TAUBMAN CENTERS INC, 10-K filed on 2/25/2013
Annual Report
Document and Entity Information Document (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Feb. 22, 2013
Jun. 30, 2012
Entity Information [Line Items]
 
 
 
Entity Registrant Name
TAUBMAN CENTERS INC. 
 
 
Entity Central Index Key
0000890319 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2012 
 
 
Document Fiscal Year Focus
2012 
 
 
Document Fiscal Period Focus
Q4 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
63,346,242 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 4.4 
CONSOLIDATED BALANCE SHEET (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Assets:
 
 
Properties (Notes 4 and 8)
$ 4,246,000 
$ 4,020,954 
Accumulated depreciation and amortization
(1,395,876)
(1,271,943)
Properties, net
2,850,124 
2,749,011 
Investment in Unconsolidated Joint Ventures (Notes 2 and 5)
214,152 
75,582 
Cash and cash equivalents
32,057 
24,033 
Restricted cash (Notes 2 and 8)
6,138 
295,318 
Accounts and notes receivable, less allowance for doubtful accounts of $3,424 and $3,303 in 2012 and 2011 (Note 6)
69,033 
59,990 
Accounts receivable from related parties (Note 12)
2,009 
1,418 
Deferred charges and other assets (Note 7)
94,982 
131,440 
Total Assets
3,268,495 
3,336,792 
Liabilities:
 
 
Mortgage notes payable (Note 8)
2,952,030 
2,864,135 
Installment notes (Notes 2 and 8)
 
281,467 
Accounts payable and accrued liabilities
278,098 
255,146 
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures (Note 5)
383,293 
192,257 
Total Liabilities
3,613,421 
3,593,005 
Commitments and contingencies (Notes 2, 4, 8, 9, 10, 11, 13, and 15)
   
   
Temporary Equity, Carrying Amount, Including Portion Attributable to Noncontrolling Interests
84,235 
Equity:
 
 
Series B Non-Participating Convertible Preferred Stock, $0.001 par and liquidation value, 40,000,000 shares authorized, 25,327,699 and 26,461,958 shares issued and outstanding at December 31, 2012 and 2011
25 
26 
Common Stock, $0.01 par value, 250,000,000 shares authorized, 63,310,148 and 58,022,475 shares issued and outstanding at December 31, 2012 and 2011
633 
580 
Additional paid-in capital (Note 2)
657,071 
673,923 
Accumulated other comprehensive income (loss) (Note 19)
(22,064)
(27,613)
Dividends in excess of net income
(891,283)
(863,040)
Stockholders' Equity Attributable to Parent
(255,618)
(216,124)
Noncontrolling interests (Note 9)
(89,308)
(124,324)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest
(344,926)
(340,448)
Total Liabilities and Equity
$ 3,268,495 
$ 3,336,792 
CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Series B Preferred Stock [Member]
Dec. 31, 2011
Series B Preferred Stock [Member]
Dec. 31, 2011
Series G Preferred Stock [Member]
Dec. 31, 2011
Series H Preferred Stock [Member]
Dec. 31, 2012
Series J Preferred Stock [Member]
Allowance for doubtful accounts
$ 3,424,000 
$ 3,303,000 
 
 
 
 
 
Preferred Stock, par value per share
 
 
$ 0.001 
$ 0.001 
$ 0 
$ 0 
$ 0 
Preferred Stock, liquidation value per share
 
 
$ 0.001 
$ 0.001 
 
 
$ 25 
Preferred Stock, Liquidation Preference, Value
 
 
 
 
$ 100,000,000 
$ 87,000,000 
$ 192,500,000 
Preferred Stock, shares authorized
 
 
40,000,000 
40,000,000 
4,000,000 
3,480,000 
7,700,000 
Preferred Stock, shares issued
 
 
25,327,699 
26,461,958 
4,000,000 
3,480,000 
7,700,000 
Preferred Stock, shares outstanding
 
 
25,327,699 
26,461,958 
4,000,000 
3,480,000 
7,700,000 
Common stock, par value per share
$ 0.01 
$ 0.01 
 
 
 
 
 
Common stock, shares authorized
250,000,000 
250,000,000 
 
 
 
 
 
Common stock, shares issued
63,310,148 
58,022,475 
 
 
 
 
 
Common stock, shares outstanding
63,310,148 
58,022,475 
 
 
 
 
 
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Revenues:
 
 
 
Minimum rents
$ 398,306 
$ 342,612 
$ 327,580 
Percentage rents
28,026 
20,358 
13,063 
Expense recoveries
258,252 
229,313 
225,079 
Management, leasing, and development services
31,811 
25,551 
16,109 
Other
31,579 
27,084 
44,596 
Total Revenues
747,974 
644,918 
626,427 
Expenses:
 
 
 
Maintenance, taxes, utilities, and promotion
201,552 
179,092 
177,703 
Other operating
73,203 
67,301 
57,354 
Management, leasing, and development services
27,417 
11,955 
8,258 
General and administrative
39,659 
31,598 
30,234 
Acquisition costs (Note 2)
 
5,295 
 
Interest expense
142,616 
122,277 
132,362 
Depreciation and amortization
149,517 
132,707 
145,271 
Total Expenses
633,964 
550,225 
551,182 
Nonoperating income
277 
1,252 
2,683 
Income from continuing operations before income tax expense and equity in income of Unconsolidated Joint Ventures
114,287 
95,945 
77,928 
Income tax expense (Note 3)
(4,964)
(610)
(734)
Equity in income of Unconsolidated Joint Ventures (Note 5)
48,494 
46,064 
45,412 
Income from continuing operations
157,817 
141,399 
122,606 
Discontinued operations (Note 2):
 
 
 
Gains on extinguishment of debt
 
174,171 
 
Other discontinued operations
 
(28,172)
(20,279)
Income (Loss) from Discontinued Operations, Including Portion Attributable to Noncontrolling Interest
 
145,999 
(20,279)
Net income
157,817 
287,398 
102,327 
Income from continuing operations attributable to noncontrolling interests (Note 9)
(51,643)
(50,218)
(45,053)
(Income) loss from discontinued operations attributable to noncontrolling interests (Note 9)
 
(44,309)
6,594 
Net income attributable to Taubman Centers, Inc.
106,174 
192,871 
63,868 
Distributions to participating securities of TRG (Note 13)
(1,612)
(1,536)
(1,635)
Preferred stock dividends (Note 14)
(21,051)
(14,634)
(14,634)
Net income attributable to Taubman Centers, Inc. common shareowners
83,511 
176,701 
47,599 
Other comprehensive income (Note 10):
 
 
 
