TAUBMAN CENTERS INC, 10-K filed on 2/24/2012
Annual Report
Document and Entity Information Document (USD $)
12 Months Ended
Dec. 31, 2011
Feb. 23, 2012
Jun. 30, 2010
Document and Entity Information [Abstract]
 
 
 
Entity Registration Name
TAUBMAN CENTERS INC. 
 
 
Entity Central Index Key
0000890319 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
Q4 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
58,058,113 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 2,000,000,000 
CONSOLIDATED BALANCE SHEET (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Assets:
 
 
Properties
$ 4,020,954 
$ 3,528,297 
Accumulated depreciation and amortization
(1,271,943)
(1,199,247)
Properties, net
2,749,011 
2,329,050 
Investment in Unconsolidated Joint Ventures
75,582 
77,122 
Cash and cash equivalents
24,033 
19,291 
Restricted Cash
295,318 
7,599 
Accounts and notes receivable, less allowance for doubtful accounts of $3,303 and $7,966 in 2011 and 2010
59,990 
49,906 
Accounts receivable from related parties
1,418 
1,414 
Deferred charges and other assets
131,440 
62,491 
Total Assets
3,336,792 
2,546,873 
Liabilities:
 
 
Mortgage notes payable
2,864,135 
2,656,560 
Installment Notes
281,467 
 
Accounts payable and accrued liabilities
255,146 
247,895 
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures
192,257 
170,329 
Liabilities
3,593,005 
3,074,784 
Commitments and Contingencies
   
   
Redeemable Noncontrolling Interests
84,235 
 
Equity:
 
 
Series B Non-Participating Convertible Preferred Stock, $0.001 par and liquidation value, 40,000,000 shares authorized, 26,461,958 and 26,233,126 shares issued and outstanding at December 31, 2011 and 2010
26 
26 
Common Stock, $0.01 par value, 250,000,000 shares authorized, 58,022,475 and 54,696,054 shares issued and outstanding at December 31, 2011 and December 31, 2010
580 
547 
Additional paid-in capital
673,923 
589,881 
Accumulated other comprehensive income (loss)
(27,613)
(14,925)
Dividends in excess of net income
(863,040)
(939,290)
Total Shareowners
(216,124)
(363,761)
Noncontrolling interests
(124,324)
(164,150)
Stockholders' Equity, including Portion Attributable to Noncontrolling Interest
(340,448)
(527,911)
Total Liabilities and Equity
$ 3,336,792 
$ 2,546,873 
Consolidated Balance Sheets (USD $)
Dec. 31, 2011
Dec. 31, 2010
Allowance for doubtful accounts
$ 3,303,000 
$ 7,966,000 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
250,000,000 
250,000,000 
Common stock, shares issued
58,022,475 
54,696,054 
Common stock, shares outstanding
58,022,475 
54,696,054 
Series B [Member]
 
 
Preferred Stock, Non-Participating, Convertible, Par Value, Per Share
$ 0.001 
$ 0.001 
Preferred Stock, Non-Participating, Convertible, Liquidation Value
$ 0.001 
$ 0.001 
Preferred Stock, Non-Participating, Convertible, Shares Authorized
40,000,000 
40,000,000 
Preferred Stock, Non-Participating, Convertible, Shares Issued
26,461,958 
26,233,126 
Preferred Stock, Non-Participating, Convertible, Shares Outstanding
26,461,958 
26,233,126 
Series G Preferred Stock [Member]
 
 
Auction Market Preferred Securities, Stock Series, Liquidation Value
100,000,000 
100,000,000 
Preferred Stock, Shares Authorized
4,000,000 
4,000,000 
Preferred Stock, Shares Issued
4,000,000 
4,000,000 
Preferred Stock, Shares Outstanding
4,000,000 
4,000,000 
Preferred Stock, Par or Stated Value Per Share
$ 0 
$ 0 
Series H Preferred Stock [Member]
 
 
Auction Market Preferred Securities, Stock Series, Liquidation Value
$ 87,000,000 
$ 87,000,000 
Preferred Stock, Shares Authorized
3,480,000 
3,480,000 
Preferred Stock, Shares Issued
3,480,000 
3,480,000 
Preferred Stock, Shares Outstanding
3,480,000 
3,480,000 
Preferred Stock, Par or Stated Value Per Share
$ 0 
$ 0 
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Revenues:
 
 
 
Minimum rents
$ 342,612 
$ 327,580 
$ 327,033 
Percentage rents
20,358 
13,063 
10,710 
Expense recoveries
229,313 
225,079 
233,957 
Management, leasing, and development services
25,551 
16,109 
21,179 
Other
27,084 
44,596 
44,579 
Total Revenue
644,918 
626,427 
637,458 
Expenses:
 
 
 
Maintenance, taxes, utilities, and promotion
179,092 
177,703 
186,397 
Other operating
67,301 
57,354 
49,035 
Restructuring Charges
 
 
2,512 
Acquisition costs
5,295 
 
 
Management, leasing, and development services
11,955 
8,258 
7,862 
General and administrative
31,598 
30,234 
27,858 
Interest expense
122,277 
132,362 
131,558 
Depreciation and amortization
132,707 
145,271 
136,505 
Total Expenses
550,225 
551,182 
541,727 
Nonoperating income
1,252 
2,683 
567 
Impairment Loss on Marketable Securities
 
 
(1,666)
Income from continuing operations before income tax expense and equity in income of Unconsolidated Joint Ventures
95,945 
77,928 
94,632 
Income tax (expense) benefit
(610)
(734)
(1,657)
Equity in income of Unconsolidated Joint Ventures
46,064 
45,412 
11,488 
Income (Loss) from Continuing Operations
141,399 
122,606 
104,463 
Gains on extinguishment of debt
174,171 
 
 
Impairment of Real Estate
 
 
166,680 
Other Discontinued Operations
(28,172)
(20,279)
(16,944)
Income (Loss) from Discontinued Operations, Including Portion Attributable to Noncontrolling Interest
145,999 
(20,279)
(183,624)
Net income (loss)
287,398 
102,327 
(79,161)
Income (Loss) from Continuing Operations Attributable to Noncontrolling Interest
(50,218)
(45,053)
(40,416)
Income (Loss) from Discontinued Operations attributable to noncontrolling interests
44,309 
(6,594)
(66,065)
Net income (loss) attributable to Taubman Centers, Inc.
192,871 
63,868 
(53,512)
Distributions to participating securities of TRG
(1,536)
(1,635)
(1,560)
Preferred stock dividends
(14,634)
(14,634)
(14,634)
Net income attributable to Taubman Centers, Inc. common shareowners
176,701 
47,599 
(69,706)
Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
 
Unrealized gain (loss) on interest rate instruments and other
(20,583)
18,240 
8,227 
Impairment loss on marketable securities
 
 
1,666 
Reclassification adjustment for amounts recognized in net income
1,215 
1,260 
1,262 
Comprehensive income (loss)
268,030 
121,827 
(68,006)
Comprehensive (income) loss attributable to noncontrolling interests
(74,856)
(48,490)
19,829 
Comprehensive income (loss) attributable to Taubman Centers, Inc.
$ 193,174 
$ 73,337 
$ (48,177)
Income (Loss) from Continuing Operations, Per Basic Share
$ 1.32 
$ 1.12 
$ 0.90 
Income (Loss) from Discontinued Operations, Per Basic Share
$ 1.79 
$ (0.25)
$ (2.21)
Earnings Per Share, Basic
$ 3.11 
$ 0.87 
$ (1.31)
Income (Loss) from Continuing Operations, Per Diluted Share
$ 1.29 
$ 1.11 
$ 0.89 
Income (Loss) from Discontinued Operations, Per Diluted Share
$ 1.74 
$ (0.25)
$ (2.19)
Earnings Per Share, Diluted
$ 3.03 
$ 0.86 
$ (1.30)
Weighted average number of common shares outstanding - basic
56,899,966 
54,569,618 
53,239,279 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Other Comprehensive Income [Member]
Accumulated Distributions in Excess of Net Income [Member]
Noncontrolling Interest [Member]
Balance at Dec. 31, 2008
$ (260,208)
$ 26 
$ 530 
$ 556,145 
$ (29,778)
$ (726,097)
$ (61,034)
Balance, shares (in shares) at Dec. 31, 2008
 
33,909,235 
53,018,987 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer
 
 
(1)
 
