UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005.	
OR

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934	
		
	For the transition period from ___________________ to _________________
Commission File Number 1-11530	
TAUBMAN CENTERS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Michigan
(State or other jurisdiction of
incorporation or organization)	38-2033632
(I.R.S. Employer
Identification No.)	
 	 	
200 East Long Lake Road
Suite 300, P.O. Box 200
Bloomfield Hills, Michigan
(Address of principal executive office)	

48303-0200
(Zip Code)	
 	 	
Registrant's telephone number, including area code:	(248) 258-6800	
 	 	
Securities registered pursuant to Section 12(b) of the Act		

Title of each class	Name of each exchange
on which registered	
Common Stock,
$0.01 Par Value	New York Stock Exchange	
 	 	
8.3% Series A Cumulative
Redeemable Preferred Stock,
$0.01 Par Value	New York Stock Exchange	
 	 	
8% Series G Cumulative
Redeemable Preferred Stock,
No Par Value	New York Stock Exchange	
 	 	
7.625% Series H Cumulative
Redeemable Preferred Stock,
No Par Value	New York Stock Exchange	
Securities registered pursuant to Section 12(g) of the Act: None
        Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  No
        Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  No
        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes  No
        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 
        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act).
       Large Accelerated Filer     Accelerated Filer     Non-Accelerated Filer 
        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  No
The aggregate market value of the 50,986,479 shares of Common Stock held by non-affiliates of the registrant as of February 27, 2006 was $1.7 billion, based upon the closing price $34.09 on the New York Stock Exchange composite tape on June 30, 2005. (For this computation, the registrant has excluded the market value of all shares of its Common Stock held by directors of the registrant and certain other shareholders; such exclusion shall not be deemed to constitute an admission that any such person is an “affiliate” of the registrant.) As of February 27, 2006, there were outstanding 51,996,139 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be held in 2006 are incorporated by reference into Parts II and III.

PART I
Item 1. BUSINESS.
        The following discussion of our business contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our expectations or beliefs concerning future events. We caution that although forward-looking statements reflect our good faith beliefs and best judgment based upon current information, these statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including those risks, uncertainties, and factors detailed from time to time in reports filed with the SEC, and in particular those set forth under the headings “General Risks of the Company” and “Environmental Matters” in this Annual Report on Form 10-K.
The Company
        Taubman Centers, Inc. (“we”, “us”, “our”, or “TCO”) was incorporated in Michigan in 1973 and we had our initial public offering (“IPO”) in 1992. We own a 64% managing general partner’s interest in The Taubman Realty Group Limited Partnership (the “Operating Partnership” or “TRG”), through which we conduct all of our operations.
        We are engaged in the ownership, development, acquisition, and operation of regional shopping centers and interests therein. Our portfolio as of December 31, 2005 included 21 urban and suburban regional and super regional shopping centers in 10 states. In addition, The Pier at Caesars (Atlantic City, New Jersey) is under construction and will open in May 2006 and The Mall at Partridge Creek (Clinton Township, Michigan) is under construction and will open in fall 2007. The Operating Partnership also owns certain regional retail shopping center development projects and more than 99% of The Taubman Company LLC (the “Manager”), which manages the shopping centers and provides other services to the Operating Partnership and to us. See the table on pages 13 and 14 of this report for information regarding the centers.
        In 2005, we formed Taubman Asia, which will be the platform for our future expansion into the Asia-Pacific region. Taubman Asia is headquartered in Hong Kong and will seek opportunities in Asia to augment our existing development and acquisition activities.
        We are a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended (the “Code”). In order to satisfy the provisions of the Code applicable to REITs, we must distribute to our shareholders at least 90% of our REIT taxable income prior to net capital gains and meet certain other requirements. The Operating Partnership’s partnership agreement provides that the Operating Partnership will distribute, at a minimum, sufficient amounts to its partners such that our pro rata share will enable us to pay shareholder dividends (including capital gains dividends that may be required upon the Operating Partnership’s sale of an asset) that will satisfy the REIT provisions of the Code.
Recent Developments
        For a discussion of business developments that occurred in 2005, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A).
The Shopping Center Business
        There are several types of retail shopping centers, varying primarily by size and marketing strategy. Retail shopping centers range from neighborhood centers of less than 100,000 square feet of GLA to regional and super-regional shopping centers. Retail shopping centers in excess of 400,000 square feet of GLA are generally referred to as “regional” shopping centers, while those centers having in excess of 800,000 square feet of GLA are generally referred to as “super-regional” shopping centers. Nineteen of our centers are “super-regional” centers. In this annual report on Form 10-K, the term “regional shopping centers” refers to both regional and super-regional shopping centers. The term “GLA” refers to gross retail space, including anchors and mall tenant areas, and the term “Mall GLA” refers to gross retail space, excluding anchors. The term “anchor” refers to a department store or other large retail store. The term “mall tenants” refers to stores (other than anchors) that are typically specialty retailers and lease space in shopping centers.
Business of the Company
        We, as managing general partner of the Operating Partnership, are engaged in the ownership, management, leasing, acquisition, development, and expansion of regional shopping centers.
1

        The centers:

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

	o	range in size between 233,000 and 1.6 million square feet of GLA and between 124,000 and 642,000 square feet of Mall GLA. The smallest center has approximately 40 stores, and the largest has over 200 stores. Of the 21 centers, 19 are super-regional shopping centers;	

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

	o	have 65 anchors, operating under 19 trade names;	

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

	o	are among the most productive (measured by mall tenants’ average per square foot sales) in the United States. In 2005, mall tenants had average per square foot sales of $508, which is significantly greater than the average for all regional shopping centers owned by public companies.	

        The most important factor affecting the revenues generated by the centers is leasing to mall tenants (primarily specialty retailers), which represents approximately 90% of revenues. Anchors account for less than 10% of revenues because many own their stores and, in general, those that lease their stores do so at rates substantially lower than those in effect for mall tenants.
        Our portfolio is concentrated in highly productive super-regional shopping centers. Of the 21 centers, 19 had annual rent rolls at December 31, 2005 of over $10 million. We believe that this level of productivity is indicative of the centers’ strong competitive position and is, in significant part, attributable to our business strategy and philosophy. We believe that large shopping centers (including regional and especially super-regional shopping centers) are the least susceptible to direct competition because (among other reasons) anchors and large specialty retail stores do not find it economically attractive to open additional stores in the immediate vicinity of an existing location for fear of competing with themselves. In addition to the advantage of size, we believe that the centers’ success can be attributed in part to their other physical characteristics, such as design, layout, and amenities.
Business Strategy And Philosophy
        We believe that the regional shopping center business is not simply a real estate development business, but rather an operating business in which a retailing approach to the on-going management and leasing of the centers is essential. Thus we:

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

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

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

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

2

        The centers compete for retail consumer spending through diverse, in-depth presentations of predominantly fashion merchandise in an environment intended to facilitate customer shopping. While some centers include stores that target high-end, upscale customers, each center is individually merchandised in light of the demographics of its potential customers within convenient driving distance.
        Our leasing strategy involves assembling a diverse mix of mall tenants in each of the centers in order to attract customers, thereby generating higher sales by mall tenants. High sales by mall tenants make the centers attractive to prospective tenants, thereby increasing the rental rates that prospective tenants are willing to pay. We implement an active leasing strategy to increase the centers’ productivity and to set minimum rents at higher levels. Elements of this strategy include terminating leases of under-performing tenants, renegotiating existing leases, and not leasing space to prospective tenants that (though viable or attractive in certain ways) would not enhance a center’s retail mix.
        In 2005, we began a new leasing strategy which offers our tenants the option to pay a fixed charge or pay their share of common area maintenance (CAM) costs. We believe that this will be positive for tenant relations, as it will allow the retailer to decide whether fixed CAM or traditional net CAM works best for them. Our research suggests this approach is unique in the industry; the retailer can choose greater predictability for a modest premium in the fixed CAM option. From a financial perspective, our analysis shows the premium will balance our additional risk. As tenants sign up for the fixed CAM option, over time there will be significantly less matching of CAM income with CAM expenditures, which can vary considerably from period to period.
Potential For Growth
        Our principal objective is to enhance shareholder value. We seek to maximize the financial results of our core assets, while also pursuing a growth strategy that primarily includes an active new center development program.
Internal Growth
        We expect that the majority of our future growth will come from our existing core portfolio and business. Although we’ve always had a culture of intensively managing our assets and maximizing the rents from tenants, we’re committed to improving the processes that significantly impact the core portfolio in order to drive even better performance.
        Our core business strategy is to maintain a portfolio of properties that deliver above-market profitable growth by providing targeted retailers with the best opportunity to do business in each market and targeted shoppers with the best local shopping experience for their needs.
Development of New Centers
        We are pursuing an active program of regional shopping center development. We believe that we have the expertise to develop economically attractive regional shopping centers through intensive analysis of local retail opportunities. We believe that the development of new centers is an important use of our capital and an area in which we excel. At any time, we have numerous potential development projects in various stages.
        In October 2005, we announced plans for the development of The Mall at Partridge Creek, a wholly owned retail project in Clinton Township, Michigan. Groundbreaking on the 640,000 square foot center occurred during November 2005 and the center is expected to open in fall 2007, with Nordstrom opening in spring 2008. The center will be anchored by Nordstrom, Parisian, and MJR Theatres.
        Our approximately $104 million balance of development pre-construction costs as of December 31, 2005 consists of costs relating to the Oyster Bay project in the Town of Oyster Bay, New York. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources — Planned Capital Spending” regarding the status of this project.
        Northlake Mall, a wholly-owned regional center, opened on September 15, 2005 in Charlotte, North Carolina. The 1.1 million square foot center is anchored by Belk, Dick’s Sporting Goods, Dillard’s, Hecht’s, and AMC Theatres.
        In April 2005, we announced the formation of Taubman Asia, which will be the platform for our future expansion into the Asia-Pacific region. Taubman Asia is headquartered in Hong Kong and will seek projects that leverage our strong retail planning, design and operational capabilities. We are currently evaluating opportunities in the region and are analyzing selected projects in the major Asian markets.
3

        In January 2005, we entered into an agreement to invest in The Pier at Caesars (The Pier), located in Atlantic City, New Jersey, with Gordon Group Holdings LLC (Gordon), which is developing the center. The Pier is currently under construction, and is expected to open in May 2006.
        Our policies with respect to development activities are designed to reduce the risks associated with development. We generally do not intend to acquire land early in the development process. Instead, we generally acquire options on land or form partnerships with landholders holding potentially attractive development sites. We typically exercise the options only once we are prepared to begin construction. The pre-construction phase for a regional center typically extends over several years and the time to obtain anchor commitments, zoning and regulatory approvals, and public financing arrangements can vary significantly from project to project. In addition, we do not intend to begin construction until a sufficient number of anchor stores have agreed to operate in the shopping center, such that we are confident that the projected sales and rents from Mall GLA are sufficient to earn a return on invested capital in excess of our cost of capital. Having historically followed these principles, our experience indicates that, on average, less than 10% of the costs of the development of a regional shopping center will be incurred prior to the construction period. However, no assurance can be given that we will continue to be able to so limit pre-construction costs. Unexpected costs due to extended zoning and regulatory processes may cause our investment in a project to exceed this historic experience.
        While we will continue to evaluate development projects using criteria, including financial criteria for rates of return, similar to those employed in the past, no assurances can be given that the adherence to these policies will produce comparable results in the future. In addition, the costs of shopping center development opportunities that are explored but ultimately abandoned will, to some extent, diminish the overall return on development projects. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital Spending” for further discussion of our development activities).
Strategic Acquisitions
        Our objective is to acquire existing centers only when they are compatible with the quality of our portfolio (or can be redeveloped to that level) and that satisfy our strategic plans and pricing requirements. We also may acquire additional interests in centers currently in our portfolio. In 2004 we acquired an additional 23.6% interest in International Plaza, bringing our ownership in the shopping center to 50.1%, and the additional 30% ownership of Beverly Center, bringing our ownership in the shopping center to 100%.
Expansions of the Centers
        Another potential element of growth is the strategic expansion of existing properties to update and enhance their market positions, by replacing or adding new anchor stores or increasing mall tenant space. Most of the centers have been designed to accommodate expansions. Expansion projects can be as significant as new shopping center construction in terms of scope and cost, requiring governmental and existing anchor store approvals, design and engineering activities, including rerouting utilities, providing additional parking areas or decking, acquiring additional land, and relocating anchors and mall tenants (all of which must take place with a minimum of disruption to existing tenants and customers).
        Construction is underway on an expansion and renovation at Waterside Shops at Pelican Bay, which will increase the size of the center to 282,000 square feet. The tenants will begin opening in stages in 2006. In addition, Nordstrom will join the center as an anchor in 2008 and an expansion of the current anchor, Saks Fifth Avenue, will be completed in late 2007 or early 2008.
        Construction at Twelve Oaks Mall will begin early in 2006 with the addition of a 167,000 square foot Nordstrom, a 60,000 square foot expansion and renovation of Marshall Field’s, and approximately 97,000 square feet of additional new store space.
        In January 2005 we closed on the purchase of the Filene’s store at Stamford Town Center. Demolition of the building is expected to begin in the first quarter of 2006 and we are currently finalizing our plans for new restaurant and retail space.
        The following table includes information regarding recent development, acquisition, and expansion and renovation activities that have been completed:
Developments:

Completion Date	Center	Location	
September 2005	Northlake Mall	Charlotte, North Carolina	
 September 2003	Stony Point Fashion Park	Richmond, Virginia	
4

Acquisitions:

Completion Date	Center	Location	
July 2004	International Plaza	Tampa, Florida	
 	  additional interest (1)	 	
January 2004	Beverly Center	Los Angeles, California	
 	  additional interest (2)	 	
December 2003	Waterside Shops at Pelican Bay (3)	Naples, Florida	
July 2003	MacArthur Center	Norfolk, Virginia	
 	  additional interest (4)	 	
March 2003	Great Lakes Crossing	Auburn Hills, Michigan	
 	  additional interest (5)	 	
Expansions and Renovations:

Completion Date	Center	Location	
December 2003	Regency Square	Richmond, Virginia	
November 2003	The Mall at Short Hills	Short Hills, New Jersey	

(1)	In July 2004, an additional 23.6% interest in the center was acquired.	
(2)	In January 2004, the joint venture partner’s 30% interest in the center was acquired.	
(3)	In December 2003, a 25% interest in the center was acquired.	
(4)	In July 2003, an additional 25% interest in the center was acquired.	
(5)	In March 2003, the joint venture partner’s 15% interest in the center was acquired.	

Rental Rates
        As leases have expired in the centers, we have generally been able to rent the available space, either to the existing tenant or a new tenant, at rental rates that are higher than those of the expired leases. In periods of increasing sales, such as those we are currently experiencing, rents on new leases will tend to rise as tenants’ expectations of future growth become more optimistic. In periods of slower growth or declining sales, rents on new leases will grow more slowly or will decline for the opposite reason. However, center revenues nevertheless increase as older leases roll over or are terminated early and replaced with new leases negotiated at current rental rates that are usually higher than the average rates for existing leases.
        The following tables contain certain information regarding per square foot minimum rent in our consolidated businesses and unconsolidated joint ventures at the comparable centers (centers that had been owned and open for the current and preceding year):

	2005	2004	2003	2002	2001	
						
Average rent per square foot:	 	 	 	 	 	
    Consolidated Businesses	$41.41 	$40.98 	$40.06 	$42.31 	$41.90 	
    Unconsolidated Joint Ventures	42.11 	42.09 	42.75 	42.03 	41.76 	
Opening base rent per square foot:		
    Consolidated Businesses	$42.38 	$44.35 	$43.41 	$45.91 	$52.77 	
    Unconsolidated Joint Ventures	44.60 	44.67 	40.06 	43.03 	47.45 	
Square feet of GLA opened:		
    Consolidated Businesses	682,305 	688,020 	512,105 	429,705 	360,302 	
    Unconsolidated Joint Ventures	421,441 	337,679 	498,950 	344,311 	297,513 	
Closing base rent per square foot:		
    Consolidated Businesses	$40.59 	$44.54 	$40.80 	$43.47 	$42.34 	
    Unconsolidated Joint Ventures	42.74 	51.40 	41.28 	41.63 	39.56 	
Square feet of GLA closed:		
    Consolidated Businesses	650,701 	499,098 	628,626 	299,234 	447,018 	
    Unconsolidated Joint Ventures	405,745 	280,393 	470,143 	362,747 	356,524 	
Releasing spread per square foot:		
    Consolidated Businesses	$1.79 	$(0.19)	$2.61 	$2.44 	$10.43 	
    Unconsolidated Joint Ventures	1.86 	(6.73)	(1.22)	1.40 	7.89 	
        The spread between opening and closing rents may not be indicative of future periods, as this statistic is not computed on comparable tenant spaces, and can vary significantly from period to period depending on the total amount, location, and average size of tenant space opening and closing in the period.
5

Lease Expirations
        The following table shows lease expirations based on information available as of December 31, 2005 for the next ten years for all owned centers in operation at that date:

Lease
Expiration
Year	Number of
Leases
Expiring	Leased Area in
Square Footage	Annualized Base Rent
Under Expiring Leases
(in thousands of dollars)	Annualized Base
Rent Under
Expiring Leases
Per Square Foot	Percent of
Total Leased
Square Footage
Represented by
Expiring Leases	
						
2006 (1)	137 	364,408 	11,796 	$32.37 	3.3%	
2007    	256 	699,690 	27,057 	38.67	6.2   	
2008    	309 	915,890 	35,807 	39.09	8.2   	
2009    	334 	929,483 	37,960 	40.84	8.3   	
2010    	232 	680,044 	30,014 	44.14	6.1   	
2011    	441 	1,417,211    	56,508 	39.87	12.7     	
2012    	305 	1,353,455    	53,837 	39.78	12.1     	
2013    	269 	1,237,728    	44,419 	35.89	11.1     	
2014    	201 	782,969 	28,018 	35.78	7.0   	
2015    	253 	994,437 	36,134 	36.34	8.9   	

(1)	Excludes leases that expire in 2006 for which renewal leases or leases with replacement tenants have been executed as of December 31, 2005.	

        We believe that the information in the table is not necessarily indicative of what will occur in the future because of several factors, but principally because of early lease terminations at the centers. For example, the average remaining term of the leases that were terminated during the period 2000 to 2005 was approximately two years. The average term of leases signed during 2005 and 2004 was approximately seven years.
        In addition, mall tenants at the centers may seek the protection of the bankruptcy laws, which could result in the termination of such tenants’ leases and thus cause a reduction in cash flow. In 2005 we experienced the lowest percentage in our history at 0.4% of leases affected compared to 1.7% in 2004. This statistic has ranged from 0.4% to 4.5% since we went public in 1992. Since 1991, the annual provision for losses on accounts receivable has been less than 2% of annual revenues.
Occupancy
        Mall tenant leased space, ending occupancy, and average occupancy rates of our centers were 91.7%, 90.0% and 88.9%, respectively, in 2005, and 90.7%, 89.6%, and 87.4%, respectively, in 2004. For comparable centers, leased space, ending occupancy, and average occupancy rates were 91.6%, 90.3%, and 89.1%, respectively, in 2005, and 90.7%, 89.6%, and 87.4%, respectively, in 2004. Occupancy statistics include centers owned and open in the full periods presented, and value center anchors. The statistics for comparable centers exclude Northlake, which opened in 2005 and Woodland, which was sold in the fourth quarter of 2005.
Major Tenants
        No single retail company represents 10% or more of our revenues. The combined operations of The Limited, Inc. accounted for approximately 4.7% of Mall GLA as of December 31, 2005 and 4.6% of 2005 minimum rent. No other single retail company accounted for more than 4% of Mall GLA or 3% of 2005 minimum rent. The following table shows the ten largest tenants and their square footage as of December 31, 2005:

Tenant	# of
Stores	Square
Footage	% of
Mall GLA	
				
Limited (The Limited, Express, Victoria's Secret)	63 	470,448 	4.7%	
Gap (Gap, Gap Kids, Banana Republic, Old Navy)	41 	334,512 	3.3   	
Forever 21	18 	251,003 	2.5   	
Abercrombie & Fitch (Abercrombie & Fitch, Hollister)	32 	234,304 	2.3   	
Foot Locker (Foot Locker, Lady Foot Locker, Champs Sports)	44 	227,122 	2.3   	
Williams-Sonoma (Williams-Sonoma, Pottery Barn, Pottery Barn Kids)	29 	213,205 	2.1   	
Retail Brand Alliance (Brooks Brothers, Casual Corner) (1)	26 	170,104 	1.7   	
Ann Taylor	28 	157,382 	1.6   	
The TJX Companies (Marshalls, T.J. Maxx)	  4 	151,313 	1.5   	
Talbots	19 	135,426 	1.4   	

(1)	Retail Brand Alliance announced its intent to terminate 77,000 square feet of retail shopping space in 2006 related to its Casual Corner and Petite Sophisticate stores.	

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General Risks of the Company
The Economic Performance and Value of our Shopping Centers are Dependent on Many Factors
        The economic performance and value of our shopping centers are dependent on various factors. Additionally, these same factors will influence our decision whether to go forward on the development of new centers and may affect the ultimate economic performance and value of projects under construction. Adverse changes in the economic performance and value of our shopping centers would adversely affect our income and cash available to pay dividends.
        Such factors include:

	o	changes in the national, regional, and/or local economic and geopolitical climates;	

	o	increases in operating costs;	

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

	o	legal liabilities;	

	o	availability and cost of financing;	

	o	changes in government regulations; and	

	o	changes in real estate zoning and tax laws.	

        In addition, the value and performance of our shopping centers may be adversely affected by certain other factors discussed below including competition, uninsured losses, and environmental liabilities. 
We are in a competitive business.
        There are numerous shopping facilities that compete with our properties in attracting retailers to lease space. In addition, retailers at our properties face continued competition from discount shopping centers, lifestyle centers, outlet malls, wholesale and discount shopping clubs, direct mail, telemarketing, television shopping networks and shopping via the Internet. Competition of this type could adversely affect our revenues and cash available for distribution to stockholders.
        We compete with other major real estate investors with significant capital for attractive investment opportunities. These competitors include other REITs, investment banking firms and private institutional investors. This competition has increased prices for commercial properties and may impair our ability to make suitable property acquisitions on favorable terms in the future.
Some of our potential losses may not be covered by insurance.
        We carry comprehensive liability, fire, flood, earthquake, extended coverage and rental loss insurance on each of our properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, some types of losses, including lease and other contract claims, that generally are not insured. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. If this happens, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.
        In November 2002, Congress passed the “Terrorism Risk Insurance Act of 2002” (TRIA), which required insurance companies to offer terrorism coverage to all existing insured companies for an additional cost. As a result, our standard property insurance policies are currently provided without a sub-limit for terrorism, eliminating the need for separate terrorism insurance policies.
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        In 2005, Congress extended the expiration date of TRIA to December 31, 2007. While Congress may further extend or replace TRIA , the possibility exists that TRIA may be allowed to expire at the end of 2007. There are specific provisions in our loans that address terrorism insurance. Simply stated, in most loans, we are obligated to obtain terrorism insurance, but there are limits on the amounts we could be required to spend to obtain such coverage. If Congress fails to further extend or replace TRIA or if another terrorist event occurs, we would likely pay higher amounts for terrorism insurance coverage and/or obtain less coverage than we have currently. Our inability to obtain such coverage or to do so only at greatly increased costs may also negatively impact the availability and cost of future financings.
We may be subject to liabilities for environmental matters.
        All of the centers presently owned by us (not including option interests in certain pre-development projects ) have been subject to environmental assessments. No assurances can be given, however, that all environmental liabilities have been identified or that no prior owner, operator, or current occupant has created an environmental condition not known to us. Moreover, no assurances can be given that future laws, ordinances or regulations will not impose any material environmental liability or that the current environmental condition of the centers will not be affected by tenants and occupants of the centers, by the condition of properties in the vicinity of the centers (such as the presence of underground storage tanks) or by third parties unrelated to us.
We hold investments in joint ventures in which we do not control all decisions, and we may have conflicts of interest with our joint venture partners.
        Some of our shopping centers are partially owned by non-affiliated partners through joint venture arrangements. As a result, we do not control all decisions regarding those shopping centers and may be required to take actions that are in the interest of the joint venture partners but not our best interests. Accordingly, we may not be able to favorably resolve any issues which arise with respect to such decisions, or we may have to provide financial or other inducements to our joint venture partners to obtain such resolution.
        Various restrictive provisions and rights govern sales or transfers of interests in our joint ventures. These may work to our disadvantage because, among other things, we may be required to make decisions as to the purchase or sale of interests in our joint ventures at a time that is disadvantageous to us.
The bankruptcy of our tenants, anchors or joint venture partners could adversely affect us.
        We could be adversely affected by the bankruptcy of third parties. The bankruptcy of a mall tenant could result in the termination of its lease which would lower the amount of cash generated by that mall. In addition, if a department store operating as an anchor at one of our shopping centers were to go into bankruptcy and cease operating, we may experience difficulty and delay in replacing the anchor. In addition, the anchor’s closing may lead to reduced customer traffic and lower mall tenant sales. As a result, we may also experience difficulty or delay in leasing spaces in areas adjacent to the vacant anchor space. The profitability of shopping centers held in a joint venture could also be adversely affected by the bankruptcy of one of the joint venture partners if, because of certain provisions of the bankruptcy laws, we were unable to make important decisions in a timely fashion or became subject to additional liabilities.
Our investments are subject to credit and market risk.
        We occasionally extend credit to third parties in connection with the sale of land or other transactions. We have occasionally made investments in marketable and other equity securities. We are exposed to risk in the event the values of our investments and/ or our loans decrease due to overall market conditions, business failure, and/ or other nonperformance by the investees or counterparties.
Our real estate investments are relatively illiquid.
        We may be limited in our ability to vary our portfolio in response to changes in economic or other conditions by restriction on transfer imposed by our partners or lenders. In addition, under TRG’s partnership agreement, upon the sale of a center or TRG’s interest in a center, TRG may be required to distribute to its partners all of the cash proceeds received by TRG from such sale. If TRG made such a distribution, the sale proceeds would not be available to finance TRG’s activities, and the sale of a center may result in a decrease in funds generated by continuing operations and in distributions to TRG’s partners, including us.
8

We may acquire or develop new properties, and these activities are subject to various risks.
        We actively pursue development and acquisition activities as opportunities arise, and these activities are subject to the following risks:

	o	the pre-construction phase for a regional center typically extends over several years, and the time to obtain anchor commitments, zoning and regulatory approvals, and public financing can vary significantly from project to project;	

	o	we may not be able to obtain the necessary zoning or other governmental approvals for a project, or we may determine that the expected return on a project is not sufficient; if we abandon our development activities with respect to a particular project, we may incur a loss on our investment;	

	o	construction and other project costs may exceed our original estimates because of increases in material and labor costs, delays and costs to obtain anchor and tenant commitments;	

	o	we may not be able to obtain financing or to refinance construction loans, which are generally recourse to TRG; and	

	o	occupancy rates and rents at a completed project may not meet our projections, and the costs of development activities that we explore but ultimately abandon will, to some extent, diminish the overall return on our completed development projects.	

        We are currently exploring development and acquisition opportunities in international markets. In addition to the risks noted above we may have additional currency, funds repatriation, tax and other political and regulatory considerations associated with such projects that may reduce our financial return.
We may not be able to maintain our status as a REIT.
        We may not be able to maintain our status as a REIT for federal income tax purposes with the result that the income distributed to shareholders will not be deductible in computing taxable income and instead would be subject to tax at regular corporate rates. We may also be subject to the alternative minimum tax if we fail to maintain our status as a REIT. Any such corporate tax liability would be substantial and would reduce the amount of cash available for distribution to our shareholders which, in turn, could have a material adverse impact on the value of, or trading price for, our shares. Although we believe we are organized and operate in a manner to maintain our REIT qualification, many of the REIT requirements of the Internal Revenue Code of 1986, as amended, or the Code, are very complex and have limited judicial or administrative interpretations. Changes in tax laws or regulations or new administrative interpretations and court decisions may also affect our ability to maintain REIT status in the future. If we do not maintain our REIT status in any year, we may be unable to elect to be treated as a REIT for the next four taxable years.
        Although we currently intend to maintain our status as a REIT, future economic, market, legal, tax, or other considerations may cause us to determine that it would be in our and our shareholders’ best interests to revoke our REIT election. If we revoke our REIT election, we will not be able to elect REIT status for the next four taxable years.
We may be subject to taxes even if we qualify as a REIT.
        Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. We cannot guarantee that sales of our properties would not be prohibited transactions unless we comply with certain statutory safe-harbor provisions. The need to avoid prohibited transactions could cause us to forego or defer sales of facilities that non-REITs otherwise would have sold or that might otherwise be in our best interest to sell.
9

        In addition, any net taxable income earned directly by our taxable REIT subsidiaries will be subject to federal and state corporate income tax. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by the taxable REIT subsidiaries if the economic arrangements between the REIT, the REIT’s tenants, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income, because not all states and localities follow the federal income tax treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to our shareholders.
The lower tax rate on certain dividends from non-REIT “C” corporations may cause investors to prefer to hold stock in non-REIT “C” corporations.
        While corporate dividends have traditionally been taxed at ordinary income rates, the maximum tax rate on certain corporate dividends received by individuals through December 31, 2008, has been reduced from 35% to 15%. This change has reduced substantially the so-called “double taxation” (that is, taxation at both the corporate and shareholder levels) that had generally applied to non-REIT “C” corporations but did not apply to REITs. Generally, dividends from REITs do not qualify for the dividend tax reduction because REITs generally do not pay corporate-level tax on income that they distribute currently to shareholders. REIT dividends are only eligible for the lower capital gains rates in limited circumstances where the dividends are attributable to income, such as dividends from a taxable REIT subsidiary, that has been subject to corporate-level tax. The application of capital gains rates to non-REIT “C” corporation dividends could cause individual investors to view stock in non-REIT “C” corporations as more attractive than shares in REITs, which may negatively affect the value of our shares.
Our ownership limitations and other provisions of our articles of incorporation and bylaws may hinder any attempt to acquire us.
        The general limitations on ownership of our capital stock and other provisions of our articles of incorporation and bylaws could have the effect of discouraging offers to acquire us and of inhibiting a change in control, which could adversely affect our shareholders’ ability to receive a premium for their shares in connection with such a transaction.
Members of the Taubman family have the power to vote a significant number of the shares of our capital stock entitled to vote.
        Based on information contained in filings made with the SEC, as of December 31, 2005, A. Alfred Taubman and the members of his family have the power to vote approximately 31% of the outstanding shares of our common stock and our Series B preferred stock, considered together as a single class, and approximately 83% of our outstanding Series B preferred stock. Our shares of common stock and our Series B preferred stock vote together as a single class on all matters generally submitted to a vote of our shareholders, and the holders of the Series B preferred stock have certain rights to nominate up to four individuals for election to our board of directors and other class voting rights. Mr. Taubman’s sons, Robert S. Taubman and William S. Taubman, serve as our Chairman of the Board, President and Chief Executive Officer, and our Chief Operating Officer, respectively. These individuals occupy the same positions with The Taubman Company, LLC, which manages all of our properties. As a result, Mr. A. Alfred Taubman and the members of his family may exercise significant influence with respect to the election of our board of directors, the outcome of any corporate transaction or other matter submitted to our shareholders for approval, including any merger, consolidation or sale of all or substantially all of our assets. In addition, because our articles of incorporation impose a limitation on the ownership of our outstanding capital stock by any person and such ownership limitation may not be changed without the affirmative vote of holders owning not less than two-thirds of the outstanding shares of capital stock entitled to vote on such matter, Mr. A. Alfred Taubman and the members of his family have the power to prevent a change in control of our company.
10

Our ability to pay dividends on our stock may be limited.
        Because we conduct all of our operations through TRG, our ability to pay dividends on our stock will depend almost entirely on payments and dividends received on our interests in TRG. Additionally, the terms of some of the debt to which TRG is a party limits its ability to make some types of payments and other dividends to us. This in turn limits our ability to make some types of payments, including payment of dividends on our stock, unless we meet certain financial tests or such payments or dividends are required to maintain our qualification as a REIT. As a result, if we are unable to meet the applicable financial tests, we may not be able to pay dividends on our stock in one or more periods.
Our ability to pay dividends is further limited by the requirements of Michigan law.
        Our ability to pay dividends on our stock is further limited by the laws of Michigan. Under the Michigan Business Corporation Act, a Michigan corporation may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as the debts become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Accordingly, we may not make a distribution on our stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of any shares of our preferred stock then outstanding.
We may incur additional indebtedness, which may harm our financial position and cash flow and potentially impact our ability to pay dividends on our stock.
        Our governing documents do not limit us from incurring additional indebtedness and other liabilities. As of December 31, 2005, we had approximately $2.1 billion of consolidated indebtedness outstanding, and our beneficial interest in both our consolidated debt and the debt of our unconsolidated joint ventures was $2.5 billion. We may incur additional indebtedness and become more highly leveraged, which could harm our financial position and potentially limit our cash available to pay dividends.
We cannot assure you that we will be able to pay dividends regularly although we have done so in the past.
        Our ability to pay dividends in the future is dependent on our ability to operate profitably and to generate cash from our operations. Although we have done so in the past, we cannot guarantee that we will be able to pay dividends on a regular quarterly basis in the future. Furthermore, any new shares of common stock issued will substantially increase the cash required to continue to pay cash dividends at current levels. Any common stock or preferred stock that may in the future be issued to finance acquisitions, upon exercise of stock options or otherwise, would have a similar effect.
Environmental Matters
        All of the centers presently owned by us (not including option interests in certain pre- development projects) have been subject to environmental assessments. We are not aware of any environmental liability relating to the centers or any other property, in which we have or had an interest (whether as an owner or operator) that we believe, would have a material adverse effect on our business, assets, or results of operations. No assurances can be given, however, that all environmental liabilities have been identified or that no prior owner, operator, or current occupant has created an environmental condition not known to us. Moreover, no assurances can be given that (1) future laws, ordinances, or regulations will not impose any material environmental liability or that (2) the current environmental condition of the centers will not be affected by tenants and occupants of the centers, by the condition of properties in the vicinity of the centers (such as the presence of underground storage tanks), or by third parties unrelated to us.
11

Personnel
        We have engaged the Manager to provide real estate management, acquisition, development, and administrative services required by us and our properties.
        As of December 31, 2005, the Manager had 526 full-time employees. The following table provides a breakdown of employees by operational areas as of December 31, 2005:

	Number of Employees	
		
Center Operations	195   	
Property Management	130   	
Leasing	47 	
Development	35 	
Financial Services	60 	
Other	59 	
		
    Total	526   	
		
Available Information
        The Company makes available free of charge through its website at www.taubman.com all reports it electronically files with, or furnishes to, the Securities Exchange Commission (the “SEC”), including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those reports, as soon as reasonably practicable after those documents are filed with, or furnished to, the SEC. These filings are also accessible on the SEC’s website at www.sec.gov.
Item 1A. RISK FACTORS.
        The information required by this item is included in this report at Item 1 under the caption “Business – General Risks of the Company.”
Item 1B. UNRESOLVED STAFF COMMENTS.
      None.
Item 2. PROPERTIES.
Ownership
        The following table sets forth certain information about each of the centers. The table includes only centers in operation at December 31, 2005. Centers are owned in fee other than Beverly Center, Cherry Creek, International Plaza, MacArthur Center, and Sunvalley, which are held under ground leases expiring between 2049 and 2083.
        Certain of the centers are partially owned through joint ventures. Generally, the Operating Partnership’s joint venture partners have ongoing rights with regard to the disposition of the Operating Partnership’s interest in the joint ventures, as well as the approval of certain major matters.
12

						
Center	Anchors	Sq. Ft. of GLA/
Mall GLA
as of 12/31/05	Year Opened/
Expanded	Year
Acquired	Ownership %
as of 12/31/05	
						
Consolidated Businesses:	 	 	 		 	 	 		 		 	
Beverly Center	 	Bloomingdale's, Macy's	 	878,000	 	1982	 	 	 	100	%	
Los Angeles, CA	 	 	 	570,000	 		
	 		
Dolphin Mall	 	Bass Pro Shops Outdoor World (2007),	 	1,313,000	 	2001	 	 	 	100	%	
Miami, FL	 	Burlington Coat Factory, Cobb Theatres,	 	623,000	 		
 	 	Dave & Busters, The Sports Authority, Off 5 th	 		
 	 	Saks, Marshalls, Neiman Marcus-Last Call	 		
	 		
Fairlane Town Center	 	Marshall Field's, JCPenney, Lord & Taylor	 	1,532,000	 	1976/1978/	 	 	 	100	%	
Dearborn, MI	 	Off 5 th Saks, Sears	 	642,000	 	1980/2000	 		
 (Detroit Metropolitan Area)	 		
	 		
Great Lakes Crossing	 	Bass Pro Shops Outdoor World, GameWorks,	 	1,359,000	 	1998	 	 	 	100	%	
Auburn Hills, MI	 	Neiman Marcus-Last Call, Off 5 th Saks	 	545,000	 		
 (Detroit Metropolitan Area)	 	Star Theatres, Circuit City	 		
	 		
International Plaza	 	Dillard's, Neiman Marcus, Nordstrom	 	1,221,000	 	2001	 	 	 	50	%	
Tampa, FL	 	Robb & Stucky	 	579,000	 		
	 		
MacArthur Center	 	Dillard's, Nordstrom	 	931,000	 	1999	 	 	 	95	%	
Norfolk, VA	 	 	 	517,000	 		
	 		
Northlake Mall	 	Belk, Dillard's, Hecht's, Dick's Sporting	 	1,072,000	(1)	2005	 	 	 	100	%	
Charlotte, NC	 	Goods	 	406,000	 		
	 		
Regency Square	 	Hecht's (two locations), JCPenney,	 	820,000	 	1975/1987	 	1997	 	100	%	
Richmond, VA	 	Sears	 	233,000	 		
	 		
The Mall at Short Hills	 	Bloomingdale's, Macy's, Neiman	 	1,341,000	 	1980/1994/	 	 	 	100	%	
Short Hills, NJ	 	Marcus, Nordstrom, Saks Fifth Avenue	 	519,000	 	1995	 				
	 		
Stony Point Fashion Park	 	Dillard's, Saks Fifth Avenue, Dick's	 	662,000	 	2003	 	 	 	100	%	
Richmond, VA	 	Sporting Goods	 	296,000	 		
	 		
