UNITED STATES	
SECURITIES AND EXCHANGE COMMISSION	
WASHINGTON, D.C. 20549	

Form 10-Q	

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)	
OF THE SECURITIES EXCHANGE ACT OF 1934	

For the Quarterly Period Ended: June 30, 2010	
Commission File No. 1-11530	

Taubman Centers, Inc.	
(Exact name of registrant as specified in its charter)

Michigan	 	38-2033632	
(State or other jurisdiction of
incorporation or organization)
 	 	(I.R.S. Employer Identification No.)	
200 East Long Lake Road, Suite 300, Bloomfield Hills, Michigan	 	48304-2324	
(Address of principal executive offices)	 	(Zip code)
 	
(248) 258-6800	
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	
 	
x Yes o No	
 	
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	
 	
x Yes o No	
 	
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer,” “accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):	
 	
Large Accelerated Filer x Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company o	
(Do not check if a smaller reporting company)	
 	
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).	
 	
o Yes x No	

As of July 30, 2010, there were outstanding 54,679,877 shares of the Company's common stock, par value $0.01 per share.	

 

Table of Contents
TAUBMAN CENTERS, INC.
CONTENTS

PART I – FINANCIAL INFORMATION	
Item 1.	Financial Statements (Unaudited):	 	
 	Consolidated Balance Sheet – June 30, 2010 and December 31, 2009	2	
 	Consolidated Statement of Operations and Comprehensive Income – Three Months Ended June 30, 2010 and 2009	3	
 	Consolidated Statement of Operations and Comprehensive Income – Six Months Ended June 30, 2010 and 2009	4	
 	Consolidated Statement of Changes in Equity – Six Months Ended June 30, 2010 and 2009	5	
 	Consolidated Statement of Cash Flows – Six Months Ended June 30, 2010 and 2009	6	
 	Notes to Consolidated Financial Statements	7	
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24	
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42	
Item 4.	Controls and Procedures	42	
PART II – OTHER INFORMATION
 	
Item 1.	Legal Proceedings	43	
Item 1A.	Risk Factors	43	
Item 6.	Exhibits	44	
SIGNATURES	 	 	

 
1

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

 	 	June 30
2010	 	 	December 31
2009	 	
Assets:	 	 	 	 	 	 	
Properties	 	$	 3,495,599	 	 	$	 3,496,853	 	
Accumulated depreciation and amortization	 	 	(1,148,314	)	 	 	(1,100,610	)	
 	 	$	 2,347,285	 	 	$	 2,396,243	 	
Investment in Unconsolidated Joint Ventures (Note 3)	 	 	89,007	 	 	 	89,804	 	
Cash and cash equivalents	 	 	9,227	 	 	 	16,176	 	
Accounts and notes receivable, less allowance for doubtful accounts of $8,049 and $6,894 in 2010 and 2009	 	 	39,383	 	 	 	44,503	 	
Accounts receivable from related parties	 	 	1,702	 	 	 	1,558	 	
Deferred charges and other assets	 	 	74,326	 	 	 	58,569	 	
 	 	$	2,560,930	 	 	$	2,606,853	 	
Liabilities:	 	 	 	 	 	 	 	 	
Notes payable (Note 4)	 	$	 2,688,242	 	 	$	 2,691,019	 	
Accounts payable and accrued liabilities	 	 	224,057	 	 	 	230,276	 	
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures (Note 3)	 	 	159,090	 	 	 	160,305	 	
 	 	$	 3,071,389	 	 	$	 3,081,600	 	
Commitments and contingencies (Notes 4, 6, 7, and 8)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Equity:	 	 	 	 	 	 	 	 	
Taubman Centers, Inc. Shareowners’ Equity:	 	 	 	 	 	 	 	 	
Series B Non-Participating Convertible Preferred Stock, $0.001 par and liquidation value, 40,000,000 shares authorized, 26,233,126 and 26,359,235 shares issued and outstanding at June 30, 2010 and December 31, 2009	 	$	 26	 	 	$	 26	 	
Series G Cumulative Redeemable Preferred Stock, 4,000,000 shares authorized, no par, $100 million liquidation preference, 4,000,000 shares issued and outstanding at June 30, 2010 and December 31, 2009	 	 	 	 	 	 	 	 	
Series H Cumulative Redeemable Preferred Stock, 3,480,000 shares authorized, no par, $87 million liquidation preference, 3,480,000 shares issued and outstanding at June 30, 2010 and December 31, 2009	 	 	 	 	 	 	 	 	
Common Stock, $0.01 par value, 250,000,000 shares authorized, 54,679,545 and 54,321,586 shares issued and outstanding at June 30, 2010 and December 31, 2009	 	 	547	 	 	 	543	 	
Additional paid-in capital	 	 	585,668	 	 	 	579,983	 	
Accumulated other comprehensive income (loss)	 	 	(21,654	)	 	 	(24,443	)	
Dividends in excess of net income	 	 	(916,328	)	 	 	(884,666	)	
 	 	$	 (351,741	)	 	$	 (328,557	)	
 	 	 	 	 	 	 	 	 	
Noncontrolling interests (Note 5)	 	 	(158,718	)	 	 	(146,190	)	
 	 	$	(510,459	)	 	$	(474,747	)	
 	 	$	2,560,930	 	 	$	2,606,853	 	

See notes to consolidated financial statements.

2

Table of Contents
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except share data)

 	 	Three Months Ended June 30	 	
 	 	2010	 	 	 	 	2009	 	
Revenues:	 	 	 	 	 	 	 	 	
Minimum rents	 	$	 84,081	 	 	 	 	$	 84,016	 	
Percentage rents	 	 	1,061	 	 	 	 	 	561	 	
Expense recoveries	 	 	56,334	 	 	 	 	 	58,525	 	
Management, leasing, and development services	 	 	4,007	 	 	 	 	 	3,189	 	
Other	 	 	8,599	 	 	 	 	 	12,648	 	
 	 	$	154,082	 	 	 	 	$	158,939	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	
Maintenance, taxes, and utilities	 	$	 44,535	 	 	 	 	$	 46,946	 	
Other operating	 	 	18,542	 	 	 	 	 	16,352	 	
Restructuring charge (Note 1)	 	 	 	 	 	 	 	 	169	 	
Management, leasing, and development services	 	 	2,185	 	 	 	 	 	1,930	 	
General and administrative	 	 	7,036	 	 	 	 	 	6,847	 	
Interest expense	 	 	37,923	 	 	 	 	 	36,473	 	
Depreciation and amortization	 	 	35,918	 	 	 	 	 	36,058	 	
 	 	$	146,139	 	 	 	 	$	144,775	 	
Nonoperating income	 	$	 1,150	 	 	 	 	$	 198	 	
Impairment loss on marketable securities (Note 10)	 	 	 	 	 	 	 	 	(1,666	)	
Income before income tax expense and equity in income of Unconsolidated Joint Ventures	 	$	 9,093	 	 	 	 	$	 12,696	 	
Income tax expense (Note 2)	 	 	(114	)	 	 	 	 	(198	)	
Equity in income of Unconsolidated Joint Ventures (Note 3)	 	 	9,505	 	 	 	 	 	8,368	 	
Net income	 	$	 18,484	 	 	 	 	$	 20,866	 	
Net income attributable to noncontrolling interests (Note 5)	 	 	(7,011	)	 	 	 	 	(7,938	)	
Net income attributable to Taubman Centers, Inc.	 	$	 11,473	 	 	 	 	$	 12,928	 	
Distributions to participating securities of TRG (Note 7)	 	 	(361	)	 	 	 	 	(361	)	
Preferred stock dividends	 	 	(3,659	)	 	 	 	 	(3,659	)	
Net income attributable to Taubman Centers, Inc. common shareowners	 	$	7,453	 	 	 	 	$	8,908	 	
 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	 18,484	 	 	 	 	$	 20,866	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	
Unrealized gain on interest rate instruments and other	 	 	3,466	 	 	 	 	 	4,064	 	
Reclassification adjustment for amounts recognized in net income:	 	 	 	 	 	 	 	 	 	 	
Impairment loss on marketable securities	 	 	 	 	 	 	 	 	 1,666	 	
Other	 	 	316	 	 	 	 	 	314	 	
Comprehensive income	 	$	 22,266	 	 	 	 	$	 26,910	 	
Comprehensive income attributable to noncontrolling interests	 	 	(9,206	)	 	 	 	 	(10,807	)	
Comprehensive income attributable to Taubman Centers, Inc.	 	$	13,060	 	 	 	 	$	16,103	 	

Basic earnings per common share (Note 9)	 	$	0.14	 	 	 	 	$	0.17	 	
 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per common share (Note 9)	 	$	0.14	 	 	 	 	$	0.17	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash dividends declared per common share	 	$	0.415	 	 	 	 	$	0.415	 	
 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding – basic	 	 	54,550,964	 	 	 	 	 	53,120,769	 	

See notes to consolidated financial statements.

3

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

 	 	Six Months Ended June 30	 	
 	 	2010	 	 	2009	 	
Revenues:	 	 	 	 	 	 	
Minimum rents	 	$	 167,435	 	 	$	 171,452	 	
Percentage rents	 	 	3,135	 	 	 	2,721	 	
Expense recoveries	 	 	109,255	 	 	 	115,283	 	
Management, leasing, and development services	 	 	7,063	 	 	 	6,745	 	
Other	 	 	18,683	 	 	 	20,428	 	
 	 	$	305,571	 	 	$	316,629	 	
Expenses:	 	 	 	 	 	 	 	 	
Maintenance, taxes, and utilities	 	$	 87,611	 	 	$	 91,487	 	
Other operating	 	 	36,347	 	 	 	31,317	 	
Restructuring charge (Note 1)	 	 	 	 	 	 	2,630	 	
Management, leasing, and development services	 	 	3,778	 	 	 	3,836	 	
General and administrative	 	 	14,425	 	 	 	13,735	 	
Interest expense	 	 	75,340	 	 	 	72,706	 	
Depreciation and amortization	 	 	73,002	 	 	 	72,351	 	
 	 	$	290,503	 	 	$	288,062	 	
Nonoperating income	 	$	 1,299	 	 	$	 433	 	
Impairment loss on marketable securities (Note 10)	 	 	 	   	 	 	(1,666	)	
Income before income tax expense and equity in income of Unconsolidated Joint Ventures	 	$	 16,367	 	 	$	 27,334	 	
Income tax expense (Note 2)	 	 	(310	)	 	 	(468	)	
Equity in income of Unconsolidated Joint Ventures (Note 3)	 	 	19,240	 	 	 	18,526	 	
Net income	 	$	 35,297	 	 	$	 45,392	 	
Net income attributable to noncontrolling interests (Note 5)	 	 	(13,521	)	 	 	(16,832	)	
Net income attributable to Taubman Centers, Inc.	 	$	 21,776	 	 	$	 28,560	 	
Distributions to participating securities of TRG (Note 7)	 	 	(723	)	 	 	(836	)	
Preferred stock dividends	 	 	(7,317	)	 	 	(7,317	)	
Net income attributable to Taubman Centers, Inc. common shareowners	 	$	13,736	 	 	$	20,407	 	
 	 	 	 	 	 	 	 	 	
Net income	 	$	 35,297	 	 	$	 45,392	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	
Unrealized gain on interest rate instruments and other	 	 	5,899	 	 	 	4,280	 	
Reclassification adjustment for amounts recognized in net income:	 	 	 	 	 	 	 	 	
Impairment loss on marketable securities	 	 	 	 	 	 	 1,666	 	
Other	 	 	631	 	 	 	631	 	
Comprehensive income	 	$	 41,827	 	 	$	 51,969	 	
Comprehensive income attributable to noncontrolling interests	 	 	(17,296	)	 	 	(20,129	)	
Comprehensive income attributable to Taubman Centers, Inc.	 	$	24,531	 	 	$	31,840	 	

Basic earnings per common share (Note 9)	 	$	0.25	 	 	$	0.38	 	
 	 	 	 	 	 	 	 	 	
Diluted earnings per common share (Note 9)	 	$	0.25	 	 	$	0.38	 	
 	 	 	 	 	 	 	 	 	
Cash dividends declared per common share	 	$	0.83	 	 	$	0.83	 	
 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding – basic	 	 	54,454,579	 	 	 	53,093,988	 	

See notes to consolidated financial statements.

4

Table of Contents
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(in thousands, except share data)

 	Taubman Centers, Inc. Shareowners’ Equity	 	 	 	 	 	 	 	
 	Preferred Stock	 	Common Stock	 	Paid-In Capital	 	Accumulated Other Comprehensive Income (Loss)	 	 	Dividends in Excess of Net Income	 	 	Noncontrolling Interests	 	 	Total Equity	 	

 	Shares	 	Amount	 	Shares	 	Amount	 														
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, January 1, 2009	 	33,909,235	 	$	 26	 	 	53,018,987	 	$	 530	 	$	 556,145	 	$	 (29,778	)	 	$	 (726,097	)	 	$	 (61,034	)	 	$	 (260,208	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of stock pursuant to Continuing Offer (Notes 5, 7, and 8)	 	(10,000	)	 	 	 	 	24,759	 	 	 	 	 	4	 	 	 	 	 	 	 	 	 	 	(4	)	 	 	 	 	
Share-based compensation under employee and director benefit plans (Note 7)	 	 	 	 	 	 	 	77,023	 	 	1	 	 	3,091	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,092	 	
Dividend equivalents (Note 7)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(179	)	 	 	 	 	 	 	(179	)	
Dividends and distributions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(52,249	)	 	 	(32,328	)	 	 	(84,577	)	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	28,560	 	 	 	16,832	 	 	 	45,392	 	
Other comprehensive income (Notes 6 and 10):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gain on interest rate instruments and other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,747	 	 	 	 	 	 	 	2,533	 	 	 	4,280	 	
Reclassification adjustments for amounts recognized in net income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Impairment loss on marketable securities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,112	 	 	 	 	 	 	 	554	 	 	 	1,666	 	
Other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	421	 	 	 	 	 	 	 	210	 	 	 	631	 	
Balance, June 30, 2009	 	33,899,235	 	$	26	 	 	53,120,769	 	$	531	 	$	559,240	 	$	(26,498	)	 	$	(749,965	)	 	$	(73,237	)	 	$	(289,903	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, January 1, 2010	 	33,839,235	 	$	 26	 	 	54,321,586	 	$	 543	 	$	 579,983	 	$	 (24,443	)	 	$	 (884,666	)	 	$	 (146,190	)	 	$	 (474,747	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of stock pursuant to Continuing Offer (Notes 5, 7, and 8)	 	(126,109	)	 	 	 	 	126,116	 	 	1	 	 	(624	)	 	34	 	 	 	 	 	 	 	589	 	 	 	 	 	
Share-based compensation under employee and director benefit plans (Note 7)	 	 	 	 	 	 	 	231,843	 	 	3	 	 	6,309	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6,312	 	
Dividend equivalents (Note 7)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(94	)	 	 	 	 	 	 	(94	)	
Dividends and distributions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(53,344	)	 	 	(30,413	)	 	 	(83,757	)	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	21,776	 	 	 	13,521	 	 	 	35,297	 	
Other comprehensive income (Note 6):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gain on interest rate instruments and other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,330	 	 	 	 	 	 	 	3,569	 	 	 	5,899	 	
Reclassification adjustment for amounts recognized in net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	425	 	 	 	 	 	 	 	206	 	 	 	631	 	
Balance, June 30, 2010	 	33,713,126	 	$	26	 	 	54,679,545	 	$	547	 	$	585,668	 	$	(21,654	)	 	$	(916,328	)	 	$	(158,718	)	 	$	(510,459	)	

See notes to consolidated financial statements.

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

 	 	Six Months Ended June 30	 	
 	 	2010	 	 	2009	 	
Cash Flows From Operating Activities:	 	 	 	 	 	 	
Net income	 	$	 35,297	 	 	$	 45,392	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	73,002	 	 	 	72,351	 	
Provision for bad debts	 	 	2,204	 	 	 	3,114	 	
Impairment loss on marketable securities	 	 	 	 	 	 	1,666	 	
Gain on sale of land	 	 	(1,040	)	 	 	 	 	
Other	 	 	5,528	 	 	 	4,913	 	
Increase (decrease) in cash attributable to changes in assets and liabilities:	 	 	 	 	 	 	 	 	
Receivables, deferred charges, and other assets	 	 	(8,150	)	 	 	3,472	 	
Accounts payable and other liabilities	 	 	2,050	 	 	 	(18,786	)	
Net Cash Provided By Operating Activities	 	$	108,891	 	 	$	112,122	 	
 	 	 	 	 	 	 	 	 	
Cash Flows From Investing Activities:	 	 	 	 	 	 	 	 	
Additions to properties	 	$	 (32,153	)	 	$	 (24,824	)	
Proceeds from sale of land	 	 	1,557	 	 	 	 	 	
Repayments of notes receivable	 	 	719	 	 	 	4,500	 	
Issuances of notes receivable	 	 	(2,948	)	 	 	 	 	
Contributions to Unconsolidated Joint Ventures	 	 	(6,820	)	 	 	(1,445	)	
Distributions from Unconsolidated Joint Ventures in excess of income	 	 	7,524	 	 	 	5,060	 	
Other	 	 	 	 	 	 	868	 	
Net Cash Used In Investing Activities	 	$	(32,121	)	 	$	(15,841	)	
 	 	 	 	 	 	 	 	 	
Cash Flows From Financing Activities:	 	 	 	 	 	 	 	 	
Debt proceeds	 	$	 82,500	 	 	$	 871	 	
Debt payments	 	 	(83,444	)	 	 	(38,378	)	
Debt issuance costs	 	 	(869	)	 	 	 	 	
Issuance of common stock and/or partnership units in connection with incentive plans	 	 	1,928	 	 	 	(1,204	)	
Distributions to noncontrolling interests	 	 	(30,413	)	 	 	(32,328	)	
Distributions to participating securities of TRG	 	 	(723	)	 	 	(836	)	
Cash dividends to preferred shareowners	 	 	(7,317	)	 	 	(7,317	)	
Cash dividends to common shareowners	 	 	(45,237	)	 	 	(66,092	)	
Other	 	 	(144	)	 	 	(980	)	
Net Cash Used In Financing Activities	 	$	(83,719	)	 	$	(146,264	)	
 	 	 	 	 	 	 	 	 	
Net Decrease In Cash and Cash Equivalents	 	$	 (6,949	)	 	$	 (49,983	)	
 	 	 	 	 	 	 	 	 	
Cash and Cash Equivalents at Beginning of Period	 	 	16,176	 	 	 	59,188	 	
 	 	 	 	 	 	 	 	 	
Cash and Cash Equivalents at End of Period	 	$	9,227	 	 	$	9,205	 	

See notes to consolidated financial statements.