Unrealized gain (loss) on interest rate instruments and other
(4,506)
(20,583)
18,240 
Cumulative translation adjustment
2,644 
 
 
Reclassification adjustment for amounts recognized in net income
793 
1,215 
1,260 
Other Comprehensive Income (Loss), Net of Tax
(1,069)
(19,368)
19,500 
Comprehensive income
156,748 
268,030 
121,827 
Comprehensive income attributable to noncontrolling interests
(51,238)
(74,856)
(48,490)
Comprehensive income attributable to Taubman Centers, Inc.
$ 105,510 
$ 193,174 
$ 73,337 
Basic earnings per common share (Note 16):
 
 
 
Continuing operations
$ 1.39 
$ 1.32 
$ 1.12 
Discontinued operations
 
$ 1.79 
$ (0.25)
Total basic earnings per common share
$ 1.39 
$ 3.11 
$ 0.87 
Diluted earnings per common share (Note 16):
 
 
 
Continuing operations
$ 1.37 
$ 1.29 
$ 1.11 
Discontinued operations
 
$ 1.74 
$ (0.25)
Total diluted earnings per common share
$ 1.37 
$ 3.03 
$ 0.86 
Weighted average number of common shares outstanding – basic
59,884,455 
56,899,966 
54,569,618 
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, 2009
$ (474,747)
$ 26 
$ 543 
$ 579,983 
$ (24,443)
$ (884,666)
$ (146,190)
Balance, 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
 
(126,109)
(126,116)
 
 
 
 
Share-based compensation under employee and director benefit plans
10,890 
 
10,887 
 
 
 
Share-based compensation under employee and director benefit plans, shares
 
 
248,352 
 
 
 
 
Adjustments of noncontrolling interests
 
 
 
(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 
Balance at Dec. 31, 2010
(527,911)
26 
547 
589,881 
(14,925)
(939,290)
(164,150)
Balance, 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 (in shares)
2,012,500 
 
2,012,500 
 
 
 
 
Issuance of equity for acquisition of properties, value
 
 
 
 
 
Issuance of equity for acquisition of properties, shares
 
1,321,522 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer
 
(1)
11 
(10)
 
 
 
Issuance of stock pursuant to Continuing Offer, shares
 
(1,092,690)
(1,092,766)
 
 
 
 
Redemption of Series F Preferred Equity
(27,000)
 
 
 
 
 
(27,000)
Share-based compensation under employee and director benefit plans
12,679 
 
12,677 
 
 
 
Share-based compensation under employee and director benefit plans, shares
 
 
221,155 
 
 
 
 
Adjustments of noncontrolling interests
309 
 
 
(40,561)
449 
 
40,421 
Contributions from noncontrolling interests (excludes net loss attributable to redeemable noncontrolling interests)
31,417 
 
 
 
 
 
31,417 
Dividend equivalents
(113)
 
 
 
 
(113)
 
Dividend and distributions (excludes dividends attributable to redeemable noncontrolling interests)
(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 
Balance at Dec. 31, 2011
(340,448)
26 
580 
673,923 
(27,613)
(863,040)
(124,324)
Balance, shares at Dec. 31, 2011
 
33,941,958 
58,022,475 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Issuance of common stock, net of offering costs
208,939 
 
29 
208,910 
 
 
 
Issuance of common stock, net of offering costs (in shares)
2,875,000 
 
2,875,000 
 
 
 
 
Issuance of stock pursuant to Continuing Offer
 
(1)
11 
(10)
 
 
 
Issuance of stock pursuant to Continuing Offer, shares
 
(1,132,359)
(1,132,424)
 
 
 
 
Issuance of Series J Preferred Stock, net of offering costs
186,215 
 
 
186,215 
 
 
 
Issuance of Series J Preferred Stock, net of offering costs, shares
 
7,700,000 
 
 
 
 
 
Redemption of Series G and H Preferred Stock
(180,588)
 
 
(180,588)
 
 
 
Redemption of Series G and H Preferred Stock, shares
 
(7,480,000)
 
 
 
 
 
Share-based compensation under employee and director benefit plans
19,846 
 
13 
19,833 
 
 
 
Share-based compensation under employee and director benefit plans, shares
 
 
1,280,249 
 
 
 
 
Tax impact of share-based compensation
1,020 
 
 
1,020 
 
 
 
Transfer to nonredeemable equity
72,035 
 
 
72,035 
 
 
 
Acquisition of additional ownership in International Plaza
(275,000)
 
 
(339,170)
 
 
(64,170)
Adjustments of noncontrolling interests
 
 
 
14,903 
6,212 
 
(21,115)
Adjustments of noncontrolling interests, shares
 
1,900 
 
 
 
 
 
Contributions from noncontrolling interests (excludes net loss attributable to redeemable noncontrolling interests)
4,567 
 
 
 
 
 
4,567 
Dividend equivalents
(140)
 
 
 
 
(140)
 
Dividend and distributions (excludes dividends attributable to redeemable noncontrolling interests)
(199,145)
 
 
 
 
(134,277)
(64,868)
Net income (excludes net loss attributable to redeemable noncontrolling interests)
158,793 
 
 
 
 
106,174 
52,619 
Unrealized gain (loss) on interest rate instruments and other
(4,506)
 
 
 
 
 
 
Unrealized gain (loss) on interest rate instruments and other (excludes other comprehensive gain (loss) attributable to redeemable noncontrolling interests)
(4,457)
 
 
 
(3,117)
 
(1,340)
Cumulative translation adjustment
2,644 
 
 
 
1,888 
 
756 
Reclassification adjustment for amounts recognized in net income
793 
 
 
 
566 
 
227 
Balance at Dec. 31, 2012
$ (344,926)
$ 25 
$ 633 
$ 657,071 
$ (22,064)
$ (891,283)
$ (89,308)
Balance, shares at Dec. 31, 2012
 
33,027,699 
63,310,148 
 
 
 
 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Parenthetical (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Contibutions attributable to redeemable noncontrolling interests
$ 231 
$ 794 
 
Dividends attributable to redeemable noncontrolling interests
(2,456)
(66)
 
Net income (loss) attributable to redeemable noncontrolling interest
(976)
(739)
(79)
Other comprehensive income (loss) attributable to redeemable noncontrolling interest
$ (49)
$ (10)
 
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Cash Flows From Operating Activities:
 
 
 
Net income
$ 157,817 
$ 287,398 
$ 102,327 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization - continuing operations
149,517 
132,707 
145,271 
Depreciation and amortization - discontinued operations
 
10,309 
8,605 
Provision for bad debts
1,397 
2,032 
3,363 
Gains on sales of land and land-related rights
 
