition, Executive will have the potential to earn an annual bonus of up to US$400,000.00 if Executive’s performance exceeds expectations. The actual bonus to which Executive will be entitled will be determined and paid during the first quarter of the subsequent calendar year based on Employer’s and Executive’s performance, as determined by Employer in good faith. Following the Initial Term, Executive’s salary and annual bonus will be determined pursuant to good faith negotiation between Employer and Executive. Employer shall consider any reasonable proposal from Executive to structure payment of his salary to achieve tax efficiencies.
     2.2 Benefits .
          (a) For the duration of Executive’s employment hereunder, Employer will provide Executive with the following benefits:
 	 	 	
Company Car:	 	Employer will pay up to US$2,500 per month toward the cost of Executive leasing a car of Executive’s choice.	
 	 	 	
Home Office:	 	Subject to Employer’s review and approval of costs incurred in connection therewith, Employer will pay up to US$200 per month to reimburse Executive for maintenance of a home office.	
 	 	 	
Business Club:	 	Employer will pay for Executive’s membership in a business/recreation club acceptable to Employer in its reasonable discretion.	
Executive shall provide Employer with receipts to substantiate any expenses subject to payment or reimbursement by Employer hereunder.
          (b) To the extent that Executive meets eligibility requirements applicable to employees generally in any benefit plan of Employer, Executive shall be entitled to participate in such plan.
          (c) Except as explicitly provided otherwise in this Agreement, Executive shall not participate in or be eligible to participate in any bonus, pension, profit, severance or incentive
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compensation plan of Employer or any of its affiliates. In no event shall Executive be entitled to benefits under both an Employer (or affiliate) plan and a comparable plan of any other entity, and in no event shall Executive be entitled to duplicative benefits under any plans of Employer and/or its affiliates or such other entities. Except insofar as benefits are explicitly granted in the other provisions of this Agreement, Employer reserves the right to modify, suspend or discontinue any and all benefit plans, practices, policies and programs at any time (whether before or after termination of employment) without notice to or recourse by Executive.
     2.3 Vacation .
          (a) Executive shall be entitled to up to twenty-five (25) days of paid vacation each twelve (12) month period. Paid vacation shall accrue on a pro rata basis from the Effective Date. Vacation time will continue to accrue so long as Executive’s total accrued vacation does not exceed four (4) weeks at any time.
          (b) In addition to such vacation time as is provided in paragraph (a) above, in each calendar year, Executive shall be entitled to such statutory holidays as are required by Hong Kong law.
     2.4 Taxation . Executive shall be solely responsible to pay all taxes and any other imposts as may be levied or assessed by any competent authority on any sums paid and/or other benefits provided to Executive by Employer. All compensation payable hereunder, shall be subject to applicable taxes, withholding and other required, normal or elected employee deductions.
SECTION 3. BUSINESS EXPENSES
     During the term of this Agreement, to the extent that such expenditures constitute ordinary and necessary business expenses, Employer shall reimburse Executive promptly, for reasonable business expenditures, including travel, entertainment and business meetings, substantiated in accordance with policies, practices and procedures established from time to time by the Board and incurred in pursuit and furtherance of Employer’s business and good will.
SECTION 4. TERMINATION
     Executive shall continue to be employed by Employer hereunder until such time as his employment is terminated pursuant to this Section 4 or otherwise expires in accordance with Section 1.5.
     4.1 Termination by Employer .
          (a) Disability . In the event that Executive shall fail, because of illness, incapacity or injury which is determined to be total and permanent by a physician selected by Employer or its insurers to render for three (3) consecutive months or for shorter periods aggregating sixty (60) or more business days out of seventy-five (75) business days in any twelve (12) month period, the services contemplated by this Agreement, Executive’s employment hereunder may be terminated by written notice of termination from Employer to Executive.
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          (b) Death . In the event of Executive’s death, Executive’s employment hereunder shall be deemed automatically terminated.
          (c) For Cause . Employer may terminate Executive’s employment hereunder at any time for “good cause” by written notice of termination to Executive if
     (1) Executive has either been convicted in court in relation to his personal dishonesty or negligent or willful professional misconduct, or following submission to the HKIAC by Employer, an arbitral tribunal shall determine that Executive could be convicted in court in relation to his personal dishonesty or negligent or willful professional misconduct;
     (2) (i) Executive has either been found civilly liable by a court or arbitral panel in relation to his personal dishonesty or negligent or willful professional misconduct, or following submission to the HKIAC by Employer, an arbitral tribunal shall determine that Executive could be found civilly liable by a court in relation to his personal dishonesty or negligent or willful professional misconduct, and (ii) in the case of civil liability for dishonesty or willful misconduct, the damages that may be assessed against Executive, together with all damages that may be assessed or have been assessed against Executive in respect of any other similarly actionable dishonest or willful action, are not less than US$10,000, or in the case of civil liability for negligence, the damages that may be assessed against Executive, together with all damages that may be assessed or have been assessed against Executive in respect of any other similarly actionable negligence, are not less than US$1,000,000;
     (3) the Board, acting in good faith, shall determine that Executive has materially breached any fiduciary duty to Employer;
