TAUBMAN CENTERS, INC. 2014 ANNUAL REPORT
SHAREHOLDERS
RETAILERS
TRANSFORMATION
SHOPPERS
LEGAL
LEASING
SPECIALTY LEASING
TENANT COORDINATION
DEVELOPMENT
RISK MANAGEMENT
CONTRACT ADMINISTRATION
INFORMATION TECHNOLOGY
CORPORATE AFFAIRS
STRATEGY
TREASURY
TAX
EXECUTIVES
INTERNAL AUDIT
CENTER MANAGEMENT
MARKETING
ACCOUNTING
SPONSORSHIP
REAL ESTATE TAX
LEASING ADMINISTRATION
CENTER OPERATIONS
TECHNOLOGY IS TRANSFORMING HOW PEOPLE SHOP. AT TAUBMAN CENTERS, WE
ARE EMBRACING THIS TRANSFORMATION. SUCCESSFUL RETAILERS WILL BE
OMNI-CHANNEL AND WILL CONTINUOUSLY SEARCH FOR INNOVATIVE WAYS TO
CONNECT WITH CUSTOMERS THROUGH BOTH ONLINE AND BRICK AND MORTAR
PLATFORMS. IN THIS DYNAMIC ENVIRONMENT, OUR A-QUALITY MALLS AND
CUSTOMER-FOCUSED ORGANIZATION ARE EXTREMELY WELL POSITIONED TO
MAXIMIZE RETAIL SALES AND CREATE ADDITIONAL SHAREHOLDER VALUE.
PAGE 1
Over the 10-year period
ended December 31, 2014,
Taubman Centers’ compounded
annual total shareholder
return was 14.4%
354
296
273
215
387
252
222
209
197
181
181
120
100
146
98
04
05
06
07
08
09
10
11
12
13
14
Taubman Centers, Inc. S&P 400 MidCap Index S&P 500 Index
MSCI US REIT Index FTSE NAREIT Equity Retail Index
COMPARISON OF CUMULATIVE TOTAL RETURN
This graph sets forth the cumulative total returns on a $100 investment in each of our Common Stock, the MSCI US REIT Index, the FTSE NAREIT
Equity Retail Index, the S&P 500 Index and the S&P 400 MidCap Index for the period December 31, 2004 through December 31, 2014 (assuming
in all cases, the reinvestment of dividends). During 2014, Taubman Centers’ shareowners enjoyed a 30.7% total shareholder return.
The company’s 10-year total shareholder return was the eleventh highest of the 98 U.S REITs that have operated during this period.
PAGE 2 TAUBMAN CENTERS, INC.
LETTER TO SHAREHOLDERS
THE SPECTACULAR GRAND OPENING OF THE MALL AT UNIVERSITY TOWN
CENTER WAS ONE OF THE HIGHLIGHTS OF A VERY PRODUCTIVE 2014 FOR
TAUBMAN CENTERS. OPENING IN OCTOBER WITH MORE THAN HALF ITS
RETAILERS AND RESTAURANTS NEW TO THE SARASOTA, FLORIDA MARKET,
THE MALL ALSO DEBUTED AS THE MOST TECHNOLOGICALLY ADVANCED
SHOPPING CENTER WE’VE EVER DEVELOPED.
Designed from the ground up as a “smart
You may not immediately think of Taubman
building,” The Mall at University Town Center is
Centers or any other shopping center developer
also a proving ground for many of the exciting
as a technology company. After all, wasn’t the
opportunities we see for our business with the
Internet supposed to make malls obsolete?
evolving convergence of brick and mortar and
But what’s becoming clearer every day is that
online shopping.
Customers are responding enthusiastically to such
offerings as free Wi-Fi, a feature-filled mobile
physical spaces – stores – are at the heart of
retailers’ omni-channel marketing and distribu-
tion strategies.
app and interactive touchscreen directories.
Highly successful brands, connecting with
Tenants are utilizing high-speed broadband and
customers through both bricks and clicks, are
voice services delivered over a state-of-the-art
using their brick and mortar assets for ware-
fiber-optic infrastructure, which also facilitates
housing and inventory management, as well as
efficient operation of the center’s energy,
for showcasing their products and functioning
life-safety, lighting and HVAC systems.
as service centers for pick-ups, deliveries and
returns. While evolving digital platforms may
for some merchants slow the growth in their
number of stores, good locations in major
markets, especially A-quality malls like ours,
are increasingly coveted.
PAGE 3
819
809
708
641
529
555
533
508
564
502
Since 2005, the compound annual growth
rate of Taubman Centers’ tenant sales
per square foot has been 5.3%
Tenant sales per square foot is the most important measure of the quality
of regional mall assets. The higher the retailers’ sales, the higher the rents
those retailers can pay, which translates to greater rewards to the landlord
and its shareholders. Taubman Centers’ tenant sales per square foot are
the highest in the publicly held U.S. regional mall industry.
(1) See Notes and Reconciliations page at the end of this report for properties
included and excluded.
TENANT SALES PER SQUARE FOOT(1) ($)
05
06
07
08
09
10
11
12
13
14
Technology is our friend, not a foe, and we’re
In a key transaction completed in the fourth
embracing its promise. Consistent with our
quarter of 2014 we sold our seven lowest-
history of breaking down “Threshold Resis-
performing assets for $1.4 billion. While these
tance” – any barrier that stands between a
centers are strong assets, they were less produc-
shopper and a purchase – and creating the
tive than the balance of our portfolio and they no
most productive retail environments in the
longer met our criteria for longer-term ownership.
industry, we’re collaborating with our tenants,
In selling these properties, our portfolio’s tenant
listening to our shoppers and investing in our
sales performance increased significantly by
properties to maximize retail sales.
about $100 to more than $800 per square foot.
This will also enhance our ability to grow Net
Operating Income (NOI) over time. As a result
of the transaction, we paid a special cash
dividend to our shareholders in December of
$4.75 per share.
Earlier in the year we also completed the sale of
our 50 percent interest in Arizona Mills (Tempe,
Ariz.) and our land in Syosset (Oyster Bay, New
York). We were not managing Arizona Mills,
and in Oyster Bay it had become clear to us
that the political environment on Long Island
made it very unlikely that we would be able to
move forward with our development plans any
time soon.
How we are strategically approaching these
opportunities and deploying technology at our
new and existing centers is the subject of the
feature section of this annual report.
FOCUSING OUR RESOURCES FOR GROWTH
Having the resources and operational skills to
improve the shopper experience through tech-
nology is one of the factors that will differentiate
the most productive malls into the future. The
full potential of these new platforms is likely to
be realized only in the highest performing
centers. Given this opportunity and the com-
petitive environment in general, dominant,
well-merchandised centers will thrive, while
poorly-positioned properties will demand
increasing amounts of capital and managerial
attention just to survive.
PAGE 4 TAUBMAN CENTERS, INC.
3.65
3.67
3.34
Over the last 10 years, the company’s
Adjusted Funds from Operations and Dividends
per share have a compounded annual growth
rate of 5% and 7.2%, respectively
2.36
2.88
2.65
3.08
3.06
2.86 2.84
Adjusted FFO per share Dividends per share
Over the last 10 years, Adjusted Funds from Operations per share has grown
56%. This increase in earnings has allowed Taubman Centers to regularly
reward our shareholders with a growing dividend. In 2014, the dividend was
increased to $2.16 per share, the seventeenth increase since the company went
public in 1992. Over the last 10 years, dividends per share have grown 86%.
(1) See Notes and Reconciliations page at the end of this report for a
reconciliation of net income to adjusted funds from operations.
(2) Excludes special dividend of $0.1834 per share paid in December, 2010.
(3) Excludes special dividend of $4.75 per share paid in December, 2014.
1.29
1.16
1.66
1.66
1.68(2)
1.54
1.76
1.85
2.16(3)
2.00
ADJUSTED FUNDS FROM OPERATIONS / DIVIDENDS PER SHARE(1) ($)
05
06
07
08
09
10
11
12
13
14
DEVELOPMENT AND
REDEVELOPMENT PROGRESS
Significant progress was made throughout the
year at six redevelopment and six ground-up
projects in the U.S. and Asia. We expect a
weighted average return of 7 percent on our
share of the approximately $1.9 billion invest-
infers a $1 billion valuation for this asset, which
we developed in 2001 for approximately $250
million. Two other centers we developed in
Florida in 2001 and 2002, Dolphin Mall and
The Mall at Millenia (Orlando, Fla.), represent
even greater value-creation success stories.
ment in these projects. This investment includes
There are very few opportunities for great new
$275 million in U.S. redevelopment, $1 billion in
shopping centers in the U.S. today, and we will
U.S. development (including The Mall at Univer-
continue to be very selective in where we direct
sity Town Center), and about $600 million in
our time, talents and dollars. Our bar is very
Asia development (roughly 60 percent in South
high. We are looking only to develop assets
Korea and 40 percent in China).
Major redevelopment projects – renovations
and/or expansions – are under way at The Mall
at Green Hills (Nashville, Tenn.), Cherry Creek
that will eventually achieve sales productivity
in the top half of our portfolio. We’re confident
that our newest properties will comfortably
meet that standard.
Shopping Center (Denver, Colo.), Dolphin Mall
As mentioned earlier, The Mall at University
(Miami, Fla.), Beverly Center (Los Angeles, Calif.),
Town Center welcomed shoppers before the
Sunvalley (Concord, Calif.), and International
2014 holiday season. It was the only newly
Plaza (Tampa, Fla.).
As we’ve said many times before, development
continues to be one of our company’s most
valuable and distinguishing core competencies.
Evidencing the extraordinary value we’ve
created through development, in January we
sold a 49.9 percent interest in International
Plaza to a joint venture between TIAA-CREF
and APG for $499 million. That purchase price
built enclosed regional mall that opened last
year in the U.S. Customer response has been
terrific to the center’s design, amenities and
retail offerings, which include Macy’s and the
market’s only Saks Fifth Avenue and Dillard’s.
The center also features such unique-to-the-
market stores as Apple, kate spade new york,
H&M, Michael Kors, Crate & Barrel, Stuart
Weitzman, lululemon athletica, and J. Crew.
PAGE 5
3.9
3.0
3.3
2.9
2.6
2.3
2.6
2.4
2.7
2.7
2.7
2.6
2.6
2.2
2.2
2.2
2.1
2.1
2.0
1.8
Over the last decade, the company has
significantly increased both its Interest
Only and Fixed Charges Coverage Ratios
Interest only Fixed charges
The company remains absolutely committed to maintaining a strong
balance sheet and believes it provides a significant competitive advantage.
(1) See Notes and Reconciliations page at the end of this report for a
description of the calculations.
