TAUBMAN CENTERS INC, 10-K filed on 2/23/2016
Annual Report
Document and Entity Information Document (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Feb. 22, 2016
Jun. 30, 2015
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, 2015 
 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
60,236,681 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Share Price
$ 76.72 
 
$ 69.50 
Entity Public Float
 
 
$ 4.1 
CONSOLIDATED BALANCE SHEET (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Assets:
 
 
Properties (Notes 4 and 8)
$ 3,713,215 
$ 3,262,505 
Accumulated depreciation and amortization
(1,052,027)
(970,045)
Real Estate Investment Property, Net
2,661,188 
2,292,460 
Investment in Unconsolidated Joint Ventures (Notes 2 and 5)
433,911 
370,004 
Cash and cash equivalents
206,635 
276,423 
Restricted cash (Note 8)
6,447 
37,502 
Accounts and notes receivable, less allowance for doubtful accounts of $2,974 and $2,927 in 2015 and 2014 (Note 6)
54,547 
49,245 
Accounts receivable from related parties (Note 12)
2,478 
832 
Deferred charges and other assets (Note 7)
198,174 
188,435 
Total Assets
3,563,380 
3,214,901 
Liabilities:
 
 
Notes payable (Note 8)
2,643,958 
2,025,505 
Accounts payable and accrued liabilities
334,525 
292,802 
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures (Note 5)
464,086 
476,651 
Total Liabilities
3,442,569 
2,794,958 
Commitments and contingencies (Notes 8, 9, 10, 11, 13, and 15)
   
   
Equity:
 
 
Series B Non-Participating Convertible Preferred Stock, $0.001 par and liquidation value, 40,000,000 shares authorized, 25,044,939 and 25,117,000 shares issued and outstanding at December 31, 2015 and 2014
25 
25 
Common Stock, $0.01 par value, 250,000,000 shares authorized, 60,233,561 and 63,324,409 shares issued and outstanding at December 31, 2015 and 2014
602 
633 
Additional paid-in capital
652,146 
815,961 
Accumulated other comprehensive income (loss) (Note 19)
(27,220)
(15,068)
Dividends in excess of net income
(512,746)
(483,188)
Stockholders' Equity Attributable to Parent
112,807 
318,363 
Noncontrolling interests (Note 9)
8,004 
101,580 
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest
120,811 
419,943 
Total Liabilities and Equity
$ 3,563,380 
$ 3,214,901 
CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
Dec. 31, 2015
Dec. 31, 2014
Allowance for doubtful accounts
$ 2,974,000 
$ 2,927,000 
Common stock, par value per share
$ 0.01 
$ 0.01 
Common stock, shares authorized
250,000,000 
250,000,000 
Common stock, shares issued
60,233,561 
63,324,409 
Common stock, shares outstanding
60,233,561 
63,324,409 
Series B Preferred Stock [Member]
 
 
Preferred Stock, par value
$ 0.001 
$ 0.001 
Preferred Stock, liquidation value per share
$ 0.001 
$ 0.001 
Preferred Stock, shares authorized
40,000,000 
40,000,000 
Preferred Stock, shares issued
25,044,939 
25,117,000 
Preferred Stock, shares outstanding
25,044,939 
25,117,000 
Series J Preferred Stock [Member]
 
 
Preferred Stock, par value
$ 0 
$ 0 
Preferred Stock, liquidation preference, value
192,500,000 
192,500,000 
Preferred Stock, shares authorized
7,700,000 
7,700,000 
Preferred Stock, shares issued
7,700,000 
7,700,000 
Preferred Stock, shares outstanding
7,700,000 
7,700,000 
Series K Preferred Stock [Member]
 
 
Preferred Stock, par value
$ 0 
$ 0 
Preferred Stock, liquidation value per share
$ 25 
 
Preferred Stock, liquidation preference, value
$ 170,000,000 
$ 170,000,000 
Preferred Stock, shares authorized
6,800,000 
6,800,000 
Preferred Stock, shares issued
6,800,000 
6,800,000 
Preferred Stock, shares outstanding
6,800,000 
6,800,000 
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Revenues:
 
 
 
Minimum rents
$ 310,831 
$ 371,454 
$ 417,729 
Percentage rents
20,233 
22,929 
28,512 
Expense recoveries
188,023 
239,782 
272,494 
Management, leasing, and development services
13,177 
12,349 
16,142 
Other
24,908 
32,615 
32,277 
Total Revenues
557,172 
679,129 
767,154 
Expenses:
 
 
 
Maintenance, taxes, utilities, and promotion
145,118 
190,119 
215,825 
Other operating
58,131 
65,142 
71,235 
Management, leasing, and development services
5,914 
6,220 
5,321 
General and administrative (Note 13)
45,727 
48,292 
50,014 
Restructuring charge (Note 2)
   
3,706 
 
Interest expense
63,041 
90,803 
130,023 
Depreciation and amortization
106,355 
120,207 
155,772 
Total Expenses
424,286 
524,489 
628,190 
Nonoperating income (expense) (Notes 2 and 10)
5,256 
(42,807)
1,348 
Income before income tax expense, equity in income of Unconsolidated Joint Ventures, and gain on dispositions, net of tax
138,142 
111,833 
140,312 
Income tax expense (Note 3)
(2,248)
(2,267)
(3,409)
Equity in income of Unconsolidated Joint Ventures (Note 5)
56,226 
62,002 
52,465 
Income before gain on dispositions, net of tax
192,120 
171,568 
189,368 
Gain on dispositions, net of tax (Note 2)
437 
1,106,554 
 
Net income
192,557 
1,278,122 
189,368 
Net income attributable to noncontrolling interests (Note 9)
(58,430)
(385,109)
(56,778)
Net income attributable to Taubman Centers, Inc.
134,127 
893,013 
132,590 
Distributions to participating securities of TRG (Note 13)
(1,969)
(6,018)
(1,749)
Preferred stock dividends (Note 14)
(23,138)
(23,138)
(20,933)
Net income attributable to Taubman Centers, Inc. common shareowners
109,020 
863,857 
109,908 
Other comprehensive income (Note 19):
 
 
 
Unrealized gain (loss) on interest rate instruments and other
(13,668)
(18,004)
8,817 
Cumulative translation adjustment
(15,279)
(7,193)
4,407 
Reclassification adjustment for amounts recognized in net income
12,021 
16,729 
5,583 
Other Comprehensive Income (Loss), Net of Tax
(16,926)
(8,468)
18,807 
Comprehensive income
175,631 
1,269,654 
208,175 
Comprehensive income attributable to noncontrolling interests
(53,458)
(382,825)
(62,443)
Comprehensive income attributable to Taubman Centers, Inc.
$ 122,173 
$ 886,829 
$ 145,732 
Basic earnings per common share (Note 16)
$ 1.78 
$ 13.65 
$ 1.73 
Diluted earnings per common share (Note 16)
$ 1.76 
$ 13.47 
$ 1.71 
Weighted average number of common shares outstanding – basic
61,389,113 
63,267,800 
63,591,523 
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, 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 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15)
 
(2)
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15), shares
 
(176,630)
176,640 
 
 
 
 
Issuance of Series K Preferred Stock, net of offering costs (Note 14)
164,395 
 
 
164,395 
 
 
 
Issuance of Series K Preferred Stock, net of offering costs (Note 14), shares
 
6,800,000 
 
 
 
 
 
Repurchase of common stock (Note 14)
(52,287)
 
(8)
(52,279)
 
 
 
Repurchase of common stock (Note 14), shares
 
 
(786,805)
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13)
13,055 
 
13,051 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13), shares
 
 
401,631 
 
 
 