 
 
Issuance of stock pursuant to Continuing Offer, shares (in shares)
 
(70,000)
84,762 
 
 
 
 
Share-based Compensation under employee and director benefit plans
 
 
1,217,837 
 
 
 
 
Adjustments of noncontrolling interest
(483)
 
 
(483)
 
 
483 
Dividend equivalents
(345)
 
 
 
 
(345)
 
Dividends and distributions
(170,522)
 
 
 
 
(104,712)
(65,810)
Net income (excludes net loss attributable to redeemable noncontrolling interests)
(79,161)
 
 
 
 
(53,512)
(25,649)
Unrealized gain (loss) on interest rate instruments and other
8,227 
 
 
 
3,372 
 
4,855 
Impairment loss on marketable securities
1,666 
 
 
 
(1,117)
 
(549)
Reclassification adjustment for amounts recognized in net income
1,262 
 
 
 
846 
 
416 
Share-based Compensation under employee and director benefit plans
24,334 
 
12 
24,322 
 
 
 
Balance at Dec. 31, 2009
(474,747)
26 
543 
579,983 
(24,443)
(884,666)
(146,190)
Balance, shares (in shares) at Dec. 31, 2009
 
33,839,235 
54,321,586 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer
 
 
(1)
 
 
 
Issuance of stock pursuant to Continuing Offer, shares (in shares)
 
(126,109)
126,116 
 
 
 
 
Share-based Compensation under employee and director benefit plans
 
 
248,352 
 
 
 
 
Adjustments of noncontrolling interest
(988)
 
 
(988)
49 
 
939 
Dividend equivalents
(306)
 
 
 
 
(306)
 
Dividends and distributions
(185,654)
 
 
 
 
(118,186)
(67,468)
Net income (excludes net loss attributable to redeemable noncontrolling interests)
102,406 
 
 
 
 
63,868 
38,538 
Unrealized gain (loss) on interest rate instruments and other
18,240 
 
 
 
8,617 
 
9,623 
Reclassification adjustment for amounts recognized in net income
1,260 
 
 
 
852 
 
408 
Share-based Compensation under employee and director benefit plans
10,890 
 
10,887 
 
 
 
Balance at Dec. 31, 2010
(527,911)
26 
547 
589,881 
(14,925)
(939,290)
(164,150)
Balance, shares (in shares) at Dec. 31, 2010
 
33,713,126 
54,696,054 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Issuance of common stock, net of offering costs
111,956 
 
20 
111,936 
 
 
 
Issuance of common stock, net of offering costs
 
 
2,012,500 
 
 
 
 
Issuance of stock pursuant to Continuing Offer
 
(1)
11 
(10)
 
 
 
Issuance of stock pursuant to Continuing Offer, shares (in shares)
 
(1,092,690)
1,092,766 
 
 
 
 
Issuance of equity for acquisition of properties, shares
 
1,321,522 
 
 
 
 
 
Issuance of equity for acquisition of properties, value
 
 
 
 
 
Redemption of Series F Preferred Equity
(27,000)
 
 
 
 
 
(27,000)
Share-based Compensation under employee and director benefit plans
 
 
221,155 
 
 
 
 
Adjustments of noncontrolling interest
309 
 
 
(40,561)
449 
 
40,421 
Contributions from Noncontrolling Interests
31,417 
 
 
 
 
 
31,417 
Dividend equivalents
(113)
 
 
 
 
(113)
 
Dividends and distributions
(210,555)
 
 
 
 
(116,508)
(94,047)
Net income (excludes net loss attributable to redeemable noncontrolling interests)
288,137 
 
 
 
 
192,871 
95,266 
Unrealized gain (loss) on interest rate instruments and other
(20,583)
 
 
 
(13,980)
 
(6,603)
Reclassification adjustment for amounts recognized in net income
1,215 
 
 
 
843 
 
372 
Share-based Compensation under employee and director benefit plans
12,679 
 
12,677 
 
 
 
Balance at Dec. 31, 2011
$ (340,448)
$ 26 
$ 580 
$ 673,923 
$ (27,613)
$ (863,040)
$ (124,324)
Balance, shares (in shares) at Dec. 31, 2011
 
33,941,958 
58,022,475 
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Cash Flows From Operating Activities:
 
 
 
Net income (loss)
$ 287,398 
$ 102,327 
$ (79,161)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization - continuing operations
132,707 
145,271 
136,505 
Depreciation and Amortization - Discontinued Operations
10,309 
8,605 
10,811 
Impairment loss on marketable securities
 
 
1,666 
Impairments
 
 
166,680 
Provision for bad debts
2,032 
3,363 
2,081 
Gain on sales of land and land-related rights
(519)
(2,218)
 
Gains on Extinguishment of Debt of Discontinued Operations
174,171 
 
 
Other
13,142 
11,216 
11,281 
Increase (decrease) in cash attributable to changes in assets and liabilities:
 
 
 
Receivables, restricted cash, deferred charges, and other assets
(21,211)
(21,805)
5,087 
Accounts payable and other liabilities
20,479 
17,849 
(19,304)
Net Cash Provided By Operating Activities
270,166 
264,608 
235,646 
Cash Flows From Investing Activities:
 
 
 
Additions to properties
(69,443)
(72,152)
(54,592)
Funding of development project
(20,882)
 
 
Refund of Mall at Studio City escrow
 
 
54,334 
Proceeds from sales of land
3,728 
3,060 
 
Additions to restricted cash
(289,389)
 
 
Investment in TCBL
11,523 
 
 
Issuances of notes receivable
 
(2,948)
(7,160)
Repayments of notes receivable
1,544 
1,623 
4,500 
Contributions to Unconsolidated Joint Ventures
(875)
(7,261)
(28,718)
Distributions from Unconsolidated Joint Ventures in excess of income
17,639 
32,836 
36,903 
Other
861 
 
985 
Net Cash Provided By (Used In) Investing Activities
(368,340)
(44,842)
6,252 
Cash Flows From Financing Activities:
 
 
 
Debt proceeds
536,648 
213,500 
978 
Debt payments
(334,017)
(243,885)
(106,026)
Debt issuance costs
(8,830)
(2,943)
 
Issuance of Common Stock, net of offering costs
111,956 
 
 
Issuance of common stock and/or partnership units in connection with incentive plans
2,593 
2,532 
14,737 
Distributions to noncontrolling interests
(94,113)
(67,468)
(65,810)
Distributions to participating securities of TRG
(1,536)
(1,635)
(1,560)
Contributions from noncontrolling interests
32,211 
 
 
Redemption of Series F Preferred Equity
(27,000)
 
 
Cash dividends to preferred shareowners
(14,634)
(14,634)
(14,634)
Cash dividends to common shareowners
(100,286)
(101,890)
(110,492)
Other
(76)
(228)
(2,103)
Net Cash Provided By (Used In) Financing Activities
102,916 
(216,651)
(284,910)
Net Increase (Decrease) In Cash and Cash Equivalents
4,742 
3,115 
(43,012)
Cash and Cash Equivalents at Beginning of Period
19,291 
16,176 
59,188 
Cash and Cash Equivalents at End of Period
$ 24,033 
$ 19,291 
$ 16,176 
Cash Flow Disclosures and Non-Cash Investing and Financing Activities (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Assumption of debt in connection with acquisitions of The Mall at Green Hills and The Gardens on El Paseo and El Paseo Village
$ 215,439 
 
 
Transfer of The Pier Shops and Regency Square in settlement of mortgage debt obligations, net
63,941 
 
 
Issuance of installment notes in connection with acquisitions of The Mall at Green Hills and The Gardens on El Paseo and El Paseo Village
281,467 
 
 
Conversion of loan receivable and accrued interest to equity, Taubman TCBL
10,450 
 
 
Other non-cash additions to properties
29,803 
28,678 
14,138 
Davis Street Unitholders [Member]
 
 
 
Temporary Equity, Stock Issued During Period, Value, New Issues
72,683 
 
 
Taubman TCBL [Member]
 
 
 
Temporary Equity, Stock Issued During Period, Value, New Issues
$ 11,882 
 
 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Organization and Basis of Presentation

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 (the 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 December 31, 2011 included 23 urban and suburban shopping centers in 11 states.

Taubman Properties Asia LLC and its subsidiaries (Taubman Asia), which is the platform for the Company’s expansion into China and South Korea, is headquartered in Hong Kong.