INTEREST ONLY/FIXED CHARGES COVERAGE RATIOS(1)
05
06
07
08
09
10
11
12
13
14
Part of a master-planned residential and com-
We broke ground in early 2014 on International
mercial development, The Mall at University
Marketplace in Waikiki, Hawaii. Scheduled to
Town Center is well positioned as the affluent
open in 2016, the center will be anchored by the
Sarasota market’s premier shopping destination,
only full-line Saks Fifth Avenue in Hawaii. It is
filling a huge void in better merchandise. Tenant
located along Kalakaua Avenue, Hawaii’s most
sales have exceeded our expectations.
important retail street. Kalakaua is ranked fifth
As we finalize this annual report, the highly
anticipated opening of our newest asset, The Mall
of San Juan, is set to take place on March 26,
2015, in the heart of Puerto Rico’s capital city.
The San Juan metropolitan area is home to 2.5
million of the island’s 3.7 million population.
Anchors Saks Fifth Avenue and Nordstrom are
the first in the Caribbean and all of Latin America,
and more than half the center’s retailers will be
new to the market. Merchandising is consistent
with the highest-end properties in our portfolio,
and includes Louis Vuitton, Versace, Jimmy
among North America’s best shopping boule-
vards, behind only New York’s Fifth Avenue,
Chicago’s Michigan Avenue, Beverly Hills’ Rodeo
Drive and San Francisco’s Union Square. Store
rents along Kalakaua are consistently above
$400 per square foot and sales reportedly exceed
$3,000 per square foot. We are designing and
merchandising the mall to be an extension of
Kalakaua, which throughout the year attracts
pedestrian traffic averaging about 40,000 people
per day, increasing to around 65,000 people
in season.
Choo, and Gucci, along with such popular
In Asia, we continue to work on the construction
unique-to-the-market retailers and restaurants
and leasing for Taubman Asia’s three projects
as kate spade new york, BRIO Tuscan Grille,
in China and South Korea. CityOn.Xi’an
Tommy Bahama, and Kona Grill. We are
and CityOn.Zhengzhou will be anchored by
particularly proud of the center’s planning and
Wangfujing, one of China’s largest department
design, and are confident The Mall of San Juan
store companies. They are also our joint-venture
will eventually be one of the top five properties
partner in these projects.
in our portfolio.
PAGE 6 TAUBMAN CENTERS, INC.
10.8
10.1
9.8
8.8
7.0
7.1
7.2
5.7
6.0
5.0
Over the 10-year period ended December 31,
2014, the compounded annual growth of our
Total Market Capitalization has been 6.6%
Since 2005, the company has nearly doubled its market capitalization –
from $5.7 billion to $10.1 billion.
TOTAL MARKET CAPITALIZATION ($ BILLIONS)
05
06
07
08
09
10
11
12
13
14
In South Korea, work is progressing on Hanam
SOLID PERFORMANCE
Union Square, located just outside Seoul.
Looking at our core, 2014 was a productive
Shinsegae, one of South Korea’s leading retailers,
year for Taubman Centers, with our centers
is our partner and will be anchoring the center.
delivering solid growth.
In 2014, we announced that along with a major
institutional investor we acquired an additional
stake in the project from Shinsegae. This trans-
action brings our total expected investment in
Hanam to approximately $380 million, and
further validates the strength and appeal of our
project to the institutional investor market.
Sales per square foot in our portfolio for the year
were $809, leading all others in the U.S. publicly
held regional mall industry by almost $200. We
consider sales per square foot to be the best
indicator of a property’s strength. The superior
sales performance consistently achieved in our
centers is tremendously valued by retailers
We’ve created an impressive platform in Asia,
making investment and expansion decisions.
with more than 100 people representing all
disciplines working at Taubman Asia in China,
South Korea and Hong Kong. As we gain
confidence in our execution of these three
initial projects, we hope to identify more
outstanding opportunities for investment.
Demand for space in our centers remains very
strong. Average rent per square foot in compa-
rable centers for the year climbed 5.7 percent to
$60.58, and trailing 12-month releasing spreads
per square foot – the difference in rent between
terminating and new leases – were 32.1 percent
for the period ending December 31, 2014.
That’s at the very high end of our historic
spread range.
Including lease cancellation income, comparable
center NOI was up 4 percent for the year.
Adjusted Funds from Operations (FFO) per
share grew by 0.5 percent despite the loss of
two-and-a-half months of results from the
seven divested centers.
PAGE 7
Sincerely,
ROBERT S. TAUBMAN
CHAIRMAN OF THE BOARD,
PRESIDENT & CHIEF EXECUTIVE OFFICER
Consistent with this solid performance and
In addition to the special dividend mentioned
strong investor sentiment for REITs in general,
earlier, we also in March 2014 increased our
Taubman Centers’ shareholders enjoyed a 30.7
regular dividend by 8 percent. In March 2015 we
percent total return for the year. This compares
announced an additional 4.6 percent increase to
favorably with the MSCI US REIT Index return of
our regular dividend. Since the company went
30.4 percent and the S&P 500 Index return of
public in 1992, we have never reduced our
13.7 percent. For longer-term perspective, over
common dividend and have increased it 18 times,
the 10 years ended December 31, 2014, the
for a compound annual growth rate of 4.4
company’s compounded annual shareholder
percent. Also in March 2015, believing that
return was 14.4 percent, eleventh best among
our shares are significantly undervalued, we
the 98 U.S. REITs that operated during that
announced a $250 million increase to our
period, and far better than the 8.3 percent return
previously authorized $200 million share
of the MSCI US REIT Index and the S&P 500
repurchase program, bringing our total
Index return of 7.7 percent. Since the company
authorization to $450 million.
began trading on the NYSE in 1992, the com-
pounded annual return has been 15.7 percent.
Of course our continuing performance would
not be possible without the creativity, skill and
dedication of the women and men of Taubman
Centers. As always, I want to thank them, recog-
nize our Board of Directors for their leadership,
and express my appreciation to our shareholders
for their trust and confidence in us.
PAGE 8 TAUBMAN CENTERS, INC.
TRANSFORMATION
PAGE 9
EMBRACING TECHNOLOGY
It took a while for everyone to
understand how technology
would impact retail real estate.
Now that we know there’s
plenty of upside, the next
question is, what’s the right
asset base to win in the omni-channel retailing world?
We believe A malls with the best locations have the
greatest opportunity to capture increased sales.
We’ve brought together people from essentially all our
internal disciplines in what we are calling the Taubman
Technology Lab. They’re focusing on the ways technol-
ogy can help with our shoppers, our retailers and our
properties. And they’ve identified 11 “domains” to make
their efforts more productive: Digital Displays, Lighting,
Parking, Payment, Consumer Devices, Building
Materials, Energy Management, Location Analytics,
Communications, Security, Big Data and Analytics.
I can honestly say that technology is part of how we
live and breathe.
LISA PAYNE
VICE CHAIRMAN, CHIEF FINANCIAL OFFICER
PAGE 10 TAUBMAN CENTERS, INC.
Our retailers see the synergies
inherent in the convergence of
online and brick-and-mortar
shopping. The technology
infrastructure we are now
providing in our properties is a
pre-requisite to the seamless flow of information that
retailers need in order to have one inventory system and
the ability to use that inventory most efficiently regardless
of sale venue. That allows them to maximize conversion
of customers while also maximizing gross margins.
Like retailers, our shoppers aren’t seeing any tension
between online and brick-and-mortar shopping. The
internet follows them everywhere on their smart
phones, including in our centers. The technology in
our centers delivers services customers desire.
As mall owners, we can uniquely provide the capability
to individualize the connection between the retailer and
the customer. Creating this level of connection in a mall
with luxury brands, whose customers have a deeper
loyalty, can drive substantial increases in market share
for the mall.
WILLIAM TAUBMAN
CHIEF OPERATING OFFICER
BUILDING TECHNOLOGY
One of the most important
advantages we’ve gained
through technology is our
ability to set measurable energy
management targets to help us
reduce our impact on the
Energy management tracking
used to be little more than
manually reading meters. Today,
we can monitor, benchmark,
analyze and adjust our systems
in every center on a laptop here
environment. Now when we update to LED lighting,
install higher-efficiency air conditioning units, or utilize
new environmentally friendly building materials, we
can see our progress in real time. And in most cases
we’re surpassing our goals.
STEVE MOORE
DIRECTOR, UTILITIES AND ENERGY MANAGEMENT
in our Bloomfield Hills, Michigan headquarters or
anywhere else. Thanks to our Taubman Smart Buildings
initiative, we have the ability to reduce costs and
eliminate inefficiencies while improving the shopper
experience, providing valued services to tenants and
generating revenues.
KEN RUONA
VICE PRESIDENT, CENTRAL OPERATIONS
The more than 35 million people
who visit Dolphin Mall each
year from all over the world
love spending time in our center
because of its welcoming,
comfortable environment. Of
course they’re not aware of the fiber optic infrastructure
flowing throughout our complex, but they know the
temperature is just right, they appreciate the download
speeds on their smart phones, and they feel safe finding
their cars at night in a well-lit parking area.
AL LARA
FACILITIES DIRECTOR, DOLPHIN MALL
PAGE 12 TAUBMAN CENTERS, INC.
SHOPPER TECHNOLOGY
We know that shoppers who
engage with us online are our
best customers. Our centers’
digital properties, which include
website, email, search and social
media platforms, enable us to
communicate with our shoppers far more efficiently
than ever before. We’re creating digital content at every
center every day. And with services like our new mobile
app and onsite digital directories, we’re making the
shopping trip even more convenient, productive and fun.
Today a shopping journey might
begin for a Brazilian woman
planning a trip to Miami
receiving a geotargeted Face-
book post in Portuguese from
Dolphin Mall. Using her smart
phone, she downloads our app, which can map her path
in the center, recommend stores similar to her favorites,
and offer our digital Passport to Shopping with special
offers from Dolphin Mall retailers and restaurants –
all before she even boards her plane.
IVAN FRANK
DIRECTOR, DIGITAL MARKETING
GLENDA COLE
V.P., SPONSORSHIP & CENTER MARKETING
Our technology initiatives are
driven by our commitment to
surprise and delight our custom-
ers. As shoppers embrace
technology, they’re telling us
that they want their experience
to be faster, smoother and easier. They want our centers
to be social, inviting places – a “third place” they can
enjoy for shopping, dining and entertainment when
they’re not at home or work.
WAI-KWAN LI
DIRECTOR, CUSTOMER KNOWLEDGE
PAGE 14 TAUBMAN CENTERS, INC.
TENANT TECHNOLOGY
Shoppers and retailers want to
stay connected. People’s lives
revolve around their smart
phones. And retailers need
uninterrupted access to the
Internet to execute their omni-
channel strategies. So by providing free Wi-Fi for
shoppers and fast, reliable broadband for tenants, we
make sure our centers facilitate this very important
interaction that will drive sales and improve the
shopping experience.