 
Adjustments of noncontrolling interests (Notes 2 and 9)
 
 
15,129 
 
(15,137)
Contributions from noncontrolling interests
4,729 
 
 
 
 
 
4,729 
Dividends and distributions (Note 2)
(208,047)
 
 
 
 
(149,787)
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
 
 
 
 
 
 
(58,260)
Other
(754)
 
 
(578)
 
(176)
 
Net income
189,368 
 
 
 
 
132,590 
56,778 
Unrealized gain (loss) on interest rate instruments and other
8,817 
 
 
 
6,117 
 
2,700 
Cumulative translation adjustment
4,407 
 
 
 
3,150 
 
1,257 
Reclassification adjustment for amounts recognized in net income
5,583 
 
 
 
3,875 
 
1,708 
Balance at Dec. 31, 2013
(215,660)
25 
631 
796,787 
(8,914)
(908,656)
(95,533)
Balance, shares at Dec. 31, 2013
 
39,651,069 
63,101,614 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15)
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15), shares
 
(35,500)
35,500 
 
 
 
 
Repurchase of common stock (Note 14)
(17)
 
 
(17)
 
 
 
Repurchase of common stock (Note 14), shares
 
 
(266)
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13)
18,932 
 
18,930 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13), shares
 
 
187,561 
 
 
 
 
Adjustments of noncontrolling interests (Notes 2 and 9)
 
 
83 
30 
 
(113)
Contributions from noncontrolling interests
22,345 
 
 
 
 
 
22,345 
Dividends and distributions (Note 2)
(674,685)
 
 
 
 
(466,731)
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
 
 
 
 
 
 
(207,954)
Other
(626)
 
 
178 
 
(814)
10 
Other, Shares
 
1,431 
 
 
 
 
 
Net income
1,278,122 
 
 
 
 
893,013 
385,109 
Unrealized gain (loss) on interest rate instruments and other
(18,004)
 
 
 
(12,783)
 
(5,221)
Cumulative translation adjustment
(7,193)
 
 
 
(5,148)
 
(2,045)
Reclassification adjustment for amounts recognized in net income
16,729 
 
 
 
11,747 
 
4,982 
Balance at Dec. 31, 2014
419,943 
25 
633 
815,961 
(15,068)
(483,188)
101,580 
Balance, shares at Dec. 31, 2014
 
39,617,000 
63,324,409 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15)
 
(1)
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15), shares
 
(72,061)
73,295 
 
 
 
 
Repurchase of common stock (Note 14)
(252,633)
 
(35)
(252,598)
 
 
 
Repurchase of common stock (Note 14), shares
 
 
(3,460,796)
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13)
19,252 
 
19,249 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13), shares
 
 
296,653 
 
 
 
 
Adjustments of noncontrolling interests (Notes 2 and 9)
(9,296)
 
 
69,521 
(198)
 
(78,619)
Dividends and distributions (Note 2)
(231,502)
 
 
 
 
(163,087)
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
 
 
 
 
 
 
(68,415)
Other
(584)
 
 
14 
 
(598)
   
Net income
192,557 
 
 
 
 
134,127 
58,430 
Unrealized gain (loss) on interest rate instruments and other
(13,668)
 
 
 
(9,653)
 
(4,015)
Cumulative translation adjustment
(15,279)
 
 
 
(10,790)
 
(4,489)
Reclassification adjustment for amounts recognized in net income
12,021 
 
 
 
8,489 
 
3,532 
Balance at Dec. 31, 2015
$ 120,811 
$ 25 
$ 602 
$ 652,146 
$ (27,220)
$ (512,746)
$ 8,004 
Balance, shares at Dec. 31, 2015
 
39,544,939 
60,233,561 
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Cash Flows From Operating Activities:
 
 
 
Net income
$ 192,557 
$ 1,278,122 
$ 189,368 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
106,355 
120,207 
155,772 
Provision for bad debts
1,994 
2,900 
489 
Gain on dispositions (Note 2)
 
(1,116,287)
 
Debt extinguishment costs (Note 2)
 
36,372 
 
Discontinuation of hedge accounting (Note 10)
 
7,763 
 
Income from Unconsolidated Joint Ventures in excess of distributions
 
   
(3,076)
Other
15,799 
18,728 
11,315 
Increase (decrease) in cash attributable to changes in assets and liabilities:
 
 
 
Receivables, restricted cash, deferred charges, and other assets
(15,636)
(595)
(12,053)
Accounts payable and other liabilities
6,616 
16,476 
29,557 
Net Cash Provided By Operating Activities
307,685 
363,686 
371,372 
Cash Flows From Investing Activities:
 
 
 
Additions to properties
(440,678)
(442,991)
(283,864)
Cash drawn from (provided to) escrow related to center construction projects (Notes 7 and 8)
28,857 
(70,607)
 
Proceeds from dispositions, net of transaction costs (Note 2)
 
1,776,394 
 
Contributions to Unconsolidated Joint Ventures (Note 2)
(97,293)
(45,974)
(108,918)
Distributions from Unconsolidated Joint Ventures in excess of income
5,755 
68,388 
   
Other
(1,762)
7,329 
21,349 
Net Cash Provided By (Used In) Investing Activities
(505,121)
1,292,539 
(371,433)
Cash Flows From Financing Activities:
 
 
 
Payments to revolving lines of credit, net
   
(158,040)
(274,235)
Debt proceeds
1,198,640 
163,779 
703,980 
Extinguishment of debt (Note 2)
   
(658,092)
 
Other debt payments
(578,790)
(106,844)
(317,365)
Debt issuance costs
(12,743)
(8,208)
(9,479)
Repurchase of common stock
(252,633)
(17)
(52,287)
Issuance of common stock and/or partnership units in connection with incentive plans
(4,526)
 
 
Issuance of common stock and/or partnership units in connection with incentive plans
 
(943)
(1,644)
Issuance of Series K Preferred Stock, net of offering costs
 
   
164,395 
Distributions to noncontrolling interests
(68,415)
(207,954)
(58,260)
Distributions to participating securities of TRG (Note 2)
(1,969)
(6,018)
(1,749)
Contributions from noncontrolling interests
   
22,345 
4,729 
Cash dividends to preferred shareowners
(23,138)
(23,138)
(20,933)
Cash dividends to common shareowners (Note 2)
(137,830)
(437,665)
(127,105)
Other
   
   
(1,050)
Net Cash Provided By (Used In) Financing Activities
127,648 
(1,420,795)
8,997 
Net Increase (Decrease) In Cash and Cash Equivalents
(69,788)
235,430 
8,936 
Cash and Cash Equivalents at Beginning of Year
276,423 
40,993 
32,057 
Cash and Cash Equivalents at End of Year
$ 206,635 
$ 276,423 
$ 40,993 
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, 2015 included 19 urban and suburban shopping centers operating in 10 states and Puerto Rico.

Taubman Properties Asia LLC and its subsidiaries (Taubman Asia), which is the platform for the Company’s operations and developments in 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% and 50.1% investments in Westfarms and International Plaza, respectively, are through general partnerships in which the other general partners have participating rights over annual operating budgets, capital spending, refinancing, or sale of the property.

The Operating Partnership

At December 31, 2015 and December 31, 2014, the Operating Partnership’s equity included two classes of preferred equity (Series J and K 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 interests, and the remaining amounts to the general and limited partners in the Operating Partnership in accordance with their percentage ownership. The Series J and K Preferred Equity are owned by the Company and are eliminated in consolidation.