     (4) the Board, acting in good faith, shall determine that Executive has engaged in habitual drug or alcohol abuse which materially impairs his ability to perform his duties;
     (5) the Board, acting in good faith, shall determine that Executive has violated any law, rule or regulation which would have a material adverse impact on Employer or has committed a crime (other than minor traffic violations or similar offenses);
     (6) the Board, acting in good faith, shall determine that Executive is insane or legally incompetent to manage his business affairs;
     (7) Executive has filed, or consented to, any petition or other proceeding in bankruptcy with respect to himself;
     (8) any third party has filed a petition or instituted any other proceeding which is not stayed within sixty (60) days of such filing seeking to find Executive bankrupt or insolvent; or
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     (9) the Board, acting in good faith, shall determine that Executive has breached any of the provisions of this Agreement which breach is not cured within thirty (30) days after Employer notifies Executive thereof in writing.
          (d)  Without Cause . Employer shall have the right to terminate Executive’s employment with Employer at any time by one hundred eighty (180) days’ prior written notice of termination from Employer to Executive.
     4.2 Termination by Executive.
          (a)  For Reason . Executive may terminate his employment hereunder at any time for “good reason” by written notice of termination to Employer in the event that (i) Employer has materially breached any of the provisions of this Agreement, including without limitation, any failure to pay Executive compensation due hereunder or any reduction in Executive’s salary during the Initial Term below the amount provided in Section 2.2, which breach is not cured within thirty (30) days after Executive notifies Employer thereof in writing and (ii) any significant change in the duties and responsibilities of Executive inconsistent in any material and adverse respect with Executive’s title and position (including status, officer positions and reporting requirements), authority, duties or responsibilities.
           (b) Without Cause . Executive may, at any time, terminate his employment hereunder upon giving Employer at least ninety (90) days’ prior written notice.
     4.3 Effects of Termination.
          (a)  Payment of Salary . In the event that, prior to the end of the Initial Term and each renewal term, Executive’s employment is terminated by Employer for other than “good cause,” or is terminated by Executive for “good reason,” Executive’s salary shall continue to be paid to him until the end of the Term; provided , however, that (i) subject always to Executive’s obligations under Section 6.1, Executive shall in good faith endeavor to find other comparable employment, and (ii) any salary continuation due to him under this paragraph will be subject to reduction on a dollar-for-dollar basis according to any cash compensation earned by him after the second anniversary of the Effective Date as a result of such other employment.
          (b)  Resignation from Other Positions . At such time as Executive’s employment hereunder ceases, Executive shall, at Employer’s request, resign immediately from any and all directorships or other positions which Executive may hold with respect to Employer or any subsidiary thereof.
          (c)  Resignation and Release of Claims . Promptly following expiration or termination of Executive’s employment hereunder, Executive shall execute and deliver to Employer a Resignation and Release of Claims in substantially the form attached hereto as Exhibit A.
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     4.4 Remedies on Termination .
          (a)  No Limitation . Employer’s exercise of its right to terminate shall be without prejudice to any other right or remedy to which it or any of its affiliates may be entitled at law or in equity or under this Agreement.
          (b)  Exclusive Remedy . Upon expiration or termination of Executive’s employment hereunder, Executive agrees that payment of the amounts required by Section 4.3(a) shall constitute the sole and exclusive obligation of Employer in respect of Executive’s employment with and relationship to Employer and that Executive shall not be entitled to any other remedy for termination of his employment hereunder except for such payment, all in accordance with the terms hereof and subject to any limitations hereunder. Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of Executive’s employment hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES
     5.1 Representations and Warranties of Each Party . Each party hereto represents to the other as follows:
          (a) Such party has the authorization power and right to execute, deliver and fully perform its obligations hereunder in accordance with the terms hereof,
          (b) This Agreement does not require any authorization, consent, approval, exemption or other action by any other party and does not conflict with or result in the breach of the terms, conditions or provisions of, constitute a default under, or result in a violation of any agreement, instrument, order, judgment or decree to which such party is subject.
     5.2 Additional Representations and Warranties of Executive . In addition to the representations and warranties given above, Executive represents, warrants and covenants to Employer as follows:
          (a) Executive has no other outstanding commitments inconsistent with any of the terms of this Agreement or the services to be rendered hereunder. There are no circumstances which will interfere with, or prevent, Executive using his best efforts in the course of his employment with Employer.
          (b) Executive will not bring to Employer for use in the performance of Executive’s duties hereunder any confidential or proprietary information or property of any other person without the express written consent of such other person.
          (c) Except as disclosed in writing to Employer, there are no prior, pending or existing customer complaints, or regulatory, self-regulatory, administrative, civil or criminal matters, or any other impediments that would affect Executive’s employment, licensing or registration. Should Executive become a subject of any such complaints, actions or matters, Executive agrees to immediately report such fact, in writing, to Employer.