Understanding that technology
never stands still, we made the
decision to install a fiber optic
infrastructure in all our proper-
ties. These technology back-
bones or foundations replaced
jungles of outdated copper wire and equipment. They
enable us and our tenants to execute today’s best ideas
more effectively, and provide the capacity to embrace
the next big technology breakthrough that is always
on the horizon.
TRICIA SKAPYAK
DIRECTOR, REVENUE PROGRAMS
MICHAEL OSMENT
SENIOR VICE PRESIDENT, CHIEF TECHNOLOGY OFFICER
PAGE 16 TAUBMAN CENTERS, INC.
PORTFOLIO OF ASSETS
ASIA
TAUBMAN ASIA REGIONAL
HEADQUARTERS
Hong Kong
CORPORATE OFFICES
Beijing, China
Shanghai, China
Seoul, South Korea
HANAM UNION SQUARE
Hanam, South Korea
IFC MALL
Yeouido, Seoul,
South Korea
(Leasing and
management services)
ifcmallseoul.com
CityOn.XI’AN
Xi’an, China
CityOn.ZHENGZHOU
Zhengzhou, China
STUDIO CITY
(Retail component)
Macau, China
(Leasing, management,
and development services)
U.S.
CORPORATE HEADQUARTERS
Bloomfield Hills, MI
CORPORATE OFFICE
New York, NY
BEVERLY CENTER
Los Angeles, CA
beverlycenter.com
THE SHOPS AT BELMOND
CHARLESTON PLACE
Charleston, SC
(Leasing services)
belmond.com/charleston-place/
CHERRY CREEK
SHOPPING CENTER
Denver, CO
shopcherrycreek.com
CITY CREEK CENTER
Salt Lake City, UT
shopcitycreekcenter.com
INTERNATIONAL
MARKET PLACE
Waikiki, Honolulu, HI
shopinternational
marketplace.com
INTERNATIONAL PLAZA
Tampa, FL
shopinternationalplaza.com
THE MALL AT MILLENIA
Orlando, FL
mallatmillenia.com
THE MALL OF SAN JUAN
San Juan, Puerto Rico
themallofsanjuan.com
THE MALL AT SHORT HILLS
Short Hills, NJ
shopshorthills.com
STAMFORD TOWN CENTER
Stamford, CT
shopstamfordtowncenter.com
THE SHOPS AT CRYSTALS
Las Vegas, NV (Leasing services)
theshopsatcrystals.com
SUNVALLEY
Concord, CA
shopsunvalley.com
DOLPHIN MALL
Miami, FL
shopdolphinmall.com
FAIR OAKS
Fairfax, VA
shopfairoaksmall.com
THE GARDENS ON EL PASEO
AND EL PASEO VILLAGE
Palm Desert, CA
thegardensonelpaseo.com
GREAT LAKES
CROSSING OUTLETS
Auburn Hills, MI
greatlakescrossingoutlets.com
THE MALL AT GREEN HILLS
Nashville, TN
shopgreenhills.com
TAUBMAN PRESTIGE OUTLETS
CHESTERFIELD
Chesterfield, MO
taubmanprestigeoutlets.com
TWELVE OAKS MALL
Novi, MI
shoptwelveoaks.com
THE MALL AT UNIVERSITY
TOWN CENTER
Sarasota, FL
mallatutc.com
WATERSIDE SHOPS
Naples, FL
watersideshops.com
WESTFARMS
West Hartford, CT
shopwestfarms.com
MAP LEGEND
Owned centers
Leasing and/or management services
Projects under construction
Unconsolidated Joint Ventures
Corporate Offices
PAGE 18 TAUBMAN CENTERS, INC.
PAGE 19
2014 TAUBMAN CENTERS, INC.
FORM 10-K
PAGE 20 TAUBMAN CENTERS, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 1-11530
TAUBMAN CENTERS, INC.
(Exact name of registrant as specified in its charter)
Michigan
(State or other jurisdiction of
incorporation or organization)
200 East Long Lake Road, Suite 300,
Bloomfield Hills, Michigan
(Address of principal executive offices)
Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock,
$0.01 Par Value
6.5% Series J Cumulative
Redeemable Preferred Stock,
No Par Value
6.25% Series K Cumulative
Redeemable Preferred Stock,
No Par Value
38-2033632
(I.R.S. Employer Identification No.)
48304-2324
(Zip code)
(248) 258-6800
Name of each exchange
on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90
days.
Yes
No
Indicate by check mark 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).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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.
Large Accelerated Filer
Smaller reporting company
Non-Accelerated Filer
Accelerated Filer
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
The aggregate market value of the 61,628,099 shares of Common Stock held by non-affiliates of the registrant as of June 30, 2014 was $4.7 billion, based upon the
closing price of $75.81 per share on the New York Stock Exchange composite tape on June 30, 2014. (For this computation, the registrant has excluded the market value
of all shares of its Common Stock held by directors of the registrant and certain other shareholders; such exclusion shall not be deemed to constitute an admission that
any such person is an "affiliate" of the registrant.) As of February 23, 2015, there were outstanding 63,315,227 shares of Common Stock.
Portions of the proxy statement for the annual shareholders meeting to be held in 2015 are incorporated by reference into Part III.
DOCUMENTS INCORPORATED BY REFERENCE
PAGE INTENTIONALLY LEFT BLANK
TAUBMAN CENTERS, INC.
TAUBMAN CENTERS, INC.
CONTENTS
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
PART I
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity
Securities
Item 6.
Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits and Financial Statement Schedules
PART IV
2
11
22
22
26
26
27
30
32
66
66
66
66
66
67
67
68
69
69
70
1
Item 1. BUSINESS.
PART I
The following discussion of our business contains various “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements represent our expectations or beliefs concerning future events. We caution that although forward-looking
statements reflect our good faith beliefs and 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, including
those risks, uncertainties, and factors detailed from time to time in reports filed with the SEC, and in particular those set forth
under “Risk Factors” in this Annual Report on Form 10-K. The forward-looking statements included in this report are made as of
the date hereof. Except as required by law, we assume no obligation to update these forward-looking statements, even if new
information becomes available in the future.
The Company
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 that 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, lease, acquire, dispose of, develop, expand, and manage regional and super-regional shopping centers and interests
therein. Our owned portfolio of operating centers as of December 31, 2014 consisted of 18 urban and suburban shopping centers
in 10 states. 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. See "Item 2. Properties" for information regarding
the centers.
Taubman Asia, which is the platform for our operations and developments in China and South Korea, is headquartered in Hong
Kong.
We operate as a REIT under the Internal Revenue Code of 1986, as amended (the Code). In order to satisfy the provisions of
the Code applicable to REITs, we must distribute to our shareowners at least 90% of our REIT taxable income prior to net capital
gains and meet certain other requirements. The Operating Partnership's partnership agreement provides that the Operating
Partnership will distribute, at a minimum, sufficient amounts to its partners such that our pro rata share will enable us to pay
shareowner dividends (including capital gains dividends that may be required upon the Operating Partnership's sale of an asset)
that will satisfy the REIT provisions of the Code.
Recent Developments
In October 2014, we disposed of a portfolio of seven centers to an affiliate of the Starwood Capital Group (Starwood) for
consideration of $1.4 billion. The centers sold (Sale Centers) include MacArthur Center, Stony Point Fashion Park, Northlake
Mall, The Mall at Wellington Green, The Shops at Willow Bend, The Mall at Partridge Creek, and Fairlane Town Center.
For further discussion of the sale of seven centers to Starwood and other business developments that occurred in 2014, see
"Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)."
2
The Shopping Center Business
There are several types of retail shopping centers, varying primarily by size and marketing strategy. Retail shopping centers
range from neighborhood centers of less than 100,000 square feet of gross leasable area (GLA) to regional and super-regional
shopping centers. Retail shopping centers in excess of 400,000 square feet of GLA are generally referred to as "regional" shopping
centers, while those centers having in excess of 800,000 square feet of GLA are generally referred to as "super-regional" shopping
centers. In this Annual Report on Form 10-K, the term "regional shopping centers" refers to both regional and super-regional
shopping centers. The term "GLA" refers to gross retail space, including anchors and mall tenant areas, and the term "Mall GLA"
refers to gross retail space, excluding anchors. The term "anchor" refers to a department store or other large retail store. The term
"mall tenants" refers to stores (other than anchors) that lease space in shopping centers.
Business of the Company
We are engaged in the ownership, leasing, acquisition, disposition, development, expansion, and management of regional
shopping centers and interests therein. We owned interests in 18 operating centers as of December 31, 2014.
As of December, 31, 2014, the centers:
•
•
•
•
•
•
are strategically located in major metropolitan areas, many in communities that are among the most affluent in the country,
including Denver, Detroit, Los Angeles, Miami, Nashville, New York City, Orlando, Salt Lake City, San Francisco,
Sarasota, St. Louis, Tampa, and Washington, D.C.;
range in size between 236,000 and 1.6 million square feet of GLA and between 186,000 and 671,000 square feet of Mall
GLA with an average of 1.0 million and 0.5 million square feet, respectively. The smallest center has approximately
60 stores, and the largest has over 200 stores with an average of 145 stores per center. Of the 18 centers, 13 are super-
regional shopping centers;
have approximately 2,200 stores operated by their mall tenants under approximately 650 trade names;
have 48 anchors, operating under 11 trade names;
lease approximately 96% of Mall GLA to national chains, including subsidiaries or divisions of Forever 21 (Forever 21,
For Love 21, and XXI Forever), The Gap (Gap, Gap Kids, Baby Gap, Banana Republic, Old Navy, Athleta, and others),
and Limited Brands (Bath & Body Works/White Barn Candle, Pink, Victoria's Secret, and others); and
are among the highest quality centers in the United States public regional mall industry as measured by our high portfolio
average of mall tenants' sales per square foot. In 2014, our mall tenants at comparable centers reported average sales per
square foot of $809.
The most important factor affecting the revenues generated by the centers is leasing to mall tenants (including temporary tenants
and specialty retailers), which represents approximately 90% of revenues. Anchors account for less than 10% of revenues because
many own their stores and, in general, those that lease their stores do so at rates substantially lower than those in effect for mall
tenants.
Our portfolio is concentrated in highly productive super-regional shopping centers. Of our 18 owned centers, 16 have annualized
rent rolls at December 31, 2014 of over $10 million. We believe that this level of productivity is indicative of the centers' strong
competitive positions and is, in significant part, attributable to our business strategy and philosophy. We believe that large shopping
centers (including regional and especially super-regional shopping centers) are the least susceptible to direct competition because
(among other reasons) anchors and large specialty retail stores do not find it economically attractive to open additional stores in
the immediate vicinity of an existing location for fear of competing with themselves. In addition to the advantage of size, we
believe that the centers' success can be attributed in part to their other physical characteristics, such as design, layout, and amenities.