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
2015
 
85,295,720

 
60,233,561

 
25,062,159

 
71%
 
71%
2014
 
88,459,859

 
63,324,409

 
25,135,450

 
72
 
72
2013
 
88,271,133

 
63,101,614

 
25,169,519

 
71
 
72

(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, 2015 consisted of 25,044,939 shares of Series B Preferred Stock (Note 14) and 60,233,561 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 generally 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 the fourth quarter of 2015, the Company recognized an impairment charge on previously capitalized pre-development costs related to its enclosed regional mall project that was intended to be part of the Miami Worldcenter mixed-use, urban development in Miami, Florida (Note 5).

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. Substantially all cash equivalents at December 31, 2015 were not insured or guaranteed by the FDIC or any other government agency and were invested across four separate financial institutions as of December 31, 2015.

The Company is required to escrow cash balances for specific uses stipulated by certain of its lenders and other various agreements. As of December 31, 2015 and December 31, 2014, the Company’s cash balances restricted for these uses were $6.4 million and $37.5 million, respectively. As of December 31, 2015, $4.8 million of the $6.4 million of restricted cash was required under certain debt agreements to be in escrow for a major construction project. Included in restricted cash is $5.5 million at December 31, 2015 on deposit in excess of the FDIC insured limit.

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 Consolidated 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.

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 generally as interest expense (Note 10).

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. To qualify as a REIT, the Company must distribute at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains, to its shareowners and meet certain other requirements. As a REIT, the Company is entitled to a dividends paid deduction for the dividends it pays to its shareowners. Therefore, the Company will generally not be subject to federal income taxes as long as it currently distributes to its shareowners an amount equal to or in excess of its taxable income. REIT qualification reduces but does not eliminate the amount of state and local taxes paid by the Company. In addition, a REIT may be subject to certain excise taxes if it engages in certain activities.
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 federal, state, and 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.
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 shareholders' equity as a component of Accumulated Other Comprehensive Income (Loss) in the Company's Consolidated Balance Sheet (Note 19).
Discontinued Operations

Prior to 2014, the Company reclassified to discontinued operations any material operations and gains or losses on disposal related to properties that are held for sale or disposed of during the period in accordance with the applicable accounting standards. In 2014 the Company early adopted Accounting Standards Update (ASU) No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity" issued by the Financial Accounting Standards Board (FASB). ASU No. 2014-08 changes the definition of a discontinued operation to include only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The Company applied the revised definition to all disposals on a prospective basis beginning January 1, 2014.

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. Net Operating Income (NOI) is often used by the Company's chief operating decision makers in assessing segment operating performance. NOI 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 and South Korea, 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, 2015, the Company's investments in Asia are in Unconsolidated Joint Ventures and accounted for under the equity method.
Dispositions, Acquisition, and Developments
Dispositions, Acquisition, and Development [Text Block]
Dispositions, Acquisition, and Developments

Dispositions

Sale of Centers to Starwood

In October 2014, the Company completed the disposition of a portfolio of seven centers to an affiliate of the Starwood Capital Group (Starwood). The following centers (Sale Centers) were sold: MacArthur Center in Norfolk, Virginia, Stony Point Fashion Park in Richmond, Virginia, Northlake Mall in Charlotte, North Carolina, The Mall at Wellington Green in Wellington, Florida, The Shops at Willow Bend in Plano, Texas, The Mall at Partridge Creek in Clinton Township, Michigan, and Fairlane Town Center in Dearborn, Michigan. The results of the seven centers are in the Company's continuing operations for all periods prior to the October 2014 sale, pursuant to the Company's previous adoption of Accounting Standards Update (ASU) No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity" beginning January 1, 2014.

In connection with the sale, the Company received consideration of $1.4 billion. The proceeds were used to prepay or defease $623 million of property-level debt and accrued interest and to pay $51.2 million of transaction and debt extinguishment costs. The net cash proceeds were used to pay $424.3 million to shareholders and unitholders as a special dividend (Note 3). The debt extinguished consisted of four loans secured by Northlake Mall, The Mall at Wellington Green, MacArthur Center, and The Mall at Partridge Creek (Note 8).

The Company recognized a gain of $629.7 million ($606.2 million at TRG's beneficial share) as a result of the disposition of the Sale Centers. In addition, the Company recorded debt extinguishment costs of $36.4 million, ($36.0 million at TRG's beneficial share) which were classified as Nonoperating Income (Expense) on the Consolidated Statement of Operations and Comprehensive Income.

In 2014, the Company incurred $7.8 million of expenses ($7.4 million at TRG's beneficial share) related to the discontinuation of hedge accounting on the swap previously designated to hedge the MacArthur Center note payable. In addition, the Company incurred $3.3 million of disposition costs related to the Sale Centers. These expenses were included in Nonoperating Income (Expense) on the Consolidated Statement of Operations and Comprehensive Income.

As a result of the sale, the Company underwent a restructuring plan to reduce its workforce across various areas of the organization. In 2014, the Company incurred $3.7 million of expenses related to the reduction in workforce. These expenses were classified as Restructuring Charge on the Consolidated Statement of Operations and Comprehensive Income. As of December 31, 2015, substantially all of the restructuring costs have been paid.

International Plaza

In January 2014, the Company sold a total of 49.9% of the Company's interests in the entity that owns International Plaza, including certain governance rights, for $499 million (excluding transaction costs), which consisted of $337 million of cash and approximately $162 million of beneficial interest in debt. The Company's ownership in the center decreased to a noncontrolling 50.1% interest, which is accounted for under the equity method subsequent to the disposition. During 2014, a gain of $368 million (net of tax of $9.7 million) was recognized as a result of the sale. In September 2015, an adjustment of $0.4 million was made, reducing the tax recognized as a result of the sale.

Arizona Mills/Oyster Bay

In January 2014, the Company completed the sale of its 50% interest in Arizona Mills, an Unconsolidated Joint Venture, and land in Syosset, New York related to the former Oyster Bay project, to Simon Property Group (SPG). The consideration, excluding transaction costs, consisted of $60 million of cash and 555,150 partnership units in Simon Property Group Limited Partnership. The number of partnership units received was determined based on a value of $154.91 per unit. The fair value of the partnership units recognized for accounting purposes was $77.7 million, after considering the one-year restriction on the sale of these partnership units (Note 17). The number of partnership units subsequently increased to 590,124, in lieu of the Company's participation in a distribution of certain partnership units of another entity by SPG and Simon Property Group Limited Partnership. The increase in the number of partnership units was neutral to the market value of the Company's holdings as of the transaction date. The Company's investment in the partnership units is classified within Deferred Charges and Other Assets on the Consolidated Balance Sheet. As a result of the sale, the Company was relieved of its $84 million share of the $167 million mortgage loan outstanding on Arizona Mills at the time of the sale. A gain of $109 million was recognized as a result of the transaction.

Acquisition

Purchase of U.S. Headquarters Building

In February 2014, the Company purchased the U.S. headquarters building located in Bloomfield Hills, Michigan for approximately $16.1 million from an affiliate of the Taubman family. In exchange for the building, the Company assumed the $17.4 million, 5.90% fixed rate loan on the building, issued 1,431 Operating Partnership units (and a corresponding number of shares of Series B Preferred Stock), and received $1.4 million in escrowed and other cash from the affiliate. In March 2015, the Company refinanced the loan on the building (Note 8).

U.S. Development

International Market Place

International Market Place, a 0.4 million square foot center, is under construction in Waikiki, Honolulu, Hawaii. The center will be anchored by Saks Fifth Avenue and is scheduled to open in August 2016. The Company owns a 93.5% interest in the project, which is subject to a participating ground lease. As of December 31, 2015, the Company's capitalized costs for the project were $282.5 million ($264.7 million at TRG's share).