Dollar amounts presented in tables within the notes to the financial statements are stated in thousands, except share data or as otherwise noted. Certain reclassifications have been made to prior year amounts to conform with current year classifications. Expenses for promotion and advertising of shopping centers that were previously classified in Other Operating are now included in Maintenance, Taxes, Utilities, and Promotion Expense. Restricted Cash, which was previously classified in Deferred Charges and Other Assets, is now shown separately in the Consolidated Balance Sheet. Amounts for 2009 and 2010 have been reclassified to conform to the 2011 classification. Income statement amounts for properties disposed of have been reclassified to discontinued operations for all periods presented. In addition, certain income statement related disclosures in the accompanying footnotes exclude amounts that have been reclassified to discontinued operations.

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. All intercompany transactions have been eliminated. The entities included in these consolidated financial statements are separate legal entities and maintain records and books of account separate from any other entity. However, inclusion of these separate entities in the consolidated financial statements does not mean that the assets and credit of each of these legal entities are available to satisfy the debts or other obligations of any other such legal entity included in the consolidated financial statements.

Investments in entities not controlled but over which the Company may exercise significant influence (Unconsolidated Joint Ventures or UJVs) are accounted for under the equity method. The Company has evaluated its investments in the Unconsolidated Joint Ventures under guidance for determining whether an entity is a variable interest entity and has concluded that the ventures are not variable interest entities. Accordingly, the Company accounts for its interests in these entities under general accounting standards for investments in real estate ventures (including guidance for determining effective control of a limited partnership or similar entity). The Company’s partners or other owners in these Unconsolidated Joint Ventures have substantive participating rights 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.

The Operating Partnership

At December 31, 2011, the Operating Partnership’s equity included two classes of preferred equity (Series G and H) and the net equity of the partnership unitholders (Note 14). 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.

At December 31, 2010 and 2009, the Operating Partnership’s equity included a third class of preferred equity (Series F). In October 2011, the Series F Preferred Equity was redeemed. The Series F Preferred Equity was owned by an institutional investor and accounted for as a noncontrolling interest of the Company (Note 9). See Note 14 for information related to the redemption.

The partnership equity of the Operating Partnership and the Company's ownership therein are shown below:
Year
 
TRG units outstanding at December 31
 
TRG units owned by TCO at December 31(1)
 
TRG units owned by noncontrolling interests at December 31
 
TCO's % interest in TRG at December 31
 
TCO's average interest in TRG
2011
 
84,502,883

 
58,022,475

 
26,480,408

 
69%
 
69%
2010
 
80,947,630

 
54,696,054

 
26,251,576

 
68
 
67
2009
 
80,699,271

 
54,321,586

 
26,377,685

 
67
 
67

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

Outstanding voting securities of the Company at December 31, 2011 consisted of 26,461,958 shares of Series B Preferred Stock (Note 14) and 58,022,475 shares of Common Stock.

Revenue Recognition

Shopping center space is generally leased to tenants under short and intermediate term leases that are accounted for as operating leases. Minimum rents are recognized on the straight-line method. Percentage rent is accrued when lessees' specified sales targets have been met. For traditional net leases, where tenants reimburse the landlord for an allocation of reimbursable costs incurred, the Company recognizes revenue in the period the applicable costs are chargeable to tenants. For tenants paying a fixed common area maintenance charge (which typically includes fixed increases over the lease term), the Company recognizes revenue on a straight-line basis over the lease terms. Management, leasing, and development revenue is recognized as services are rendered, when fees due are determinable, and collectibility is reasonably assured. Fees for management, leasing, and development services are established under contracts and are generally based on negotiated rates, percentages of cash receipts, and/or actual costs incurred. Fixed-fee development services contracts are generally accounted for under the percentage-of-completion method, using cost to cost measurements of progress. Profits on real estate sales are recognized whenever (1) a sale is consummated, (2) the buyer has demonstrated an adequate commitment to pay for the property, (3) the Company’s receivable is not subject to future subordination, and (4) the Company has transferred to the buyer the risks and rewards of ownership. Other revenues, including fees paid by tenants to terminate their leases, are recognized when fees due are determinable, no further actions or services are required to be performed by the Company, and collectibility is reasonably assured. Taxes assessed by government authorities on revenue-producing transactions, such as sales, use, and value-added taxes, are primarily accounted for on a net basis on the Company’s income statement.

Allowance for Doubtful Accounts and Notes

The Company records a provision for losses on accounts receivable to reduce them to the amount estimated to be collectible. The Company records a provision for losses on notes receivable to reduce them to the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the collateral if the loans are collateral dependent.

Depreciation and Amortization

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

Capitalization

Direct and indirect costs that are clearly related to the acquisition, development, construction and improvement of properties are capitalized. Compensation costs are allocated based on actual time spent on a project. Costs incurred on real estate for ground leases, property taxes, insurance, and interest costs for qualifying assets are capitalized during periods in which activities necessary to get the property ready for its intended use are in progress.

The viability of all projects under construction or development, including those owned by Unconsolidated Joint Ventures, are regularly evaluated on an individual basis under the accounting for abandonment of assets or changes in use. To the extent a project, or individual components of the project, are no longer considered to have value, the related capitalized costs are charged against operations. Additionally, all properties are reviewed for impairment on an individual basis whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Impairment of a shopping center owned by consolidated entities is recognized when the sum of expected cash flows (undiscounted and without interest charges) is less than the carrying value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint Venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value, including the results of discounted cash flow and other valuation techniques. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income.

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

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity of 90 days or less at the date of purchase. Included in cash equivalents is $12.6 million and $9.0 million at December 31, 2011 and 2010, respectively, invested in a single investment company's money market fund, which are not insured or guaranteed by the FDIC or any other government agency.

The Company is required to escrow cash balances for specific uses stipulated by its lenders. As of December 31, 2011 and December 31, 2010, the Company’s restricted cash balances were $295.3 million and $7.6 million, respectively. In 2011 cash was drawn from the Company's line of credit primarily to collateralize the repayment of the $281.5 million installment notes that were issued for the acquisition of The Mall at Green Hills, The Gardens on El Paseo and El Paseo Village (Note 2) and is classified within Restricted Cash on the Consolidated Balance Sheet.

Acquisitions

The Company recognizes the assets acquired, the liabilities assumed, and any noncontrolling interests in the acquiree at their fair values as of the acquisition date. The cost of acquiring a controlling ownership interest or an additional ownership interest (if not already consolidated) is allocated to the tangible assets acquired (such as land and building) and to any identifiable intangible assets based on their estimated fair values at the date of acquisition. The fair value of a property is determined on an “as-if-vacant” basis. Management considers various factors in estimating the "as-if-vacant" value including an estimated lease up period, lost rents and carrying costs. The identifiable intangible assets would include the estimated value of “in-place” leases, above and below market “in-place” leases, and tenant relationships. The portion of the purchase price that management determines should be allocated to identifiable intangible assets is amortized in depreciation and amortization or as an adjustment to rental revenue, as appropriate, over the estimated life of the associated intangible asset (for instance, the remaining life of the associated tenant lease). The Company records goodwill when the cost of an acquired entity exceeds the net of the amounts assigned to assets acquired and liabilities assumed. Acquisition-related costs, including due diligence costs, professional fees, and other costs to effect an acquisition, are expensed as incurred.

Deferred Charges and Other Assets

Direct financing costs are deferred and amortized on a straight-line basis, which approximates the effective interest method, over the terms of the related agreements as a component of interest expense. Direct costs related to successful leasing activities are capitalized and amortized on a straight-line basis over the lives of the related leases. Cash expenditures for leasing costs are recognized in the Statement of Cash Flows as operating activities. All other deferred charges are amortized on a straight-line basis over the terms of the agreements to which they relate. Goodwill is reviewed for impairment annually, or more frequently if events or circumstances indicate that the asset may be impaired. If relevant qualitative factors indicate that goodwill may be impaired, the Company evaluates whether the fair value of goodwill is less than its carrying amount. If the book value of goodwill exceeds its estimated fair value, an impairment test is performed to measure the amount of impairment loss, if any, to be recorded.