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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Interim Financial Statements

General

Taubman Centers, Inc. (the Company or TCO) is a Michigan corporation that operates as a self-administered and self-managed real estate investment trust (REIT). The Taubman Realty Group Limited Partnership (the Operating Partnership or TRG) is a majority-owned partnership subsidiary of TCO that owns direct or indirect interests in all of the company’s real estate properties. In this report, the term “Company" refers to TCO, the Operating Partnership, and/or the Operating Partnership's subsidiaries as the context may require. The Company engages in the ownership, management, leasing, acquisition, disposition, development, and expansion of regional and super-regional retail shopping centers and interests therein. The Company’s owned portfolio as of June 30, 2010 included 23 urban and suburban shopping centers in ten states.

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

The unaudited interim financial statements should be read in conjunction with the audited financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.

Dollar amounts presented in tables within the notes to the financial statements are stated in thousands, except share data or as otherwise noted. Certain reclassifications have been made to 2009 amounts to conform with current year classifications.

Consolidation

The consolidated financial statements of the Company include all accounts of the Company, the Operating Partnership, and its consolidated subsidiaries, including The Taubman Company LLC (the Manager) and Taubman Asia.

Investments in entities not controlled but over which the Company may exercise significant influence (Unconsolidated Joint Ventures or UJVs) are accounted for under the equity method. The Company has evaluated its investments in the Unconsolidated Joint Ventures under guidance for determining whether an entity is a variable interest entity, including new amendments to ASC Topic 810 "Consolidation" that became effective January 1, 2010, and has concluded that the ventures are not variable interest entities. Accordingly, the Company accounts for its interests in these entities under general accounting standards for investments in real estate ventures (including guidance for determining effective control of a limited partnership or similar entity). The Company’s partners or other owners in these Unconsolidated Joint Ventures have substantive participating rights including approval rights over annual operating budgets, capital spending, financing, admission of new partners/members, or sale of the properties and the Company has concluded that the equity method of accounting is appropriate for these interests. Specifically, the Company’s 79% investment in Westfarms is through a general partnership in which the other general partners have approval rights over annual operating budgets, capital spending, refinancing, or sale of the property.

Ownership

In addition to the Company’s common stock, there are three classes of preferred stock (Series B, G, and H) outstanding as of June 30, 2010. Dividends on the 8% Series G and 7.625% Series H Preferred Stock are cumulative and are paid on the last day of each calendar quarter. The Company owns corresponding Series G and Series H Preferred Equity interests in the Operating Partnership that entitle the Company to income and distributions (in the form of guaranteed payments) in amounts equal to the dividends payable on the Company’s Series G and Series H Preferred Stock.

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company also is obligated to issue to partners in the Operating Partnership other than the Company, upon subscription, one share of nonparticipating Series B Preferred Stock per each Operating Partnership unit. The Series B Preferred Stock entitles its holders to one vote per share on all matters submitted to the Company’s shareowners and votes together with the common stock on all matters as a single class. The holders of Series B Preferred Stock are not entitled to dividends or earnings. The Series B Preferred Stock is convertible into the Company’s common stock at a ratio of 14,000 shares of Series B Preferred Stock for one share of common stock.

The Operating Partnership

At June 30, 2010, the Operating Partnership’s equity included three classes of preferred equity (Series F, G, and H) and the net equity of the partnership unitholders. Net income and distributions of the Operating Partnership are allocable first to the preferred equity interests, and the remaining amounts to the general and limited partners in the Operating Partnership in accordance with their percentage ownership. The Series G and Series H Preferred Equity are owned by the Company and are eliminated in consolidation. The Series F Preferred Equity is owned by an institutional investor and accounted for as a noncontrolling interest of the Company.

The Company's ownership in the Operating Partnership at June 30, 2010 consisted of a 68% managing general partnership interest, as well as the Series G and H Preferred Equity interests. The Company's average ownership percentage in the Operating Partnership for the six months ended June 30, 2010 and 2009 was 67%. At June 30, 2010, the Operating Partnership had 80,931,121 partnership units outstanding, of which the Company owned 54,679,545 units.

Finite Life Entities

ASC Topic 480, “Distinguishing Liabilities from Equity” establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. At June 30, 2010, the Company held controlling interests in consolidated entities with specified termination dates in 2081 and 2083. The noncontrolling owners’ interests in these entities are to be settled upon termination by distribution or transfer of either cash or specific assets of the underlying entity. The estimated fair value of these noncontrolling interests was approximately $107 million at June 30, 2010, compared to a book value of $(99.5) million that is classified in Noncontrolling Interests in the Company’s Consolidated Balance Sheet.

Restructuring

In 2009, in response to the decreased level of active projects due to the downturn in the economy, the Company reduced its workforce by about 40 positions, primarily in areas that directly or indirectly affect its development initiatives in the U.S. and Asia. The charge for the six months ended June 30, 2009 was $2.6 million, which primarily represented the cost of terminations of personnel.

Note 2 – Income Taxes

Income Tax Expense

The Company’s state income tax expense for the three and six months ended June 30, 2010 and 2009 is as follows:

 	 	Three Months Ended June 30	 	 	Six Months Ended    June 30	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Current	 	$	 219	 	 	$	 362	 	 	$	 495	 	 	$	 680	 	
Deferred	 	 	(105	)	 	 	(164	)	 	 	(185	)	 	 	(212	)	
Total income tax expense	 	$	114	 	 	$	198	 	 	$	310	 	 	$	468	 	

The Company expects to have less than $0.1 million of federal alternative minimum tax payable in 2010. The Company had no other federal or foreign income tax during these periods as a result of net operating losses incurred by the Company’s Taxable REIT Subsidiaries.

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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Taxes

Deferred tax assets and liabilities as of June 30, 2010 and December 31, 2009 are as follows:

 	 	2010	 	 	2009	 	
Deferred tax assets:	 	 	 	 	 	 	
Federal	 	$	 7,795	 	 	$	 8,697	 	
Foreign	 	 	1,971	 	 	 	1,513	 	
State	 	 	6,540	 	 	 	6,467	 	
Total deferred tax assets	 	$	 16,306	 	 	$	 16,677	 	
Valuation allowances	 	 	(8,732	)	 	 	(9,090	)	
Net deferred tax assets	 	$	7,574	 	 	$	7,587	 	
Deferred tax liabilities:	 	 	 	 	 	 	 	 	
Federal	 	$	 616	 	 	$	 615	 	
State	 	 	4,236	 	 	 	4,396	 	
Total deferred tax liabilities	 	$	4,852	 	 	$	5,011	 	

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

Note 3 – Investments in Unconsolidated Joint Ventures

General Information

The Company owns beneficial interests in joint ventures that own shopping centers. The Operating Partnership is the direct or indirect managing general partner or managing member of these Unconsolidated Joint Ventures, except for the ventures that own Arizona Mills, The Mall at Millenia, and Waterside Shops.

Shopping Center	Ownership as of June 30, 2010 and December 31, 2009	
Arizona Mills	   50%	
Fair Oaks	50	
The Mall at Millenia	50	
Stamford Town Center	50	
Sunvalley	50	
Waterside Shops	25	
Westfarms	79	

The Company's carrying value of its Investment in Unconsolidated Joint Ventures differs from its share of the partnership or members’ equity reported in the combined balance sheet of the Unconsolidated Joint Ventures due to (i) the Company's cost of its investment in excess of the historical net book values of the Unconsolidated Joint Ventures and (ii) the Operating Partnership’s adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the Unconsolidated Joint Ventures. The Company's additional basis allocated to depreciable assets is recognized on a straight-line basis over 40 years. The Operating Partnership’s differences in bases are amortized over the useful lives of the related assets.

In its Consolidated Balance Sheet, the Company separately reports its investment in Unconsolidated Joint Ventures for which accumulated distributions have exceeded investments in and net income of the Unconsolidated Joint Ventures. The net equity of certain joint ventures is less than zero because distributions are usually greater than net income, as net income includes non-cash charges for depreciation and amortization.

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Combined Financial Information

Combined balance sheet and results of operations information is presented in the following table for the Unconsolidated Joint Ventures, followed by the Operating Partnership's beneficial interest in the combined operations information. Beneficial interest is calculated based on the Operating Partnership's ownership interest in each of the Unconsolidated Joint Ventures.

 	 	June 30
2010	 	 	December 31
2009	 	
Assets:	 	 	 	 	 	 	
Properties	 	$	 1,095,311	 	 	$	 1,094,963	 	
Accumulated depreciation and amortization	 	 	(410,494	)	 	 	(396,518	)	
 	 	$	 684,817	 	 	$	 698,445	 	
Cash and cash equivalents	 	 	17,229	 	 	 	18,544	 	
Accounts and notes receivable, less allowance for doubtful accounts of $1,482 and $1,703 in 2010 and 2009	 	 	19,488	 	 	 	26,982	 	
Deferred charges and other assets	 	 	25,744	 	 	 	22,310	 	
 	 	$	747,278	 	 	$	766,281	 	
 	 	 	 	 	 	 	 	 	
Liabilities and accumulated deficiency in assets:	 	 	 	 	 	 	 	 	
Notes payable	 	$	 1,087,056	 	 	$	 1,092,806	 	
Accounts payable and other liabilities	 	 	36,858	 	 	 	50,615	 	
TRG's accumulated deficiency in assets	 	 	(203,234	)	 	 	(205,566	)	
Unconsolidated Joint Venture Partners' accumulated deficiency in assets	 	 	(173,402	)	 	 	(171,574	)	
 	 	$	747,278	 	 	$	766,281	 	
 	 	 	 	 	 	 	 	 	
TRG's accumulated deficiency in assets (above)	 	$	 (203,234	)	 	$	 (205,566	)	
TRG basis adjustments, including elimination of intercompany profit	 	 	69,430	 	 	 	70,371	 	
TCO's additional basis	 	 	63,721	 	 	 	64,694	 	
Net Investment in Unconsolidated Joint Ventures	 	$	 (70,083	)	 	$	 (70,501	)	
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures	 	 	159,090	 	 	 	160,305	 	
Investment in Unconsolidated Joint Ventures	 	$	89,007	 	 	$	89,804	 	

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 	 	Three Months Ended June 30	 	 	Six Months Ended June 30	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Revenues	 	$	63,722	 	 	$	63,654	 	 	$	127,062	 	 	$	129,744	 	
Maintenance, taxes, utilities, and other operating expenses	 	$	 22,845	 	 	$	 23,363	 	 	$	 43,675	 	 	$	 46,368	 	
Interest expense	 	 	 15,916	 	 	 	16,120	 	 	 	31,734	 	 	 	 32,068	 	
Depreciation and amortization	 	 	8,880	 	 	 	9,757	 	 	 	18,172	 	 	 	18,960	 	
Total operating costs	 	$	47,641	 	 	$	49,240	 	 	$	93,581	 	 	$	97,396	 	
Nonoperating income	 	 	(11	)	 	 	3	 	 	 	1	 	 	 	57	 	
Net income	 	$	16,070	 	 	$	14,417	 	 	$	33,482	 	 	$	32,405	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to TRG	 	$	 9,345	 	 	$	 8,005	 	 	$	 19,238	 	 	$	 18,265	 	
Realized intercompany profit, net of depreciation on TRG’s basis adjustments	 	 	 646	 	 	 	 849	 	 	 	 975	 	 	 	 1,234	 	
Depreciation of TCO's additional basis	 	 	(486	)	 	 	(486	)	 	 	(973	)	 	 	(973	)	
Equity in income of Unconsolidated Joint Ventures	 	$	9,505	 	 	$	8,368	 	 	$	19,240	 	 	$	18,526	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beneficial interest in Unconsolidated Joint Ventures’ operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues less maintenance, taxes, utilities, and other operating expenses	 	$	 23,076	 	 	$	 22,536	 	 	$	 46,491	 	 	$	 46,484	 	
Interest expense	 	 	 (8,248	)	 	 	(8,369	)	 	 	(16,450	)	 	 	(16,653	)	
Depreciation and amortization	 	 	(5,323	)	 	 	(5,799	)	 	 	(10,801	)	 	 	(11,305	)	
Equity in income of Unconsolidated Joint Ventures	 	$	9,505	 	 	$	8,368	 	 	$	19,240	 	 	$	18,526	 	

The estimated fair value of the Unconsolidated Joint Ventures’ notes payable was $1.1 billion at June 30, 2010 and December 31, 2009.

Note 4 – Beneficial Interest in Debt and Interest Expense

The Operating Partnership's beneficial interest in the debt, capitalized interest, and interest expense of its consolidated subsidiaries and its Unconsolidated Joint Ventures is summarized in the following table. The Operating Partnership's beneficial interest in the consolidated subsidiaries excludes debt and interest related to the noncontrolling interests in Cherry Creek Shopping Center (50%), International Plaza (49.9%), The Pier Shops (22.5%), The Mall at Wellington Green (10%), and MacArthur Center (MacArthur) (5%).

 	 	At 100%	 	 	At Beneficial Interest	 	
 	 	Consolidated Subsidiaries	 	 	Unconsolidated Joint Ventures	 	 	Consolidated Subsidiaries	 	 	Unconsolidated Joint Ventures	 	
Debt as of:	 	 	 	 	 	 	 	 	 	 	 	 	
June 30, 2010	 	$	 2,688,242	 	 	$	 1,087,056	 	 	$	 2,329,317	 	 	$	 556,378	 	
December 31, 2009	 	 	2,691,019	 	 	 	1,092,806	 	 	 	2,332,030	 	 	 	559,817	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capitalized interest:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Six months ended June 30, 2010	 	$	 59	 	 	 	 	 	 	$	 59	 	 	 	 	 	
Six months ended June 30, 2009	 	 	598	 	 	$	 23	 	 	 	588	 	 	$	 11	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Six months ended June 30, 2010	 	$	 75,340	 	 	$	 31,734	 	 	$	 64,827	 	 	$	 16,450	 	
Six months ended June 30, 2009	 	 	72,706	 	 	 	32,068	 	 	 	62,898	 	 	 	16,653	 	

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt Covenants and Guarantees

Certain loan agreements contain various restrictive covenants, including a minimum net worth requirement, a maximum payout ratio on distributions, a minimum debt yield ratio, a maximum leverage ratio, minimum interest coverage ratios and a minimum fixed charges coverage ratio, the latter being the most restrictive. Other than The Pier Shops’ loan, which is in default, the Company is in compliance with all of its covenants and loan obligations as of June 30, 2010. The default on this loan did not trigger any cross defaults on the Company’s other indebtedness. The maximum payout ratio on distributions covenant limits the payment of distributions generally to 95% of funds from operations, as defined in the loan agreements, except as required to maintain the Company's tax status, pay preferred distributions, and for distributions related to the sale of certain assets.

Payments of principal and interest on the loans in the following table are guaranteed by the Operating Partnership as of June 30, 2010.

Center	 	Loan Balance
as of 6/30/10	 	 	TRG's Beneficial Interest in Loan Balance
as of 6/30/10	 	 	Amount of Loan Balance Guaranteed by TRG
as of 6/30/10	 	 	% of Loan Balance Guaranteed by TRG	 	 	% of Interest Guaranteed by TRG	 	
 	 	(in millions)	 	 	 	 	 	 	 	
Dolphin Mall	 	$	 45.0	 	 	$	 45.0	 	 	$	 45.0	 	 	 	100	%	 	 	100	%	
Fairlane Town Center	 	 	80.0	 	 	 	80.0	 	 	 	80.0	 	 	 	100	%	 	 	100	%	
Twelve Oaks Mall	 	 	–	 	 	 	–	 	 	 	–	 	 	 	100	%	 	 	100	%	

The Company is required to escrow cash balances for specific uses stipulated by certain of its lenders. As of June 30, 2010 and December 31, 2009, the Company’s cash balances restricted for these uses were $13.3 million and $3.5 million, respectively. Such amounts are included within Deferred Charges and Other Assets in the Company’s Consolidated Balance Sheet.

Debt Maturing in 2010

In June 2010, the Company completed a 10-year, $82.5 million non-recourse financing on The Mall at Partridge Creek that bears interest at an all-in-rate of 6.25%. The loan payments are based on amortizing principal over 30 years. The existing $73.8 million floating rate loan was paid off and the excess proceeds were used to pay down the Company’s revolving line of credit.

The Company is currently working on the refinancing of the $128 million loan on MacArthur, which matures in October 2010. The new loan is expected to have a 10-year term. The proceeds on the loan are expected to be approximately equal to the current principal amount.

See Note 12 for information on the July 2010 refinancing of Arizona Mills.

The Pier Shops Loan Default

The $135 million loan encumbering The Pier Shops is currently in default. Under the terms of the agreement, interest accrues at the original stated rate of 6.01% plus a 4% default rate. The Company will continue to record the operations of the center in its results until the loan obligation is extinguished upon transfer of the title of The Pier Shops (Note 8). In addition, a non-cash accounting gain will be recognized when the loan obligation is extinguished upon transfer of title of The Pier Shops.