Twelve Oaks Mall	 	Marshall Field's, JCPenney, Lord &	 	1,189,000	 	1977/1978	 	 	 	100	%	
Novi, MI	 	Taylor,Nordstrom (2007), Sears	 	451,000	 		
 (Detroit Metropolitan Area)	 		
	 		
The Mall at Wellington Green	 	City Furniture and Ashley Furniture Home Store,	 	1,278,000		2001/2003	 			90	%	
Wellington, FL	 	Dillard's, JCPenney, Macy's, Nordstrom	 	465,000	 		
 (Palm Beach County)	 		
	 		
The Shops at Willow Bend	 	Dillard's, Foley's, Neiman Marcus	 	1,391,000	(2)	2001/2004	 	 	 	100	%	
Plano, TX	 	Saks Fifth Avenue	 	    533,000	 		
 (Dallas Metropolitan Area)	 		
	 		
	 	Total GLA	 	14,987,000		
	 	Total Mall GLA	 	6,379,000		
	 	TRG% of Total GLA	 	14,202,000		
	 	TRG% of Total Mall GLA	 	6,017,000		
	 		
Unconsolidated Joint Ventures:	 		
Arizona Mills	 	GameWorks, Harkins Cinemas,	 	1,231,000	 	1997	 		 	50	%	
Tempe, AZ	 	JCPenney Outlet, Neiman Marcus-	 	527,000	 		
 (Phoenix Metropolitan Area)	 	Last Call, Off 5 th Saks	 		
	 		
Cherry Creek Shopping Center	 	Foley's, Neiman Marcus,	 	1,023,000	(3)	1990/1998	 	 	 	50	%	
Denver, CO	 	Nordstrom (2007), Saks Fifth Avenue	 	550,000	 		
	 		
Fair Oaks	 	Hecht's, JCPenney, Lord & Taylor,	 	1,571,000	 	1980/1987/	 	 	 	50	%	
Fairfax, VA	 	Sears, Macy's	 	566,000	 	1988/2000	 		
 (Washington, DC Metropolitan Area)	 		
	 		
The Mall at Millenia	 	Bloomingdale's, Macy's, Neiman	 	1,116,000	 	2002	 		 	50	%	
Orlando, FL	 	Marcus	 	516,000	 		
	 		
Stamford Town Center	 	Macy's, Saks Fifth Avenue	 	853,000	(4)	1982	 		 	50	%	
Stamford, CT	 	 	 	360,000	 		
	 		
Sunvalley	 	JCPenney, Macy's (two locations),	 	1,328,000	 	1967/1981	 	2002	 	50	%	
Concord, CA	 	Sears	 	488,000	 		
 (San Francisco Metropolitan Area)	 		
	 		
Waterside Shops at Pelican Bay	 	Nordstrom (2008), Saks Fifth Avenue	 	233,000	(5)	1992	 	2003	 	25	%	
Naples, FL	 	 	 	124,000	 		
	 		
Westfarms	 	Filene's, Filene's Men's Store/Furniture	 	1,289,000	 	1974/1983/	 	 	 	79	%	
West Hartford, CT	 	Gallery, JCPenney, Lord & Taylor, Nordstrom	 	519,000	 	1997	 				
	 		
	 	Total GLA	 	8,644,000		
	 	Total Mall GLA	 	3,650,000		
	 	TRG% of Total GLA	 	4,638,000		
	 	TRG% of Total Mall GLA	 	1,945,000		
	 		
	 	Grand Total GLA	 	23,631,000		
	 	Grand Total Mall GLA	 	10,029,000		
	 	TRG% of Total GLA	 	18,840,000		
	 	TRG% of Total Mall GLA	 	7,962,000		

(1)	GLA includes approximately 60,000 square feet for AMC Theatres.	
(2)	GLA includes the former Lord & Taylor store, which closed on April 30, 2005.	
(3)	Nordstrom will occupy the former Lord & Taylor space, which closed on April 30, 2005.	
(4)	GLA includes the former Filene’s store, which closed in January 2005.	
(5)	Center is currently under renovation and expansion.	
13

Anchors
        The following table summarizes certain information regarding the anchors at the operating centers (excluding the value centers) as of December 31, 2005:

Name	Number of
Anchor Stores	12/31/05 GLA
(in thousands)	% of GLA	
Belk	 	1	 	180	 	0.9	%	
	 		
City Furniture and Ashley Furniture Home Store	 	1	 	140	 	0.7	%	
	 		
Dick's Sporting Goods	 	2	 	159	 	0.8	%	
	 		
Dillard's	 	6	 	1,335	 	6.8	%	
	 		
Federated	 		
     Macy's	 	8	 	1,669	 		
     Marshall Field's	 	2	 	480	 		
     Hecht's	 	4	 	618	 		
     Bloomingdale's	 	3	 	614	 		
     Lord & Taylor	 	4	 	518	 		
     Foley's	 	2	 	418	 		
     Filene's	 	1	 	209	 		
     Filene's Mens Store/Furniture Gallery	 	    1	 	    80	 		
       Total	 	25	 	4,606	 	23.3	%	
	 		
JCPenney	 	7	 	1,266	 	6.4	%	
	 		
Neiman Marcus (1)	 	5	 	556	 	2.8	%	
	 		
Nordstrom (2)	 	5	 	796	 	4.0	%	
	 		
Robb & Stucky	 	1	 	119	 	0.6	%	
	 		
Saks	 		
     Saks Fifth Avenue	 	6	 	467	 		
     Off 5 th Saks (3)	 	    1	 	      93	 		
     Total	 	7	 	560	 	2.8	%	
	 		
Sears	 	5	 	1,104	 	5.6	%	

Total	 	65	 	10,821	 	54.9	%  (4)	

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

14

Mortgage Debt
        The following table sets forth certain information regarding the mortgages encumbering the centers as of December 31, 2005. All mortgage debt in the table below is nonrecourse to the Operating Partnership, except for debt encumbering Dolphin Mall and The Shops at Willow Bend (repaid in February 2006). The Operating Partnership has guaranteed the payment of all or a portion of the principal and interest on the mortgage debt of these centers. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Loan Commitments and Guarantees”). A $1.0 million note secured by certain equipment of The Mall at Millenia is excluded.

Centers Consolidated in
TCO's Financial Statements	Stated
Interest
Rate	Principal Balance
as of 12/31/05
(thousands of dollars)	Annual Debt
Service
(thousands of dollars)	Maturity
Date	Balance Due
on Maturity
(thousands of dollars)	Earliest
Prepayment
Date	
							
Beverly Center	 	5.28%	 	347,500		Interest Only	(1)	02/11/14	 	303,277	 	01/16/07	(2)	
Dolphin Mall	 	LIBOR+2.15%	(3)	141,311	 	2,184+Interest	(4)	02/09/07	(5)	138,779	 	30 Days Notice	(6)	
Great Lakes Crossing	 	5.25%	 	145,239	 	10,006	(7)	03/11/13	 	125,507	 	30 Days Notice	(2)	
International Plaza (50.1%)	 	4.21%	(8)	182,135	(8)	11,274	(7)	01/08/08	 	175,150	 	30 Days Notice	(9)	
MacArthur Center (95%)	 	7.59%	(10)	140,895	(10)	12,400	(7)	10/01/10	 	126,884	 	30 Days Notice	(2)	
The Mall at Oyster Bay	 	LIBOR+2.00%		56,241		Interest Only		03/01/06	(11)	56,241	 	10 Days Notice	(16)	
Regency Square	 	6.75%	 	78,792	 	6,421	(7)	11/01/11	 	71,569	 	60 Days Notice	(13)	
The Mall at Short Hills	 	5.47%		540,000	 	Interest Only		12/14/15	 	540,000	 	01/01/11	(14)	
Stony Point Fashion Park	 	6.24%	 	113,228	 	8,488	(7)	06/01/14		98,585	 	08/13/06	(15)	
The Mall at Wellington	 		
  Green (90%)	 	5.44%		200,000		Interest Only		05/06/15		200,000	 	06/24/07	(15)	
The Shops at Willow Bend	 	LIBOR+2.25%		144,607	 	2,367+Interest	(4)	07/09/06	(16)	143,346	 	30 Days Notice	(16)	
	 		
Other Consolidated Secured Debt	 		
	 		
TRG Credit Facility	 	LIBOR+0.80%	(17)	0		Interest Only	 	02/14/08	(18)	0	 	2 Days Notice	(12)	
TRG Credit Facility	 	Variable Bank Rate	(19)	0		Interest Only	 	02/14/08		0	 	At Any Time	(12)	
	 		
Centers Owned by Unconsolidated	 		
Joint Ventures/TRG's % Ownership	 		
	 		
Arizona Mills (50%)	 	7.90%		139,408	 	12,728	(7)	10/05/10	 	130,419	 	30 Days Notice	(2)	
Cherry Creek Shopping Center (50%)	 	7.68%		173,984	 	15,946	(20)	08/11/06	(21)	172,523	 	60 Days Notice	(22)	
Fair Oaks (50%)	 	6.60%		140,000	 	Interest Only	 	04/01/08	 	140,000	 	30 Days Notice	(23)	
The Mall at Millenia (50%)	 	5.46%		210,000	 	Interest Only	(24)	04/09/13	 	195,255	 	03/29/06	(2)	
Sunvalley (50%)	 	5.67%		129,905	 	9,372	(7)	11/01/12	 	114,056	 	30 Days Notice	(2)	
Westfarms (79%)	 	6.10%		201,417	 	15,272	(7)	07/11/12	 	179,028	 	30 Days Notice	(2)	

(1)	Loan is interest only through 2/11/06 then begin amortizing principal based on 30 years. Annual debt service will be $23.1 million.	
(2)	No defeasance deposit required if paid within three months of maturity date.	
(3)	The entire debt balance is capped at 7% plus 2.15% credit spread until maturity based on one-month LIBOR.	
(4)	Amortizing principal based on 25 years at 7%.	
(5)	Maturity date may be extended for a total of 2 years.	
(6)	Debt may be prepaid with a prepayment penalty equal to 2% of principal prepaid between the period 9/9/05 to 2/8/06 and a 1% penalty of principal prepaid between the period 2/9/06 and 8/8/06. No prepayment penalty if prepaid after 8/9/06. The Company expects to pay off the loan in August 2006.	
(7)	Amortizing principal based on 30 years.	
(8)	Debt is reduced by $0.3 million of purchase accounting discount from acquisition which increases the stated rate on the debt of 4.21% to an effective rate of 4.38%.	
(9)	No defeasance deposit required if paid within one month of maturity date.	
(10)	Debt includes $3.6 million of purchase accounting premium from acquisition which reduces the stated rate on the debt of 7.59% to an effective rate of 6.84%.	
(11)	Loan was repaid in February 2006.	
(12)	Prepayment can be made without penalty.	
(13)	No defeasance deposit required if paid within six months of maturity date.	
(14)	Debt may be prepaid with a prepayment penalty equal to greater of yield maintenance or 1% of principal prepaid. No prepayment penalty is due if prepaid within three months of maturity date. 30 days notice required.	
(15)	No defeasance deposit required if paid within four months of maturity date.	
(16)	Loan was repaid in February 2006.	
(17)	The facility is a $350 million line of credit and is secured by mortgages on Fairlane Town Center and Twelve Oaks Mall.	
(18)	The maturity date may be extended one year.	
(19)	The facility is a $40 million line of credit and is secured by an indirect interest in 40% of The Mall at Short Hills.	
(20)	Amortizing principal based on 25 years.	
(21)	A lender has agreed to lock the rate on $190 million of a planned refinancing at 5.01%. The new loan is expected to close in the second quarter 2006.	
(22)	Debt may be prepaid with a yield maintenance prepayment penalty. No prepayment penalty is due if redeemed within three months of maturity date.	
(23)	Debt may be prepaid with a yield maintenance prepayment penalty. No prepayment penalty is due if prepaid within six months of maturity date.	
(24)	Interest only through 4/9/08. Thereafter, principal will be amortized based on 30 years. Annual debt service will be $14.2 million.	

        For additional information regarding the centers and their operations, see the responses to Item 1 of this report.
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Item 3. LEGAL PROCEEDINGS.
        In September 2005, the last pending shareholder class and derivative actions relating to the unsolicited tender offer were settled, and those actions, as well as all of the claims asserted in the actions, were dismissed with prejudice. The settlement did not have a material financial impact on the Company.
        Neither we, our subsidiaries, nor any of the joint ventures is presently involved in any material litigation, nor, to our knowledge, is any material litigation threatened against us, our subsidiaries, or any of the properties. Except for routine litigation involving present or former tenants (generally eviction or collection proceedings), substantially all litigation is covered by liability insurance.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
      Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.
         The common stock of Taubman Centers, Inc. is listed and traded on the New York Stock Exchange (Symbol: TCO). As of February 27, 2006, the 51,996,139 outstanding shares of Common Stock were held by 518 holders of record. The closing price per share of the Common Stock on the New York Stock Exchange on February 27, 2006 was $39.95.
        The following table presents the dividends declared and range of share prices for each quarter of 2005 and 2004:

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

	Market Quotations	
		
2004 Quarter Ended	High	Low	Dividends	
                  March 31	$25.17	$21.00	$0.270	
		
                  June 30	25.65	19.30	0.270	
		
                  September 30	26.75	22.18	0.270	
		
                  December 31	30.33	26.01	0.285	
		
        Other information required by this item is hereby incorporated by reference to the table and footnotes appearing in our definitive proxy statement for the annual meeting of shareholders to be held in 2006 (the “Proxy Statement”) under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters – Securities Authorized for Issuance Under Equity Compensation Plans.”
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Item 6. SELECTED FINANCIAL DATA.
        The following table sets forth selected financial data and should be read in conjunction with the financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report:

	Year Ended December 31	
		
	2005	2004	2003	2002	2001	
	(in thousands of dollars, except as noted)	
STATEMENT OF OPERATIONS DATA:	 		 		 		 		 		 	
  Rents, recoveries, and other shopping center revenues	 	473,438	 	431,453	 	388,483	 	356,182	 	309,347	 	
  Income before gain on disposition of interest in center,	 		
    discontinued operations, cumulative effect of change in	 		
    accounting principle, and minority and preferred interests	 	57,432	 	59,970	 	31,292	 	42,015	 	51,480	 	
  Gain on disposition of interest in center (1)	 	52,799	 		
  Discontinued operations (2)	 	 	 	328	 	50,881	 	13,816	 	4,184	 	
  Cumulative effect of change in accounting principle (3)	 	 	 	 	 	 	 	 	 	(8,404	)	
  Minority interest in TRG	 	(35,869	)	(35,694	)	(35,501	)	(32,826	)	(31,673	)	
  TRG preferred distributions	 	(2,460	)	(12,244	)	(9,000	)	(9,000	)	(9,000	)	
  Net income (4)	 	71,735	 	12,378	 	37,836	 	14,426	 	7,657	 	
  Preferred dividends	 	(27,622	)	(17,444	)	(16,600	)	(16,600	)	(16,600	)	
  Net income (loss) allocable to common shareowners	 	44,113	 	(5,066	)	21,236	 	(2,174	)	(8,943	)	
  Income (loss) from continuing operations per common	 		
    share - diluted	 	0.87	 	(0.11	)	(0.13	)	(0.16	)	(0.13	)	
  Net income (loss) per common share - diluted	 	0.87	 	(0.10	)	0.41	 	(0.05	)	(0.18	)	
  Dividends declared per common share	 	1.160	 	1.095	 	1.050	 	1.025	 	1.005	 	
  Weighted average number of common shares outstanding -	 		
    basic	 	50,459,314	 	49,021,843	 	50,387,616	 	51,239,237	 	50,500,058	 	
  Weighted average number of common shares outstanding -	 		
    diluted	 	50,530,139	 	49,021,843	 	50,387,616	 	51,239,237	 	50,500,058	 	
  Number of common shares outstanding at end of period	 	51,866,184	 	48,745,625	 	49,936,786	 	52,207,756	 	50,734,984	 	
  Ownership percentage of TRG at end of period	 	64	%	61	%	61	%	62	%	62	%	
	 		
BALANCE SHEET DATA:	 		
  Real estate before accumulated depreciation	 	3,081,324	 	2,936,964	 	2,519,922	 	2,393,428	 	1,985,737	 	
  Total assets (5)	 	2,797,580	 	2,632,434	 	2,186,970	 	2,269,707	 	2,141,439	 	
  Total debt	 	2,089,948	 	1,930,439	 	1,495,777	 	1,463,725	 	1,342,212	 	
	 		
SUPPLEMENTAL INFORMATION:	 		
  Funds from Operations allocable to TCO (4)(6)	 	110,578	 	103,070	 	87,325	 	88,240	 	78,524	 	
  Mall tenant sales (7)	 	4,124,534	 	3,728,010	 	3,417,572	 	3,113,620	 	2,797,867	 	
  Sales per square foot (7)(8)	 	508	 	466	 	441	 	457	 	465	 	
  Number of shopping centers at end of period	 	21	 	21	 	21	 	20	 	20	 	
  Ending Mall GLA in thousands of square feet	 	10,029	 	9,982	 	9,988	 	9,850	 	9,186	 	
  Leased space (9)(10)	 	91.7	%	90.7	%	89.8	%	90.3	%	87.7	%	
  Ending occupancy (10)	 	90.0	%	89.6	%	87.4	%	87.0	%	84.0	%	
  Average occupancy (10)	 	88.9	%	87.4	%	86.6	%	84.8	%	84.9	%	
  Average base rent per square foot (8) :	 		
    Consolidated businesses:	 		
      All mall tenants	 	$41.41	 	$40.98	 	$40.06	 	$42.31	 	$41.90	 	
      Stores opening during year	 	42.38	 	44.35	 	43.41	 	45.91	 	52.77	 	
      Stores closing during year	 	40.59	 	44.54	 	40.80	 	43.47	 	42.34	 	
    Unconsolidated Joint Ventures:	 		
      All mall tenants	 	$42.11	 	$42.09	 	$42.75	 	$42.03	 	$41.76	 	
      Stores opening during year	 	44.60	 	44.67	 	40.06	 	43.03	 	47.45	 	
      Stores closing during year	 	42.74	 	51.40	 	41.28	 	41.63	 	39.56	 	

(1)	In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland for $177.4 million.	
(2)	Biltmore Fashion Park was sold in 2003, and La Cumbre Plaza and Paseo Nuevo were sold in 2002. Discontinued operations in 2004, 2003, and 2002 include gains on dispositions of interests in centers of $0.3 million, $49.6 million, and $12.3 million, respectively.	
(3)	In January 2001, we adopted Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” and its amendments and interpretations. We recognized a loss as a transition adjustment to mark our share of interest rate agreements to fair value as of January 1, 2001.	
(4)	Funds from Operations (FFO) is defined and discussed in MD&A – Presentation of Operating Results. Net income in 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills, the pay-off of the Northlake Mall loan, and debt modifications in connection with the pay-off of the Oyster Bay loan. In addition to these charges, FFO in 2005 includes a $3.1 million charge incurred in connection with the redemption of $87 million of the Series A Preferred Stock. Net income and FFO in 2004 include insurance recoveries related to the unsolicited tender offer of $1.0 million, a $2.7 million charge incurred in connection with the redemption of the Series C and D Preferred Equity, and a $5.7 million restructuring loss. Net income and FFO include costs incurred in connection with the unsolicited tender offer, net of recoveries, of $24.8 million and $5.1 million in 2003 and 2002, respectively. FFO amounts for years prior to 2005 have been restated to include an add-back of depreciation for CAM assets which were recovered from tenants in the year of acquisition and depreciated over the recovery period.	
(5)	Certain reclassifications have been made to prior year information to conform to current year classifications.	
(6)	Reconciliations of net income (loss) to FFO for 2005, 2004, and 2003 are provided in MD&A – Presentation of Operating Results. For 2002, net loss of $2.2 million, less the gain on dispositions of interests in centers of $12.3 million, adding back depreciation and amortization of $124.3 million and minority interests in TRG of $32.8 million, arrives at TRG’s FFO of $142.6 million, of which TCO’s share was $88.2 million. For 2001, net loss of $8.9 million, adding back the cumulative effect of change in accounting principle of $8.4 million, depreciation and amortization of $96.5 million, and minority interests in TRG of $31.7 million, arrives at TRG’s FFO of $127.6 million, of which TCO’s share was $78.5 million.	
(7)	Based on reports of sales furnished by mall tenants.	
(8)	See MD&A for information regarding this statistic.	
(9)	Leased space comprises both occupied space and space that is leased but not yet occupied.	
(10)	2003 statistics have been restated to include anchor spaces at value centers (Arizona Mills, Dolphin Mall, and Great Lakes Crossing). Prior to 2003, these statistics exclude anchor spaces at value centers.	

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our expectations or beliefs concerning future events, including the following: statements regarding future developments and joint ventures, rents and returns, statements regarding the continuation of trends, and any statements regarding the sufficiency of our cash balances and cash generated from operating and financing activities for our future liquidity and capital resource needs. We caution that although forward-looking statements reflect our good faith beliefs and best judgment based upon current information, these statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including those risks, uncertainties, and factors detailed from time to time in reports filed with the SEC, and in particular those set forth under the headings “General Risks of the Company” and “Environmental Matters” in this Annual Report on Form 10-K. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements of Taubman Centers, Inc. and the Notes thereto.
General Background and Performance Measurement
        Taubman Centers, Inc. (“we”, “us”, “our” or “TCO”) owns a managing general partner’s interest in The Taubman Realty Group Limited Partnership (the “Operating Partnership” or “TRG”), through which we conduct all of our operations. The Operating Partnership owns, develops, acquires, and operates shopping centers. The Consolidated Businesses consist of shopping centers that are controlled by ownership or contractual agreement, development projects for future regional shopping centers, variable interest entities for which we are the primary beneficiary, and The Taubman Company LLC (“Manager”). Shopping centers owned through joint ventures that are not controlled by us but over which we have significant influence (“Unconsolidated Joint Ventures”) are accounted for under the equity method.
        References in this discussion to “beneficial interest” refer to our ownership or pro-rata share of the item being discussed. Also, the operations of the shopping centers are often best understood by measuring their performance as a whole, without regard to our ownership interest. Consequently, in addition to the discussion of the operations of the Consolidated Businesses, the operations of the Unconsolidated Joint Ventures are presented and discussed as a whole.
        There are a number of items that affect the comparability of information used in measuring performance. During 2005, we opened Northlake Mall and sold our interest in Woodland. During 2003, we opened Stony Point Fashion Park, acquired an interest in Waterside Shops at Pelican Bay, and sold our interest in Biltmore Fashion Park (see “Results of Operations – Openings, Acquisitions, and Dispositions”). Additional “comparable center” statistics that include centers owned and open for two years are provided to present the performance of comparable centers in our continuing operations. For 2005 and 2004, comparable centers exclude Northlake Mall and Woodland.
Overall Summary of Management's Discussion and Analysis of Financial Condition and Results of Operations
        Our business is to lease space in our shopping centers. Generally these leases are long term (7 to 10 years). Therefore general economic trends most directly impact our tenants’ sales and consequently their ability to perform under their existing lease agreements and expand into new locations as well as our ability to find new tenants for our shopping centers. Occupancy continued to increase during 2005, and we have now reported year over year occupancy increases for six straight quarters. We anticipate that during the first half of 2006 occupancy will be even with the first half of 2005 due to some early terminations and we expect increases in the second half of the year. Tenant sales trends demonstrated strong growth in 2005, increasing 9.0% and reaching a new record level of $508 per square foot for our comparable centers. This increase in sales resulted in a significant increase in percentage rent in 2005 and a decrease in our tenants’ occupancy costs as a percentage of sales (see “Results of Operations”). We believe these improving tenant sales provide us an opportunity to increase rents in the future. (see “Mall Tenant Sales and Center Revenues” and “Rental Rates and Occupancy”).
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        The rents we are able to achieve are similarly affected by economic trends and tenants’ expectations thereof, as described under “Rental Rates and Occupancy”. The spread between rents on openings and closings may not be indicative of future periods, as this statistic is not computed on comparable tenant spaces, and can vary significantly from quarter to quarter depending on the total amount, location, and average size of tenant space opening and closing in the period. Mall tenant sales, occupancy levels and our resulting revenues are seasonal in nature (see “Seasonality”).
        Our analysis of our financial results begins under “Results of Operations”. We have been active in developing and expanding our shopping center portfolio, and we describe the most recent center openings, including Northlake Mall and Stony Point Fashion Park under “Openings, Acquisitions, and Dispositions”. Also, over the last three years, we acquired additional interests in five centers and disposed of interests in two centers, including the disposition in December 2005 of our interest in a 50% owned unconsolidated joint venture. Additional efforts to broaden our growth included the formation of Taubman Asia, which will be the platform for our future expansion into the Asia-Pacific region.
        We similarly have been very active in managing our balance sheet, completing a series of new financings and refinancings of existing debt, issuances of partnership and preferred equity, and redemptions of partners’ interests in TRG, as well as a series of stock buybacks, as outlined under “Debt Transactions” and “Equity Transactions”. As a result of our most recent financings, we believe we are better positioned for a rise in interest rates.
        We have certain additional sources of income beyond our rental revenues and recoveries from tenants. We disclose the Operating Partnership’s share of these sources of income under “Other Income”. Included in this income are lease cancellation income and gains on peripheral land sales, as well as other sources of revenue derived from our shopping centers, such as parking garage and sponsorship income.
        With all the preceding information as background, we have then provided insight and explanations for variances in our financial results from 2003 through 2005 under “Comparison of 2005 to 2004” and “Comparison of 2004 to 2003". As information useful to understanding our results, we have described the presentation of our minority interest, the recent dispositions of interests in centers, and the reasons for our use of non-GAAP measures such as EBITDA and Funds from Operations (FFO) under “Presentation of Operating Results”. Reconciliations from net income allocable to common shareowners to these measures follow the annual comparisons.
        Our discussion of sources and uses of capital resources under “Liquidity and Capital Resources” begins with a brief overview of capital activities and transactions occurring in 2005. Analysis of specific operating, investing, and financing activities is then provided in more detail. Cash flows from rents and recoveries, recent center openings, and the acquisition of an additional interest in a property provide the resources for payments of interest and other operating expenses, leasing costs, and required distributions and dividends. Proceeds from the sale of a property and the completion of a major financing have created significant liquidity to be used for the pay-off of several existing loans and further investment in development properties.
        Specific analysis of our fixed and floating rates and periods of interest rate risk exposure is provided under “Beneficial Interest in Debt”. Completing our analysis of our exposure to rates are the effects of changes in interest rates on our cash flows and fair values of debt contained under “Sensitivity Analysis”.
        In conducting our business, we enter into various contractual obligations, including those for debt, capital leases for property improvements, operating leases for office space and land, purchase obligations, and other long-term commitments. Detail of these obligations, including expected settlement periods, is contained under “Contractual Obligations”. Property-level debt represents the largest single class of obligations. Described under “Loan Commitments and Guarantees” and “Cash Tender Agreement” are our significant guarantees and commitments.
        Development of new malls and renovation and expansion of existing malls continues to be a significant use of our capital, as described in “Capital Spending” and “Planned Capital Spending”. Recent spending includes that related to the recently opened Northlake Mall in Charlotte, North Carolina, The Mall at Partridge Creek, in Clinton Township, Michigan, and our Oyster Bay project in the Town of Oyster Bay, New York. We have not yet received the necessary entitlement approvals to begin construction on our planned Oyster Bay project. Once we have received the necessary approvals we expect to finalize our anticipated costs and return on this project and set an opening date. Additional capital spending in 2006 is expected to continue for these and other projects.
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        Dividends and distributions are also significant uses of our capital resources. The tax status of our dividends and the factors considered when determining the amount of our dividends, including requirements arising because of our status as a REIT, are described under “Dividends”. We increased our quarterly dividend by 7% in the fourth quarter of 2005. Our total return to our shareholders was 20.4% for 2005.
Mall Tenant Sales and Center Revenues
        Over the long term, the level of mall tenant sales is the single most important determinant of revenues of the shopping centers because mall tenants provide approximately 90% of these revenues and because mall tenant sales determine the amount of rent, percentage rent, and recoverable expenses (together, total occupancy costs) that mall tenants can afford to pay. However, levels of mall tenant sales can be considerably more volatile in the short run than total occupancy costs.
        We believe that the ability of tenants to pay occupancy costs and earn profits over long periods of time increases as sales per square foot increase, whether through inflation or real growth in customer spending. Because most mall tenants have certain fixed expenses, the occupancy costs that they can afford to pay and still be profitable are a higher percentage of sales at higher sales per square foot.
        Sales directly impact the amount of percentage rents certain tenants and anchors pay. The effects of increases or declines in sales on our operations are moderated by the relatively minor share of total rents (approximately four percent in 2005) percentage rents represent. However, a sustained trend in sales does impact, either negatively or positively, our ability to lease vacancies and negotiate rents at advantageous rates.
        Tenant sales trends demonstrated strong growth in 2005, increasing 9.0% and reaching a new record level of $508 per square foot. This increase in sales resulted in a significant increase in percentage rent in 2005 and a decrease in our tenants’ occupancy costs as a percentage of sales ( see “Results of Operations”). We believe these improving tenant sales provide us an opportunity to increase rents in the future.
        The following table summarizes occupancy costs, excluding utilities, for mall tenants as a percentage of mall tenant sales:

	2005	2004	2003	
Mall tenant sales (in thousands of dollars)	 	4,124,534	 	3,728,010	 	3,417,572	 	
Sales per square foot (1)	 	508	 	466	 	441	 	
	 		
Consolidated Businesses:	 		
  Minimum rents	 	9.3	%	10.0	%	10.5	%	
  Percentage rents	 	0.4		0.2		0.2		
  Expense recoveries	 	4.6		5.0		5.3		
							
  Mall tenant occupancy costs as a percentage of	 		
    mall tenant sales	 	14.3	%	15.2	%	16.0	%	
							
Unconsolidated Joint Ventures:	 		
  Minimum rents	 	8.9	%	9.7	%	10.5	%	
  Percentage rents	 	0.3		0.3		0.2		
  Expense recoveries	 	4.0		4.4		4.7		
							
  Mall tenant occupancy costs as a percentage of	 		
    mall tenant sales	 	13.2	%	14.4	%	15.4	%	

(1)	Sales per square foot for 2005 and 2004 is presented for the comparable centers, including value centers (excludes Northlake Mall and Woodland).	

Rental Rates and Occupancy
        As leases have expired in the shopping centers, we have generally been able to rent the available space, either to the existing tenant or a new tenant, at rental rates that are higher than those of the expired leases. In a period of increasing sales, rents on new leases will tend to rise as tenants’ expectations of future growth become more optimistic. In periods of slower growth or declining sales, rents on new leases will grow more slowly or will decline for the opposite reason. However, center revenues nevertheless increase as older leases roll over or are terminated early and replaced with new leases negotiated at current rental rates that are usually higher than the average rates for existing leases. The following table contains certain information regarding rentals at the comparable shopping centers:
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	2005	2004	2003	
Average rent per square foot:	 		 		 		 	
    Consolidated Businesses	 	$41.41		$40.98		$40.06		
    Unconsolidated Joint Ventures	 	42.11		42.09		42.75		
Opening base rent per square foot:	 		
    Consolidated Businesses	 	$42.38		$44.35		$43.41		
    Unconsolidated Joint Ventures	 	44.60		44.67		40.06		
Square feet of GLA opened:	 		
    Consolidated Businesses	 	682,305	 	688,020	 	512,105	 	
    Unconsolidated Joint Ventures	 	421,441	 	337,679	 	498,950	 	
Closing base rent per square foot:	 		
    Consolidated Businesses	 	$40.59		$44.54		$40.80		
    Unconsolidated Joint Ventures	 	42.74		51.40		41.28		
Square feet of GLA closed:	 		
    Consolidated Businesses	 	650,701	 	499,098	 	628,626	 	
    Unconsolidated Joint Ventures	 	405,745	 	280,393	 	470,143	 	
Releasing spread per square foot:	 		
    Consolidated Businesses	 	$1.79		$(0.19	)	$2.61		
    Unconsolidated Joint Ventures	 	1.86		(6.73	)	(1.22	)	

        The spread between opening and closing rents may not be indicative of future periods, as this statistic is not computed on comparable tenant spaces, and can vary significantly from period to period depending on the total amount, location, and average size of tenant space opening and closing in the period. Rents on stores opening in 2004 and 2003 were generally negotiated in a decreasing sales environment. Now that sales have shown positive year over year growth for every month over the past 11 quarters, and assuming this positive trend continues, we would expect to also see improvement in rent growth.
        Mall tenant leased space, ending occupancy, and average occupancy rates are as follows:

	2005	2004	2003	
All Centers:	 		 		 		 	
  Leased space	 	91.7	%	90.7	%	89.8	%	
  Ending occupancy	 	90.0		89.6		87.4		
  Average occupancy	 	88.9		87.4		86.6		
	 		
Comparable Centers:	 		
  Leased space	 	91.6	%	90.7	%	89.5	%	
  Ending occupancy	 	90.3		89.6		87.3		
  Average occupancy	 	89.1		87.4		86.6		
        Occupancy continued to increase during 2005, with ending occupancy increasing to 90.0%, a 0.4% increase from 89.6% in 2004. For our comparable centers, ending occupancy was 90.3%, a 0.7% increase from 89.6% in 2004. We have reported year-over-year occupancy gains for six straight quarters. We anticipate that during the first half of 2006 occupancy will be even with 2005 due to early terminations and expect increases in the second half of the year. Income from temporary in-line tenants, which has become an integral part of our business, continues to augment our income. Temporary tenants, defined as those with lease terms less than 12 months, are not included in occupancy or leased space statistics. As of December 31, 2005, approximately 2.6% of space was occupied by temporary tenants. Tenant bankruptcy filings as a percentage of the total number of tenant leases was a record low of 0.4% in 2005, compared to 1.7% in 2004, and 2.3% in 2003.
Seasonality
        The regional shopping center industry is seasonal in nature, with mall tenant sales highest in the fourth quarter due to the Christmas season, and with lesser, though still significant, sales fluctuations associated with the Easter holiday and back-to-school events. While minimum rents and recoveries are generally not subject to seasonal factors, most leases are scheduled to expire in the first quarter, and the majority of new stores open in the second half of the year in anticipation of the Christmas selling season. Additionally, most percentage rents are recorded in the fourth quarter. Accordingly, revenues and occupancy levels are generally highest in the fourth quarter. Included in revenues are gains on sales of peripheral land and lease cancellation income that may vary significantly from quarter to quarter.
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	Total
2005	4th
Quarter
2005	3rd
Quarter
2005	2nd
Quarter
2005	1st
Quarter
2005	
						
	(in thousands of dollars)	
Mall tenant sales	 	4,124,534	 	1,393,006	 	932,229	 	913,408	 	885,891	 	
Revenues:	 		
     Consolidated Businesses	 	473,438	 	132,152	 	111,858	 	117,589	 	111,839	 	
     Unconsolidated Joint Ventures	 	297,345	 	84,468	 	71,266	 	70,742	 	70,869	 	
Occupancy:	 		
     Ending-comparable	 	90.3	%	90.3	%	89.2	%	88.7	%	88.4	%	
     Average-comparable	 	89.1		90.1		89.0		88.5		88.6		
     Ending	 	90.0		90.0		88.9		88.7		88.4		
     Average	 	88.9		89.7		88.9		88.5		88.6		
Leased space:	 		
     Comparable	 	91.6		91.6		91.3		90.9		90.5		
     All centers	 	91.7		91.7		91.2		90.9		90.5		
        Because the seasonality of sales contrasts with the generally fixed nature of minimum rents and recoveries, mall tenant occupancy costs (the sum of minimum rents, percentage rents, and expense recoveries) relative to sales are considerably higher in the first three quarters than they are in the fourth quarter.