(519)
(2,218)
Gains on extinguishment of debt of discontinued operations
 
(174,171)
 
Other
12,165 
13,142 
11,216 
Increase (decrease) in cash attributable to changes in assets and liabilities:
 
 
 
Receivables, restricted cash, deferred charges, and other assets
(24,445)
(21,211)
(21,805)
Accounts payable and other liabilities
27,898 
20,479 
17,849 
Net Cash Provided By Operating Activities
324,349 
270,166 
264,608 
Cash Flows From Investing Activities:
 
 
 
Additions to properties
(247,637)
(69,443)
(72,152)
Release of (additions to) restricted cash (Note 2)
289,389 
(289,389)
 
Proceeds from disposition of Taubman TCBL (Note 2)
4,414 
 
 
Investment in TCBL Inc. (Note 2)
 
(11,523)
 
Investments in Asia Unconsolidated Joint Ventures
(104,753)
(20,882)
 
Contributions to Unconsolidated Joint Ventures
(5,455)
(875)
(7,261)
Contribution for acquisition of additional interest in Waterside Shops (Note 2)
(36,250)
 
 
Distributions from Unconsolidated Joint Ventures in excess of income
220,662 
17,639 
32,836 
Proceeds from sales of land
 
3,728 
3,060 
Issuances of notes receivable
 
 
(2,948)
Repayments of notes receivable
5,974 
1,544 
1,623 
Other
 
861 
 
Net Cash Provided By (Used In) Investing Activities
126,344 
(368,340)
(44,842)
Cash Flows From Financing Activities:
 
 
 
Debt proceeds
105,740 
536,648 
213,500 
Debt payments
(11,462)
(334,017)
(243,885)
Repayment of installment notes
(281,467)
 
 
Debt issuance costs
(4,711)
(8,830)
(2,943)
Issuance of common stock, net of offering costs
208,939 
111,956 
 
Issuance of common stock and/or partnership units in connection with incentive plans
6,503 
2,593 
2,532 
Issuance of Series J Preferred Stock, net of offering costs
186,215 
 
 
Redemptions of Series G and H Preferred Stock
(187,000)
 
 
Redemption of Series F Preferred Equity
 
(27,000)
 
Acquisition of noncontrolling interest in International Plaza (Note 2)
275,000 
 
 
Distributions to noncontrolling interests
(67,325)
(94,113)
(67,468)
Distributions to participating securities of TRG
(1,612)
(1,536)
(1,635)
Contributions from noncontrolling interests
4,798 
32,211 
 
Cash dividends to preferred shareowners
(14,639)
(14,634)
(14,634)
Cash dividends to common shareowners
(111,543)
(100,286)
(101,890)
Other
(105)
(76)
(228)
Net Cash Provided By (Used In) Financing Activities
(442,669)
102,916 
(216,651)
Net Increase In Cash and Cash Equivalents
8,024 
4,742 
3,115 
Cash and Cash Equivalents at End of Period
$ 32,057 
$ 24,033 
$ 19,291 
Summary of Significant Accounting Policies
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, 2012 included 24 urban and suburban shopping centers in 12 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.

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, 2012, the Operating Partnership’s equity included one class of preferred equity (Series J Preferred Equity) 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 interest, and the remaining amounts to the general and limited partners in the Operating Partnership in accordance with their percentage ownership. The Series J Preferred Equity is owned by the Company and is eliminated in consolidation.

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. In September 2012, the Series G and Series H Preferred Equity were redeemed. The Series G and Series H Preferred Equity were owned by the Company and eliminated in consolidation. At December 31, 2010, the Operating Partnership's equity also included the Series F Preferred Equity. 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 redemptions of the Series G and Series H Preferred Equity and the issuance of the Series J Preferred Equity.



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
2012
 
88,656,297

 
63,310,148

 
25,346,149

 
71%
 
69%
2011
 
84,502,883

 
58,022,475

 
26,480,408

 
69
 
69
2010
 
80,947,630

 
54,696,054

 
26,251,576

 
68
 
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, 2012 consisted of 25,327,699 shares of Series B Preferred Stock (Note 14) and 63,310,148 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. The Company deposits cash and cash equivalents with institutions with high credit quality. From time to time, cash and cash equivalents may be in excess of FDIC insurance limits. Included in cash equivalents is $18.0 million and $12.6 million at December 31, 2012 and 2011, 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, 2012 and December 31, 2011, the Company’s restricted cash balances were $6.1 million and $295.3 million, respectively. Included in restricted cash is $4.6 million at December 31, 2012 on deposit in excess of the FDIC insured limit. In 2011 cash was drawn from the Company's revolving lines 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. Costs related to the acquisition of a controlling interest, 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.

Foreign Currency Translation
The Company has certain entities in Asia for which the functional currency is the local currency. The assets and liabilities of the entities are translated from their functional currency into U.S. Dollars at the rate of exchange in effect on the balance sheet date. Income statement accounts are generally translated using the average exchange rate for the period. Income statement amounts of significant transactions are translated at the rate in effect as of the date of the transaction. The Company's share of unrealized gains and losses resulting from the translation of the entities' financial statements are reflected in stockholders' equity as a component of Accumulated Other Comprehensive Income (loss) in the Company's Consolidated Balance Sheet (Note 19).
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. At December 31, 2012, the Company's investments in Asia are in Unconsolidated Joint Ventures and accounted for under the equity method.
Acquisitions, Dispositions and Development
Acquisitions Dispositions and Development [Text Block]
Acquisitions, Dispositions, and Development

Acquisitions

International Plaza

In December 2012, the Company acquired an additional 49.9% interest in International Plaza from CSAT, LP, which increased its ownership in the center to 100%. The $437 million purchase price for CSAT, LP's interest in the center consisted of $275 million of cash and approximately $162 million of beneficial interest in debt. The acquisition of the additional interest in a consolidated subsidiary was accounted for as an equity transaction. Consequently, the difference of $339.2 million between the consideration paid for the interest and the book value of the noncontrolling interest was recognized as an adjustment to additional paid-in-capital and the noncontrolling partners in TRG.

Waterside Shops

In December 2012, the Company acquired an additional 25% interest in Waterside Shops, which brought the Company's ownership interest in the center to 50%. The acquisition of the additional interest was accomplished by purchasing an affiliate of Oregon PERS' 50% interest in the center on a pari passu basis with an affiliate of The Forbes Company. The $155 million purchase price for Oregon PERS' interest in the center consisted of $72.5 million of cash and $82.5 million of beneficial interest in debt. The Company's share of the consideration for the additional interest was $77.5 million, which consisted of cash and beneficial interest in debt of $36.3 million and $41.3 million, respectively. After the acquisition, the Company continues to recognize its investment in Waterside Shops in Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet. The Company's share of the difference between the purchase price and the net book value of the additional interest in the Unconsolidated Joint Venture was estimated to be $52.7 million, which has been preliminarily allocated to land, buildings, improvements, and equipment. In addition, beneficial interest in debt was increased by a $3.9 million purchase accounting premium to record the debt at fair value.