The Mall of San Juan

The Mall of San Juan, a 0.6 million square foot center in San Juan, Puerto Rico, opened in March 2015. The center is anchored by Nordstrom and Saks Fifth Avenue. As of December 31, 2015, the Company owned a 95% interest in the center subsequent to the acquisition of an additional 15% interest in April 2015. The additional interest was acquired at cost. In connection with the acquisition, the noncontrolling owner used $9.3 million of previously contributed capital to fund its obligation to reimburse the Company for certain shared infrastructure costs, which was classified as a reduction of the Noncontrolling interests and an offsetting reduction of Properties on the Consolidated Balance Sheet (Note 18).

Asia Development

CityOn.Xi'an

The Company has a joint venture with Wangfujing Group Co., Ltd (Wangfujing), one of China's largest department store chains, which will own a 60% controlling interest in and manage an approximately 1.0 million square foot shopping center, CityOn.Xi'an, to be located at Xi'an Saigao City Plaza, a large-scale mixed-use development under construction 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 April 2016. As of December 31, 2015, the Company's share of total project costs were $107.3 million, as decreased by $3.3 million for the change in exchange rates. This investment is classified within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.

CityOn.Zhengzhou

The Company also has a second joint venture with Wangfujing which owns a majority interest in and will manage an approximately 1.0 million square foot multi-level shopping center, CityOn.Zhengzhou, under construction in Zhengzhou, China. Through this joint venture, the Company beneficially owns a 32% interest in the shopping center, which is scheduled to open in fall 2016. As of December 31, 2015, the Company's share of total project costs were $72.3 million, as decreased by $2.5 million for the change in exchange rates. This investment is classified within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.

Hanam Union Square

The Company's joint venture with Shinsegae Group, South Korea's largest retailer, is developing an approximately 1.7 million square foot shopping center, Hanam Union Square, under construction in Hanam, Gyeonggi Province, South Korea, which is scheduled to open in early fall 2016. The Company has partnered with a major institution in Asia for a 49% ownership interest in Hanam Union Square. The institutional partner owns 14.7% of the project, bringing the Company's effective ownership to 34.3%. As of December 31, 2015, the Company's share of total project costs were $207.2 million, as decreased by $12.5 million for the change in exchange rates. This investment is classified within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.
Income Taxes
Income Taxes
Income Taxes

Income Tax Expense

The Company’s income tax expense (benefit) for the years ended December 31, 2015, 2014, and 2013 consisted of the following:

 
2015
 
2014

2013
Federal current
$
1,931

 
$
8,036


$
547

Federal deferred
(34
)
 
1,354


632

Foreign current
628


1,300


2,193

Foreign deferred
(114
)

(48
)

(116
)
State current
(528
)
 
1,361

 
230

State deferred
(72
)
 
(3
)
 
(77
)
Total income tax expense
$
1,811

 
$
12,000


$
3,409

Less income tax (expense) benefit allocated to Gain on Dispositions (1)
437

 
(9,733
)

 
Income tax expense as reported on the Consolidated Statement of Operations and Comprehensive Income
$
2,248


$
2,267


$
3,409



(1)
Amount represents the income taxes incurred as part of the Company's sale of interests in International Plaza in January 2014. The tax on the sale is classified within Gain on Dispositions, Net of Tax on the Consolidated Statement of Operations and Comprehensive Income. In September 2015, an adjustment of $0.4 million was made to reduce the tax recognized as a result of the sale.

Net Operating Loss Carryforwards

As of December 31, 2015, the Company had a foreign net operating loss carryforward of $4.2 million. Of the $4.2 million, $0.2 million had a carryforward period of 10 years and the remaining had an indefinite carryforward period.

Deferred Taxes

Deferred tax assets and liabilities as of December 31, 2015 and 2014 were as follows:

 
2015
 
2014
Deferred tax assets:
 
 
 
Federal
$
1,427

 
$
1,382

Foreign
1,676

 
1,806

State
944

 
471

Total deferred tax assets
$
4,047

 
$
3,659

Valuation allowances
(1,913
)
 
(1,703
)
Net deferred tax assets
$
2,134

 
$
1,956

Deferred tax liabilities:
 

 
 

Federal
$
602

 
$
592

Foreign
501

 
473

State
70

 
89

Total deferred tax liabilities
$
1,173

 
$
1,154



The Company believes that it is more likely than not the results of future operations will generate sufficient taxable income to recognize the net deferred tax assets. These future operations are primarily dependent upon the Manager's profitability, the timing and amounts of gains on peripheral land sales, the profitability of Taubman Asia's 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.

International Plaza

In November 2013, substantially all of the interest in International Plaza acquired by the Company in 2012 was transferred to a Taxable REIT Subsidiary of the Company. Prior to the transfer in November 2013, substantially all of the interest was held by a nontaxable subsidiary of the Company. No deferred taxes were recorded related to any book-tax basis differences related to this transaction because of its intercompany nature.

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 2015, 2014, and 2013 may not be indicative of future periods.
Year
 
Dividends per common share declared
 
Return of capital
 
Ordinary income
 
Long term capital gain
 
Unrecaptured Sec. 1250 capital gain
 
2015
 
$
2.2600

 
$
0.0972

 
$
2.1621

 
$
0.0004

 
$
0.0003

 
2014
 
4.7500

(1) 
0.7057

 
0.0000

 
1.8748

(2) 
2.1695

(2) 
2014
 
2.1600

 
0.3208

 
1.7773

 
0.0287

(2) 
0.0332

(2) 
2013
 
2.0000

 
0.2636

 
1.7364

 
0.0000

 
0.0000

 


(1)
Includes a special dividend of $4.75 per share of common stock declared and paid during December 2014, which was declared as a result of the Company's disposition of a portfolio of seven centers to Starwood in October 2014 (Note 2).
(2)
The portion of the per share common dividends paid on December 31, 2014 designated as capital gain (long term and unrecaptured Sec. 1250) dividends for tax purposes is $0.0619 per share of the $0.54 dividend and $4.0443 per share of the $4.75 dividend). 
Year

Dividends per Series J Preferred share declared

Ordinary income

Long term capital gain

Unrecaptured Sec. 1250 capital gain
 
2015

$
1.6250


$
1.6245


$
0.0003


$
0.0002

 
2014

1.6250


0.49072


0.52580

(1) 
0.60848

(1) 
2013
 
1.6250

 
1.6250

 
0.0000

 
0.0000

 


(1)
The portion of the per share Series J preferred dividends designated as capital gain (long term and unrecaptured Sec. 1250) for tax purposes is as follows; $0.32178 per share of the $0.40625 paid on June 30, 2014, $0.40625 per share of the $0.40625 paid on September 30, 2014, and $0.40625 per share of the $0.40625 paid on December 31, 2014.

Year
 
Dividends per Series K Preferred share declared
 
Ordinary income
 
Long term capital gain
 
Unrecaptured Sec. 1250 capital gain
 
2015
 
$
1.56250

 
$
1.5620

 
$
0.0003

 
$
0.0002

 
2014
 
1.56250

 
0.47185

 
0.50558

(1) 
0.58507

(1) 
2013
 
1.24132

 
1.24132

 
0.0000

 
0.0000

 


(1)
The portion of the per share Series K preferred dividends designated as capital gain (long term and unrecaptured Sec. 1250) for tax purposes is as follows; $0.30939 per share of the $0.39063 paid on June 30, 2014, $0.39063 per share of the $0.39063 paid on September 30, 2014, and $0.39063 per share of the $0.39063 paid on December 31, 2014.