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          (d) Executive has no other agreements or understandings, written or oral, with Employer regarding compensation.
SECTION 6. NON-COMPETITION
     6.1 Non-Competition . Executive acknowledges that, in the course of his employment with Employer pursuant to this Agreement, he will become familiar with trade secrets and other confidential information concerning Employer and its affiliates and that his services have been and will be of special, unique and extraordinary value to the Company. Executive agrees that for the Term (and, if Executive’s employment hereunder is terminated or expires within ten (10) years after the Effective Date, for a period of one (1) year thereafter), he shall not in any manner, directly or indirectly, through any Executive Related Entity or otherwise, engage or be engaged, or assist any other person, firm, corporation, enterprise or business in engaging or being engaged, in the Line of Business in the Territory unless previously approved in writing by Employer.
     6.2 Conflicts of Interest . Without limiting the foregoing, without the prior express written authorization of the Board or such committee as may be designated from time to time by the Board to screen possible conflicts of interest between the activities of individual managers and Employer’s business, Executive shall not, directly or indirectly, during the Term and for one year thereafter, engage in any activity (a “ Conflict of Interest ”) competitive with or adverse to the business of Employer or its affiliates, whether alone, as a partner, or as an officer, director, employee or investor of or in any other entity. Notwithstanding anything to the contrary in the preceding sentence, it is expressly understood and agreed that:
          (a) Ownership by Executive of less than five percent (5%) in aggregate of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a securities exchange or publicly traded in the over-the-counter market shall not be deemed to constitute a Conflict of Interest.
          (b) It shall not be a Conflict of Interest for Executive to serve in any capacity with any civic, educational or charitable organization, provided that such activities and services do not interfere or conflict with the performance of his duties hereunder or create any conflict of interest with such duties.
     6.3 Non-Solicitation of Employees . Executive agrees that during the Term and for a period of one year thereafter, Executive will not, directly or indirectly, disrupt, damage, impair, or interfere with the business of Employer or any affiliate thereof by hiring, or allowing any Executive Related Entity to hire, any employee of Employer or any affiliate thereof or by soliciting, influencing, encouraging or recruiting any employee of Employer or any affiliate thereof to work for Executive or an Executive Related Entity.
     6.4 Severability of Provisions . Executive agrees that each of the restrictions set out in Sections 6.1, 6.2 and 6.3 above represents a separate and independent restriction, and that such restrictions are reasonable having regard to Executive’s position with Employer. If for any reason whatsoever, any one or more of such restrictions contained in such Sections shall, individually or taken together, be adjudged to go beyond what is reasonable for the protection of the legitimate interest of the Employer and its affiliates, such restriction or restrictions shall be severed from
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this Agreement without affecting the remainder of the provisions in this Agreement, which shall remain in full force and effect.
     6.5 Injunctive Relief . Executive agrees that the covenants and restrictions set out in Sections 6.1, 6.2 and 6.3 above are fair, reasonable and necessary and are reasonably required for the protection of Employer and its affiliates, having regard to Executive’s seniority and position with Employer. Executive also acknowledges that any breach by him of any provision of Sections 6.1, 6.2 and 6.3 above is likely to cause irreparable harm to Employer and its interests. Executive accepts that monetary damages are unlikely to adequately compensate Employer in such event, and hence, in the event of any actual or threatened breach of any provision of Sections 6.1, 6.2 and 6.3 above, Executive agrees that Employer shall be entitled to injunctive or other equitable relief from any court of competent jurisdiction to enjoin such breach (without being required to post any bond or other security therefor), and Executive expressly submits to the jurisdiction of any such court for this purpose. Executive also consents to the issuance by such court of a temporary restraining order to maintain the status quo pending the outcome of any substantive proceedings.
     6.6 Definitions . For purposes of this Section 6, the following capitalized terms shall have the meanings provided below:
     (1) “ Executive Related Entity ” means any person, firm, corporation, enterprise, or partnership, other than Taubman Properties Asia LLC, in which Executive holds any interest or in respect of which Executive serves as an officer, director, shareholder, investor or employee or serves as an advisor or consultant, or in relation to which Executive is otherwise affiliated.
     (2) “ Line of Business ” means investment in commercial properties and/or the development, operation or management of such properties.
     (3) “ Territory ” means the People’s Republic of China, the Hong Kong Special Administrative Region, the Macau Special Administrative Region, the Republic of China, the Republic of Korea, Japan, Singapore, Malaysia, Indonesia, Thailand, Cambodia, Vietnam, India, and Australia.
SECTION 7. COMPLIANCE
     Executive agrees to abide by all existing and future laws, all rules and regulations set forth by all competent regulatory agencies, exchanges, and self-regulatory bodies and Employer’s internal rules and regulations and policies and practices. Executive further agrees to submit to such supervision as may be necessary to ensure compliance therewith.
SECTION 8. MISCELLANEOUS
     8.1 Succession; Survival . This Agreement shall inure to the benefit of and shall be binding upon Employer, its successors and assigns, but without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger or sale of all or substantially all of the assets of Employer or a similar transaction in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of
 8 