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 – Noncontrolling Interests

As of June 30, 2010 and December 31, 2009, noncontrolling interests in the Company are comprised of the ownership interests of (1) noncontrolling interests in the Operating Partnership and (2) the noncontrolling interests in joint ventures controlled by the Company through ownership or contractual arrangements. These noncontrolling interests reported in equity are not subject to any mandatory redemption requirements or other redemption features outside of the Company's control that would result in presentation outside of permanent equity pursuant to general accounting standards regarding the classification and measurement of redeemable equity instruments.

The net equity balance of the noncontrolling interests as of June 30, 2010 and December 31, 2009 includes the following:

 	 	2010	 	 	2009	 	
Noncontrolling interests:	 	 	 	 	 	 	
Noncontrolling interests in consolidated joint ventures	 	$	 (100,636	)	 	$	 (100,014	)	
Noncontrolling interests in partnership equity of TRG	 	 	(87,299	)	 	 	(75,393	)	
Preferred equity of TRG	 	 	29,217	 	 	 	29,217	 	
 	 	$	(158,718	)	 	$	(146,190	)	

Net income attributable to the noncontrolling interests for the three months ended June 30, 2010 and June 30, 2009 includes the following:

 	 	2010	 	 	2009	 	
Net income attributable to noncontrolling interests:	 	 	 	 	 	 	
Noncontrolling share of income of consolidated joint ventures	 	$	 (1,968	)	 	$	 (2,033	)	
TRG Series F preferred distributions	 	 	(615	)	 	 	(615	)	
Noncontrolling share of income of TRG	 	 	(4,428	)	 	 	(5,290	)	
 	 	$	(7,011	)	 	$	(7,938	)	

Net income attributable to the noncontrolling interests for the six months ended June 30, 2010 and June 30, 2009 includes the following:

 	 	2010	 	 	2009	 	
Net income attributable to noncontrolling interests:	 	 	 	 	 	 	
Noncontrolling share of income of consolidated joint ventures	 	$	 (3,981	)	 	$	 (3,726	)	
TRG Series F preferred distributions	 	 	(1,230	)	 	 	(1,230	)	
Noncontrolling share of income of TRG	 	 	(8,310	)	 	 	(11,876	)	
 	 	$	(13,521	)	 	$	(16,832	)	

Equity Transactions

The following schedule presents the effects of changes in Taubman Centers, Inc.’s ownership interest in consolidated subsidiaries on Taubman Centers, Inc.’s equity for the six months ended June 30, 2010 and June 30, 2009:

 	 	2010	 	 	2009	 	
Net income attributable to Taubman Centers, Inc. common shareowners	 	$	 13,736	 	 	$	 20,407	 	
Transfers (to) from the noncontrolling interest –	 	 	 	 	 	 	 	 	
Increase in Taubman Centers, Inc.’s paid-in capital for the acquisition of additional units of TRG under the Continuing Offer	 	 	(589	)	 	 	(4	)	
Net transfers (to) from noncontrolling interests	 	 	(589	)	 	 	(4	)	
Change from net income attributable to Taubman Centers, Inc. and transfers (to) from noncontrolling interests	 	$	13,147	 	 	$	20,403	 	

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 – Derivative and Hedging Activities

Risk Management Objective and Strategies for Using Derivatives

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

The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedging instruments under the accounting requirements for derivatives and hedging.

As of June 30, 2010, the Company has exposure to three outstanding derivatives. Two of the derivatives are receive-variable (LIBOR) /pay-fixed interest rate swaps held by 50% owned Unconsolidated Joint Ventures that have total notional balances of $250 million and $30 million with swapped rates of 4.22% (including credit spread of 1.40% on the loan) expiring April 2011 and 5.95% (including credit spread of 0.90% on the loan) expiring November 2012, respectively. The third derivative is a receive-variable (LIBOR)/pay-fixed interest rate swap held by a 50.1% owned consolidated joint venture with a total notional balance of $325 million with a swap rate of 5.01% (including credit spread of 1.15% on the loan) expiring January 2011. All three of the swaps have been designated and are expected to be effective as cash flow hedges of the interest payments on the associated debt.

Cash Flow Hedges of Interest Rate Risk

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

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

The Company expects that approximately $10.0 million of the AOCI of Taubman Centers, Inc. and the noncontrolling interests will be reclassified from AOCI and recognized as a reduction of income in the following 12 months.

As of June 30, 2010, the Company had $3.2 million of net realized losses included in AOCI resulting from settled derivative instruments, which were designated as cash flow hedges, that are being recognized as a reduction of income over the term of the hedged debt.

The tables below present the effect of derivative instruments on the Company’s Consolidated Statement of Operations and Comprehensive Income for the three and six months ended June 30, 2010 and June 30, 2009. The tables include the location and amount of unrealized gains and losses on outstanding derivative instruments in cash flow hedging relationships and the location and amount of realized losses reclassified from AOCI into income resulting from settled derivative instruments associated with hedged debt.

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended June 30, 2010 and June 30, 2009, the Company did not have any hedge ineffectiveness or amounts that were excluded from the assessment of hedge effectiveness recorded in earnings.

 	 	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)	 	Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	 	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	 	
 	 	Three months ended
June 30	 	 	 	Three months ended
June 30	 	
 	 	2010	 	 	2009	 	 	 	2010	 	 	2009	 	
Derivatives in cash flow hedging relationships:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate contract – consolidated subsidiaries	 	$	 2,868	 	 	$	 2,582	 	Interest Expense	 	$	 (2,932	)	 	$	 (2,830	)	
Interest rate contracts – UJVs	 	 	694	 	 	 	1,167	 	Equity in Income of UJVs	 	 	(979	)	 	 	(905	)	
Total derivatives in cash flow hedging relationships	 	$	3,562	 	 	$	3,749	 	 	 	$	(3,911	)	 	$	(3,735	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Realized losses on settled cash flow hedges:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate contracts – consolidated subsidiaries	 	 	 	 	 	 	 	 	Interest Expense	 	$	 (222	)	 	$	 (222	)	
Interest rate contract – UJVs	 	 	 	 	 	 	 	 	Equity in Income of UJVs	 	 	(94	)	 	 	(94	)	
Total realized losses on settled cash flow hedges	 	 	 	 	 	 	 	 	 	 	$	(316	)	 	$	(316	)	

During the six months ended June 30, 2010 and June 30, 2009, the Company did not have any hedge ineffectiveness or amounts that were excluded from the assessment of hedge effectiveness recorded in earnings.

 	 	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)	 	Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	 	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	 	
 	 	Six months ended
June 30	 	 	 	Six months ended
June 30	 	
 	 	2010	 	 	2009	 	 	 	2010	 	 	2009	 	
Derivatives in cash flow hedging relationships:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate contract – consolidated subsidiaries	 	$	 4,900	 	 	$	 3,336	 	Interest Expense	 	$	 (5,880	)	 	$	 (5,501	)	
Interest rate contracts – UJVs	 	 	934	 	 	 	1,130	 	Equity in Income of UJVs	 	 	(1,968	)	 	 	(1,774	)	
Total derivatives in cash flow hedging relationships	 	$	5,834	 	 	$	4,466	 	 	 	$	(7,848	)	 	$	(7,275	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Realized losses on settled cash flow hedges:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate contracts – consolidated subsidiaries	 	 	 	 	 	 	 	 	Interest Expense	 	$	 (443	)	 	$	 (443	)	
Interest rate contract – UJVs	 	 	 	 	 	 	 	 	Equity in Income of UJVs	 	 	(188	)	 	 	(188	)	
Total realized losses on settled cash flow hedges	 	 	 	 	 	 	 	 	 	 	$	(631	)	 	$	(631	)	

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company records all derivative instruments at fair value in the Consolidated Balance Sheet. The following table presents the location and fair value of the Company’s derivative financial instruments as reported in the Consolidated Balance Sheet as of June 30, 2010 and December 31, 2009. As of June 30, 2010 and December 31, 2009, the Company does not have any derivatives in an asset position.

 	 	 	Liability Derivatives	 	
 	Consolidated Balance Sheet Location	 	June 30 2010	 	 	December 31 2009	 	
Derivatives designated as hedging instruments:	 	 	 	 	 	 	 	
Interest rate contract – consolidated subsidiaries	Accounts Payable and Accrued Liabilities	 	$	 5,886	 	 	$	10,786	 	
Interest rate contracts – UJVs	Investment in UJVs	 	 	3,524	 	 	 	4,458	 	
Total derivatives designated as hedging instruments	 	 	$	9,410	 	 	$	15,244	 	
Total derivatives	 	 	$	9,410	 	 	$	15,244	 	

Contingent Features

As of June 30, 2010 and December 31, 2009, all three of the Company's outstanding derivatives contain provisions that state if the hedged entity defaults on any of its indebtedness in excess of $1 million, then the derivative obligation could also be declared in default. In addition, one of the three outstanding derivatives contains a provision that if the Company defaults on any of its indebtedness in excess of $1 million, then the derivative obligation could also be declared in default. Although the Company is currently in default on the debt relating to The Pier Shops, the Company is not in default on any debt obligations that would trigger a credit risk related default on its current outstanding derivatives.

As of June 30, 2010 and December 31, 2009, the fair value of derivative instruments with credit-risk-related contingent features that are in a liability position was $9.4 million and $15.2 million, respectively. As of June 30, 2010 and December 31, 2009, the Company was not required to post any collateral related to these agreements. If the Company breached any of these provisions it would be required to settle its obligations under the agreements at their fair value. See Note 10 for fair value information on derivatives.

Note 7 – Share-Based Compensation

In May 2008, the Company’s shareowners approved The Taubman Company 2008 Omnibus Long-Term Incentive Plan (2008 Omnibus Plan). The 2008 Omnibus Plan provides for the award to directors, officers, employees, and other service providers of the Company of restricted shares, restricted units of limited partnership in the Operating Partnership, options to purchase shares or Operating Partnership units, unrestricted shares or Operating Partnership units, and other awards to acquire up to an aggregate of 6.1 million Company common shares or Operating Partnership units. In addition, non-employee directors have the option to defer their compensation, other than their meeting fees, under a deferred compensation plan.

In May 2010, the Company’s shareowners approved an amendment to the 2008 Omnibus Plan to increase the Company common shares or Operating Partnership units available for awards by 2.4 million from an aggregate of 6.1 million to 8.5 million. This amendment also revised the methodology used to determine the amount of Company common shares or Operating Partnership units available for future grants. Under the 2008 Omnibus Plan (as amended) non-option awards granted after the May 2010 amendment are deducted at a ratio of 1.85 Company common shares or Operating Partnership units while non-option awards granted prior to the amendment continue to be deducted at a ratio of 2.85. Options are deducted on a one-for-one basis.  The amount available for future grants is adjusted when the number of contingently issuable shares or units are settled, for grants that are forfeited, and for options that expire without being exercised.

Prior to the adoption of the 2008 Omnibus Plan, the Company provided share-based compensation through an incentive option plan, a long-term incentive plan, and non-employee directors' stock grant and deferred compensation plans.

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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The compensation cost charged to income for the Company’s share-based compensation plans was $2.4 million and $3.9 million for the three and six months ended June 30, 2010, respectively. The compensation cost charged to income for the Company’s share-based compensation plans was $1.9 million and $3.6 million for the three and six months ended June 30, 2009, respectively. Compensation cost capitalized as part of properties and deferred leasing costs was approximately $0.1 million and $0.2 million for the three and six months ended June 30, 2010, respectively, and $0.1 million for both the three and six months ended June 30, 2009, respectively.

Options

A summary of option activity for the six months ended June 30, 2010 is presented below:

 	 	Number of Options	 	 	Weighted Average    Exercise Price	 	 	Weighted Average Remaining Contractual Term (in years)	 	 	Range of  Exercise Prices	 	
Outstanding at January 1, 2010	 	 	1,629,609	 	 	$	 35.24	 	 	 	6.8	 	 	$	13.83 - $55.90	 	
Exercised	 	 	(160,931	)	 	 	19.05	 	 	 	 	 	 	 	 	 	
Outstanding at June 30, 2010	 	 	1,468,678	 	 	$	37.01	 	 	 	6.2	 	 	$	13.83 - $55.90	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fully vested options at June 30, 2010	 	 	1,170,162	 	 	$	37.32	 	 	 	6.3	 	 	 	 	 	

The aggregate intrinsic value (the difference between the period end stock price and the option exercise price) of in-the-money options outstanding and in-the-money fully vested options as of June 30, 2010 was $8.8 million and $6.9 million, respectively.

The total intrinsic value of options exercised during the six months ended June 30, 2010 was $3.9 million. Cash received from option exercises for the six months ended June 30, 2010 was $3.1 million. No options were exercised during the six months ended June 30, 2009.

As of June 30, 2010 there were 0.3 million nonvested options outstanding, and $0.4 million of total unrecognized compensation cost related to nonvested options. That cost is expected to be recognized over a weighted average period of 1.4 years.

Under both the prior option plan and the 2008 Omnibus 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 Operating Partnership pays distributions, the deferred option units receive their proportionate share of the distributions in the form of cash payments. Beginning with the ten year anniversary of the date of exercise (unless Mr. Taubman retires earlier), the deferred partnership units will be issued in ten annual installments. The deferred units are accounted for as participating securities of the Operating Partnership.

Performance Share Units

In May 2010, the Company granted Performance Share Units (PSU) under the 2008 Omnibus Plan (as amended). Each PSU represents the right to receive, upon vesting, shares of the Company’s common stock ranging from 0-300% of the PSU based on the Company’s market performance relative to that of a peer group. The vesting date is in March 2013 if continuous service has been provided or upon retirement or certain other events if earlier. No dividends accumulate during the vesting period.

The Company estimated the value of the PSU granted during the six months ended June 30, 2010 using a Monte Carlo simulation, considering historical returns of the Company and the peer group of companies, a risk-free interest rate of 1.1%, and a measurement period of 2.78 years. When used in the simulation, the value of the Company’s stock was reduced by the discounted present value of expected dividends during the vesting period. The resulting weighted average grant-date fair value was $63.54 per PSU.

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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of PSU activity for the six months ended June 30, 2010 is presented below:

 	 	Number of Performance Stock Units	 	 	Weighted Average Grant Date Fair Value	 	
Outstanding at January 1, 2010	 	 	196,943	 	 	$	 15.60	 	
Granted	 	 	75,413	 	 	 	63.54	 	
Outstanding at June 30, 2010	 	 	272,356	 	 	$	 28.88	 	

None of the PSU outstanding at June 30, 2010 were vested. As of June 30, 2010, there was $6.0 million of total unrecognized compensation cost related to nonvested PSU outstanding. This cost is expected to be recognized over an average period of 2.4 years.

Restricted Share Units

In 2010, restricted share units (RSU) were issued under the 2008 Omnibus Plan (as amended) and represent the right to receive upon vesting one share of the Company’s common stock. The vesting date is March 2013 if continuous service has been provided for that period, or upon retirement or certain other events if earlier. No dividends accumulate during the vesting period.

The Company estimated the value of the RSU granted during the six months ended June 30, 2010 using the Company’s common stock at the grant date deducting the present value of expected dividends during the vesting period using a risk-free rate of 1.1%. The result of the Company’s valuation was a weighted average grant-date fair value of $35.37.

A summary of Restricted Share Units (RSU) activity for the six months ended June 30, 2010 is presented below:

 	 	Number of Restricted Stock Units	 	 	Weighted Average Grant Date Fair Value	 	
Outstanding at January 1, 2010	 	 	567,110	 	 	$	 24.92	 	
Granted	 	 	144,588	 	 	 	35.37	 	
Redeemed	 	 	(91,757	)	 	 	56.44	 	
Forfeited	 	 	(2,057	)	 	 	14.71	 	
Outstanding at June 30, 2010	 	 	617,884	 	 	$	 22.72	 	

All of the RSU outstanding at June 30, 2010 were nonvested. As of June 30, 2010, there was $7.0 million of total unrecognized compensation cost related to nonvested RSU outstanding. This cost is expected to be recognized over an average period of 2.1 years.

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 – Commitments and Contingencies

Cash Tender

At the time of the Company's initial public offering and acquisition of its partnership interest in the Operating Partnership in 1992, the Company entered into an agreement (the Cash Tender Agreement) with A. Alfred Taubman, who owns an interest in the Operating Partnership, whereby he has the annual right to tender to the Company partnership units in the Operating Partnership (provided that the aggregate value is at least $50 million) and cause the Company to purchase the tendered interests at a purchase price based on a market valuation of the Company on the trading date immediately preceding the date of the tender. At A. Alfred Taubman's election, his family may participate in tenders. The Company will have the option to pay for these interests from available cash, borrowed funds, or from the proceeds of an offering of the Company's common stock. Generally, the Company expects to finance these purchases through the sale of new shares of its stock. The tendering partner will bear all market risk if the market price at closing is less than the purchase price and will bear the costs of sale. Any proceeds of the offering in excess of the purchase price will be for the sole benefit of the Company. The Company accounts for the Cash Tender Agreement between the Company and Mr. Taubman as a freestanding written put option. As the option put price is defined by the current market price of the Company's stock at the time of tender, the fair value of the written option defined by the Cash Tender Agreement is considered to be zero.

Based on a market value at June 30, 2010 of $37.63 per common share, the aggregate value of interests in the Operating Partnership that may be tendered under the Cash Tender Agreement was approximately $0.9 billion. The purchase of these interests at June 30, 2010 would have resulted in the Company owning an additional 30% interest in the Operating Partnership.