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, 2015. 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, 2015, 2014, and 2013 or in the Consolidated Balance Sheet as of December 31, 2015 and 2014. As of December 31, 2015, returns for the calendar years 2012 through 2015 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, 2015 and December 31, 2014 are summarized as follows:
 
2015
 
2014
Land
$
243,870


$
226,252

Buildings, improvements, and equipment
3,107,338


2,457,660

Construction in process and pre-development costs
362,007


578,593

 
$
3,713,215


$
3,262,505

Accumulated depreciation and amortization
(1,052,027
)

(970,045
)
 
$
2,661,188


$
2,292,460



Depreciation expense for 2015, 2014, and 2013 was $98.8 million, $110.1 million, and $142.5 million, respectively.

The charge to operations in 2015, 2014, and 2013 for domestic and non-U.S. pre-development activities was $4.3 million, $4.2 million, and $10.6 million, respectively.
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, International Plaza, Stamford Town Center, Sunvalley, The Mall at University Town Center, and Westfarms. The Operating Partnership also provides certain management, leasing, and/or development services to the other shopping centers noted below.
Shopping Center
 
Ownership as of
December 31, 2015 and 2014
CityOn.Xi'an (under construction)
 
Note 2
CityOn.Zhengzhou (under construction)
 
Note 2
Fair Oaks
 
50%
Hanam Union Square (under construction)
 
Note 2
International Plaza
 
50.1
The Mall at Millenia
 
50
Stamford Town Center
 
50
Sunvalley
 
50
The Mall at University Town Center
 
50
Waterside Shops
 
50
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 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, any distributions related to refinancing of the centers further decrease the net equity of the centers.


The Mall at Miami Worldcenter

In 2015, the Company made a decision not to move forward with an enclosed regional mall that was intended to be part of the Miami Worldcenter mixed-use, urban development in Miami, Florida. As a result of this decision, an impairment charge of $11.8 million was recognized in the fourth quarter of 2015, which represents previously capitalized costs related to the pre-development of the enclosed mall plan. The impairment charge was recorded within Equity in Income of Unconsolidated Joint Ventures on the Consolidated Statement of Operations and Comprehensive Income.
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, 2015 and December 31, 2014 excludes the balances of CityOn.Xi'an, CityOn.Zhengzhou, and Hanam Union Square which are currently under construction (Note 2). Beneficial interest is calculated based on the Operating Partnership's ownership interest in each of the Unconsolidated Joint Ventures.

 
December 31 2015
 
December 31 2014
Assets:
 
 
 
Properties
$
1,628,492

 
$
1,580,926

Accumulated depreciation and amortization
(589,145
)
 
(548,646
)
 
$
1,039,347

 
$
1,032,280

Cash and cash equivalents
36,047

 
49,765

Accounts and notes receivable, less allowance for doubtful accounts of $1,602 and $1,590 in 2015 and 2014
42,361

 
38,788

Deferred charges and other assets
39,562

 
33,200

 
$
1,157,317

 
$
1,154,033

 


 
 
Liabilities and accumulated deficiency in assets:
 

 
 

Notes payable (1)
$
2,001,200

 
$
1,989,546

Accounts payable and other liabilities
70,539

 
103,161

TRG's accumulated deficiency in assets
(512,256
)
 
(525,759
)
Unconsolidated Joint Venture Partners' accumulated deficiency in assets
(402,166
)
 
(412,915
)
 
$
1,157,317

 
$
1,154,033

 


 
 
TRG's accumulated deficiency in assets (above)
$
(512,256
)
 
$
(525,759
)
TRG's investment in properties under construction (Note 2)
296,847

 
232,091

TRG basis adjustments, including elimination of intercompany profit
132,218

 
132,058

TCO's additional basis
53,016

 
54,963

Net Investment in Unconsolidated Joint Ventures
$
(30,175
)
 
$
(106,647
)
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures
464,086

 
476,651

Investment in Unconsolidated Joint Ventures
$
433,911

 
$
370,004


(1)
As the balances presented exclude those of centers under construction, the Notes Payable amount excludes the construction loans outstanding for Hanam Union Square of $52.9 million ($18.1 million at TRG's share) and CityOn.Zhengzhou of $44.7 million ($14.2 million at TRG's share) at December 31, 2015.
 
Year Ended December 31
 
2015
 
2014
 
2013
Revenues
$
378,280

 
$
338,017

 
$
294,720

Maintenance, taxes, utilities, promotion, and other operating expenses
$
118,909

 
$
106,249

 
$
92,901

Interest expense
85,198

 
74,806

 
68,998

Depreciation and amortization
55,318

 
47,377

 
36,644

Total operating costs
$
259,425

 
$
228,432

 
$
198,543

Nonoperating expense
(1
)
 
(22
)
 


Net income
$
118,854

 
$
109,563

 
$
96,177

 


 
 
 
 
Net income attributable to TRG
$
65,384

 
$
60,690

 
$
53,166

Realized intercompany profit, net of depreciation on TRG’s basis adjustments
4,542

 
3,258

 
1,245

Depreciation of TCO's additional basis
(1,946
)
 
(1,946
)
 
(1,946
)
Beneficial interest in UJV impairment charge - Miami Worldcenter
(11,754
)
 
 
 
 
Equity in income of Unconsolidated Joint Ventures
$
56,226

 
$
62,002

 
$
52,465

 
 
 
 
 
 
Beneficial interest in Unconsolidated Joint Ventures’ operations:
 

 
 

 
 

Revenues less maintenance, taxes, utilities, promotion, and other operating expenses
$
147,905

 
$
132,652

 
$
114,939

Interest expense
(45,564
)
 
(40,416
)
 
(37,554
)
Depreciation and amortization
(34,361
)
 
(30,234
)
 
(24,920
)
Beneficial interest in UJV impairment charge - Miami Worldcenter
(11,754
)
 
 
 
 
Equity in income of Unconsolidated Joint Ventures
$
56,226

 
$
62,002

 
$
52,465



Related Party

TRG owns a 50% general partnership interest in Sunvalley, while the other 50% is controlled by the A. Alfred Taubman Restated Revocable Trust. A. Alfred Taubman was the former Chairman of the Board and the father of Robert S. and William S. Taubman. Sunvalley is subject to a ground lease on the land, which is 50% owned through an affiliate of TRG and 50% by an entity owned and controlled by Robert S. Taubman, William S. Taubman, and Gayle Taubman Kalisman. The Manager is the manager of the Sunvalley shopping center.

Other

The provision for losses on accounts receivable of the Unconsolidated Joint Ventures was $0.9 million, $1.7 million, and $0.6 million for the years ended December 31, 2015, 2014, and 2013, respectively.

Deferred charges and other assets of $39.6 million at December 31, 2015 were comprised of leasing costs of $39.7 million, before accumulated amortization of $(17.8) million, net deferred financing costs of $7.0 million, and other net charges of $10.6 million. Deferred charges and other assets of $33.2 million at December 31, 2014 were comprised of leasing costs of $37.2 million, before accumulated amortization of $(16.6) million, net deferred financing costs of $9.6 million, and other net charges of $3.0 million.