 

Employer hereunder. The obligations and duties of Executive hereunder are personal and otherwise not assignable. Amounts payable to Executive hereunder shall not be subject to sale, transfer, pledge, assignment or alienation other than by will or the laws of descent and distribution.
     8.2 Notices . Any notice or other communication to be delivered to any party hereto in connection with this Agreement shall be in writing and sent to the address for such party indicated below, or at such other address as such party may from time to time in writing designate to the other party:
          If to Employer:
The Taubman Company Asia Limited
c/o Taubman Asia Management Limited
Level 24, One Pacific Place
88 Queensway, Admiralty, Hong Kong
Facsimile: (852) 3607-1300
Attention: Chief Executive Officer
          With a copy to:
The Taubman Company LLC
200 East Long Lake Road
Bloomfield Hills, Michigan 48304
United States of America
Facsimile: +1-248-258-7601
Attention: General Counsel
          If to Executive:
Morgan Parker
5/179 Baroona Road
Rosalie
Queensland 4064
Australia
Each such notice or other communication shall be effective (i) if given by telecommunication, when transmitted to the applicable number so specified in (or pursuant to) this Section 8.2 and an appropriate confirmation of transmission is received, or (ii) if given by any other means, when actually delivered to the intended address.
     8.3 Entire Agreement; Amendments . This Agreement contains the entire agreement of the parties relating to the subject matter hereof and it supersedes any prior agreements, undertakings, commitments and practices relating to Executive’s employment by Employer or its affiliates. No amendment or modification of the terms of this Agreement shall be valid unless made in writing and signed by Executive and, on behalf of Employer, by an individual expressly so authorized by the Board.
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     8.4 Waiver . No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.
     8.5 Choice of Law . This Agreement, the legal relations between the parties and any action, whether contractual or non-contractual, instituted by any party with respect to matters arising under or growing out of or in connection with or in respect of this Agreement, the relationship of the parties or the subject matter hereof shall be governed by and construed in accordance with the laws of New York applicable to contracts made and performed in such jurisdiction and without regard to conflicts of law doctrines, to the extent permitted by law.
     8.6 Arbitration . Subject to Section 6.5, any dispute, controversy or claim arising out of or in respect of this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall, at the request of any party hereto, be submitted to and settled by arbitration conducted before a single arbitrator in Hong Kong under the auspices of the HKIAC. The arbitration tribunal shall apply the Rules of Arbitration of the United Nations Commission on International Trade Law. The arbitration of such issues, including the determination of any amount of damages suffered, shall be final and binding upon the parties to the maximum extent permitted by law. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. Each party shall bear its own expenses, and Employer and Executive shall respectively bear one-half the aggregate amount of arbitration costs.
     8.7 Confidentiality; Proprietary Information . Executive agrees to not make use of, divulge or otherwise disclose, directly or indirectly any trade secret or other confidential or proprietary information concerning the business (including but not limited to its employees, services, practices or policies) of Employer or any of its Affiliates (“ Confidential Information ”) of which Executive may learn or be aware as a result of Executive’s employment during the Term, except to the extent such use or disclosure is (i) necessary to the performance of this Agreement and in furtherance of Employer’s best interests, (ii) lawfully obtainable from other sources, or (iii) authorized in writing by Employer. All records, files, documents, drawings, specifications, software, equipment and similar items relating to the business of Employer or its affiliates, including without limitation all records relating to customers (the “ Documents ”), whether prepared by Executive or otherwise coming into Executive’s possession, shall remain the exclusive property of Employer or such affiliates. Upon termination of employment, Executive agrees to promptly deliver to Employer all Documents in the possession or under the control of Executive. The provisions of this Section 8.7 shall survive the expiration, suspension or termination of this Agreement for any reason. In the event Executive becomes legally compelled to disclose any Confidential Information, then Executive will provide Employer with prompt notice thereof so that Employer may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section 8.7. In the event that such protective order or other remedy is not obtained, or that Employer waives compliance with the provisions of this Section 8.7, Executive will furnish only that portion of the Confidential Information which, in Employer’s reasonable judgment, is legally required unless applicable law (or an authority having jurisdiction thereunder) dictates otherwise.
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     8.8 Place of Employment . The principal place of employment and the location of Executive’s principal office shall be in Hong Kong or such other place as shall be mutually agreed upon by Executive and Employer; provided, however, that Executive will be expected to engage in frequent travel as Employer may reasonably request or as may be required for the proper rendition of services hereunder.
     8.9 Severability . If this Agreement shall for any reason be or become unenforceable in any material respect by any party, this Agreement shall thereupon terminate and become unenforceable by the other party as well. Subject to Section 6.4, if any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect, and if any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances, to the fullest extent permitted by law.
     8.10 Section Headings . Section and other headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.
     8.11 Counterparts . This Agreement and any amendment hereto may be executed in one or more counterparts. All of such counterparts shall constitute one and the same agreement and shall become effective when a copy signed by each party has been delivered to the other party.
     8.12 Representation By Counsel; Interpretation . Employer and Executive each acknowledge that each party to this Agreement has been represented by counsel in connection with this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the parties.
     8.13 Right of Offset . Employer shall have the right to set off, against any amount otherwise payable to Employee under this Agreement, any amount owed by Employee to Employer or to any affiliate of Employer, whether under this Agreement or otherwise.
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     IN WITNESS WHEREOF the parties hereto have executed, or caused their duly authorized representatives to execute, this Agreement as of the date first-above written.
 	 	 	 	 	