Share-Based Compensation Plans

The cost of share-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized over the requisite employee service period which is generally the vesting period of the grant. The Company recognizes compensation costs for awards with graded vesting schedules on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

Interest Rate Hedging Agreements

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

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

Income Taxes

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

The Company has made Taxable REIT Subsidiary (TRS) elections for all of its corporate subsidiaries pursuant to section 856(I) of the Internal Revenue Code. The TRSs are subject to corporate level income taxes, including certain foreign income taxes for foreign operations, which are provided for in the Company’s financial statements.

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

Noncontrolling Interests

Noncontrolling interests in the Company are comprised of the ownership interests of (1) noncontrolling interests in the Operating Partnership and (2) the noncontrolling interests in joint ventures controlled by the Company through ownership or contractual arrangements. Consolidated net income and comprehensive income includes amounts attributable to the Company and the noncontrolling interests. Transactions that change the Company's ownership interest in a subsidiary are accounted for as equity transactions if the Company retains its controlling financial interest in the subsidiary. A gain or loss is recognized upon the deconsolidation of a subsidiary.
The Company evaluates whether noncontrolling interests are subject to any redemption features outside of the Company's control that would result in presentation outside of permanent equity pursuant to general accounting standards regarding the classification and measurement of redeemable equity instruments. Certain noncontrolling interests in the Operating Partnership and consolidated ventures of the Company qualify as redeemable noncontrolling interests (Note 9). To the extent such noncontrolling interests are currently redeemable or it is probable that they will eventually become redeemable, these interests are adjusted to the greater of their redemption value or their carrying value at each balance sheet date.

Discontinued Operations

The Company reclassifies to discontinued operations any material operations and gains or losses on disposal related to consolidated properties disposed of during the period. In 2011, the Company disposed of two centers and reported gains on the extinguishment of debt in the Statement of Operations and Comprehensive Income (Note 2).

Use of Estimates

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

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

No single retail company represents 10% or more of the Company's revenues. Although the Company does business in China, South Korea and Hong Kong, there are not yet any material revenues from customers or long-lived assets attributable to a country other than the United States of America
Acquisitions, Dispositions and Development
Acquisitions Dispositions and Development [Text Block]
Acquisitions and Dispositions

Acquisitions

The Mall at Green Hills, The Gardens on El Paseo and El Paseo Village

In December 2011, the Company acquired The Mall at Green Hills in Nashville, Tennessee, and The Gardens on El Paseo and El Paseo Village in Palm Desert, California from affiliates of Davis Street Properties, LLC. The consideration for the properties was $560 million, excluding transaction costs. The consideration consists of the assumption of approximately $206 million of debt, approximately $281.5 million in installment notes, and the issuance of 1.3 million Operating Partnership units. The assumed debt consists of three loans (see Note 8 for balances, stated interest rates, and maturity dates). The 1.3 million Operating Partnership units issued were determined based on a value of $55 per unit, which approximates the fair value due to restrictions on sale of these Operating Partnership units. See Note 9 for features of the Operating Partnership units. The installment notes bore interest at 3.125% and were paid in full in February 2012 (Note 8). As of December 31, 2011, the installment notes were secured by restricted cash funded by borrowings under the Company's line of credit, which was classified within Restricted Cash on the Consolidated Balance Sheet. All recipients of the Operating Partnership units acquired an equal number of shares of Series B Preferred Stock (Note 14).
 
The following table summarizes the preliminary allocation of the purchase price to the identifiable assets acquired and liabilities assumed at the dates of acquisition.
 
 
Allocation of purchase price
 
Properties:
 
 
 
Land
$
74,200

 
 
Buildings, improvements, and equipment
468,936

 
 
Total additions to properties
$
543,136

 
Deferred charges and other assets:
 
 
 
In-place leases
29,831

 
 
Total assets acquired
$
572,967

 
 
 
 
 
Accounts payable and accrued liabilities:
 
 
 
Below market rents
$
(3,377
)
 
Mortgage notes payable:
 
 
 
Premium for above market interest rates
(9,590
)
 
 
Total liabilities acquired
$
(12,967
)
 
 
Net assets acquired
$
560,000

 


Revenue and net income of the acquired centers were immaterial for the partial period owned in December.

Unaudited Proforma Information

If the acquisitions had occurred on January 1, 2010, the Company's consolidated revenues and net income for the year ended December 31, 2011 would have been $678.4 million and $275.8 million, respectively, and the Company's consolidated revenues and net income for the year ended December 31, 2010 would have been $657.6 million and $87.9 million, respectively.

TCBL

In December 2011, Taubman Asia acquired a 90% controlling interest in a Beijing-based retail real estate consultancy company with more than 200 staff across seven offices in Mainland China. The new company is named Taubman TCBL and the total consideration for the transaction was $23.7 million. Taubman Asia paid approximately $11.5 million in cash and credited the noncontrolling owners with approximately $11.9 million of capital in the newly formed company. The $11.5 million in cash includes approximately $10.2 million that was lent in August 2011 by Taubman Asia to the noncontrolling partners. Upon closing, the loan and $0.3 million of accrued interest were converted to capital and the remaining balance was paid in cash. Substantially all of the purchase price was allocated to goodwill in Taubman TCBL. Revenues and net income of the acquired business were immaterial for the period owned in December 2011. The acquisition would not have had a material impact on the Company's 2011 and 2010 results had the acquisition occurred on January 1, 2010.

Purchase Price Allocations

For the preceding acquisitions, the Company has not yet finalized its allocations of the purchase prices to the tangible and identifiable intangible assets and liabilities acquired. The Company is awaiting certain valuation information for assets and liabilities acquired to complete its allocations. A final determination of the required purchase price allocations will be made during 2012.

Acquisition costs

During the year ended December 31, 2011, the Operating Partnership incurred expenses for the acquisition of The Mall at Green Hills, The Gardens on El Paseo and El Paseo Village, and Taubman TCBL as discussed above. No acquisition costs were incurred during 2010 and 2009.

Dispositions

In November 2011, the mortgage lender for The Pier Shops at Caesars (The Pier Shops) completed the foreclosure on the property and title to the property was transferred to the mortgage lender. The Company has been relieved of $135 million of debt obligations plus accrued default interest associated with the property. As a result, a $126.7 million non-cash accounting gain was recognized on extinguishment of the debt obligation, representing the difference between the book value of the debt, interest payable and other obligations extinguished over the net book value of the property and other assets transferred as of the transfer date. In 2009, the Company concluded that the carrying value of the investment in the consolidated joint venture that owns The Pier Shops was impaired and recognized a non-cash charge of $107.7 million, representing the excess of The Pier Shops’ book value of the investment over its fair value of approximately $52 million. The Operating Partnership’s share of the charge was $101.8 million. The Company’s conclusion was based on a decision by its Board of Directors, in connection with a review of the Company’s capital plan, to discontinue the Company’s financial support of The Pier Shops.

In December 2011, the mortgage lender for Regency Square accepted a deed in lieu of foreclosure on the property and title to the property was transferred to the mortgage lender. The Company has been relieved of $72.2 million of debt obligations plus accrued default interest associated with the property. As a result, a $47.4 million non-cash accounting gain was recognized on extinguishment of the debt obligation, representing the difference between the book value of the debt, interest payable and other obligations extinguished over the net book value of the property and other assets transferred as of the transfer date. In 2009, the Company concluded that the carrying value of the investment in Regency Square was impaired and recognized a non-cash charge of $59 million, representing the excess book value of the investment over its fair value of approximately $29 million. The Company’s conclusion was based on estimates of future cash flows for the property, which were negatively impacted by necessary capital expenditures and declining net operating income. In September 2010, the Board of Directors concluded that it was in the best interest of the Company to discontinue its financial support of Regency Square.

Discontinued operations for all periods reported in the accompanying Statement of Operations and Comprehensive Income consist of the financial results of The Pier Shops and Regency Square. Total revenues from discontinued operations were $21.5 million, $28.1 million, and $28.7 million for the years ended December 31, 2011, 2010 and 2009. The net loss from discontinued operations, excluding the gains on extinguishment of debt in 2011, during the years ended December 31, 2011, 2010 and 2009 was $28.2 million, $20.3 million, and $183.6 million, respectively. Included in the net loss for the year ended December 31, 2009 are non-cash impairment charges of $166.7 million.
Income Taxes
Income Taxes
Income Taxes

Income Tax Expense

The Company’s income tax expense for the years ended December 31, 2011, 2010 and 2009 is as follows:

 
2011
 
2010
 
2009
State current
$
551

 
$
907

 
$
1,017

State deferred
(366
)
 
(183
)
 
385

Federal current
217

 
45

 


Federal deferred
158

 


 


Foreign current
50

 
(35
)
 
255

Total income tax expense
$
610

 
$
734

 
$
1,657



Net Operating Loss Carryforwards

As of December 31, 2011, the Company has a total federal net operating loss carryforward of $5.9 million, expiring as follows:

Tax Year
 
Expiration
 
Amount
2007
 
2027
 
$
273

2008
 
2028
 
5,326

2009
 
2029
 
286



The Company also has a foreign net operating loss carryforward of $5.3 million, $4.4 million of which has an indefinite carryforward period and $0.9 million of which expires in 2020.