3
Business Strategy And Philosophy
We believe that the regional shopping center business is not simply a real estate development business, but rather an operating
business in which a retailing approach to the on-going management and leasing of the centers is essential. Thus we:
•
•
•
•
•
offer retailers a location where they can maximize their profitability;
offer a large, diverse selection of retail stores and dining in each center to give customers a broad selection of consumer
goods, food, and entertainment and a variety of price ranges;
endeavor to increase overall mall tenants' sales by leasing space to a constantly changing mix of tenants, thereby increasing
rents;
seek to anticipate trends in the retailing industry and emphasize ongoing introductions of new retail concepts into our
centers. Due in part to this strategy, a number of successful retail trade names have opened their first mall stores in the
centers. In addition, we have brought to the centers "new to the market" retailers. We believe that the execution of this
leasing strategy is an important element in building and maintaining customer loyalty and increasing mall productivity;
and
provide innovative initiatives, including those that utilize technology and the Internet, to increase revenues, enhance the
shopping experience, build customer loyalty, and increase tenant sales. Our Taubman website program connects shoppers
to each of our individual center brands through desktop and mobile devices. We have a robust email program reaching
our most loyal customers weekly and our social media sites offer retailers and customers an immediate geo-targeted
communication vehicle. We have pioneered an indoor navigation technology that has the potential to significantly change
a shopper's experience and connect them to retailers in new ways. This technology has been utilized in a mobile shopping
app at The Mall at University Town Center and we anticipate rolling out similar technology throughout a number of
centers this year. We are also investing in other synergistic digital capabilities in our centers with an overall strategy of
creating a "Smart Mall", which includes shopper Wi-Fi, advanced energy management, and high-speed networking options
for our tenants.
The centers compete for retail consumer spending through diverse, in-depth presentations of predominantly fashion merchandise
in an environment intended to facilitate customer shopping. Many of our centers include stores that target high-end customers,
and such stores may also attract other retailers to come to the center. However, each center is individually merchandised in light
of the demographics of its potential customers within convenient driving distance. When necessary, we consider rebranding existing
centers in order to maximize customer loyalty, increase tenant sales, and achieve greater profitability.
Our leasing strategy involves assembling a diverse mix of mall tenants in each of the centers in order to attract customers, thereby
generating higher sales by mall tenants. High sales by mall tenants make the centers attractive to prospective tenants, thereby
increasing the rental rates that prospective tenants are willing to pay. We implement an active leasing strategy to increase the
centers' productivity and to set minimum rents at higher levels. Elements of this strategy include renegotiating existing leases and
leasing space to prospective tenants that would enhance a center's retail mix.
Since 2005, an increased number of our tenants are paying a fixed Common Area Maintenance (CAM) charge, with typically
a fixed increase over the term of the lease, rather than the traditional net lease structure where a tenant pays their share of CAM.
This allows the retailer greater predictability of their costs. While some pricing risk has shifted to the landlord, cost savings can
have a positive impact on our profitability. Approximately 80% of our tenants in 2014 (including those with gross leases or paying
a percentage of their sales) effectively pay a fixed charge for CAM. As a result there is significantly less matching of CAM income
with CAM expenditures, which can vary considerably from period to period.
4
Potential For Growth
Our principal objective is to enhance shareowner value. We seek to maximize the financial results of our core assets, while also
pursuing a growth strategy that primarily has included an active new center development program. Our internally generated funds
and distributions from operating centers and other investing activities, augmented by use of our existing revolving 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. From time to time, we also may access
the equity markets or sell interests in shopping centers to raise additional funds or refinance existing obligations on a strategic
basis.
Internal Growth
As noted in “Business Strategy and Philosophy” above in detail, our core business strategy is to maintain a portfolio of properties
that deliver above-market profitable growth by providing targeted retailers with the best opportunity to do business in each market
and targeted shoppers with the best local shopping experience for their needs.
We continue to expect that over time a significant portion of our future growth will come from our existing core portfolio and
business. We have always had and will continue to have a culture of intensively managing our assets and maximizing the rents
from tenants as this is a key growth driver going forward.
While the sale of seven centers to Starwood reduced the size of our core portfolio, the more consistent, smaller base will allow
us to focus where the greatest net asset value can be created: our most highly productive centers, our redevelopments, and
development pipeline. The remaining portfolio of 18 centers has improved demographics and operating statistics, which we believe
will lead to faster Net Operating Income (NOI) growth of about 0.50% over time and average tenant sales higher by over $100
per square foot. We now have an even stronger portfolio of assets, a better balance sheet, and a business with excellent future
prospects.
Another potential element of growth over time is the strategic expansion and redevelopment of existing properties to update
and enhance their market positions by replacing or adding new anchor stores, increasing mall tenant space, or rebranding centers.
Most of the centers have been designed to accommodate expansions. Expansion projects can be as significant as new shopping
center construction in terms of scope and cost, requiring governmental and existing anchor store approvals, design and engineering
activities, including rerouting utilities, providing additional parking areas or decking, acquiring additional land, and relocating
anchors and mall tenants (all of which must take place with a minimum of disruption to existing tenants and customers).
We have projects underway at several of our centers that are expected to create incremental GLA:
• At Beverly Center we are adding approximately 12,000 square feet, including the addition of a new Uniqlo store, which
opened in 2014, and a new dining court scheduled to open in late 2015 to early 2016.
• At Cherry Creek Shopping Center we are adding an approximately 53,000 square foot, three-level Restoration Hardware
store as a mini-anchor, as well as about 38,000 square feet of additional in-line mall space. This expansion will occupy the
former Saks Fifth Avenue site. All work is anticipated to be completed in 2015.
• At Dolphin Mall we are planning to add approximately 32,000 square feet of new restaurant space along with an adjacent
valet area on a vacant parcel of the property. Construction is expected to be completed in 2015.
• At The Mall at Green Hills, a relocation of the current Dillard’s store and the addition of approximately 170,000 square feet
of mall tenant area is underway. The project is expected to be completed in 2018.
• At International Plaza we are adding approximately 36,000 square feet. The project includes a flagship, design gallery format
Restoration Hardware store. The project is expected to be completed in late 2015.
• And finally, at Sunvalley we are converting some existing lower-level space into a food court. Construction is expected to
be completed in 2015.
We also look to monetize our common areas through robust specialty leasing and sponsorship programs. About 9% of our 2014
comparable center net operating income was generated from such programs. Examples found in our centers include destination
holiday experiences, customer service programs, sponsored children's play areas, and turnkey attractions.
5
External Growth
We are focused on four areas of external growth: U.S. traditional center development, outlet centers, Asia, and acquisitions.
With growth in population, we expect that there will be demand for new centers over the next ten years. We opened a new center
in the U.S. in October 2014 and announced or have begun construction on six shopping centers in the U.S. and Asia and we continue
to work on and evaluate various development possibilities for additional new centers.
• Development of New U.S. Traditional and Outlet Centers
We have developed 12 properties since 1998, or an average about one every 18 months. We are currently under construction on
two centers with openings in 2015 and 2016, and have announced plans for a third center. We expect to continue to have sufficient
opportunities to build projects at a pace, on average, of about one center every other year. While we focus on the development of
traditional malls, we also believe outlet centers are a natural extension of our existing capabilities. We will generally target projects
in markets with high barriers to entry and require significant pre-leasing before we begin construction.
Over the past three years, we have opened three new centers:
• The Mall at University Town Center in Sarasota, Florida opened in October 2014. We have a 50% ownership interest in
the 0.9 million square foot center.
• Taubman Prestige Outlets Chesterfield, a new outlet center, opened in the western-St. Louis, Missouri suburb of
Chesterfield in August 2013. We have a 100% ownership interest in the 0.3 million square foot outlet center.
• City Creek Center, a mixed-use project in Salt Lake City, Utah, opened in March 2012. We have a 100% ownership
interest in the 0.6 million square foot center.
The Mall of San Juan, part of a mixed-use development anticipated to include a hotel/casino and retail, is under construction in
San Juan, Puerto Rico and is expected to open in March 2015. The Caribbean's first Nordstrom and Saks Fifth Avenue will anchor
the 0.7 million square foot center. We have an 80% ownership interest in the retail portion of the project.
International Market Place, a 0.4 million square foot center, is under construction in Waikiki, Honolulu, Hawaii. The center will
be anchored by the only full-line Saks Fifth Avenue in Hawaii and is expected to open in spring 2016. We have a 93.5% interest
in the project, which is subject to a participating ground lease.
In 2013, we announced our involvement in The Mall at Miami Worldcenter, which will be developed in partnership with the
Forbes Company. We will own at least one-third of the project, and as much as one-half, depending on the participation of the
land owner. The center will be part of a mixed-use development offering a hotel, convention and entertainment space, office,
residential and retail. The 0.7 million square foot center will feature Macy's and Bloomingdale's.
While we attempt to maximize external growth through the development of new centers, we also prudently manage the risks
associated with development. We generally do not acquire land early in the development process. Instead, we generally acquire
options on land or form partnerships with landowners holding potentially attractive development sites. We typically exercise the
options only once we are prepared to begin construction. The pre-construction phase for a regional center typically extends over
several years and the time to obtain anchor commitments, zoning and regulatory approvals, and public financing arrangements
can vary significantly from project to project. In addition, we generally do not begin construction until a sufficient number of
anchor stores or significant tenants have agreed to operate in the shopping center, such that we are confident that the projected
tenant sales and rents from Mall GLA are sufficient to earn a stabilized return on invested capital in excess of our cost of capital.
Having historically followed these principles, our experience indicates that, on average, less than 10% of the costs of the
development of a regional shopping center will be incurred prior to the construction period. However, no assurance can be given
that we will continue to be able to so limit pre-construction costs.
While we will continue to evaluate development projects using criteria, including financial criteria for rates of return, similar
to those employed in the past, no assurances can be given that the adherence to these criteria will produce comparable or projected
results in the future. In addition, the costs of shopping center development opportunities that are explored but ultimately abandoned
will, to some extent, diminish the overall return on development projects taken as a whole. See "MD&A – Liquidity and Capital
Resources – Capital Spending" for further discussion of our development activities.
6
• Asia
Taubman Asia is responsible for our operations and development in the Asia-Pacific region, focusing on China and South Korea.
We have pursued a strategy of seeking strategic partners to jointly develop high quality malls in our areas of focus. Taubman Asia
is engaged in projects that leverage our strong retail planning, design, and operational capabilities with our strategic partners being
responsible for acquiring and entitling the land and leading construction.
We currently have two joint ventures with Beijing Wangfujing Department Store (Group) Co., Ltd (Wangfujing), one of China's
largest department store chains. The first joint venture will own a 60% controlling interest in and manage CityOn.Xi'an, an
approximately 1.0 million square foot shopping center located at Xi'an Saigao City Plaza, a large-scale mixed-use development
in Xi'an, China. We will beneficially own a 30% interest in CityOn.Xi'an, which is scheduled to open in late 2015. The second
joint venture with Wangfujing will manage and own a 65% majority interest in CityOn.Zhengzhou, a shopping center in Zhengzhou,
China. We beneficially own a 32% interest in the 1.0 million square foot shopping center, which is scheduled to open in spring
2016.