Continuing Offer

The Company has made a continuing, irrevocable offer to all present holders (other than certain excluded holders, including A. Alfred Taubman), permitted 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, all existing optionees under the previous option plan, and all existing and future optionees under the 2008 Omnibus Plan (as amended) to exchange shares of common stock for partnership interests in the Operating Partnership (the Continuing Offer). Under the Continuing Offer agreement, one unit of the Operating Partnership interest is exchangeable for one share of the Company's common stock. Upon a tender of Operating Partnership units, the corresponding shares of Series B Preferred Stock, if any, will automatically be converted into the Company’s common stock at a rate of 14,000 shares of Series B Preferred Stock for one common share.

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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Litigation

In September 2009, a restaurant owner filed a lawsuit in Superior Court of the State of California for the County of Los Angeles (Case No. BC 421212) against Taubman Centers, Inc., the Operating Partnership, and the Manager. The plaintiff is alleging breach of oral agreement, promissory estoppel, specific performance, and fraud related to a proposed lease. The plaintiff is seeking damages exceeding $10 million, lost profits, restitution on its current lease, exemplary or punitive damages, and specific performance. The lawsuit is in its discovery phase and the Company is vigorously defending it. The outcome of this lawsuit cannot be predicted with any certainty and management is currently unable to estimate an amount or range of potential loss that could result if an unfavorable outcome occurs.

In April 2009, two restaurant owners, their two restaurants, and their principal filed a lawsuit in United States District Court for the Eastern District of Pennsylvania (Case No. CV01619) against Atlantic Pier Associates LLC ("APA", the owner of the leasehold interest in The Pier Shops), the Operating Partnership, Taubman Centers, Inc., the owners of APA and certain affiliates of such owners, and a former employee of one of such affiliates. The plaintiffs are alleging the defendants misrepresented and concealed the status of certain tenant leases at The Pier Shops and that such status was relied upon by the plaintiffs in making decisions about their own leases. The plaintiffs are seeking damages exceeding $20 million, rescission of their leases, exemplary or punitive damages, costs and expenses, attorney’s fees, return of certain rent, and other relief as the court may determine. The lawsuit is in its early legal stages and the defendants are vigorously defending it. The outcome of this lawsuit cannot be predicted with any certainty and management is currently unable to estimate an amount or range of potential loss that could result if an unfavorable outcome occurs.

While management does not believe that an adverse outcome in either or both of the above lawsuits would have a material adverse effect on the Company's financial condition, there can be no assurance that adverse outcomes would not have material effects on the Company's results of operations for any particular period.

In April 2010, the holder of the mortgage on The Pier Shops filed a mortgage foreclosure complaint in the United States District Court for the District of New Jersey (Case No. CV01755) against APA. The plaintiff seeks to establish the amounts due under The Pier Shops’ mortgage loan agreement, foreclose all right, title, and lien which APA has in The Pier Shops’ leasehold interest, obtain possession of the property, and order a foreclosure sale of the property to satisfy the amounts due under the loan. The Company anticipates that the foreclosure will be completed in the third quarter of 2010, at which time ownership of The Pier Shops will be transferred in satisfaction of the obligations under the debt. However, the foreclosure process is not in the Company’s control and possibly transfer of title may not be completed until later.

Other

See Note 4 for the Operating Partnership's guarantees of certain notes payable, Note 6 for contingent features relating to derivative instruments, and Note 7 for obligations under existing share-based compensation plans.

Note 9 – Earnings Per Share

Basic earnings per share amounts are based on the weighted average of common shares outstanding for the respective periods. Diluted earnings per share amounts are based on the weighted average of common shares outstanding plus the dilutive effect of potential common stock. Potential common stock includes outstanding partnership units exchangeable for common shares under the Continuing Offer (Note 8), outstanding options for partnership units, PSU, RSU, deferred shares under the Non-Employee Directors’ Deferred Compensation Plan, and unissued partnership units under a unit option deferral election. In computing the potentially dilutive effect of potential common stock, partnership units are assumed to be exchanged for common shares under the Continuing Offer, increasing the weighted average number of shares outstanding. The potentially dilutive effects of partnership units outstanding and/or issuable under the unit option deferral elections are calculated using the if-converted method, while the effects of other potential common stock are calculated using the treasury method. Contingently issuable shares are included in diluted EPS based on the number of shares, if any, that would be issuable if the end of the reporting period were the end of the contingency period.

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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2010, there were 8.5 million partnership units outstanding and 0.9 million unissued partnership units under unit option deferral elections that may be exchanged for common shares of the Company under the Continuing Offer. These outstanding partnership units and unissued units were excluded from the computation of diluted earnings per share as they were anti-dilutive in all periods presented. Also, there were out-of-the-money options for 0.5 million and 0.6 million shares for the three and six months ended June 30, 2010, respectively, and 1.4 million shares for both the three and six months ended June 30, 2009 that were excluded from the computation of diluted EPS because they were anti-dilutive in these periods.

 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	June 30	 	 	June 30	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Net income attributable to Taubman Centers, Inc. common shareowners (Numerator):	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	 7,453	 	 	$	 8,908	 	 	$	 13,736	 	 	$	 20,407	 	
Impact of additional ownership of TRG	 	 	56	 	 	 	36	 	 	 	104	 	 	 	55	 	
Diluted	 	$	7,509	 	 	$	8,944	 	 	$	13,840	 	 	$	20,462	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares (Denominator) – basic	 	 	54,550,964	 	 	 	53,120,769	 	 	 	54,454,579	 	 	 	53,093,988	 	
Effect of dilutive securities	 	 	1,060,923	 	 	 	546,099	 	 	 	1,036,356	 	 	 	372,575	 	
Shares (Denominator) – diluted	 	 	55,611,887	 	 	 	53,666,868	 	 	 	55,490,935	 	 	 	53,466,563	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per common share – basic	 	$	0.14	 	 	$	0.17	 	 	$	0.25	 	 	$	0.38	 	
Earnings per common share – diluted	 	$	0.14	 	 	$	0.17	 	 	$	0.25	 	 	$	0.38	 	

Note 10 – Fair Value Disclosures

This note contains required fair value disclosures for assets and liabilities remeasured at fair value on a recurring basis and financial instruments carried at other than fair value, as well as assumptions employed in deriving these fair values.

Recurring Valuations

Derivative Instruments

The fair value of interest rate hedging instruments is the amount that the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the reporting date. The Company’s valuations of its derivative instruments are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative, and therefore fall into Level 2 of the fair value hierarchy. The valuations reflect the contractual terms of the derivatives, including the period to maturity, and use observable market-based inputs, including forward curves. The fair values of interest rate hedging instruments also incorporate credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty's nonperformance risk.

Marketable Securities

The Company's valuations of marketable securities, which are considered to be available-for-sale, and an insurance deposit utilize unadjusted quoted prices determined by active markets for the specific securities the Company has invested in, and therefore fall into Level 1 of the fair value hierarchy.

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of the fair value for each major category of assets and liabilities is presented below:

 	 	Fair Value Measurements as of
June 30, 2010 Using	 	 	Fair Value Measurements as of
December 31, 2009 Using	 	
Description	 	Quoted Prices in Active Markets for Identical Assets
(Level 1)	 	 	Significant Other Observable Inputs
(Level 2)	 	 	Quoted Prices in Active Markets for Identical Assets
(Level 1)	 	 	Significant Other Observable Inputs
(Level 2)	 	
Available-for-sale securities	 	$	 1,730	 	 	 	 	 	$	 1,665	 	 	 	 	
Insurance deposit	 	 	10,359	 	 	 	 	 	 	9,689	 	 	 	 	
Total assets	 	$	12,089	 	 	 	 	 	$	11,354	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivative interest rate contract (Note 6)	 	 	 	 	 	$	(5,886	)	 	 	 	 	 	$	(10,786	)	
Total liabilities	 	 	 	 	 	$	(5,886	)	 	 	 	 	 	$	(10,786	)	

The insurance deposit shown above represents an escrow account maintained in connection with a property and casualty insurance arrangement for the Company’s shopping centers, and is classified within Deferred Charges and Other Assets. Corresponding deferred revenue relating to amounts billed to tenants for this arrangement has been classified within Accounts Payable and Other Liabilities.

The available-for-sale securities shown above consist of marketable securities that represent shares in a Vanguard REIT fund that were purchased to facilitate a tax efficient structure for the 2005 disposition of Woodland mall and is classified within Deferred Charges and Other Assets. In the second quarter of 2009, the Company concluded that a decrease in value was other than temporary, and therefore recognized a $1.7 million impairment loss.

Financial Instruments Carried at Other Than Fair Values

Community Development District Obligation

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 June 30, 2010 and December 31, 2009, the book value of the infrastructure assets and improvements, net of depreciation, was $44.8 million and $45.8 million, respectively. The related obligation is classified within Accounts Payable and Accrued Liabilities and had a balance of $63.3 million at June 30, 2010 and December 31, 2009. The fair value of this obligation, derived from quoted market prices, was $61.6 million at June 30, 2010 and $59.8 million at December 31, 2009.

Notes Payable

The fair value of notes payable is estimated based on quoted market prices, if available. If no quoted market prices are available, the fair value of mortgages and other notes payable are estimated using cash flows discounted at current market rates. When selecting discount rates for purposes of estimating the fair value of notes payable at June 30, 2010 and December 31, 2009, the Company employed the credit spreads at which the debt was originally issued plus an additional 1.5% and 2% credit spread at June 30, 2010 and December 31, 2009, respectively, to account for current market conditions. This additional spread is an estimate and is not necessarily indicative of what the Company could obtain in the market at the reporting date. The Company does not believe that the use of different interest rate assumptions would have resulted in a materially different fair value of notes payable as of June 30, 2010 or December 31, 2009. To further assist financial statement users, the Company has included with its fair value disclosures an analysis of interest rate sensitivity. The fair values of the loans on The Pier Shops and Regency Square, at June 30, 2010 and December 31, 2009, have been estimated at the fair value of the centers, which are collateral for the loans.

 
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TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair values of notes payable at June 30, 2010 and December 31, 2009 are as follows:

 	 	2010	 	 	2009	 	
 	 	Carrying Value	 	 	Fair Value	 	 	Carrying Value	 	 	Fair Value	 	
Notes payable	 	$	 2,688,242	 	 	$	 2,652,417	 	 	$	 2,691,019	 	 	$	 2,523,759	 	

The fair values of the notes payable are dependent on the interest rates used in estimating the values. An overall 1% increase in rates employed in making these estimates would have decreased the fair values of the debt shown above at June 30, 2010 by $85.0 million or 3.3%.

See Note 3 regarding the fair value of the Unconsolidated Joint Ventures’ notes payable, and Note 6 regarding additional information on derivatives.

Note 11 – New Accounting Pronouncement

In September 2009, the FASB ratified the EITF’s consensus on “Multiple-Deliverable Revenue Arrangements”, contained in Accounting Standards Update No. 2009-13. This consensus amends previous accounting guidance on separating consideration in multiple-deliverable arrangements. This consensus eliminates the residual method of allocation in previous guidance and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price. This consensus also establishes a selling price hierarchy based on available evidence for determining the selling price of a deliverable, (i) first on vendor-specific objective evidence, (ii) then third party evidence, and (iii) then the estimated selling price. This consensus also requires that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This consensus is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the application of the EITF’s consensus on its results of operations and financial position.

Note 12 – Subsequent Event

In July 2010, a 10-year, $175 million non-recourse refinancing was completed on Arizona Mills, a 50% owned joint venture, which bears interest at an all-in-rate of 5.83%. The payments are based on amortizing principal over 30 years. The proceeds were used to pay off the existing $131 million 7.90% fixed rate loan and the Company’s share of excess proceeds was used to pay down the Company’s revolving line of credit.

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our expectations or beliefs concerning future events, including the following: statements regarding future developments and joint ventures, rents, returns, and earnings; statements regarding the continuation of trends; and any statements regarding the sufficiency of our cash balances and cash generated from operating, investing, and financing activities for our future liquidity and capital resource needs. We caution that although forward-looking statements reflect our good faith beliefs and reasonable 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, because of risks, uncertainties, and factors including, but not limited to, the continuing impacts of the U.S. recession and global credit environment, other changes in general economic and real estate conditions, changes in the interest rate environment and the availability of financing, and adverse changes in the retail industry. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future. Other risks and uncertainties are detailed from time to time in reports filed with the SEC, and in particular those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K. The following discussion should be read in conjunction with the accompanying consolidated financial statements of Taubman Centers, Inc. and the notes thereto.

General Background and Performance Measurement

Taubman Centers, Inc. (TCO) is a Michigan corporation that operates as a self-administered and self-managed real estate investment trust (REIT). The Taubman Realty Group Limited Partnership (the Operating Partnership or TRG) is a majority-owned partnership subsidiary of TCO, which owns direct or indirect interests in all of our real estate properties. In this report, the terms "we", "us", and "our" refer to TCO, the Operating Partnership, and/or the Operating Partnership's subsidiaries as the context may require. We own, manage, lease, acquire, dispose of, develop, and expand regional and super-regional shopping centers. The Consolidated Businesses consist of shopping centers and entities that are controlled by ownership or contractual agreements, The Taubman Company LLC (Manager), and Taubman Properties Asia LLC and its subsidiaries (Taubman Asia). Shopping centers owned through joint ventures that are not controlled by us but over which we have significant influence (Unconsolidated Joint Ventures) are accounted for under the equity method.

References in this discussion to “beneficial interest” refer to our ownership or pro-rata share of the item being discussed. Also, the operations of the shopping centers are often best understood by measuring their performance as a whole, without regard to our ownership interest. Consequently, in addition to the discussion of the operations of the Consolidated Businesses, the operations of the Unconsolidated Joint Ventures are presented and discussed as a whole. All operating statistics provided exclude The Pier Shop at Caesars (The Pier Shops). See “Results of Operations – The Pier Shops at Caesars.”

Use of Non-GAAP Measures

We use Net Operating Income (NOI) as an alternative measure to evaluate the operating performance of centers, both on individual and stabilized portfolio bases. We define NOI as property-level operating revenues (includes rental income excluding straightline adjustments of minimum rent) less maintenance, taxes, utilities, ground rent, and other property operating expenses. Since NOI excludes general and administrative expenses, pre-development charges, interest income and expense, depreciation and amortization, impairment charges, restructuring charges, and gains from land and property dispositions, it provides a performance measure that, when compared period over period, reflects the revenues and expenses most directly associated with owning and operating rental properties, as well as the impact on their operations from trends in tenant sales, occupancy and rental rates, and operating costs. We also use NOI excluding lease cancellation income as an alternative measure because this income may vary significantly from period to period, which can affect comparability and trend analysis. We generally provide separate projections for expected NOI growth and our lease cancellation income.

The operating results in “Results of Operations” include the supplemental earnings measures of Beneficial Interest in EBITDA and Funds from Operations (FFO). Beneficial Interest in EBITDA represents our share of the earnings before interest, income taxes, and depreciation and amortization of our consolidated and unconsolidated businesses. We believe Beneficial Interest in EBITDA provides a useful indicator of operating performance, as it is customary in the real estate and shopping center business to evaluate the performance of properties on a basis unaffected by capital structure.

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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. We may also present adjusted versions of NOI, Beneficial Interest in EBITDA, and FFO when used by management to evaluate our operating performance when certain significant items have impacted our results that affect comparability with prior or future periods due to the nature or amounts of these items. For the three and six months ended June 30, 2009, FFO was adjusted for a restructuring charge.

Our presentations of NOI, Beneficial Interest in EBITDA, FFO, and adjusted versions of these measures are not necessarily comparable to the similarly titled measures of other REITs due to the fact that not all REITs use the same definitions. These measures should not be considered alternatives to net income or as an indicator of our operating performance. Additionally, these measures do not represent cash flows from operating, investing or financing activities as defined by GAAP. Reconciliations of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations and Adjusted Funds from Operations, Net Income to Beneficial Interest in EBITDA, and Net Income to Net Operating Income are presented following the Comparison of the Six Months Ended June 30, 2010 to the Six Months Ended June 30, 2009.

Current Operating Trends

We have begun to see positive signs of stabilization in the economy and capital markets although the impacts of the recent recession continue. During the six months ended June 30, 2010, only 0.1% of tenants sought the protection of the bankruptcy laws, compared to 2.0% of tenants in the comparable period in 2009. We believe this is indicative of the improved health of retailers as well as the proactive way landlords worked with retailers in trouble last year so that they could stay open, effectively helping them restructure outside of bankruptcy. The retail environment has shown improvement as it appears that retail sales bottomed out last year. However, retailers are still sensitive to occupancy costs and negotiations continue to be challenging.

Our mall tenant sales per square foot statistics have shown improvement since July 2009 and we ended fourth quarter 2009 with a 3.8% increase over fourth quarter 2008. Our mall tenants reported a 12.1% increase in sales per square foot in the second quarter of 2010 from the same period in 2009. For the six month period ended June 30, 2010, sales per square foot increased 11.4% over 2009. This is a positive sign of what we believe will be as high as an 8% improvement in sales in 2010. For the twelve month period ended June 30, 2010, mall tenant sales were $523 per square foot. Tenant sales and sales per square foot information are operating statistics used in measuring the productivity of the portfolio and are based on reports of sales furnished by mall tenants. Sales are the most important measure of a portfolio’s overall strength and the best predictor of the leasing environment ahead. Over the long term, the level of mall tenant sales is the single most important determinant of revenues of the shopping centers because mall tenants provide approximately 90% of these revenues and because mall tenant sales determine the amount of rent, percentage rent, and recoverable expenses (together, total occupancy costs) that mall tenants can afford to pay. However, levels of mall tenant sales can be considerably more volatile in the short run than total occupancy costs, and may be impacted significantly, either positively or negatively, by the success or lack of success of a small number of tenants or even a single tenant.

Sales directly impact the amount of percentage rents certain tenants and anchors pay. The effects of increases or declines in sales on our operations are moderated by the relatively minor share of total rents that percentage rents represent of total rents.