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 consisted of the assumption of $206 million of debt, $281.5 million in installment notes, and the issuance of 1.3 million Operating Partnership units. The assumed debt consisted 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 approximated the fair value at the acquisition date, 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 revolving lines of credit, which was classified within Restricted Cash on the Consolidated Balance Sheet. For each Operating Partnership unit issued, a share of Series B Preferred Stock (Note 15) was also issued.
 
The following table summarizes the 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
468,077

 
 
Total additions to properties
$
542,277

 
Deferred charges and other assets
30,690

 
 
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

 


Acquisition costs

During the year ended December 31, 2011, the Operating Partnership incurred $5.3 million in expenses for the acquisition of The Mall at Green Hills, The Gardens on El Paseo and El Paseo Village, and Taubman TCBL. Acquisition costs incurred during 2012 were immaterial and none were incurred during 2010.

Dispositions

Discontinued operations for all periods reported in the accompanying Statement of Operations and Comprehensive Income consist of the financial results of The Pier Shops at Caesars (The Pier Shops) and Regency Square. Total revenues from discontinued operations were $21.5 million and $28.1 million for the years ended December 31, 2011 and 2010, respectively. The net loss from discontinued operations, excluding the gains on extinguishment of debt in 2011, during the years ended December 31, 2011 and 2010 was $28.2 million and $20.3 million, respectively.

In November 2011, the mortgage lender for The Pier Shops completed the foreclosure on the property and title to the property was transferred to the mortgage lender. The Company was 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 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 was 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.

U.S. Development

City Creek Center

City Creek Center, a mixed-use project in Salt Lake City, Utah, opened in March 2012. The Company owns the retail space subject to a long-term participating lease. City Creek Reserve, Inc. (CCRI), an affiliate of the LDS Church, is the participating lessor and provided all of the construction financing. The Company owns 100% of the leasehold interest in the retail buildings and property. The Company paid $75 million to CCRI for leasehold improvements upon opening of the retail center in March 2012, which is classified within Additions to Properties on the Consolidated Statement of Cash Flows.

The Mall at University Town Center

The Mall at University Town Center, a 0.9 million square foot center, is under construction in Sarasota, Florida. The Company is funding its 50% share of the project. The center will be anchored by Saks Fifth Avenue, Macy's, and Dillard's and is expected to open in October 2014. As of December 31, 2012, the Company has invested $5.9 million in the project.

The Mall of San Juan

The Mall of San Juan, a 0.7 million square foot center, is under construction in San Juan, Puerto Rico. In July 2012, the Company closed on the purchase of the land and owns 80% of the project. The center will be anchored by Nordstrom and Saks Fifth Avenue and is expected to open in spring 2015. As of December 31, 2012, the Company has capitalized costs of $46.5 million ($36.8 million at TRG's share).

Taubman Prestige Outlets Chesterfield

Taubman Prestige Outlets Chesterfield, an outlet project in Chesterfield, Missouri, is under construction. The Company has a 90% ownership interest in the project and expects to open the 0.3 million square foot first phase of this project in August 2013. As of December 31, 2012, the Company has capitalized costs of $47.2 million ($42.6 million at TRG's share).
 
Asia

Hanam Union Square

In 2011, the Company agreed to partner with Shinsegae Group, South Korea's largest retailer, to build an approximately 1.7 million square foot shopping mall in Hanam, Gyeonggi Province, South Korea. At that time, the Company invested $20.9 million for an interest in the project, which was classified within Deferred Charges and Other Assets on the Consolidated Balance Sheet as of December 31, 2011. In 2012, upon completion of due diligence, the Company confirmed its 30% interest in the development and invested additional funds into the project, which is scheduled to open in 2016. As of December 31, 2012, the Company has invested $78.8 million in the project, which is classified within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.

Retail component of Xi'an Saigao City Plaza

In 2012, the Company entered into a joint venture with Beijing Wangfujing Department Store (Group) Co., Ltd, one of China's largest department store chains. The joint venture will own a 60% controlling interest in and manage an approximately 1.0 million foot shopping center to be located at Xi'an Saigao City Plaza, a large-scale mixed-use development in Xi'an, China. Through this joint venture, the Company will beneficially own a 30% interest in the shopping center, which is scheduled to open in 2015. As of December 31, 2012, the Company has invested $49.2 million in the project, which is classified within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.

Zhengzhou Vancouver Times Square

In 2013, the Company entered into a joint venture with Beijing Wangfujing Department Store (Group) Co., Ltd. The joint venture will own a majority interest and manage an approximately 1.0 million square foot multi-level shopping center to be located in Zhengzhou, China. Through this joint venture, the Company will beneficially own a 32% interest in the shopping center, which is scheduled to open in 2015. As of December 31, 2012, the Company has invested $0.3 million in the project, which is classified within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.
 
TCBL

In December 2011, the Company acquired a 90% controlling interest in a Beijing-based retail real estate consultancy company in Mainland China. The new company was named Taubman TCBL and the total consideration for the transaction was $23.7 million. Taubman Asia paid $11.5 million in cash and credited the noncontrolling owners with $11.9 million of capital in the newly formed company. Substantially all of the purchase price was allocated to goodwill in Taubman TCBL.

In November 2012, assets of the Taubman TCBL business were sold for $15.5 million. Additionally, the purchase price was adjusted for certain working capital and other transition costs. The total sale consideration was approximately equal to Taubman's investment in the business. As part of the sale, the non-controlling owners in Taubman TCBL relinquished the capital that was credited to them in connection with the Company's 2011 acquisition of Taubman TCBL. In connection with the sale, the Company received cash of approximately $4.4 million, while the remaining consideration consisted of approximately $3.6 million held in an escrow account pending receipt of consideration in an equivalent amount of Chinese Renminbi, a note receivable of approximately $8.5 million, and other receivables of approximately $0.8 million. The cash held in escrow is included within Deferred Charges and Other Assets on the Consolidated Balance Sheet (Note 7). The note receivable and other receivables are included within Accounts and Notes Receivable on the Consolidated Balance Sheet (Note 6). Additionally, the Company incurred a tax liability of $3.2 million, which is included within Income Tax Expense on the Consolidated Statement of Operations and Comprehensive Income during 2012.
Income Taxes
Income Taxes
Income Taxes

Income Tax Expense

The Company’s income tax expense for the years ended December 31, 2012, 2011, and 2010 is as follows:

 
2012
 
2011
 
2010
State current
$
205

 
$
551

 
$
907

State deferred
(13
)
 
(366
)
 
(183
)
Federal current
1,011

 
217

 
45

Federal deferred
257

 
158

 
 
Foreign current
3,324

(1) 
50

 
(35
)
Foreign deferred
180

(1) 
 
 
 
Total income tax expense
$
4,964

 
$
610

 
$
734



(1) The Company recognized $3.2 million of income tax expense related to the sale of Taubman TCBL's assets (Note 2), of which $2.8 million is included in foreign current tax expense and $0.4 million is included in foreign deferred tax expense.