We also have a joint venture with Shinsegae Group, South Korea's largest retailer, that is developing Hanam Union Square, a
1.7 million square foot shopping mall project in Hanam, Gyeonggi Province, South Korea. The center is scheduled to open in late
2016. In August 2014, we partnered with a new institutional investor and increased our effective ownership in the project to 34.3%.
As part of our Asia strategy, we are looking to mitigate our operating costs through third-party contracts when possible. We
provide leasing and management services for IFC Mall in Yeouido, Seoul, South Korea. In August 2012, the 0.4 million square
foot mall opened 100% leased with over 100 stores. In addition, we are providing management, leasing, and development services
for the retail portion of Studio City, a cinematically-themed integrated entertainment, retail and gaming resort developed by Melco
Crown Entertainment Limited in the Cotai region of Macau, China.
We attempt to manage risks for our Asia developments through similar means as those mentioned previously under "Development
of New U.S. Traditional and Outlet Centers", as well as pursuing initial projects that are already fully entitled with partners having
appropriate expertise in land acquisition and local regulatory issues. However, in Asia, our projects are expected to have lower
initial rates of return at stabilization than those expected in the U.S. With the high sales growth rates in that region, we generally
expect that returns on our investments are forecasted to equal those earned in the U.S. by the seventh or eighth year.
See "MD&A - Results of Operations - Taubman Asia" for further details regarding our activities in Asia.
•
Strategic Acquisitions
We expect attractive opportunities to acquire existing centers, or interests in existing centers, from other companies to continue
to be scarce and expensive. However, we continue to look for assets where we can add significant value or that would be strategic
to the rest of our portfolio, and we have capital available for selective opportunities. Our objective is to acquire existing centers
only when they are compatible with the quality of our portfolio (or can be redeveloped to that level). We also may acquire additional
interests in centers currently in our portfolio.
In December 2012, we acquired an additional 49.9% interest in International Plaza, located in Tampa, Florida, bringing our
ownership in the shopping center to 100%. Subsequently, in January 2014 we sold a total of 49.9% of our interests in the entity
that owns the center in order to generate significant capital for our development projects.
Also in December 2012, we acquired an additional 25% interest in Waterside Shops, which brought our ownership interest in
the center to 50% on a pari passu basis with an affiliate of the Forbes Company.
See "MD&A - Results of Operations - U.S. Acquisitions" for further details regarding the assets acquired.
7
Rental Rates
As leases have expired in the centers, we have generally been able to rent the available space, either to the existing tenant or a
new tenant, at rental rates that are higher than those of the expired leases. 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. Average rent per square foot statistics reflect the contractual rental terms of the lease currently
in effect and include the impact of rental concessions. 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.
The following table contains certain information regarding average mall tenant minimum rent per square foot of our Consolidated
Businesses and Unconsolidated Joint Ventures at the comparable centers (centers that had been owned and open for the current
and preceding year). Comparable center statistics for 2014 and 2013 exclude Arizona Mills, Taubman Prestige Outlets Chesterfield,
The Mall at University Town Center, and the Sale Centers. Subsequent to the sale of a total of 49.9% of our interests in the entity
that owns International Plaza in January 2014, we began accounting for our remaining interest in International Plaza under the
equity method of accounting. This affects the comparability of operating results for Consolidated Businesses and Unconsolidated
Joint Ventures period over period.
Average rent per square foot:
Consolidated Businesses
Unconsolidated Joint Ventures
Combined
2014
2013
2012
2011
2010
$
61.96
$
59.88
$
46.86
$
45.53
$
58.65
60.58
52.68
57.33
45.44
46.42
44.58
45.22
43.63
43.73
43.66
See “MD&A – Rental Rates and Occupancy” for information regarding opening and closing rents per square foot for our centers.
Lease Expirations
The following table shows scheduled lease expirations for mall tenants based on information available as of December 31, 2014
for the next ten years for all owned centers in operation at that date.
Tenants 10,000 square feet or less (1)
Total (1)(2)
Annualized
Base
Rent Under
Expiring
Leases
Per Square
Foot (3)
Percent of
Total Leased
Square
Footage
Represented
by Expiring
Leases
Leased
Area in
Square
Footage
$
512
592
558
509
460
441
451
582
546
591
44.45
56.19
63.65
68.86
67.75
64.01
80.69
75.58
68.07
68.55
8.9%
10.3%
9.7%
8.9%
8.0%
7.7%
7.9%
10.1%
9.5%
10.3%
Annualized
Base
Rent Under
Expiring
Leases
Per Square
Foot (3)
Percent of
Total Leased
Square
Footage
Represented
by Expiring
Leases
Leased
Area in
Square
Footage
$
574
900
944
817
878
692
674
1,000
616
786
40.54
41.24
46.23
52.07
47.71
53.30
69.03
58.46
64.75
61.58
6.4%
10.1%
10.6%
9.2%
9.9%
7.8%
7.6%
11.2%
6.9%
8.8%
Number of
Leases
Expiring
189
247
237
199
235
172
188
249
196
223
Lease
Expiration
Year
2015 (4)
2016
2017
2018
2019
2020
2021
2022
2023
2024
Number of
Leases
Expiring
185
238
219
183
218
159
176
230
191
211
(1) Excludes rents from temporary in-line tenants and centers not open and operating at December 31, 2014.
(2)
In addition to tenants with spaces 10,000 square feet or less, includes tenants with spaces over 10,000 square feet and value and outlet center
anchors. Excludes rents from regional mall anchors and temporary in-line tenants.
(3) Weighted average of the annualized contractual rent per square foot as of the end of the reporting period.
(4) Excludes leases that expire in 2015 for which renewal leases or leases with replacement tenants have been executed as of December 31, 2014.
8
We believe that the information in the table is not necessarily indicative of what will occur in the future because of several
factors, but principally because of early lease terminations at the centers. For example, the average remaining term of the leases
that were terminated during the period 2009 to 2014 was approximately one year. The average term of leases signed was
approximately seven and eight years during 2014 and 2013, respectively.
In addition, mall tenants at the centers may seek the protection of the bankruptcy laws, which could result in the termination of
such tenants' leases and thus cause a reduction in cash flow. In 2014, tenants representing 1.6% of leases filed for bankruptcy
during the year compared to 0.3% in 2013. This statistic has ranged from 0.3% to 1.6% of leases per year over the last five years.
The annual provision for losses on accounts receivable represents 0.4% of total revenues in 2014 and has ranged from 0.1% to
0.5% over the last five years.
Occupancy
Occupancy and leased space statistics include temporary in-line tenants (TILs) and also include value and outlet center anchors.
The following table shows ending occupancy and leased space for the past five years:
2014
2013
2012
2011
2010
All Centers: (1)
Ending occupancy
Leased space
Comparable Centers: (1) (2)
Ending occupancy
Leased space
96.6%
97.5
95.5%
96.8
95.1%
96.7
94.1%
96.0
95.4%
96.7
95.8%
96.7
96.3%
97.5
(1) Prior period occupancy and leased space statistics have been restated to include TILs.
(2) Comparable center statistics for 2014 and 2013 exclude Arizona Mills, Taubman Prestige Outlets Chesterfield, The Mall at University Town Center, and
the Sale Centers.
Major Tenants
No single retail company represents 10% or more of our Mall GLA or revenues. The combined operations of Forever 21 accounted
for under 6% of Mall GLA as of December 31, 2014 and less than 5% of 2014 minimum rent. No other single retail company
accounted for more than 5% of Mall GLA as of December 31, 2014 or 4% of 2014 minimum rent.
The following table shows the ten mall tenants who occupy the most Mall GLA at our centers and their square footage as of
December 31, 2014:
Tenant
Forever 21 (Forever 21, For Love 21, XXI Forever)
The Gap (Gap, Gap Kids, Baby Gap, Banana Republic, Old Navy, Athleta, and others)
H&M
Limited Brands (Bath & Body Works/White Barn Candle, Pink, Victoria's Secret, and others)
Williams-Sonoma (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, and others)
Abercrombie & Fitch (Abercrombie & Fitch, Hollister, and others)
Ann Taylor (Ann Taylor, Ann Taylor Loft, and others)
Urban Outfitters (Anthropologie, Anthropologie Accessories, Free People, Urban Outfitters)
Express (Express, Express Men)
Foot Locker (Foot Locker, Lady Foot Locker, Champs Sports, Foot Action USA, and others)
# of
Stores
15
41
13
37
26
23
30
19
15
29
Square
Footage
447,022
363,675
261,052
233,069
198,260
174,515
162,976
145,519
133,688
129,143
% of
Mall GLA
5.4%
4.4
3.1
2.8
2.4
2.1
2.0
1.7
1.6
1.5
9
Competition
There are numerous shopping facilities that compete with our properties in attracting retailers to lease space. We compete with
other major real estate investors with significant capital for attractive investment opportunities. See “Risk Factors” for further
details of our competitive business.
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. See “MD&A – Seasonality” for further discussion.
Environmental Matters
See “Risk Factors” regarding discussion of environmental matters.
Financial Information about Geographic Areas
We have not had material revenues attributable to foreign countries in the last three years. We also do not have material long-
lived assets located in foreign countries, as our investments in Asia are accounted for as equity method investments.
Personnel
We have engaged the Manager to provide real estate management, acquisition, development, leasing, and administrative services
required by us and our properties in the United States. Taubman Asia Management Limited (TAM) and certain other affiliates
provide similar services for third parties in China and South Korea as well as Taubman Asia.
As of December 31, 2014, the Manager, TAM, and certain other affiliates had 598 full-time employees.
Available Information
The Company makes available free of charge through its website at www.taubman.com all reports it electronically files with,
or furnishes to, the Securities Exchange Commission (the “SEC”), including its Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those reports, as soon as reasonably practicable
after those documents are filed with, or furnished to, the SEC. These filings are also accessible on the SEC’s website at www.sec.gov.
10
Item 1A. RISK FACTORS.
The economic performance and value of our shopping centers are dependent on many factors.
The economic performance and value of our shopping centers are dependent on various factors. Additionally, these same factors
will influence our decision whether to go forward on the development of new centers, acquisitions and dispositions, and may also
affect the ultimate economic performance and value of projects under construction and acquired shopping centers. Adverse changes
in the economic performance and value of our shopping centers would also adversely affect our income and cash available to pay
dividends.
Such factors include:
•
•
•
•
•
•
•
•
changes in the global, national, regional, and/or local economic and geopolitical climates. Changes such as the global
economic and financial market downturn such as the one a few years ago may cause, among other things, a significant
tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, lower consumer
and business spending, and lower consumer confidence and net worth;
changes in specific local economies and/or real estate conditions. These changes may have a more significant impact on
our financial performance due to the geographic concentration of some of our centers;
changes in mall tenant sales performance of our centers, which over the long term are 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 that mall tenants can afford to pay;
availability and cost of financing. While current interest rates continue to be historically low, it is uncertain how long
such rates will continue;
the public perception of the safety of customers at our shopping centers;
legal liabilities;
changes in government regulations; and
changes in real estate zoning and tax laws.