Deferred Taxes

Deferred tax assets and liabilities as of December 31, 2011 and 2010 are as follows:

 
2011
 
2010
Deferred tax assets:
 
 
 
Federal
$
3,655

 
$
8,589

Foreign
1,196

 
2,361

State
232

 
6,786

Total deferred tax assets
$
5,083

 
$
17,736

Valuation allowances
(1,373
)
 
(10,199
)
Net deferred tax assets
$
3,710

 
$
7,537

Deferred tax liabilities:
 

 
 

Federal
$
623

 
$
607

State
121

 
4,171

Total deferred tax liabilities
$
744

 
$
4,778



The Company believes that it is more likely than not the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. These future operations are primarily dependent upon the Manager's profitability, the timing and amounts of gains on land sales, the profitability of the Company’s Asia operations and other factors affecting the results of operations of the Taxable REIT Subsidiaries. The valuation allowances relate to net operating loss carryforwards and tax basis differences where there is uncertainty regarding their realizability.

Tax Status of Dividends

Dividends declared on the Company’s common and preferred stock and their tax status are presented in the following tables. The tax status of the Company’s dividends in 2011, 2010, and 2009 may not be indicative of future periods. The portion of dividends paid in 2010 shown below as capital gains are designated as capital gain dividends for tax purposes.

Year
 
Dividends per common share declared
 
Return of capital
 
Ordinary income
 
15% Rate long term capital gain
 
Unrecaptured Sec. 1250 capital gain
2011
 
$
1.7625

 
$
0.4455

 
$
1.3170

 
$
0.0000

 
$
0.0000

2010
 
1.8659

(1) 
0.0780

 
1.2732

 
0.5147

 
0.0000

2009
 
1.6600

 
0.6467

 
1.0133

 
0.0000

 
0.0000


(1) Includes a special dividend of $0.1834 per share, which was declared as a result of the taxation of capital gain incurred
from the restructuring of the Company’s ownership in International Plaza, including the liquidation of the Operating
Partnership’s private REIT.

Year
 
Dividends per Series G Preferred share declared
 
Ordinary income
 
15% Rate long term capital gain
 
Unrecaptured Sec. 1250 capital gain
2011
 
$
2.000

 
$
2.0000

 
$
0.0000

 
$
0.0000

2010
 
2.000

 
1.4483

 
0.5517

 
0.0000

2009
 
2.000

 
2.0000

 
0.0000

 
0.0000


Year
 
Dividends per Series H Preferred share declared
 
Ordinary income
 
15% Rate long term capital gain
 
Unrecaptured Sec. 1250 capital gain
2011
 
$
1.90625

 
$
1.90625

 
$
0.0000

 
$
0.0000

2010
 
1.90625

 
1.38045

 
0.5258

 
0.0000

2009
 
1.90625

 
1.90625

 
0.0000

 
0.0000



Michigan State Taxes

In May 2011, the State of Michigan replaced the Michigan Business Tax with a Corporate Income Tax that became effective on January 1, 2012. Due to the repeal of the Michigan Business Tax, the Company wrote off net deferred tax assets and deferred tax liabilities of approximately $3.7 million and $4.1 million, respectively, in 2011. Under the new law, the Company does not expect to pay any Corporate Income Tax based on estimates of taxable income of the Company's unitary filing group for Michigan tax purposes.

Uncertain Tax Positions

The Company had no unrecognized tax benefits as of or during the three year period ended December 31, 2011. The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2011. The Company has no material interest or penalties relating to income taxes recognized in the Consolidated Statement of Operations and Comprehensive Income for the years ended December 31, 2011, 2010 and 2009 or in the Consolidated Balance Sheet as of December 31, 2011 and 2010. As of December 31, 2011, returns for the calendar years 2008 through 2011 remain subject to examination by U.S. and various state and foreign tax jurisdictions.
Properties
Real Estate Disclosure [Text Block]
Properties

Properties at December 31, 2011 and December 31, 2010 are summarized as follows:

 
2011
 
2010
Land
$
333,375

 
$
271,662

Buildings, improvements, and equipment
3,625,400

 
3,194,309

Construction in process
15,479

 
15,626

Development pre-construction costs
46,700

 
46,700

 
$
4,020,954

 
$
3,528,297

Accumulated depreciation and amortization
(1,271,943
)
 
(1,199,247
)
 
$
2,749,011

 
$
2,329,050



Depreciation expense for 2011, 2010, and 2009 was $127.2 million, $144.9 million, and $139.7 million, respectively.

The charge to operations in 2011, 2010, and 2009 for domestic and non-U.S. pre-development activities was $23.7 million, $16.0 million, and $12.3 million, respectively.

See Note 2 for properties acquired in 2011.

The Pier Shops at Caesars and Regency Square

See Note 2 for information related to the transfers of these shopping centers to their mortgage lenders in 2011 and Note 17 regarding impairment charges taken on these centers in 2009.

Oyster Bay

The Company is expensing costs relating to the Oyster Bay project until it is probable that it will be able to successfully move forward with a project. The Company’s capitalized investment in the project as of December 31, 2011 is $39.8 million, which is classified in “development pre-construction costs” and consists of land and site improvements. If the Company is ultimately unsuccessful in obtaining the right to build the center, it is uncertain whether the Company would be able to recover the full amount of this capitalized investment through alternate uses of the land.

Other

One shopping center pays annual special assessment levies of a Community Development District (CDD), for which the Company has capitalized the related infrastructure assets and improvements (Note 17).
Investments in Unconsolidated Joint Ventures
Investments in Unconsolidated Joint Ventures
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.

Shopping Center
Ownership as of
December 31, 2011 and 2010
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 Unconsolidated Joint Ventures for which accumulated distributions have exceeded investments in and net income of the Unconsolidated 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. In addition, distributions related to refinancing of the centers will further decrease the net equity of the centers.

Westfarms

In 2009, West Farms Associates and West Farms Mall, LLC (together, “Westfarms”) and The Taubman Company LLC (together with Westfarms, the “WFM Parties”) entered into a settlement agreement (the “Settlement Agreement”) with three developers of a project called Blue Back Square in West Hartford, Connecticut. Pursuant to the Settlement Agreement, the lawsuit was withdrawn with prejudice upon payment by Westfarms of $34 million to the developers. The Company has a 79% investment in Westfarms Associates, an unconsolidated joint venture that owns Westfarms mall, and the Company’s share of the settlement was $26.8 million. In January 2010, the WFM Parties executed a settlement agreement with the Town of West Hartford, which provided for a full and general release for the benefit of the WFM Parties upon payment by Westfarms of $4.5 million, or $3.6 million at the Company’s share, which was recorded in 2009.

The Mall at Studio City

In 2008, Taubman Asia entered into agreements to own a noncontrolling 25% interest in, and provide services to, The Mall at Studio City, the retail component of a major mixed-use project in Macao, China. In 2009, the Company’s Macao agreements were terminated and an initial $54 million cash payment was returned because the financing for the project was not completed.

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 operations information. Beneficial interest is calculated based on the Operating Partnership's ownership interest in each of the Unconsolidated Joint Ventures.
 