	Total
2005	4th
Quarter
2005	3rd
Quarter
2005	2nd
Quarter
2005	1st
Quarter
2005	
						
Consolidated Businesses:	 		 		 		 		 		 	
     Minimum rents	 	9.3	%	7.2	%	10.3	%	10.4	%	10.8	%	
     Percentage rents	 	0.4		0.7		0.1		0.1		0.3		
     Expense recoveries	 	4.6		3.7		4.9		5.4		4.8		
 	 		 		 		 		 		 	
     Mall tenant occupancy costs	 	14.3	%	11.6	%	15.3	%	15.9	%	15.9	%	
 	 		 		 		 		 		 	
Unconsolidated Joint Ventures:	 		
     Minimum rents	 	8.9	%	6.6	%	9.6	%	10.0	%	10.2	%	
     Percentage rents	 	0.3		0.8		0.2		 		0.3		
     Expense recoveries	 	4.0		3.6		4.2		4.3		4.0		
 	 		 		 		 		 		 	
     Mall tenant occupancy costs	 	13.2	%	11.0	%	14.0	%	14.3	%	14.5	%	
 	 		 		 		 		 		 	
Results of Operations
Openings, Acquisitions, and Dispositions
        During the three year period ended December 31, 2005, we completed the following shopping center openings, acquisitions, and dispositions:
Openings

Shopping Center	Date	Location	Ownership	
Northlake Mall	September 2005	Charlotte, North Carolina	Wholly-owned	
Stony Point Fashion Park	September 2003	Richmond, Virginia	Wholly-owned	

Acquisitions

Shopping Center	Date	Acquisition	Resulting Ownership	
International Plaza	July 2004	Additional 23.6% interest	50.1% owned consolidated joint venture	
Beverly Center	January 2004	Additional 30% interest	Wholly-owned	
Waterside Shops at Pelican Bay	December 2003	25% interest	25% unconsolidated joint venture	
MacArthur Center	July 2003	Additional 25% interest	95% owned consolidated joint venture	
Great Lakes Crossing	March 2003	Additional 15% interest	Wholly-owned	
Dispositions

Shopping Center	Date	Former Ownership	
Woodland	December 2005	50% owned unconsolidated joint venture	
Biltmore Fashion Park	December 2003	Wholly-owned	
22

        In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland for $177.4 million. Our share of proceeds of $85.4 million included a $9 million note receivable, with the remainder in cash. The note bears interest at 5.40%, is secured by an irrevocable letter of credit, and is due in the first quarter of 2006. We recognized a gain of $52.8 million on the transaction, representing the excess of the fair value over the net book basis of our interest in the center. Our gain on the transaction differed from the $73.4 million gain recognized by the Operating Partnership due to our $20.6 million additional basis in Woodland. The cash proceeds from the sale were used in early 2006 to acquire the land for The Mall at Partridge Creek, as part of a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code and the regulations thereunder (“Section 1031 like-kind exchange”). Additional proceeds were also used to purchase the land and real property improvements of the Oyster Bay development, also as part of a Section 1031 like-kind exchange, and to pay off the outstanding balance on the loan on the property.
Taubman Asia
        In April 2005, we announced the formation of Taubman Asia, which will be the platform for our future expansion into the Asia-Pacific region. Taubman Asia is headquartered in Hong Kong and will seek projects that leverage our strong retail planning, design, and operational capabilities. We are currently evaluating opportunities in the region and are analyzing selected projects in the major Asian markets. We are working with Morgan Stanley Real Estate Fund on certain of these opportunities, including the New Songdo City project in Incheon, South Korea. We are also working with the Gordon Group and have joined Harrah’s and Keppel Land to submit a proposal to design and operate the retail portion of an integrated casino resort at Marina Bay in Singapore. The proposal is due April 1, 2006.
        We spent approximately $4 million, net of certain reimbursed costs, during 2005, and expect to spend approximately $5 million during 2006 for office and deal pursuit costs in Asia. When we get to the point of having a deal to execute, we will build up a project team with the specific expertise that the particular project requires. We hope to move forward on a project during 2006. Depending on the complexity, this would suggest an opening in 2008 to 2010.
Debt Transactions
        We completed a series of debt transactions in the three year period ended December 31, 2005, as follows:

	Date	Initial Loan
Balance/Facility		Stated
Interest Rate	Maturity Date (1)	
		(in millions of dollars)	 			
The Mall at Short Hills	December 2005	540 	 	5.47%	December 2015	
The Mall at Wellington Green	May 2005	200 	 	5.44%	May 2015	
TRG revolving credit facility	October 2004	350 	 	LIBOR+0.80%	February 2008	
Northlake Mall construction facility	July 2004	142 	 	LIBOR+1.75%	August 2007 (2)	
Stony Point Fashion Park	June 2004	115 	 	6.24%	June 2014	
The Mall at Oyster Bay facility (3)	May 2004	62 		LIBOR+2.00%	March 2006 (4)	
The Mall at Wellington Green	April 2004	140 	 	LIBOR+1.50%	May 2007 (5)	
Dolphin Mall	February 2004	145 	 	LIBOR+2.15%	February 2007 (6)	
Beverly Center	January 2004	348 	 	5.28%	February 2014	
The Shops at Willow Bend	June 2003	150 	 	LIBOR+2.90%	July 2006 (4)	
Mall at Millenia	March 2003	210 	 	5.46%	April 2013	
Great Lakes Crossing	February 2003	151 	 	5.25%	March 2013	

(1)	Excludes any options to extend the maturities (see the footnotes to our financial statements regarding extension options).	
(2)	The loan was repaid in December 2005.	
(3)	See “Liquidity and Capital Resources – Contractual Obligations”.	
(4)	The loan was repaid in February 2006.	
(5)	The loan was repaid in May 2005.	
(6)	Current maturity date.	

        Proceeds from the December 2005 financing on The Mall at Short Hills were used to pay down the existing 6.7% $260 million loan on the center, the Northlake Mall construction loan and our revolver. We incurred charges of $10.9 million during the fourth quarter of 2005 in connection with a prepayment premium for the existing Short Hills loan and the write-off of the remaining financing costs for the Short Hills and Northlake Mall loans. We also wrote off $1.8 million related to the modification of the Oyster Bay loan, which we repaid in February 2006. In addition, we paid off the remaining $144 million balance on the loans on The Shops at Willow Bend when they became prepayable without penalty in February 2006. We wrote off the remaining $2 million financing costs associated with the Willow Bend loans at that time. We also expect to pay off the remaining $141 million balance on the loan on Dolphin Mall when it becomes prepayable without penalty in August 2006. We expect to write off approximately $1.0 million of financing costs related to the Dolphin loan at that time.
23

        In June 2005, a lender agreed to lock the rate on $190 million of a planned refinancing of Cherry Creek Shopping Center’s mortgage debt at 5.01%. Cherry Creek’s current $174 million mortgage debt carries a rate of 7.68%, matures in August 2006, and is prepayable without penalty within three months of maturity.
Equity Transactions
        We also completed a series of equity transactions in the three year period ended December 31, 2005, as follows:

	# of
shares/units	Amount	Price per
share/unit	Date	
		(in millions of dollars)			
Repurchases:	 	 	 	 	
  Redemption of Series A Cumulative		
    Redeemable Preferred Stock (1)	  	87.0	  	July 2005	
  Redemption of Series C and D Preferred		
    Partnership Equity (2)	  	100.0	  	November 2004	
  Stock buybacks (3)	2,447,781 	50.2	$20.50	April-May 2004	
  Redemption of TRG units (4)	1,629,817 	30.2	18.53	December 2003	
  Stock buybacks (3)	2,972,000 	52.8	17.75	April-May 2003	
		
Issuances:		
  Issuance of Series H Cumulative		
    Redeemable Preferred Stock (5)	3,480,000 	87.0	25.00	July 2005	
  Issuance of Series G Cumulative		
    Redeemable Preferred Stock (6)	4,000,000 	100.0	25.00	November 2004	
  Private placement of 8.2% Series F		
    Cumulative Redeemable Preferred		
    Partnership Equity	  	30.0	  	May 2004	
  TRG units issued in connection with		
    acquisition of additional interest in		
    Beverly Center (7)	276,724 	7.6	27.50	January 2004	
  TRG units issued in connection with		
    purchase of additional interest in		
    MacArthur (7)	190,909 	5.2	27.50	July 2003	
  TRG units issued in connection with equity		
    investment by G.K. Las Vegas Limited		
    Partnership (8)	2,083,333 	50.0	24.00	May 2003	

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

        In December 2005, our Board of Directors authorized the purchase of up to $50 million of our common stock on the open market. As of December 31, 2005, we had not purchased any shares or redeemed any units under this program. Repurchases of common stock will be financed through general corporate funds, including equity issuances, and through borrowings under existing lines of credit.
        Repurchases of common stock in 2004 and 2003 were under a previous buyback program. As of December 31, 2004, the maximum amount authorized under this program had been repurchased.
24

GMPT Portfolio and Restructuring
        In October 2004, The Mills Corporation finalized its acquisition of 50% interests in nine of General Motors Pension Trusts’ (GMPT) shopping centers, completing a recapitalization of GMPT’s mall portfolio. We reached an agreement with GMPT to cease management of these centers, effective November 1, 2004. We recognized a restructuring charge of $5.7 million during the fourth quarter of 2004 relating to the termination of these contracts. Substantially all of this charge represented employee severance payments.
Other Income
        We have certain additional sources of income beyond our rental revenues, recoveries from tenants, and revenues from management, leasing, and development services, as summarized in the following table. Shopping center related revenues in 2005 increased primarily due to parking-related revenue and sponsorship income. Gains on peripheral land sales can vary significantly from year-to-year, depending on the results of negotiations with tenants, counterparties, and potential purchasers of land, as well as the timing of the transactions. Similarly, lease cancellation income is dependent on the overall economy and performance of particular retailers in specific locations and can also vary significantly. We expect that our share of lease cancellation income and gains on land sales in 2006 will be approximately $7 million to $8 million and $4 million, respectively.

	2005	2004	2003	
	Consolidated
Businesses	Unconsolidated
Joint Ventures	Consolidated
Businesses	Unconsolidated
Joint Ventures	Consolidated
Businesses	Unconsolidated
Joint Ventures	
	(Operating Partnership's share in millions of dollars)	
Shopping center related revenues	20.1	3.2	15.5	3.0	15.5	3.0	
Gains on sales of peripheral land and land-related rights	4.4	 	6.4	 	1.8	 	
Lease cancellation revenue	6.5	1.4	7.5	1.7	8.8	2.9	
Interest income	2.4	0.4	1.1	0.1	1.3	0.1	
							
 	33.5	5.0	30.5	4.8	27.4	5.9	

(1)	Amounts in this table may not add due to rounding.	

Subsequent Events
        In January 2006, a lender agreed to lock the rate at 5.41% on a $215.5 million financing of Northlake Mall. This interest-only loan has a 10-year term and closed in February 2006. In February 2006, we paid off the outstanding principal balances on the Shops at Willow Bend loans of $144.4 million.
         In addition, we exercised our options to acquire certain property at The Mall at Partridge Creek in January 2006 and at Oyster Bay in February 2006 and paid off the related third party loan on Oyster Bay (see “Debt Transactions”).
Application of Critical Accounting Policies
        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment, often about the effect of matters that are inherently uncertain and that may change in subsequent periods. We are required to make such estimates and assumptions when applying the following accounting policies.
25

Valuation of Shopping Centers
        All properties, including those under construction and/or owned by joint ventures, are reviewed for impairment when events or changes in circumstances indicate that their carrying value may not be recoverable. Impairment of a shopping center owned by consolidated entities would be recognized when the sum of expected cash flows (undiscounted and without interest charges) is less than the carrying value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint Venture is recognized when the carrying value is not considered recoverable based on evaluation of the severity and duration of the decline in value, including the results of discontinued cash flow and other valuation techniques. The expected cash flows of a shopping center are dependent on estimates and other factors subject to change, including (1) changes in the national, regional, and/or local economic climates, (2) competition from other shopping centers, stores, clubs, mailings, and the internet, (3) increases in operating costs, (4) bankruptcy and/or other changes in the condition of third parties, including anchors and tenants, and (5) expected holding period. These factors could cause our expected future cash flows from a shopping center to change, and, as a result, an impairment could be considered to have occurred. To the extent an impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged against operations. There were no impairment charges recognized in the periods covered within this Annual Report. As of December 31, 2005, the consolidated net book value of our properties was $2.4 billion, representing over 85% of our consolidated assets. We also have varying ownership percentages in the properties of Unconsolidated Joint Ventures with a total combined net book value of $0.7 billion. These amounts include certain development costs that are described in the policy that follows.
Capitalization of Development Costs
        In developing shopping centers, we typically obtain land or land options, zoning and regulatory approvals, anchor commitments, and financing arrangements during a process that may take several years and during which we may incur significant costs. We capitalize all development costs once it is considered probable that a project will reach a successful conclusion. Prior to this time, we expense all costs relating to a potential development, including payroll, and include these costs in Funds from Operations (see “Presentation of Operating Results”).
        Many factors in the development of a shopping center are beyond our control, including (1) changes in the national, regional, and/or local economic climates, (2) competition from other shopping centers, stores, clubs, mailings, and the internet, (3) availability and cost of financing, (4) changes in regulations, laws, and zoning, and (5) decisions made by third parties, including anchors. These factors could cause our assessment of the probability of a development project reaching a successful conclusion to change. If a project subsequently was considered less than probable of reaching a successful conclusion, a charge against operations for previously capitalized development costs would occur.
        Our approximately $104 million balance of development pre-construction costs as of December 31, 2005 consists of costs relating to our Oyster Bay project in the Town of Oyster Bay, New York. See “Liquidity and Capital Resources — Planned Capital Spending” regarding the status of this project.
Valuation of Accounts Receivable
        Rents and expense recoveries from tenants are our principal source of income; they represent over 90% of our revenues. In generating this income, we will routinely have accounts receivable due from tenants. The collectibility of tenant receivables is affected by bankruptcies, changes in the economy, and the ability of the tenants to perform under the terms of their lease agreements. While we estimate potentially uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates. Also, if a tenant were not able to perform under the terms of its lease agreement, receivable balances not previously provided for may be required to be charged against operations. Bad debt expense was less than 1% of total revenues in 2005, while bankruptcy filings affected a record low 0.4% of tenant leases during the year. Since 1991, the annual provision for losses on accounts receivable has been less than 2% of annual revenues.
26

Valuations for Acquired Property and Intangibles
        Upon acquisition of an investment property, including that of an additional interest in an asset already partially owned, we make an assessment of the valuation and composition of assets and liabilities acquired. These assessments consider fair values of the respective assets and liabilities and are determined based on estimated future cash flows using appropriate discount and capitalization rates and other commonly accepted valuation techniques. The estimated future cash flows that are used for this analysis reflect the historical operations of the property, known trends and changes expected in current market and economic conditions which would impact the property’s operations, and our plans for such property. These estimates of cash flows and valuations are particularly important given the application of FASB Statement Nos. 141 and 142 for the allocation of purchase price between land, building and improvements, and other identifiable intangibles.
New Accounting Pronouncements
        In October 2005, the FASB Issued Staff Position (FSP) No. FAS 13-1 “Accounting for Rental Costs Incurred during a Construction Period”. This FSP requires that rental costs associated with ground or building operating leases incurred during a construction period be recognized as rental expense. However, FSP No. FAS 13-1 does not address lessees that account for the sale or rental of real estate projects under FASB Statement No. 67 “Accounting for Costs and Initial Rental Operations of Real Estate Projects”. As our policy is to capitalize rental costs associated with ground leases incurred during construction periods under Statement No. 67, FSP No. FAS 13-1 will not have a material effect on our results of operations when it becomes effective in 2006.
        In June 2005, the FASB ratified the EITF’s consensus on Issue No. 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.” This consensus establishes the presumption that general partners in a limited partnership control that limited partnership regardless of the extent of the general partners’ ownership interest in the limited partnership. The consensus further establishes that the rights of the limited partners can overcome the presumption of control by the general partners, if the limited partners have either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights. Whether the presumption of control is overcome is a matter of judgment based on the facts and circumstances, for which the consensus provides additional guidance. This consensus is currently applicable to us for new or modified partnerships, and will otherwise be applicable to existing partnerships in 2006. This consensus applies to limited partnerships or similar entities, such as limited liability companies that have governing provisions that are the functional equivalent of a limited partnership.
        With the issuance of EITF 04-5 and the amendment of Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” (SOP 78-9) and the corresponding changes and considerations surrounding control, we have determined that in the first quarter of 2006 we will begin consolidating the entity that owns the Cherry Creek Shopping Center. This entity is currently accounted for under the equity method in accordance with the provisions of SOP 78-9. Under the equity method, net income (loss) was allocated to the outside partner based on ownership percentage. Because the net equity balance of the outside partner is less than zero, income will be allocated to the outside partner equal to its share of distributions and the outside partner’s interest will be presented as a zero balance in the consolidated balance sheet. The net equity balance of the outside partner’s interest is zero due to accumulated distributions in excess of net income and not as a result of operating losses. Distributions to partners are usually greater than net income because net income includes non-cash charges for depreciation and amortization. As of January 1, 2006, the impact to the balance sheet will be an increase in assets of approximately $128 million and liabilities of approximately $180 million, and a $52 million reduction of beginning equity representing the cumulative effect of change in accounting principle.
        In May 2005, the FASB issued Statement No. 154 “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3". This Statement changes the requirements for the accounting for and reporting of a change in accounting principle. Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. In the event of such impracticality, this Statement provides for other means of application. In the event that we change accounting principles, we will evaluate the impact of Statement No. 154.
27

        In December 2004, the FASB issued Statement No. 123 (Revised) “Share-Based Payment”. This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. A public entity will initially measure the cost of employee services received in exchange for an award of liability instruments based on its current fair value; the fair value of that award will be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period. Statement No. 123 (Revised) will be effective in 2006. We expect that adoption of this Statement will not have a material effect on our future results of operations. We currently apply Statement No. 123 “Accounting for Stock-Based Compensation,” including its provisions for the expense recognition of options. As part of our adoption of Statement No. 123 (Revised), for any grant for which vesting accelerates upon retirement, we will begin recognizing compensation cost from the date of the grant through the date the employee first becomes eligible to retire, if this period is shorter than the stated vesting period of the grant. Currently, we recognize compensation cost using the stated vesting period, regardless of retirement eligibility. If we had applied the new practice historically , it would not have any had a material impact on our results of operations for any period presented, nor is it expected to have a material impact on future results of operations.
Presentation of Operating Results
        The following tables contain the operating results of our Consolidated Businesses and the Unconsolidated Joint Ventures. Income allocated to the minority partners in the Operating Partnership and preferred interests is deducted to arrive at the results allocable to our common shareowners. Because the net equity of the Operating Partnership is less than zero, the income allocated to the minority partners is equal to their share of distributions. The net equity of these minority partners is less than zero due to accumulated distributions in excess of net income and not as a result of operating losses. Distributions to partners are usually greater than net income because net income includes non-cash charges for depreciation and amortization. Amounts allocable to minority partners in certain consolidated joint ventures are added back or deducted to arrive at our net results. Our average ownership percentage of the Operating Partnership was 62% in 2005, 61% in 2004, and 60% in 2003.
        The results of International Plaza are presented within the Consolidated Businesses for periods beginning July 1, 2004, as a result of our acquisition of a controlling interest in the center. Prior to the acquisition date, this center is included within the Unconsolidated Joint Ventures.
        The operating results in the following tables include the supplemental earnings measures of Beneficial Interest in EBITDA and Funds from Operations (FFO). Beneficial Interest in EBITDA represents the Operating Partnership’s share of the earnings before interest and depreciation and amortization, excluding gains on sales of depreciated operating properties of its consolidated and unconsolidated businesses. We believe Beneficial Interest in EBITDA provides a useful indicator of operating performance, as it is customary in the real estate and shopping center business to evaluate the performance of properties on a basis unaffected by capital structure.
        The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (loss) (computed in accordance with Generally Accepted Accounting Principles (GAAP)), excluding gains (or losses) from extraordinary items and sales of properties, plus real estate related depreciation and after adjustments for unconsolidated partnerships and joint ventures. We believe that FFO is a useful supplemental measure of operating performance for REITs. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, we and most industry investors and analysts have considered presentations of operating results that exclude historical cost depreciation to be useful in evaluating the operating performance of REITs. We primarily use FFO in measuring performance and in formulating corporate goals and compensation. Our presentation of FFO is not necessarily comparable to the FFO of other REITs due to the fact that not all REITs use the NAREIT definition. FFO should not be considered an alternative to net income as an indicator of our operating performance. Additionally, FFO does not represent cash flows from operating, investing or financing activities as defined by GAAP.
28

        Prior to the fourth quarter of 2004, we did not include an add-back for depreciation of center replacement assets when computing our Beneficial Interest in EBITDA or FFO. As of the fourth quarter of 2004, we began to include such an add-back for depreciation on assets whose cost was recovered from tenants over a period of more than one year and we restated previously reported EBITDA and FFO amounts. We did this both to be consistent with industry practice and because we have begun offering our tenants the option to pay a fixed charge or pay their share of common area maintenance (CAM) costs. As more tenants elect the fixed CAM option, over time there will be significantly less matching of CAM income with CAM capital-related expenses, which was the basis for our prior reporting practice.
        Because of this change in our business practice and related contractual terms of leases, we have reviewed our history of expenditures on center replacement assets, including assets reimbursed in the year of acquisition, in order to appropriately set pricing for our fixed CAM option and to provide information for planning future expenditures. Since the depreciation periods for CAM assets are matched to the periods over which we expect to recover the costs of the assets (the period of benefit to the Company), CAM assets recovered in the year of acquisition are depreciated over the same period. As a result of this review of expenditures we have quantified the amount of CAM assets which were recovered from tenants in the year of acquisition and depreciated over the period of recovery. This additional amount of depreciation has been added back to calculate EBITDA and FFO and we have restated previously reported amounts.
29

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

	2005	2004	
		
	CONSOLIDATED
BUSINESSES	UNCONSOLIDATED
JOINT VENTURES
AT 100% (1)	CONSOLIDATED
BUSINESSES	UNCONSOLIDATED
JOINT VENTURES
AT 100% (1)	
		
	(in millions of dollars)	
REVENUES:	 		 		 		 		 	
  Minimum rents	 	262.1		184.5		235.1		195.0		
  Percentage rents	 	9.8		8.1		6.3		6.5		
  Expense recoveries	 	152.0		95.2		137.5		101.5		
  Management, leasing and development services	 	13.8				21.3			
  Other	 	35.7		9.5		31.3		9.8		
									
Total revenues	 	473.4		297.3		431.5		312.8		
	 		
OPERATING EXPENSES:	 		
  Recoverable expenses (2)	 	137.9		80.1		127.6		85.6		
  Other operating	 	45.0		20.7		38.2		22.2		
  Restructuring loss	 					5.7			
  Costs related to unsolicited tender offer, net of	 		
    recoveries	 					(1.0	)		
  Management, leasing and development services	 	9.1				17.5			
  General and administrative	 	28.0				26.6			
  Interest expense (3)	 	121.6		67.6		95.9		74.0		
  Depreciation and amortization (4)	 	116.9		46.0		101.1		50.4		
									
Total operating expenses	 	458.5		214.4		411.6		232.2		
									
 	 	15.0		82.9		19.9		80.6		

Equity in income of Unconsolidated Joint Ventures (4)(5)	 	42.5				40.1			
							
Income before gain on disposition of interest in center,	 		
  discontinued operations, and minority and preferred interests	 	57.4				60.0			
Gain on disposition of interest in center (5)	 	52.8							
Discontinued operations-	 		
  Net gain on dispositions of interest in center	 					0.3			
Minority and preferred interests:	 		
  TRG preferred distributions (6)	 	(2.5	)			(12.2	)		
  Minority share of consolidated joint ventures	 	(0.2	)			0.0			
  Minority share of income of TRG	 	(40.4	)			(14.9	)		
  Distributions less than (in excess of) minority share of income	 	4.5				(20.8	)		
							
Net income	 	71.7				12.4			
Preferred dividends (7)	 	(27.6	)			(17.4	)		
							
Net income (loss) allocable to common shareowners	 	44.1				(5.1	)		

SUPPLEMENTAL INFORMATION (8) :	 		
  EBITDA - 100%	 	265.0		205.3		226.0		214.6		
  EBITDA - outside partners' share	 	(14.9	)	(91.9	)	(6.2	)	(99.4	)	
									
  Beneficial interest in EBITDA	 	250.1		113.5		219.8		115.2		
  Beneficial interest expense	 	(116.1	)	(37.6	)	(92.9	)	(39.9	)	
  Non-real estate depreciation	 	(2.1	)			(2.4	)		
  Preferred dividends and distributions	 	(30.1	)			(29.7	)		
									
  Funds from Operations contribution	 	101.8		75.9		94.8		75.3		

(1)	With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany transactions and exclude the gain on the sale of Woodland (Note 5). The Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their performance as a whole, without regard to our ownership interest. In our consolidated financial statements, we account for investments in the Unconsolidated Joint Ventures under the equity method.	
(2)	Included in recoverable expenses of the Consolidated Businesses and Unconsolidated Joint Ventures are $11.5 million and $8.8 million, respectively, of depreciation of center replacement assets for 2005, and $9.1 million and $9.6 million, respectively, for 2004. TRG’s beneficial interest in these amounts was $11.0 million and $4.7 million, respectively, for 2005, and $8.9 million and $5.3 million, respectively, for 2004.	
(3)	Interest expense for 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills, the pay-off of the Northlake Mall loan, and the debt modifications in connection with the pay-off of the Oyster Bay loan.	
(4)	Amortization of our additional basis in the Operating Partnership included in equity in income of Unconsolidated Joint Ventures was $3.0 million in both 2005 and 2004. Also, amortization of the additional basis included in depreciation and amortization was $4.3 million and $4.2 million in 2005 and 2004, respectively.	
(5)	During 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland. Our equity in the gain on the sale is separately presented on the income statement, and is therefore excluded from the equity in income of Unconsolidated Joint Ventures line item.	
(6)	TRG preferred distributions for 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and D preferred equity.	
(7)	Preferred dividends in 2005 include a $3.1 million charge incurred in connection with the redemption of $87 million of the Series A Preferred Stock.	
(8)	EBITDA and FFO for 2004 have been restated from amounts previously reported to include an add-back of depreciation of center replacement assets recoverable from tenants in the year of acquisition.	
(9)	Amounts in this table may not add due to rounding. Certain reclassifications have been made to prior year information to conform to current year classifications.	

30

Consolidated Businesses
        Total revenues for the year ended December 31, 2005 were $473.4 million, a $41.9 million or 9.7% increase over 2004. Minimum rents increased $27.0 million, due to International Plaza, which we began consolidating upon the acquisition of a controlling interest in the center, the September 2005 opening of Northlake Mall and increases in occupancy, tenant rollovers, and income from temporary tenants and specialty retailers. Percentage rents increased due to International Plaza and higher tenant sales. Expense recoveries increased due to International Plaza, Northlake, and increases in recoverable costs at certain centers. Management, leasing, and development revenue decreased primarily due to the loss of revenue from the nine GMPT management contracts, which were cancelled in November 2004, and were partially offset by revenue from the MGM Project CityCenter and Salt Lake City contracts and cost reimbursements related to Taubman Asia. We expect that management, leasing, and development revenue, less related expenses, will be approximately $5 million in 2006. Other income increased primarily due to increases in parking-related revenue, sponsorship, and interest income, which were partially offset by decreases in gains on sales of peripheral land.
        Total operating expenses were $458.5 million, a $46.9 million or 11.4% increase from 2004. Recoverable expenses increased primarily due to International Plaza and Northlake, as well as increases in maintenance costs, electricity expense, and property taxes at certain centers. Other operating expense increased primarily due to office and deal pursuit costs in Asia, International Plaza, and overhead no longer allocable to the GMPT management contracts, offset by a decrease in bad debt expense. During 2004, $1.0 million of insurance proceeds were received relating to costs expended in connection with an unsolicited tender offer in 2003. Also during 2004, a $5.7 million restructuring loss was recognized. Substantially all of this charge represented employee severance payments and benefits. Management, leasing, and development expense decreased primarily due to the cancellation of the GMPT management contracts, with certain overhead costs previously allocated to the contracts now being recognized as other operating expenses or general and administrative expense. This was partially offset by expenses related to the MGM Project CityCenter and Salt Lake City contracts and activities related to Taubman Asia. In addition to the increase related to expenses that were previously allocated to GMPT, general and administrative expense increased due to professional fees, travel, and severance costs, which were offset by a decrease in bonus grants outstanding that fluctuate with our stock price. We expect that general and administrative expenses will be approximately $6.5 million to $6.7 million for each quarter of 2006. Interest expense increased due to charges incurred in 2005 in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills, the pay-off of the Northlake Mall loan and a debt modification in connection with the pay-off of the Oyster Bay loan. Other interest expense increases were due to International Plaza, the refinancings of The Mall at Wellington Green and Stony Point Fashion Park, as well as the opening of Northlake Mall and increases in floating interest rates. Depreciation expense increased primarily due to International Plaza, Northlake, and changes in depreciable lives of tenant and anchor allowances in connection with early terminations.
Unconsolidated Joint Ventures
        Total revenues for the year ended December 31, 2005 were $297.3 million, a $15.5 million or 5.0% decrease from 2004. Minimum rents decreased $10.5 million, primarily due to the consolidation of International Plaza, which was partially offset by increases in occupancy and tenant rollovers. Percentage rents increased due to higher tenant sales. Expense recoveries decreased due to International Plaza, offset by increases at other centers.
        Total operating expenses decreased by $17.8 million to $214.4 million for the year ended December 31, 2005. Recoverable expenses decreased primarily due to International Plaza. Other operating expense decreased primarily due to International Plaza, partially offset by increases in professional fees and other expenses. Interest expense decreased primarily due to International Plaza and the payoff of debt on Woodland and Stamford Town Center. Depreciation expense decreased primarily due to International Plaza.
        As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by $2.3 million to $82.9 million. Our equity in income of the Unconsolidated Joint Ventures was $42.5 million, a $2.4 million increase from 2004.
Net Income
        As a result of the foregoing, our income before the gain on disposition of our interest in Woodland, discontinued operations and minority and preferred interests decreased by $2.6 million to $57.4 million for 2005. In 2005, we recognized our $52.8 million share of the gain on disposition of Woodland. Discontinued operations in 2004 included a $0.3 million adjustment to the gain on the disposition of Biltmore Fashion Park. Preferred dividends in 2005 include a $3.1 million charge related to the partial redemption of the Series A preferred stock, while TRG preferred distributions in 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and Series D Preferred Equity. After allocation of income to minority and preferred interests, the net income (loss) allocable to common shareowners for 2005 was $44.1 million compared to $(5.1) million in 2004.
31

Comparison of 2004 to 2003
        The following table sets forth operating results for 2004 and 2003, showing the results of the Consolidated Businesses and Unconsolidated Joint Ventures:

	2004	2003	
		
	CONSOLIDATED
BUSINESSES	UNCONSOLIDATED
JOINT VENTURES
AT 100% (1)	CONSOLIDATED
BUSINESSES	UNCONSOLIDATED
JOINT VENTURES
AT 100% (1)	
		
	(in millions of dollars)	
REVENUES:	 		 		 		 		 	
  Minimum rents	 	235.1		195.0		207.5		200.0		
  Percentage rents	 	6.3		6.5		4.8		3.7		
  Expense recoveries	 	137.5		101.5		125.6		103.9		
  Management, leasing and development services	 	21.3				22.1			
  Other	 	31.3		9.8		28.4		12.4		
									
Total revenues	 	431.5		312.8		388.5		320.0		
	 		
OPERATING EXPENSES:	 		
  Recoverable expenses (2)	 	127.6		85.6		111.5		87.8		
  Other operating	 	38.2		22.2		37.1		22.6		
  Restructuring loss	 	5.7							
  Costs related to unsolicited tender offer, net of	 		
    recoveries	 	(1.0	)			24.8			
  Management, leasing and development services	 	17.5				19.4			
  General and administrative	 	26.6				24.6			
  Interest expense	 	95.9		74.0		84.2		82.7		
  Depreciation and amortization (3)	 	101.1		50.4		92.3		55.8		
									
Total operating expenses	 	411.6		232.2		393.9		248.9		
									
 	 	19.9		80.6		(5.4	)	71.1		

Equity in income of Unconsolidated Joint Ventures (3)	 	40.1				36.7			
							
Income before discontinued operations and minority	 		
  and preferred interests	 	60.0				31.3			
Discontinued operations:	 		
  Net gain on dispositions of interest in center	 	0.3				49.6			
  EBITDA	 					10.4			
  Interest expense	 					(5.9	)		
  Depreciation and amortization	 					(3.2	)		
Minority and preferred interests:	 		
  TRG preferred distributions (4)	 	(12.2	)			(9.0	)		
  Minority share of consolidated joint ventures	 	0.0				0.2			
  Minority share of income of TRG	 	(14.9	)			(28.2	)		
  Distributions in excess of minority share of income	 	(20.8	)			(7.3	)		
							
Net income	 	12.4				37.8			
Preferred dividends	 	(17.4	)			(16.6	)		
							
Net income (loss) allocable to common shareowners	 	(5.1	)			21.2			

SUPPLEMENTAL INFORMATION (5) :	 		
  EBITDA - 100%	 	226.0		214.6		189.6		217.1		
  EBITDA - outside partners' share	 	(6.2	)	(99.4	)	(4.1	)	(99.3	)	
									
  Beneficial interest in EBITDA	 	219.8		115.2		185.5		117.8		
  Beneficial interest expense	 	(92.9	)	(39.9	)	(87.4	)	(43.3	)	
  Non-real estate depreciation	 	(2.4	)			(2.5	)		
  Preferred dividends and distributions	 	(29.7	)			(25.6	)		
									
  Funds from Operations contribution	 	94.8		75.3		70.1		74.5		

(1)	With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany transactions. The Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their performance as a whole, without regard to our ownership interest. In our consolidated financial statements, we account for investments in the Unconsolidated Joint Ventures under the equity method	
(2)	Included in recoverable expenses of the Consolidated Businesses and Unconsolidated Joint Ventures are $9.1 million and $9.6 million, respectively, of depreciation of center replacement assets for 2004, and $8.1 million and $7.5 million, respectively, for 2003. TRG’s beneficial interest in these amounts was $8.9 million and $5.3 million, respectively, for 2004, and $8.0 million and $4.1 million, respectively, for 2003.	
(3)	Amortization of our additional basis in the Operating Partnership included in equity in income of Unconsolidated Joint Ventures was $3.0 million in both 2004 and 2003. Also, amortization of the additional basis included in depreciation and amortization was $4.2 million in both 2004 and 2003.	
(4)	TRG preferred distributions for 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and D preferred equity.	
(5)	EBITDA and FFO for 2004 and 2003 have been restated from amounts previously reported to include an add-back of depreciation of center replacement assets recoverable from tenants in the year of acquisition.	
(6)	Amounts in this table may not add due to rounding. Certain reclassifications have been made to prior year information to conform to current year classifications.	

32

Consolidated Businesses
        Total revenues for the year ended December 31, 2004 were $431.5 million, a $43.0 million or 11.1% increase over 2003. Minimum rents increased $27.6 million, primarily due to the opening of Stony Point, as well as International Plaza, which we began consolidating upon the acquisition of a controlling interest in the center. Minimum rent also increased due to increases in occupancy, tenant rollovers, and income from temporary tenants and specialty retailers. Percentage rents increased due to International Plaza and favorable tenant sales performance at other centers. Expense recoveries increased due to International Plaza, the opening of Stony Point, and increases in recoverable expenses at certain centers. In 2003, recoveries included the effect of a favorable property tax settlement at a center. Management, leasing, and development revenue decreased primarily due to the loss of revenue from the GMPT management contracts, which were cancelled in November 2004. Other income increased primarily due to increases in gains on peripheral land sales, partially offset by decreases in lease cancellation revenue.
        Total operating expenses were $411.6 million, a $17.7 million or 4.5% increase from 2003. Recoverable expenses increased primarily due to International Plaza and Stony Point, as well as increases in property taxes at certain other centers. Recoverable expenses in 2003 included a favorable $4.9 million property tax settlement at one of the centers. Other operating expense increased primarily due to International Plaza and Stony Point and increases in development related costs, which were partially offset by a decrease in bad debt expense. During the year ended December 31, 2004, $1.0 million of insurance proceeds were received relating to costs expended in connection with the unsolicited tender offer, while $24.8 million in costs, net of insurance recoveries, were incurred during 2003. Also during 2004, a $5.7 million restructuring loss was recognized. Substantially all of this charge represented employee severance payments and benefits. Management, leasing, and development expense decreased primarily due to the cancellation of the GMPT management contracts. General and administrative costs increased primarily due to increased compensation and insurance costs. The increase in compensation cost was primarily due to the mark-to-market of deferred long-term compensation bonuses, most of which were paid in early 2005. Interest expense increased primarily due to International Plaza, increased debt, increases in floating interest rates, decreased capitalized interest upon the openings of Stony Point and the Wellington Green expansions, the acquisition of Waterside, and the refinancing of Beverly Center. These increases were partially offset by decreases due to the maturity of certain interest rate swap agreements. Depreciation expense increased primarily due to International Plaza and Stony Point.
Unconsolidated Joint Ventures
        Total revenues for the year ended December 31, 2004 were $312.8 million, a $7.2 million or 2.3% decrease from 2003. Minimum rents decreased $5.0 million, primarily due to the consolidation of International Plaza, which was partially offset by an increase due to the acquisition of the interest in Waterside Shops at Pelican Bay. The decrease was also partially offset by increased occupancy and income from specialty retailers. Percentage rents increased due to improved tenant sales performance at certain centers as well as the acquisition of Waterside. Expense recoveries decreased primarily due to the consolidation of International Plaza, offset by the acquisition of the interest in Waterside Shops at Pelican Bay and an increase in recoverable expenses at certain other centers. Other revenue decreased primarily due to a decrease in lease cancellation revenue.
        Total operating expenses decreased by $16.7 million to $232.2 million for the year ended December 31, 2004. Recoverable expenses decreased primarily due to International Plaza, partially offset by Waterside and increases in recoverable expenses at certain other centers. Other operating expense decreased primarily due to International Plaza and a decrease in bad debt expense, partially offset by Waterside and development related costs. Interest expense decreased primarily due to International Plaza and the payoff of debt on Woodland and Stamford Town Center. Depreciation expense decreased primarily due to International Plaza, partially offset by Waterside.
        As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by $9.5 million to $80.6 million. Our equity in income of the Unconsolidated Joint Ventures was $40.1 million, a $3.4 million increase from 2003.
Net Income
        As a result of the foregoing, our income before discontinued operations and minority and preferred interests increased by $28.7 million to $60.0 million for 2004. Discontinued operations in 2004 included a $0.3 million adjustment to the gain on the disposition of Biltmore Fashion Park, while 2003 included a $49.6 million gain on the disposition of the center, as well as adjustments to prior gains. TRG preferred distributions in 2004 include a $2.7 million charge incurred in connection with the redemption of the Series C and Series D Preferred Equity. After allocation of income to minority and preferred interests, the net income (loss) allocable to common shareowners for 2004 was $(5.1) million compared to $21.2 million in 2003.
33

Reconciliation of Net Income (Loss) to Funds from Operations

	2005	2004	2003	
	(in millions of dollars)	
Net income (loss) allocable to common shareowners	 	44.1		(5.1	)	21.2		
	 		
Add (less) depreciation and gains on dispositions of properties:	 		
     Gains on dispositions of interests in centers	 	(52.8	)	(0.3	)	(49.6	)	
     Depreciation and amortization (1) :	 		
         Consolidated businesses at 100%	 	128.4		110.2		100.4		
         Minority partners in consolidated joint ventures	 	(9.2	)	(3.2	)	(1.5	)	
         Discontinued operations	 					3.2		
         Share of unconsolidated joint ventures	 	33.4		35.2		37.7		
         Non-real estate depreciation	 	(2.1	)	(2.4	)	(2.5	)	
	 		
Add minority interests in TRG:	 		
     Minority share of income in TRG	 	40.4		14.9		28.2		
     Distributions (less than) in excess of minority share of income of TRG	 	(4.5	)	20.8		7.3		

Funds from Operations - TRG (2)	 	177.7		170.1		144.5		
							
Funds from Operations - TCO (2)	 	110.6		103.1		87.3		

(1)	Depreciation includes $10.1 million, $8.1 million, and $6.5 million of mall tenant allowance amortization for the years ended December 31, 2005, 2004, and 2003, respectively. Depreciation also includes depreciation of center replacement assets recoverable from tenants of $15.7 million, $14.2 million, and $12.1 million for the years ended December 31, 2005, 2004, and 2003, respectively.	
(2)	FFO for the years ended December 31, 2004 and 2003 have been restated from previously reported amounts to include an add-back of depreciation of center replacement assets recoverable from tenants. TCO’s share of TRG’s FFO is based on an average ownership of 62%, 61%, and 60% during the years ended December 31, 2005, 2004, and 2003, respectively.	
(3)	Amounts in this table may not add due to rounding.	