 	THE TAUBMAN COMPANY ASIA LIMITED,
a Cayman Islands Company
 	 	
 	By:  	/s/ Robert S. Taubman  	 	
 	 	Its: Chief Executive Officer 	 	

 	By:  	/s/ Morgan B. Parker  	 	
 	 	MORGAN PARKER  	 	

Solely for the purpose of Section 1.3 hereof:
 	 	 	 	 	
TAUB-CO ASIA MANAGEMENT, INC.,
a Michigan corporation
 	 	 	
By:  	/s/ Robert S. Taubman  	 	 	
 	Its: President 	 	 	
 	 	 	 	
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Exhibit A
RESIGNATION AND RELEASE OF CLAIMS
     Reference is made to that certain Employment Agreement, dated as of April 11, 2008 (the “ Employment Agreement ”), between The Taubman Company Asia Limited (the “ Employer ”) and Morgan Parker. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to such terms in the Employment Agreement.
     I, Morgan Parker, hereby resign from all directorships or other positions which I may hold with Employer or its subsidiaries and affiliates.
     Except for the payment of amounts provided for in Sections 4.3(a) of the Employment Agreement, I hereby acknowledge that I have no outstanding claims whatsoever against Employer or any of its subsidiaries and otherwise discharge Employer and each of its subsidiaries from any claims which I may have against Employer or such subsidiary as of the date hereof.

 	 	Morgan Parker	 	
 	
Date:                                          
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Exhibit 10 (c)
FIRST AMENDMENT TO THE
TAUBMAN CENTERS, INC. NON-EMPLOYEE DIRECTORS’ DEFERRED COMPENSATION PLAN
(Effective as of May 18, 2005)
      WHEREAS , TAUBMAN CENTERS, INC. (the “Company”) has adopted and maintains the Taubman Centers, Inc. Non-Employee Directors’ Deferred Compensation Plan, as effective May 18, 2005 (the “Plan”); and
      WHEREAS , pursuant to Section 4.1 of the Plan, the Company may amend the Plan; and
      WHEREAS , the Company desires to amend the Plan, effective as of January 1, 2008, to allow directors the opportunity to choose whether deferrals are made from the cash portion or the stock portion of his annual retainer fee.
      NOW, THEREFORE , the Plan is hereby amended. effective as of January 1, 2008, in the following respects:

 	1.	 	Section 1.7 of the Plan (Committee) is amended to read as follows:	
     “ 1.7 ‘Committee’ means the Compensation Committee of the Board of Directors.”

 	2.	 	Section 3.1 of the Plan (Deferral Election Forms) is amended to read as follows:	
     “ 3.1 Deferral Election Forms. Each Director may elect to defer up to 100% of the annual retainer fee he shall receive in any calendar year with respect to his service as a Director, including the portion of his annual retainer fee that would otherwise be paid in stock under the Taubman Centers, Inc. Non-Employee Directors Stock Grant Plan, by executing a written Deferral Election Form. Once the election to defer is made, a Director will not have access to the amounts deferred until service on the Board of Directors has terminated or until the occurrence of a Change of Control Event. Directors must elect on the Deferral Election Form whether deferrals of less than 100% of the annual retainer fee will be made from the cash portion of the Director’s annual retainer fee or the portion that would otherwise be paid in stock under the Taubman Centers, Inc. Non-Employee Directors Stock Grant Plan, or a portion of both. Each Deferral Election Form must: (a) specify the percentage the Director elects to defer, (b) identify the proportion of deferrals to be made from the cash portion and stock portion of the Director’s retainer fee, (c) state that the deferred retainer fee will be paid following the termination of the Director’s service pursuant to Section 3.4 of the Plan, and (d) be executed before the first day of the taxable year in which the Director will earn the retainer fee subject to the Deferral Election Form or, if later, within 30 days after he first becomes eligible for the Plan. A Deferral Election Form will not apply to any retainer fees earned or paid prior to the date the Deferral Election Form is executed.”
      IN WITNESS WHEREOF , the undersigned has executed this First Amendment as of the date written below.
 	 	 	 	 	
 	TAUBMAN CENTERS, INC.
a Michigan corporation
 	 	
 	By:  	/s/ Robert S. Taubman  	 	
 	 	Its: Chairman, President and Chief Executive Officer
 	 	
 	Date: 	May 29, 2008	 	

 	 	 	 	 	
Exhibit 12
TAUBMAN CENTERS, INC.
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
(in thousands, except ratios)
 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended	 	
 	 	June 30	 	
 	 	2008	 	 	2007	 	
Earnings before income from equity investees	 	$	27,645	 	 	$	35,127	 	
 	 	 	 	 	 	 	 	 	
Add back:	 	 	 	 	 	 	 	 	
Fixed charges	 	$	82,022	 	 	$	73,203	 	
Amortization of previously capitalized interest	 	 	2,286	 	 	 	2,139	 	
Distributed income of Unconsolidated Joint Ventures	 	 	17,725	 	 	 	17,425	 	
 	 	 	 	 	 	 	 	 	
Deduct:	 	 	 	 	 	 	 	 	
Capitalized interest	 	 	(4,890	)	 	 	(7,428	)	
Preferred distributions	 	 	(1,230	)	 	 	(1,230	)	