Depreciation expense on properties for 2015, 2014, and 2013 was $50.0 million, $40.9 million, and $35.6 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, 2015 and December 31, 2014 are summarized as follows:

 
2015
 
2014
Trade
$
29,559

 
$
24,757

Notes
1,297

 
2,037

Straight-line rent and recoveries
26,665

 
25,378

 
$
57,521

 
$
52,172

Less: Allowance for doubtful accounts
(2,974
)
 
(2,927
)
 
$
54,547

 
$
49,245



Deferred Charges Other Assets
Deferred Charges and Other Assets [Text Block]
Deferred Charges and Other Assets

Deferred charges and other assets at December 31, 2015 and December 31, 2014 are summarized as follows:

 
2015
 
2014
Leasing costs
$
29,097


$
27,454

Accumulated amortization
(10,702
)

(10,659
)
 
$
18,395


$
16,795

In-place leases, net
8,525


11,765

Investment in SPG partnership units (Notes 2 and 17)
77,711


77,711

Deferred financing costs, net
22,693


15,815

Insurance deposit (Note 17)
14,346


13,059

Deposits
40,424


40,257

Prepaid expenses
6,622


5,496

Deferred tax asset, net
2,134


1,956

Other, net
7,324


5,581

 
$
198,174


$
188,435



As of both December 31, 2015 and December 31, 2014, the Company had $37.0 million in restricted deposits related to its Asia investments.
Notes Payable
Debt Disclosure [Text Block]
Notes Payable

Notes payable at December 31, 2015 and December 31, 2014 consist of the following:
 
2015
 
2014
 
Stated Interest Rate
 
Maturity Date
 
Balance Due on Maturity
 
Facility Amount
 
Cherry Creek Shopping Center
$
280,000


$
280,000

 
5.24%
 
06/08/16
 
$
280,000

 
 
 
City Creek Center
81,756

(1) 
83,189

(1) 
4.37%
 
08/01/23
 
68,575

 
 
 
El Paseo Village



15,932

(2) 
4.42%
 

 


 
 
 
The Gardens on El Paseo
81,920

(3) 
83,059

(3) 
6.10%
 
06/11/16
 
81,480

 
 
 
Great Lakes Crossing Outlets
212,863


217,281

 
3.60%
 
01/06/23
 
177,038

 
 

 
The Mall at Green Hills
150,000


150,000

 
LIBOR+1.60%
 
12/01/18
(4) 
150,000

 
 
 
International Market Place
92,169

(5) 


 
LIBOR + 1.75%
 
08/14/18
(5) 
92,169

 
$
330,890

 
The Mall of San Juan
258,250

(6) 
163,779

(6) 
LIBOR + 2.00%
 
04/02/17
(6) 
258,250

 
320,000

 
The Mall at Short Hills
1,000,000



 
3.48%
 
10/01/27
 
1,000,000

 
 
 
The Mall at Short Hills
 
 
540,000

 
5.47%
 

 


 
 
 
U.S. Headquarters Building
12,000




 
LIBOR + 1.40%
(7) 
03/01/24
 
12,000

 
 
 
U.S. Headquarters Building
 
 
17,265

(8) 
5.90%
 

 


 
 
 
$65M Revolving Credit Facility
 
(9) 
 
(9) 
LIBOR + 1.40%
 
04/30/16
 
 
 
65,000

(9) 
$1.1B Revolving Credit Facility
 
(10) (11) 
 
(10) (11) 
LIBOR + 1.25%
(10) 
02/28/19
(10) 
 
 
1,100,000

(10) 
$475M Unsecured Term Loan
475,000

(11) (12) 
475,000

(11) (12) 
LIBOR + 1.35%
(12) 
02/28/19
 
475,000

 
 
 
 
$
2,643,958

 
$
2,025,505

 
 
 
 
 
 

 
 

 


(1)
The Operating Partnership has provided a limited guarantee of the repayment of the City Creek Center loan, which could be triggered only upon a decline in center occupancy to a level that the Company believes is remote.
(2)
Balance includes purchase accounting premium adjustment of $0.1 million in 2014 for an above market interest rate upon acquisition of the center in December 2011. In October 2015, the Company paid off the mortgage note payable on El Paseo Village.
(3)
Balance includes purchase accounting premium adjustment of $0.4 million and $1.6 million in 2015 and 2014, respectively, for an above market interest rate upon acquisition of the center in December 2011.
(4)
Loan has a one-year extension option.
(5)
The Operating Partnership has provided an unconditional guaranty of 50% of the principal balance and all accrued but unpaid interest during the term of the loan. The principal guarantee may be reduced to 25% of the outstanding principal balance or terminated upon achievement of certain performance measures. Loan has two, one-year extension options.
(6)
The Operating Partnership has provided an unconditional guaranty of the principal balance and all accrued but unpaid interest during the term of the loan. Loan has two, one-year extension options.
(7)
Debt is swapped via a hedge at 2.09% plus a 1.40% credit spread for an effective rate of 3.49% until maturity.
(8)
Balance includes purchase accounting premium adjustment of $0.2 million for an above market interest rate upon acquisition of the building in February 2014 (Note 2).
(9)
The unused borrowing capacity at December 31, 2015 was $58.8 million, after considering $6.2 million of letters of credit outstanding on the facility.
(10)
TRG is the borrower under the $1.1 billion unsecured revolving credit facility with an accordion feature to increase the borrowing capacity to $1.5 billion, subject to certain conditions including having the borrowing capacity based on the unencumbered asset pool EBITDA and obtaining lender commitments. As of December 31, 2015, the Company cannot fully utilize the accordion feature unless additional assets are added to the unencumbered asset pool. The facility bears interest at a range of LIBOR plus 1.15% to LIBOR plus 1.70% and a facility fee of 0.20% to 0.30% based on the Company's total leverage ratio. The facility has a one-year extension option. The unused borrowing capacity at December 31, 2015 was $1.1 billion.
(11)
As of December 31, 2015, the entities that own Beverly Center, Dolphin Mall, and Twelve Oaks Mall are guarantors under the $475 million unsecured term loan and the $1.1 billion unsecured revolving credit facility.
(12)
TRG is the borrower under the $475 million unsecured term loan with an accordion feature to increase the borrowing capacity to $600 million, subject to certain conditions including having the borrowing capacity based on the unencumbered asset pool EBITDA and obtaining lender commitments. As of December 31, 2015, the Company cannot fully utilize the accordion feature unless additional assets are added to the unencumbered asset pool. The loan bears interest at a range of LIBOR plus 1.35% to LIBOR plus 1.90% based on the Company's total leverage ratio. From January 2014 until maturity, the LIBOR rate is swapped to a fixed rate of 1.65%, resulting in an effective rate in the range of 3.00% to 3.55% (Note 10).


Notes payable are collateralized by properties with a net book value of $1.8 billion at December 31, 2015.


The following table presents scheduled principal payments on notes payable as of December 31, 2015:

2016
$
367,527

 
2017
264,566

(1) 
2018
248,731

(2) 
2019
481,820

 
2020
7,058

 
Thereafter
1,273,816

 
Total principal maturities
$
2,643,518

 
Net unamortized debt premiums
440

 
Total notes payable
$
2,643,958

 

(1)
Includes $258.3 million with two, one-year extension options.
(2)
Includes $92.2 million with two, one-year extension options and $150.0 million with a one-year extension option.

2016 Maturities

The $65.0 million revolving credit facility is scheduled to mature in April 2016. The Company intends to extend the line of credit for one year upon maturity.

In the second quarter of 2016, the Company expects to complete a refinancing of the loan at Cherry Creek Shopping Center prior to or upon maturity. The existing $280.0 million, 5.24% fixed rate loan is scheduled to mature in June 2016. Also, in the second quarter of 2016, the Company expects to pay off the loan on The Gardens on El Paseo at the earliest prepayment date without penalty. The existing $81.9 million, 6.10% fixed rate loan on The Gardens on El Paseo is scheduled to mature in June 2016.