While sales are critical over the long term, the high quality regional mall business has been a very stable business model with its diversity of income from thousands of tenants, its staggered lease maturities, and high proportion of fixed rent. However, a sustained trend in sales does impact, either negatively or positively, our ability to lease vacancies and negotiate rents at advantageous rates.

 
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In the second quarter of 2010, ending occupancy was 87.9% compared to 88.8% in the second quarter of 2009. We continue to expect to end the year even with 2009 occupancy. Temporary tenants, defined as those with lease terms less than 12 months, are not included in occupancy or leased space statistics. Temporary tenant leasing continues to be strong and as of June 30, 2010, approximately 3.5% of mall tenant space was occupied by temporary tenants, compared to 2.5% in the second quarter of 2009. See “Seasonality” for occupancy and leased space statistics.

Leased space was 90.8% at June 30, 2010, down 0.5% from June 30, 2009. The difference between leased space and occupancy is that leased space includes spaces where leases have been signed but the tenants are not yet open. Neither statistic includes temporary tenants. We view occupancy as more relevant to operating results as it represents those spaces upon which we are currently collecting rent from permanent tenants. Finally, the spread between leased space and occupied space, at 2.9% this quarter, is consistent with our history of 2% to 3% in the second quarter.

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. Generally, center revenues have increased as older leases rolled over or were terminated early and replaced with new leases negotiated at current rental rates that were usually higher than the average rates for existing leases. In periods of increasing sales, rents on new leases will generally tend to rise. In periods of slower growth or declining sales, rents on new leases will grow more slowly or will decline for the opposite reason, as tenants' expectations of future growth become less optimistic. Rent per square foot information for our Consolidated Businesses and Unconsolidated Joint Ventures follows:

 	 	Three Months
Ended June 30	 	 	Six Months
Ended June 30	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Average rent per square foot:	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	 42.96	 	 	$	 43.04	 	 	$	 42.96	 	 	$	 44.18	 	
Unconsolidated Joint Ventures	 	 	 43.64	 	 	 	 44.24	 	 	 	 43.72	 	 	 	 44.56	 	
Combined	 	 	 43.20	 	 	 	43.40	 	 	 	 43.20	 	 	 	 44.30	 	

 	 	Trailing 12 Months
Ended June 30	 	
 	 	2010 (1)	 	 	2009 (1)	 	
Opening base rent per square foot:	 	 	 	 	 	 	
Consolidated Businesses	 	$	 47.94	 	 	$	 46.27	 	
Unconsolidated Joint Ventures	 	 	 43.41	 	 	 	 56.39	 	
Combined	 	 	 46.55	 	 	 	 49.21	 	
Square feet of GLA opened:	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	 557,646	 	 	 	 657,777	 	
Unconsolidated Joint Ventures	 	 	 248,778	 	 	 	 269,857	 	
Combined	 	 	 806,424	 	 	 	 927,634	 	
Closing base rent per square foot:	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	 44.68	 	 	$	 45.21	 	
Unconsolidated Joint Ventures	 	 	 48.27	 	 	 	 49.35	 	
Combined	 	 	 45.64	 	 	 	 46.34	 	
Square feet of GLA closed:	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	 685,426	 	 	 	 763,895	 	
Unconsolidated Joint Ventures	 	 	 250,531	 	 	 	 286,295	 	
Combined	 	 	 935,957	 	 	 	1,050,190	 	
Releasing spread per square foot:	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	$	 3.26	 	 	$	 1.06	 	
Unconsolidated Joint Ventures	 	 	 (4.86	)	 	 	 7.04	 	
Combined	 	 	 0.91	 	 	 	 2.87	 	

(1)  	Opening and closing statistics exclude spaces greater than or equal to 10,000 square feet.	

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Average rent per square foot across our portfolio, including both consolidated and unconsolidated properties, was down 0.5% for the quarter. We expect total average rent per square foot for the year to be down about 1.5% due to the annualization of rent relief granted in 2009. This was the result of concerted efforts to keep tenants open in a difficult environment. 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. We continue to believe that our opening rents will improve during 2010 and will end the year measurably above the 2009 amount of $46.63. While this statistic is very sensitive to the final leasing of the year, the impact on 2010 reported earnings will be nominal.

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 period. While minimum rents and recoveries are generally not subject to seasonal factors, most leases are scheduled to expire in the first quarter, and the majority of new stores open in the second half of the year in anticipation of the Christmas selling season. Additionally, most percentage rents are recorded in the fourth quarter. Accordingly, revenues and occupancy levels are generally highest in the fourth quarter. Gains on sales of peripheral land and lease cancellation income may vary significantly from quarter to quarter.

 	 	2 nd
Quarter
2010	 	1 st
Quarter
2010	 	Total
2009	 	4 th
Quarter
2009	 	3 rd
Quarter
2009	 	2 nd
Quarter
2009	 	1 st
Quarter
2009	 	
 	 	(in thousands, except occupancy and leased space data)	 	
Mall tenant sales (1)	 	$	1,062,263	 	$	1,005,181	 	$	4,227,936	 	$	1,350,806	 	$	987,008	 	$	968,964	 	$	921,158	 	
Revenues and nonoperating income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Businesses	 	 	155,232	 	 	151,638	 	 	666,815	 	 	186,306	 	 	163,447	 	 	159,137	 	 	157,925	 	
Unconsolidated Joint Ventures	 	 	63,711	 	 	63,352	 	 	272,622	 	 	75,504	 	 	67,317	 	 	63,657	 	 	66,144	 	
Occupancy and leased space:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending occupancy	 	 	87.9	%	 	88.2	%	 	89.6	%	 	89.6	%	 	88.7	%	 	88.8	%	 	88.8	%	
Average occupancy	 	 	88.0	 	 	88.4	 	 	89.0	 	 	89.5	 	 	88.5	 	 	88.9	 	 	89.0	 	
Leased space	 	 	90.8	 	 	91.2	 	 	91.6	 	 	91.6	 	 	91.0	 	 	91.3	 	 	90.7	 	

(1)  	Based on reports of sales furnished by mall tenants.	

Because the seasonality of sales contrasts with the generally fixed nature of minimum rents and recoveries, mall tenant occupancy costs (the sum of minimum rents, percentage rents, and expense recoveries) as a percentage of sales are considerably higher in the first three quarters than they are in the fourth quarter.

 	 	2 nd
Quarter
2010	 	1 st
Quarter
2010	 	Total
2009	 	4 th
Quarter
2009	 	3 rd
Quarter
2009	 	2 nd
Quarter
2009	 	1 st
Quarter
2009	 	
Consolidated Businesses   :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	9.8	%	 	10.6	%	 	10.2	%	 	8.0	%	 	10.6	%	 	10.8	%	 	12.2	%	
Percentage rents	 	 	0.1	 	 	0.3	 	 	0.3	 	 	0.5	 	 	0.2	 	 	0.1	 	 	0.3	 	
Expense recoveries	 	 	5.1	 	 	5.0	 	 	5.7	 	 	5.9	 	 	5.3	 	 	5.9	 	 	6.0	 	
Mall tenant occupancy costs	 	 	15.0	%	 	15.9	%	 	16.2	%	 	14.4	%	 	16.1	%	 	16.8	%	 	18.5	%	
Unconsolidated Joint Ventures:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	9.5	%	 	9.7	%	 	9.6	%	 	7.7	%	 	10.3	%	 	10.6	%	 	10.9	%	
Percentage rents	 	 	0.1	 	 	0.3	 	 	0.3	 	 	0.5	 	 	0.3	 	 	0.0	 	 	0.3	 	
Expense recoveries	 	 	4.5	 	 	4.5	 	 	5.0	 	 	4.8	 	 	5.0	 	 	5.1	 	 	4.9	 	
Mall tenant occupancy costs	 	 	14.1	%	 	14.5	%	 	14.9	%	 	13.0	%	 	15.6	%	 	15.7	%	 	16.1	%	
Combined:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	 	 9.7	%	 	 10.3	%	 	 9.9	%	 	 7.8	%	 	 10.5	%	 	 10.8	%	 	 11.8	%	
Percentage rents	 	 	 0.1	 	 	 0.3	 	 	 0.3	 	 	 0.5	 	 	 0.2	 	 	 0.0	 	 	 0.3	 	
Expense recoveries	 	 	4.9	 	 	4.8	 	 	5.6	 	 	5.6	 	 	5.2	 	 	5.6	 	 	5.6	 	
Mall tenant occupancy costs	 	 	14.7	%	 	15.4	%	 	15.8	%	 	13.9	%	 	15.9	%	 	16.4	%	 	17.7	%	

 
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Results of Operations

In addition to the trends in our operations disclosed in the preceding sections, the following sections discuss certain transactions that affected operations in the six month periods ended June 30, 2010 and 2009, or are expected to impact operations in the future.

The Pier Shops at Caesars

In September 2009, our Board of Directors concluded that given long-term prospects for the property, it was in our best interest to discontinue financial support of The Pier Shops. Cash flows generated from the center are insufficient to cover debt service on the $135 million non-recourse mortgage loan. As a result of our discontinuing payment of debt service, the loan is now in default. Under the terms of the agreement, interest accrues at the original stated rate of 6.01% plus a 4% default rate. Although we are no longer funding any cash shortfalls, we continue to record the operations of the center and interest on the loan in our results until title for the center has been transferred and our obligation for the loan is extinguished. In April 2010, the holder of the mortgage on The Pier Shops filed a lawsuit to foreclose on the mortgage.  We anticipate that the foreclosure will be completed in the third quarter of 2010, at which time ownership of The Pier Shops will be transferred in satisfaction of the obligations under the debt. However, the foreclosure process is not in our control and possibly transfer of title may not be completed until later.  We expect the non-cash impact of owning The Pier Shops (including default interest) to result in an incremental earnings charge, excluding depreciation and amortization, of slightly more than $(1.0) million per month in 2010. Including the impact of depreciation and amortization, the impact on earnings is expected to be about $(1.5) million per month. In addition, a non-cash accounting gain, representing the difference between the book value of the debt, interest payable and other obligations extinguished over the net book value of the property and any other assets transferred, will be recognized when the loan obligation is extinguished upon transfer of title of The Pier Shops.

Center Operations

The impacts of the recession, which negatively impacted certain of our operating statistics as discussed in the previous sections, are expected to continue to affect operations throughout 2010. We now expect that NOI of our centers, excluding lease cancellation income, could decrease by about 2% in 2010 compared to our previous expectation of down 2% to 4%. This improvement is due to better than anticipated rents, increased percentage rents, better net recoveries, and higher sponsorship income. The expected NOI decrease is impacted by about 1% related to lower recoveries of CAM capital expenditures. See “General Background and Performance Measurement – Use of Non-GAAP Measures” for the definition and discussion of NOI and see “Reconciliation of Net Income to NOI” following the Comparison of the Six Months Ended June 30, 2010 to the Six Months Ended June 30, 2009.

The Mall at Partridge Creek

In June 2010, we completed a 10-year, $82.5 million non-recourse financing on The Mall at Partridge Creek that bears interest at an all-in-rate of 6.25%. The loan payments are based on amortizing principal over 30 years. The existing $73.8 million floating rate loan was paid off and we paid down our revolving line of credit.

Subsequent Event

In July 2010, a 10-year, $175 million non-recourse refinancing was completed on Arizona Mills, a 50% owned joint venture, which bears interest at an all-in-rate of 5.83%. The payments are based on amortizing principal over 30 years. The proceeds were used to pay off the existing $131 million 7.90% fixed rate loan and our share of excess proceeds was used to pay down our revolving line of credit.

 
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Comparison of the Three Months Ended June 30, 2010 to the Three Months Ended June 30, 2009

The following table sets forth operating results for the three months ended June 30, 2010 and June 30, 2009, showing the results of the Consolidated Businesses and Unconsolidated Joint Ventures:
 	 	Three Months Ended
June 30, 2010	 	 	Three Months Ended
June 30, 2009	 	
 	 	CONSOLIDATED BUSINESSES	 	 	UNCONSOLIDATED JOINT VENTURES AT 100% (1)	 	 	CONSOLIDATED BUSINESSES	 	 	UNCONSOLIDATED JOINT VENTURES AT 100% (1)	 	
 	 	(in millions)	 	
REVENUES:	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	$	 84.1	 	 	$	 38.1	 	 	$	 84.0	 	 	$	 38.6	 	
Percentage rents	 	 	1.1	 	 	 	0.5	 	 	 	0.6	 	 	 	0.1	 	
Expense recoveries	 	 	56.3	 	 	 	23.5	 	 	 	58.5	 	 	 	23.8	 	
Management, leasing, and development services	 	 	4.0	 	 	 	 	 	 	 	3.2	 	 	 	 	 	
Other	 	 	8.6	 	 	 	1.7	 	 	 	12.6	 	 	 	1.2	 	
Total revenues	 	$	 154.1	 	 	$	 63.7	 	 	$	 158.9	 	 	$	 63.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Maintenance, taxes, and utilities	 	$	 44.5	 	 	$	 16.5	 	 	$	 46.9	 	 	$	 16.3	 	
Other operating	 	 	18.5	 	 	 	5.5	 	 	 	16.4	 	 	 	6.0	 	
Restructuring charge	 	 	 	 	 	 	 	 	 	 	0.2	 	 	 	 	 	
Management, leasing, and development services	 	 	2.2	 	 	 	 	 	 	 	1.9	 	 	 	 	 	
General and administrative	 	 	7.0	 	 	 	 	 	 	 	6.8	 	 	 	 	 	
Interest expense	 	 	37.9	 	 	 	15.9	 	 	 	36.5	 	 	 	16.1	 	
Depreciation and amortization (2)	 	 	35.9	 	 	 	9.1	 	 	 	36.1	 	 	 	9.9	 	
Total expenses	 	$	 146.1	 	 	$	 47.0	 	 	$	 144.8	 	 	$	 48.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Nonoperating income	 	 	 1.2	 	 	 	 	 	 	 	 0.2	 	 	 	 	 	
Impairment loss on marketable securities	 	 	 	 	 	 	 	 	 	 	(1.7	)	 	 	 	 	
 	 	$	 9.1	 	 	$	16.7	 	 	$	 12.7	 	 	$	15.4	 	
Income tax expense	 	 	(0.1	)	 	 	 	 	 	 	(0.2	)	 	 	 	 	
Equity in income of Unconsolidated Joint Ventures (2)	 	 	9.5	 	 	 	 	 	 	 	8.4	 	 	 	 	 	
Net income	 	$	 18.5	 	 	 	 	 	 	$	 20.9	 	 	 	 	 	
Net income attributable to noncontrolling interests:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Noncontrolling share of income of consolidated joint ventures	 	 	(2.0	)	 	 	 	 	 	 	(2.0	)	 	 	 	 	
TRG Series F preferred distributions	 	 	(0.6	)	 	 	 	 	 	 	(0.6	)	 	 	 	 	
Noncontrolling share of income of TRG	 	 	(4.4	)	 	 	 	 	 	 	(5.3	)	 	 	 	 	
Distributions to participating securities of TRG	 	 	(0.4	)	 	 	 	 	 	 	(0.4	)	 	 	 	 	
Preferred stock dividends	 	 	(3.7	)	 	 	 	 	 	 	(3.7	)	 	 	 	 	
Net income attributable to Taubman Centers, Inc. common shareowners	 	$	7.5	 	 	 	 	 	 	$	8.9	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SUPPLEMENTAL INFORMATION   (3) :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA – 100%	 	$	 82.9	 	 	$	 41.7	 	 	$	 85.2	 	 	$	 41.4	 	
EBITDA – outside partners' share	 	 	(9.8	)	 	 	(18.7	)	 	 	(10.1	)	 	 	(18.9	)	
Beneficial interest in EBITDA	 	$	 73.2	 	 	$	 23.1	 	 	$	 75.1	 	 	$	 22.5	 	
Beneficial interest expense	 	 	(32.6	)	 	 	(8.2	)	 	 	(31.5	)	 	 	(8.4	)	
Beneficial income tax expense	 	 	(0.1	)	 	 	 	 	 	 	(0.2	)	 	 	 	 	
Non-real estate depreciation	 	 	(0.8	)	 	 	 	 	 	 	(0.9	)	 	 	 	 	
Preferred dividends and distributions	 	 	(4.3	)	 	 	 	 	 	 	(4.3	)	 	 	 	 	
Funds from Operations contribution	 	$	35.3	 	 	$	14.8	 	 	$	38.2	 	 	$	14.2	 	

(1)  	With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany transactions. The Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their performance as a whole, without regard to our ownership interest. In our consolidated financial statements, we account for investments in the Unconsolidated Joint Ventures under the equity method.	
(2)  	Amortization of our additional basis in the Operating Partnership included in depreciation and amortization was $1.2 million in both 2010 and 2009. Also, amortization of our additional basis included in equity in income of Unconsolidated Joint Ventures was $0.5 million in both 2010 and 2009.	
(3)  	See “General Background and Performance Measurement – Use of Non-GAAP Measures” for the definition and discussion of EBITDA and FFO.	
 (4)  	Amounts in this table may not add due to rounding.	

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Consolidated Businesses

Total revenues for the quarter ended June 30, 2010 were $154.1 million, a $4.8 million or 3.0% decrease from the comparable period in 2009. Expense recoveries decreased primarily due to lower expenses and decreased CAM capital expenditures. Other income decreased primarily due to lower lease cancellation revenue.

Total expenses were $146.1 million, a $1.3 million or 0.9% increase from the comparable period in 2009. Maintenance, taxes and utilities expense decreased primarily due to lower maintenance costs and electricity expenses at certain centers. Other operating expense increased primarily due to higher costs related to marketing and property management, partially offset by a reduction in the provision for bad debts. Interest expense increased primarily due to the default interest rate charged on The Pier Shops loan in 2010.