Net Operating Loss Carryforwards

As of December 31, 2012, the Company has a total federal net operating loss carryforward of $5.7 million, expiring as follows:

Tax Year
 
Expiration
 
Amount
2007
 
2027
 
$
30

2008
 
2028
 
5,245

2009
 
2029
 
297

2010
 
2030
 
37

2011
 
2031
 
44



The Company also has a foreign net operating loss carryforward of $4.4 million, $4.3 million of which has an indefinite carryforward period and $0.1 million of which expires at various points between 2014 and 2016.




Deferred Taxes

Deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows:

 
2012
 
2011
Deferred tax assets:
 
 
 
Federal
$
3,378

 
$
3,655

Foreign
1,090

 
1,196

State
182

 
232

Total deferred tax assets
$
4,650

 
$
5,083

Valuation allowances
(991
)
 
(1,373
)
Net deferred tax assets
$
3,659

 
$
3,710

Deferred tax liabilities:
 

 
 

Federal
$
609

 
$
623

Foreign
401

 
 
State
107

 
121

Total deferred tax liabilities
$
1,117

 
$
744



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 2012, 2011, and 2010 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
2012
 
$
1.8500

 
$
0.5429

 
$
1.3071

 
$
0.0000

 
$
0.0000

2011
 
1.7625

 
0.4455

 
1.3170

 
0.0000

 
0.0000

2010
 
1.8659

(1) 
0.0780

 
1.2732

 
0.5147

 
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
2012
 
$
1.350

 
$
1.3500

 
$
0.0000

 
$
0.0000

2011
 
2.000

 
2.0000

 
0.0000

 
0.0000

2010
 
2.000

 
1.4483

 
0.5517

 
0.0000


Year
 
Dividends per Series H Preferred share declared
 
Ordinary income
 
15% Rate long term capital gain
 
Unrecaptured Sec. 1250 capital gain
2012
 
$
1.28672

 
$
1.28672

 
$
0.0000

 
$
0.0000

2011
 
1.90625

 
1.90625

 
0.0000

 
0.0000

2010
 
1.90625

 
1.38045

 
0.5258

 
0.0000



Year
 
Dividends per Series J Preferred share declared
 
Ordinary income
 
15% Rate long term capital gain
 
Unrecaptured Sec. 1250 capital gain
2012
 
$
0.6184

 
$
0.6184

 
$
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 $3.7 million and $4.1 million, respectively, in 2011. The Company did not recognize any Michigan Corporate Income Tax in 2012 based on its estimates of taxable income of the Company's unitary filing group for Michigan tax purposes.

Tax Benefits

During the year ended December 31, 2012, the Company realized a $1.0 million tax benefit as additional paid-in capital relating to the redemption of certain share-based compensation awards.  This benefit represents the amount of reduced Federal income tax attributed to the tax deduction that exceeds the recognized deferred tax asset relating to the awards, which was based on their cumulative book compensation cost. This excess tax deduction is due to changes in the fair value of the Company's shares between the grant date (the measurement date for book purposes) and the exercise date (the measurement date for tax purposes) of the awards.

Uncertain Tax Positions

The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2012. 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, 2012, 2011, and 2010 or in the Consolidated Balance Sheet as of December 31, 2012 and 2011. As of December 31, 2012, returns for the calendar years 2009 through 2012 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, 2012 and December 31, 2011 are summarized as follows:

 
2012
 
2011
Land
$
333,270

 
$
333,375

Buildings, improvements, and equipment
3,749,180

 
3,625,400

Construction in process
116,850

 
15,479

Development pre-construction costs
46,700

 
46,700

 
$
4,246,000

 
$
4,020,954

Accumulated depreciation and amortization
(1,395,876
)
 
(1,271,943
)
 
$
2,850,124

 
$
2,749,011



Depreciation expense for 2012, 2011, and 2010 was $134.9 million, $127.2 million, and $144.9 million, respectively.

The charge to operations in 2012, 2011, and 2010 for domestic and non-U.S. pre-development activities was $19.8 million, $23.7 million, and $16.0 million, respectively.

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, 2012 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 sole direct or indirect managing general partner or managing member of Fair Oaks, Stamford Town Center, Sunvalley, and Westfarms. The Operating Partnership also provides certain management, leasing, and/or development services to the other shopping centers.

Shopping Center
Ownership as of
December 31, 2012 and 2011
Arizona Mills
50%
Fair Oaks
50
Hanam Union Square (under development)
Note 2
The Mall at Millenia
50
Stamford Town Center
50
Sunvalley
50
Waterside Shops
50/25 (Note 2)
Westfarms
79
Retail component of Xi'an Saigao City Plaza (under development)
Note 2


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 or terms of the related assets and liabilities.

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.

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. The combined information of the Unconsolidated Joint Ventures as of December 31, 2012 excludes the balances of Hanam Union Square and the retail component of Xi'an Saigao City Plaza, which are currently under development (Note 2). Beneficial interest is calculated based on the Operating Partnership's ownership interest in each of the Unconsolidated Joint Ventures.