Debt Covenants and Guarantees

Certain loan agreements contain various restrictive covenants, including the following corporate covenants on the Company’s unsecured primary revolving line of credit, unsecured term loan, and the construction facilities on The Mall at University Town Center, The Mall of San Juan, and International Market Place: a minimum net worth requirement, a maximum total leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum recourse secured debt ratio, and a maximum payout ratio. In addition, the Company’s primary revolving line of credit and term loan have unencumbered pool covenants, which currently apply to Beverly Center, Dolphin Mall, and Twelve Oaks Mall on a combined basis. These covenants include a minimum number and minimum value of eligible unencumbered assets, a maximum unencumbered leverage ratio, a minimum unencumbered interest coverage ratio, and a minimum unencumbered asset occupancy ratio. As of December 31, 2015, the corporate total leverage ratio was the most restrictive covenant. The Company was in compliance with all of its covenants and loan obligations as of December 31, 2015. The maximum payout ratio 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.

In connection with the financing of the construction facility at International Market Place, the Operating Partnership has provided an unconditional guarantee of 50% of the construction loan principal balance and all accrued but unpaid interest during the term of the loan. The Operating Partnership has also provided a guarantee as to the completion of construction of the center. The maximum amount of the construction facility is $330.9 million. The outstanding balance of the International Market Place construction financing facility as of December 31, 2015 was $92.2 million. Accrued but unpaid interest as of December 31, 2015 was $0.1 million. The principal guaranty may be reduced to 25% of the outstanding principal balance upon stabilization and achievement of certain performance measures. The principal guaranty may be released upon achievement of further restrictive performance measures. The Company believes the likelihood of a payment under the guarantees to be remote.

In connection with the financing of the construction facility at The Mall at University Town Center, which is owned by an Unconsolidated Joint Venture, the Operating Partnership provided an unconditional guarantee of 25% of the construction loan principal balance and 50% of all accrued but unpaid interest during the term of the loan. The maximum amount of the construction facility is $225 million. The outstanding balance of the Mall at University Town Center construction financing facility as of December 31, 2015 was $220.7 million. Accrued but unpaid interest as of December 31, 2015 was $0.4 million. The principal guaranty may be reduced to 12.5% of the outstanding principal balance upon achievement of certain performance measures. Upon stabilization, the unconditional guaranty may be released. The Company believes the likelihood of a payment under the guarantee to be remote.

In connection with the financing of the construction facility at The Mall of San Juan, the Operating Partnership has provided an unconditional guarantee of the construction loan principal balance and all accrued but unpaid interest during the term of the loan. In addition, the Operating Partnership has provided a guarantee as to the completion of the center. The maximum amount of the construction facility is $320 million. The outstanding balance of The Mall of San Juan construction financing facility as of December 31, 2015 was $258.3 million. Accrued but unpaid interest as of December 31, 2015 was $0.3 million. The Company believes the likelihood of a payment under the guarantees to be remote.

In connection with the $175 million additional financing at International Plaza, which is owned by an Unconsolidated Joint Venture, the Operating Partnership provided an unconditional and several guarantee of 50.1% of all obligations and liabilities related to an interest rate swap that was required on the debt for the term of the loan. As of December 31, 2015, the interest rate swap was in a liability position of $1.8 million and had unpaid interest of $0.2 million. The Company believes the likelihood of a payment under the guarantee to be remote.

Other

The Company is required to escrow cash balances for specific uses stipulated by certain of its lenders and other various agreements. As of December 31, 2015 and December 31, 2014, the Company's cash balances restricted for these uses were $6.4 million and $37.5 million, respectively. As of December 31, 2015, $4.8 million of the $6.4 million of restricted cash was required under a certain debt agreement to be in escrow for a major construction project.

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 Market Place (6.5%), and The Mall of San Juan (20% prior to April 2015, and subsequently 5%), as well as the noncontrolling interests in The Mall at Wellington Green (10%) and MacArthur Center (5%) through the disposition of the centers in October 2014 (Note 2).
 
At 100%
 
At Beneficial Interest
 
 
Consolidated Subsidiaries
 
Unconsolidated Joint Ventures
 
Consolidated Subsidiaries
 
Unconsolidated Joint Ventures
 
Debt as of:
 
 
 
 
 
 
 
 
December 31, 2015
$
2,643,958


$
2,098,776


$
2,485,055


$
1,121,469

 
December 31, 2014
2,025,505


1,989,546


1,852,749


1,085,991

 












 
Capitalized interest:
 


 


 


 

 
Year Ended December 31, 2015
$
31,112

(1) 
$
792

(2) 
$
30,130


$
543

(2) 
Year Ended December 31, 2014
27,255

(1) 
3,121


26,227


1,578

 












 
Interest expense:
 


 


 


 

 
Year Ended December 31, 2015
$
63,041


$
85,198


$
56,076


$
45,564

 
Year Ended December 31, 2014
90,803


74,806


82,702


40,416

 

(1)
The Company capitalizes interest costs incurred in funding its equity contributions to development projects accounted for as Unconsolidated Joint Ventures. The capitalized interest cost is included in the Company's basis in its investment in Unconsolidated Joint Ventures. 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)
Capitalized interest on the Asia Unconsolidated Joint Venture construction loans is presented at the Company's beneficial interest in both the Unconsolidated Joint Ventures (at 100%) and Unconsolidated Joint Ventures (at Beneficial Interest) columns.
Noncontrolling Interests
Noncontrolling Interests
Noncontrolling Interests

Redeemable Noncontrolling Interests

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). The Taubman Asia operating agreement provides that so long as the Taubman Asia President is employed by Taubman Asia on April 1, 2016, then during the month ended April 30, 2016, he will have the right to exercise an option to put up to 40% of his ownership interest for cash in December 2016 at a valuation determined as of October 31, 2016. In addition, 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 50% (increasing to 100% as early as June 2017) 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 both December 31, 2015 and December 31, 2014. Any adjustments to the redemption value are recorded through equity.

The Company owns a 93.5% controlling interest in a joint venture that is redeveloping International Market Place in Waikiki, Honolulu, Hawaii. The 6.5% joint venture partner has no obligation nor the right to contribute capital. The Company is entitled to a preferential return on its capital contributions. The Company has the right to purchase the joint venture partner's interest and the joint venture partner has the right to require the Company to purchase the joint venture partner's interest after the third anniversary of the opening of the center, and annually thereafter. 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 both December 31, 2015 and December 31, 2014. Any adjustments to the redemption value are recorded through equity.