Earnings available for fixed charges and preferred dividends	 	$	123,558	 	 	$	119,236	 	

Fixed charges:	 	 	 	 	 	 	 	 	
Interest expense	 	$	72,954	 	 	$	61,884	 	
Capitalized interest	 	 	4,890	 	 	 	7,428	 	
Interest portion of rent expense	 	 	2,948	 	 	 	2,661	 	
Preferred distributions	 	 	1,230	 	 	 	1,230	 	
 	 	 	 	 	 	 	
Total fixed charges	 	$	82,022	 	 	$	73,203	 	

Preferred dividends	 	 	7,317	 	 	 	7,317	 	

Total fixed charges and preferred dividends	 	$	89,339	 	 	$	80,520	 	

Ratio of earnings to fixed charges and preferred dividends	 	 	1.4	 	 	 	1.5	 	

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 quarterly report on Form 10-Q of Taubman Centers, Inc.;	
 		
2.	 	Based on my knowledge, this quarterly 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: August 1, 2008 	/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 quarterly report on Form 10-Q of Taubman Centers, Inc.;	

2.	 	Based on my knowledge, this quarterly 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: August 1, 2008 	/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 Quarterly Report on Form 10-Q for the period ended June 30, 2008 (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.	
 	 	 	
/s/ Robert S. Taubman	 	Date: August 1, 2008	
 
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 Quarterly Report on Form 10-Q for the period ended June 30, 2008 (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.	
 	 	 	
/s/ Lisa A. Payne	 	Date: August 1, 2008	
 
Lisa A. Payne	 	 	
Vice Chairman, Chief Financial Officer, and Director	 	 	
(Principal Financial Officer)	 	 	

      
Exhibit 99
MORTGAGE AND OTHER NOTES PAYABLE
INCLUDING WEIGHTED AVERAGE INTEREST RATES AT JUNE 30, 2008
(in millions of dollars, amounts may not add due to rounding)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	Beneficial	 	Effective	 	 	 	 	 	LIBOR	 	 	
 	 	 	 	 	 	100%	 	Interest	 	Rate	 	 	 	 	 	Rate	 	Principal Amortization and Debt Maturities	
 	 	 	 	 	 	6/30/08	 	6/30/08	 	6/30/08	 	(a)	 	Spread	 	2008	 	2009	 	2010	 	2011	 	2012	 	2013	 	2014	 	2015	 	2016	 	2017	 	2018	 	Total	
Consolidated Fixed Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beverly Center	 	 	 	 	 	 	336.3	 	 	 	336.3	 	 	 	5.28	%	 	 	 	 	 	 	 	 	 	 	2.6	 	 	 	5.4	 	 	 	5.7	 	 	 	6.0	 	 	 	6.3	 	 	 	6.6	 	 	 	303.8	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	336.3	 	
Cherry Creek Shopping Center	 	 	50.00	%	 	 	280.0	 	 	 	0.0	 	 	 	5.24	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	140.0	 	 	 	 	 	 	 	 	 	 	 	140.0	 	
Great Lakes Crossing	 	 	 	 	 	 	139.2	 	 	 	139.2	 	 	 	5.25	%	 	 	 	 	 	 	 	 	 	 	1.3	 	 	 	2.7	 	 	 	2.9	 	 	 	3.0	 	 	 	3.2	 	 	 	126.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	139.2	 	
MacArthur Center	 	 	95.00	%	 	 	134.0	 	 	 	127.4	 	 	 	6.91	%	 	 	(b	)	 	 	 	 	 	 	1.4	 	 	 	3.0	 	 	 	122.9	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	127.4	 	
Northlake Mall	 	 	 	 	 	 	215.5	 	 	 	215.5	 	 	 	5.41	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	215.5	 	 	 	 	 	 	 	 	 	 	 	215.5	 	
Regency Square	 	 	 	 	 	 	76.1	 	 	 	76.1	 	 	 	6.75	%	 	 	 	 	 	 	 	 	 	 	0.6	 	 	 	1.3	 	 	 	1.4	 	 	 	72.8	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	76.1	 	
Stony Point Fashion Park	 	 	 	 	 	 	109.7	 	 	 	109.7	 	 	 	6.24	%	 	 	 	 	 	 	 	 	 	 	0.8	 	 	 	1.6	 	 	 	1.8	 	 	 	1.9	 	 	 	2.0	 	 	 	2.1	 	 	 	99.5	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	109.7	 	
The Mall at Short Hills	 	 	 	 	 	 	540.0	 	 	 	540.0	 	 	 	5.47	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	540.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	540.0	 	
The Mall at Wellington Green	 	 	90.00	%	 	 	200.0	 	 	 	0.0	 	 	 	5.44	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	180.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	180.0	 	
The Pier Shops at Caesars	 	 	77.50	%	 	 	135.0	 	 	 	0.0	 	 	 	6.01	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	104.6	 	 	 	 	 	 	 	104.6	 	
 	 	 	 	 	 	 	