December 31 2011
 
December 31
2010
Assets:
 
 
 
Properties
$
1,107,314

 
$
1,092,916

Accumulated depreciation and amortization
(446,059
)
 
(417,712
)
 
$
661,255

 
$
675,204

Cash and cash equivalents
22,042

 
21,339

Accounts and notes receivable, less allowance for doubtful accounts of $1,422 and $1,471 in 2011 and 2010
24,628

 
26,288

Deferred charges and other assets
21,289

 
18,891

 
$
729,214

 
$
741,722

 
 
 
 
Liabilities and accumulated deficiency in assets:
 

 
 

Notes payable
$
1,138,808

 
$
1,125,618

Accounts payable and other liabilities
55,737

 
37,292

TRG's accumulated deficiency in assets
(244,758
)
 
(224,636
)
Unconsolidated Joint Venture Partners' accumulated deficiency in assets
(220,573
)
 
(196,552
)
 
$
729,214

 
$
741,722

 
 
 
 
TRG's accumulated deficiency in assets (above)
$
(244,758
)
 
$
(224,636
)
TRG basis adjustments, including elimination of intercompany profit
67,282

 
68,682

TCO's additional basis
60,801

 
62,747

Net Investment in Unconsolidated Joint Ventures
$
(116,675
)
 
$
(93,207
)
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures
192,257

 
170,329

Investment in Unconsolidated Joint Ventures
$
75,582

 
$
77,122


 
Year Ended December 31
 
2011
 
2010
 
2009
Revenues
$
266,455

 
$
270,391

 
$
272,535

Maintenance, taxes, utilities, promotion, and other operating expenses
$
84,922

 
$
90,680

 
$
95,775

Litigation charges

 

 
38,500

Interest expense
61,034

 
63,835

 
64,405

Depreciation and amortization
38,389

 
37,234

 
38,396

Total operating costs
$
184,345

 
$
191,749

 
$
237,076

Nonoperating income
162

 
2

 
87

Net income
$
82,272

 
$
78,644

 
$
35,546

 
 
 
 
 
 
Net income attributable to TRG
$
46,208

 
$
45,092

 
$
10,748

Realized intercompany profit, net of depreciation on TRG’s basis adjustments
1,802

 
2,266

 
2,686

Depreciation of TCO's additional basis
(1,946
)
 
(1,946
)
 
(1,946
)
Equity in income of Unconsolidated Joint Ventures
$
46,064

 
$
45,412

 
$
11,488

 
 
 
 
 
 
Beneficial interest in Unconsolidated Joint Ventures’ operations:
 

 
 

 
 

Revenues less maintenance, taxes, utilities, promotion, and other operating expenses
$
100,773

 
$
100,682

 
$
67,815

Interest expense
(31,607
)
 
(33,076
)
 
(33,427
)
Depreciation and amortization
(23,102
)
 
(22,194
)
 
(22,900
)
Equity in income of Unconsolidated Joint Ventures
$
46,064

 
$
45,412

 
$
11,488



Other

The provision for losses on accounts receivable of the Unconsolidated Joint Ventures was $0.7 million, $0.5 million, and $0.9 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Deferred charges and other assets of $21.3 million at December 31, 2011were comprised of leasing costs of $31.3 million, before accumulated amortization of $(19.6) million, net deferred financing costs of $4.8 million, and other net charges of $4.8 million. Deferred charges and other assets of $18.9 million at December 31, 2010 were comprised of leasing costs of $30.9 million, before accumulated amortization of $(18.9) million, net deferred financing costs of $2.8 million, and other net charges of $4.1 million.

The estimated fair value of the Unconsolidated Joint Ventures’ notes payable was $1.2 billion at December 31, 2011 and 2010. The methodology for determining fair value is consistent with the methodology used for determining the fair value of consolidated mortgage notes payable (Note 17).

Depreciation expense on properties for 2011, 2010, and 2009 was $30.3 million, $32.3 million, and $33.8 million, respectively.
Accounts and Notes Receivable
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
Accounts and Notes Receivable

Accounts and notes receivable at December 31, 2011 and December 31, 2010 are summarized as follows:

 
2011
 
2010
Trade
$
31,462

 
$
24,515

Notes
6,968

 
10,517

Straight-line rent and recoveries
24,863

 
22,840

 
$
63,293

 
$
57,872

Less: Allowance for doubtful accounts and notes
(3,303
)
 
(7,966
)
 
$
59,990

 
$
49,906



Notes receivable as of December 31, 2011 provide interest at a range of interest rates from 2.9% to 10.0% (with a weighted average interest rate of 4.8%) and mature at various dates through December 2019. The balance of notes receivable at December 31, 2010 included $4 million of notes from certain tenants at The Pier Shops that were delinquent. These notes, net of their related allowance, were transferred to the lender as part of the extinguishment of the center's debt (Note 2). The balance of notes receivable at December 31, 2011 and 2010 included $5.1 million and $6.5 million, respectively, related to the joint venture partners at Westfarms for their share of the litigation charges that were paid in 2009 (Note 5).
Deferred Charges Other Assets
Deferred Charges and Other Assets [Text Block]
Deferred Charges and Other Assets

Deferred charges and other assets at December 31, 2011 and December 31, 2010 are summarized as follows:

 
2011
 
2010
Leasing costs
$
37,026

 
$
37,780

Accumulated amortization
(17,259
)
 
(17,282
)
 
$
19,767

 
$
20,498

In-place leases, net (Note 2)
29,632

 
 
Goodwill (Note 2)
22,884

 
 
Funding of development project (below)
20,882

 
 
Deferred financing costs, net
11,200

 
5,399

Insurance deposit (Note 17)
10,708

 
10,135

Prepaid expenses
3,923

 
3,487

Deferred tax asset, net
3,710

 
7,537

Investments (Note 17)
2,158

 
2,061

Interest rate contract (Note 10)
 
 
4,856

Intangibles, net
 
 
252

Other, net
6,576

 
8,266

 
$
131,440

 
$
62,491



In September 2011, Taubman Asia agreed to partner with Shinsegae Group, South Korea's largest retailer, to build a shopping mall in Hanam, Gyeonggi Province, South Korea. The Company has invested $20.9 million for an interest in the project. The Company has the option to put its interest in the project after the completion of due diligence. The potential return of the investment, including a 7% return on the investment, is secured by a letter of credit from Shinsegae.
Beneficial Interest in Debt and Interest Expense
Beneficial interest in Debt and Interest Expense
Notes Payable

Mortgage notes payable at December 31, 2011 and December 31, 2010 consist of the following:

 
2011
 
2010
 
Stated Interest Rate
 
Maturity Date
 
Balance Due on Maturity
 
Facility Amount
 
Beverly Center
$
316,724

 
$
322,700

 
5.28%
 
02/11/14
 
$
303,277

 
 
 
Cherry Creek Shopping Center
280,000

 
280,000

 
5.24%
 
06/08/16
 
280,000

 
 
 
Dolphin Mall
290,000

 
 
 
LIBOR + 1.75%
 
01/29/15
(1) 
290,000

 
 
(1) 
Dolphin Mall
 
 
10,000

 
LIBOR + 0.70%
 
 
(1) 
 
 
 
(1) 
El Paseo Village
17,059

(2 
) 
 
 
4.42%
 
12/06/15
 
15,565

 
 
 
Fairlane Town Center
30,000

 
 
 
LIBOR + 1.75%
 
01/29/15
(1) 
30,000

 
 
(1) 
Fairlane Town Center
 
 
80,000

 
LIBOR + 0.70%
 
 
(1) 
 
 
 
(1) 
Great Lakes Crossing Outlets
129,222

 
132,262

 
5.25%
 
03/11/13
 
125,507

 
 

 
International Plaza
325,000

 
 
 
4.85%
 
12/01/21
 
285,503

 
 

 
International Plaza
 
 
325,000

 
LIBOR + 1.15%
(3) 
 
 
 
 
 
 
MacArthur Center
131,000

 
131,000

 
LIBOR + 2.35%
(4) 
09/01/20
 
117,234

 
 

 
Northlake Mall
215,500

 
215,500

 
5.41%
 
02/06/16
 
215,500

 
 

 
Regency Square
 
(5) 
72,690

 
 
 
 
 
 
(5) 
 

 
Stony Point Fashion Park
103,615

 
105,484

 
6.24%
 
06/01/14
 
98,585

 
 

 
The Gardens on El Paseo
86,475

(6) 
 
 
6.10%
 
06/11/16
 
81,480

 
 
 
The Mall at Green Hills
111,801

(7) 
 
 
6.89%
 
12/01/13
 
105,045

 
 
 
The Mall at Partridge Creek
81,203

 
82,140

 
6.15%
 
07/06/20
 
70,433

 
 

 
The Mall at Short Hills
540,000

 
540,000

 
5.47%
 
12/14/15
 
540,000

 
 

 
The Mall at Wellington Green
200,000

 
200,000

 
5.44%
 
05/06/15
 
200,000

 
 