Reconciliation of Net Income (Loss) to Beneficial Interest in EBITDA

	2005	2004	2003	
	(in millions of dollars)	
Net income (loss) allocable to common shareowners	 	44.1		(5.1	)	21.2		
	 		
Add (less) depreciation and gains on dispositions of properties:	 		
     Gains on dispositions of interests in centers	 	(52.8	)	(0.3	)	(49.6	)	
     Depreciation and amortization:	 		
         Consolidated businesses at 100%	 	128.4		110.2		100.4		
         Minority partners in consolidated joint ventures	 	(9.2	)	(3.2	)	(1.5	)	
         Discontinued operations	 					3.2		
         Share of unconsolidated joint ventures	 	33.4		35.2		37.7		
	 		
Add minority interests in TRG:	 		
     Minority share of income in TRG	 	40.4		14.9		28.2		
     Distributions (less than) in excess of minority share of income of TRG	 	(4.5	)	20.8		7.3		
	 		
Add (less) preferred interests and interest expense:	 		
     Preferred dividends and distributions	 	30.1		29.7		25.6		
     Interest expense for all businesses in continuing operations	 	189.2		170.0		166.9		
     Interest expense allocable to minority partners in consolidated	 		
         joint ventures	 	(5.5	)	(3.1	)	(2.7	)	
     Interest expense of discontinued operations	 					5.9		
     Interest expense allocable to outside partners in unconsolidated	 		
         joint ventures	 	(30.0	)	(34.1	)	(39.4	)	
							
Beneficial interest in EBITDA - TRG (1)	 	363.5		335.0		303.3		
							
(1)	TRG’s beneficial interest in EBITDA for the years ended December 31, 2004 and 2003 have been restated from previously reported amounts to include an add-back of depreciation of center replacement assets recoverable from tenants.	
(2)	Amounts in this table may not add due to rounding.	

34

Liquidity and Capital Resources
        In the following discussion, references to beneficial interest represent the Operating Partnership’s ownership share of the results of its consolidated and unconsolidated businesses. We do not have, and have not had, any parent company indebtedness; all debt discussed represents obligations of the Operating Partnership or its subsidiaries and joint ventures.
        Capital resources are required to maintain our current operations, pay dividends, and fund planned capital spending for future developments and other commitments and contingencies. We believe that our net cash provided by operating activities, distributions from our joint ventures, the unutilized portions of our credit facilities, and our ability to access the capital markets assure adequate liquidity to meet current and future cash requirements and will allow us to conduct our operations in accordance with our dividend and financing policies. The following sections contain information regarding our recent capital transactions and sources and uses of cash; beneficial interest in debt and sensitivity to interest rate risk; and historical capital spending. We then provide information regarding our anticipated future capital spending; covenants, commitments, and contingencies; and dividend policies.
Summaries of 2005 Capital Activities and Transactions
        As of December 31, 2005, we had a consolidated cash balance of $163.6 million. Approximately $76.4 million of this cash relates to the December 2005 sale of Woodland and was used in early 2006 to complete the acquisition of replacement properties as Section 1031 like-kind exchanges (see “Results of Operations – Openings, Acquisitions, and Dispositions”). Additionally, cash included the remaining proceeds from the December 2005 refinancing of the Mall at Short Hills (see “Results of Operations – Debt Transactions”). Our cash balance also includes $8.5 million that is restricted to specific uses stipulated by our lenders, including ground lease payments, taxes, insurance, debt service, capital improvements, leasing costs, and tenant allowances. We also have secured lines of credit of $350 million and $40 million. Neither line had outstanding borrowings as of December 31, 2005. Both lines of credit mature in February 2008. The $350 million line of credit has a one-year extension option.
During 2005, we:

	o	Completed financings of approximately $740 million relating to The Mall at Short Hills and The Mall at Wellington Green	

	o	Issued $87 million of preferred stock, redeeming $87 million of existing preferred stock	

	o	Opened Northlake Mall	

	o	Completed the sale of Woodland	

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

        These transactions are more fully described in “Results of Operations” and “Capital Spending”.
Operating Activities
        Our net cash provided by operating activities was $184.6 million in 2005, compared to $135.5 million in 2004 and $133.5 million in 2003. In 2005, increases in cash related primarily to increases in rents, the opening of Northlake Mall, and additional operating cash flows due to International Plaza, which we began consolidating upon acquisition of a controlling interest in the center. Included in interest expense in 2005 was a prepayment premium paid in connection with The Mall at Short Hills refinancing in December 2005 (see “Debt Transactions”). In 2004, increases in cash related primarily to increases in rents and recoveries and additional operating cash flows due to the full year of operations of Stony Point Fashion Park, offset by payments of costs previously accrued in connection with the unsolicited tender offer, restructuring costs, and settlement of the Beverly Center swap agreement that hedged the related financing.
Investing Activities
        Net cash used in investing activities was $91.1 million in 2005 compared to $243.6 million in 2004 and $41.7 million in 2003.
35

        Cash used in investing activities was impacted by the timing of capital expenditures, with additions to properties in 2005, 2004, and 2003 for the construction of Northlake Mall, Stony Point Fashion Park, and The Mall at Millenia, as well as other development activities and other capital items. A tabular presentation of 2005 capital spending is shown in “Capital Spending”. During 2004, $58.5 million, net of cash transferred in, was used to purchase an additional interest in International Plaza, and $3.3 million was used to acquire an additional interest in Beverly Center. In 2003, $30.3 million was used to acquire interests in Great Lakes Crossing, MacArthur Center, and Waterside Shops at Pelican Bay. Contributions to Unconsolidated Joint Ventures of $30.4 million in 2005 were made primarily for the purchase of anchor spaces at Stamford Town Center and Cherry Creek Shopping Center, the initial contribution to The Pier at Caesars (see “Capital Spending – New Centers”), and to fund construction at Waterside Shops at Pelican Bay, while $72.3 million in 2004 were made primarily to fund the repayment of debt at Stamford and Woodland.
        Sources of cash used in funding these investing activities, other than cash flows from operating activities, included distributions from Unconsolidated Joint Ventures, as well as the transactions described under Financing Activities. Distributions in excess of earnings from Unconsolidated Joint Ventures provided $17.1 million in 2005, $20.2 million in 2004, and $49.1 million in 2003. In 2003, these distributions included $21.0 million of excess proceeds from the March 2003 refinancing of The Mall at Millenia. Net proceeds from sales of peripheral land were $6.1 million, $11.5 million and $5.7 million in 2005, 2004, and 2003, respectively. The timing of land sales is variable and proceeds from land sales can vary significantly from period to period. During 2005, $76.4 million of escrowed cash was received in connection with the sale of Woodland and held for purchase of replacement property.
Financing Activities
        Net cash provided by financing activities was $41.0 million in 2005, compared to $106.8 million of cash provided in 2004, and $93.8 million of cash used in 2003.
        Net cash used in or provided by financing activities was primarily impacted by cash requirements of the investing activities described in the preceding section. Proceeds from the issuance of debt, net of payments and issuance costs, were $157.4 million in 2005, compared to $236.5 million in 2004 and $20.6 million in 2003. Issuance of stock and partnership units related to the exercise of employee options contributed $6.7 million in 2005, $10.4 million in 2004, and $2.3 million in 2003. In 2005 we used $87 million in proceeds from the issuance of Series H Preferred Stock to redeem a portion of Series A Preferred Stock. In 2004, issuance of Series F Preferred Equity contributed $30.0 million and we used proceeds from the issuance of the $100 million Series G Preferred Stock to redeem all of the outstanding Series C and D Cumulative Redeemable Preferred Equity. Equity issuance costs were $3.2 million and $4.1 million in 2005 and 2004, respectively. Issuance of partnership units related to an investment by a former owner of an interest in Beverly Center contributed $50.0 million 2003. Repurchases of common stock totaled $50.2 million and $52.8 million in 2004 and 2003, respectively. Total dividends and distributions paid were $119.9 million, $115.8 million, and $113.9 million in 2005, 2004, and 2003, respectively.
Beneficial Interest in Debt
        At December 31, 2005, the Operating Partnership’s debt and its beneficial interest in the debt of its Consolidated and Unconsolidated Joint Ventures totaled $2,530.5 million, with an average interest rate of 5.90% excluding amortization of debt issuance costs and the effects of interest rate hedging instruments. These costs are reported as interest expense in the results of operations. Interest expense for the year ended December 31, 2005 includes $0.6 million of non-cash amortization relating to acquisitions, or 0.02% of the average all-in rate. Included in beneficial interest in debt is debt used to fund development and expansion costs. Beneficial interest in construction work in progress totaled $139.1 million as of December 31, 2005, which includes $128.3 million of assets on which interest is being capitalized. Beneficial interest in capitalized interest was $9.9 million for 2005. The following table presents information about our beneficial interest in debt as of December 31, 2005:
36

				
	Amount	Interest Rate
Including Spread	
			
	(in millions of dollars)		
Fixed rate debt	 	2,185.5		5.80	%	(1)	 	
	 		
Floating rate debt -	 		
    Floating month to month (2)	 	345.0		6.53		(1)		

Total beneficial interest in debt (3)	 	2,530.5		5.90		(1)		

Amortization of financing costs (4)	 			0.26	%		
					
Average all-in rate	 			6.16	%		

(1)	Represents weighted average interest rate before amortization of financing costs.	
(2)	The Shops at Willow Bend debt of $144.6 million and the Oyster Bay debt of $56.2 million were repaid in February 2006.	
(3)	In January 2006, the Company entered into a 10-year 5.41% rate lock on a $215.5 million planned financing of Northlake Mall,which closed in February 2006.	
(4)	Financing costs include financing fees, interest rate cap premiums, and losses on settlement of derivatives used to hedge the refinancing of certain fixed rate debt. It does not include prepayment premiums and deferred financing fees written off for refinancings.	
(5)	Amounts in table may not add due to rounding.	

        In addition, as of December 31, 2005, $283.3 million of our beneficial interest in floating rate debt is covered under interest rate cap agreements with LIBOR cap rates ranging from 4.6% to 7.0% with terms ending February 2006 through July 2007.
Sensitivity Analysis
        We have exposure to interest rate risk on our debt obligations and interest rate instruments. We use derivative instruments primarily to manage exposure to interest rate risks inherent in variable rate debt and refinancings. We routinely use cap, swap, and treasury lock agreements to meet these objectives. Based on the Operating Partnership’s beneficial interest in floating rate debt in effect at December 31, 2005, a one percent increase or decrease in interest rates on this floating rate debt would decrease or increase cash flows by approximately $3.4 million and, due to the effect of capitalized interest, annual earnings by approximately $3.2 million. Based on our consolidated debt and interest rates in effect at December 31, 2005, a one percent increase in interest rates would decrease the fair value of debt by approximately $101.8 million, while a one percent decrease in interest rates would increase the fair value of debt by approximately $110.1 million.
Contractual Obligations
        In conducting our business, we enter into various contractual obligations, including those for debt, capital leases for property improvements, operating leases for office space and land, purchase obligations (primarily for construction), and other long-term commitments. Detail of these obligations as of December 31, 2005 for our consolidated businesses, including expected settlement periods, is contained below:

	Payments due by period	
		
	Total	Less than 1
year (2006)	1-3 years
(2007-2008)	3-5 years
(2009-2010)	More than 5
years (2011+)	
						
	(in millions of dollars)	
Debt (1) :	 		 		 		 		 		 	
  Property level debt	 	2,089.9		215.6		346.0		155.2		1,373.2		
  Interest payments	 	759.8		106.6		187.5		172.6		293.1		
Capital lease obligations	 	14.4		5.8		7.2		1.4			
Operating leases	 	161.4		6.6		13.0		12.7		129.2		
Purchase obligations:	 		
  Planned capital spending (2)	 	214.3		214.3			
  Other purchase obligations (3)	 	7.7		2.3		2.8		1.3		1.2		
Other long-term liabilities (4)	 	88.3		9.9		7.8		4.7		66.0		
											
Total	 	3,335.8		561.1		564.3		347.9		1,862.7		

(1)	The settlement periods for debt do not consider extension options. Amounts relating to interest on floating rate debt are calculated based on the debt balances and interest rates as of December 31, 2005.	
(2)	As of December 31, 2005, we were contractually committed for $68.5 million of this planned spending. See “Planned Capital Spending” for detail regarding planned spending.	
(3)	Excludes purchase agreements with cancellation provisions of 90 days or less.	
(4)	Other long-term liabilities consist of various accrued liabilities, most significantly assessment bond obligations and long-term incentive compensation.	
(5)	Amounts in this table may not add due to rounding.	

37

        In May 2004, we entered into a series of agreements related to a project in the Town of Oyster Bay, New York (see “Planned Capital Spending”) to facilitate a Section 1031 like-kind exchange. A third party acquired our option to purchase land in the Town of Oyster Bay, New York and reimbursed us for our project costs to date. Subsequently, the third party acquired the land and became the owner of the project. We are the developer of the project and had an option to purchase the project, which we exercised in 2006 using proceeds from the sale of Woodland. The owner provided 3% of project funding ($3.0 million as of December 31, 2005) and leased the property to a wholly owned subsidiary of the Operating Partnership. A senior lender has funded $56.2 million of the project costs and we provided the remainder of the project funding under a junior subordinated financing to the owner. We guaranteed the lease payments and the completion of the project. We consolidated the owner and other entities described above as of December 31, 2005, and the junior loan and other intercompany transactions are eliminated in consolidation. The senior loan was repaid in connection with the exercise of the option in February 2006.
        In September 2005, we entered into a series of agreements related to The Mall at Partridge Creek, in Clinton Township, Michigan (see “Planned Capital Spending”). The ownership of the land purchased for this project was structured to facilitate a Section 1031 like-kind exchange. A third party exchange company acquired the land using the proceeds from a loan from the Operating Partnership and entered into a lease of the land to a wholly-owned subsidiary of the Operating Partnership. We had an option to purchase the land from the third party exchange company, which we exercised in January 2006 using proceeds from the sale of Woodland. We consolidated the entity that owned the land as of December 31, 2005. The loan and other intercompany transactions are eliminated in consolidation.
Loan Commitments and Guarantees
        Certain loan agreements contain various restrictive covenants, including minimum net worth requirements, minimum debt service coverage ratios, a maximum payout ratio on distributions, a maximum leverage ratio, a minimum debt yield ratio, and a minimum fixed charges coverage ratio, the latter two being the most restrictive. The Operating Partnership is in compliance with all of its covenants.
        Payments of principal and interest on the loans in the following table are guaranteed by the Operating Partnership as of December 31, 2005.

Center	Loan balance
as of 12/31/05	TRG's
beneficial
interest in
loan balance
as of 12/31/05	Amount of
loan balance
guaranteed
by TRG
as of 12/31/05	% of loan
balance
guaranteed
by TRG	% of interest
guaranteed
by TRG	
						
	(in millions of dollars)			
Dolphin Mall	141.3	141.3	141.3	100%	100%	
The Mall at Millenia	1.0	0.5	0.5	50    	50    	
The Shops at Willow Bend	144.6	144.6	144.6	100    	100    	

        The debt on The Shops at Willow Bend was repaid in February 2006. We expect to pay off the Dolphin loan when it becomes prepayable without penalty in August 2006.
        Payments of rent and all other sums payable related to the Oyster Bay agreements are guaranteed by the Operating Partnership. As of December 31, 2005, the balances of the senior loan and owner equity contribution (see “Contractual Obligations”) were $56.2 million and $3.0 million, respectively, and were repaid when the option was exercised in February 2006.
Cash Tender Agreement
    A.        Alfred Taubman has the annual right to tender to us units of partnership interest in the Operating Partnership (provided that the aggregate value is at least $50 million) and cause us to purchase the tendered interests at a purchase price based on a market valuation of TCO on the trading date immediately preceding the date of the tender (the Cash Tender Agreement). At A. Alfred Taubman’s election, his family, and certain others may participate in tenders. We will have the option to pay for these interests from available cash, borrowed funds, or from the proceeds of an offering of our common stock. Generally, we expect to finance these purchases through the sale of new shares of our stock. The tendering partner will bear all market risk if the market price at closing is less than the purchase price and will bear the costs of sale. Any proceeds of the offering in excess of the purchase price will be for the sole benefit of TCO.
38

        Based on a market value at December 31, 2005 of $34.75 per common share, the aggregate value of interests in the Operating Partnership that may be tendered under the Cash Tender Agreement was approximately $884 million. The purchase of these interests at December 31, 2005 would have resulted in our owning an additional 31% interest in the Operating Partnership.
Capital Spending
        Capital spending for routine maintenance of the shopping centers is generally recovered from tenants. Capital spending during 2005 is summarized in the following table:

	2005 (1)		
			
	Consolidated
Businesses	Beneficial interest
in Consolidated
Businesses	Unconsolidated
Joint
Ventures	Beneficial interest
in Unconsolidated
Joint Ventures		
			
	(in millions of dollars)		
New Development Projects:	 		 		 		 		 		
    Pre-construction development activities	 	31.8	(2)	31.8	(2)		
    New centers	 	106.3	(3)	106.3	(3)		
	 		
Existing Centers:	 		
    Renovation projects with incremental GLA	 		
      and/or anchor replacement	 	2.6		2.6		49.4	(4)	19.7	(4)		
    Renovations with no incremental GLA effect	 		
      and other	 	4.2		4.1		3.1		1.6			
    Mall tenant allowances (5)	 	13.2		12.2		5.6		2.9			
    Asset replacement costs reimbursable by tenants	 	9.8		9.2		8.0		4.6			
	 		
Corporate office improvements and equipment	 	5.2		5.2			
										
Additions to properties	 	173.1		171.5		66.1		28.8			

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

        The following table presents a reconciliation of the Consolidated Businesses’ capital spending shown above to cash additions to properties as presented in our Consolidated Statement of Cash Flows for the year ended December 31, 2005:

	(in millions of dollars)	
Consolidated Businesses' capital spending	173.1  	
Differences between cash and accrual basis	(12.8)	
		
Additions to properties	160.3  	
		
39

        Capital spending during 2004 is summarized in the following table:

	2004 (1)		
			
	Consolidated
Businesses	Beneficial interest
in Consolidated
Businesses	Unconsolidated
Joint
Ventures	Beneficial interest
in Unconsolidated
Joint Ventures		
			
	(in millions of dollars)		
New Development Projects:	 		 		 		 		 		
    Pre-construction development activities	 	37.6	(2)	37.6	(2)		
    New centers	 	49.6	(3)	49.6	(3)		
	 		
Existing Centers:	 		
    Renovation projects with incremental GLA	 		
      and/or anchor replacement	 	8.9		8.4		17.0	(4)	6.5	(4)		
    Renovations with no incremental GLA effect	 		
      and other	 	1.4		1.1		1.0		0.7			
    Mall tenant allowances (5)	 	15.6		15.0		8.4		4.5			
    Asset replacement costs reimbursable by tenants	 	12.2		11.1		8.2		4.7			
	 		
Corporate office improvements and equipment	 	1.3		1.3			
										
Additions to properties	 	126.7		124.2		34.6		16.3			

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

        The Operating Partnership’s share of mall tenant allowances per square foot leased, committed under contracts during the year, excluding expansion space and new developments, was $19.84 in 2005 and $19.02 in 2004. In addition, the Operating Partnership’s share of capitalized leasing and tenant coordination costs in 2005 and 2004, excluding new developments, was $6.6 million and $9.3 million, respectively, or $6.09 and $9.07, respectively, per square foot leased.
Planned Capital Spending
New Centers
        Groundbreaking occurred in November 2005 on an approximately 640,000 square foot center, The Mall at Partridge Creek, in Clinton Township, Michigan. The center will be anchored by Nordstrom, Parisian, and MJR Theatres. The land for the site was purchased in September 2005 (see “Contractual Obligations”) and the center is scheduled to open in the fall of 2007, with Nordstrom opening in spring 2008. Our investment in this center will be approximately $155 million and we are expecting a stabilized return of 9.5%.
        In January 2005, we entered into an agreement to invest in The Pier at Caesars (The Pier), located in Atlantic City, New Jersey, with Gordon Group Holdings LLC (Gordon), who is developing the center. The Pier is currently under construction, and is expected to open in May 2006. Under the agreement, we will have a 30% interest in The Pier. Our capital contribution in The Pier will be made in three steps. The initial investment of $4 million was made at the closing in January 2005. A second payment equal to 70% of our projected required total investment (less the initial $4 million payment) is expected to be made within six months after the project opens. The third and final payment will be made shortly after the completion of the project’s stabilization year (2007) based on its actual net operating income (NOI) and debt levels. Our total capital contribution will be computed at a price to be calculated at a seven percent capitalization rate. Depending on the performance of the project, we expect our total cash investment to be in the range of $30 million to $35 million. During construction of the project, Gordon will loan the venture the funding for capital expenditures in excess of the construction loan financing. Interest on the loan will be accruable at the short-term applicable federal rate (AFR) under Section 1274(d) of the Internal Revenue Code and will be repaid before any distributions to the venture partners. The contributions of the Company will be used to repay the principal portion of the loan. Consequently, the Company expects that its share of distributions and income will initially be less than its residual 30% interest.
40

        In addition to our acquisition of an interest in The Pier, we have entered into a joint development agreement with Gordon to develop certain future casino and entertainment oriented retail projects. The five-year agreement, which includes extension options, requires each party to offer an equal ownership of future development opportunities for such projects to the other party.
        In 2004, we signed a conditional letter of intent regarding a future development in Salt Lake City, Utah. The project would be a reconfiguration of two existing properties. The ownership structure and amount of our investment in this project has not yet been finalized.
        Our approximately $104 million balance of development pre-construction costs as of December 31, 2005 consists primarily of costs relating to our Oyster Bay project in the Town of Oyster Bay, New York. The mall will be anchored by Nordstrom and Neiman Marcus. The demolition of the site is finished, and we are working with the community to resolve all issues remaining prior to special use permit approval and the issuance of building permits. Once we have received the necessary approvals we expect to finalize our anticipated costs and return on this project and set an opening date. The returns on this project will be somewhat lower than our normal targets due to the significant pre-development and construction costs on this site resulting from the unanticipated delays in the approval and entitlement process. We expect success with the ongoing negotiations, but if we are ultimately unsuccessful in the negotiation process, it is anticipated that the recovery on this asset would be significantly less than our current investment.
Existing Centers
        Construction is underway on an expansion and renovation at Waterside Shops at Pelican Bay. The expansion will increase the size of the center to 282,000 square feet and will cost approximately $51 million. We expect a return of approximately 11% on our $13 million share of project costs. The tenants will begin opening in stages in 2006. In addition, Nordstrom will join the center as an anchor in 2008 and an expansion of the current anchor, Saks Fifth Avenue, will be completed in late 2007 or early 2008.
        We have announced plans for the addition of a 167,000 square foot Nordstrom, a 60,000 square foot expansion and renovation of Marshall Field’s, and approximately 97,000 square feet of additional new store space at Twelve Oaks Mall. Construction is expected to begin in early 2006 and be completed by fall 2007. We expect a 10% return on our estimated cost of $63 million.
        At Stamford Town Center we purchased the Filene’s store, which closed in January 2005. Demolition of the former Filene’s building is expected to begin in the first quarter of 2006 and we are currently finalizing our plans for new restaurant and retail space. While we have not yet determined the total project costs, we expect the total cost to be somewhat higher than $50 million with a high single-digit return.
        The following table summarizes planned capital spending for 2006, excluding the capital contribution related to The Pier (above), as well as costs related to the future development in Salt Lake City and projects or expansions for which budgets have not yet been approved by the Board of Directors:

	2006 (1)	
		
	Consolidated
Businesses	Beneficial interest
in Consolidated
Businesses	Unconsolidated
Joint
Ventures	Beneficial interest
in Unconsolidated
Joint Ventures	
		
	(in millions of dollars)	
New development projects	146.2	(2)	146.2	 	 	 	
Existing Centers	62.9	(3)	62.4	21.9	(3)	11.8	
Corporate office improvements and equipment	5.3		5.3				
							
Total	214.3	 	213.8	21.9	 	11.8	

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

        Estimates of future capital spending include only projects approved by our Board of Directors and, consequently, estimates will change as new projects are approved. Costs of potential development projects, including our exploration of development possibilities in Asia, are expensed until we conclude that it is probable that the project will reach a successful conclusion.
41

        Disclosures regarding planned capital spending, including estimates regarding capital expenditures, occupancy, and returns on new developments presented above are forward-looking statements and certain significant factors could cause the actual results to differ materially, including but not limited to: (1) actual results of negotiations with anchors, tenants, and contractors, (2) timing and outcome of litigation and entitlement processes, (3) changes in the scope, number, and valuation of projects, (4) cost overruns, (5) timing of expenditures, (6) financing considerations, (7) actual time to complete projects, (8) changes in economic climate, (9) competition from others attracting tenants and customers, (10) increases in operating costs, (11) timing of tenant openings, and (12) early lease terminations and bankruptcies.
Dividends
        We pay regular quarterly dividends to our common and Series A, Series G, and Series H preferred shareowners. Dividends to our common shareowners are at the discretion of the Board of Directors and depend on the cash available to us, our financial condition, capital and other requirements, and such other factors as the Board of Directors deems relevant. To qualify as a REIT, we must distribute at least 90% of our REIT taxable income to our shareowners, as well as meet certain other requirements. Preferred dividends accrue regardless of whether earnings, cash availability, or contractual obligations were to prohibit the current payment of dividends. The 8.3% Series A preferred stock became callable in October 2002.
        On December 7, 2005, we declared a quarterly dividend of $0.305 per common share that was paid on January 20, 2006 to shareowners of record on December 30, 2005. The Board of Directors declared a quarterly dividend of $0.51875 per share on our 8.3% Series A Preferred Stock, paid December 30, 2005 to shareowners of record on December 20, 2005. We declared a quarterly dividend of $0.50 per share on our 8% Series G Preferred Stock, paid December 30, 2005 to shareowners of record on December 20, 2005. We also declared a quarterly dividend of $0.4765625 per share on our 7.625% Series H Preferred Stock, paid on December 30, 2005 to shareholders of record on December 20, 2005.
        The annual determination of our common dividends is based on anticipated Funds from Operations available after preferred dividends, as well as assessments of annual capital spending, financing considerations, and other appropriate factors.
        Any inability of the Operating Partnership or its Joint Ventures to secure financing as required to fund maturing debts, capital expenditures and changes in working capital, including development activities and expansions, may require the utilization of cash to satisfy such obligations, thereby possibly reducing distributions to partners of the Operating Partnership and funds available to us for the payment of dividends.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
        The information required by this Item is included in this report at Item 7 under the caption “Liquidity and Capital Resources”.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
        The Financial Statements of Taubman Centers, Inc. and the Reports of Independent Registered Public Accounting Firms thereon are filed pursuant to this Item 8 and are included in this report at Item 15.
Item 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
        None.
Item 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
        As of the end of the period covered by this annual report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined by SEC Rule 13a-15(e)). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.
42

Management’s Annual Report on Internal Control over Financial Reporting
        Management’s Annual Report on Internal Control over Financial Reporting accompanies the Company’s financial statements included in Item 15 of this annual report.
Report of the Independent Registered Public Accounting Firm
        The report issued by the Company’s auditors, KPMG LLP, accompanies the Company’s financial statements included in Item 15 of this annual report.
Changes in Internal Control over Financial Reporting
        There were no changes in the Company’s internal control over financial reporting identified in connection with the Company’s fourth quarter 2005 evaluation of such internal control that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. OTHER INFORMATION.
      Not applicable.
PART III*
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
        The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Management—Directors and Executive Officers”, “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters — Section 16(a) Beneficial Ownership Reporting Compliance”, “Management – Corporate Governance”, and “Management – The Board of Directors and Committees.”
Item 11. EXECUTIVE COMPENSATION.
        The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Executive Compensation” and “Management — Compensation of Directors.”
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
        The information required by this item is hereby incorporated by reference to the table and related footnotes appearing in the Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.”
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
        The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Management—Related Party Transactions” and “Executive Compensation—Certain Employment and Consulting Arrangements”.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
        The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Report of the Audit Committee”.

* The Compensation Committee Report on Executive Compensation, the Audit Committee Report, and the Shareholder Return Performance Graph appearing in the Proxy Statement are not incorporated by reference in this Annual Report on Form 10-K or in any other report, registration statement, or prospectus of the Registrant.
43

PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

15(a)(1)	 	
The following financial statements of Taubman Centers, Inc. and the Independent Auditors' Report thereon are filed with this report:	

	TAUBMAN CENTERS, INC.
Management's Annual Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheet as of December 31, 2005 and 2004
Consolidated Statement of Operations for the years ended
  December 31, 2005, 2004, and 2003
Consolidated Statement of Shareowners' Equity for the years ended
  December 31, 2005, 2004, and 2003
Consolidated Statement of Cash Flows for the years ended
  December 31, 2005, 2004, and 2003
Notes to Consolidated Financial Statements	Page
 F-2
 F-3
 F-4
 F-5
 F-6

 F-7

 F-8

 F-9
F-10	
 	
15(a)(2)	 	
The following is a list of the financial statement schedules required by Item 15(d):	

	TAUBMAN CENTERS, INC.
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2005,
  2004, and 2003
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2005	     

F-35

F-36
	
 	15(a)(3)	 		

      3(a)

      3(b)

      3(c)

      4(a)

      4(b)

      4(c)

          

      4(d)

          
          	--

--

--

--

--

--

  

--	Restated By-Laws of Taubman Centers, Inc., as amended through May 18, 2005 (incorporated herein by reference
to Exhibit 3 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005
("2005 Second Quarter Form 10-Q")).

Restated Articles of Incorporation of Taubman Centers, Inc., as amended through June 10, 2005 (incorporated
herein by reference to Exhibit 3.1 filed with the Registrant's Current Report on Form 8-K dated June 8, 2005).

Certificate of Amendment to the Articles of Incorporation of Taubman Centers, Inc. (incorporated herein by
reference to Exhibit 3(c) filed with the Registrant's Annual Report on Form 10-K for the year ended December
31, 2004 ("2004 Form 10-K")).

Loan Agreement dated as of January 15, 2004 among La Cienega Associates, as Borrower, Column Financial, Inc.,
as Lender (incorporated herein by reference to Exhibit 4 filed with the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 2004 ("2004 First Quarter Form 10-Q")).

Assignment of Leases and Rents, La Cienega Associates, Assignor, and Column Financial, Inc., Assignee, dated as
of January 15, 2004 (incorporated herein by reference to Exhibit 4 filed with the 2004 First Quarter Form
10-Q).

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

Loan Agreement dated as of March 29, 1999 among Taubman Auburn Hills Associates Limited Partnership, as
Borrower, Fleet National Bank, as a Bank, PNC Bank, National Association, as a Bank, the other Banks signatory
thereto, each as a Bank, and PNC Bank, National Association, as Administrative Agent (incorporated herein by
reference to exhibit 4(a) filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999 ("1999 Second Quarter Form 10-Q")).	
44

			
 4(e)

      

 4(f)

 4(g)

 4(h)

 4(i)

 4(j)

 4(k)

      

 4(l)

      

 4(m)

      

      

 4(n)

      

*10(a)	--

  

--

--

--

--

--

--

  

--

  

--

  

  

--

  

--	Mortgage, Assignment of Leases and Rents and Security Agreement from Taubman Auburn Hills Associates Limited
Partnership, a Delaware limited partnership to PNC Bank, National Association, as Administrative Agent for the
Banks, dated as of March 29, 1999 (incorporated herein by reference to Exhibit 4(b) filed with the 1999 Second
Quarter Form 10-Q).

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

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

Amended and Restated Promissory Note A-3, dated December 14, 2005, by Short Hills Associates L.L.C. to
Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.3 of the Registrant's Current
Report on Form 8-K dated December 16, 2005).

Amended and Restated Mortgage, Security Agreement and Fixture Filings, dated December 14, 2005 by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.4 of the
Registrant's Current Report on Form 8-K dated December 16, 2005).

Amended and Restated Assignment of Leases, dated December 14, 2005, by Short Hills Associates L.L.C. to
Metropolitan Life Insurance Company (incorporated by reference to Exhibit 4.5 of the Registrant's Current
Report on Form 8-K dated December 16, 2005).

Secured Revolving Credit Agreement dated as of October 13, 2004 among the Taubman Realty Group Limited
Partnership and Eurohypo AG, New York Branch ("Eurohypo"), KeyBank National Association, PNC Bank National
Association, Commerzbank AG, New York and Grand Cayman Branches, Hypo Real Estate Capital Corporation, Comerica
Bank, PB (USA) Realty Corporation, Bank One, N.A. (incorporated by reference to Exhibit 10(a) of the
Registrant's Current Report on Form 8-K dated October 13, 2004).

Amendment to Secured Revolving Credit Agreement dated as of March 31, 2005, among The Taubman Realty Group
Limited Partnership and Eurohypo AG, New York Branch (incorporated herein by reference to Exhibit 4 filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 ("2005 First Quarter
10-Q")).

Building Loan Agreement dated as of June 21, 2000 among Willow Bend Associates Limited Partnership, as
Borrower, PNC Bank, National Association, as Lender, Co-Lead Agent and Lead Bookrunner, Fleet National Bank, as
Lender, Co-Lead Agent, Joint Bookrunner and Syndication Agent, Commerzbank AG, New York Branch, as Lender,
Managing Agent and Co-Documentation Agent, Bayerische Hypo-Und Vereinsbank AG, New York Branch, as Lender,
Managing Agent and Co-Documentation Agent, and PNC Bank, National Association, as Administrative Agent.
(incorporated herein by reference to Exhibit 4 (a) filed with the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000 ("2000 Second Quarter Form 10-Q")).

Building Loan Deed of Trust, Assignment of Leases and Rents and Security Agreement from Willow Bend Associates
Limited Partnership, a Delaware limited partnership, to David M. Parnell, for the benefit of PNC Bank, National
Association, as Administrative Agent for Lenders. (incorporated herein by reference to Exhibit 4 (b) filed with
the 2000 Second Quarter Form 10-Q).

The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan, as Amended and Restated Effective as
of September 30, 1997 (incorporated herein by reference to Exhibit 10(b) filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997).	
45

			
*10(b)

      

*10(c)

*10(d)

*10(e)

 10(f)

      

 10(g)

 10(h)

 10(i)

 10(j)

      

*10(k)

*10(l)

*10(m)

*10(n)

*10(o)	--

  

--

--

--

--

  

--

--

--

--

  

--

--

--

--

--	First Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan as Amended and
Restated Effective as of September 30, 1997, effective January 1, 2002 (incorporated herein by reference to
Exhibit 10(b) filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001
("2001 Form 10-K")).

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

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

The Form of The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan Option Agreement
(incorporated herein by reference to Exhibit 10(e) filed with the 2004 Form 10-K).

Registration Rights Agreement among Taubman Centers, Inc., General Motors Hourly-Rate Employees Pension Trust,
General Motors Retirement Program for Salaried Employees Trust, and State Street Bank & Trust Company, as
trustee of the AT&T Master Pension Trust (incorporated herein by reference to Exhibit 10(e) filed with the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 ("1992 Form 10-K")).

Registration Rights Agreement by and between Taubman Centers, Inc. and GSEP 2004 Realty Corp., dated as of May
27, 2004 (incorporated by reference to Exhibit 10(a) filed with the 2004 Second Quarter 10-Q).

Private Placement Purchase Agreement among Taubman Centers, Inc., The Taubman Realty Group Limited Partnership,
and GSEP 2004 Realty Corp, dated as of May 27, 2004 (incorporated by reference to Exhibit 10(b) filed with the
2004 Second Quarter 10-Q).

Master Services Agreement between The Taubman Realty Group Limited Partnership and the Manager (incorporated
herein by reference to Exhibit 10(f) filed with the 1992 Form 10-K).

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

Supplemental Retirement Savings Plan (incorporated herein by reference to Exhibit 10(i) filed with the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994).

The Taubman Company Long-Term Compensation Plan (as amended and restated effective January 1, 2000)
(incorporated herein by reference to Exhibit 10 (c) filed with the 2000 Second Quarter Form 10-Q).

First Amendment to the Taubman Company Long-Term Compensation Plan (as amended and restated effective January
1, 2000) (incorporated herein by reference to Exhibit 10(m) filed with the 2004 Form 10-K).

Second Amendment to the Taubman Company Long-Term Performance Compensation Plan (as amended and restated
effective January 1, 2000).

The Taubman Company 2005 Long-Term Incentive Plan (incorporated herein by reference to the Form DEF14A filed
with the Securities and Exchange Commission on April 5, 2005).	
46

			
*10(p)

*10(q)

*10(r)

*10(s)

*10(t)

*10(u)

 10(v)

 10(w)

 10(x)

 10(y)

       

 10(z)

       

 10(aa)

       

 10(ab)

 10(ac)	--

--

--

--

--

--

--

--

--

--

  

--

  

--

  

--

--	Employment Agreement between The Taubman Company Limited Partnership and Lisa A. Payne (incorporated herein by
reference to Exhibit 10 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997).

Change of Control Employment Agreement by and between Taubman Centers, Inc., Taubman Realty Group Limited
Partnership, and Lisa A. Payne (incorporated herein by reference to Exhibit 10(a) filed with the Registrant's
2005 First Quarter 10-Q).

Form of Change of Control Agreement (incorporated herein by reference to Exhibit 10(b) filed with the
Registrant's 2005 First Quarter 10-Q).

Consulting Agreement between The Taubman Company L.L.C. and Courtney Lord Associates, Ltd. (incorporated herein
by reference to Exhibit 10 filed with the 2004 First Quarter Form 10-Q).

Termination Agreement between The Taubman Company L.L.C. and Courtney Lord (incorporated herein by reference to
Exhibit 10 filed with the 2004 First Quarter Form 10-Q).

Consulting and Non-Competition Agreement between The Taubman Company, L.L.C. and John L. Simon (incorporated
herein by reference to Exhibit 10 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004).

Second Amended and Restated Continuing Offer, dated as of May 16, 2000. (incorporated herein by reference to
Exhibit 10 (b) filed with the 2000 Second Quarter Form 10-Q).

The Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman Realty Group Limited
Partnership dated September 30, 1998 (incorporated herein by reference to Exhibit 10 filed with the
Registrant's Quarterly Report on Form 10-Q dated September 30, 1998).

Annex II to Second Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of The
Taubman Realty Group Limited Partnership. (incorporated herein by reference to Exhibit 10(p) filed with
Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 ("1999 Form 10-K")).

First Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman
Realty Group Limited Partnership dated September 30, 1998 (incorporated herein by reference to Exhibit 10(b)
filed with the Registrant's Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2002 ("2002 Second
Quarter Form 10-Q/A")).