Total Consolidated Fixed	 	 	 	 	 	 	2,165.7	 	 	 	1,968.7	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6.7	 	 	 	14.1	 	 	 	134.6	 	 	 	83.7	 	 	 	11.4	 	 	 	134.8	 	 	 	403.3	 	 	 	720.0	 	 	 	355.5	 	 	 	104.6	 	 	 	0.0	 	 	 	1,968.7	 	
Weighted Rate	 	 	 	 	 	 	5.59	%	 	 	5.61	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.87	%	 	 	5.87	%	 	 	6.80	%	 	 	6.58	%	 	 	5.44	%	 	 	5.27	%	 	 	5.52	%	 	 	5.46	%	 	 	5.34	%	 	 	6.01	%	 	 	6.01	%	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Floating Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dolphin Mall (c)	 	 	 	 	 	 	120.0	 	 	 	120.0	 	 	 	3.16	%	 	 	(d	)	 	 	0.70	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	120.0	 (f)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	120.0	 	
Fairlane Town Center (c)	 	 	 	 	 	 	80.0	 	 	 	80.0	 	 	 	3.16	%	 	 	(d	)	 	 	0.70	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	80.0	 (f)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	80.0	 	
International Plaza	 	 	50.10	%	 	 	325.0	 	 	 	162.8	 	 	 	5.01	%	 	 	(e	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	162.8	 (g)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	162.8	 	
The Mall at Partridge Creek	 	 	 	 	 	 	70.6	 	 	 	70.6	 	 	 	3.63	%	 	 	(d	)	 	 	1.15	%	 	 	 	 	 	 	 	 	 	 	70.6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	70.6	 	
TRG Revolving Credit	 	 	 	 	 	 	12.4	 	 	 	12.4	 	 	 	3.38	%	 	 	(h	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12.4	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12.4	 	
Twelve Oaks Mall (c)	 	 	 	 	 	 	0.0	 	 	 	0.0	 	 	 	0.00	%	 	 	(d	)	 	 	0.70	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.0	 (f)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.0	 	
Other	 	 	 	 	 	 	0.4	 	 	 	0.2	 	 	 	5.00	%	 	 	 	 	 	 	 	 	 	 	0.1	 	 	 	0.1	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.2	 	
 	 	 	 	 	 	 	
Total Consolidated Floating	 	 	 	 	 	 	608.4	 	 	 	446.1	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.1	 	 	 	0.1	 	 	 	70.6	 	 	 	375.3	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	446.1	 	
Weighted Rate	 	 	 	 	 	 	4.21	%	 	 	3.92	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.00	%	 	 	5.00	%	 	 	3.63	%	 	 	3.97	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Consolidated	 	 	 	 	 	 	2,774.2	 	 	 	2,414.8	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	10.0	 	 	 	14.2	 	 	 	205.2	 	 	 	459.0	 	 	 	11.4	 	 	 	134.8	 	 	 	403.3	 	 	 	720.0	 	 	 	355.5	 	 	 	104.6	 	 	 	0.0	 	 	 	2,414.8	 	
Weighted Rate	 	 	 	 	 	 	5.29	%	 	 	5.30	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.86	%	 	 	5.86	%	 	 	5.71	%	 	 	4.44	%	 	 	5.44	%	 	 	5.27	%	 	 	5.52	%	 	 	5.46	%	 	 	5.34	%	 	 	6.01	%	 	 	6.01	%	 	 	 	 	

Joint Ventures Fixed Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Arizona Mills	 	 	50.00	%	 	 	135.1	 	 	 	67.5	 	 	 	7.90	%	 	 	 	 	 	 	 	 	 	 	0.5	 	 	 	1.0	 	 	 	66.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	67.5	 	
The Mall at Millenia	 	 	50.00	%	 	 	209.6	 	 	 	104.8	 	 	 	5.46	%	 	 	 	 	 	 	 	 	 	 	0.7	 	 	 	1.4	 	 	 	1.5	 	 	 	1.6	 	 	 	1.6	 	 	 	98.1	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	104.8	 	
The Mall at Millenia	 	 	50.00	%	 	 	2.0	 	 	 	1.0	 	 	 	6.00	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1.0	 	
Sunvalley	 	 	50.00	%	 	 	124.8	 	 	 	62.4	 	 	 	5.67	%	 	 	 	 	 	 	 	 	 	 	0.6	 	 	 	1.2	 	 	 	1.2	 	 	 	1.3	 	 	 	58.2	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	62.5	 	
Waterside Shops	 	 	25.00	%	 	 	165.0	 	 	 	41.3	 	 	 	5.54	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	41.3	 	 	 	 	 	 	 	 	 	 	 	41.3	 	
Westfarms	 	 	78.94	%	 	 	193.8	 	 	 	153.0	 	 	 	6.10	%	 	 	 	 	 	 	 	 	 	 	1.3	 	 	 	2.7	 	 	 	2.9	 	 	 	3.1	 	 	 	142.9	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	153.0	 	
 	 	 	 	 	 	 	