 
2012
 
2011
Assets:
 
 
 
Properties
$
1,129,647

 
$
1,107,314

Accumulated depreciation and amortization
(473,101
)
 
(446,059
)
 
$
656,546

 
$
661,255

Cash and cash equivalents
30,070

 
22,042

Accounts and notes receivable, less allowance for doubtful accounts of $1,072 and $1,422 in 2012 and 2011
26,032

 
24,628

Deferred charges and other assets
31,282

 
21,289

 
$
743,930

 
$
729,214

 
 
 
 
Liabilities and accumulated deficiency in assets:
 

 
 

Mortgage notes payable
$
1,490,857

 
$
1,138,808

Accounts payable and other liabilities
68,282

 
55,737

TRG's accumulated deficiency in assets
(470,411
)
 
(244,758
)
Unconsolidated Joint Venture Partners' accumulated deficiency in assets
(344,798
)
 
(220,573
)
 
$
743,930

 
$
729,214

 
 
 
 
TRG's accumulated deficiency in assets (above)
$
(470,411
)
 
$
(244,758
)
TRG's investment in projects under development (Note 2)
128,279

 
 
TRG basis adjustments, including elimination of intercompany profit
114,136

 
67,282

TCO's additional basis
58,855

 
60,801

Net Investment in Unconsolidated Joint Ventures
$
(169,141
)
 
$
(116,675
)
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures
383,293

 
192,257

Investment in Unconsolidated Joint Ventures
$
214,152

 
$
75,582


 
Year Ended December 31
 
2012
 
2011
 
2010
Revenues
$
282,136

 
$
266,455

 
$
270,391

Maintenance, taxes, utilities, promotion, and other operating expenses
$
91,094

 
$
84,922

 
$
90,680

Interest expense
68,760

 
61,034

 
63,835

Depreciation and amortization
37,342

 
38,389

 
37,234

Total operating costs
$
197,196

 
$
184,345

 
$
191,749

Nonoperating income
18

 
162

 
2

Net income
$
84,958

 
$
82,272

 
$
78,644

 
 
 
 
 
 
Net income attributable to TRG
$
47,763

 
$
46,208

 
$
45,092

Realized intercompany profit, net of depreciation on TRG’s basis adjustments
2,677

 
1,802

 
2,266

Depreciation of TCO's additional basis
(1,946
)
 
(1,946
)
 
(1,946
)
Equity in income of Unconsolidated Joint Ventures
$
48,494

 
$
46,064

 
$
45,412

 
 
 
 
 
 
Beneficial interest in Unconsolidated Joint Ventures’ operations:
 

 
 

 
 

Revenues less maintenance, taxes, utilities, promotion, and other operating expenses
$
107,044

 
$
100,773

 
$
100,682

Interest expense
(35,862
)
 
(31,607
)
 
(33,076
)
Depreciation and amortization
(22,688
)
 
(23,102
)
 
(22,194
)
Equity in income of Unconsolidated Joint Ventures
$
48,494

 
$
46,064

 
$
45,412



Other

The provision for losses on accounts receivable of the Unconsolidated Joint Ventures was $0.3 million, $0.7 million, and $0.5 million for the years ended December 31, 2012, 2011, and 2010, respectively.

Deferred charges and other assets of $31.3 million at December 31, 2012 were comprised of leasing costs of $28.3 million, before accumulated amortization of $(15.8) million, net deferred financing costs of $7.0 million, and other net charges of $11.7 million. Deferred charges and other assets of $21.3 million at December 31, 2011 were 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.

The estimated fair value of the Unconsolidated Joint Ventures’ notes payable was $1.5 billion and $1.2 billion at December 31, 2012 and 2011, respectively. The methodology for determining this fair value is consistent with that used for determining the fair value of consolidated mortgage notes payable (Note 17).

Depreciation expense on properties for 2012, 2011, and 2010 was $31.1 million, $30.3 million, and $32.3 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, 2012 and December 31, 2011 are summarized as follows:

 
2012
 
2011
Trade
$
33,351

 
$
31,462

Notes
9,512

 
6,968

Straight-line rent and recoveries
29,594

 
24,863

 
$
72,457

 
$
63,293

Less: Allowance for doubtful accounts
(3,424
)
 
(3,303
)
 
$
69,033

 
$
59,990



Notes receivable as of December 31, 2012 includes a $8.5 million note related to the sale of Taubman TCBL's assets (Note 2), which was non-interest bearing in 2012. All of the notes receivable as of December 31, 2012 mature in 2013. The balance of notes receivable at December 31, 2011 included $5.1 million related to the joint venture partners at Westfarms for their share of litigation charges that were paid in 2009. In June 2012, the joint venture partners at Westfarms repaid this note upon the refinancing of Westfarms' debt.
Deferred Charges Other Assets
Deferred Charges and Other Assets [Text Block]
Deferred Charges and Other Assets

Deferred charges and other assets at December 31, 2012 and December 31, 2011 are summarized as follows:

 
2012
 
2011
Leasing costs
$
36,291

 
$
37,026

Accumulated amortization
(16,472
)
 
(17,259
)
 
$
19,819

 
$
19,767

In-place leases, net (Note 2)
22,751

 
29,632

Goodwill (Note 2)


 
22,884

Initial funding of Hanam Union Square development project (Note 2)


 
20,882

Deferred financing costs, net
13,071

 
11,200

Insurance deposit (Note 17)
11,291

 
10,708

Deposits
6,295

 
1,749

Prepaid expenses
5,181

 
3,923

Deferred tax asset, net
3,659

 
3,710

TCBL disposition escrow (Note 2)
3,550

 
 
Investments (Note 17)
2,452

 
2,158

Other, net
6,913

 
4,827

 
$
94,982

 
$
131,440

Beneficial Interest in Debt and Interest Expense
Beneficial interest in Debt and Interest Expense
Notes Payable

Mortgage notes payable at December 31, 2012 and December 31, 2011 consist of the following:

 
2012
 
2011
 
Stated Interest Rate
 
Maturity Date
 
Balance Due on Maturity
 
Facility Amount
 
Beverly Center
$
310,468

 
$
316,724

 
5.28%
 
02/11/14
 
$
303,277

 
 
 
Cherry Creek Shopping Center
280,000

 
280,000

 
5.24%
 
06/08/16
 
280,000

 
 
 
Dolphin Mall
250,000

 
290,000

 
LIBOR + 1.75%
 
01/29/15
(1) 
250,000

 
 
(1) 
El Paseo Village
16,698

(2) 
17,059

(2) 
4.42%
 
12/06/15
 
15,565

 
 
 
Fairlane Town Center
60,000

 
30,000

 
LIBOR + 1.75%
 
01/29/15
(1) 
60,000

 
 
(1) 
Great Lakes Crossing Outlets
126,036

 
129,222

 
5.25%
 
03/11/13
 
125,507

 
 

 
International Plaza
325,000

 
325,000

 
4.85%
 
12/01/21
 
285,503

 
 

 
MacArthur Center
130,567

 
131,000

 
LIBOR + 2.35%
(3) 
09/01/20
 
117,234

 
 

 
Northlake Mall
215,500

 
215,500

 
5.41%
 
02/06/16
 
215,500

 
 

 
Stony Point Fashion Park
101,644

 
103,615

 
6.24%
 
06/01/14
 
98,585

 
 
 
The Gardens on El Paseo
85,336

(4) 
86,475

(4) 
6.10%
 
06/11/16
 
81,480

 
 