Second Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of The Taubman
Realty Group Limited Partnership effective as of September 3, 1999 (incorporated herein by reference to Exhibit
10(a) filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 ("1999
Third Quarter Form 10-Q")).

Third Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman
Realty Group Limited Partnership, dated May 2, 2003 (incorporated herein by reference to Exhibit 10(a) filed
with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 ("2003 Second Quarter
Form 10-Q")).

Fourth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman
Realty Group Limited Partnership, dated December 31, 2003 (incorporated herein by reference to Exhibit 10(x)
filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 2003).

Fifth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman
Realty Group Limited Partnership, dated February 1, 2005 (incorporated herein by reference to Exhibit 10.1
filed with the Registrant's Current Report on Form 8-K filed on February 7, 2005).	
47

			
 10(ad)

 10(ae)

*10(af)

 10(ag)

 10(ah)

 10(ai)

       

*10(aj)

*10(ak)

*10(al)

*10(am)

 12

 21

 23(a)

 23(b)

 24

 31(a)

 31(b)

 32(a)	--

--

--

--

--

--

  

--

--

--

--

--

--

--

--

--

--

--

--	Annex III to The Second Amendment and Restatement of Agreement of Limited Partnership of The Taubman Realty
Group Limited Partnership, dated as of May 27, 2004 (incorporated by reference to Exhibit 10(c) filed with the
2004 Second Quarter Form 10-Q).

Amended and Restated Shareholders' Agreement dated as of October 30, 2001 among Taub-Co Management, Inc., The
Taubman Realty Group Limited Partnership, The A. Alfred Taubman Restated Revocable Trust, and Taub-Co Holdings
LLC (incorporated herein by reference to Exhibit 10(q) filed with the 2001 Form 10-K).

The Taubman Realty Group Limited Partnership and The Taubman Company LLC Election and Option Deferral Agreement
(incorporated herein by reference to Exhibit 10(r) filed with the 2001 Form 10-K).

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

Contribution Agreement by and among the Taubman Realty Group Limited Partnership, a Delaware Limited
Partnership, and G.K. Las Vegas Limited Partnership, a California Limited Partnership, dated May 2, 2003
(incorporated herein by reference to Exhibit 10(b) filed with the Registrant's 2003 Second Quarter Form 10-Q).

Management Agreement Transition and Termination Agreement, dated October 15, 2004, by and between Briarwood
LLC, TL-Columbus Associates LLC, The Falls Shopping Center Associates LLC, TKL-East LLC, Meadowood Mall LLC,
Stoneridge Properties LLC, and Tuttle Crossing Associates II LLC, and The Taubman Company LLC (incorporated
herein by reference to Exhibit 10 filed with the Registrant's Current Report on Form 8-K dated October 15,
2004).

Summary of Compensation for the Board of Directors of Taubman Centers, Inc. (incorporated herein by reference
to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K dated December 7, 2004).

The Form of The Taubman Company Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10
of the Registrant's Current Report on Form 8-K dated May 18, 2005).

The Taubman Centers, Inc. Non-Employee Directors' Deferred Compensation Plan (incorporated by reference to
Exhibit 10 of the Registrant's Current Report on Form 8-K dated May 18, 2005).

The Form of The Taubman Centers, Inc. Non-Employee Directors' Deferred Compensation Plan (incorporated by
reference to Exhibit 10 of the Registrant's Current Report on Form 8-K dated May 18, 2005).

Statement Re: Computation of Taubman Centers, Inc. Ratio of Earnings to Combined Fixed Charges and Preferred
Dividends.

Subsidiaries of Taubman Centers, Inc.

Consent of Deloitte & Touche LLP.

Consent of KPMG LLP.

Powers of Attorney.

Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.	
48

			
32(b)

99(a)

99(b)	--

--

--	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

Debt Maturity Schedule.

Real Estate and Accumulated Depreciation Schedule of the Unconsolidated Joint Ventures of The Taubman Realty
Group Limited Partnership.	
*     A management contract or compensatory plan or arrangement required to be filed.

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

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

49

TAUBMAN CENTERS, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2005 AND 2004
AND FOR EACH OF THE YEARS ENDED
DECEMBER 31, 2005, 2004, AND 2003
F-1

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
        The management of Taubman Centers, Inc. is responsible for the preparation and integrity of the financial statements and financial information reported herein. This responsibility includes the establishment and maintenance of adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance that assets are safeguarded, transactions are properly authorized and recorded, and that the financial records and accounting policies applied provide a reliable basis for the preparation of financial statements and financial information that are free of material misstatement.
        The management of Taubman Centers, Inc. is required to assess the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005. Management bases this assessment of the effectiveness of its internal control on recognized control criteria, the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has completed its assessment as of December 31, 2005.
        Based on its assessment, management believes that Taubman Centers, Inc. maintained effective internal control over financial reporting as of December 31, 2005. The independent registered public accounting firm, KPMG LLP, that audited the 2005 financial statements included in this annual report have issued an attestation report on management’s assessment of the Company’s system of internal controls over financial reporting, also included herein.
F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareowners
Taubman Centers, Inc.:
        We have audited the accompanying consolidated balance sheets of Taubman Centers, Inc. (the Company) as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareowners’ equity and cash flows for each of the years in the two-year period ended December 31, 2005. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedules listed in the Index at Item 15 (a) (2). These consolidated financial statements and related financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and related financial statement schedules based on our audits.
        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.
KPMG LLP
Chicago, Illinois
February 27, 2006
F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareowners
Taubman Centers, Inc.:
        We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Taubman Centers, Inc. (the Company) maintained effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
        A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
        In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareowners’ equity, and cash flows, and related financial statement schedules for each of the years in the two-year period ended December 31, 2005, and our report dated February 27, 2006 expressed an unqualified opinion on those consolidated financial statements and related financial statement schedules.
KPMG LLP
Chicago, Illinois
February 27, 2006
F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareowners
Taubman Centers, Inc.
We have audited the accompanying consolidated statements of operations, shareowners’ equity, and cash flows of Taubman Centers, Inc. (the “Company”) for the year ended December 31, 2003. Our audit also included the financial statement schedule for the year ended December 31, 2003 at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedules based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the results of the Company's operations and its cash flows for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule for such period, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
Deloitte & Touche LLP
Detroit, Michigan
February 4, 2004 (except Note 7 relating to recoverable depreciation, to which the date is January 31, 2005)
F-5

TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)

	December 31	
		
	2005	2004	
Assets:	 		 		 	
  Properties (Notes 7 and 11)	 	$ 3,081,324	 	$ 2,936,964	 	
  Accumulated depreciation and amortization (Note 7)	 	(651,665	)	(558,891	)	
					
 	 	$ 2,429,659	 	$ 2,378,073	 	
  Investment in Unconsolidated Joint Ventures (Note 8)	 	106,117	 	129,934	 	
  Cash and cash equivalents	 	163,577	 	29,081	 	
  Accounts and notes receivable, less allowance for doubtful accounts of	 	 	 		
    $5,497 and $8,661 in 2005 and 2004 (Note 9)	 	41,717	 	32,124	 	
  Accounts and notes receivable from related parties (Note 14)	 	2,400	 	1,636	 	
  Deferred charges and other assets (Note 10)	 	54,110	 	61,586	 	
					
 	 	$ 2,797,580	 	$ 2,632,434	 	
					
Liabilities:	 		
  Notes payable (Note 11)	 	$ 2,089,948	 	$ 1,930,439	 	
  Accounts payable and accrued liabilities	 	235,410	 	223,331	 	
  Dividends and distributions payable	 	15,819	 	13,892	 	
  Distributions in excess of investments in and net income of Unconsolidated	 		
    Joint Ventures (Note 8)	 	101,028	 	106,367	 	
					
 	 	$ 2,442,205	 	$ 2,274,029	 	
Commitments and contingencies (Notes 7,11, 13, 17, and 22)	 		
	 		
Preferred Equity of TRG (Note 16)	 	$      29,217	 	$      29,217	 	
	 		
Partners' Equity of TRG allocable to minority partners (Note 1)	 		
	 		
Shareowners' Equity (Note 16):	 		
  Series A Cumulative Redeemable Preferred Stock, $0.01 par value,	 		
    8,000,000 shares authorized, $113 million liquidation preference, 4,520,000	 		
    and 8,000,000 shares issued and outstanding at December 31, 2005 and 2004	 	$             45	 	$             80	 	
  Series B Non-Participating Convertible Preferred Stock, $0.001 par and	 		
    liquidation value, 40,000,000 shares authorized, 29,175,240 and	 		
    29,714,937 shares issued and outstanding at December 31, 2005 and 2004	 	29	 	30	 	
  Series G Cumulative Redeemable Preferred Stock, 4,000,000 shares	 		
    authorized, no par, $100 million liquidation preference, 4,000,000 shares issued	 		
    and outstanding at December 31, 2005 and 2004	 		
  Series H Cumulative Redeemable Preferred Stock, 3,480,000 shares	 		
    authorized, no par, $87 million liquidation preference, 3,480,000 shares issued	 		
    and outstanding at December 31, 2005	 		
  Common Stock, $0.01 par value, 250,000,000 shares authorized, 51,866,184	 		
    and 48,745,625 shares issued and outstanding at December 31, 2005 and 2004	 	519	 	487	 	
  Additional paid-in capital	 	739,090	 	729,481	 	
  Accumulated other comprehensive income (loss) (Note 12)	 	(9,051	)	(11,387	)	
  Dividends in excess of net income	 	(404,474	)	(389,503	)	
					
 	 	$    326,158	 	$    329,188	 	
					
 	 	$ 2,797,580	 	$ 2,632,434	 	
					
See notes to consolidated financial statements.
F-6

TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)

	Year Ended December 31	
		
	2005	2004	2003	
Revenues:	 		 		 		 	
  Minimum rents	 	$      262,106	 	$      235,114	 	$      207,539	 	
  Percentage rents	 	9,835	 	6,288	 	4,821	 	
  Expense recoveries	 	151,950	 	137,466	 	125,627	 	
  Revenues from management, leasing, and development services	 	13,818	 	21,333	 	22,088	 	
  Other	 	35,729	 	31,252	 	28,408	 	
							
 	 	$      473,438		$      431,453	 	$      388,483	 	
							
Operating Expenses:	 		
  Recoverable expenses	 	$      137,915	 	$      127,563	 	$      111,522	 	
  Other operating	 	45,014	 	38,229	 	37,089	 	
  Restructuring loss (Note 4)	 		 	5,662			
  Costs related to unsolicited tender offer, net of recoveries (Note 3)	 		 	(1,044	)	24,832		
  Management, leasing, and development services (Note 4)	 	9,072	 	17,533	 	19,359	 	
  General and administrative	 	27,986	 	26,617	 	24,591	 	
  Interest expense (Note 11)	 	121,612	 	95,934	 	84,194	 	
  Depreciation and amortization	 	116,857	 	101,059	 	92,344	 	
							
 	 	$      458,456		$      411,553	 	$      393,931	 	
							
Income (loss) before equity in income of Unconsolidated Joint Ventures,	 		
  gain on disposition of interest in center, discontinued operations,	 		
  and minority and preferred interests	 	$        14,982	 	$        19,900	 	$       (5,448	)	
Equity in income of Unconsolidated Joint Ventures (Note 8)	 	42,450	 	40,070	 	36,740	 	
							
Income before gain on disposition of interest in center, discontinued	 		
  operations, and minority and preferred interests	 	$        57,432	 	$        59,970	 	$        31,292	 	
Gain on disposition of interest in center (Note 2)	 	52,799	 		
Discontinued operations (Note 2):	 		
  Net income from operations	 		 		 	1,303		
  Net gains on dispositions of interests in centers	 		 	328		49,578		
							
Income before minority and preferred interests	 	$      110,231	 	$        60,298	 	$        82,173	 	
Minority share of consolidated joint ventures	 	(167	)	18	 	164	 	
Minority interest in TRG:	 		
  Minority share of income of TRG	 	(40,403	)	(14,913	)	(28,189	)	
  Distributions less than (in excess of) minority share of income	 	4,534	 	(20,781	)	(7,312	)	
TRG Series C, D, and F preferred distributions (Note 16)	 	(2,460	)	(12,244	)	(9,000	)	
							
Net income	 	$        71,735	 	$        12,378	 	$        37,836	 	
Series A , G, and H preferred stock dividends (Note 16)	 	(27,622	)	(17,444	)	(16,600	)	
							
Net income (loss) allocable to common shareowners	 	$        44,113	 	$       (5,066	)	$        21,236	 	

Basic earnings per common share (Note 18):	 		
  Income (loss) from continuing operations	 	$             .87	 	$            (.11	)	$            (.13	)	
							
  Net income (loss)	 	$             .87	 	$            (.10	)	$             .42		
							
Diluted earnings per common share (Note 18):	 		
  Income (loss) from continuing operations	 	$             .87	 	$            (.11	)	$            (.13	)	
							
  Net income (loss)	 	$             .87	 	$            (.10	)	$             .41		
							
Cash dividends declared per common share	 	$          1.160		$          1.095	 	$          1.050		
							
Weighted average number of common shares outstanding	 	50,459,314	 	49,021,843	 	50,387,616	 	
							
See notes to consolidated financial statements.
F-7

TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF SHAREOWNERS’ EQUITY
YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
(in thousands, except share data)

						Accumulated Other	Dividends in		
	Preferred Stock	Common Stock	Additional	Comprehensive	Excess of		
	Shares	Amount	Shares	Amount	Paid-in Capital	Income (Loss)	Net Income	Total	
		
Balance, January 1, 2003	 	 	 	39,767,066	 	$	112	 	 	52,207,756	 	$	522	 	$	690,387	 	$	(17,485	)	$	(299,354	)	$	374,182	 	
 		
Issuance of stock pursuant to Continuing	 	 		
  Offer (Notes 15 and 17)	 	 	 	(508,420	)	 	 	 	 	701,030	 	 	7	 	 	2,264	 	 	 	 	 	 	 	 	2,271	 	
Release of units (Note 16)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	975	 	 	 	 	 	 	 	 	975	 	
Purchases of stock (Note 16)	 	 	 	 	 	 	 	 	 	(2,972,000	)	 	(30	)	 	(52,732	)	 	 	 	 	 	 	 	(52,762	)	
Partnership units issued (Note 16)	 	 	 	190,909	 	 	 	 	 	 	 	 	 		 	53,704	 	 	 	 	 	 	 	 	53,704	 	
Partnership units redeemed (Note 16)	 	 	 	(1,629,817	)	 	(2	)	 	 	 	 	 	 	 	(30,236	)	 	 	 	 	 	 	 	(30,238	)	
Cash dividends declared	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(69,361	)	 	(69,361	)	
 		
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	37,836	 		37,836	 	
Other comprehensive income:	 	 		
   Changes in fair value of available-for-sale	 	 		
     securities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(297	)	 	 	 	 	(297	)	
   Reduction of loss on interest rate instruments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	4,532	 	 	 	 	 	4,532	 	
   Reclassification adjustment for amounts	 	 		
     recognized in net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	657	 	 	 	 	 	657	 	
										
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	42,728	 	
																	
Balance, December 31, 2003	 	 	 	37,819,738	 	$	110	 	 	49,936,786	 	$	499	 	$	664,362	 	$	(12,593	)	$	(330,879	)	$	321,499	 	
		
Issuance of stock pursuant to Continuing	 	 		
  Offer (Notes 15 and 17)	 	 	 	(565,575	)	 	 	 	 	1,256,620	 	 	12	 	 	7,716	 	 	 	 	 	 	 	 	7,728	 	
Issuance of Series G preferred stock, net of issuance costs	 	 	 	4,000,000		 	 	 	 	 	 	 	 	 	 	96,729	 	 	 	 	 	 	 	 	96,729	 	
Release of units (Note 16)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	510	 	 	 	 	 	 	 	 	510	 	
Purchases of stock (Note 16)	 	 	 	 	 	 	 	 	 	(2,447,781	)	 	(24	)	 	(50,154	)	 	 	 	 	 	 	 	(50,178	)	
Partnership units issued (Note 16)	 	 	 	460,774		 	 	 	 	 	 	 	 	 	 	10,318	 	 	 	 	 	 	 	 	10,318	 	
Cash dividends declared	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(71,002	)	 	(71,002	)	
 		
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12,378	 		12,378	 	
Other comprehensive income:	 	 		
   Realized loss on interest rate instruments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(6,054	)	 	 	 	 	(6,054	)	
   Reduction of loss on interest rate instruments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5,999		 	 	 	 	5,999		
   Reclassification adjustment for amounts	 	 		
     recognized in net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,261	 	 	 	 	 	1,261	 	
										
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	13,584	 	
																	
Balance, December 31, 2004	 	 	 	41,714,937	 	$	110	 	 	48,745,625	 	$	487	 	$	729,481	 	$	(11,387	)	$	(389,503	)	$	329,188	 	
		
Issuance of stock pursuant to Continuing	 	 		
  Offer (Notes 15 and 17)	 	 	 	(1,932,134	)	 	(1	)	 	3,120,103	 	 	32	 	 	7	 	 	 	 	 	 	 	 	38	 	
Issuance of Series B preferred stock (Note 16)	 	 	 	836,921		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of Series H preferred stock, net of issuance costs	 	 	 	3,480,000		 	 	 	 	 	 	 	 	 	 	83,842	 	 	 	 	 	 	 	 	83,842	 	
Redemption of Series A preferred stock	 	 	 	(3,480,000	)	 	(35	)	 	 	 	 	 	 	 	(83,850	)	 	 	 	 	 	 	 	(83,885	)	
Release of units (Note 16)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	500	 	 	 	 	 	 	 	 	500	 	
Partnership units issued (Note 16)	 	 	 	555,516		 	 	 	 	 	 	 	 	 	 	6,663	 	 	 	 	 	 	 	 	6,663	 	
Share-based compensation under employee and director benefit plans (Note 15)	 	 	 			 	 	 	 	456	 	 	 	 	 	2,447	 	 	 	 	 	82	 	 	2,529	 	
Dividend equivalents (Note 15)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(165	)	 	(165	)	
Cash dividends declared	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(86,623	)	 	(86,623	)	
 		
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	71,735	 		71,735	 	
Other comprehensive income:	 	 		
   Unrealized gain on interest rate instruments and other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	894		 	 	 	 	894		
   Reclassification adjustment for amounts recognized in net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,442	 	 	 	 	 	1,442	 	
										
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	74,071	 	
																	
Balance, December 31, 2005	 	 	 	41,175,240	 	$	74	 	 	51,866,184	 	$	519	 	$	739,090	 	$	(9,051	)	$	(404,474	)	$	326,158	 	
																	
See notes to consolidated financial statements.
F-8

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

	Year Ended December 31	
		
	2005	2004	2003	
Cash Flows From Operating Activities:	 		 		 		 	
  Net income	 	$   71,735	 	$   12,378	 	$   37,836	 	
  Adjustments to reconcile net income to net cash provided by	 		
    operating activities:	 		
      Minority and preferred interests	 	38,496	 	47,920	 	44,337	 	
      Depreciation and amortization of continuing operations	 	116,857	 	101,059	 	92,344	 	
      Depreciation and amortization of discontinued operations	 	 	 	 	 	3,227	 	
      Provision for losses on accounts receivable	 	2,512	 	4,103	 	5,027	 	
      Gains on sales of land	 	(4,833	)	(6,758	)	(1,906	)	
      Gains on dispositions of interests in centers (Note 2)	 	(52,799	)	(328	)	(49,578	)	
      Settlement of swap agreement	 		 	(6,054	)		
      Other	 	16,744	 	13,421	 	4,774	 	
      Increase (decrease) in cash attributable to changes in assets and	 		
        liabilities:	 		
          Receivables, deferred charges, and other assets	 	(4,349	)	(9,802	)	(14,562	)	
          Accounts payable and other liabilities	 	214	 	(20,404	)	11,953	 	
							
Net Cash Provided by Operating Activities	 	$ 184,577	 	$ 135,535	 	$ 133,452	 	

Cash Flows From Investing Activities:	 		
  Additions to properties	 	$(160,266	)	$(141,323	)	$(116,367	)	
  Dividends received from technology investment	 		 		 	445	 	
  Net proceeds from dispositions of interests in centers (Note 2)	 	76,400	 	 	 	50,961	 	
  Proceeds from sales of land	 	6,082	 	11,539	 	5,705	 	
  Acquisition of interests in centers, net of cash transferred in (Note 2)	 	 	 	(61,774	)	(30,255	)	
  Contributions to Unconsolidated Joint Ventures	 	(30,350	)	(72,257	)	(1,322	)	
  Distributions from Unconsolidated Joint Ventures in excess of income	 	17,073	 	20,180	 	49,136	 	
							
Net Cash Used In Investing Activities	 	$(91,061	)	$(243,635	)	$(41,697	)	

Cash Flows From Financing Activities:	 		
  Debt proceeds	 	$ 830,818	 	$ 819,527	 	$ 398,537	 	
  Debt payments	 	(670,709	)	(571,156	)	(372,789	)	
  Debt issuance costs	 	(2,756	)	(11,902	)	(5,134	)	
  Repurchase of common stock (Note 16)	 	 	 	(50,178	)	(52,762	)	
  Redemption of preferred stock and repurchase of preferred	 		
    equity in TRG	 	(87,000	)	(100,000	)		
  Issuance of units of partnership interest (Note 16)	 	 	 	 	 	49,985	 	
  Issuance of common stock and/or partnership units in connection	 		
    with Incentive Option Plan (Notes 15 and 17)	 	6,701	 	10,372	 	2,271	 	
  Issuance of preferred stock and equity in TRG	 	87,000	 	130,000	 		
  Equity issuance costs	 	(3,158	)	(4,054	)		
  Distributions to minority and preferred interests	 	(38,329	)	(45,213	)	(44,501	)	
  Cash dividends to preferred shareowners	 	(24,507	)	(17,444	)	(16,600	)	
  Cash dividends to common shareowners	 	(57,080	)	(53,174	)	(52,829	)	
							
Net Cash Provided By (Used In) Financing Activities	 	$   40,980	 	$ 106,778	 	$(93,822	)	

Net Increase (Decrease) In Cash and Cash Equivalents	 	$ 134,496	 	$  (1,322	)	$  (2,067	)	
	 		
Cash and Cash Equivalents at Beginning of Year	 	29,081	 	30,403	 	32,470	 	

Cash and Cash Equivalents at End of Year	 	$ 163,577	 	$   29,081	 	$   30,403	 	
							
See notes to consolidated financial statements.
F-9

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Years Ended December 31, 2005
Note 1 — Summary of Significant Accounting Policies
Organization and Basis of Presentation
General
        Taubman Centers, Inc. (the Company or TCO), a real estate investment trust, or REIT, is the managing general partner of The Taubman Realty Group Limited Partnership (the Operating Partnership or TRG). The Operating Partnership is an operating subsidiary that engages in the ownership, management, leasing, acquisition, development, and expansion of regional retail shopping centers and interests therein. The Operating Partnership’s owned portfolio as of December 31, 2005 included 21 urban and suburban shopping centers in ten states. Two new centers are under construction in New Jersey and Michigan.
        In 2005, the Company formed Taubman Asia, which will be the platform for its future expansion into the Asia-Pacific region. Taubman Asia is headquartered in Hong Kong and will seek opportunities in Asia to augment the Company’s existing development and acquisition activities.
Consolidation
        The consolidated financial statements of the Company include all accounts of the Company, TRG, and its consolidated subsidiaries, including The Taubman Company LLC (the Manager). The Company also consolidates the accounts of the owner of the Oyster Bay project (Note 7) and the owner of the land being used for the development of The Mall at Partridge Creek (Note 2), which qualify as variable interest entities under FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (FIN 46R) and in which the Operating Partnership holds the majority variable interests. All intercompany transactions have been eliminated.
        Investments in entities not controlled but over which the Company may exercise significant influence (Unconsolidated Joint Ventures) are accounted for under the equity method. The Company has evaluated its investments in the Unconsolidated Joint Ventures and has concluded that the ventures are not variable interest entities as defined in FIN 46R. Accordingly, the Company continues to account for its interests in these ventures under the guidance in Statement of Position 78-9 (SOP 78-9). The Company’s partners or other owners in these Unconsolidated Joint Ventures have important rights, as contemplated by paragraphs .09 and .10 of SOP 78-9, including approval rights over annual operating budgets, capital spending, financing, admission of new partners/members, or sale of the properties and the Company has concluded that the equity method of accounting is appropriate for these interests. Specifically, the Company’s 79% investment in Westfarms is through a general partnership in which the other general partners have approval rights over annual operating budgets, capital spending, refinancing, or sale of the property. Under the equity method of accounting, the investments in Joint Ventures are initially recorded at cost, and subsequently increased for additional contributions and allocations of income and reduced for distributions received.
        The Company has completed its evaluation of the effect of the recent EITF consensus on Issue No. 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” as well as recent amendments made to SOP 78-9 on the Company’s consolidation policies. This consensus is currently applicable to the Company for new or modified partnerships, and will otherwise be applicable to existing partnerships in 2006. The Company has determined that in the first quarter of 2006 it will change its accounting treatment of the entity that owns the Cherry Creek Shopping Center. The Company currently accounts for the entity under the equity method in accordance with the provisions of SOP 78-9. With the issuance of EITF 04-5 and the amendment of SOP 78-9 and the corresponding changes and considerations surrounding control, the Company will begin to consolidate the Cherry Creek entity (Note 21).
F-10

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
The Operating Partnership
        At December 31, 2005, the Operating Partnership’s equity included four classes of preferred equity (Series A, F, G, and H) and the net equity of the partnership unitholders. Net income and distributions of the Operating Partnership are allocable first to the preferred equity interests, and the remaining amounts to the general and limited partners in the Operating Partnership in accordance with their percentage ownership. The Series A, Series G, and Series H Preferred Equity is owned by the Company and is eliminated in consolidation. The Series F Preferred Equity is owned by an institutional investor. The Company’s Series B Preferred Stock is currently held by partners in TRG other than the Company. The Series B Preferred Stock entitles its holders to one vote per share on all matters submitted to the Company’s shareholders and votes together with the common stock on all matters as a single class.
        Because the net equity of the Operating Partnership unitholders is less than zero, $(208) million as of December 31, 2005, the interest of the noncontrolling unitholders will be presented as a zero balance in the consolidated balance sheet as of December 31, 2005 and December 31, 2004. The income allocated to the noncontrolling unitholders is equal to their share of distributions as long as the net equity of the Operating Partnership is less than zero. The net equity of the Operating Partnership is less than zero because of accumulated distributions in excess of net income and not as a result of operating losses. Distributions to partners are usually greater than net income because net income includes non-cash charges for depreciation and amortization.
Revenue Recognition
        Shopping center space is generally leased to specialty retail tenants under short and intermediate term leases which are accounted for as operating leases. Minimum rents are recognized on the straight-line method. Percentage rent is accrued when lessees’ specified sales targets have been met. Most expense recoveries, which include an administrative fee, are recognized as revenue in the period applicable costs are chargeable to tenants. Management, leasing, and development revenue is recognized as services are rendered, when fees due are determinable, and collectibility is reasonably assured. Fees for management, leasing, and development services are established under contracts and are generally based on negotiated rates, percentages of cash receipts, and/or actual costs incurred. Profits on real estate sales are recognized whenever (1) a sale is consummated, (2) the buyer has demonstrated an adequate commitment to pay for the property, (3) the Company’s receivable is not subject to future subordination, and (4) the Company has transferred to the buyer the risks and rewards of ownership. Other revenues, including fees paid by tenants to terminate their leases, are recognized when fees due are determinable, no further actions or services are required to be performed by the Company, and collectibility is reasonably assured. The Company records a provision for losses on accounts receivable to reduce them to the amount estimated to be collectible.
Depreciation and Amortization
        Buildings, improvements and equipment are depreciated on straight-line or double-declining balance bases over the estimated useful lives of the assets, which generally range from 3 to 50 years. Capital expenditures that are recoverable from tenants are depreciated over the estimated recovery period. This depreciation is included in recoverable expenses. Intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. Tenant allowances and deferred leasing costs are amortized on a straight-line basis over the lives of the related leases. In the event of early termination of such leases, the unrecoverable net book values of the assets are recognized as depreciation and amortization expense in the period of termination.
Capitalization
        Direct and indirect costs that are clearly related to the acquisition, development, construction and improvement of properties are capitalized under guidelines of SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.” Compensation costs are allocated based on actual time spent on a project. Costs incurred on real estate for ground leases, property taxes and insurance are capitalized during periods in which activities necessary to get the property ready for its intended use are in progress. Interest costs determined under guidelines of SFAS No. 34, “Capitalization of Interest Cost” are capitalized during periods in which activities necessary to get the property ready for its intended use are in progress.
F-11

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        All properties, including those under construction or development and/or owned by Unconsolidated Joint Ventures, are reviewed for impairment on an individual basis whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Impairment of a shopping center owned by consolidated entities is recognized when the sum of expected cash flows (undiscounted and without interest charges) is less than the carrying value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint Venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value, including the results of discounted cash flow and other valuation techniques. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income.
        In leasing a shopping center space, the Company may provide funding to the lessee through a tenant allowance. In accounting for a tenant allowance, the Company determines whether the allowance represents funding for the construction of leasehold improvements and evaluates the ownership, for accounting purposes, of such improvements. If the Company is considered the owner of the leasehold improvements for accounting purposes, the Company capitalizes the amount of the tenant allowance and depreciates it over the shorter of the useful life of the leasehold improvements or the lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue. Factors considered during this evaluation usually include (1) who holds legal title to the improvements, (2) evidentiary requirements concerning the spending of the tenant allowance, and (3) other controlling rights provided by the lease agreement (e.g. unilateral control of the tenant space during the build-out process). Determination of the accounting for a tenant allowance is made on a case-by-case basis, considering the facts and circumstances of the individual tenant lease.
Cash and Cash Equivalents
        Cash equivalents consist of highly liquid investments with a maturity of 90 days or less at the date of purchase. At December 31, 2005, besides ordinary working capital funds, the Company’s balance of cash and cash equivalents included escrowed funds from the sale of Woodland in December 2005 used in the first quarter of 2006 to acquire replacement property in connection with Section 1031 exchanges (Notes 2 and 7) and the remaining proceeds received from the December 2005 refinancing of The Mall at Short Hills, used to repay certain loans and anticipated to be used for paydowns of other notes payable in 2006 (Note 11).
Acquisition of Interests in Centers
        The cost of acquiring an ownership interest or an additional ownership interest in a center is allocated to the tangible assets acquired (such as land and building) and to any identifiable intangible assets based on their estimated fair values at the date of acquisition. The fair value of the property is determined on an “as-if-vacant” basis. Management considers various factors in estimating the “as-if-vacant” value including an estimated lease up period, lost rents and carrying costs. The identifiable intangible assets would include the estimated value of “in place” leases, above and below market “in place” leases, and tenant relationships. The portion of the purchase price that management determines should be allocated to identifiable intangible assets is amortized over the estimated life of the associated intangible asset (for instance, the remaining life of the associated tenant lease).
Deferred Charges and Other Assets
        Direct financing costs are deferred and amortized on a straight-line basis, which approximates the effective interest method, over the terms of the related agreements as a component of interest expense. Direct costs related to successful leasing activities are capitalized and amortized on a straight-line basis over the lives of the related leases. All other deferred charges are amortized on a straight-line basis over the terms of the agreements to which they relate.
Share-Based Compensation Plans
        Effective January 1, 2003, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation” prospectively for all employee awards granted, modified, or settled after January 1, 2003. There were no awards granted, modified, or settled in 2004 or 2003. See Note 15 “Share Based Compensation and Other Benefit Plans” for a summary of awards granted, exercised, and forfeited in 2005. See Note 21 “New Accounting Pronouncements” regarding recent revisions to SFAS No. 123.
F-12

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Interest Rate Hedging Agreements
        All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If a derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (OCI) and are recognized in the income statement when the hedged item affects income. Ineffective portions of changes in the fair value of a cash flow hedge are recognized in the Company’s income as interest expense.
        The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items.
Income Taxes
        The Company operates in such a manner as to qualify as a REIT under the provisions of the Internal Revenue Code; therefore, applicable taxable income is included in the taxable income of its shareowners, to the extent distributed by the Company. To qualify as a REIT, the Company must distribute at least 90% of its REIT taxable income prior to net capital gains to its shareowners and meet certain other requirements. Additionally, no provision for income taxes for consolidated partnerships has been made, as such taxes are the responsibility of the individual partners.
        In connection with the Tax Relief Extension Act of 1999, the Company made Taxable REIT Subsidiary elections for all of its corporate subsidiaries pursuant to section 856(I) of the Internal Revenue Code. The Company’s Taxable REIT Subsidiaries are subject to corporate level income taxes which are provided for in the Company’s financial statements.
        Deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence, including expected taxable earnings and potential tax planning strategies. The Company’s temporary differences primarily relate to deferred compensation and depreciation.
Finite Life Entity
        SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. At December 31, 2005, the Company held a controlling majority interest in a consolidated entity with a specified termination date in 2080. The minority owner’s 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 minority interest was approximately $55.5 million at December 31, 2005, compared to a book value of zero.
Use of Estimates
        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F-13

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Fair Value of Financial Instruments
        The following methods and assumptions were used to estimate the fair value of financial instruments:

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

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

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

Segments and Related Disclosures
        The Company has one reportable operating segment: it owns, develops, and manages regional shopping centers. The Company has aggregated its shopping centers into this one reportable segment, as the shopping centers share similar economic characteristics and other similarities. The shopping centers are located in major metropolitan areas, have similar tenants (most of which are national chains), are operated using consistent business strategies, and are expected to exhibit similar long-term financial performance. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is often used by the Company's chief operating decision makers in assessing segment performance. EBITDA is believed to be a useful indicator of operating performance as it is customary in the real estate and shopping center business to evaluate the performance of properties on a basis unaffected by capital structure.
        No single retail company represents 10% or more of the Company’s revenues. Although the Company operates a subsidiary headquartered in Hong Kong, there are not yet any material revenues from customers attributable to a country other than the United States of America.
Other
        During 2005, as part of its tenant billing and expense accrual account reconciliation processes, the Company determined that it had overstated prior years’ revenues and expenses by a net amount of approximately $0.9 million, or $0.02 per common share. The errors were not considered material to the results of operations of any prior period or the current period, and adjustments to these revenues and expenses have been recognized in the Company’s 2005 results.
        During the year ended December 31, 2004, when reconciling general and fixed asset subsidiary ledgers, the Company determined that it had understated prior years’ depreciation expense of its consolidated and unconsolidated shopping centers by a total of $0.7 million, or $0.01 per common share. The error was not considered material to the results of operations of any period prior to or including 2004, and an adjustment in this amount has been recognized in the Company’s 2004 results.
        Dollar amounts presented in tables within the notes to the consolidated financial statements are stated in thousands, except share data or as otherwise noted. Certain reclassifications have been made to 2004 amounts to conform to current year classifications.
F-14

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 2 – Dispositions, New Center Development, and Acquisitions
Dispositions
        In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland for $177.4 million. The Company’s share of proceeds included a $9 million note receivable, with the remainder in cash. The note bears interest at 5.40%, is secured by an irrevocable letter of credit, and is due in the first quarter of 2006. The Company recognized a gain of $52.8 million on the transaction, representing the excess of the fair value over the net book basis of its interest in the center. The Company’s gain on the transaction differed from the $73.4 million gain recognized by the Operating Partnership due to its $20.6 million additional basis in Woodland. The cash proceeds from the sale were used in January 2006 to acquire the land for The Mall at Partridge Creek, as part of a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code and the regulations thereunder (“Section 1031 like-kind exchange”). Additional proceeds were used in February 2006 to purchase the land and real property improvements of the Oyster Bay development, also as part of a Section 1031 like-kind exchange, and to pay down the outstanding balance on the loan on the property (Note 7). In connection with the sale, the Company entered into a tax indemnification agreement with its joint venture partner (Note 17).
        In December 2003, the Company sold its interest in Biltmore Fashion Park to The Macerich Company. The sales price consisted of $51 million in cash and $30.2 million in Macerich partnership units. A gain of approximately $47.6 million was recognized. Immediately following the transaction, the Company transferred the Macerich units to several Operating Partnership unitholders in redemption and retirement of 1,629,817 Operating Partnership units. These unitholders were the original owners of Biltmore Fashion Park.
        The Company has separately presented the results of Biltmore Fashion Park as discontinued operations for the year ended December 31, 2003. Revenues, operating expenses, and income from operations of Biltmore Fashion Park in 2003 were $17.4 million, $16.1 million, and $1.3 million, respectively.
New Center Development
        Groundbreaking occurred in November 2005 on The Mall at Partridge Creek, a wholly owned retail project in Clinton Township, Michigan. The ownership of the land purchased for this project was structured to facilitate a Section 1031 like-kind exchange in order to provide flexibility for disposing of assets in the future. The Company engaged the services of a third party exchange company to acquire the land and hold title for a period of no longer than 180 days. The third party acquired the Company’s option to purchase the land using the proceeds from a loan from the Operating Partnership. Subsequently, the third party acquired the land and entered into a lease of the land to the Operating Partnership. The Company had an option to purchase the land from the third party exchange company during the 180 day exchange period, which was exercised in January 2006 using proceeds from the sale of Woodland. The Company consolidated the entity that owned the land as of December 31, 2005. The loan and other intercompany transactions are eliminated in consolidation.
        Northlake Mall, a wholly-owned regional center, opened on September 15, 2005 in Charlotte, North Carolina.
        In January 2005, the Company entered into an agreement to invest in The Pier at Caesars (The Pier), located in Atlantic City, New Jersey, with Gordon Group Holdings LLC (Gordon), who is developing the center. The Pier is currently under construction, and is expected to open in May 2006. Under the agreement, the Company will have a 30% interest in The Pier. The Company’s capital contribution in The Pier will be made in three steps. The initial investment of $4 million was made at the closing in January 2005. A second payment equal to 70% of the Company’s projected required total investment (less the initial $4 million payment) is expected to be made within six months after the project opens. The third and final payment will be made shortly after the completion of the project’s stabilization year (2007) based on its actual net operating income (NOI) and debt levels. The investment in The Pier is accounted for under the equity method. During construction of the project, Gordon will loan the venture the funding for capital expenditures in excess of the construction loan financing. Interest on the loan will be accruable at the short-term applicable federal rate (AFR) under Section 1274(d) of the Internal Revenue Code and will be repaid before any distributions to the venture partners. The contributions of the Company will be used to repay the principal portion of the loan. Consequently, the Company expects that its share of distributions and income will initially be less than its residual 30% interest.
F-15

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        Stony Point Fashion Park, a wholly-owned regional center, opened September 18, 2003 in Richmond, Virginia.
Acquisitions
        In July 2004, the Company acquired an additional 23.6% interest in International Plaza for $60.2 million in cash, increasing its ownership in the center to 50.1%. As a result of the acquisition, the Company has a controlling interest in the center and began consolidating its results as of the purchase date. Prior to the acquisition date, the Company accounted for International Plaza under the equity method. As of December 31, 2005, the Operating Partnership has a preferred investment in International Plaza of $27 million, on which an annual preferential return of 8.25% will accrue. In addition to the preferred return on its investment, the Operating Partnership is entitled to receive the balance of its preferred investment before any available cash will be utilized for distribution to the non-preferred partner.
        In January 2004, the Company purchased the additional 30% ownership of Beverly Center. Consideration of approximately $11 million for this interest consisted of $3.3 million in cash and 276,724 of newly issued partnership units valued at $27.50 per unit. The price of the acquisition was determined pursuant to a 1988 option agreement. The Company had carried the $11 million net exercise price as a liability on its balance sheet. The Company already recognized 100% of the financial results of the center in its financial statements.
        In December 2003, the Company acquired a 25% interest in Waterside Shops at Pelican Bay in Naples, Florida for $22 million, through a joint venture with The Forbes Company, which is managing the center.
        In July 2003, the Company acquired an additional 25% interest in MacArthur Center, a consolidated joint venture, bringing its ownership in the shopping center to 95%, for $4.9 million in cash and 190,909 partnership units. Although the number of units issued was determined based on a negotiated value of $27.50 per unit, these units were recorded based on the Company’s common share price of $19.48 on the closing date of July 10, 2003.
        In March 2003, the Company acquired the 15% minority interest in Great Lakes Crossing, a consolidated joint venture, for $3.2 million in cash, pursuant to a favorable pricing formula pre-established in the partnership agreement, bringing its ownership in the center to 100%.
Note 3 – Unsolicited Tender Offer
        In the fall of 2002, the Company received an unsolicited tender offer seeking to acquire control of the Company. The Company’s Board of Directors rejected the proposal and recommended that the Company’s shareholders not tender their shares pursuant to the tender offer. In October 2003, the tender offer was withdrawn, and the related litigation ended. During 2004, the Company recovered through its insurance $1.0 million relating to the unsolicited tender offer and related litigation. During 2003, the Company incurred approximately $30.4 million in costs in connection with the unsolicited tender offer and related litigation, offset by insurance recoveries of $5.6 million.
Note 4 – Management, Leasing, and Development Services
        The majority of the Company’s current third party management, leasing, and development revenue is derived from two agreements. The first, a management agreement for a shopping center owned by a third party, is renewable year-to-year, and is cancelable by the owner with 90 days written notice. The second is an agreement for retail leasing and development and design advisory services for a mixed-use urban development project scheduled to open in 2009 in Las Vegas, Nevada. The term of this fixed-fee contract is approximately 25 years, effective June 2005, and is generally cancelable for cause and by the project owner upon payment to the Company of a cancellation fee.
        In October 2004, the Mills Corporation finalized its acquisition of 50% interests in nine of General Motors Pension Trusts’ (GMPT) shopping centers, completing a recapitalization of GMPT’s mall portfolio. The Company ceased management of these centers on November 1, 2004, subject to an agreement with GMPT. The Company recognized a restructuring charge of $5.7 million during the fourth quarter of 2004 relating to the termination of these management contracts. The restructuring charge is classified in the line item Restructuring loss in the income statements. Substantially all of this charge represented employee severance payments and benefits and were paid as of December 31, 2005.
F-16

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 5 — Income Taxes
        During the years ended December 31, 2005, 2004, and 2003, the Company’s federal income tax expense was zero as a result of net operating losses incurred by the Company’s Taxable REIT Subsidiaries, except as follows related to the sale of Woodland. During 2005, the Company recognized deferred federal income tax expense of $0.5 million in connection with the sale of Woodland. The Company has a net operating loss carryforward from its Taxable REIT Subsidiaries of $0.8 million from 2002 that expires in 2022, and an estimated net operating loss carryforward of $3.8 million from 2004 that will expire in 2024. As of December 31, 2005, 2004, and 2003, the Company had net deferred tax assets of $3.2 million, $3.4 million, and $3.4 million, after valuation allowances of $9.6 million, $9.4 million, and $9.9 million, respectively.
        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 2005, 2004, and 2003 may not be indicative of future periods. The portion of dividends paid in 2005 shown below as capital gains and unrecaptured Section 1250 capital gains are designated as capital gain dividends for tax purposes.