These factors may ultimately impact the valuation of certain long-lived or intangible assets that are subject to impairment testing,
potentially resulting in impairment charges, which may be material to our financial condition or results of operations. See “MD&A
– Results of Operations – Application of Critical Accounting Policies: Valuation of Shopping Centers" for additional information
regarding impairment testing.
In addition, the value and performance of our shopping centers may be adversely affected by certain other factors discussed
below including the state of the capital markets, expansion into Asia, unscheduled closings or bankruptcies of our tenants,
competition, uninsured losses, and environmental liabilities.
11
We are in a competitive business.
There are numerous shopping facilities that compete with our properties in attracting retailers to lease space. Our ability to
attract tenants to our shopping centers and lease space is important to our success, and difficulties in doing so can materially impact
our centers' performance. The existence of competing shopping centers could have a material adverse impact on our ability to
develop or operate shopping centers, lease space, and on the level of rents that can be achieved. In addition, retailers at our properties
face continued competition from shopping through various means and channels, including via the Internet, lifestyle centers, outlet
malls, wholesale and discount shopping clubs, and television shopping networks. Competition of this type could adversely affect
our revenues and cash available for distribution to shareowners. Further, as new technologies emerge, the relationship among
customers, retailers, and shopping centers are evolving on a rapid basis and it is critical that we adapt to such new technologies
and relationships on a timely basis. For example, a small but increasing number of tenants utilize our shopping centers as showrooms
or as part of an omni-channel strategy (allowing customers to shop seamlessly through various sales channels). As a result, customers
may make purchases through other sales channels during or immediately after visiting our shopping centers, with such sales not
being captured currently in our tenant sales figures or monetized in our minimum or percentage rents.
We compete with other major real estate investors with significant capital for attractive investment opportunities. These
competitors include other REITs, investment banking firms, and private and institutional investors, some of whom have greater
financial resources or have different investment criteria than we do. In particular, there is intense competition to acquire or develop
highly productive super-regional shopping centers, which is the focus of our core business. This competition may impair our ability
to acquire or develop suitable properties on favorable terms in the future.
Our real estate investments are relatively illiquid.
We may be limited in our ability to vary our portfolio in response to changes in economic, market, or other conditions by
restrictions on transfer imposed by our partners or lenders. If we were unable to refinance our debt at a center, we may be required
to contribute capital to repay debt, fund capital spending, or other cash requirements. In addition, under TRG’s partnership
agreement, upon the sale of a center or TRG’s interest in a center, TRG may be required to distribute to its partners all or a portion
of the cash proceeds received by TRG from such sale (a "special distribution"). If TRG made such a distribution, the sale proceeds
would not be available to finance TRG’s activities, and the sale of a center may result in a decrease in funds generated by continuing
operations and in distributions to TRG’s partners, including us. In December 2014, a special distribution was paid as a result of
the disposition of a portfolio of seven centers to Starwood. See “MD&A – Liquidity and Capital Resources – Dividends" for further
discussion of the special distribution. Further, pursuant to TRG’s partnership agreement, TRG may not dispose or encumber certain
of its centers or its interest in such centers without the consent of a majority-in-interest of its partners other than us.
Dispositions may not achieve anticipated results.
We actively maintain a strategy of recycling capital to achieve growth over time. At times this strategy may include strategically
disposing of assets to improve the overall performance of our core mall portfolio, including by: achieving improved portfolio
metrics, demographics, and operating statistics, such as higher sales productivity and occupancy rates; accelerating future growth
targets in our operating results and funds from operations; strengthening of our balance sheet; and creating increased net asset
value for our shareholders over time. However, we may not achieve some or all of the targeted results we originally anticipated
at the time of disposition. If we are not successful at achieving the anticipated results, whether as a result of our October 2014
disposition of seven centers to Starwood or any future disposition, there is a potential for a significant adverse impact on our
returns and our overall profitability.
12
We may acquire or develop new properties and/or redevelop and expand our existing properties, and these activities are subject
to various risks.
We actively pursue development, redevelopment, expansion, and acquisition activities as opportunities arise, and these activities
are subject to the following risks:
•
the pre-construction phase for a new project often extends over several years, and the time to obtain landowner, anchor, and
tenant commitments, zoning and regulatory approvals, and public financing can vary significantly from project to project;
• we may not be able to obtain the necessary zoning, governmental and other approvals, or anchor or tenant commitments
for a project, or we may determine that the expected return on a project is not sufficient; if we abandon our development
activities with respect to a particular project, we may incur a loss on our investment;
•
construction and other project costs may exceed our original estimates because of increases in material and labor costs,
delays, nonperformance of services by our contractors, and costs to obtain anchor and tenant commitments;
• we may not be able to obtain financing or to refinance construction loans, which are generally recourse to TRG;
• we may be obligated to contribute funding for development, redevelopment, or expansion projects in excess of our
ownership requirements if our partners are unable or are not required to fund their ownership share;
•
•
equity issuances as a source of funds, directly as consideration for acquisitions or indirectly through capital market
transactions, may become less financially favorable as affected by our stock price as well as general market conditions;
occupancy rates and rents, as well as occupancy costs and expenses, at a completed project or an acquired property may
not meet our projections, and the costs of development activities that we explore but ultimately abandon will, to some
extent, diminish the overall return on our completed development projects; and
•
competitive pressures in our targeted markets may negatively impact our ability to meet our leasing objectives.
We currently have multiple projects under development in the U.S. and Asia for which we will be providing development,
leasing and certain other services. Although we believe we have adequate resources and the ability to perform all responsibilities,
certain risks described above may be magnified due to the higher level of activity.
Certain of our projects under development represent the retail portion of larger mixed-use projects. As a result, there may be
certain additional risks associated with such projects, including:
•
•
•
increased time to obtain necessary permits and approvals;
increased uncertainty regarding shared infrastructure and common area costs; and
impact on sales and performance of the retail center from delays in opening of other uses and or/the performance of such
uses.
In addition, global economic and market conditions may reduce viable development and acquisition opportunities that meet our
unlevered return requirements.
13
Our business activities and pursuit of new opportunities in Asia may pose risks.
We have offices in Hong Kong, Seoul, Beijing, and Shanghai and we are pursuing and evaluating investment opportunities in
various South Korea and China markets. We have invested in three joint ventures to develop shopping centers in Asia and may
invest in other shopping centers in the future. We are also currently providing leasing and management services for a retail project
in Seoul, South Korea and development, leasing, and management services for a retail project in Macau. In addition to the general
risks related to development activities described in the preceding section, our international activities are subject to unique risks,
including:
•
•
•
•
•
•
•
•
•
•
•
•
adverse effects of changes in exchange rates for foreign currencies;
changes in and/or difficulties in operating in foreign political environments;
difficulties in operating with foreign vendors and joint venture and business partners;
difficulties of complying with a wide variety of foreign laws including laws affecting funding and use of cash, corporate
governance, property ownership restrictions, development activities, operations, anti-corruption, taxes, and litigation;
changes in and/or requirements of complying with applicable laws and regulations in the United States that affect foreign
operations, including the Foreign Corrupt Practices Act;
difficulties in managing international operations, including difficulties that arise from ambiguities in contracts written in
foreign languages and difficulties that arise in enforcing such contracts;
differing lending practices, including lower loan-to-value ratios;
differing employment and labor issues;
obstacles to the repatriation of earnings and cash;
lower initial investment returns than those generally experienced in the U.S.;
obstacles to hiring and maintaining appropriately trained staff; and
differences in cultures including adapting practices and strategies that have been successful in the U.S. regional mall
business to retail needs and expectations in new markets.
In regards to foreign currency, our projects in China and South Korea require investments and may require debt financing
denominated in foreign currencies, with the possibility that such investments will be greater than anticipated depending on changes
in exchange rates. These projects could also generate returns on or of capital in foreign currencies that could ultimately be less
than anticipated as a result of exchange rates. As part of investing in these projects, we are implementing appropriate risk
management policies and practices, which may include the hedging of foreign currency risks. However, developing an effective
foreign currency risk strategy is complex and may be costly, and no strategy can completely insulate us from risk associated with
foreign currency fluctuations. Further, we cannot provide assurance that such policies and practices will be successful and/or that
the applicable accounting for foreign currency hedges will be favorable to any particular period's results of operations. Foreign
currency hedges could be economically beneficial to us, but could have unfavorable accounting impacts, depending on the
qualification of the hedges for hedge accounting treatment.
As we expand our international activities and levels of investment, these risks could increase in significance and adversely affect
our financial returns on international projects and services and overall financial condition. We have put in place policies, practices,
and systems for mitigating some of these international risks, although we cannot provide assurance that we will be entirely successful
in doing so.
14
We could be subject to liability, penalties and other sanctions and other adverse consequences arising out of non-compliance with
the United States Foreign Corrupt Practices Act (FCPA) or foreign anti-corruption laws.
We are subject to the FCPA, which generally prohibits United States companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining business, and which requires proper record keeping and
characterization of payments we make in our reports filed with the SEC. Although we have policies and procedures designed to
promote compliance with the FCPA and other anti-corruption laws, we cannot provide assurance that we will continue to be found
to be operating in compliance with, or be able to detect violations of, any such laws or regulations. We cannot provide assurance
that these policies and procedures will protect us from intentional, reckless or negligent acts committed by our employees, agents,
partners or others acting on our behalf. If our employees, agents, partners, or others acting on our behalf are found to have engaged
in such practices, severe penalties and other consequences could be imposed. Those penalties and consequences that may be
imposed against us or individuals in appropriate circumstances include, but are not limited to, injunctive relief, disgorgement,
significant fines and penalties, and modifications to business practices and compliance programs. In addition, we cannot predict
the nature, scope or effect of future regulatory requirements or investigations to which our international operations might be subject,
the manner in which existing laws might be administered or interpreted, or the potential that we may face regulatory sanctions.
Any of these violations or remedial measures, if applicable to us, could have a material adverse impact on our business, reputation,
results of operations, cash flow, financial condition, liquidity, ability to make distributions to our shareholders, or the value of our
investments.
Foreign companies, including some that may compete with us, may not be subject to the FCPA or other anti-corruption laws.
Accordingly, such companies may be more likely to engage in activities prohibited by the FCPA or other anti-corruption laws,
which could have a significant adverse impact on our returns or our ability to compete for business in such countries.
The bankruptcy, early termination, sales performance, or closing of our tenants and anchors could adversely affect us.
We could be adversely affected by the bankruptcy, early termination, sales performance, or closing of tenants and anchors.