Total Joint Venture Fixed	 	 	 	 	 	 	830.3	 	 	 	430.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3.0	 	 	 	7.3	 	 	 	71.7	 	 	 	6.0	 	 	 	202.7	 	 	 	98.1	 	 	 	0.0	 	 	 	0.0	 	 	 	41.3	 	 	 	0.0	 	 	 	0.0	 	 	 	430.0	 	
Weighted Rate	 	 	 	 	 	 	6.05	%	 	 	6.11	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6.17	%	 	 	6.15	%	 	 	7.73	%	 	 	5.84	%	 	 	5.97	%	 	 	5.46	%	 	 	0.00	%	 	 	0.00	%	 	 	5.54	%	 	 	0.00	%	 	 	0.00	%	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Joint Ventures Floating Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair Oaks	 	 	50.00	%	 	 	250.0	 	 	 	125.0	 	 	 	4.22	%	 	 	(i	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	125.0	 (g)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	125.0	 	
Taubman Land Associates	 	 	50.00	%	 	 	30.0	 	 	 	15.0	 	 	 	5.95	%	 	 	(j	)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	15.0	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	15.0	 	
Other	 	 	 	 	 	 	0.8	 	 	 	0.6	 	 	 	5.00	%	 	 	 	 	 	 	 	 	 	 	0.1	 	 	 	0.3	 	 	 	0.1	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.6	 	
 	 	 	 	 	 	 	
Total Joint Venture Floating	 	 	 	 	 	 	280.8	 	 	 	140.6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.1	 	 	 	0.3	 	 	 	0.1	 	 	 	125.0	 	 	 	15.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	140.6	 	
Weighted Rate	 	 	 	 	 	 	4.41	%	 	 	4.41	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.00	%	 	 	5.00	%	 	 	5.00	%	 	 	4.22	%	 	 	5.95	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Joint Venture	 	 	 	 	 	 	1,111.2	 	 	 	570.6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3.1	 	 	 	7.6	 	 	 	71.8	 	 	 	131.0	 	 	 	217.7	 	 	 	98.1	 	 	 	0.0	 	 	 	0.0	 	 	 	41.3	 	 	 	0.0	 	 	 	0.0	 	 	 	570.6	 	
Weighted Rate	 	 	 	 	 	 	5.64	%	 	 	5.69	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6.11	%	 	 	6.11	%	 	 	7.73	%	 	 	4.29	%	 	 	5.97	%	 	 	5.46	%	 	 	0.00	%	 	 	0.00	%	 	 	5.54	%	 	 	0.00	%	 	 	0.00	%	 	 	 	 	

TRG Beneficial Interest Totals	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fixed Rate Debt	 	 	 	 	 	 	2,996.0	 	 	 	2,398.7	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	9.7	 	 	 	21.4	 	 	 	206.3	 	 	 	89.7	 	 	 	214.1	 	 	 	232.9	 	 	 	403.3	 	 	 	720.0	 	 	 	396.8	 	 	 	104.6	 	 	 	0.0	 	 	 	2,398.7	 	
 	 	 	 	 	 	 	5.72	%	 	 	5.70	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.96	%	 	 	5.97	%	 	 	7.12	%	 	 	6.53	%	 	 	5.94	%	 	 	5.35	%	 	 	5.52	%	 	 	5.46	%	 	 	5.36	%	 	 	6.01	%	 	 	6.01	%	 	 	 	 	
Floating Rate Debt	 	 	 	 	 	 	889.3	 	 	 	586.6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.2	 	 	 	0.4	 	 	 	70.8	 	 	 	500.3	 	 	 	15.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	0.0	 	 	 	586.6	 	
 	 	 	 	 	 	 	4.27	%	 	 	4.03	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.00	%	 	 	5.00	%	 	 	3.63	%	 	 	4.03	%	 	 	5.95	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	0.00	%	 	 	 	 	
Total	 	 	 	 	 	 	3,885.3	 	 	 	2,985.4	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	9.9	 	 	 	21.8	 	 	 	277.0	 	 	 	589.9	 	 	 	229.1	 	 	 	232.9	 	 	 	403.3	 	 	 	720.0	 	 	 	396.8	 	 	 	104.6	 	 	 	0.0	 	 	 	2,985.4	 	
 	 	 	 	 	 	 	5.39	%	 	 	5.37	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5.94	%	 	 	5.95	%	 	 	6.23	%	 	 	4.41	%	 	 	5.94	%	 	 	5.35	%	 	 	5.52	%	 	 	5.46	%	 	 	5.36	%	 	 	6.01	%	 	 	6.01	%	 	 	 	 	
 	 	 	 	 	 	 	Average Maturity Fixed Debt	 	6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	Average Maturity Total Debt	 	5	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

			
(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)	 	Debt includes $1.7 million of purchase accounting premium from acquisition which reduces the stated rate on the debt of 7.59% to an effective rate of 6.91%.	
 		
(c)	 	TRG revolving credit facility of $550 million. Dolphin, Fairlane and Twelve Oaks are the direct borrowers under this facility.	
 		
(d)	 	The debt is floating month to month at LIBOR plus spread.	
 		
(e)	 	Debt is swapped to an effective rate of 5.01% until maturity.	
 		
(f)	 	One year extension option available.	
 		
(g)	 	Two one year extension options available.	
 		
(h)	 	Rate floats daily.	
 		
(i)	 	Debt is swapped to an effective rate of 4.22% until maturity.	
 		
(j)	 	Debt is swapped to an effective rate of 5.95% until maturity.