Year	Dividends
per commons
share declared	Return of
capital	Ordinary
income	20% Rate
long term
capital gain
(Pre 5/06/03)	15% Rate
long term
capital gain
(Post 5/05/03)	Unrecaptured Section
1250 capital gains	
							
2005	 	$1.160		$0.3179		$0.7282			 	$0.0404		$0.0735		
2004	 	1.095		0.6932		0.3835		 		0.0183		 		
2003	 	1.050		0.5054		0.2567		$0.0076	 	0.1401		0.1402		

Year	Dividends per
Series A preferred
share declared	Ordinary
income	20% Rate
long term
capital gain
(Pre 5/06/03)	15% Rate
long term
capital gain
(Post 5/05/03)	Unrecaptured Section
1250 capital gains	
						
2005	 	$2.075		$1.8712				$0.0723		$0.1315		
2004	 	2.075		2.0403				0.0347				
2003	 	2.075		1.5060		$0.0149		0.2770		0.2771		

Year	Dividends per
Series G preferred
share declared	Ordinary
income	15% Rate
long term
capital gain
(Post 5/05/03)	Unrecaptured Section
1250 capital gains		
						
2005	 	$2.000		$1.8036		$0.0697		$0.1267			
2004	 	0.211		0.2076		0.0035			

Year	Dividends per
Series H preferred
share declared	Ordinary
income	15% Rate
long term
capital gain
(Post 5/05/03)	Unrecaptured Section
1250 capital gains		
						
2005	 	$0.953		$0.8595		$0.0332		$0.0604			
        The Company redeemed 3,480,000 shares of its 8,000,000 outstanding Series A Preferred Shares on July 11, 2005 for $25 per share and paid to all holders of the Series A Preferred Shares $0.0576389 per share in accrued dividends, which are reported separately above as a 2005 dividend payment. Because the redemption of the Series A Preferred Stock was a partial, rather than a full, redemption, the appropriate income tax treatment of the $25 per share redemption payment (whether capital gain or loss from the sale or exchange of stock or ordinary income from a dividend payment) depends on an individual investor’s facts and circumstances.
F-17

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 6 — Investment in the Operating Partnership
        The partnership equity of the Operating Partnership and the Company’s ownership therein are shown below:

Year	TRG Units
outstanding at
December 31	TRG Units
owned by TCO at
December 31 (1)	TCO's % interest
in TRG at
December 31	TCO's
average
interest in TRG	
2005	 	81,074,633	 	51,866,184	 	64	%	62	%	
2004	 	80,514,605	 	48,745,625	 	61		61		
2003	 	81,839,857	 	49,936,786	 	61	 	60	 	

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

        Net income and distributions of the Operating Partnership are allocable first to the preferred equity interests (Note 16), and the remaining amounts to the general and limited Operating Partnership partners in accordance with their percentage ownership.
Note 7 — Properties
        Properties at December 31, 2005 and December 31, 2004 are summarized as follows:

 	 	 	 	2005	 	 	2004	 	
Land	 	 	$	248,582	 	$	229,553	 	
Buildings, improvements, and equipment	 	 	 	2,709,215	 	 	2,550,178	 	
Construction in process	 	 	 	19,855	 	 	85,378	 	
Development pre-construction costs	 	 	 	103,672	 	 	71,855	 	
					
 	 	 	$	3,081,324	 	$	2,936,964	 	
Accumulated depreciation and amortization	 	 	 	(651,665	)	 	(558,891	)	
					
 	 	 	$	2,429,659	 	$	2,378,073	 	
					
        Buildings and improvements under capital leases were $13.0 million and $14.2 million at December 31, 2005 and 2004, respectively.
        Depreciation expense for 2005, 2004, and 2003 was $109.3 million, $93.2 million, and $87.8 million, respectively. In addition, depreciation of assets that are recoverable from tenants was $11.5 million and $9.1 million in 2005 and 2004, respectively. Depreciation of assets that are recoverable from tenants over a period of more than one year was $6.3 million in 2003. Depreciation of assets that are recoverable from tenants is classified as recoverable expenses.
        The charge to operations in 2005, 2004, and 2003 for domestic and non-U.S. pre-development activities was $8.5 million, $4.0 million, and $3.4 million, respectively.
        The Company’s balance of development pre-construction costs as of December 31, 2005 and 2004 consists of costs relating to its Oyster Bay project in the Town of Oyster Bay, New York. The demolition of the site is finished and the Company is working with the community to resolve all issues remaining prior to special use permit approval and the issuance of building permits. The Company expects success with the ongoing negotiations, but if it is ultimately unsuccessful in the negotiation process, it is anticipated that its recovery on this asset would be significantly less than its current investment.
        In May 2004, the Company entered into a series of agreements related to the Oyster Bay project to facilitate a Section 1031 like-kind exchange. A third party acquired the Company’s option to purchase land and reimbursed the Company for its project costs to date. Subsequently, the third party acquired the land and became the owner of the project. The Company is the developer of the project and had an option to purchase the project, which the Company exercised in 2006 using proceeds from the sale of Woodland. The owner provided 3% of project funding ($3.0 million as of December 31, 2005) and leased the property to a wholly owned subsidiary of the Operating Partnership. A senior lender has funded $56.2 million of the project costs and the Company provided the remainder of the project funding under a junior subordinated financing to the owner. The Company guaranteed the lease payments and the completion of the project. The Company consolidated the owner and other entities described above as of December 31, 2005 and the junior loan and other intercompany transactions are eliminated in consolidation. The senior loan was repaid in connection with the exercise of the option in February 2006.
F-18

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        In September 2005, the Company entered into a series of agreements related to The Mall at Partridge Creek, in Clinton Township, Michigan to facilitate a Section 1031 like-kind exchange. A third party exchange company acquired the land using the proceeds from a loan from the Operating Partnership and entered into a lease of the land to the Operating Partnership. The Company had an option to purchase the land from the third party, which the Company exercised in January 2006 using proceeds from the sale of Woodland. The Company consolidated the entity that owned the land as of December 31, 2005. The loan and other intercompany transactions are eliminated in consolidation.
        One shopping center pays annual special assessment levies of a Community Development District (CDD), which provided certain infrastructure assets and improvements. As the amount and period of the special assessments were determinable, the Company capitalized the infrastructure assets and improvements and recognized an obligation for the future special assessments to be levied. At December 31, 2005, the book value of the infrastructure assets and improvements, net of depreciation, was $55.4 million. The related obligation is classified as an accrued liability and had a balance of $65.1 million at December 31, 2005. The fair value of this obligation, based on quoted market prices, was $71.0 million at December 31, 2005.
        FASB Statement No. 143 “Accounting for Asset Retirement Obligations” requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of the fair value can be made. During 2005, Interpretation No. 47 was issued, clarifying the required accounting and measurement process for an asset retirement obligation for which settlement is subject to uncertainties that may or may not be within the control of an entity (a “conditional” asset retirement obligation). In connection with the issuance of this Interpretation, the Company re-evaluated its properties for potential asset retirement obligations and its related accounting. Based on this review, the Company identified immaterial conditional asset retirement obligations related to disposal of asbestos-containing materials (ACMs) found at certain of the Company’s older centers. The adoption of Interpretation No. 47 during 2005 did not have a material effect on the financial position or results of operations as of or for the year ended December 31, 2005.
Note 8 — Investments in Unconsolidated Joint Ventures
        The Company has investments in joint ventures that own shopping centers. The Operating Partnership is the managing general partner or managing member of these Unconsolidated Joint Ventures, except for the ventures that own Arizona Mills, The Mall at Millenia, and Waterside Shops at Pelican Bay.

Shopping Center	Ownership as of
December 31, 2005 and 2004	
Arizona Mills	50%	
Cherry Creek Shopping Center (Note 21)	50    	
Fair Oaks	50    	
The Mall at Millenia	50    	
The Pier at Caesars (under construction)	(Note 2)   	
Stamford Town Center	50    	
Sunvalley	50    	
Waterside Shops at Pelican Bay	25    	
Westfarms	79    	
        The Company’s carrying value of its Investment in Unconsolidated Joint Ventures differs from its share of the partnership equity reported in the combined balance sheet of the Unconsolidated Joint Ventures due to (i) the Company’s cost of its investment in excess of the historical net book values of the Unconsolidated Joint Ventures and (ii) the Operating Partnership’s adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the Unconsolidated Joint Ventures. The Company’s additional basis allocated to depreciable assets is recognized on a straight-line basis over 40 years. The Operating Partnership’s differences in bases are amortized over the useful lives of the related assets.
        In its consolidated balance sheet, the Company separately reports its investment in joint ventures for which accumulated distributions have exceeded investments in and net income of the joint ventures. The net equity of certain joint ventures is less than zero because distributions are usually greater than net income, as net income includes non-cash charges for depreciation and amortization.
F-19

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        Combined balance sheet and results of operations information is presented in the following table for the Unconsolidated Joint Ventures, followed by the Operating Partnership’s beneficial interest in the combined information. The combined information of the Unconsolidated Joint Ventures as of December 31, 2005 excludes the balances of The Pier at Caesars, currently under construction (Note 2). Beneficial interest is calculated based on the Operating Partnership’s ownership interest in each of the Unconsolidated Joint Ventures. The accounts of Woodland, formerly a 50% Unconsolidated Joint Venture sold in 2005, are included in these results through the date of the sale. The Company’s equity in the gain on the sale of Woodland is separately presented on the Company’s income statement, and is therefore excluded from the equity in income of Unconsolidated Joint Ventures line item (Note 2). The accounts of International Plaza, formerly an Unconsolidated Joint Venture, are included in these results through the date of its acquisition (Note 2). The Company will begin consolidating the entity that owns Cherry Creek Shopping Center in 2006 (Note 21).

	December 31	
		
	2005	2004	
Assets:	 		 		 	
  Properties	 	$ 1,076,743	 	$ 1,080,482	 	
  Accumulated depreciation and amortization	 	(363,394	)	(360,830	)	
					
 	 	$    713,349	 	$    719,652	 	
  Cash and cash equivalents	 	33,498	 	25,173	 	
  Accounts and notes receivable, less allowance for doubtful	 		
    accounts of $1,822 and $2,809 in 2005 and 2004	 	23,189	 	22,866	 	
  Deferred charges and other assets	 	24,458	 	26,213	 	
					
 	 	$    794,494	 	$    793,904	 	

Liabilities and accumulated deficiency in assets:	 		
  Notes payable	 	$    999,545	 	$ 1,008,604	 	
  Accounts payable and other liabilities	 	59,322	 	53,706	 	
  TRG's accumulated deficiency in assets	 	(172,554	)	(176,396	)	
  Unconsolidated Joint Venture Partners' accumulated deficiency	 		
    in assets	 	(91,819	)	(92,010	)	
					
 	 	$    794,494	 	$    793,904	 	

TRG's accumulated deficiency in assets (above)	 	$  (172,554	)	$  (176,396	)	
TRG's investment in The Pier at Caesars	 	4,663	 		
TRG basis adjustments, including elimination of intercompany profit	 	80,424	 	83,796	 	
TCO's additional basis	 	92,556	 	116,167	 	
					
Net Investment in Unconsolidated Joint Ventures	 	$        5,089	 	$      23,567	 	
					
Distributions in excess of investments in and net income of	 		
  Unconsolidated Joint Ventures	 	101,028	 	106,367	 	
					
Investment in Unconsolidated Joint Ventures	 	$    106,117	 	$    129,934	 	

	Year Ended December 31	
		
	2005	2004	2003	
Revenues	 	$ 297,345	 	$ 312,694	 	$ 319,988	 	
							
Recoverable and other operating expense	 	$ 105,850	 	$ 113,958	 	$ 117,279	 	
Interest expense	 	67,590	 	74,033	 	82,744	 	
Depreciation and amortization	 	43,151	 	47,801	 	53,414	 	
							
Total operating costs	 	$ 216,591	 	$ 235,792	 	$ 253,437	 	
							
Gain on disposition of interest in center	 	$ 145,881	 		
					
Net income	 	$ 226,635	 	$   76,902	 	$   66,551	 	

Net income allocable to TRG	 	$ 114,680	 	$   39,147	 	$   35,588	 	
Realized intercompany profit and TRG's additional basis	 	4,370	 	3,963	 	4,191	 	
TCO's additional basis in Woodland	 	(20,764	)		
Depreciation of TCO's additional basis	 	(3,037	)	(3,040	)	(3,039	)	
							
Equity in income of Unconsolidated Joint Ventures	 	$   95,249	 	$   40,070	 	$   36,740	 	
							
TRG's share of gain on disposition of interest in center	 	(52,799	)		
					
Equity in income of Unconsolidated Joint Venture excluding	 		
  gain on disposition of interest in center	 	$   42,450	 		

Beneficial interest in Unconsolidated Joint Ventures' operations:	 		
  Revenues less recoverable and other operating expenses	 	$ 113,453	 	$ 112,643	 	$ 113,706	 	
  Interest expense	 	(37,594	)	(39,913	)	(43,320	)	
  Depreciation and amortization	 	(33,409	)	(32,660	)	(33,646	)	
							
  Equity in income of Unconsolidated Joint Ventures	 	$   42,450	 	$   40,070	 	$   36,740	 	
							
F-20

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        The provision for losses on accounts receivable of the Unconsolidated Joint Ventures was $0.2 million, $1.4 million, and $4.0 million for the years ended December 31, 2005, 2004, and 2003, respectively.
        Deferred charges and other assets of $24.5 million at December 31, 2005 were comprised of leasing costs of $34.2 million, before accumulated amortization of $(14.9) million, net deferred financing costs of $3.3 million, and other net charges of $1.8 million. Deferred charges and other assets of $26.2 million at December 31, 2004 were comprised of leasing costs of $35.3 million, before accumulated amortization of $(14.9) million, net deferred financing costs of $4.5 million, and other net charges of $1.3 million.
        The estimated fair value of the Unconsolidated Joint Ventures’ notes payable was $1.0 billion at both December 31, 2005 and 2004.
        Depreciation expense on properties for 2005, 2004 and 2003 was $38.6 million, $43.5 million and $48.4 million. In addition, depreciation of costs that are recoverable from tenants was $8.8 million and $9.6 million in 2005 and 2004, respectively. Depreciation of costs that are recoverable from tenants over a period of more than one year was $5.6 million in 2003. Depreciation of costs that are recoverable from tenants is classified as recoverable expenses and included in total operating costs in the table above.
        Certain entities related to TRG or its joint venture partners provided management, leasing and development services to Arizona Mills, L.L.C., Forbes Taubman Orlando L.L.C., and Waterside Shops L.L.C. Charges from these entities were $7.2 million, $5.3 million, and $5.5 million in 2005, 2004, and 2003, respectively.
Note 9 — Accounts and Notes Receivable
        Accounts and notes receivable at December 31, 2005 and December 31, 2004 are summarized as follows:

	2005	2004	
Trade	 	$ 21,052	 	$ 21,970	 	
Notes	 	15,244	 	10,080	 	
Straight-line rent asset	 	10,159	 	7,840	 	
Other	 	759	 	895	 	
					
 	 	$ 47,214	 	$ 40,785	 	
Less: allowance for doubtful accounts	 	(5,497	)	(8,661	)	
					
 	 	$ 41,717	 	$ 32,124	 	
					
        Notes receivable as of December 31, 2005 provide interest at a range of interest rates from 5.4% to 8% (with a weighted average interest rate of 6.4% at December 31, 2005) and mature at various dates from March 2006 to June 2009.
Note 10 — Deferred Charges and Other Assets
        Deferred charges and other assets at December 31, 2005 and December 31, 2004 are summarized as follows:

	2005	2004	
Leasing costs	 	$ 30,951	 	$ 30,570	 	
Accumulated amortization	 	(13,992	)	(13,318	)	
					
 	 	$ 16,959	 	$ 17,252	 	
Deferred financing costs, net	 	10,191	 	17,184	 	
Intangibles, net	 	8,457	 	10,829	 	
Investments	 	3,704	 	3,524	 	
Deferred tax asset, net	 	3,151	 	3,365	 	
Other, net	 	11,648	 	9,432	 	
					
 	 	$ 54,110	 	$ 61,586	 	
					
        Intangible assets are primarily comprised of the fair value of in-place leases recognized in connection with acquisitions (Note 2).
F-21

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 11 – Notes Payable
        Notes payable at December 31, 2005 and December 31, 2004 consist of the following:

	2005	2004	Stated
Interest Rate	Maturity
Date	Balance Due
on Maturity	Facility
Amount	
														
Beverly Center	 	$   347,500	 	$   347,500	 	5.28%	 	02/11/14	 	$   303,277	 		
Dolphin Mall	 	141,311	 	143,495		LIBOR+2.15%	 	02/09/07	 	138,779	 		
Great Lakes Crossing	 	145,239	 	147,450	 	5.25%	 	03/11/13	 	125,507	 		
International Plaza	 	182,135	 	185,400	 	4.21%	 	01/08/08	 	175,150	 		
MacArthur Center	 	140,895	 	143,283	 	7.59%	 	10/01/10	 	126,884	 		
Northlake Mall (1)	 		 	29,429	 	LIBOR+1.75%	 		 		 		 	
The Mall at Oyster Bay	 	56,241	 	42,598	 	LIBOR+2.00%	 	03/01/06	(2)	56,241	 	$    62,000    	 	
Regency Square	 	78,792	 	79,784	 	6.75%	 	11/01/11	 	71,569	 		
The Mall at Short Hills	 	540,000	 		 	5.47%	 	12/14/15	 	540,000	 		
The Mall at Short Hills	 		 	261,800	 	6.70%	 		 		 		
Stony Point Fashion Park	 	113,228	 	114,508	 	6.24%	 	06/01/14	 	98,585	 		
The Mall at Wellington Green	 	200,000	 	 	 	5.44%	 	05/06/15	 	200,000	 		
The Mall at Wellington Green	 	 	 	140,000	 	LIBOR+1.50%	 	 	 	 	 		
The Shops at Willow Bend	 	96,405	 	97,983	 	LIBOR+1.50%	 	07/09/06	(3)	95,564	 	 	 	
The Shops at Willow Bend	 	48,202	 	48,992	 	LIBOR+3.75%	 	07/09/06	(3)	47,782	 	 	 	
Line of Credit	 	 	 	125,000	 	LIBOR+0.80%	 	02/14/08	 	 	 	350,000    	 	
Line of Credit	 		 	23,217	 	Variable Bank Rate	 	02/14/08	 	 	 	40,000    	 	
						
 		$2,089,948		$1,930,439			

(1)	In early 2006, the Company entered into a $215.5 million 5.41% fixed rate, 10-year interest-only financing of Northlake Mall, which closed in February 2006.	
(2)	Loan was paid off in February 2006 (Note 7).	
(3)	Loan was repaid in February 2006 with the remaining proceeds from the December 2005 refinancing of The Mall at Short Hills.	

        In December 2005, the Company closed on a $540 million fixed-rate non-recourse refinancing of The Mall at Short Hills. Proceeds were used to pay down the existing 6.7%, $260 million loan on the center, the Northlake Mall construction loan, and the Company’s revolver. Interest expense for the year ended December 31, 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to this refinancing and the pay-off of the Northlake Mall loan, and debt modifications in connection with the pay-off of the Oyster Bay loan.
        Notes payable are collateralized by properties with a net book value of $2.2 billion at December 31, 2005 and $2.3 billion at December 31, 2004.
        The Dolphin Mall loan has an option to extend the maturity for up to two years. The $350 million line of credit has a one-year extension option.
        The following table presents scheduled principal payments on mortgage debt as of December 31, 2005:

2006	 	$   215,560	 	
2007	 	157,556	 	
2008	 	188,426	 	
2009	 	14,188	 	
2010	 	141,047	 	
Thereafter	 	1,373,171	 	
Fair Value of Financial Instruments Related to Debt
        The estimated fair values of financial instruments at December 31, 2005 and December 31, 2004 are as follows:

	2005	2004	
			
	Carrying Value	Fair Value	Carrying Value	Fair Value	
Mortgage notes payable	 	$2,089,948	 	$2,092,034	 	$1,930,439	 	$1,960,863	 	
Interest rate instruments:	 		
  in a receivable position	 	71	 	71	 	61	 	61	 	
  in a payable position	 	-	 	-	 	879	 	879	 	
F-22

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Debt Covenants and Guarantees
        Certain loan agreements contain various restrictive covenants, including minimum net worth requirements, minimum debt service coverage ratios, a maximum payout ratio on distributions, a maximum leverage ratio, a minimum debt yield ratio, and a minimum fixed charges coverage ratio, the latter two being the most restrictive. The Operating Partnership is in compliance with all of its covenants.
        Payments of principal and interest on the loans in the following table are guaranteed by the Operating Partnership as of December 31, 2005.

Center	Loan balance
as of 12/31/05	TRG's
beneficial
interest in
loan balance
as of 12/31/05	Amount of
loan balance
guaranteed
by TRG
as of 12/31/05	% of loan
balance
guaranteed
by TRG	% of interest
guaranteed
by TRG	
						
	(in millions)			
Dolphin Mall	$141.3	$141.3	$141.3	100%	100%	
The Mall at Millenia	1.0	0.5	0.5	50    	50    	
The Shops at Willow Bend (1)	144.6	144.6	144.6	100    	100    	

(1)	The Shops at Willow Bend loans were paid off in February 2006.	

        Payments of rent and all other sums payable related to the Oyster Bay agreements are guaranteed by the Operating Partnership. As of December 31, 2005, the balances of the senior loan and owner equity contribution (Note 7) were $56.2 million and $3.0 million, respectively, and were repaid when the option was exercised in February 2006.
        The Company is required to escrow cash balances for specific uses stipulated by its lenders, including ground lease payments, taxes, insurance, debt service, capital improvements, leasing costs, and tenant allowances. As of December 31, 2005 and December 31, 2004, the Company’s cash balances restricted for these uses were $8.5 million and $9.7 million, respectively.
Beneficial Interest in Debt and Interest Expense
        The Operating Partnership’s beneficial interest in the debt, capital lease obligations, capitalized interest, and interest expense of its consolidated subsidiaries and its Unconsolidated Joint Ventures is summarized in the following table. The Operating Partnership’s beneficial interest excludes debt and interest related to the minority interests in International Plaza (49.9% as of July 2004, Note 2), MacArthur Center (5%) and The Mall at Wellington Green (10%).

	At 100%	At Beneficial Interest	
			
	Consolidated
Subsidiaries	Unconsolidated
Joint
Ventures	Consolidated
Subsidiaries	Unconsolidated
Joint
Ventures	
					
Debt as of:	 		 		 		 		 	
   December 31, 2005	 	$2,089,948	 	$   999,545	 	$1,972,046	 	$558,443	 	
   December 31, 2004	 	1,930,439	 	1,008,604	 	1,816,751	 	563,490	 	
	 		
Capital Lease Obligations:	 		
   December 31, 2005	 	$     13,014	 	$       1,966	 	$     12,510	 	$       983	 	
   December 31, 2004	 	14,167	 	2,145	 	13,381	 	1,228	 	
	 		
Capitalized Interest:	 		
   Year ended December 31, 2005	 	$       9,940	 	$              3	 	$       9,940	 	$           1	 	
   Year ended December 31, 2004	 	5,995	 	 	 	5,995	 		
	 		
Interest Expense:	 		
   Year ended December 31, 2005	 	$   121,612	 	$     67,590	 	$   116,082	 	$  37,594	 	
   Year ended December 31, 2004	 	95,934	 	74,033	 	92,874	 	39,913	 	
F-23

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 12 — Derivatives
        The Company uses derivative instruments primarily to manage exposure to interest rate risks inherent in variable rate debt and refinancings. The Company routinely uses cap, swap, and treasury lock agreements to meet these objectives. None of the Company’s derivatives are designated as fair value hedges. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements of SFAS 133.
        The following table presents the effect that derivative instruments had on interest expense and equity in income of Unconsolidated Joint Ventures during the three years ended December 31, 2005:

	2005	2004	2003	
Payments under swap agreements	 	$   883	 	$5,462	 	$8,434	 	
Adjustment of accumulated other comprehensive income for amounts	 		
  recognized in net income	 	1,442	 	1,262	 	657	 	
Hedge ineffectiveness related to changes in time value of interest	 		
  rate agreements	 	 	 	 	 	2	 	
Change in fair value of cap agreements not designated as hedges	 	5	 		
							
Net reduction to income	 	$2,330	 	$6,724	 	$9,093	 	
							
        As of December 31, 2005, the Company had $8.9 million of net realized losses included in Accumulated OCI, related to terminated derivative instruments, that are being recognized as interest expense over the term of the hedged debt, as follows:

Hedged Items	OCI Amounts	Recognition Period	
Beverly Center refinancing	 	$4,843	 	January 2004 through December 2013	 	
Regency Square financing	 	1,636	 	November 2001 through October 2011	 	
Westfarms refinancing	 	2,441	 	July 2002 through July 2012	 	
				
 	 	$8,920			 	
				
        Additionally, as of December 31, 2005, the Company had $0.1 million of net unrealized losses included in Accumulated OCI that will be recognized as interest expense over the effective periods of the derivative agreements, as follows:

Hedged Items	OCI Amounts	Recognition Period	
Dolphin Mall financing	 	$    6	 	February 2004 through January 2006	 	
The Shops at Willow Bend financing	 	136	 	June 2003 through February 2006	 	
				
 	 	$142			 	
				
        The Company expects that approximately $1.4 million of the $9.1 million in Accumulated OCI at December 31, 2005 will be reclassified from Accumulated OCI and recognized as a reduction of income during 2006. In addition, the Company expects that approximately $0.1 million will be recognized as interest expense in 2006 for changes in fair value of derivatives not accounted for as hedges.
        In January 2004, the Beverly Center loan was refinanced. At the time of the refinancing, the swaps hedging the Beverly refinancing were cash settled for $6.1 million. This realized loss is included in Accumulated OCI and is being recognized as interest expense over the ten-year term of the hedged debt.
Note 13 — Leases
        Shopping center space is leased to tenants and certain anchors pursuant to lease agreements. Tenant leases typically provide for minimum rent, percentage rent, and other charges to cover certain operating costs. Future minimum rent under operating leases in effect at December 31, 2005 for operating centers, assuming no new or renegotiated leases or option extensions on anchor agreements, is summarized as follows:

2006	 	$259,566	 	
2007	 	252,743	 	
2008	 	234,467	 	
2009	 	212,457	 	
2010	 	195,253	 	
Thereafter	 	663,961	 	
F-24

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        Certain shopping centers, as lessees, have ground leases expiring at various dates through the year 2080. Ground rent expense is recognized on a straight-line basis over the lease terms. The Company also leases its office facilities and certain equipment. Rental expense on a straight-line basis under operating leases was $6.6 million in 2005, $7.7 million in 2004, and $6.9 million in 2003. Included in these amounts are related party office rental expense of $2.3 million in 2005, $2.4 million in 2004, and $2.8 million in 2003. Additional contingent rental payments based on leasable area were $0.5 million in 2005.
        The following is a schedule of future minimum rental payments required under operating leases:

2006	 	$    6,565	 	
2007	 	6,592	 	
2008	 	6,450	 	
2009	 	6,334	 	
2010	 	6,333	 	
Thereafter	 	129,151	 	
        The table above includes $2.2 million in 2006, $2.4 million in each year from 2007 through 2009, $2.5 million in 2010, and $2.6 million in each year from 2011 through 2014 of related party amounts.
        Certain shopping centers have entered into lease agreements for property improvements with initial five year terms which qualify as capital leases. As of December 31, 2005, future minimum lease payments for these capital leases are as follows:

2006	 	$   5,765	 	
2007	 	4,153	 	
2008	 	3,016	 	
2009	 	1,463	 	
			
Total minimum lease payments	 	$ 14,397	 	
Less amount representing interest	 	(1,383	)	
			
Capital lease obligations	 	$ 13,014	 	
			
Note 14 — Transactions with Affiliates
        The Taubman Company LLC (the Manager), which is 99% beneficially owned by the Operating Partnership, provides property management, leasing, development, and other administrative services to the Company, the shopping centers, Taubman affiliates, and other third parties. Accounts receivable from related parties include amounts due from Unconsolidated Joint Ventures or other affiliates of the Company, primarily relating to services performed by the Manager. These receivables include certain amounts due to the Manager related to reimbursement of third-party (non-affiliated) costs.
        During 1997, the Operating Partnership acquired an option from a related party to purchase certain real estate on which the Operating Partnership was exploring the possibility of developing a shopping center. Through December 31, 2000, the Operating Partnership had made payments of $450,000. In 2000, the Operating Partnership decided not to go forward with the project and reached an agreement with the optionor to be reimbursed, at the time of the sale or lease of the real estate, for an amount equal to the lesser of 50% of the project costs to date or $350,000. The Operating Partnership received $140,000 in reimbursements during 2005, of an expected total reimbursement of $350,000. The Company received an additional $202,000 in early 2006.
        A. Alfred Taubman and certain of his affiliates receive various property management services from the Manager. For such services, Mr. A. Taubman and affiliates paid the Manager approximately $1.6 million, $1.7 million, and $1.9 million in 2005, 2004, and 2003, respectively.
        Other related party transactions are described in Notes 13, 15, 16, and 17.
F-25

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 15 – Share-Based Compensation and Other Employee Plans
        The Company provides certain share-based compensation through an incentive option plan, a long-term incentive plan, and non-employee directors’ stock grant and deferred compensation plans. All of the plans were designed to provide additional incentive for the achievement of financial goals and offer additional alignment of the interests of management and/or the directors with those of shareholders. Additionally, the non-employee directors’ plans are intended to provide incentives for directors to continue to serve on the board and to attract new directors with outstanding qualifications.
        The compensation cost charged to income for the above-mentioned share-based compensation plans was $2.4 million for the year ended December 31, 2005. Compensation cost capitalized as part of properties and deferred leasing costs for the year ended December 31, 2005 was $0.4 million. There was no compensation cost charged to income or capitalized in 2004 or 2003 for the above mentioned plans as all outstanding options were fully vested.
Incentive Options
        The Company’s incentive option plan (the Option Plan), which is shareholder approved, permits the grant of options to employees. The Operating Partnership’s units issued in connection with the Option Plan are exchangeable for shares of the Company’s common stock under the Continuing Offer (Note 17). Options for 0.9 million have been granted and are outstanding at December 31, 2005. Of the 0.9 million options outstanding, 0.6 million have vesting schedules with a third vesting at each of the third, fifth, and seventh years of the grant anniversary, if continuous service has been provided and certain conditions dependent on the Company’s market performance in comparison to its competitors have been met. Substantially all of the other 0.3 million options outstanding have vesting schedules with a third vesting at each of the first, second, and third years of the grant anniversary, if continuous service has been provided. The options have ten-year contractual terms. As of December 31, 2005, options for 1.4 million Operating Partnership units remain available for grant under the Option Plan.
        The Company has estimated the value of the options issued in 2005 using a Black-Scholes valuation model based on the following assumptions: expected volatility of 21.0%, expected dividend of 4.0%, expected term of 7.0 years, and risk-free rates of 3.83% to 4.15%. Expected volatility and dividend yields are based on historical volatility and yields of the Company’s stock, respectively, as well as other factors. In developing the assumption of expected term, the Company has considered the vesting and contractual terms as well as the expected terms of options disclosed by members of its peer group. The risk-free rates used are based on the U.S. Treasury yield curves in effect at the times of grants. For the options for which vesting is dependent on the Company’s market performance in comparison to its competitors, the Company used a Monte Carlo simulation to estimate the probability of the vesting conditions being met. The weighted-average grant-date fair value of all options granted, including those dependent on market performance, during the year ended December 31, 2005 was $3.80 per option.
        A summary of option activity under the Option Plan for 2005, 2004, and 2003 is presented below:

	Number
of Options	Weighted Average
Exercise Price	Weighted Average
Remaining
Contractual Terms
(in years)	Range of
Exercise
Prices	
					
Outstanding at January 1, 2003	 	1,597,783	 	$     12.11		4.9		$9.69 - $13.89	 	
    Exercised	 	(192,574	)	11.81			

Outstanding at December 31, 2003	 	1,405,209	 	12.15		4.0		$9.69 - $13.14	 	
    Exercised	 	(845,767	)	12.26			

Outstanding at December 31, 2004	 	559,442	 	11.98		3.7		$9.69 - $12.25	 	
    Granted	 	902,139	 	30.09		9.2			
    Exercised	 	(559,442	)	11.98			
    Forfeited	 	(50,000	)	29.38			

Outstanding at December 31, 2005	 	852,139	 	$     30.13		9.2		$29.38 - $31.31	 	

Fully vested options at December 31, 2005	 	9,582	 	$     31.31		9.3			
								
F-26

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        The aggregate intrinsic value (the difference between the period end stock price and the option strike price) of options outstanding as of December 31, 2005 was $3.9 million. The total intrinsic value of options exercised during the years ended December 31, 2005 and 2004 was $9.5 million and $10.8 million, respectively.
        Cash received from option exercises under the Option Plan for the years ended December 31, 2005 and 2004 was $6.7 million and $10.4 million, respectively.
        As of December 31, 2005 there were 0.8 million nonvested options outstanding, and $2.2 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.5 years.
        Under the Option Plan, vested unit options can be exercised by tendering mature units with a market value equal to the exercise price of the unit options. In 2002, Robert S. Taubman, the Company’s chief executive officer, exercised options for 3.0 million units by tendering 2.1 million mature units and deferring receipt of 0.9 million units under the unit option deferral election. As the Company declares distributions, the deferred option units receive their proportionate share of the distributions in the form of cash payments. These deferred option units will remain in a deferred compensation account until Mr. Taubman’s retirement or ten years from the date of exercise. Beginning with the ten year anniversary of the date of exercise, the deferred partnership units will be paid in ten annual installments.
Long-Term Incentive Plan
        In May 2005, the Company’s shareholders approved the adoption of The Taubman Company 2005 Long-Term Incentive Plan (LTIP). The LTIP allows the Company to make grants of restricted stock units (RSU) to employees. An aggregate of 1.4 million shares of the Company’s common stock remain available for issuance under the LTIP. There were RSU for 0.1 million shares outstanding at December 31, 2005. Each RSU will represent the right to receive upon vesting one share of the Company’s common stock plus a cash payment equal to the aggregate cash dividends that would have been paid on such share of common stock from the date of grant of the award to the vesting date.