Equity Balances of Nonredeemable Noncontrolling Interests

The net equity balance of the nonredeemable noncontrolling interests as of December 31, 2015 and December 31, 2014 included the following:
 
2015
 
2014
Non-redeemable noncontrolling interests:
 
 
 
Noncontrolling interests in consolidated joint ventures
$
(23,569
)
 
$
(14,796
)
Noncontrolling interests in partnership equity of TRG
31,573

 
116,376

 
$
8,004

 
$
101,580


Income Allocable to Noncontrolling Interests

Net income attributable to the noncontrolling interests for the years ended December 31, 2015, 2014, and 2013 included the following:
 
2015
 
2014
 
2013
Net income attributable to non-redeemable noncontrolling interests:
 
 
 
 
 
Noncontrolling share of income of consolidated joint ventures
$
11,222

 
$
34,239

 
$
10,344

Noncontrolling share of income of TRG
47,208

 
350,870

 
46,434

 
$
58,430

 
$
385,109

 
$
56,778



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, 2015, 2014, and 2013:

 
2015
 
2014
 
2013
Net income attributable to Taubman Centers, Inc. common shareowners
$
109,020

 
$
863,857

 
$
109,908

Transfers (to) from the noncontrolling interest:
 

 
 

 
 
Increase in Taubman Centers, Inc.’s paid-in capital for the adjustments of noncontrolling interest (1)
69,521

 
83

 
15,129

Decrease in Taubman Centers, Inc.’s paid-in capital related to the acquisition of additional ownership interest in an outlet joint venture


 


 
(1,050
)
Net transfers (to) from noncontrolling interests
69,521

 
83

 
14,079

Change from net income attributable to Taubman Centers, Inc. and transfers from noncontrolling interests
$
178,541

 
$
863,940

 
$
123,987


(1)
In 2015, 2014, and 2013, 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 share-based compensation under employee and director benefit plans (Note 13), issuances of stock pursuant to the continuing offer (Note 15), redemption of the outlet joint venture partner's interest in 2013, and stock repurchases (Note 14).

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, 2015, 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 $530 million at December 31, 2015, compared to a book value of $(23.6) 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, 2015, the Company had the following outstanding derivatives that were designated and are expected to be effective as cash flow hedges of the interest payments and/or the currency exchange rate 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)
 
100
%
 
$
200,000

 
1.64
%
 
1.35
%
(1) 
2.99
%
(1) 
February 2019
Receive variable (LIBOR) /pay-fixed swap (1)
 
100
%
 
175,000

 
1.65
%
 
1.35
%
(1) 
3.00
%
(1) 
February 2019
Receive variable (LIBOR) /pay-fixed swap (1)
 
100
%
 
100,000

 
1.64
%
 
1.35
%
(1) 
2.99
%
(1) 
February 2019
Receive variable (LIBOR) /pay-fixed swap (2)
 
100
%
 
12,000

 
2.09
%
 
1.40
%
 
3.49
%
 
March 2024
Unconsolidated Joint Ventures:
 
 

 
 

 
 

 
 

 
 

 
 
Receive variable (LIBOR) /pay-fixed swap (3)
 
50
%
 
134,698

 
2.40
%
 
1.70
%
 
4.10
%
 
April 2018
Receive variable (LIBOR) /pay-fixed swap (3)
 
50
%
 
134,698

 
2.40
%
 
1.70
%
 
4.10
%
 
April 2018
Receive variable (LIBOR) /pay-fixed swap (4)
 
50.1
%
 
172,180

 
1.83
%
 
1.75
%
 
3.58
%
 
December 2021
Receive variable (LIBOR) USD/pay-fixed KRW cross-currency interest rate swap (5)
 
34.3
%
 
52,065 USD / 60,500,000 KRW

 
1.52
%
 
1.60
%
 
3.12
%
 
September 2020


(1)
The hedged forecasted transaction for each of these swaps is the first previously unhedged one-month LIBOR-indexed interest payments accrued and made each month on a debt principal amount equal to the swap notional amount, regardless of the specific debt agreement from which they may flow. The Company is currently using these swaps to manage interest rate risk on the $475 million TRG Term Loan. The credit spread on this loan can also vary within a range of 1.35% to 1.90%, depending on the Company's leverage ratio at the measurement date.
(2)
The notional amount on this swap is equal to the outstanding principal balance of the floating rate loan on the U.S. headquarters building.
(3)
The notional amount on each of these swaps is equal to 50% of the outstanding principal balance of the loan on Fair Oaks.
(4)
The notional amount on this swap is equal to the outstanding principal balance of the floating rate loan on International Plaza.
(5)
The notional amount on this swap is equal to the outstanding principal balance of the U.S. dollar construction loan for Hanam Union Square. There is a cross-currency interest rate swap to fix the interest rate on the loan and swap the related principal and interest payments from U.S. dollars to Korean Won in order to reduce the impact of fluctuations in interest rates and exchange rates on the cash flows of the joint venture. The currency swap exchange rate is 1,162.0.





Cash Flow Hedges

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 AOCI during the term of the hedged debt transaction.

Amounts reported in AOCI related to currently outstanding interest rate 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. Amounts reported in AOCI related to the cross-currency interest rate swap are recognized as an adjustment to income as transaction gains or losses arising from the remeasurement of foreign currency denominated loans are recognized and as actual interest and principal obligations are repaid.

The Company expects that approximately $7.9 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.

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, 2015, 2014, and 2013. The tables include the amount of gains or losses on outstanding derivative instruments recognized in OCI in cash flow hedging relationships and the location and amount of gains or losses reclassified from AOCI into income resulting from outstanding derivative instruments and settled derivative instruments associated with hedged debt.

During the year ended December 31, 2015, the Company had $0.3 million of hedge ineffectiveness expense related to the swaps used to hedge the TRG term loan which was recorded in Nonoperating Income (Expense) on the Consolidated Statement of Operations and Comprehensive Income. In addition, during the year ended December 31, 2015, the Company recorded a loss of $0.2 million in Equity in Income of Unconsolidated Joint Ventures on the Consolidated Statement of Operations and Comprehensive Income related to the Hanam Union Square swap prior to its hedge inception in September 2015 and an immaterial amount of hedge ineffectiveness after hedge inception. During the year ended December 31, 2014, the Company had an immaterial amount of hedge ineffectiveness related to the swap on MacArthur Center (prior to discontinuation of hedge accounting (Note 2)) recorded as Nonoperating Income (Expense) on the Consolidated Statement of Operations and Comprehensive Income. For the year ended December 31, 2013, 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)
 
Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
 
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
 
2015
 
2014
 
2013
 
 
 
2015
 
2014
 
2013
Derivatives in cash flow hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts – consolidated subsidiary (1)





 
 
 
Nonoperating Income (Expense) (1)
 



$
(4,880
)
 
 
Interest rate contracts – consolidated subsidiaries (1)
$
(1,730
)

$
(7,362
)
 
$
9,990

 
Interest Expense (1)
 
$
(7,211
)

(8,663
)
 
$
(3,221
)
Interest rate contracts – UJVs
71


893

 
5,083

 
Equity in Income of UJVs
 
(4,489
)

(3,186
)
 
(3,080
)
Cross-currency interest rate swap – UJV
12




 

 
Equity in Income of UJVs
 
(321
)


 

Total derivatives in cash flow hedging relationships
$
(1,647
)

$
(6,469
)
 
$
15,073

 
 
 
$
(12,021
)

$
(16,729
)
 
$
(6,301
)






 
 
 
 
 





 
 
Realized losses on settled cash flow hedges:
 


 

 
 
 
 
 
 


 

 
 
Interest rate contracts – consolidated subsidiary
 


 

 
 
 
Interest Expense
 





 
$
(605
)
Total realized losses on settled cash flow hedges
 

 
 

 
 
 
 
 
$

 
$

 
$
(605
)

(1) Includes the MacArthur Center swap for the period that it was effective as a hedge until June 2014, when hedge accounting was discontinued.

The Company records all derivative instruments at fair value in the Consolidated Balance Sheet. The following table presents the location and fair value of the Company’s derivative financial instruments as reported in the Consolidated Balance Sheet as of December 31, 2015 and 2014.
 
 
 
Fair Value
 
Consolidated Balance Sheet Location
 
December 31 2015
 
December 31
2014
Derivatives designated as hedging instruments:
 
 
 
 
 
Asset derivative:
 
 
 
 
 
Interest rate contract - UJV
Investment in UJVs



$
109

Total assets designated as hedging instruments



$