Nonoperating income increased $1.0 million primarily due to a $1.0 million gain on a land sale during the three months ended June 30, 2010. There were no land sales in the three months ended June 30, 2009. We expect gains on land sales to be approximately $1 million to $2 million for 2010.

In the three months ended June 30, 2009, we recognized an impairment loss of $1.7 million on our investment in marketable securities. No similar losses were recognized in 2010.

Unconsolidated Joint Ventures

Total revenues for the three months ended June 30, 2010 were $63.7 million, flat over the comparable period in 2009.

Total expenses decreased by $1.3 million or 2.7%, to $47.0 million for the three months ended June 30, 2010 due primarily to decreases in professional fees and depreciation expense.

As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by $1.3 million to $16.7 million for the three months ended June 30, 2010. Our equity in income of the Unconsolidated Joint Ventures was $9.5 million, a $1.1 million increase from the comparable period in 2009.

Net Income and EPS

Our net income was $18.5 million for the three months ended June 30, 2010, compared to $20.9 million for the three months ended June 30, 2009. After allocation of income to noncontrolling, preferred, and participating interests, the net income attributable to Taubman Centers, Inc. common shareowners for 2010 was $7.5 million compared to $8.9 million in the comparable period in 2009. Net income allocable to common shareholders per diluted common share (EPS) for the three months ended June 30, 2010 was $0.14, versus $0.17 per diluted common share for the three months ended June 30, 2009.

FFO and FFO per Share

Our FFO was $50.1 million for the three months ended June 30, 2010 compared to $52.4 million for the three months ended June 30, 2009. FFO per diluted share was $0.61 in 2010, a decrease of 6.2% from $0.65 in the comparable period in 2009. See “General Background and Performance Measurement – Use of Non-GAAP Measures” for the definition of FFO and “Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations and Adjusted Funds from Operations.” In addition to the factors above that resulted in the decrease in net income and FFO, the decrease in the per share amounts was also due to the increase in the number of average diluted shares as a result of options exercised and other share-based compensation.

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Comparison of the Six Months Ended June 30, 2010 to the Six Months Ended June 30, 2009

The following table sets forth operating results for the six months ended June 30, 2010 and June 30, 2009, showing the results of the Consolidated Businesses and Unconsolidated Joint Ventures:
 	 	Six Months Ended
June 30, 2010	 	 	Six Months Ended
June 30, 2009	 	
 	 	CONSOLIDATED BUSINESSES	 	 	UNCONSOLIDATED JOINT VENTURES AT 100% (1)	 	 	CONSOLIDATED BUSINESSES	 	 	UNCONSOLIDATED JOINT VENTURES AT 100% (1)	 	
 	 	(in millions)	 	
REVENUES:	 	 	 	 	 	 	 	 	 	 	 	 	
Minimum rents	 	$	 167.4	 	 	$	 76.0	 	 	$	 171.5	 	 	$	 77.5	 	
Percentage rents	 	 	3.1	 	 	 	1.5	 	 	 	2.7	 	 	 	1.2	 	
Expense recoveries	 	 	109.3	 	 	 	45.8	 	 	 	115.3	 	 	 	47.6	 	
Management, leasing, and development services	 	 	7.1	 	 	 	 	 	 	 	6.7	 	 	 	 	 	
Other	 	 	18.7	 	 	 	3.7	 	 	 	20.4	 	 	 	3.4	 	
Total revenues	 	$	 305.6	 	 	$	 127.1	 	 	$	 316.6	 	 	$	 129.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Maintenance, taxes, and utilities	 	$	 87.6	 	 	$	 32.4	 	 	$	 91.5	 	 	$	 32.3	 	
Other operating	 	 	36.3	 	 	 	10.1	 	 	 	31.3	 	 	 	12.4	 	
Restructuring charge	 	 	 	 	 	 	 	 	 	 	2.6	 	 	 	 	 	
Management, leasing, and development services	 	 	3.8	 	 	 	 	 	 	 	3.8	 	 	 	 	 	
General and administrative	 	 	14.4	 	 	 	 	 	 	 	13.7	 	 	 	 	 	
Interest expense	 	 	75.3	 	 	 	31.7	 	 	 	72.7	 	 	 	32.1	 	
Depreciation and amortization (2)	 	 	73.0	 	 	 	18.6	 	 	 	72.4	 	 	 	19.3	 	
Total expenses	 	$	 290.5	 	 	$	 92.8	 	 	$	 288.1	 	 	$	 96.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Nonoperating income	 	 	 1.3	 	 	 	 	 	 	 	 0.4	 	 	 	0.1	 	
Impairment loss on marketable securities	 	 	 	 	 	 	 	 	 	 	(1.7	)	 	 	 	 	
 	 	$	 16.4	 	 	$	34.3	 	 	$	 27.3	 	 	$	33.7	 	
Income tax expense	 	 	(0.3	)	 	 	 	 	 	 	(0.5	)	 	 	 	 	
Equity in income of Unconsolidated Joint Ventures (2)	 	 	19.2	 	 	 	 	 	 	 	18.5	 	 	 	 	 	
Net income	 	$	 35.3	 	 	 	 	 	 	$	 45.4	 	 	 	 	 	
Net income attributable to noncontrolling interests:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Noncontrolling share of income of consolidated joint ventures	 	 	(4.0	)	 	 	 	 	 	 	(3.7	)	 	 	 	 	
TRG Series F preferred distributions	 	 	(1.2	)	 	 	 	 	 	 	(1.2	)	 	 	 	 	
Noncontrolling share of income of TRG	 	 	(8.3	)	 	 	 	 	 	 	(11.9	)	 	 	 	 	
Distributions to participating securities of TRG	 	 	(0.7	)	 	 	 	 	 	 	(0.8	)	 	 	 	 	
Preferred stock dividends	 	 	(7.3	)	 	 	 	 	 	 	(7.3	)	 	 	 	 	
Net income attributable to Taubman Centers, Inc. common shareowners	 	$	13.7	 	 	 	 	 	 	$	20.4	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
SUPPLEMENTAL INFORMATION   (3) :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA – 100%	 	$	 164.7	 	 	$	 84.6	 	 	$	 172.4	 	 	$	 85.1	 	
EBITDA – outside partners' share	 	 	(19.5	)	 	 	(38.1	)	 	 	(19.6	)	 	 	(38.6	)	
Beneficial interest in EBITDA	 	$	 145.2	 	 	$	 46.5	 	 	$	 152.8	 	 	$	 46.5	 	
Beneficial interest expense	 	 	(64.8	)	 	 	(16.5	)	 	 	(62.9	)	 	 	(16.7	)	
Beneficial income tax expense	 	 	(0.3	)	 	 	 	 	 	 	(0.5	)	 	 	 	 	
Non-real estate depreciation	 	 	(1.7	)	 	 	 	 	 	 	(1.7	)	 	 	 	 	
Preferred dividends and distributions	 	 	(8.5	)	 	 	 	 	 	 	(8.5	)	 	 	 	 	
Funds from Operations contribution	 	$	69.8	 	 	$	30.0	 	 	$	79.1	 	 	$	29.8	 	

(1)  	With the exception of the Supplemental Information, amounts include 100% of the Unconsolidated Joint Ventures. Amounts are net of intercompany transactions. The Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their performance as a whole, without regard to our ownership interest. In our consolidated financial statements, we account for investments in the Unconsolidated Joint Ventures under the equity method.	
(2)  	Amortization of our additional basis in the Operating Partnership included in depreciation and amortization was $2.5 million in both 2010 and 2009. Also, amortization of our additional basis included in equity in income of Unconsolidated Joint Ventures was $1.0 million in both 2010 and 2009.	
(3)  	See “General Background and Performance Measurement – Use of Non-GAAP Measures” for the definition and discussion of EBITDA and FFO.	
(4)  	Amounts in this table may not add due to rounding.	

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Consolidated Businesses

Total revenues for the six months ended June 30, 2010 were $305.6 million, an $11.0 million or 3.5% decrease from the comparable period in 2009. Minimum rents decreased by $4.1 million, due to decreases in rent per square foot and average occupancy and a positive prior period adjustment in 2009. Expense recoveries decreased primarily due to lower expenses and decreased CAM capital expenditures. Other income decreased primarily due to a decrease in lease cancellation revenue and parking-related revenue, which were partially offset by increased sponsorship income. We expect $11 million for our share of lease cancellation revenue for 2010.

Total expenses were $290.5 million, a $2.4 million or 0.8% increase from the comparable period in 2009. Maintenance, taxes and utilities expense decreased primarily due to decreases in electricity expenses and maintenance costs at certain centers. Other operating expense increased primarily due to pre-development costs. Predevelopment expense in 2009 was low due to reimbursements for work performed in prior periods. We continue to expect predevelopment expense will total about $15 million for the year. Interest expense increased primarily due to the default interest rate charged on The Pier Shops loan in 2010.

Unconsolidated Joint Ventures

Total revenues for the six months ended June 30, 2010 were $127.1 million, a $2.6 million or 2.0% decrease over the comparable period in 2009. Minimum rents decreased $1.5 million, primarily due to decreases in rent per square foot and average occupancy. Expense recoveries decreased primarily due to decreased costs related to marketing and promotion services.

Total expenses decreased by $3.3 million or 3.4%, to $92.8 million for the six months ended June 30, 2010. Other operating expense decreased primarily due to reductions in marketing and promotion expense, professional fees, and bad debt expense.

As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by $0.6 million to $34.3 million for the six months ended June 30, 2010. Our equity in income of the Unconsolidated Joint Ventures was $19.2 million, a $0.7 million increase from the comparable period in 2009.

Net Income and EPS

Our net income was $35.3 million for the six months ended June 30, 2010, compared to $45.4 million for the six months ended June 30, 2009. After allocation of income to noncontrolling, preferred, and participating interests, the net income attributable to Taubman Centers, Inc. common shareowners for 2010 was $13.7 million compared to $20.4 million in the comparable period in 2009. EPS for the six months ended June 30, 2010 was $0.25, versus $0.38 per diluted common share for the six months ended June 30, 2009.

FFO and FFO per Share

Our FFO was $99.9 million for the six months ended June 30, 2010 compared to $109.0 for the six months ended June 30, 2009. FFO per diluted share was $1.21 in 2010, a decrease of 10.4% from $1.35 in the comparable period in 2009. See “General Background and Performance Measurement – Use of Non-GAAP Measures” for the definition of FFO and “Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations and Adjusted Funds from Operations.” In addition to the factors above that resulted in the decrease in net income and FFO, the decrease in the per share amounts was also due to the increase in the number of average diluted shares as a result of options exercised and other share-based compensation.

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Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations and Adjusted Funds from Operations

 	 	Three Months Ended June 30	 	
 	 	2010 	 	 	2009 	 	
 	 	Dollars in millions	 	 	Diluted Shares/ Units	 	 	Per Share/ Unit	 	 	Dollars in millions	 	 	Diluted Shares/ Units	 	 	Per Share/ Unit	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to TCO common shareowners	 	$	 7.5	 	 	 	55,611,887	 	 	$	 0.14	 	 	$	 8.9	 	 	 	53,666,868	 	 	$	 0.17	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add depreciation of TCO’s additional basis	 	 	1.7	 	 	 	 	 	 	 	0.03	 	 	 	1.7	 	 	 	 	 	 	 	0.03	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to TCO common shareowners, excluding step-up depreciation	 	$	 9.2	 	 	 	55,611,887	 	 	$	 0.16	 	 	$	 10.6	 	 	 	53,666,868	 	 	$	 0.20	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Noncontrolling share of income of TRG	 	 	 4.4	 	 	 	26,337,361	 	 	 	 	 	 	 	 5.3	 	 	 	26,437,684	 	 	 	 	 	
Distributions to participating securities	 	 	0.4	 	 	 	871,262	 	 	 	 	 	 	 	0.4	 	 	 	871,262	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to partnership unitholders and participating securities	 	$	 14.0	 	 	 	82,820,510	 	 	$	 0.17	 	 	$	 16.3	 	 	 	80,975,814	 	 	$	 0.20	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) depreciation and amortization (1) :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	 35.9	 	 	 	 	 	 	 	 0.43	 	 	 	 36.1	 	 	 	 	 	 	 	 0.45	 	
Depreciation of TCO’s additional basis	 	 	 (1.7	)	 	 	 	 	 	 	 (0.02	)	 	 	 (1.7	)	 	 	 	 	 	 	 (0.02	)	
Noncontrolling partners in consolidated joint ventures	 	 	 (2.5	)	 	 	 	 	 	 	 (0.03	)	 	 	 (3.2	)	 	 	 	 	 	 	 (0.04	)	
Share of Unconsolidated Joint Ventures	 	 	 5.3	 	 	 	 	 	 	 	 0.06	 	 	 	 5.8	 	 	 	 	 	 	 	 0.07	 	
Non-real estate depreciation	 	 	(0.8	)	 	 	 	 	 	 	(0.01	)	 	 	(0.9	)	 	 	 	 	 	 	(0.01	)	

Funds from Operations	 	$	 50.1	 	 	 	82,820,510	 	 	$	 0.61	 	 	$	52.4	 	 	 	80,975,814	 	 	$	 0.65	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TCO's average ownership percentage of TRG	 	 	67.4	%	 	 	 	 	 	 	 	 	 	 	66.8	%	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations attributable to TCO	 	$	33.8	 	 	 	 	 	 	$	0.61	 	 	$	35.0	 	 	 	 	 	 	$	0.65	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations	 	$	 50.1	 	 	 	82,820,510	 	 	$	 0.61	 	 	$	 52.4	 	 	 	80,975,814	 	 	$	 0.65	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring charge	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.2	 	 	 	 	 	 	 	0.00	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Funds from Operations	 	$	 50.1	 	 	 	82,820,510	 	 	$	 0.61	 	 	$	 52.6	 	 	 	80,975,814	 	 	$	 0.65	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TCO's average ownership percentage of TRG	 	 	67.4	%	 	 	 	 	 	 	 	 	 	 	66.8	%	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Funds from Operations attributable to TCO	 	$	33.8	 	 	 	 	 	 	$	0.61	 	 	$	35.1	 	 	 	 	 	 	$	0.65	 	

(1)  	Depreciation includes $3.7 million and $3.4 million of mall tenant allowance amortization for the three months ended June 30, 2010 and 2009, respectively.	
(2)  	Amounts in this table may not recalculate due to rounding.	

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Reconciliation of Net Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations and Adjusted Funds from Operations

 	 	Six Months Ended June 30	 	
 	 	2010 	 	 	2009 	 	
 	 	Dollars in millions	 	 	Diluted Shares/ Units	 	 	Per Share/ Unit	 	 	Dollars in millions	 	 	Diluted Shares/ Units	 	 	Per Share/ Unit	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to TCO common shareowners	 	$	 13.7	 	 	 	55,490,935	 	 	$	 0.25	 	 	$	20.4	 	 	 	53,466,563	 	 	$	 0.38	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add depreciation of TCO’s additional basis	 	 	3.4	 	 	 	 	 	 	 	0.06	 	 	 	3.4	 	 	 	 	 	 	 	0.06	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to TCO common shareowners, excluding step-up depreciation	 	$	 17.2	 	 	 	55,490,935	 	 	$	 0.31	 	 	$	23.8	 	 	 	53,466,563	 	 	$	 0.45	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Noncontrolling share of income of TRG	 	 	 8.3	 	 	 	26,351,949	 	 	 	 	 	 	 	 11.9	 	 	 	26,438,939	 	 	 	 	 	
Distributions to participating securities	 	 	0.7	 	 	 	871,262	 	 	 	 	 	 	 	0.8	 	 	 	871,262	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to partnership unitholders and participating securities	 	$	 26.2	 	 	 	82,714,146	 	 	$	 0.32	 	 	$	36.6	 	 	 	80,776,764	 	 	$	 0.45	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) depreciation and amortization (1) :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	 73.0	 	 	 	 	 	 	 	 0.88	 	 	 	 72.4	 	 	 	 	 	 	 	 0.90	 	
Depreciation of TCO’s additional basis	 	 	 (3.4	)	 	 	 	 	 	 	 (0.04	)	 	 	 (3.4	)	 	 	 	 	 	 	 (0.04	)	
Noncontrolling partners in consolidated joint ventures	 	 	 (5.0	)	 	 	 	 	 	 	 (0.06	)	 	 	 (6.1	)	 	 	 	 	 	 	 (0.08	)	
Share of Unconsolidated Joint Ventures	 	 	 10.8	 	 	 	 	 	 	 	 0.13	 	 	 	 11.3	 	 	 	 	 	 	 	 0.14	 	
Non-real estate depreciation	 	 	(1.7	)	 	 	 	 	 	 	(0.02	)	 	 	(1.7	)	 	 	 	 	 	 	(0.02	)	

Funds from Operations	 	$	 99.9	 	 	 	82,714,146	 	 	$	1.21	 	 	$	109.0	 	 	 	80,776,764	 	 	$	 1.35	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TCO's average ownership percentage of TRG	 	 	67.4	%	 	 	 	 	 	 	 	 	 	 	66.8	%	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations attributable to TCO	 	$	67.3	 	 	 	 	 	 	$	1.21	 	 	$	72.7	 	 	 	 	 	 	$	1.35	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funds from Operations	 	$	 99.9	 	 	 	82,714,146	 	 	$	 1.21	 	 	$	109.0	 	 	 	80,776,764	 	 	$	 1.35	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring charge	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2.6	 	 	 	 	 	 	 	0.03	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Funds from Operations	 	$	 99.9	 	 	 	82,714,146	 	 	$	 1.21	 	 	$	111.6	 	 	 	80,776,764	 	 	$	 1.38	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TCO's average ownership percentage of TRG	 	 	67.4	%	 	 	 	 	 	 	 	 	 	 	66.8	%	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Funds from Operations attributable to TCO	 	$	67.3	 	 	 	 	 	 	$	1.21	 	 	$	74.5	 	 	 	 	 	 	$	1.38	 	

(1)  	Depreciation includes $7.3 million and $6.9 million of mall tenant allowance amortization for the six months ended June 30, 2010 and 2009, respectively.	
(2)  	Amounts in this table may not recalculate due to rounding.	