	Restricted Stock Units	Weighted-Average
Grant Date Fair Value	
			
Outstanding at January 1, 2005	 		 		 	
  Granted	 	140,440	 	$     31.31		
  Forfeited	 	(1,536	)	31.31		
					
Outstanding at December 31, 2005	 	138,904	 	$     31.31		
					
        These RSU vest on the third year anniversary of the grant if continuous service has been provided for that period, or upon retirement if earlier. Based on an analysis of historical employee turnover, the Company has made an annual forfeiture assumption of 2.4% of grants when recognizing compensation costs relating to the RSU.
        Of the RSU outstanding at December 31, 2005, 137,172 were nonvested. As of December 31, 2005, there was $2.9 million of total unrecognized compensation cost related to nonvested RSU outstanding under the LTIP. This cost is expected to be recognized over an average period of 2.2 years.
Non-Employee Directors’ Stock Grant and Deferred Compensation Plans
        In May 2005, the Company’s shareholders approved the adoption of the Taubman Centers, Inc. Non-Employee Directors’ Stock Grant Plan (SGP). The SGP provides for the annual grant to each non-employee director of the Company shares of the Company’s common stock having a fair market value of $15,000 and determined quarterly based on the fair value of the Company’s stock. The Company has authorized 50,000 shares of the Company’s common stock for issuance under the SGP. Approximately 450 shares have been granted under the SGP as of December 31, 2005.
F-27

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        Also in May, the Board of Directors of the Company approved the adoption of the Taubman Centers, Inc. Non-Employee Directors’ Deferred Compensation Plan (DCP). The DCP allows each non-employee director of the Company the right to defer the receipt of all or a portion of his or her annual director retainer until the termination of his or her service on the Company’s Board of Directors and for such deferred compensation to be denominated in restricted stock units, representing the right to receive shares of the Company’s common stock at the end of the deferral period. The Company has authorized 175,000 shares of common stock for issuance under the DCP. During the deferral period, when the Company pays cash dividends on its common stock, the directors’ deferral accounts will be credited with dividend equivalents on their deferred restricted stock units, payable in additional restricted stock units based on the then-fair market value of the Company’s common stock. There were 2,506 restricted stock units under the DCP outstanding at December 31, 2005.
Other Employee Plans
        As of December 31, 2005 and 2004 the Company had fully vested awards outstanding for 89,938 and 287,825 notional shares of stock, respectively, under a previous long-term performance compensation plan. These awards will be settled in cash based on a twenty day average of the market value of the Company’s common stock. The cash payment on cumulative units remaining has been deferred by employees until retirement or termination. The liability for the eventual payout of these awards is marked to market quarterly based on the twenty day average of the Company’s stock price. During the year ended December 31, 2005 and 2004, compensation cost of $0.6 million and $2.9 million was recognized relating to these awards, respectively, most of which was expensed.
        The Company has a voluntary retirement savings plan established in 1983 and amended and restated effective January 1, 2001 (the Plan). The Plan is qualified in accordance with Section 401(k) of the Internal Revenue Code (the Code). The Company contributes an amount equal to 2% of the qualified wages of all qualified employees and matches employee contributions in excess of 2% up to 7% of qualified wages. In addition, the Company may make discretionary contributions within the limits prescribed by the Plan and imposed in the Code. Costs relating to the Plan were $1.6 million in 2005, $1.9 million in 2004, and $2.0 million in 2003.
Note 16 — Common and Preferred Stock and Equity of TRG
        The 8.3% Series A Cumulative Redeemable Preferred Stock (Series A Preferred Stock) and 8.0% Series G Cumulative Redeemable Preferred Stock (Series G Preferred Stock) have no stated maturity, sinking fund, or mandatory redemption requirements and are not convertible into any other securities of the Company. The Series A Preferred Stock and Series G Preferred Stock have liquidation preferences of $113 million ($25 per share) and $100 million ($25 per share), respectively. Dividends are cumulative and are payable in arrears on or before the last day of each calendar quarter. All accrued dividends have been paid. The Series A Preferred Stock can be redeemed by the Company at $25 per share plus any accrued dividends. The Series G Preferred Stock will be redeemable by the Company at $25 per share, plus accrued dividends, beginning in November 2009. The redemption price of the Series A Preferred Stock can be paid solely out of the sale of capital stock of the Company. The Company owns corresponding Series A and Series G Preferred Equity interests in the Operating Partnership that entitle the Company to income and distributions (in the form of guaranteed payments) in amounts equal to the dividends payable on the Company’s Series A and Series G Preferred Stock.
        The Company is obligated to issue to the minority interest, upon subscription, one share of Series B Non-Participating Convertible Preferred Stock (Series B Preferred Stock) for each of the Operating Partnership units held by the minority interest. Each share of Series B Preferred Stock entitles the holder to one vote on all matters submitted to the Company’s shareholders. The holders of Series B Preferred Stock, voting as a class, have the right to designate up to four nominees for election as directors of the Company. On all other matters, including the election of directors, the holders of Series B Preferred Stock will vote with the holders of common stock. The holders of Series B Preferred Stock are not entitled to dividends or earnings of the Company. Under certain circumstances, the Series B Preferred Stock is convertible into common stock at a ratio of 14,000 shares of Series B Preferred Stock for one share of common stock. During the years ended December 31, 2005, 2004, and 2003, 1.9 million, 0.6 million, and 0.5 million shares of Series B Preferred Stock were converted to the Company’s shares as a result of tenders of units under the Continuing Offer.
F-28

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        The Operating Partnership’s $30 million 8.2% Cumulative Redeemable Preferred Partnership Equity (Series F Preferred Equity) is owned by institutional investors, and has a fixed 8.2% coupon rate, no stated maturity, sinking fund, or mandatory redemption requirements. The Company, beginning in May 2009 can redeem the Series F Preferred Equity. The holders of Series F Preferred Equity have the right, beginning in 2014, to exchange $100 in liquidation value of such equity for one share of Series F Preferred Stock. The terms of the Series F Preferred Stock are substantially similar to those of the Series F Preferred Equity. Like the Series A and Series G Preferred Stock, the Series F Preferred Stock is non-voting.
        In July 2005, the Company issued $87 million of Series H Cumulative Redeemable Preferred Stock (Series H Preferred Stock). This stock has a fixed 7.625% coupon and no stated maturity, sinking fund, or mandatory redemption requirements. The Series H Preferred Stock will be redeemable by the Company at $25 per share, plus accrued dividends, beginning in July 2010. The proceeds were used to redeem $87 million of the Series A Preferred Stock. Offering costs of $3.1 million were incurred in connection with the new issuance. Emerging Issues Task Force Topic D-42, “The Effect on the Calculation of Earnings Per Share for the Redemption or Induced Conversion of Preferred Stock,” provides that any excess of the fair value of the consideration transferred to the holders of preferred stock redeemed over the carrying amount of the preferred stock should be subtracted from net earnings to determine net earnings available to common stockholders. As a result of application of Topic D-42, the Company recognized a charge of $3.1 million, representing the difference between the carrying value and the redemption price of the shares of Series A Preferred Stock redeemed. After this charge, $4.0 million of the original Series A Preferred Stock offering costs remain and would be subject to Topic D-42 in future periods in the event the remainder of the Series A Preferred Stock were to be redeemed.
        During November 2004, the Operating Partnership’s Series C and Series D Preferred Equity were redeemed by the Company. The excess of the $100 million redemption value over the $97.3 million book value has been recorded as a preferred distribution in the Company’s results of operations for 2004.
        In January 2004, 276,724 additional partnership units were issued in connection with the acquisition of the 30% interest in Beverly Center (Note 2).
        In December 2003, 1.6 million partnership units were redeemed in exchange for 705,636 Macerich units valued at $30.2 million (Note 2). These units were owned by an affiliate of the former owner of Biltmore Fashion Park.
        In July 2003, 190,909 additional partnership units were issued in connection with the acquisition of an additional 25% interest in MacArthur Center (Note 2).
        In May 2003, G.K. Las Vegas Limited Partnership, (Sheldon M. Gordon, along with his affiliates in their prior ownership of The Forum Shops at Caesars (Gordon)) invested $50 million in the Operating Partnership in exchange for 2.08 million partnership units. Upon issuance, these units did not have voting rights, and had limited resale rights. During 2005, in conjunction with the Company’s investment in The Pier at Caesars, the Company lifted the voting and resale restriction on the Gordon units. During the first quarter of 2005, Gordon was issued 0.8 million shares of the Company’s Series B Preferred Stock upon subscription. An affiliate of Gordon owned an interest in Beverly Center, which the Company purchased in January 2004 (Note 2).
        In December 2005, the Company’s Board of Directors authorized the purchase of up to $50 million of the Company’s common stock on the open market. As of December 31, 2005, the Company had not purchased any shares or redeemed any units under this program. Repurchases of common stock will be financed through general corporate funds, including equity issuances, and through borrowings under existing lines of credit. During 2004 and 2003, the Company repurchased shares of its common stock under an existing buyback program. For each share of stock repurchased, an equal number of Operating Partnership units were redeemed. Cumulatively as of the end of 2004, since the program’s inception in March 2000, the Company had repurchased approximately 9.6 million shares for a total of $150 million, the maximum amount permitted under the program.
        In connection with the Company’s 1999 acquisition of Lord Associates, a retail leasing firm, partnership units and Series B Preferred stock were being released over a five-year period ending in January 2005, with $0.5 million, $0.5 million, and $1.0 million having been released in 2005, 2004, and 2003, respectively. Such amounts were recognized as compensation expense.
F-29

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 17 — Commitments and Contingencies
        At the time of the Company’s initial public offering (IPO), the Company entered into an agreement (the Cash Tender Agreement) with A. Alfred Taubman, who owns an interest in the Operating Partnership, whereby he has the annual right to tender to the Company units of partnership interest in the Operating Partnership (provided that the aggregate value is at least $50 million) and cause the Company to purchase the tendered interests at a purchase price based on a market valuation of the Company on the trading date immediately preceding the date of the tender. The Company will have the option to pay for these interests from available cash, borrowed funds, or from the proceeds of an offering of the Company’s common stock. Generally, the Company expects to finance these purchases through the sale of new shares of its stock. The tendering partner will bear all market risk if the market price at closing is less than the purchase price and will bear the costs of sale. Any proceeds of the offering in excess of the purchase price will be for the sole benefit of the Company. At A. Alfred Taubman’s election, his family and certain others may participate in tenders.
        Based on a market value at December 31, 2005 of $34.75 per common share, the aggregate value of interests in the Operating Partnership that may be tendered under the Cash Tender Agreement was approximately $884 million. The purchase of these interests at December 31, 2005 would have resulted in the Company owning an additional 31% interest in the Operating Partnership.
        The Company has made a continuing, irrevocable offer to all present holders (other than certain excluded holders, including A. Alfred Taubman), assignees of all present holders, those future holders of partnership interests in the Operating Partnership as the Company may, in its sole discretion, agree to include in the continuing offer, and all existing and future optionees under the Operating Partnership’s incentive option plan to exchange shares of common stock for partnership interests in the Operating Partnership (the Continuing Offer). Under the Continuing Offer agreement, one unit of the Operating Partnership interest is exchangeable for one share of the Company’s common stock.
        The disposition of Woodland by one of the Company’s Unconsolidated Joint Ventures was structured in a tax efficient manner to facilitate the investment of the Company’s share of the sales proceeds in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code and the regulations thereunder. The structuring of the disposition has included the continued existence and operation of the partnership that previously owned the shopping center. In connection with the disposition, the Company entered into a tax indemnification agreement with the Woodland joint venture partner, a life insurance company. Under this tax indemnification agreement, the Company has agreed to indemnify the joint venture partner in the event an unfavorable tax determination is received as a result of the structuring of the sale in the tax efficient manner described. The maximum amount that the Company could be required to pay under the indemnification is equal to the taxes incurred by the joint venture partner as a result of the unfavorable tax determination by the IRS or the state of Michigan within their respective three and four year statutory assessment limitation periods, in excess of those that would have otherwise been due if the Unconsolidated Joint Venture had sold Woodland, distributed the cash sales proceeds, and liquidated the owning entities. The Company cannot reasonably estimate this maximum amount of the indemnity, as the Company is not privy to or does not have knowledge of its joint venture partner’s tax basis or tax attributes in the Woodland entities or its life insurance-related assets. However, the Company believes that the probability of having to perform under the tax indemnification agreement is remote. The Company and the Woodland joint venture partner have also indemnified each other for their shares of costs or revenues of operating or selling the shopping center in the event additional costs or revenues are subsequently identified.
        Neither the Company, its subsidiaries, nor any of its joint ventures is presently involved in any material litigation, nor, to its knowledge, is any material litigation threatened against the Company, its subsidiaries, or any of the properties. Except for routine litigation involving present or former tenants (generally eviction or collection proceedings), substantially all litigation is covered by liability insurance. See also Note 3.
        See Note 11 for the Operating Partnership’s guarantees of certain notes payable.
F-30

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 18 — Earnings Per Share
        Basic earnings per share amounts are based on the weighted average of common shares outstanding for the respective periods. Diluted earnings per share amounts are based on the weighted average of common shares outstanding plus the dilutive effect of common stock equivalents. Common stock equivalents include outstanding partnership units exchangeable for common shares under the Continuing Offer (Note 17), outstanding options for units of partnership interest under the Operating Partnership’s incentive option plan, RSU under the LTIP and DCP, and unissued partnership units under unit option deferral elections (Note 15). In computing the potentially dilutive effect of these common stock equivalents, partnership units are assumed to be exchanged for common shares under the Continuing Offer, increasing the weighted average number of shares outstanding. The potentially dilutive effects of partnership units outstanding and/or issuable under the unit option deferral elections are calculated using the if-converted method, while the effects of other common stock equivalents are calculated using the treasury stock method.
        As of December 31, 2005, there were 11.5 million partnership units outstanding and 0.9 million unissued partnership units under unit option deferral elections, which currently receive income allocations equal to distributions paid, and which may be exchanged for common shares of the Company under the Continuing Offer (Note 17). These outstanding units and unissued units were excluded from the computation as they were anti-dilutive in the periods presented. These outstanding units and unissued units could only be dilutive to earnings per share if the minority interests’ ownership share of the Operating Partnership’s income was greater than their share of distributions.

	Year Ended December 31	
		
	2005	2004	2003	
Income (loss) from continuing operations allocable to	 		 		 		 	
  common shareowners (Numerator):	 		
Net income (loss) allocable to common shareowners	 	$        44,113	 	$       (5,066	)	$        21,236	 	
Common shareowners' share of discontinued operations	 	 	 	(199	)	(27,893	)	
							
Basic income(loss) from continuing operations	 	$        44,113	 	$       (5,265	)	$       (6,657	)	
Effect of dilutive securities	 	 	 	 	 	(138	)	
							
Diluted income (loss) from continuing operations	 	$        44,113	 	$       (5,265	)	$       (6,795	)	

Shares (Denominator) - basic	 	50,459,314	 	49,021,843	 	50,387,616	 	
Effect of dilutive securities	 	70,825	 		
							
Shares (Denominator) - diluted	 	50,530,139	 	49,021,843	 	50,387,616	 	

Income (loss) from continuing operations per common share:	 		
  Basic	 	$            0.87	 	$         (0.11	)	$         (0.13	)	
							
  Diluted	 	$            0.87	 	$         (0.11	)	$         (0.13	)	

Discontinued operations per common share:	 		
  Basic	 	$            0.00	 	$            0.00	 	$            0.55	 	
							
  Diluted	 	$            0.00	 	$            0.00	 	$            0.54	 	
							
Note 19 — Cash Flow Disclosures and Non-Cash Investing and Financing Activities
        Interest paid in 2005, 2004, and 2003, net of amounts capitalized of $9.9 million, $6.0 million, and $9.1 million, respectively, approximated $112.0 million, $93.7 million, and $78.6 million, respectively. The following non-cash investing and financing activities occurred during 2005, 2004, and 2003:

	2005	2004	2003	
Non-cash additions to properties	 	$50,844	 	$38,020	 	$44,301	 	
Note receivable on Woodland sale (Note 2)	 	9,000	 		
Capital lease obligations	 	91	 	4,559	 	8,038	 	
Issuance of partnership units in connection with acquisition (Note 2)	 	 	 	7,674	 	3,719	 	
Receipt of Macerich Company partnership units in connection	 		
  with disposition of Biltmore (Note 2)	 	 	 	 	 	30,201	 	
Exchange of Macerich Company partnership units in redemption	 		
  of a TRG partner (Note 2)	 	 	 	 	 	(30,201	)	
        Non-cash additions to properties primarily represent accrued construction and tenant allowance costs of new centers and development projects. Additionally, consolidated assets increased upon consolidation of the accounts of International Plaza (Note 2).
F-31

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
Note 20 — Quarterly Financial Data (Unaudited)
        The following is a summary of quarterly results of operations for 2005 and 2004:

	2005 (1)	
		
	First
Quarter	Second
Quarter	Third
Quarter	Fourth
Quarter	
					
Revenues	 	$ 111,839	 	$ 117,589	 	$ 111,858	 	$ 132,152	 	
Equity in income of Unconsolidated Joint Ventures	 	9,070	 	9,372	 	9,268	 	14,740	 	
Income before minority and preferred interests	 	18,216	 	11,227	 	9,752	 	71,036	 	
Net income	 	8,420	 	1,636	 	288	 	61,391	 	
Net income (loss) allocable to common shareowners	 	2,270	 	(4,514	)	(9,030	)	55,387	 	
Basic earnings per common share -	 		
  Net income (loss)	 	$      0.05	 	$    (0.09	)	$    (0.18	)	$      1.09	 	
Diluted earnings per common share -	 		
  Net income (loss)	 	$      0.05	 	$    (0.09	)	$    (0.18	)	$      0.93	 	
					
	2004 (2)	
		
	First
Quarter	Second
Quarter	Third
Quarter	Fourth
Quarter	
					
Revenues	 	$ 101,332	 	$  98,937	 	$ 110,901	 	$ 120,283	 	
Equity in income of Unconsolidated Joint Ventures	 	9,593	 	8,779	 	8,291	 	13,407	 	
Income before minority and preferred interests	 	19,202	 	11,585	 	12,759	 	16,752	 	
Net income	 	7,931	 	233	 	1,260	 	2,954	 	
Net income (loss) allocable to common shareowners	 	3,781	 	(3,917	)	(2,890	)	(2,040	)	
Basic earnings per common share -	 		
  Net income (loss)	 	$      0.08	 	$    (0.08	)	$    (0.06	)	$    (0.04	)	
Diluted earnings per common share -	 		
  Net income (loss)	 	$      0.07	 	$    (0.08	)	$    (0.06	)	$    (0.04	)	

(1)	Amounts include a $3.1 million charge incurred in connection with the redemption of $87 million of Series A stock in the third quarter of 2005, and $12.7 million of charges incurred during the fourth quarter of 2005 in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills, the pay-off of the Northlake Mall loan, and debt modifications in connection with the pay-off of the Oyster Bay loan. The fourth quarter of 2005 also includes a $52.8 million gain on the sale of Woodland (Note 2).	
(2)	Amounts include insurance recoveries related to the unsolicited tender offer of $1.0 million in the first quarter of 2004 (Note 3), a $2.7 million charge incurred in connection with the redemption of the Series C and D Preferred Equity in the fourth quarter of 2004 (Note 16), and a $5.7 million restructuring loss recognized in the fourth quarter of 2004 (Note 4).	

Note 21 — New Accounting Pronouncements
        In October 2005, the FASB Issued Staff Position (FSP) No. FAS 13-1 “Accounting for Rental Costs Incurred during a Construction Period”. This FSP requires that rental costs associated with ground or building operating leases incurred during a construction period be recognized as rental expense. However, FSP No. FAS 13-1 does not address lessees that account for the sale or rental of real estate projects under FASB Statement No. 67 “Accounting for Costs and Initial Rental Operations of Real Estate Projects”. As the Company’s policy is to capitalize rental costs associated with ground leases incurred during construction periods under Statement No. 67, FSP No. FAS 13-1 will not have a material effect on the Company’s results of operations when it becomes effective in 2006.
        In June 2005, the FASB ratified the EITF’s consensus on Issue No. 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.” This consensus establishes the presumption that general partners in a limited partnership control that limited partnership regardless of the extent of the general partners’ ownership interest in the limited partnership. The consensus further establishes that the rights of the limited partners can overcome the presumption of control by the general partners, if the limited partners have either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general partners without cause or (b) substantive participating rights. Whether the presumption of control is overcome is a matter of judgment based on the facts and circumstances, for which the consensus provides additional guidance. This consensus is currently applicable to the Company for new or modified partnerships, and will otherwise be applicable to existing partnerships in 2006. This consensus applies to limited partnerships or similar entities, such as limited liability companies that have governing provisions that are the functional equivalent of a limited partnership.
F-32

TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
        With the issuance of EITF 04-5 and the amendment of Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” (SOP 78-9) and the corresponding changes and considerations surrounding control, the Company has determined that in the first quarter of 2006 it will begin consolidating the entity that owns the Cherry Creek Shopping Center. This entity is currently accounted for under the equity method in accordance with the provisions of SOP 78-9. Under the equity method, net income (loss) was allocated to the outside partner based on its ownership percentage. Because the net equity balance of the outside partner is less than zero, upon consolidation, income will be allocated to the outside partner equal to its share of distributions and the outside partner’s interest will be presented as a zero balance in the consolidated balance sheet. The net equity balance of the outside partner’s interest is zero due to accumulated distributions in excess of net income and not as a result of operating losses. Distributions to partners are usually greater than net income because net income includes non-cash charges for depreciation and amortization. As of January 1, 2006, the impact to the balance sheet will be an increase in assets of approximately $128 million and liabilities of approximately $180 million, and a $52 million reduction of beginning equity representing the cumulative effect of change in accounting principle.
        In May 2005, the FASB issued Statement No. 154 “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3". This Statement changes the requirements for the accounting for and reporting of a change in accounting principle. Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. In the event of such impracticality, this Statement provides for other means of application. In the event the Company changes accounting principles, it will evaluate the impact of Statement No. 154.
        In December 2004, the FASB issued Statement No. 123 (Revised) “Share-Based Payment”. This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. A public entity will initially measure the cost of employee services received in exchange for an award of liability instruments based on its current fair value; the fair value of that award will be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period. Statement No. 123 (Revised) will be effective for the Company in 2006. The Company expects that adoption of this Statement will not have a material effect on its future results of operations. The Company currently applies Statement No. 123 “Accounting for Stock-Based Compensation,” including its provisions for the expense recognition of options (Note 15). As part of its adoption of Statement No. 123 (Revised), for any grant for which vesting accelerates upon retirement, the Company will begin recognizing compensation cost from the date of the grant through the date the employee first becomes eligible to retire, if this period is shorter than the stated vesting period of the grant. Currently, the Company recognizes compensation cost using the stated vesting period, regardless of retirement eligibility. If the Company had applied the new practice historically , it would not have had a material impact on its results of operations for any period presented, nor is it expected to have a material impact on future results of operations.
Note 22 — Subsequent Events
        In January 2006, a lender agreed to lock the rate at 5.41% on a $215.5 million financing of Northlake Mall. This interest-only loan has a 10-year term and closed in February 2006.In February 2006, the Company paid off the outstanding principal balances on the Shops at Willow Bend loans of $144.4 million.
        In addition, the Company exercised its options to acquire certain property at The Mall at Partridge Creek in January 2006 and at Oyster Bay in February 2006 and paid off the related third party loan on Oyster Bay (Note 6).
F-33

Schedule II
TAUBMAN CENTERS, INC.
Valuation and Qualifying Accounts
For the years ended December 31, 2005, 2004, and 2003
(in thousands)

		Additions				
						
	Balance at
beginning
of year	Charged to
costs and
expenses	Charged to
other
accounts	Write-offs	Transfers, net	Balance
at end
of year	
Year ended December 31, 2005	 		
  Allowance for doubtful receivables	 	$8,661	 	2,512	 		 	(5,676	)			$5,497	 	

Year ended December 31, 2004	 		
  Allowance for doubtful receivables	 	$7,403	 	4,103	 		 	(4,039	)	1,194	(1)	$8,661	 	
													
Year ended December 31, 2003	 		 		 		 		 		 		 	
  Allowance for doubtful receivables	 	$5,829	 	5,027	 		 	(3,453	)			$7,403	 	

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

F-34

Schedule III
TAUBMAN CENTERS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2005
(in thousands)

												
	Initial Cost
to Company		Gross Amount at Which
Carried at Close of Period						
	Land	Buildings,
Improvements,
and Equipment	Cost
Capitalized
Subsequent
to Acquisition (1)	Land	BI&E	Total	Accumulated
Depreciation
(A/D)	Total
Cost Net
of A/D	Encumbrances	Date of
Completion of
Construction or
Acquisition	Depreciable
Life	
Shopping Centers:	 	 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	
  Beverly Center, Los Angeles, CA	 	 	 	 	 	$	209,149	 	$	36,204	 	 	 	 	$	245,353	 	$	245,353	 	$	97,913	 	$	147,440	 	$	347,500	 	1982	 		40 Years		
  Dolphin Mall, Miami, Florida	 	 	$	34,881	 	 	240,311	 	 	12,860	 	$	34,881	 	 	253,171	 	 	288,052	 	 	40,182	 	 	247,870	 	 	141,311	 	2001	 	 	50 Years	 	 	
  Fairlane Town Center, Dearborn, MI	 	 	 	17,330	 	 	104,668	 	 	27,926	 	 	17,330	 	 	132,594	 	 	149,924	 	 	40,562	 	 	109,362	 	 	Note	(2)	1996	 	 	40 Years	 	 	
  Great Lakes Crossing, Auburn Hills, MI	 	 	 	15,506	 	 	194,584	 	 	20,021	 	 	15,506	 	 	214,605	 	 	230,111	 	 	65,349	 	 	164,762	 	 	145,239	 	1998	 	 	50 Years	 	 	
  International Plaza, Tampa, FL	 	 	 	 	 	 	311,212	 	 	8,438	 	 	 	 	 	319,650	 	 	319,650	 	 	48,541	 	 	271,109	 	 	182,135		2001	 		50 Years		
  MacArthur Center, Norfolk, VA	 	 	 	 	 	 	146,392	 	 	11,294	 	 	 	 	 	157,686	 	 	157,686	 	 	32,919	 	 	124,767	 	 	140,895		1999	 		50 Years		
  Northlake Mall, Charlotte, NC	 	 	 	17,589	 	 	153,591	 	 		 	 	17,589	 	 	153,591	 	 	171,180	 	 	3,834	 	 	167,346	 	 		 	2005	 	 	50 Years	 	 	
  Regency Square, Richmond, VA	 	 	 	18,635	 	 	101,600	 	 	5,792	 	 	18,635	 	 	107,392	 	 	126,027	 	 	29,633	 	 	96,394	 	 	78,792	 	1997	 	 	40 Years	 	 	
  The Mall at Short Hills, Short Hills, NJ	 	 	 	25,114	 	 	169,745	 	 	118,527	 	 	25,114	 	 	288,272	 	 	313,386	 	 	99,015	 	 	214,371	 	 	540,000	 	1980	 	 	40 Years	 	 	
  Stony Point Fashion Park, Richmond, VA	 	 	 	10,677	 	 	103,387	 	 	1,466	 	 	10,677	 	 	104,853	 	 	115,530	 	 	15,250	 	 	100,280	 	 	113,228	 	2003	 	 	50 Years	 	 	
  Twelve Oaks Mall, Novi, MI	 	 	 	25,410	 	 	191,185	 	 	4,401	 	 	25,410	 	 	195,586	 	 	220,996	 	 	63,273	 	 	157,723	 	 	Note	(2)	1977	 	 	50 Years	 	 	
  The Mall at Wellington Green,	 	 		
    Wellington, FL	 	 	 	18,967	 	 	194,000	 	 	9,468	 	 	21,439	 	 	200,996	 	 	222,435	 	 	38,841	 	 	183,594	 	 	200,000	 	2001	 	 	50 Years	 	 	
  The Shops at Willow Bend, Plano, TX	 	 	 	26,192	 	 	231,564	 	 	7,854	 	 	26,192	 	 	239,418	 	 	265,610	 	 	40,232	 	 	225,378	 	 	144,607	 	2001	 	 	50 Years	 	 	
Other:	 	 		
  Office Facilities	 	 	 	 	 	 	 	 	 	33,470	 	 	 	 	 	33,470	 	 	33,470	 	 	25,495	 	 	7,975	 		
  Peripheral Land	 	 	 	31,645	 	 	 	 	 		 	 	31,645	 	 		 	 	31,645	 	 	 	 	 	31,645	 	 	 	 		
  Construction in Process and	 	 		
    Development Pre-construction Costs	 	 	 	 	 	 	121,858	 	 	1,669	 	 	 	 	 	123,527	 	 	123,527	 	 	 	 	 	123,527	 	 	56,241	 		
  Assets under CDD obligations	 	 	 	4,164	 	 	61,411	 	 	 	 	 	4,164	 	 	61,411	 	 	65,575	 	 	10,147	 	 	55,428	 		
  Other	 	 	 	 	 	 	1,167	 	 	 	 	 	 	 	 	1,167	 	 	1,167	 	 	479	 	 	688	 	 	 	 		
																		
TOTAL	 	 	$	246,110	 	$	2,535,824	 	$	299,390	 	$	248,582	 	$	2,832,742	 	 	$3,081,324	(3)	 	$651,665		 	$2,429,659		
																		
The changes in total real estate assets and accumulated depreciation for the years ended December 31, 2005, 2003, and 2003 are as follows:

	Total
Real Estate
Assets
2005		Total
Real Estate
Assets
2004		Total
Real Estate
Assets
2003		Accumulated
Depreciation (5)
2005	Accumulated
Depreciation (5)
2004	Accumulated
Depreciation (5)
2003			
Balance, beginning of year	 	 	$	2,936,964	 	$	2,519,922	 	$	2,393,428	 	Balance, beginning of year	 	 	$	(558,891	)	$	(450,515	)	$	(375,738	)		
New development and improvements	 	 	 	173,297	 	 	112,995	 	 	124,860	 	Depreciation for year	 	 	 	(109,279	)	 	(93,209	)	 	(87,756	)		
Acquisition of additional interests	 	 	 			 			 	18,071		Disposals/writeoffs	 	 	 	16,388	 	 	15,193	 	 	12,979	 		
Disposals/writeoffs	 	 	 	(27,905	)		(15,997	)	 	(12,979	)	Transfers (In)/Out	 	 		117		 	(30,360	) (4)					
Transfers In/(Out)	 	 	 	(1,032	)		320,044	(4)	 	(3,458	)								
							Balance, end of year	 	 	$	(651,665	)	$	(558,891	)	$	(450,515	)		
Balance, end of year	 	 	$	3,081,324	 	$	2,936,964	 	$	2,519,922	 									

(1)	Includes costs of assets recovered from tenants over a period of more than one year.	
(2)	These centers are collateral for the Company’s line of credit.	
(3)	The unaudited aggregate cost for federal income tax purposes as of December 31, 2005 was $2.938 billion.	
(4)	Includes costs relating to International Plaza, which became a Consolidated Joint Venture in 2004.	
(5)	Does not include depreciation of assets recoverable from tenants.	

F-35

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

                        

 Date: March 1, 2006
                      	TAUBMAN CENTERS, INC.

By: /s/ Robert S. Taubman
                                            
         Robert S. Taubman
         Chairman of the Board, President,
         and Chief Executive Officer		
        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date	

/s/ Robert S. Taubman	Chairman of the Board, President,	March 1, 2006	
Robert S. Taubman	Chief Executive Officer, and Director		
 		
/s/ Lisa A. Payne	Vice Chairman, Chief Financial	March 1, 2006	
Lisa A. Payne	Officer, and Director (Principal Financial Officer)		
 		
/s/ William S. Taubman	Chief Operating Officer,	March 1, 2006	
William S. Taubman	and Director		
 		
/s/ Esther R. Blum	Senior Vice President, Controller, and	March 1, 2006	
Esther R. Blum	Chief Accounting Officer		
 		
*                          	Director	March 1, 2006	
Graham Allison		
 		
*                          	Director	March 1, 2006	
Allan J. Bloostein		
 		
*                          	Director	March 1, 2006	
Jerome A. Chazen		
 		
*                          	Director	March 1, 2006	
Craig M. Hatkoff		
 		
*                          	Director	March 1, 2006	
Peter Karmanos, Jr.		
 		
*                          	Director	March 1, 2006	
William U. Parfet		

			

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

EXHIBIT INDEX

 	      Exhibit Number	

 3(a)

 3(b)

 3(c)

 4(a)

     

 4(b)

 4(c)

     

 4(d)

     

 4(e)

     

 4(f)

 4(g)

 4(h)

 4(i)

     

 4(j)	--

--

--

--

  

--

--

  

--

  

--

  

--

--

--

--

  

--	Restated By-Laws of Taubman Centers, Inc., as amended through May 18, 2005 (incorporated
herein by reference to Exhibit 3 filed with the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005 ("2005 Second Quarter Form 10-Q")).

Restated Articles of Incorporation of Taubman Centers, Inc., as amended through June 10,
2005 (incorporated herein by reference to Exhibit 3.1 filed with the Registrant's Current
Report on Form 8-K dated June 8, 2005).

Certificate of Amendment to the Articles of Incorporation of Taubman Centers, Inc.
(incorporated herein by reference to Exhibit 3(c) filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 2004 ("2004 Form 10-K")).

Loan Agreement dated as of January 15, 2004 among La Cienega Associates, as Borrower,
Column Financial, Inc., as Lender (incorporated herein by reference to Exhibit 4 filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 ("2004
First Quarter Form 10-Q")).

Assignment of Leases and Rents, La Cienega Associates, Assignor, and Column Financial,
Inc., Assignee, dated as of January 15, 2004 (incorporated herein by reference to Exhibit 4
filed with the 2004 First Quarter Form 10-Q).

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

Loan Agreement dated as of March 29, 1999 among Taubman Auburn Hills Associates Limited
Partnership, as Borrower, Fleet National Bank, as a Bank, PNC Bank, National Association,
as a Bank, the other Banks signatory thereto, each as a Bank, and PNC Bank, National
Association, as Administrative Agent (incorporated herein by reference to exhibit 4(a)
filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1999 ("1999 Second Quarter Form 10-Q")).

Mortgage, Assignment of Leases and Rents and Security Agreement from Taubman Auburn Hills
Associates Limited Partnership, a Delaware limited partnership to PNC Bank, National
Association, as Administrative Agent for the Banks, dated as of March 29, 1999
(incorporated herein by reference to Exhibit 4(b) filed with the 1999 Second Quarter Form
10-Q).

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

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

Amended and Restated Promissory Note A-3, dated December 14, 2005, by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to
Exhibit 4.3 of the Registrant's Current Report on Form 8-K dated December 16, 2005).

Amended and Restated Mortgage, Security Agreement and Fixture Filings, dated December 14,
2005 by Short Hills Associates L.L.C. to Metropolitan Life Insurance Company (incorporated
by reference to Exhibit 4.4 of the Registrant's Current Report on Form 8-K dated December
16, 2005).

Amended and Restated Assignment of Leases, dated December 14, 2005, by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by reference to
Exhibit 4.5 of the Registrant's Current Report on Form 8-K dated December 16, 2005).	

			
 4(k)

      

 4(l)

      

 4(m)

      

      

 4(n)

      

*10(a)

      

*10(b)

      

*10(c)

*10(d)

*10(e)

 10(f)

      

 10(g)	--

  

--

  

--

  

  

--

  

--

  

--

  

--

--

--

--

  

--	Secured Revolving Credit Agreement dated as of October 13, 2004 among the Taubman Realty
Group Limited Partnership and Eurohypo AG, New York Branch ("Eurohypo"), KeyBank National
Association, PNC Bank National Association, Commerzbank AG, New York and Grand Cayman
Branches, Hypo Real Estate Capital Corporation, Comerica Bank, PB (USA) Realty Corporation,
Bank One, N.A. (incorporated by reference to Exhibit 10(a) of the Registrant's Current
Report on Form 8-K dated October 13, 2004).

Amendment to Secured Revolving Credit Agreement dated as of March 31, 2005, among The
Taubman Realty Group Limited Partnership and Eurohypo AG, New York Branch (incorporated
herein by reference to Exhibit 4 filed with the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2005 ("2005 First Quarter 10-Q")).

Building Loan Agreement dated as of June 21, 2000 among Willow Bend Associates Limited
Partnership, as Borrower, PNC Bank, National Association, as Lender, Co-Lead Agent and Lead
Bookrunner, Fleet National Bank, as Lender, Co-Lead Agent, Joint Bookrunner and Syndication
Agent, Commerzbank AG, New York Branch, as Lender, Managing Agent and Co-Documentation
Agent, Bayerische Hypo-Und Vereinsbank AG, New York Branch, as Lender, Managing Agent and
Co-Documentation Agent, and PNC Bank, National Association, as Administrative Agent.
(incorporated herein by reference to Exhibit 4 (a) filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000 ("2000 Second Quarter Form 10-Q")).

Building Loan Deed of Trust, Assignment of Leases and Rents and Security Agreement from
Willow Bend Associates Limited Partnership, a Delaware limited partnership, to David M.
Parnell, for the benefit of PNC Bank, National Association, as Administrative Agent for
Lenders. (incorporated herein by reference to Exhibit 4 (b) filed with the 2000 Second
Quarter Form 10-Q).

The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan, as Amended and
Restated Effective as of September 30, 1997 (incorporated herein by reference to Exhibit
10(b) filed with the Registrant's Annual Report on Form 10-K for the year ended December
31, 1997).

First Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan
as Amended and Restated Effective as of September 30, 1997, effective January 1, 2002
(incorporated herein by reference to Exhibit 10(b) filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2001 ("2001 Form 10-K")).

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

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

The Form of The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan Option
Agreement (incorporated herein by reference to Exhibit 10(e) filed with the 2004 Form 10-K).