 
The Mall at Green Hills
108,284

(5) 
111,801

(5) 
6.89%
 
12/01/13
 
105,045

 
 
 
The Mall at Partridge Creek
80,222

 
81,203

 
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

 
 

 
Twelve Oaks Mall
85,000

 
 
 
LIBOR + 1.75%
 
01/29/15
(1) 
85,000

 
 
(1) 
Revolving line of credit
37,275

 
 
 
LIBOR + 1.40%
(6) 
04/30/14
(6) 
37,275

 
65,000

(6) 
Revolving line of credit
 
 
6,536

 
LIBOR + 1.00%
(6) 
 
 
 
 
 
 
 
$
2,952,030

 
$
2,864,135

 
 
 
 
 
 

 
 

 


(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, 2012 was $255 million. Sublimits may be reallocated quarterly, but not more often than twice a year. The facility has a one-year extension option.
(2)
Balance includes purchase accounting adjustment of $0.2 million and $0.3 million premium in 2012 and 2011, respectively, for an above market interest rate upon acquisition of the center in December 2011 (Note 2).
(3)
Stated interest rate is swapped to an effective rate of 4.99%.
(4)
Balance includes purchase accounting adjustment of $3.9 million and $5.0 million premium in 2012 and 2011, respectively, for an above market interest rate upon acquisition of the center in December 2011 (Note 2).
(5)
Balance includes purchase accounting adjustment of $2.0 million and $4.2 million premium in 2012 and 2011, respectively, for an above market interest rate upon acquisition of the center in December 2011 (Note 2).
(6)
In April 2012, the maturity date on the Company's secondary revolving line of credit was extended through April 2014. The maximum amount available under this facility increased to $65 million and the rate was increased to LIBOR plus 1.40% from LIBOR plus 1.00%. The unused borrowing capacity at December 31, 2012 was $23.6 million.

Mortgage notes payable are collateralized by properties with a net book value of $2.3 billion at December 31, 2012.
The following table presents scheduled principal payments on mortgage notes payable as of December 31, 2012:

2013
$
243,843

(1)
2014
443,515

 
2015
1,158,548

 
2016
585,093

 
2017
8,585

 
Thereafter
506,390

 
Total principal maturities
$
2,945,974

 
Net unamortized debt premiums
6,056

 
Total mortgages
$
2,952,030

 
    
(1)
Includes $126 million that was refinanced in January 2013 (Note 21).

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 3.125%. As of December 31, 2011, the installment notes were secured by restricted cash funded by borrowings under the Company's revolving lines of credit, which was classified within Restricted Cash on the Consolidated Balance Sheet.

2013 Maturities

In January 2013, a 10-year, $225 million non-recourse refinancing was completed on Great Lakes Crossing Outlets. The existing $126 million, 5.25% fixed rate loan was scheduled to mature in March 2013 (Note 21).

The $108.3 million loan on The Mall at Green Hills loan matures in December 2013. The Company expects to pay off the loan using its revolving line of credit to allow for financial flexibility as it continues to explore expansion opportunities at the center.

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 of its covenants and loan obligations as of December 31, 2012. 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 Dolphin Mall, Fairlane Town Center, and Twelve Oaks Mall loans were guaranteed by the Operating Partnership as of December 31, 2012.

The Company is required to escrow cash balances for specific uses stipulated by certain of its lenders. As of December 31, 2012 and December 31, 2011, the Company’s cash balances restricted for these uses were $6.1 million and $5.9 million, respectively. Restricted cash at December 31, 2011 included cash funded by the Company's revolving lines of credit that was used to repay the $281.5 million of installment notes in February 2012 (Note 2).

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 Shopping Center (50%), International Plaza (49.9%) through acquisition of additional interest in December 2012 (Note 2), 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, 2012
$
2,952,030

 
$
1,490,857

 
$
2,785,501

 
$
841,363

December 31, 2011
3,145,602

 
1,138,808

 
2,816,877

 
580,557

 
 
 
 
 
 
 
 
Capitalized interest:
 

 
 

 
 

 
 

Year Ended December 31, 2012
$
3,594

(1) 
67

 
$
3,487

 
33

Year Ended December 31, 2011
422

 
 

 
422

 
 
 
 
 
 
 
 
 
 
Interest expense from continuing operations:
 

 
 

 
 

 
 

Year Ended December 31, 2012
$
142,616

 
$
68,760

 
$
126,031

 
$
35,862

Year Ended December 31, 2011
122,277

 
61,034

 
110,147

 
31,607

 
 
 
 
 
 
 
 
Interest expense from discontinued operations (2) -
 
 
 
 
 
 
 
Year Ended December 31, 2011
21,247

 
 
 
21,247

 
 

(1)
The Company capitalizes interest costs incurred in funding its equity contributions to development projects accounted for as UJVs. The capitalized interest cost is included in the Company's basis in its investment in UJVs. Such capitalized interest reduces interest expense in the Company's Consolidated Statement of Operations and Comprehensive Income and in the table above is included within Consolidated Subsidiaries.
(2)
Includes The Pier Shops and Regency Square (Note 2).
Noncontrolling Interests
Noncontrolling Interests
Noncontrolling Interests

Partnership Units Issued in Connection with 2011 Acquisition

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 1.3 million Operating Partnership units determined based on a value of $55 per unit. These partnership units became eligible to be converted into the Company's common shares in December 2012 pursuant to the Continuing Offer (Note 15). Prior to that date, the holders had the ability to put the units back to the Operating Partnership 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 accounted for these Operating Partnership units as a redeemable noncontrolling interest through December 2012 when they became subject to the Continuing Offer. The carrying value of these units was $72.7 million at December 31, 2011, which was classified within Redeemable Noncontrolling Interests on the Consolidated Balance Sheet. Adjustments to the redemption value were recorded through equity. In December 2012, upon the expiration of the redemption right of these redeemable noncontrolling interests, the carrying value of these units is now classified within Noncontrolling Interests on the Consolidated Balance Sheet. As of December 31, 2012, of the 1.3 million Operating Partnership units originally issued as consideration, approximately 0.9 million units were tendered under the Continuing Offer.

Redeemable Noncontrolling Interests

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 owned a 10% residual interest. The noncontrolling ownership interest could be put back to the Company at various dates. Considering the redemption provisions, the Company accounted 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. In November 2012, upon the sale of Taubman TCBL's assets (Note 2), the non-controlling owners relinquished the capital that was credited in connection with the acquisition.

The Company's president of Taubman Asia (the Asia President) has 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 upon specified terminations of the Asia President’s employment, although such put or call right may not be exercised for specified time periods after certain termination events. The redemption price for the ownership interest is generally a nominal amount through 2013 and subsequently 50% (increasing to 100% as early as 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, 2012 and December 31, 2011. Any adjustments to the redemption value are recorded through equity.