 
The Pier Shops at Caesars  
 
(8) 
135,000

 
 
 
 
 
 

 
 

 
Twelve Oaks Mall
 
 
 

 
LIBOR + 1.75%
 
01/29/15
(1) 
 

 
 
(1) 
Twelve Oaks Mall
 
 
 
 
LIBOR + 0.70%
 
 
(1) 
 
 
 
(1) 
Line of Credit
6,536

 
24,784

 
LIBOR + 1.00%
 
04/30/12
 
6,536

 
65,000

(9) 
 
$
2,864,135

 
$
2,656,560

 
 
 
 
 
 

 
 

 


(1)
Dolphin, Fairlane, and Twelve Oaks are the borrowers and collateral for the $650 million revolving credit facility. The unused borrowing capacity at December 31, 2011 was $330 million. Sublimits may be reallocated quarterly but not more often than twice a year. The facility has a one-year extension option. Prior to the July 2011 refinancing, the revolving facility was $550 million.
(2)
Balance includes purchase accounting adjustment of $0.3 million premium for an above market interest rate upon acquisition of the center in December 2011 (Note 2).
(3)
In January 2011, the loan was extended. Prior to January 2011, the rate on the loan was fixed at 5.01% due to an interest rate swap that expired.
(4)
Stated interest rate is swapped to an effective rate of 4.99%.
(5)
Title to Regency Square was transferred to the lender in December 2011 and the Company was relieved of $72.2 million of debt plus accrued interest (Note 2).
(6)
Balance includes purchase accounting adjustment of $5 million premium for an above market interest rate upon acquisition of the center in December 2011 (Note 2).
(7)
Balance includes purchase accounting adjustment of $4.2 million premium for an above market interest rate upon acquisition of the center in December 2011 (Note 2).
(8)
Title to The Pier Shops was transferred to the lender in November 2011 and the Company was relieved of $135 million debt plus accrued interest (Note 2).
(9)
The unused borrowing capacity at December 31, 2011 was $29.2 million.

Mortgage notes payable are collateralized by properties with a net book value of $2.4 billion at December 31, 2011.

The following table presents scheduled principal payments on mortgage notes payable as of December 31, 2011:

2012
$
20,950

 
2013
243,842

 
2014
406,241

 
2015
1,083,548

(1)
2016
585,092

 
Thereafter
514,974

 
Total principal maturities
$
2,854,647

 
Net unamortized debt premiums
9,488

 
Total mortgages
$
2,864,135

 

    
(1)
Includes $320 million with a one-year extension option.

Installment Notes

At December 31, 2011, the Company had installment notes outstanding of $281.5 million that were repaid in February 2012. The interest rate on the notes was 3.13%. As of December 31, 2011, the installment notes were secured by restricted cash funded by borrowings under the Company's line of credit, which was classified within Restricted Cash on the Consolidated Balance Sheet.

2012 Maturities

In March 2011, the maturity date on the Company’s secondary line of credit was extended through April 2012. In addition, the maximum amount available under this facility was increased to $65 million from the prior $40 million maximum for the $25 million letter of credit required by the lessor of the City Creek Center project. The Company intends to extend the line of credit at maturity.

The $181.1 million loan on Westfarms, a 79% owned Unconsolidated Joint Venture (Note 5), matures in July 2012 and is prepayable without penalty in April 2012. Currently the loan is fixed at 6.10%. The $116.3 million loan on Sunvalley, a 50% owned Unconsolidated Joint Venture (Note 5), matures in November 2012 and is prepayable without penalty in August 2012. Currently the loan is fixed at 5.67%. The $30 million loan on Taubman Land Associates, a Sunvalley entity, also matures in November 2012. Currently the loan is swapped to an effective rate of 5.95% until maturity. The Company expects to refinance these loans at rates under 5% and expects its share of excess proceeds to be in excess of $100 million.

Debt Covenants and Guarantees

Certain loan agreements contain various restrictive covenants, including a minimum net worth requirement, a maximum payout ratio on distributions, a minimum debt yield ratio, a minimum fixed charges coverage ratio, minimum interest coverage ratios, and a maximum leverage ratio, the latter being the most restrictive. The Company is in compliance with all covenants and loan obligations as of December 31, 2011. 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.

Payments of principal and interest on the loans in the following table are guaranteed by the Operating Partnership as of December 31, 2011.

Center
Loan Balance as of 12/31/11
 
TRG's Beneficial Interest in Loan Balance as of 12/31/11
 
Amount of Loan Balance Guaranteed by TRG as of 12/31/11
 
% of Loan Balance Guaranteed by TRG
 
% of Interest Guaranteed by TRG
 
(in millions)
 
 
 
 
Dolphin Mall
$
290.0

 
$
290.0

 
$
290.0

 
100
%
 
100
%
Fairlane Town Center
30.0

 
30.0

 
30.0

 
100
%
 
100
%
Twelve Oaks Mall

 

 

 
100
%
 
100
%


Restricted cash at December 31, 2011 included cash funded by the Company's line of credit that was used to repay the $281.5 million of installment notes in February 2012 (Note 2). In addition, the Company is required to escrow cash balances for specific uses stipulated by its lenders. As of December 31, 2011 and December 31, 2010, the Company’s restricted cash balances for these uses were $5.9 million and $7.6 million, respectively.

Beneficial Interest in Debt and Interest Expense

The Operating Partnership's beneficial interest in the debt, 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 noncontrolling interests in Cherry Creek (50%), International Plaza (49.9%), The Pier Shops (22.5%) through disposition in November 2011, The Mall at Wellington Green (10%), and MacArthur Center (5%).

 
At 100%
 
At Beneficial Interest
 
Consolidated Subsidiaries
 
Unconsolidated Joint Ventures
 
Consolidated Subsidiaries
 
Unconsolidated Joint Ventures
Debt as of:
 
 
 
 
 
 
 
December 31, 2011
$
3,145,602

 
$
1,138,808

 
$
2,816,877

 
$
580,557

December 31 2010
2,656,560

 
1,125,618

 
2,297,460

(1) 
575,103

 
 
 
 
 
 
 
 
Capitalized interest:
 

 
 

 
 

 
 

Year Ended December 31, 2011
$
422

 
 

 
$
422

 
 

Year Ended December 31, 2010
319

 
 
 
319

 
 
 
 
 
 
 
 
 
 
Interest expense from continuing operations:
 

 
 

 
 

 
 

Year Ended December 31, 2011
$
122,277

 
$
61,034

 
$
110,147

 
$
31,607

Year Ended December 31, 2010
132,362

 
63,835

 
114,504

 
33,076

 
 
 
 
 
 
 
 
Interest expense from discontinued operations (2):
 
 
 
 
 
 
 
Year Ended December 31, 2011
$
21,427

 
 
 
$
21,427

 
 
Year Ended December 31, 2010
20,346

 
 
 
16,980

(1) 
 

(1)
The Pier Shops is included at beneficial interest of 77.5%.
(2)
Includes The Pier Shops and Regency Square, see Note 2. See “MD&A – Results of Operations – Discontinued Operations of The Pier Shops and Regency Square: Reconciliations of Net Operating Income to Net Loss,” regarding a change in the presentation of beneficial interest in The Pier Shops’ operations in 2011.
Noncontrolling Interests
Noncontrolling Interests
Noncontrolling Interests

Redeemable Noncontrolling Interests

In December 2011, the Company acquired The Mall at Green Hills and The Gardens on El Paseo and El Paseo Village from affiliates of Davis Street Properties, LLC (Note 2). The purchase price consideration included approximately 1.3 million Operating Partnership units determined based on a value of $55 per unit. These partnership units will become eligible to be converted into the Company's common shares after one year pursuant to the Continuing Offer (Note 15). Prior to that date, the holders have the ability to put the units back to the Company for cash at the lesser of the current market price of the Company's common shares or $55 per share. Considering the redemption provisions, the Company is accounting for these Operating Partnership units as a redeemable noncontrolling interest until they become subject to the Continuing Offer. The carrying value of these units was $72.7 million at December 31, 2011. Adjustments to the redemption value are recorded through equity.