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Reconciliation of Net Income to Beneficial Interest in EBITDA

 	 	Three Months Ended June 30	 	 	Six Months Ended June 30	 	
 	 	(in millions)	 	 	(in millions)	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Net income	 	$	 18.5	 	 	$	 20.9	 	 	$	 35.3	 	 	$	 45.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) depreciation and amortization:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	35.9	 	 	 	36.1	 	 	 	73.0	 	 	 	72.4	 	
Noncontrolling partners in consolidated joint ventures	 	 	(2.5	)	 	 	(3.2	)	 	 	(5.0	)	 	 	(6.1	)	
Share of Unconsolidated Joint Ventures	 	 	5.3	 	 	 	5.8	 	 	 	10.8	 	 	 	11.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) interest expense and income tax expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	37.9	 	 	 	36.5	 	 	 	75.3	 	 	 	72.7	 	
Noncontrolling partners in consolidated joint ventures	 	 	(5.3	)	 	 	(4.9	)	 	 	(10.5	)	 	 	(9.8	)	
Share of Unconsolidated Joint Ventures	 	 	8.2	 	 	 	8.4	 	 	 	16.5	 	 	 	16.7	 	
Income tax expense	 	 	0.1	 	 	 	0.2	 	 	 	0.3	 	 	 	0.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less noncontrolling share of income of consolidated joint ventures	 	 	(2.0	)	 	 	(2.0	)	 	 	(4.0	)	 	 	(3.7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beneficial interest in EBITDA	 	$	 96.2	 	 	$	 97.6	 	 	$	 191.7	 	 	$	 199.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TCO's average ownership percentage of TRG	 	 	67.4	%	 	 	66.8	%	 	 	67.4	%	 	 	66.8	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beneficial interest in EBITDA attributable to TCO	 	$	64.9	 	 	$	65.2	 	 	$	129.1	 	 	$	133.0	 	

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

 
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Reconciliation of Net Income to Net Operating Income

 	 	Three Months
Ended June 30	 	 	Six Months
Ended June 30	 	
 	 	(in millions)	 	
 	 	2010	 	 	2009	 	 	2010	 	 	2009	 	
Net income	 	$	 18.5	 	 	$	 20.9	 	 	$	 35.3	 	 	$	 45.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) depreciation and amortization:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	35.9	 	 	 	36.1	 	 	 	73.0	 	 	 	 72.4	 	
Noncontrolling partners in consolidated joint ventures	 	 	(2.5	)	 	 	(3.2	)	 	 	(5.0	)	 	 	 (6.1	)	
Share of Unconsolidated Joint Ventures	 	 	5.3	 	 	 	5.8	 	 	 	10.8	 	 	 	11.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) interest expense and income tax expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated businesses at 100%	 	 	37.9	 	 	 	36.5	 	 	 	75.3	 	 	 	72.7	 	
Noncontrolling partners in consolidated joint ventures	 	 	(5.3	)	 	 	(4.9	)	 	 	(10.5	)	 	 	(9.8	)	
Share of Unconsolidated Joint Ventures	 	 	8.2	 	 	 	8.4	 	 	 	16.5	 	 	 	16.7	 	
Income tax expense	 	 	0.1	 	 	 	0.2	 	 	 	0.3	 	 	 	0.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less noncontrolling share of income of consolidated joint ventures	 	 	 (2.0	)	 	 	 (2.0	)	 	 	 (4.0	)	 	 	 (3.7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add EBITDA attributable to outside partners:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA attributable to noncontrolling partners in consolidated joint ventures	 	 	 9.8	 	 	 	 10.1	 	 	 	 19.5	 	 	 	 19.6	 	
EBITDA attributable to outside partners in Unconsolidated Joint Ventures	 	 	18.7	 	 	 	18.9	 	 	 	38.1	 	 	 	38.6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA at 100%	 	$	 124.7	 	 	$	 126.6	 	 	$	 249.3	 	 	$	 257.5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Add (less) items excluded from shopping center Net Operating Income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
General and administrative expenses	 	 	 7.0	 	 	 	 6.8	 	 	 	 14.4	 	 	 	 13.7	 	
Management, leasing, and development services, net	 	 	 (1.8	)	 	 	 (1.3	)	 	 	 (3.3	)	 	 	 (2.9	)	
Restructuring charge	 	 	 	 	 	 	 0.2	 	 	 	 	 	 	 	 2.6	 	
Gain on sale of peripheral land	 	 	 (1.0	)	 	 	 	 	 	 	 (1.0	)	 	 	 	 	
Interest income	 	 	 (0.1	)	 	 	 (0.2	)	 	 	 (0.3	)	 	 	 (0.5	)	
Impairment loss on marketable securities	 	 	 	 	 	 	 1.7	 	 	 	 	 	 	 	 1.7	 	
Straight-line of rents	 	 	 (0.6	)	 	 	 (0.9	)	 	 	 (0.5	)	 	 	 (1.8	)	
The Pier Shops’ net operating income	 	 	 (1.1	)	 	 	 (1.5	)	 	 	 (2.3	)	 	 	 (2.3	)	
Non-center specific operating expenses and other	 	 	5.6	 	 	 	4.9	 	 	 	11.8	 	 	 	8.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Operating Income at 100%	 	$	132.7	 	 	$	136.4	 	 	$	268.2	 	 	$	276.2	 	

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Liquidity and Capital Resources

Our internally generated funds and distributions from operating centers, and other investing activities, augmented by use of our existing lines of credit, provide resources to maintain our current operations and assets, and pay dividends. Generally, our need to access the capital markets is limited to refinancing debt obligations at maturity and funding major capital investments. See “Capital Spending” for more details. Market conditions may continue to limit our sources of funds for these financing activities and our ability to refinance our debt obligations at present principal amounts, interest rates, and other terms.

We are financed with property-specific secured debt and we have two unencumbered center properties (Willow Bend and Stamford, a 50% owned Unconsolidated Joint Venture property). Of the three loans maturing in 2010, two loans have now been refinanced. The Partridge Creek financing was completed in June 2010 and the Arizona Mills loan was refinanced in early July 2010. Both of these new loans have higher principal amounts than the previous loan balances. For the terms of these new loans see “Results of Operations -  "Refinancing" and - "Subsequent Event”. We are currently working on the refinancing of the MacArthur Center (MacArthur) loan, which matures in October 2010. The existing loan totals $128 million at 100% and $121 million at our beneficial share. The new MacArthur loan is expected to have a 10-year term. The proceeds are expected to be about equal to the current principal amount.

In 2011, $649 million at 100% and $361 million at our beneficial share of additional debt matures (excluding our lines of credit, which are discussed below). Two of the loans, totaling $575 million at 100% and $288 million at our beneficial share, have two twelve-month extension options, subject to certain conditions. We continue to watch the capital markets and the performance of the centers being refinanced in 2011, and if we are unable to refinance or extend all loans maturing in 2011 at their current principal balances we believe we have sufficient resources to address any shortfall.

As of June 30, 2010, we had a consolidated cash balance of $9.2 million. We also have secured lines of credit of $550 million and $40 million. As of June 30, 2010, the total amount utilized of both lines of credit was $143 million. Both lines of credit mature in February 2011. The $550 million line of credit has a one-year extension option. Twelve banks participate in our $550 million line of credit and the failure of one bank to fund a draw on our line does not negate the obligation of the other banks to fund their pro-rata shares.

Our $135 million loan at The Pier Shops is currently in default. We will continue to accrue the results of the center until the foreclosure process is complete and the ownership of The Pier Shops is transferred in satisfaction of the obligations under the debt. However, there is no cash impact as we are not obligated to fund cash shortfalls of the center (see “Results of Operations – The Pier Shops at Caesars”).

Operating Activities

Our net cash provided by operating activities was $108.9 million in 2010, compared to $112.1 million in 2009. See “Results of Operations” for descriptions of 2010 and 2009 transactions affecting operating cash flow.

Investing Activities

Net cash used in investing activities was $32.1 million in 2010, compared to $15.8 million in 2009. Additions to properties in 2010 related primarily to tenant improvements at existing centers and other capital items. Additions to properties in 2009 related to additions to existing centers, site improvements, and other capital items. A tabular presentation of 2010 capital spending is shown in “Capital Spending.” During 2010, we issued $2.9 million in notes receivable and received a $0.7 million repayment. Contributions to Unconsolidated Joint Ventures of $6.8 million in 2010 included $3.6 million to fund our share of the settlement at Westfarms that was paid in March 2010. Contributions to Unconsolidated Joint Ventures of $1.4 million in 2009 included $1.1 million of funding and costs related to our Sarasota joint venture.

Sources of cash used in funding these investing activities, other than cash flows from operating activities, included distributions from Unconsolidated Joint Ventures. Distributions from Unconsolidated Joint Ventures in excess of income provided $7.5 million and $5.1 million in 2010 and 2009, respectively.

 
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Financing Activities

Net cash used in financing activities was $83.7 million in 2010 compared to $146.3 million in 2009. Payments on debt and for issuance costs, net of proceeds from the issuance of debt, were $1.8 million in 2010, compared to $37.5 million in 2009. In 2010 and 2009, net proceeds of $1.9 million were received and net payments of $1.2 million were made, respectively, in connection with incentive plans. Total dividends and distributions paid were $83.7 million and $106.6 million in 2010 and 2009, respectively. Common dividends paid in 2010 decreased primarily due to a change in the timing of quarterly dividend payments.

Beneficial Interest in Debt

At June 30, 2010, the Operating Partnership's debt and its beneficial interest in the debt of its Consolidated Business and Unconsolidated Joint Ventures totaled $2,885.7 million, with an average interest rate of 5.52% excluding amortization of debt issuance costs and interest rate hedging costs. These costs are reported as interest expense in the results of operations. Interest expense for the six months ended June 30, 2010 includes $0.4 million of non-cash amortization relating to acquisitions, or 0.03% of the average all-in rate. Beneficial interest in debt includes debt used to fund development and expansion costs. Beneficial interest in construction work in progress totaled $58.2 million as of June 30, 2010, which includes $5.7 million of assets on which interest is being capitalized. The following table presents information about our beneficial interest in debt as of June 30, 2010:

 	 	Amount	 	 	Interest Rate Including   Spread	
 	 	(in millions)	 	 	 	 	
Fixed rate debt	 	$	 2,439.4	 	 	 	5.88	% (1) (2)	
 	 	 	 	 	 	 	 	 	
Floating rate debt:	 	 	 	 	 	 	 	 	
Swapped through December 2010	 	 	162.8	 	 	 	5.01	%	
Swapped through March 2011	 	 	125.0	 	 	 	4.22	%	
Swapped through October 2012	 	 	15.0	 	 	 	5.95	%	
 	 	$	 302.8	 	 	 	4.73	% (1)	
Floating month to month	 	 	143.5	 	 	 	1.08	% (1)	
Total floating rate debt	 	$	446.3	 	 	 	3.56	% (1)	
 	 	 	 	 	 	 	 	 	
Total beneficial interest in debt	 	$	2,885.7	 	 	 	5.52	% (1)	
 	 	 	 	 	 	 	 	 	
Amortization of financing costs (3)	 	 	 	 	 	 	0.19	%	
Average all-in rate	 	 	 	 	 	 	5.72	% (2)	

(1)  	Represents weighted average interest rate before amortization of financing costs.	
(2)  	The Pier Shops’ loan is in default. As of December 2009 interest accrues at the default rate of 10.01% rather than the original stated rate of 6.01%. Excluding our beneficial interest in The Pier Shops’ debt of $104.6 million from the table changes the average fixed rate to 5.70% and the average all-in rate to 5.55%.	
(3)  	Financing costs include debt issuance costs and costs related to interest rate agreements of certain fixed rate debt.	
(4)   	Amounts in table may not add due to rounding.	

Sensitivity Analysis

We have exposure to interest rate risk on our debt obligations and interest rate instruments. We use derivative instruments primarily to manage exposure to interest rate risks inherent in variable rate debt and refinancings. We routinely use cap, swap, and treasury lock agreements to meet these objectives. Based on the Operating Partnership's beneficial interest in floating rate debt in effect at June 30, 2010, a one percent increase in interest rates on this floating rate debt would decrease cash flows and annual earnings by approximately $1.4 million, while a one percent decrease in interest rates on this floating rate debt would increase cash flows and annual earnings by approximately $1.4 million. Based on our consolidated debt and interest rates in effect at June 30, 2010, a one percent increase in interest rates would decrease the fair value of debt by approximately $85.0 million, while a one percent decrease in interest rates would increase the fair value of debt by approximately $89.5 million.

 
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Loan Commitments and Guarantees

Certain loan agreements contain various restrictive covenants, including a minimum net worth requirement, a maximum payout ratio on distributions, a minimum debt yield ratio, a maximum leverage ratio, minimum interest coverage ratios, and a minimum fixed charges coverage ratio, the latter being the most restrictive. This covenant requires that we maintain a minimum fixed charges coverage ratio of more than 1.5 over a trailing 12-month period. As of June 30, 2010, our trailing 12-month minimum fixed charges coverage ratio was 2.1. Other than The Pier Shops’ loan, which is in default, we are in compliance with all of our covenants and loan obligations as of June 30, 2010. The default on this loan did not trigger any cross defaults on our other indebtedness. The maximum payout ratio on distributions covenant limits the payment of distributions generally to 95% of funds from operations, as defined in the loan agreements, except as required to maintain our tax status, pay preferred distributions, and for distributions related to the sale of certain assets. See “Note 4 – Beneficial Interest in Debt and Interest Expense” to our consolidated financial statements for more details on loan guarantees.

Cash Tender Agreement

A. Alfred Taubman has the annual right to tender partnership units in the Operating Partnership and cause us to purchase the tendered interests at a purchase price based on a market valuation of TCO on the trading date immediately preceding the date of the tender. See “Note 8 – Commitments and Contingencies” to our consolidated financial statements for more details.

Capital Spending

City Creek Center

We have finalized agreements, regarding City Creek Center, a mixed-use project in Salt Lake City, Utah. The 0.7 million square foot retail component of the project will include Macy’s and Nordstrom as anchors. We are currently providing development and leasing services and will be the manager for the retail space, which we will own under a participating lease. City Creek Reserve, Inc. (CCRI), an affiliate of the LDS Church, is the participating lessor and is providing all of the construction financing. We expect an approximately 11% to 12% return on our approximately $76 million investment, of which $75 million will be paid to CCRI upon opening of the retail center. We are required to maintain a $25 million letter of credit until the $75 million is paid to CCRI. As of June 30, 2010, the capitalized cost of this project was approximately $1 million. Construction is progressing and we are leasing space for a spring 2012 opening.

2010 Capital Spending

Capital spending for routine maintenance of the shopping centers is generally recovered from tenants. Capital spending through June 30, 2010 is summarized in the following table:

 	 	2010 (1)	 	
 	 	Consolidated Businesses	 	 	Beneficial Interest in Consolidated Businesses	 	 	Unconsolidated Joint Ventures	 	 	Beneficial Interest in Unconsolidated Joint Ventures	 	
 	 	(in millions)	 	
Existing centers:	 	 	 	 	 	 	 	 	 	 	 	 	
Projects with incremental GLA or anchor replacement	 	$	 3.9	 	 	$	 3.9	 	 	 	 	 	 	 	
Projects with no incremental GLA and other	 	 	3.1	 	 	 	3.1	 	 	$	 1.3	 	 	$	 0.6	 	
Mall tenant allowances (2)	 	 	11.1	 	 	 	10.6	 	 	 	0.9	 	 	 	0.5	 	
Asset replacement costs reimbursable by tenants	 	 	2.3	 	 	 	2.1	 	 	 	1.1	 	 	 	0.6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate office improvements, technology, and equipment and other	 	 	0.4	 	 	 	0.4	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Additions to properties	 	$	20.8	 	 	$	20.2	 	 	$	3.3	 	 	$	1.8	 	

(1)  	Costs are net of intercompany profits and are computed on an accrual basis.	
(2)  	Excludes initial lease-up costs.	
(3)   	Amounts in this table may not add due to rounding.	

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For the six months ended June 30, 2010, in addition to the costs above, we incurred our $3.7 million share of Consolidated Businesses’ and $0.4 million share of Unconsolidated Joint Ventures’ capitalized leasing costs.

The following table presents a reconciliation of the Consolidated Businesses’ capital spending shown above (on an accrual basis) to additions to properties (on a cash basis) as presented in our Consolidated Statement of Cash Flows for the six months ended June 30, 2010:

 	 	(in millions)	 	
Consolidated Businesses’ capital spending	 	$	 20.8	 	
Differences between cash and accrual basis	 	 	11.4	 	
Additions to properties	 	$	32.2	 	

Planned 2010 Capital Spending

The following table summarizes planned capital spending for 2010:

 	 	2010 (1)	 	
 	 	Consolidated Businesses	 	 	Beneficial Interest in Consolidated Businesses	 	 	Unconsolidated Joint Ventures	 	 	Beneficial Interest in Unconsolidated Joint Ventures	 	
 	 	(in millions)	 	
Existing centers (2)	 	$	 65.3	 	 	$	 62.3	 	 	$	 12.9	 	 	$	 7.1	 	
Corporate office improvements, technology, and equipment	 	 	1.0	 	 	 	1.0	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	66.3	 	 	$	63.3	 	 	$	12.9	 	 	$	7.1	 	

(1)  	Costs are net of intercompany profits.	
(2)  	Primarily includes costs related to renovations, mall tenant allowances, and asset replacement costs reimbursable by tenants.	
(3)  	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.