The Company owns a 90% controlling interest in a joint venture that is focusing on developing and owning outlet shopping centers. The amount of capital that the 10% 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. The Company has the right to purchase the joint venture partner's entire interest and the joint venture partner has 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, 2012 and December 31, 2011. Any adjustments to the redemption value are recorded through equity.


Reconciliation of Redeemable Noncontrolling Interests
 
2012
 
2011
Balance January 1
$
84,235

 
$

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

Issuance of redeemable noncontrolling interest - shopping center acquisitions (Note 2)
 
 
72,683

Contributions
231

 
794

Distributions
(2,456
)
 
(66
)
Allocation of net loss
(976
)
 
(739
)
Allocation of other comprehensive loss
(49
)
 
(10
)
Capital relinquished in connection with TCBL disposition (Note 2)
(8,855
)
 
 
Transfer to nonredeemable equity
(72,035
)
 
 
Adjustments of redeemable noncontrolling interests
(95
)
 
(309
)
Balance December 31
$

 
$
84,235



Equity Balances of Nonredeemable Noncontrolling Interests

The net equity balance of the nonredeemable noncontrolling interests as of December 31, 2012 and December 31, 2011 includes the following:

 
2012
 
2011
Non-redeemable noncontrolling interests:
 
 
 
Noncontrolling interests in consolidated joint ventures
$
(45,066
)
 
$
(101,872
)
Noncontrolling interests in partnership equity of TRG
(44,242
)
 
(22,452
)
 
$
(89,308
)
 
$
(124,324
)


Income Allocable to Noncontrolling Interests

Net income attributable to the noncontrolling interests for the years ended December 31, 2012, 2011, and 2010 includes the following:

 
2012
 
2011
 
2010
Net income (loss) attributable to noncontrolling interests:
 
 
 
 
 
Non-redeemable noncontrolling interests:
 
 
 
 
 
Noncontrolling share of income of consolidated joint ventures
$
14,867

 
$
15,477

 
$
9,859

Noncontrolling share of income of TRG
37,752

 
80,161

 
26,219

TRG Series F preferred distributions
 
 
(372
)
 
2,460

 
$
52,619

 
$
95,266

 
$
38,538

Redeemable noncontrolling interests
(976
)
 
(739
)
 
(79
)
 
$
51,643

 
$
94,527

 
$
38,459



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, 2012, 2011, and 2010:

 
2012
 
2011
 
2010
Net income attributable to Taubman Centers, Inc. common shareowners
$
83,511

 
$
176,701

 
$
47,599

Transfers (to) from the noncontrolling interest –
 

 
 

 
 
Increase (Decrease) in Taubman Centers, Inc.’s paid-in capital for the adjustments of noncontrolling interest (1)
14,903

 
(40,561
)
 
(988
)
Decrease in Taubman Centers, Inc.’s paid-in capital related to the acquisition of additional ownership interest in International Plaza
(339,170
)
 
 
 
 
Net transfers (to) from noncontrolling interests
(324,267
)
 
(40,561
)
 
(988
)
Change from net income attributable to Taubman Centers, Inc. and transfers (to) from noncontrolling interests
$
(240,756
)
 
$
136,140

 
$
46,611


(1)
In 2012, 2011, and 2010, 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 in August 2012 and June 2011 (Note 14), share-based compensation under employee and director benefit plans (Note 13), issuances of stock pursuant to the Continuing Offer (Note 13), the acquisition of additional ownership interest in International Plaza, issuances of Operating Partnership units in connection with the acquisition of centers (Note 2), and redemptions of certain redeemable Operating Partnership units (Note 2) .

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, 2012, the Company held a controlling interest in a consolidated entity with a specified termination date in 2083. The noncontrolling owners’ interest in this entity is to be settled upon termination by distribution or transfer of either cash or specific assets of the underlying entity. The estimated fair value of this noncontrolling interest was approximately $361 million at December 31, 2012, compared to a book value of $(46.0) million that is classified in Noncontrolling Interests in the Company’s Consolidated Balance Sheet. The fair value of the noncontrolling interest was calculated as the noncontrolling interest's ownership shares of the underlying property's fair value. The property's fair value was estimated by considering its in-place net operating income, current market capitalization rate, 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.

As of December 31, 2012, 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
%
 
$
130,567

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

 
 

 
 

 
 

 
 

 
 
Receive variable (LIBOR) /pay-fixed swap (2)
 
50.0
%
 
137,500

 
2.40
%
 
1.70
%
 
4.10
%
 
April 2018
Receive variable (LIBOR) /pay-fixed swap (2)
 
50.0
%
 
137,500

 
2.40
%
 
1.70
%
 
4.10
%
 
April 2018


(1)
The notional amount of the swap is equal to the outstanding principal balance on the loan.
(2)
The notional amount on each of these swaps is equal to 50% of the outstanding principal balance on the loan, which begins amortizing in August 2014.

Cash Flow Hedges of Interest Rate Risk

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the unrealized gain or loss on the derivative is reported as a component of Other Comprehensive Income (OCI). The ineffective portion of the change in fair value, if any, is recognized directly in earnings. Net realized gains or losses resulting from derivatives that were settled in conjunction with planned fixed-rate financings or refinancings continue to be included in Accumulated Other Comprehensive Income (Loss) (AOCI) during the term of the hedged debt transaction.

Amounts reported in AOCI related to currently outstanding derivatives are recognized as an adjustment to income as interest payments are made on the Company’s variable-rate debt. Realized gains or losses on settled derivative instruments included in AOCI are recognized as an adjustment to income over the term of the hedged debt transaction.

The Company expects that approximately $6.8 million of the AOCI of Taubman Centers, Inc. and the noncontrolling interests will be reclassified from AOCI and recognized as a reduction of income in the following 12 months.

As of December 31, 2012, the Company had $0.6 million of net realized losses included in AOCI resulting from a settled derivative instrument, which was designated as a cash flow hedge that is being recognized as a reduction of income over the term of the hedged debt.

The following tables present the effect of derivative instruments on the Company’s Consolidated Statement of Operations and Comprehensive Income for the years ended December 31, 2012, 2011, and 2010. The tables include the location and amount of unrealized gains and losses on outstanding derivative instruments in cash flow hedging relationships and the location and amount of realized losses reclassified from AOCI into income resulting from settled derivative instruments associated with hedged debt.

During the years ended December 31, 2012, 2011, and 2010 the Company did not have any hedge ineffectiveness or amounts that were excluded from the assessment of hedge effectiveness recorded in earnings.

 
Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)