Registration Rights Agreement among Taubman Centers, Inc., General Motors Hourly-Rate
Employees Pension Trust, General Motors Retirement Program for Salaried Employees Trust,
and State Street Bank & Trust Company, as trustee of the AT&T Master Pension Trust
(incorporated herein by reference to Exhibit 10(e) filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992 ("1992 Form 10-K")).

Registration Rights Agreement by and between Taubman Centers, Inc. and GSEP 2004 Realty
Corp., dated as of May 27, 2004 (incorporated by reference to Exhibit 10(a) filed with the
2004 Second Quarter 10-Q).	

			
 10(h)

 10(i)

 10(j)

      

*10(k)

*10(l)

*10(m)

*10(n)

*10(o)

*10(p)

*10(q)

*10(r)

*10(s)

*10(t)

*10(u)

*10(v)	--

--

--

  

--

--

--

--

--

--

--

--

--

--

--

--	Private Placement Purchase Agreement among Taubman Centers, Inc., The Taubman Realty Group
Limited Partnership, and GSEP 2004 Realty Corp, dated as of May 27, 2004 (incorporated by
reference to Exhibit 10(b) filed with the 2004 Second Quarter 10-Q).

Master Services Agreement between The Taubman Realty Group Limited Partnership and the
Manager (incorporated herein by reference to Exhibit 10(f) filed with the 1992 Form 10-K).

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

Supplemental Retirement Savings Plan (incorporated herein by reference to Exhibit 10(i)
filed with the Registrant's Annual Report on Form 10-K for the year ended December 31,
1994).

The Taubman Company Long-Term Compensation Plan (as amended and restated effective January
1, 2000) (incorporated herein by reference to Exhibit 10 (c) filed with the 2000 Second
Quarter Form 10-Q).

First Amendment to the Taubman Company Long-Term Compensation Plan (as amended and restated
effective January 1, 2000) (incorporated herein by reference to Exhibit 10(m) filed with
the 2004 Form 10-K).

Second Amendment to the Taubman Company Long-Term Performance Compensation Plan (as amended
and restated effective January 1, 2000).

The Taubman Company 2005 Long-Term Incentive Plan (incorporated herein by reference to the
Form DEF14A filed with the Securities and Exchange Commission on April 5, 2005).

Employment Agreement between The Taubman Company Limited Partnership and Lisa A. Payne
(incorporated herein by reference to Exhibit 10 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997).

Change of Control Employment Agreement by and between Taubman Centers, Inc., Taubman Realty
Group Limited Partnership, and Lisa A. Payne (incorporated herein by reference to Exhibit
10(a) filed with the Registrant's 2005 First Quarter 10-Q).

Form of Change of Control Agreement (incorporated herein by reference to Exhibit 10(b)
filed with the Registrant's 2005 First Quarter 10-Q).

Consulting Agreement between The Taubman Company L.L.C. and Courtney Lord Associates, Ltd.
(incorporated herein by reference to Exhibit 10 filed with the 2004 First Quarter Form
10-Q).

Termination Agreement between The Taubman Company L.L.C. and Courtney Lord (incorporated
herein by reference to Exhibit 10 filed with the 2004 First Quarter Form 10-Q).

Consulting and Non-Competition Agreement between The Taubman Company, L.L.C. and John L.
Simon (incorporated herein by reference to Exhibit 10 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004).

Second Amended and Restated Continuing Offer, dated as of May 16, 2000. (incorporated
herein by reference to Exhibit 10 (b) filed with the 2000 Second Quarter Form 10-Q).	

			
 10(w)

       

 10(x)

       

 10(y)

       

 10(z)

       

 10(aa)

       

 10(ab)

       

 10(ac)

       

 10(ad)

 10(ae)

       

*10(af)

 10(ag)

 10(ah)	--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

--

  

--

--

--	The Second Amendment and Restatement of Agreement of Limited Partnership of the Taubman
Realty Group Limited Partnership dated September 30, 1998 (incorporated herein by reference
to Exhibit 10 filed with the Registrant's Quarterly Report on Form 10-Q dated September 30,
1998).

Annex II to Second Amendment to the Second Amendment and Restatement of Agreement of
Limited Partnership of The Taubman Realty Group Limited Partnership. (incorporated herein
by reference to Exhibit 10(p) filed with Registrant's Annual Report on Form 10-K for the
year ended December 31, 1999 ("1999 Form 10-K")).

First Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership
of the Taubman Realty Group Limited Partnership dated September 30, 1998 (incorporated
herein by reference to Exhibit 10(b) filed with the Registrant's Quarterly Report on Form
10-Q/A for the quarter ended June 30, 2002 ("2002 Second Quarter Form 10-Q/A")).

Second Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of The Taubman Realty Group Limited Partnership effective as of September 3,
1999 (incorporated herein by reference to Exhibit 10(a) filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 ("1999 Third Quarter
Form 10-Q")).

Third Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership
of the Taubman Realty Group Limited Partnership, dated May 2, 2003 (incorporated herein by
reference to Exhibit 10(a) filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2003 ("2003 Second Quarter Form 10-Q")).

Fourth Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated December 31, 2003
(incorporated herein by reference to Exhibit 10(x) filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2003).

Fifth Amendment to the Second Amendment and Restatement of Agreement of Limited Partnership
of the Taubman Realty Group Limited Partnership, dated February 1, 2005 (incorporated
herein by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K
filed on February 7, 2005).

Annex III to The Second Amendment and Restatement of Agreement of Limited Partnership of
The Taubman Realty Group Limited Partnership, dated as of May 27, 2004 (incorporated by
reference to Exhibit 10(c) filed with the 2004 Second Quarter Form 10-Q).

Amended and Restated Shareholders' Agreement dated as of October 30, 2001 among Taub-Co
Management, Inc., The Taubman Realty Group Limited Partnership, The A. Alfred Taubman
Restated Revocable Trust, and Taub-Co Holdings LLC (incorporated herein by reference to
Exhibit 10(q) filed with the 2001 Form 10-K).

The Taubman Realty Group Limited Partnership and The Taubman Company LLC Election and
Option Deferral Agreement (incorporated herein by reference to Exhibit 10(r) filed with the
2001 Form 10-K).

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

Contribution Agreement by and among the Taubman Realty Group Limited Partnership, a
Delaware Limited Partnership, and G.K. Las Vegas Limited Partnership, a California Limited
Partnership, dated May 2, 2003 (incorporated herein by reference to Exhibit 10(b) filed
with the Registrant's 2003 Second Quarter Form 10-Q).	

			
 10(ai)

      

*10(aj)

*10(ak)

*10(al)

*10(am)

 12

 21

 23(a)

 23(b)

 24

 31(a)

 31(b)

 32(a)

 32(b)

 99(a)

 99(b)	--

  

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--	Management Agreement Transition and Termination Agreement, dated October 15, 2004, by and
between Briarwood LLC, TL-Columbus Associates LLC, The Falls Shopping Center Associates
LLC, TKL-East LLC, Meadowood Mall LLC, Stoneridge Properties LLC, and Tuttle Crossing
Associates II LLC, and The Taubman Company LLC (incorporated herein by reference to Exhibit
10 filed with the Registrant's Current Report on Form 8-K dated October 15, 2004).

Summary of Compensation for the Board of Directors of Taubman Centers, Inc. (incorporated
herein by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K
dated December 7, 2004).

The Form of The Taubman Company Restricted Stock Unit Award Agreement (incorporated by
reference to Exhibit 10 of the Registrant's Current Report on Form 8-K dated May 18, 2005).

The Taubman Centers, Inc. Non-Employee Directors' Deferred Compensation Plan (incorporated
by reference to Exhibit 10 of the Registrant's Current Report on Form 8-K dated May 18,
2005).

The Form of The Taubman Centers, Inc. Non-Employee Directors' Deferred Compensation Plan
(incorporated by reference to Exhibit 10 of the Registrant's Current Report on Form 8-K
dated May 18, 2005).

Statement Re: Computation of Taubman Centers, Inc. Ratio of Earnings to Combined Fixed
Charges and Preferred Dividends.

Subsidiaries of Taubman Centers, Inc.

Consent of Deloitte & Touche LLP.

Consent of KPMG LLP.

Powers of Attorney.

Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Debt Maturity Schedule.

Real Estate and Accumulated Depreciation Schedule of the Unconsolidated Joint Ventures of
The Taubman Realty Group Limited Partnership.	
* A management contract or compensatory plan or arrangement required to be filed.
 
SECOND AMENDMENT TO THE
THE TAUBMAN COMPANY LONG-TERM PERFORMANCE COMPENSATION PLAN
 
(As Amended and Restated Effective January   1,   2000)
 
WHEREAS , THE TAUBMAN COMPANY LLC (formerly The Taubman Company Limited Partnership) (the “Company”) has adopted and maintains The Taubman Company Long-Term Performance Compensation Plan, as most recently amended and restated effective January 1, 2000 (the “Plan”); and
WHEREAS , pursuant to Section 7.1 of the Plan, the Compensation Committee of the Board of Directors of Taubman Centers, Inc. (the “Compensation Committee”) has the authority to amend the Plan; and
WHEREAS , the Compensation Committee desires to amend the Plan, effective as of January 1, 2005, to comply with new provisions in the law enacted as Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations thereunder, with respect to awards granted under the Plan that were not vested as of December 31, 2004.
NOW, THEREFORE , Section 6.6(A)(d) of the Plan is hereby amended, reading as follows:
“ (d)          Deadline for Deferral Election . Any election by a Participant to defer the Settlement Date for a Sub Account pursuant to this Section 6.6A must be made no later than, and shall become irrevocable on, December 31, 2005.”
IN WITNESS WHEREOF , the undersigned has executed this Second Amendment as of the date written below.

 	TAUBMAN REALTY GROUP,	
 	a Delaware limited partnership	 	
 
 	By:	Taubman Centers, Inc.	 	
 	Its:	Managing General Partner	
 
By:      /s/ Esther R. Blum                              
 	Esther R. Blum	
 
 	Its:	Senior Vice President, Controller	
 	and Chief Accounting Officer	 	
 
 	Date:	December 10, 2005	

 

 
  
Exhibit 12
TAUBMAN CENTERS, INC.
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
(in thousands, except ratios)

	Year Ended December 31	
		
	2005	2004	2003	2002	2001	
Earnings from Continuing Operations before	 	 	 		 	 		 	 		 	 		 	 		 	
  income from equity investees	 	 	$	14,982	 	$	19,900	 	$	(5,448	)	$	14,103	 	$	29,619	 	
	 	 		
Add:	 	 		
  Fixed charges	 	 	 	137,837	 	 	116,584	 	 	104,626	 	 	95,280	 	 	97,184	 	
  Amortization of previously capitalized interest	 	 	 	3,843	 	 	3,612	 	 	3,256	 	 	2,601	 	 	1,630	 	
  Distributed income of Unconsolidated Joint Ventures (1)	 	 	 	95,249	 	 	40,070	 	 	36,740	 	 	27,912	 	 	21,861	 	
	 	 		
Deduct:	 	 		
  Capitalized interest	 	 	 	(9,940	)	 	(5,995	)	 	(9,134	)	 	(6,317	)	 	(23,701	)	
  Preferred distributions	 	 	 	(2,460	)	 	(12,244	)	 	(9,000	)	 	(9,000	)	 	(9,000	)	

Earnings available for fixed charges and preferred dividends	 	 	$	239,511	 	$	161,927	 	$	121,040	 	$	124,579	 	$	117,593	 	

Fixed charges:	 	 		
  Interest expense (2)	 	 	$	121,612	 	$	95,934	 	$	84,194	 	$	77,479	 	$	61,959	 	
  Capitalized interest	 	 	 	9,940	 	 	5,995	 	 	9,134	 	 	6,317	 	 	23,701	 	
  Interest portion of rent expense	 	 	 	3,825	 	 	2,411	 	 	2,298	 	 	2,484	 	 	2,524	 	
  Preferred distributions (3)	 	 	 	2,460	 	 	12,244	 	 	9,000	 	 	9,000	 	 	9,000	 	

    Total fixed charges	 	 	$	137,837	 	$	116,584	 	$	104,626	 	$	95,280	 	$	97,184	 	
	 	 		
Preferred dividends (4)	 	 	 	27,622	 	 	17,444	 	 	16,600	 	 	16,600	 	 	16,600	 	

Total fixed charges and preferred dividends	 	 	$	165,459	 	$	134,028	 	$	121,226	 	$	111,880	 	$	113,784	 	

Ratio of earnings to fixed charges and preferred	 	 		
  dividends	 	 	 	1.4	 	 	1.2	 	 	1.0	  (5)	 	1.1	 	 	1.0	 	

(1)	In December 2005, a 50% owned unconsolidated joint venture sold its interest in Woodland. The Company's $52.8 million equity in the gain on the sale is separately presented on the face of the income statement.	
(2)	Interest expense in 2005 includes a $12.7 million charge incurred in connection with a prepayment premium and the write-off of financing costs related to the refinancing of The Mall at Short Hills and the pay-off of the Northlake Mall loan, and debt modifications in connection with the pay-off of the Oyster Bay loan.	
(3)	TRG preferred distributions for the year ended December 31, 2004 include a $2.7 million charge relating to the redemption of the Series C and D Preferred Equity.	
(4)	Preferred dividends for the year ended December 31, 2005 include a $3.1 million charge relating to the redemption of $87 million of Series A Preferred Stock, representing the difference between the book value and redemption price of the stock.	
(5)	Earnings available for fixed charges and preferred dividends were less than total fixed charges and preferred dividends by $0.2 million.	

 
Exhibit 21
 
TAUBMAN CENTERS, INC.
LIST OF SUBSIDIARIES

NAME	JURISDICTION
OF FORMATION	 
DOING BUSINESS AS	
Beverly Associates L.P. 1	Delaware	N/A	
Beverly Partners 1, Inc.	Delaware	N/A	
Biltmore Holdings Associates 1 LLC	Arizona	N/A	
Biltmore Holdings Associates 2 LLC	Arizona	N/A	
Cherry Creek Holdings LLC	Delaware	N/A	
Dolphin Mall Associates Limited Partnership	Delaware	Dolphin Mall	
Dolphin Mall Holdings LLC	Delaware	N/A	
Fairlane Town Center LLC	Michigan	Fairlane Town Center	
Great Lakes Crossing, L.L.C.	Delaware	N/A	
International Plaza Holding Company, LLC	Delaware	N/A	
La Cienega Partners Limited Partnership	Delaware	Beverly Center	
Lakeside/Novi Land Partnership LLC	Michigan	N/A	
LCA Holdings, LLC	Delaware	N/A	
MacArthur Holdings, Inc.	Delaware	N/A	
MacArthur Shopping Center LLC	Delaware	MacArthur Center	
Mall Financing, Inc.	Michigan	N/A	
Millenia SPE, L.L.C.	Delaware	N/A	
Northlake Land LLC	Delaware	N/A	
Oyster Bay Associates Limited Partnership	Delaware	N/A	
Oyster Bay Holdings LLC	Delaware	N/A	
Partridge Creek Fashion Park LLC	Delaware	The Mall at Partridge Creek (under construction)	
Plano Holdings, LLC	Delaware	N/A	
Short Hills Associates, L.L.C.	Delaware	The Mall at Short Hills	
Short Hills Holdings LLC	Delaware	N/A	
Short Hills SPE LLC	Delaware	N/A	
Stony Point Associates LLC	Delaware	N/A	
Stony Point Fashion Park Associates, L.L.C.	Delaware	Stony Point Fashion Park	
Stony Point Land LLC	Delaware	N/A	
Survivor, Inc.	Michigan	N/A	

 

 
 
Tampa Westshore Associates Limited Partnership	Delaware	International Plaza	
Taub-Co Asia Management, Inc.	Michigan	N/A	
Taub-Co Biltmore, Inc.	Delaware	N/A	
Taub-Co Cherry Creek, Inc.	Delaware	N/A	
Taub-Co Fairfax, Inc.	Delaware	N/A	
Taub-Co Finance LLC	Delaware	N/A	
Taub-Co Finance II, Inc.	Michigan	N/A	
Taub-Co Kemp, Inc.	Michigan	N/A	
Taub-Co Land Holdings, Inc.	Michigan	N/A	
Taub-Co Landlord LLC	Delaware	N/A	
Taub-Co License LLC	Delaware	N/A	
Taub-Co Management, Inc.	Michigan	N/A	
Taub-Co Management IV, Inc.	Michigan	N/A	
Taub-Co Oyster Bay LLC	Delaware	N/A	
Taub-Co TRS Services, Inc.	Michigan	N/A	
Taub-Co Woodland LLC	Delaware	N/A	
Taubman Asia Holdings, Inc.	Michigan	N/A	
Taubman Asia Limited	Cayman Islands	N/A	
Taubman Asia Management Limited	Cayman Islands	N/A	
Taubman Auburn Hills Associates Limited Partnership	Delaware	Great Lakes Crossing	
Taubman-Dolphin Mall Associates, LLC	Delaware	N/A	
Taubman-Dolphin, Inc.	Delaware	N/A	
Taubman-Ivanhoe LLC	Delaware	N/A	
Taubman MacArthur Associates Limited Partnership	Delaware	N/A	
Taubman Palm Beach LLC	Delaware	N/A	
Taubman Properties Asia LLC	Delaware	N/A	
Taubman Regency Square Associates, LLC	Delaware	Regency Square	
The Taubman Company Asia Limited	Cayman Islands	N/A	
The Taubman Company LLC	Delaware	The Taubman Company	
The Taubman Realty Group Limited Partnership	Delaware	N/A	
T-I 2002 SPE, LLC	Delaware	N/A	
T-I REIT, Inc.	Delaware	N/A	

 

 
 
TJ Palm Beach Associates Limited Partnership	Delaware	The Mall at Wellington Green	
TRG Auburn Hills LLC	Delaware	N/A	
TRG Charlotte, LLC	Delaware	Northlake Mall	
TRG Charlotte Land LLC	Delaware	N/A	
TRG-Fairfax L.L.C.	Delaware	N/A	
TRG Holdings, LLC	Michigan	N/A	
TRG Net Investors, LL C	Delaware	N/A	
TRG Properties - Orlando L.L.C.	Delaware	N/A	
TRG Properties-Waterside L.L.C.	Delaware	N/A	
TRG Realcom LLC	Delaware	N/A	
TRG Regency Corporation	Delaware	N/A	
TRG Regency SPE, LLC	Delaware	N/A	
TRG Short Hills LLC	Delaware	N/A	
TRG Stamford Holdings LLC	Delaware	N/A	
TRG Sunvalley LLC	Delaware	N/A	
TRG-Tampa LLC	Delaware	N/A	
TRG Telecom LLC	Delaware	N/A	
TRG The Pier LLC	Delaware	N/A	
TRG Trust	Michigan	N/A	
TTC Transportation, LLC	Delaware	N/A	
Twelve Oaks Mall, LLC	Michigan	Twelve Oaks Mall	
Wellington Green LLC	Delaware	N/A	
Willow Bend Associates Limited Partnership	Delaware	N/A	
Willow Bend Holdings 1 LLC	Delaware	N/A	
Willow Bend Holdings 2 LLC	Delaware	N/A	
Willow Bend Kemp Limited Partnership	Delaware	N/A	
Willow Bend Realty Limited Partnership	Delaware	N/A	
Willow Bend Shopping Center Limited Partnership	Delaware	The Shops at Willow Bend	
Willow Bend SPE LLC	Delaware	N/A	
Woodland Holdings Investments LLC	Delaware	N/A	
Woodland Investment Associates Limited Partnership	Delaware	N/A	

 

 

 	Exhibit 23(a)	

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Amendment No. 1 to Form S-11, on Form S-8 Registration Statement No. 33-65934 of Taubman Centers, Inc., in Amendment No. 1 to Form S-3 Registration Statement No. 33-99636 of Taubman Centers, Inc., in Amendment No. 3 to Form S-3 Registration Statement No. 333-19503 of Taubman Centers, Inc., in Form S-3 Registration Statement No. 333-16781 of Taubman Centers, Inc., in Post-Effective Amendment No. 1 to Form S-3 Registration Statement No. 333-35433 of Taubman Centers, Inc., in Post-Effective Amendment No. 1 to Registration Statement No. 033-73038 on Form S-3 of Taubman Centers, Inc., in Form S-3 Registration Statement No, 333-117225 of Taubman Centers, Inc., in Amendment No. 1 to Form S-3 Registration Statement No. 333-125065 of Taubman Centers, Inc., and in Form S-8 Registration Statement Nos. 333-125066 and 333-81577 of Taubman Centers, Inc. of our report dated February 4, 2004 (except Note 7 relating to recoverable depreciation, to which the date is January 31, 2005) relating to the financial statements and the financial statement schedule for the year ended December 31, 2003, of Taubman Centers, Inc. appearing in this Annual Report on Form 10-K of Taubman Centers, Inc. for the year ended December 31, 2005.
 
Deloitte & Touche LLP
Detroit, Michigan
March 1, 2006

 

 
 
 	Exhibit 23(b)	

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareowners
Taubman Centers, Inc.:
 
We consent to the incorporation by reference in the registration statements, including amendments thereto, on Forms S-8 (Nos. 33-65934, 333-81577 and 333-125066) and on Form S-3 (Nos. 33-99636, 333-19503, 333-16781, 333-35433, 033-73038, 333-117225 and 333-125065) of Taubman Centers, Inc. of our reports dated February 27, 2006, with respect to (i) the consolidated balance sheets of Taubman Centers, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareowners’ equity, and cash flows for each of the years in the two-year period ended December 31, 2005 and related financial statement schedules and (ii) management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of Taubman Centers, Inc.
 
KPMG LLP
Chicago, Illinois
March 1, 2006

 

  
POWER OF ATTORNEY
 
The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 17th day of February, 2006.

 	/s/ Graham T. Allison                             	
 	Graham T. Allison	 	

 

 

POWER OF ATTORNEY
 
The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 19th day of February, 2006.

 	/s/ Allan J. Bloostein                                	
 	Allan J. Bloostein	 	

 

 
POWER OF ATTORNEY
 
The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 19th day of February, 2006.

 	/s/ J erome A. Chazen                              	
 	Jerome A. Chazen	 	

 

 

POWER OF ATTORNEY
 
The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 24th day of February, 2006.

 	/s/ Craig M. Hatkoff                                	
 	Craig M. Hatkoff	 	

 

 
 
POWER OF ATTORNEY
 
The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 19th day of February, 2006.

 	/s/ Peter Karmanos, Jr.                          	
 	Peter Karmanos, Jr.	 	

 

 
 
POWER OF ATTORNEY
 
The undersigned, a Director of Taubman Centers, Inc., a Michigan corporation (the " Company "), does hereby constitute and appoint Robert S. Taubman and Lisa A. Payne and each of them, with full power of substitution, as his true and lawful attorney and agent to execute in his name and on his behalf, as a Director of the Company, the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and any and all amendments thereto, to be filed with the Securities and Exchange Commission (the " Commission ") pursuant to the Securities Exchange Act of 1934, as amended (the " Act "), and any and all instruments that such attorneys and agents, or either of them, may deem necessary or advisable to enable the Company to comply with the Act and the rules, regulations, and requirements of the Commission. The undersigned does hereby ratify and confirm as his own act and deed all that such attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Each such attorney or agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature this 17th day of February, 2006.

 	/s/ William U. Parfet                              	
 	William U. Parfet	 	

 

 

Exhibit 31 (a)
 
Certification of Chief Executive Officer
Pursuant to 15 U.S.C. Section 10A, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Robert S. Taubman, certify that:
 
1.	I have reviewed this annual report on Form 10-K of Taubman Centers, Inc.;	
 
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 
 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 
 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 
 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 
 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	
 
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	
 
 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and	
 
 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	
 
Date: March 1, 2006	/s/ Robert S. Taubman                                          	
 	Robert S. Taubman	
 	Chairman of the Board of Directors, President, and Chief Executive Officer	

 

 
Exhibit 31 (b)
 
Certification of Chief Financial Officer
Pursuant to 15 U.S.C. Section 10A, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Lisa A. Payne, certify that:
 
1.	I have reviewed this annual report on Form 10-K of Taubman Centers, Inc.;	
 
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 
 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 
 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 
 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 
 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	
 
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	
 
 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and	
 
 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

Date: March 1, 2006	/s/ Lisa A. Payne                                                     	
 	Lisa A. Payne	
 	Vice Chairman, Chief Financial Officer, and Director (Principal Financial Officer)	

 

 
Exhibit 32 (a)
 
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, Robert S. Taubman, Chief Executive Officer of Taubman Centers, Inc. (the "Registrant"), certify that based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2005 (the "Report"):
 
 	(i)	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and	
 
 	(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.	

/s/	Robert S. Taubman                        	Date: March 1, 2006	
Robert S. Taubman
Chairman of the Board of Directors,
President, and Chief Executive Officer

 

Exhibit 32 (b)
 
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, Lisa A. Payne, Chief Financial Officer of Taubman Centers, Inc. (the "Registrant"), certify that based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2005 (the "Report"):
 
 	(i)	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and	
 
 	(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.	

 
/s/ Lisa A. Payne                                                   	Date: March 1, 2006	
Lisa A. Payne
Vice Chairman, Chief Financial Officer,
and Director (Principal Financial Officer)

 

  
Exhibit 99(a)
MORTGAGE AND OTHER NOTES PAYABLE
INCLUDING WEIGHTED INTEREST RATES AT DECEMBER 31, 2005
 (in millions of dollars, amounts may not add due to rounding)

		
100%	Beneficial
Interest	Effective
Rate	
(a)	LIBOR
Rate		
		12/31/05  	12/31/05	12/31/05	 	Spread	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	Total		

Consolidated Fixed Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
		
Beverly Center
Great Lakes Crossing
International Plaza
MacArthur Center
Regency Square
Stony Point Fashion Park
The Mall at Short Hills
The Mall at Wellington Green	
50.10%
95.00%

90.00%	347.5
145.2
182.1
140.9
 78.8
113.2
540.0
200.0	347.5
145.2
 91.1
134.0
 78.8
113.2
540.0
180.0	 5.28%
 5.25%
 4.38%
 6.84%
 6.75%
 6.24%
 5.47%
 5.44%	   
   
(b)
(c)

   
   		3.9
2.3
1.6
2.6
1.1
1.4
 
 	4.8
2.5
1.7
2.7
1.1
1.5
 
 	5.0
2.6
87.8
2.8
1.2
1.5
 
 	5.4
2.7
 
3.0
1.3
1.6
 
 	5.7
2.9
 
122.9
1.4
1.8

 	6.0
3.0

72.7
1.9

 	6.3
3.2

2.0

 	6.6
126.0

2.1

 	303.8

99.5

 

 
540.0
180.0	347.5
145.2
 91.1
134.0
 78.8
113.2
540.0
180.0		
		
Total Consolidated Fixed
Weighted Rate

Consolidated Floating Rate Debt:
Dolphin Mall
Oyster Bay
The Shops at Willow Bend
The Shops at Willow Bend
TRG Revolving Credit
TRG Revolving Credit	

	1,747.8
5.51%

141.3
 56.2
 96.4
 48.2
 0.0
0.0	1,629.9
5.57%

141.3
 56.2
 96.4
 48.2
  0.0
0.0	 

6.52%
6.29%
5.87%
8.12%

   

(d)
(e)
(f)
(g)
(h)
(e)	      

2.15%
2.00%
1.50%
3.75%
      
0.80%	12.8
5.69%

 
56.2
 96.4
 48.2

     	14.3
5.68%

141.3
 (i)             
 (i)             
 (i)             

 	100.9
4.57%

 (j)             

             
     0.0
    0.0	14.1
5.86%

     

     
     
(k)             	134.6
6.73%

     

     
     
     	 83.6
6.58%

     

     
     
     	 11.4
5.44%

     

     
     
     	134.8
5.27%

     

     
     
     	403.3
5.52%

     

     
     
     	720.0
5.46%

     

     
     
     	1,629.9

141.3
 56.2
 96.4
 48.2
  0.0
0.0		
		
Total Consolidated Floating
Weighted Rate

Total Consolidated
Weighted Rate		  342.2
  6.52%

2,089.9
  5.68%	  342.2
  6.52%

1,972.0
  5.74%				200.8
6.53%

213.7
6.48%	141.3
6.52%

155.6
6.44%	0.00
0.00%

100.9
4.57%	     

14.1
5.86%	     

134.6
6.73%	     

 83.6
6.58%	     

 11.4
5.44%	     

134.8
5.27%	     

403.3
5.52%	     

720.0
5.46%	  342.2

1,972.0

Joint Ventures Fixed Rate Debt:		
		
Arizona Mills
Cherry Creek Shopping Center
Fair Oaks
Mall at Millenia
Sunvalley
Westfarms	50.00%
50.00%
50.00%
50.00%
50.00%
78.94%	139.4
174.0
140.0
210.0
129.9
201.4	 69.7
 87.0
 70.0
105.0
 65.0
159.0	7.90%
7.68%
6.60%
5.46%
5.67%
6.10%			 0.8
87.0

 1.0
 2.3	0.9
(l)           

1.0
2.4	 0.9
    
70.0
 0.9
 1.1
 2.6	1.0

1.4
1.2
2.7	66.0

 1.5
 1.2
 2.9	   

1.6
1.3
3.1	     

  1.6
 58.2
142.9	     

 98.1

     

 

     

     	 69.7
 87.0
 70.0
105.0
 65.0
159.0		
		
Total Joint Venture Fixed
Weighted Rate

Joint Ventures Floating Rate Debt:
Other	      

      	994.7
  6.51%

    4.8	555.6
6.46%

  2.8	     

6.98%	   

   	     

     	 91.1
7.62%

  1.0	  4.3
6.36%

  0.8	75.5
6.57%

  0.5	  6.3
6.17%

  0.4	 71.7
7.73%

  0.1	  6.0
5.84%

     	202.7
5.97%

     	 98.1
5.46%

     	 

     	 

     	555.6

  2.8		
		
Total Joint Venture Floating
Weighted Rate

Total Joint Venture
Weighted Rate		   4.8
6.98%

999.5
  6.51%	    2.8
6.98%

558.4
6.47%				  1.0
6.98%

 92.1
7.61%	  0.8
6.98%

  5.1
6.46%	  0.5
6.98%

 75.9
6.57%	  0.4
6.98%

  6.7
6.22%	  0.1
6.98%

 71.8
7.73%	     

  6.0
5.84%	     

202.7
5.97%	     

 98.1
5.46%	     

 

 
 	  2.8

 558.4		

TRG Beneficial Interest Totals
Fixed Rate Debt (m)
                               
Floating Rate Debt
                               
Total

                               	 	

  2,742.5
   5.87%
    347.0
   6.53%
  3,089.5
   5.95%

  2,185.5
   5.80%
    345.0
   6.53%
  2,530.5
   5.90%

Average
Maturity		 

6.22
=====		     

103.9
7.38%
201.9
6.53%
305.8
6.82%	     

 18.6
5.84%
142.1
6.52%
160.7
6.44%	     

176.4
5.43%
0.5
6.98%
176.8
5.43%	     

20.4
5.96%
0.4
6.98%
20.8
5.98%	     

206.3
7.08%
0.1
6.98%
206.4
7.08%	     

 89.6
6.53%

 89.6
6.53%	     

214.1
5.94%

214.1
5.94%	     

232.9
5.35%

232.9
5.35%	     

403.3
5.52%

403.3
5.52%	     

720.0
5.46%

720.0
5.46%	        

2,185.5

 345.0

2,530.5		
(a)	Includes the impact of interest rate swaps, if any, but does not include effect of amortization of debt issuance costs, losses on settlement of derivatives used to hedge the refinancing of certain fixed rate debt, or interest rate cap premiums.	
(b)	Debt is reduced by $0.3 million of purchase accounting discount from acquisition which increases the stated rate on the debt of 4.21% to an effective rate of 4.38%.	
(c)	Debt includes $3.6 million of purchase accounting premium from acquisition which reduces the stated rate on the debt of 7.59% to an effective rate of 6.84%.	
(d)	The debt is floating month to month at LIBOR plus spread and the entire debt balance is capped at 7% plus spread to February 2007.	
(e)	LIBOR rate floats month to month.	
(f)	LIBOR rate is floating month to month. $94.7 million of this debt is capped at 4.6% plus spread to July 2006.	
(g)	LIBOR rate is floating month to month. $47.3 million of this debt is capped at 5.75% plus spread to July 2006.	
(h)	Rate floats daily.	
(i)	The loan was repaid in February 2006.	
(j)	Maturity date may be extended for 2 additional years. The Company plans to pay off the loan when it becomes prepayable without penalty in August 2006.	
(k)	Maturity date may be extended for 1 year.	
(l)	A lender has agreed to lock the rate on $190 million of a planned refinancing at 5.01%. The new loan is expected to close in the 2nd quarter of 2006.	
(m)	In January 2006, the Company entered into a rate lock on $215.5 million of a planned financing of Northlake Mall. The financing closed in February 2006.	
  
Exhibit 99(b)
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2005
(in thousands)

												
	Initial Cost
to Company		Gross Amount at Which
Carried at Close of Period						
	Land	Buildings,
Improvements,
and Equipment	Cost
Capitalized
Subsequent
to Acquisition	Land	BI&E	Total	Accumulated
Depreciation
(A/D)	Total
Cost Net
of A/D	Encumbrances	Date of
Completion of
Construction or
Acquisition	Depreciable
Life	
Shopping Centers:	 	 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 	 	 	 	 	 	
  Arizona Mills, Tempe, AZ	 	 	$	22,017	 	$	163,473	 	$	6,685	 	$	22,017	 	$	170,158	 	$	192,175	 	$	49,241	 	$	142,934	 	$	139,408	 	1997	 		50 Years		
  Cherry Creek, Denver, CO	 	 		55	 	 	99,205	 	 	75,375	 		55	 	 	174,580	 	 	174,635	 	 	72,873	 	 	101,762	 	 	173,984	 	1990	 	 	40 Years	 	 	
  Fair Oaks, Fairfax, VA	 	 	 	7,667	 	 	36,043	 	 	55,692	 	 	7,667	 	 	91,735	 	 	99,402	 	 	42,646	 	 	56,756	 	 	140,000	 	1980	 	 	55 Years	 	 	
  The Mall at Millenia, Orlando, FL	 	 	 	18,516	 	 	183,438	 	 	2,559	 	 	18,516	 	 	185,997	 	 	204,513	 	 	26,645	 	 	177,868	 	 	211,004	(1)	2002	 	 	50 Years	 	 	
  Stamford Town Center, Stamford, CT	 	 	 	9,538	 	 	42,320	 	 	25,427	 	 	9,538	 	 	67,747	 	 	77,285	 	 	39,437	 	 	37,848	 	 			1982	 		40 Years		
  Sunvalley, Concord, CA	 	 	 	354	 	 	65,714	 	 	6,044	 	 	354	 	 	71,758	 	 	72,112	 	 	44,143	 	 	27,969	 	 	129,905		1967	 		40 Years		
  Waterside Shops at Pelican Bay, Naples, FL	 	 	 	8,531	 	 	67,392	 	 	184	 	 	8,531	 	 	67,576	 	 	76,107	 	 	26,734	 	 	49,373	 	 		 	2003	 	 	40 Years	 	 	
  Westfarms, Farmington, CT	 	 	 	5,287	 	 	38,638	 	 	108,205	 	 	5,287	 	 	146,843	 	 	152,130	 	 	61,675	 	 	90,455	 	 	201,417	 	1974	 	 	34 Years	 	 	
Other:	 	 		
  Peripheral Land	 	 	 	1,547	 	 	 	 	 		 	 	1,547	 	 		 	 	1,547	 	 	 	 	 	1,547	 	 	 	 		
  Construction in process and	 	 		
    development pre-construction costs	 	 	 	 	 	 		 	 	26,837	 	 	 	 	 	26,837	 	 	26,837	 	 	 	 	 	26,837	 	 		 		
																		
TOTAL	 	 	$	73,512	 	$	696,223	 	$	307,008	 	$	73,512	 	$	1,003,231	 	$	1,076,743	(2)	$	363,394		$	713,349		
																		
The changes in total real estate assets and accumulated depreciation for the years ended December 31, 2005, 2004, and 2003 are as follows:

		2005	2004	2003	
	 	 	 	 	 	 		 	 		 	 		 	
                                                     Balance, beginning of year	 	 	 	 	 	$	1,080,482	 	$	1,250,964	 	$	1,248,335	 	
                                                       Improvements	 	 	 	 	 	 	67,023	 	 	23,117	 	 	7,382	 	
                                                       Acquisitions	 	 	 	 	 	 			 	75,918	   (3)				
                                                       Disposals/write-offs	 	 	 	 	 	 	(18,251	)	 	(6,916	)	 	(4,753	)	
                                                       Transfers Out	 	 	 	 	 	 	(52,511	)  (4)	 	(262,601	)  (5)	 	 	 	
								
                                                     Balance, end of year	 	 		 	 	$	1,076,743	   (6)	$	1,080,482		$	1,250,964	   (7)	
								
The changes in accumulated depreciation and amortization for the years ended December 31, 2005, 2004, and 2003 are as follows:

		2005	2004	2003	
	 	 	 	 	 	 		 	 		 	 		 	
                                                     Balance, beginning of year	 	 	 	 	 	$	(360,830	)	$	(331,321	)	$	(287,670	)	
                                                       Depreciation for year	 	 	 	 	 	 	(38,616	)	 	(43,486	)	 	(48,404	)	
                                                       Acquisitions	 	 	 	 	 	 	 	 	 	(22,634	)  (3)	 			
                                                       Disposals/write-offs	 	 	 	 	 	 	9,460	 	 	6,916		 	4,753		
                                                       Transfers Out	 	 	 	 	 	 	26,592	   (4)	 	29,695	   (5)	 	 		
								
                                                     Balance, end of year	 	 		 	 	$	(363,394	)	$	(360,830	)	$	(331,321	)  (7)	

(1)	Includes a term loan of $1,004, secured by certain equipment.	
(2)	The unaudited aggregate cost for federal income tax purposes as of December 31, 2005 was $1.238 billion.	
(3)	Includes costs relating to the purchase of a 25% interest in Waterside Shops at Pelican Bay, which became an Unconsolidated Joint Venture in 2003.	
(4)	Includes costs relating to Woodland, which was sold in 2005.	
(5)	Subsequent to TRG’s July 1, 2004 purchase of a joint venture partner’s interest, the accounts of International Plaza are no longer included in these combined financial statements.	
(6)	Excludes costs related to the investment in The Pier at Caesars, which is currently under construction.	
(7)	Excludes costs relating to a 25% ownership interest in Waterside Shops at Pelican Bay, which was acquired in December 2003.