In December 2011, Taubman Asia acquired a 90% controlling interest in TCBL (Note 2). As part of the purchase price consideration, $11.9 million of capital in the newly formed company was credited by Taubman Asia to the noncontrolling owners, who also own a 10% residual interest. The noncontrolling ownership interest can be put back to the Company at 50% of the fair value of the ownership interest beginning in December 2016, increasing to 100% in December 2018. Taubman Asia will fund any additional capital required by the business and will receive a preferred return on all capital contributed. The ownership agreements provide for the distribution of preferred returns on capital as well as returns of all such capital prior to the sharing of profits on relative ownership interests. Considering the redemption provisions, the Company accounts for the joint venture partner's interest as a contingently redeemable noncontrolling interest. The carrying value of the interest was $11.6 million at December 31, 2011. Any adjustments to the redemption value will be recorded through equity.

In October 2010, 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 subsequent to the Asia President obtaining his ownership interest. 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, and the Asia President has the ability to put, the Asia President's ownership interest, subject to certain conditions including the termination of the Asia President's employment and the expiration of certain required holding periods. The redemption price for the ownership interest is a nominal amount through 2013 and subsequently 50% (increasing to 100% in May 2015) of the fair value of the ownership interest less the amount required to return the Operating Partnership's preferred interest. The Company has determined that the Asia President's ownership interest in Taubman Asia qualifies as an equity award, considering its specific redemption provisions, and accounts for it as a contingently redeemable noncontrolling interest, with a carrying value of zero at December 31, 2011. Any adjustments to the redemption value will be recorded through equity.

In July 2010, the Company formed a joint venture that is focusing on developing and owning outlet shopping centers. The Company owns a 90% controlling interest and consolidates the venture, while the joint venture partner owns a 10% interest. The amount of capital that the joint venture partner is required to contribute is capped. The Company will have a preferred investment to the extent it contributes capital in excess of the amount commensurate with its ownership interest. At any time after June 2012, the Company will have the right to purchase the joint venture partner's entire interest and the joint venture partner will have the right to require the Company to purchase the joint venture partner's entire interest. Additionally, the parties each have a one-time put and/or call on the joint venture partner's interest in any stabilized centers, while still maintaining the ongoing joint venture relationship. The purchase price of the joint venture partner's interest will be based on fair value. Considering the redemption provisions, the Company accounts for the joint venture partner's interest as a contingently redeemable noncontrolling interest with a carrying value of zero at December 31, 2011. Any adjustments to the redemption value will be recorded through equity.

Reconciliation of Redeemable Noncontrolling Interests
 
2011
Balance January 1, 2011
$

Issuance of redeemable noncontrolling interest (Note 2)
11,882

Issuance of redeemable noncontrolling interest (Note 2)
72,683

Contributions
794

Allocation of net loss
(739
)
Comprehensive income (loss)
(10
)
Distributions
(66
)
Adjustments of redeemable noncontrolling interests
(309
)
Balance December 31, 2011
$
84,235



Equity Balances of Nonredeemable Noncontrolling Interests

The net equity balance of the nonredeemable noncontrolling interests as of December 31, 2011 and December 31, 2010 includes the following:

 
2011
 
2010
Non-redeemable noncontrolling interests:
 
 
 
Noncontrolling interests in consolidated joint ventures
$
(101,872
)
 
$
(100,355
)
Noncontrolling interests in partnership equity of TRG
(22,452
)
 
(93,012
)
TRG Series F preferred equity (Note 14)
 
 
29,217

 
$
(124,324
)
 
$
(164,150
)


Income Allocable to Noncontrolling Interests

Net income attributable to the noncontrolling interests for the years ended December 31, 2011, 2010, and 2009 includes the following:

 
2011
 
2010
 
2009
Net income (loss) attributable to noncontrolling interests:
 
 
 
 
 
Non-redeemable noncontrolling interests:
 
 
 
 
 
Noncontrolling share of income of consolidated joint ventures
$
15,477

 
$
9,859

 
$
3,115

Noncontrolling share of income (loss) of TRG
80,161

 
26,219

 
(31,224
)
TRG Series F preferred distributions
(372
)
 
2,460

 
2,460

 
$
95,266

 
$
38,538

 
$
(25,649
)
Redeemable noncontrolling interests
(739
)
 
(79
)
 
 
 
$
94,527

 
$
38,459

 
$
(25,649
)


Equity Transactions

The following schedule presents the effects of changes in Taubman Centers, Inc.’s ownership interest in consolidated subsidiaries on Taubman Centers, Inc.’s equity for the years ended December 31, 2011, 2010, and 2009:

 
2011
 
2010
 
2009
Net income (loss) attributable to Taubman Centers, Inc. common shareowners
$
176,701

 
$
47,599

 
$
(69,706
)
Transfers (to) from the noncontrolling interest –
 

 
 

 
 
Decrease in Taubman Centers, Inc.’s paid-in capital for the adjustments of noncontrolling interest (1)
(40,561
)
 
(988
)
 
(483
)
Net transfers (to) from noncontrolling interests
(40,561
)
 
(988
)
 
(483
)
Change from net income (loss) attributable to Taubman Centers, Inc. and transfers (to) from noncontrolling interests
$
136,140

 
$
46,611

 
$
(70,189
)

(1)
In 2011, 2010 and 2009, adjustments of the noncontrolling interest were made as a result of changes in the Company's ownership of the Operating Partnership in connection with the Company's issuance of common stock (Note 14), share-based compensation under employee and director benefit plans (Note 13), issuances of stock pursuant to the Continuing Offer (Note 13), and issuances of Operating Partnership units in connection with the acquisition of centers (Note 2).

International Plaza Refinancing

In November 2011, International Plaza refinanced its debt and distributed a portion of the excess proceeds to its partners. The noncontrolling partner’s share of the distributions was $25.2 million and is classified within Dividends and Distributions in the Consolidated Statement of Changes in Equity. In January 2011, the loan on International Plaza was extended. At extension, the principal balance on the loan was required to be paid down by $52.6 million. The outside partner's share of $26.4 million is classified within Contributions from Noncontrolling Interest in the Consolidated Statement of Changes in Equity.

Finite Life Entities

Accounting Standards Codification Topic 480, “Distinguishing Liabilities from Equity” establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. At December 31, 2011, the Company held controlling interests in consolidated entities with specified termination dates in 2081 and 2083. The noncontrolling 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 noncontrolling interests was approximately $208 million at December 31, 2011, compared to a book value of $(99.3) million that is classified in Noncontrolling Interests in the Company’s Consolidated Balance Sheet. The fair values of the noncontrolling interests were calculated as the noncontrolling interests' ownership shares of the underlying properties' fair values. The properties' fair values were estimated by considering their in-place net operating incomes, current market capitalization rates, and mortgage debt outstanding.
Derivative and Hedging Activities
Derivative and Hedging Activities
Derivative and Hedging Activities

Risk Management Objective and Strategies for Using Derivatives

The Company uses derivative instruments, such as interest rate swaps and interest rate caps, primarily to manage exposure to interest rate risks inherent in variable rate debt and refinancings. The Company may also enter into forward starting swaps or treasury lock agreements to set the effective interest rate on a planned fixed-rate financing. The Company’s interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. In a forward starting swap or treasury lock agreement that the Company cash settles in anticipation of a fixed rate financing or refinancing, the Company will receive or pay an amount equal to the present value of future cash flow payments based on the difference between the contract rate and market rate on the settlement date.

The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedging instruments under the accounting requirements for derivatives and hedging, except for two immaterial out-of-the-money interest rate caps, which mature in January 2012 and April 2012.

As of December 31, 2011, the Company had the following outstanding interest rate derivatives that were designated and are expected to be effective as cash flow hedges of the interest payments on the associated debt.
<
Instrument Type
 
Ownership
 
Notional Amount
 
Swap Rate
 
Credit Spread on Loan
 
Total Swapped Rate on Loan
 
Maturity Date
Consolidated Subsidiaries:
 
 
 
 
 
 
 
 
 
 
 
 
Receive variable (LIBOR) /pay-fixed swap (1)
 
95.0
%
 
$
131,000

 
2.64
%
 
2.35
%
 
4.99
%
 
September 2020
Unconsolidated Joint Ventures:
 
 

 
 

 
 

 
 

 
 

 
 
Receive variable (LIBOR) /pay-fixed swap
 
50.0
%
 
30,000

 
5.05
%
 
0.90
%
 
5.95
%
 
November 2012
Receive variable (LIBOR) /pay-fixed swap (2)
 
50.0
%
 
137,500

 
2.40
%
 
1.70
%
 
4.10
%
 
April 2018