Certain of our lease agreements include co-tenancy and/or sales-based kick-out provisions which allow a tenant to pay a reduced
rent amount and, in certain instances, terminate the lease, if we fail to maintain certain occupancy levels or if the tenant does not
achieve certain specified sales targets. If occupancy or tenant sales do not meet or fall below certain thresholds, rents we are
entitled to receive from our retail tenants could be reduced. The bankruptcy of a mall tenant could result in the termination of its
lease, which would lower the amount of cash generated by that mall. In addition, if a department store operating as an anchor at
one of our shopping centers were to go into bankruptcy and cease operating, we may experience difficulty and delay and incur
significant expense in replacing the anchor. In addition, the anchor’s closing may lead to reduced customer traffic and lower mall
tenant sales. As a result, we may also experience difficulty or delay in leasing spaces in areas adjacent to the vacant anchor space.
The early termination or closing of mall tenants or anchors for reasons other than bankruptcy could have a similar impact on the
operations of our centers, although in the case of early terminations we may benefit in the short-term from lease cancellation
income (See “MD&A – Rental Rates and Occupancy”).
Our investments are subject to credit and market risk.
We occasionally extend credit to third parties in connection with the sale of land or other transactions. We also have occasionally
made investments in marketable and other equity securities. We are exposed to risk in the event the values of our investments and/
or our loans decrease due to overall market conditions, business failure, and/or other nonperformance by the investees or
counterparties.
Capital markets may limit our sources of funds for financing activities.
Our ability to access the capital markets may be restricted at a time when we would like, or need, to access those markets. This
could have an impact on our flexibility to react to changing economic and business conditions. A lack of available credit, lack of
confidence in the financial sector, increased volatility in the financial markets and reduced business activity could materially and
adversely affect our business, financial condition, results of operations and our ability to obtain and manage our liquidity. In
addition, the cost of debt financing and the proceeds may be materially adversely impacted by such market conditions. Also, our
ability to access equity markets as a source of funds may be affected by our stock price as well as general market conditions.
15
We are obligated to comply with financial and other covenants that could affect our operating activities.
Certain loan agreements contain various restrictive covenants, including the following corporate covenants on our unsecured
primary revolving line of credit, unsecured term loan, and the construction facilities on The Mall at University Town Center and
The Mall of San Juan: a minimum net worth requirement, a maximum total leverage ratio, a maximum secured leverage ratio, a
minimum fixed charge coverage ratio, a maximum recourse secured debt ratio, and a maximum payout ratio. In addition, our
primary revolving line of credit and term loan have unencumbered pool covenants, which currently apply to Beverly Center,
Dolphin Mall, and Twelve Oaks Mall on a combined basis. These covenants include a minimum number and minimum value of
eligible unencumbered assets, a maximum unencumbered leverage ratio, a minimum unencumbered interest coverage ratio, and
a minimum unencumbered asset occupancy ratio. As of December 31, 2014, the corporate minimum fixed charge coverage ratio
is the most restrictive covenant. These covenants may restrict our ability to pursue certain business initiatives or certain transactions
that might otherwise be advantageous. In addition, failure to meet certain of these financial covenants could cause an event of
default under and/or accelerate some or all of such indebtedness which could have a material effect on us.
Our hedging interest rate protection arrangements may not effectively limit our interest rate risk exposure.
We manage our exposure to interest rate risk through a combination of interest rate protection agreements to effectively fix or
cap a portion of our variable rate debt. Our use of interest rate hedging arrangements to manage risk associated with interest rate
volatility may expose us to additional risks, including that a counterparty to a hedging arrangement may fail to honor its obligations.
Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with
interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our
results of operations or financial condition. We might be subject to additional costs, such as transaction fees or breakage costs, if
we terminate these arrangements.
The occurrence of cyber incidents, a deficiency in our cyber security, or a data breach could negatively impact our business by
causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business
relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information
resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized
access to systems to disrupt operations, corrupting data, or stealing confidential information. We rely upon information technology
networks and systems, some of which are managed by third-parties, to process, transmit, and store electronic information, and to
manage or support a variety of business processes and activities. As our reliance on technology has increased, so have the risks
posed to our systems, both internal and those we have outsourced. Primary risks that could directly result from the occurrence of
a cyber incident include, but are not limited to, operational interruption, damage to our relationship with our tenants, and private
data exposure (including personally identifiable information, or proprietary and confidential information, of ours and our
employees, as well as third parties). Any such incidents could result in legal claims or proceedings, liability or regulatory penalties
under laws protecting the privacy of personal information, and reduce the benefits of our advanced technologies. We carry cyber
liability insurance; however a loss could exceed the limits of the policy. We have implemented processes, procedures and controls
to help mitigate these risks, but these measures, our increased awareness of a risk of a cyber incident, and our insurance coverage,
do not guarantee that our financial results will not be negatively impacted by such an incident.
Some of our potential losses may not be covered by insurance.
We carry liability, fire, flood, earthquake, extended coverage, and rental loss insurance on each of our properties. We believe
the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, some types of
losses, including punitive damages (in certain states) and lease and other contract claims, which generally are not insured. If an
uninsured liability claim or a liability claim in excess of insured limits is made, we may have to make a payment to satisfy such
claim. In addition, if an uninsured property loss or a property loss in excess of insured limits occurs, we could lose all or a portion
of the capital we have invested in a property, as well as the anticipated future revenue from the property. If this happens, we might
nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.
In November 2002, Congress passed the “Terrorism Risk Insurance Act of 2002” (TRIA), which required insurance companies
to offer terrorism coverage to all existing insured companies for an additional cost. As a result, our property insurance policies
are currently provided without a sub-limit for terrorism, eliminating the need for separate terrorism insurance policies.
16
In January 2015, Congress passed the "Terrorism Risk Insurance Program Authorization Act of 2015", which extended the
termination date of the Terrorism Insurance Program established under the TRIA through December 31, 2020. There are specific
provisions in our loans that address terrorism insurance. Simply stated, in most loans, we are obligated to maintain terrorism
insurance, but there are limits on the amounts we are required to spend to obtain such coverage. If a terrorist event occurs, the cost
of terrorism insurance coverage would be likely to increase, which could result in our having less coverage than we have currently.
Our inability to obtain such coverage or to do so only at greatly increased costs may also negatively impact the availability and
cost of future financings.
We may be subject to liabilities for environmental matters.
All of the centers presently owned by us (not including option interests in certain pre-development projects) have been subject
to environmental assessments. We are not aware of any environmental liability relating to the centers or any other property in
which we have or had an interest (whether as an owner or operator) that we believe would have a material adverse effect on our
business, assets, or results of operations. No assurances can be given, however, that all environmental liabilities have been identified
by us or that no prior owner or operator, or any occupant of our properties has created an environmental condition not known to
us. Moreover, no assurances can be given that (1) future laws, ordinances, or regulations will not impose any material environmental
liability or that (2) the current environmental condition of the centers will not be affected by tenants and occupants of the centers,
by the condition of properties in the vicinity of the centers (such as the presence of underground storage tanks), or by third parties
unrelated to us. Environmental liability may be imposed without regard to fault, and under certain circumstances, can be joint and
several, resulting in one party being held responsible for the entire obligation. In addition, the presence of, or failure to remediate,
hazardous substances or waste may adversely affect our ability to sell or rent any property or to use it as collateral for a loan.
We hold investments in joint ventures in which we do not control all decisions, and we may have conflicts of interest with our joint
venture partners.
Some of our shopping centers and shopping center projects are partially owned by non-affiliated partners through joint venture
arrangements. As a result, we do not control all decisions regarding those shopping centers and may be required to take actions
that are in the interest of the joint venture partners but not our best interests. Accordingly, we may not be able to favorably resolve
any issues that arise with respect to such decisions, or we may have to provide financial or other inducements to our joint venture
partners to obtain such resolution.
For joint ventures that we do not manage, we do not control decisions as to the design or operation of internal controls over
accounting and financial reporting, including those relating to maintenance of accounting records, authorization of receipts and
disbursements, selection and application of accounting policies, reviews of period-end financial reporting, and safeguarding of
assets. Therefore, we are exposed to increased risk that such controls may not be designed or operating effectively, which could
ultimately affect the accuracy of financial information related to these joint ventures as prepared by our joint venture partners.
Various restrictive provisions and rights govern sales or transfers of interests in our joint ventures. These may work to our
disadvantage because, among other things, we may be required to make decisions as to the purchase or sale of interests in our
joint ventures at a time that is disadvantageous to us.
The bankruptcy or financial difficulties of our joint venture partners could adversely affect us.
The profitability of shopping centers held in a joint venture could also be adversely affected by the bankruptcy of one of the
joint venture partners if, because of certain provisions of the bankruptcy laws, we were unable to make important decisions in a
timely fashion or became subject to additional liabilities. In addition, if our joint venture partners are not able to fund required
contributions, it may be necessary for us to contribute equity in excess of our ownership share to fund initial development, capital,
and/or operating costs.
17
We may not be able to maintain our status as a REIT.
We may not be able to maintain our status as a REIT for federal income tax purposes with the result that the income distributed
to shareowners would not be deductible in computing taxable income and instead would be subject to tax at regular corporate
rates. We may also be subject to the alternative minimum tax if we fail to maintain our status as a REIT. Any such corporate tax
liability would be substantial and would reduce the amount of cash available for distribution to our shareowners which, in turn,
could have a material adverse impact on the value of, or trading price for, our shares. Although we believe we are organized and
operate in a manner to maintain our REIT qualification, many of the REIT requirements of the Code, are very complex and have
limited judicial or administrative interpretations. Changes in tax laws or regulations or new administrative interpretations and
court decisions may also affect our ability to maintain REIT status in the future. If we do not maintain our REIT status in any year,
we may be unable to elect to be treated as a REIT for the next four taxable years.
Although we currently intend to maintain our status as a REIT, future economic, market, legal, tax, or other considerations may
cause us to determine that it would be in our and our shareowners’ best interests to revoke our REIT election. If we revoke our
REIT election, we will not be able to elect REIT status for the next four taxable years.
We may be subject to taxes even if we qualify as a REIT.
Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state, local, and foreign
taxes on our income and property. For example, we will be subject to federal income tax to the extent we distribute less than 100%
of our REIT taxable income, including capital gains. Moreover, if we have net income from “prohibited transactions,” that income
will be subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property held primarily
for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction
depends on the facts and circumstances related to that sale. We cannot guarantee that sales of our properties would not be prohibited
transactions unless we comply with certain statutory safe-harbor provisions. The need to avoid prohibited transactions could cause
us to forego or defer sales of assets that non-REITs otherwise would have sold or that might otherwise be in our best interest to
sell.