Disclosures regarding planned capital spending, including estimates regarding timing of openings, capital expenditures, occupancy, and returns on new developments 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) availability of and cost of financing and other financing considerations, (7) actual time to start construction and 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 preferred shareowners. Dividends to our common shareowners are at the discretion of the Board of Directors and depend on the cash available to us, our financial condition, capital and other requirements, and such other factors as the Board of Directors deems relevant. To qualify as a REIT, we must distribute at least 90% of our REIT taxable income prior to net capital gains to our shareowners, as well as meet certain other requirements. We must pay these distributions in the taxable year the income is recognized, or in the following taxable year if they are declared during the last three months of the taxable year, payable to shareowners of record on a specified date during such period and paid during January of the following year. Such distributions are treated as paid by us and received by our shareowners on December 31 of the year in which they are declared. In addition, at our election, a distribution for a taxable year may be declared in the following taxable year if it is declared before we timely file our tax return for such year and if paid on or before the first regular dividend payment after such declaration. These distributions qualify as dividends paid for the 90% REIT distribution test for the previous year and are taxable to holders of our capital stock in the year in which paid. Preferred dividends accrue regardless of whether earnings, cash availability, or contractual obligations were to prohibit the current payment of dividends.

 
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The annual determination of our common dividends is based on anticipated Funds from Operations available after preferred dividends and our REIT taxable income, as well as assessments of annual capital spending, financing considerations, and other appropriate factors. We intend to continue to pay dividends in cash in 2010, subject to our Board of Directors’ approval.

Any inability of the Operating Partnership or its Joint Ventures to secure financing as required to fund maturing debts, capital expenditures and changes in working capital, including development activities and expansions, may require the utilization of cash to satisfy such obligations, thereby possibly reducing distributions to partners of the Operating Partnership and funds available to us for the payment of dividends.

On May 21, 2010, we declared a quarterly dividend of $0.415 per common share, $0.50 per share on our 8% Series G Preferred Stock, and $0.4765625 on our 7.625% Series H Preferred Stock, all of which were paid on June 30, 2010 to shareowners of record on June 15, 2010.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is included in this report at Item 2 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Sensitivity Analysis.”

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2010, our disclosure controls and procedures were effective to ensure the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods prescribed by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II
OTHER INFORMATION

Item 1. Legal Proceedings

Refer to “Note 8 – Commitments and Contingencies” to our consolidated financial statements relating to the California restaurant owners litigation and, the restaurant owners at The Pier Shops litigation. There were no material developments regarding these matters during the quarter ended June 30, 2010.

In April 2010, the holder of the mortgage on The Pier Shops filed a mortgage foreclosure complaint in the United States District Court for the District of New Jersey (Case No. CV01755) against APA. The plaintiff seeks to establish the amounts due under The Pier Shops’ mortgage loan agreement, foreclose all right, title, and lien which APA has in The Pier Shops’ leasehold interest, obtain possession of the property, and order a foreclosure sale of the property to satisfy the amounts due under the loan. The Company anticipates that the foreclosure will be completed in the third quarter of 2010, at which time ownership of The Pier Shops will be transferred in satisfaction of the obligations under the debt. However, the foreclosure process is not in the Company’s control and possibly transfer of title may not be completed until later.

Item 1A. Risk Factors

There were no material changes in our risk factors previously disclosed in Part I, Item 1A. of our Form 10-K for the year ended December 31, 2009.

 
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Item 6. Exhibits

10(a)	--	The Taubman Company 2008 Omnibus Long-Term Incentive Plan, as amended and restated as of May 21, 2010 (incorporated herein by reference to Appendix A to the Registrant’s Proxy Statement on Schedule 14A, filed with the Commission on March 31, 2010)	
12	--	Statement Re: Computation of Taubman Centers, Inc. Ratio of Earnings to Combined Fixed Charges and Preferred Dividends	
31(a)	--	Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
31(b)	--	Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
32(a)	--	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
32(b)	--	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
99	--	Debt Maturity Schedule	
101	--	The following materials from Taubman Centers, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Balance Sheet, (2) the Consolidated Statements of Operations and Comprehensive Income, (3) Consolidated Statement of Changes in Equity, (4) the Consolidated Statement of Cash Flows, and (5) Notes to Consolidated Financial Statements, tagged as blocks of text.	

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 	TAUBMAN CENTERS, INC.	
Date: August 2, 2010	By: /s/ Lisa A. Payne                                                                      	
 	Lisa A. Payne	
 	Vice Chairman, Chief Financial Officer, and Director (Principal Financial Officer)	

 
45

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

 	 	 	Six Months Ended June 30	 	
 	 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	
Earnings before income from equity investees (1)	 	$	16,367	 	 	$	27,334	 	
 	 	 	 	 	 	 	 	 	 	
Add back:	 	 	 	 	 	 	 	 	
    Fixed charges	 	 	79,297	 	 	 	77,355	 	
    Amortization of previously capitalized interest	 	 	2,266	 	 	 	2,279	 	
    Distributed income of Unconsolidated Joint Ventures	 	 	19,240	 	 	 	18,526	 	
 	 	 	 	 	 	 	 	 	 	
Deduct:	 	 	 	 	 	 	 	 	
    Capitalized interest	 	 	(59	)	 	 	(598	)	
    Preferred distributions	 	 	(1,230	)	 	 	(1,230	)	
 	 	 	 	 	 	 	 	 	 	
Earnings available for fixed charges and preferred dividends	 	$	115,881	 	 	$	123,666	 	
 	 	 	 	 	 	 	 	 	 	
Fixed charges:	 	 	 	 	 	 	 	 	
    Interest expense	 	$	75,340	 	 	$	72,706	 	
    Capitalized interest	 	 	59	 	 	 	598	 	
    Interest portion of rent expense	 	 	2,668	 	 	 	2,821	 	
    Preferred distributions	 	 	1,230	 	 	 	1,230	 	
 	Total fixed charges	 	$	79,297	 	 	$	77,355	 	
 	 	 	 	 	 	 	 	 	 	
Preferred dividends	 	 	7,317	 	 	 	7,317	 	
 	 	 	 	 	 	 	 	 	 	
Total fixed charges and preferred dividends	 	$	86,614	 	 	$	84,672	 	
 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to fixed charges and preferred dividends	 	 	1.3	 	 	 	1.5	 	

 	 	 	 	 	 	 	 	 	 	
(1)	Earnings before income from equity investees for the six months ended June 30, 2009 includes a $2.6 million restructuring charge, which primarily represents the costs of terminations of personnel.	 	

Exhibit 31 (a)

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

I, Robert S. Taubman, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Taubman Centers, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	

 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and	

 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

 Date: August 2 , 2010	/s/ Robert S. Taubman  	
 	Robert S. Taubman	
 	Chairman of the Board of Directors, President, and Chief Executive Officer	

Exhibit 31 (b)

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

I, Lisa A. Payne, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Taubman Centers, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures  and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	

 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and	

 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	

 Date: August 2, 2010	/s/ Lisa A. Payne                                                                 	
 	Lisa A. Payne	
 	Vice Chairman, Chief Financial Officer, and Director (Principal Financial Officer)	

Exhibit 32 (a)

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

I, Robert S. Taubman, Chief Executive Officer of Taubman Centers, Inc. (the "Registrant"), certify that based upon a review of the Quarterly Report on Form 10-Q for the period ended June 30, 2010 (the "Report"):

 	(i)	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and	

 	(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.	

/s/ Robert S. Taubman  	 Date: August 2, 2010	
Robert S. Taubman	 	
Chairman of the Board of Directors, President, and Chief Executive Officer	 	

Exhibit 32 (b)

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

I, Lisa A. Payne, Chief Financial Officer of Taubman Centers, Inc. (the "Registrant"), certify that based upon a review of the Quarterly Report on Form 10-Q for the period ended June 30, 2010 (the "Report"):

 	(i)	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and	

 	(ii)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.	

/s/ Lisa A. Payne                                                                 	 Date: August 2, 2010	
Lisa A. Payne	 	
Vice Chairman, Chief Financial Officer, and Director (Principal Financial Officer)	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Exhibit	 99	
 	MORTGAGE AND OTHER NOTES PAYABLE (a)	
 	INCLUDING WEIGHTED AVERAGE INTEREST RATES AT JUNE 30, 2010	
 	(in millions of dollars, amounts may not add due to rounding)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Beneficial	Effective	LIBOR	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	100%	 	Interest	 	Rate	 	Rate	 	Principal Amortization and Debt Maturities	
 	 	 	6/30/10	 	6/30/10	 	6/30/10	(b)	Spread	 	2010	 	2011	 	2012	2013	2014	2015	2016	2017	2018	2019	2020	Total	
Consolidated Fixed Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beverly Center	 	325.5	 	325.5	 	5.28%	 	 	 	2.8	 	6.0	 	6.3	6.6	303.8	 	 	 	 	 	 	325.5	
Cherry Creek Shopping Center	50.00%	280.0	 	140.0	 	5.24%	 	 	 	 	 	 	 	 	 	 	 	140.0	 	 	 	 	140.0	
Great Lakes Crossing	 	133.7	 	133.7	 	5.25%	 	 	 	1.5	 	3.0	 	3.2	126.0	 	 	 	 	 	 	 	133.7	
MacArthur Center	95.00%	127.7	 	121.3	 	6.96%	(c)	 	 	121.3	 	 	 	 	 	 	 	 	 	 	 	 	121.3	
Northlake Mall	 	215.5	 	215.5	 	5.41%	 	 	 	 	 	 	 	 	 	 	 	215.5	 	 	 	 	215.5	
Regency Square	 	73.5	 	73.5	 	6.75%	 	 	 	0.7	 	72.8	 	 	 	 	 	 	 	 	 	 	73.5	
Stony Point Fashion Park	106.4	 	106.4	 	6.24%	 	 	 	0.9	 	1.9	 	2.0	2.1	99.5	 	 	 	 	 	 	106.4	
The Mall at Partridge Creek	82.5	 	82.5	 	6.15%	 	 	 	0.4	 	0.9	 	1.0	1.1	1.1	1.2	1.3	1.4	1.4	1.5	71.2	82.5	
The Mall at Short Hills	 	540.0	 	540.0	 	5.47%	 	 	 	 	 	 	 	 	 	 	540.0	 	 	 	 	 	540.0	
The Mall at Wellington Green	90.00%	200.0	 	180.0	 	5.44%	 	 	 	 	 	 	 	 	 	 	180.0	 	 	 	 	 	180.0	
The Pier Shops at Caesars	77.50%	135.0	(d)	104.6	 	10.01%	(d)	 	 	104.6	(d)	 	 	 	 	 	 	 	 	 	 	104.6	
Total Consolidated Fixed	2,219.8	 	2,023.1	 	 	 	 	 	232.2	 	84.6	 	12.4	135.9	404.4	721.2	356.8	1.4	1.4	1.5	71.2	2,023.1	
Weighted Rate	 	5.86%	 	5.84%	 	 	 	 	 	8.30%	 	6.57%	 	5.49%	5.27%	5.52%	5.46%	5.35%	6.15%	6.15%	6.15%	6.15%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Floating Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
International Plaza	50.10%	325.0	 	162.8	 	5.01%	(e)	 	 	 	 	162.8	(f)	 	 	 	 	 	 	 	 	 	162.8	
TRG Revolving Credit	 	18.4	 	18.4	 	1.31%	(g)	 	 	 	 	18.4	 	 	 	 	 	 	 	 	 	 	18.4	
TRG $550M Revolving Credit Facility:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  Dolphin Mall (j)	 	45.0	 	45.0	 	1.05%	(h)	0.70%	 	 	 	45.0	(j)	 	 	 	 	 	 	 	 	 	45.0	
  Fairlane Town Center (j)	 	80.0	 	80.0	 	1.05%	(h)	0.70%	 	 	 	80.0	(j)	 	 	 	 	 	 	 	 	 	80.0	
  Twelve Oaks Mall (j)	 	0.0	 	0.0	 	 	 	0.70%	 	 	 	0.0	(j)	 	 	 	 	 	 	 	 	 	0.0	
Total Consolidated Floating	468.4	 	306.2	 	 	 	 	 	0.0	 	306.2	 	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	306.2	
Weighted Rate	 	3.81%	 	3.17%	 	 	 	 	 	0.00%	 	3.17%	 	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Consolidated	 	2,688.2	 	2,329.3	 	 	 	 	 	232.2	 	390.9	 	12.4	135.9	404.5	721.2	356.8	1.4	1.4	1.5	71.2	2,329.3	
Weighted Rate	 	5.50%	 	5.49%	 	 	 	 	 	8.30%	 	3.91%	 	5.49%	5.27%	5.52%	5.46%	5.35%	6.15%	6.15%	6.15%	6.15%	 	
Joint Ventures Fixed Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Arizona Mills (k)	50.00%	131.0	 	65.5	 	7.90%	 	 	 	65.5	 	 	 	 	 	 	 	 	 	 	 	 	65.5	
The Mall at Millenia	50.00%	204.0	 	102.0	 	5.46%	 	 	 	0.7	 	1.6	 	1.6	98.1	 	 	 	 	 	 	 	102.0	
Sunvalley	50.00%	120.2	 	60.1	 	5.67%	 	 	 	0.6	 	1.3	 	58.2	 	 	 	 	 	 	 	 	60.1	
Waterside Shops	25.00%	165.0	 	41.3	 	5.54%	 	 	 	 	 	 	 	 	 	 	 	41.3	 	 	 	 	41.3	
Westfarms	78.94%	186.9	 	147.5	 	6.10%	 	 	 	1.5	 	3.1	 	142.9	 	 	 	 	 	 	 	 	147.5	
Total Joint Venture Fixed	807.0	 	416.3	 	 	 	 	 	68.3	 	6.0	 	202.7	98.1	0.0	0.0	41.3	0.0	0.0	0.0	0.0	416.3	
Weighted Rate	 	6.05%	 	6.11%	 	 	 	 	 	7.81%	 	5.84%	 	5.97%	5.46%	0.00%	0.00%	5.54%	0.00%	0.00%	0.00%	0.00%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Joint Ventures Floating Rate Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair Oaks	50.00%	250.0	 	125.0	 	4.22%	(l)	 	 	 	 	125.0	(f)	 	 	 	 	 	 	 	 	 	125.0	
Taubman Land Associates	50.00%	30.0	 	15.0	 	5.95%	(m)	 	 	 	 	 	 	15.0	 	 	 	 	 	 	 	 	15.0	
Other (n)	 	0.1	 	0.0	 	3.25%	 	 	 	0.0	 	 	 	 	 	 	 	 	 	 	 	 	0.0	
Total Joint Venture Floating	280.1	 	140.0	 	 	 	 	 	0.0	 	125.0	 	15.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	140.0	
Weighted Rate	 	4.40%	 	4.40%	 	 	 	 	 	3.25%	 	4.22%	 	5.95%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Joint Venture	 	1,087.1	 	556.4	 	 	 	 	 	68.4	 	131.0	 	217.7	98.1	0.0	0.0	41.3	0.0	0.0	0.0	0.0	556.4	
Weighted Rate	 	5.63%	 	5.68%	 	 	 	 	 	7.81%	 	4.29%	 	5.97%	5.46%	0.00%	0.00%	5.54%	0.00%	0.00%	0.00%	0.00%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TRG Beneficial Interest Totals	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fixed Rate Debt	 	3,026.8	 	2,439.4	 	 	 	 	 	300.5	 	90.6	 	215.1	233.9	404.4	721.2	398.0	1.4	1.4	1.5	71.2	2,439.4	
 	 	 	5.91%	 	5.88%	 	 	 	 	 	8.19%	 	6.53%	 	5.94%	5.35%	5.52%	5.46%	5.37%	6.15%	6.15%	6.15%	6.15%	 	
Floating Rate Debt	 	748.5	 	446.3	 	 	 	 	 	0.0	 	431.2	 	15.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	446.3	
 	 	 	4.03%	 	3.56%	 	 	 	 	 	3.25%	 	3.47%	 	5.95%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	 	
Total	 	3,775.3	 	2,885.7	 	 	 	 	 	300.5	 	521.8	 	230.1	233.9	404.4	721.2	398.0	1.4	1.4	1.5	71.2	2,885.7	
 	 	 	5.54%	 	5.52%	 	 	 	 	 	8.19%	 	4.00%	 	5.94%	5.35%	5.52%	5.46%	5.37%	6.15%	6.15%	6.15%	6.15%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Average Maturity Fixed Debt	 	4	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Average Maturity Total Debt	 	4	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(a)	All debt is secured and non-recourse to TRG unless otherwise indicated.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(b)	 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.	
(c)	Debt includes $0.2 million of purchase accounting premium from acquisition which reduces the stated rate on the debt of 7.59% to an effective rate of 6.96%.	 	 	
(d)	The Pier Shops' loan is in default.  As of December 2009, interest accrues at the default rate of 10.01% rather than the original stated rate of 6.01%.  Debt maturity is shown in 2010 when the debt obligation is expected to be extinguished.	
(e)	Debt is swapped to an effective rate of 5.01% until maturity.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(f)	Two one year extension options available.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(g)	Rate floats daily.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(h)	The debt is floating month to month at LIBOR plus spread.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(i)	TRG revolving credit facility of $550 million.  Dolphin, Fairlane and Twelve Oaks are the direct borrowers under this facility. Debt is guaranteed by TRG. 	 	
(j)	One year extension option available.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(k)	The debt was refinanced for $175 million on July 1, 2010 at a rate of 5.76% and has a 10 year maturity.	 	 	 	 	 	 	 	 	 	
(l)	Debt is swapped to an effective rate of 4.22% until maturity.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(m)	Debt is swapped to an effective rate of 5.95% until maturity.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(n)	Debt is unsecured.