In addition, any net taxable income earned directly by our taxable REIT subsidiaries will be subject to federal, and state corporate
income tax, and to the extent there are foreign operations certain foreign taxes. In this regard, several provisions of the laws
applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal
income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an
affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions
taken by the taxable REIT subsidiaries if the economic arrangements among the REIT, the REIT’s tenants, and the taxable REIT
subsidiary are not comparable to similar arrangements among unrelated parties. Also, some state, local, and foreign jurisdictions
may tax some of our income even though as a REIT we are not subject to federal income tax on that income, because not all states,
localities, and foreign jurisdictions follow the federal income tax treatment of REITs. Finally, there may be changes in the laws
of states, localities, and foreign jurisdictions that may increase the taxes we pay. To the extent that we and our affiliates are required
to pay federal, state, local, and/or foreign taxes, we will have less cash available for distributions to our shareowners.
The lower tax rate on certain dividends from non-REIT “C” corporations may cause investors to prefer to hold stock in non-REIT
“C” corporations.
The maximum tax rate (including the net investment income tax of 3.8%) on certain corporate dividends received by individuals
is 23.8%, which is less than the maximum income tax rate of 39.6% applicable to ordinary income. This rate differential continues
to substantially reduce the so-called "double taxation" (that is, taxation at both the corporate and shareowner levels) that applies
to non-REIT "C" corporations but does not generally apply to REITs. Dividends from a REIT do not qualify for the favorable tax
rate applicable to dividends from non-REIT "C" corporations unless the dividends are attributable to income that has already been
subjected to the corporate income tax, such as income from a prior year that the REIT did not distribute and dividend income
received by the REIT from a taxable REIT subsidiary or other fully taxable "C" corporation. Although REITs, unlike non-REIT
“C” corporations, have the ability to designate certain dividends as capital gain dividends subject to the favorable rates applicable
to capital gain, the application of reduced dividend rates to non-REIT “C” corporation dividends may still cause individual investors
to view stock in non-REIT “C” corporations as more attractive than shares in REITs, which may negatively affect the value of our
shares.
18
Our ownership limitations and other provisions of our articles of incorporation and bylaws generally prohibit the acquisition
of more than 8.23% of the value of our capital stock and may otherwise hinder any attempt to acquire us.
Various provisions of our articles of incorporation and bylaws could have the effect of discouraging a third party from
accumulating a large block of our stock and making offers to acquire us, and of inhibiting a change in control, all of which could
adversely affect our shareowners’ ability to receive a premium for their shares in connection with such a transaction. In addition
to customary anti-takeover provisions, as detailed below, our articles of incorporation contain REIT-specific restrictions on the
ownership and transfer of our capital stock which also serve similar anti-takeover purposes.
Under our Restated Articles of Incorporation, in general, no shareowner may own more than 8.23% (the “General Ownership
Limit”) in value of our "Capital Stock" (which term refers to the common stock, preferred stock and Excess Stock, as defined
below). Our Board of Directors has the authority to allow a “look through entity” to own up to 9.9% in value of the Capital Stock
(Look Through Entity Limit), provided that after application of certain constructive ownership rules under the Code and rules
regarding beneficial ownership under the Michigan Business Corporation Act, no individual would constructively or beneficially
own more than the General Ownership Limit. A look through entity is an entity (other than a qualified trust under Section 401(a)
of the Code, certain other tax-exempt entities described in the Articles, or an entity that actually or constructively owns 10% or
more of the equity of any tenant from which we or TRG directly or indirectly receives or accrues rent from real property) whose
beneficial owners, rather than the entity, would be treated as owning the capital stock owned by such entity.
The Articles provide that if the transfer of any shares of Capital Stock or a change in our capital structure would cause any
person (Purported Transferee) to own Capital Stock in excess of the General Ownership Limit or the Look Through Entity Limit,
then the transfer is to be treated as invalid from the outset, and the shares in excess of the applicable ownership limit automatically
acquire the status of “Excess Stock.” A Purported Transferee of Excess Stock acquires no rights to shares of Excess Stock. Rather,
all rights associated with the ownership of those shares (with the exception of the right to be reimbursed for the original purchase
price of those shares) immediately vest in one or more charitable organizations designated from time to time by our Board of
Directors (each, a “Designated Charity”). An agent designated from time to time by the Board (each, a “Designated Agent”) will
act as attorney-in-fact for the Designated Charity to vote the shares of Excess Stock, take delivery of the certificates evidencing
the shares that have become Excess Stock, and receive any distributions paid to the Purported Transferee with respect to those
shares. The Designated Agent will sell the Excess Stock, and any increase in value of the Excess Stock between the date it became
Excess Stock and the date of sale will inure to the benefit of the Designated Charity. A Purported Transferee must notify us of any
transfer resulting in shares converting into Excess Stock, as well as such other information regarding such person’s ownership of
the capital stock we request.
These ownership limitations will not be automatically removed even if the REIT requirements are changed so as to no longer
contain any ownership concentration limitation or if the concentration limitation is increased because, in addition to preserving
our status as a REIT, the effect of such ownership limit is to prevent any person from acquiring unilateral control of us. Changes
in the ownership limits cannot be made by our Board of Directors and would require an amendment to our articles. Currently,
amendments to our articles require the affirmative vote of holders owning not less than two-thirds of the outstanding capital stock
entitled to vote.
A. Alfred Taubman, Robert Taubman, William Taubman, and Gayle Taubman Kalisman (Taubman Family) may be deemed
under SEC rules of attribution, which includes conversion of options that have vested and shares subject to issuance under an
option deferral agreement, to beneficially own 26%, 29%, 28%, and 26%, respectively, of our stock that is entitled to vote on
shareowner matters (Voting Stock) as of December 31, 2014. However, the combined Taubman Family ownership of Voting Stock
includes 24,128,303 shares of the 25,117,000 shares of Series B Preferred Stock outstanding or 96% of the total outstanding and
1,417,946 shares of the 63,324,409 shares of common stock outstanding or 2% of the total outstanding as of December 31, 2014.
The Series B Preferred Stock is convertible into shares of common stock at a ratio of 14,000 shares of Series B Preferred Stock
to one share of common stock, and therefore one share of Series B Preferred Stock has a value of 1/14,000ths of the value of one
share of common stock. Accordingly, the foregoing ownership of Voting Stock does not violate the ownership limitations set forth
in our charter.
19
Members of the Taubman family have the power to vote a significant number of the shares of our capital stock entitled to vote.
Based on information contained in filings made with the SEC, as of December 31, 2014, A. Alfred Taubman and the members
of his family have the power to vote approximately 29% of the outstanding shares of our common stock and our Series B Preferred
Stock, considered together as a single class, including approximately 96% of our outstanding Series B preferred stock. Our shares
of common stock and our Series B Preferred Stock vote together as a single class on all matters generally submitted to a vote of
our shareowners, and the holders of the Series B preferred stock have certain rights to nominate up to four individuals for election
to our board of directors and other class voting rights. Mr. Taubman’s son, Robert S. Taubman, serves as our Chairman of the
Board, President and Chief Executive Officer. Mr. Taubman’s son, William S. Taubman, serves as our Chief Operating Officer
and one of our directors. These individuals occupy the same positions with the Manager. As a result, Mr. A. Alfred Taubman and
the members of his family may exercise significant influence with respect to the election of our board of directors, the outcome
of any corporate transaction or other matter submitted to our shareowners for approval, including any merger, consolidation or
sale of all or substantially all of our assets. In addition, because our articles of incorporation impose a limitation on the ownership
of our outstanding capital stock by any person and such ownership limitation may not be changed without the affirmative vote of
holders owning not less than two-thirds of the outstanding shares of capital stock entitled to vote on such matter, Mr. A. Alfred
Taubman and the members of his family, as a practical matter, have the power to prevent a change in control of our company.
The market price of our common stock may fluctuate significantly.
The market price of our common stock may fluctuate significantly in response to many factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
general market and economic conditions;
actual or anticipated variations in our operating results, funds from operations, cash flows, liquidity or distributions
(including special distributions);
changes in our earnings estimates or those of analysts;
publication of research reports about us, the real estate industry generally or the regional mall industry, and
recommendations by financial analysts with respect to us or other REITs;
the amount of our outstanding debt at any time, the amount of our maturing debt in the near and medium term and our
ability to refinance such debt and the terms thereof or our plans to incur additional debt in the future;
the ability of our tenants to pay rent to us and meet their other obligations to us under current lease terms and our ability
to re-lease space as leases expire;
increases in market interest rates that lead purchasers of our common stock to demand a higher dividend yield;
changes in market valuations of similar companies;
any securities we may issue or additional debt we incur in the future;
additions or departures of key management personnel;
actions by institutional shareholders;
risks we are taking in relation to our new developments and capital uses;
perceived risks in connection with our international development strategy;
the public announcement of proposed acquisitions and dispositions, developments and re-developments and the
consummation thereof;
speculation in the press or investment community; and
continuing high levels of volatility in the capital and credit markets.
Many of the factors listed above are beyond our control. These factors may cause the market price of our common stock to
decline, regardless of our financial performance and condition and prospects. It is impossible to provide any assurance that the
market price of our common stock will not fall in the future, and it may be difficult for holders to resell shares of our common
stock at prices they find attractive, or at all.
20
Our shareholders will experience dilution as a result of equity offerings and they may experience further dilution if we issue
additional common stock.
We issued common equity, both common shares and TRG partnership units, that had a dilutive effect on our earnings per diluted
share and funds from operations per diluted share for the years ended December 31, 2012 and December 31, 2011. In addition, in
2013 and 2012, we issued additional shares of preferred stock which adversely affected the earnings per share available to our
common shareholders. We are not restricted from issuing additional shares of our common stock or preferred stock, including any
securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or
any substantially similar securities. Any additional future issuances of common stock will reduce the percentage of our common
stock owned by investors who do not participate in future issuances. In most circumstances, shareholders will not be entitled to
vote on whether or not we issue additional common stock. In addition, depending on the terms and pricing of an additional offering
of our common stock and the value of our properties, our shareholders may experience dilution in both the book value and fair
value of their shares. The market price of our common stock could decline as a result of sales of a large number of shares of our
common stock in the market after this offering or the perception that such sales could occur, and this could materially and adversely
affect our ability to raise capital through future offerings of equity or equity-related securities.
Our ability to pay dividends on our stock may be limited.
Because we conduct all of our operations through TRG or its subsidiaries, our ability to pay dividends on our stock will depend
almost entirely on payments and distributions received on our interests in TRG. Additionally, the terms of some of the debt to
which TRG is a party limits its ability to make some types of payments and other distributions to us. This in turn limits our ability
to make some types of payments, including payment of dividends on our stock, unless we meet certain financial tests or such
payments or dividends are required to maintain our qualification as a REIT. As a result, if we are unable to meet the applicable
financial tests, we may not be able to pay dividends on our stock in one or more periods beyond what is required for REIT purposes.
Our ability to pay dividends is further limited by the requirements of Michigan law.
Our ability to pay dividends on our stock is further limited by the laws of Michigan. Under the Michigan Business Corporation
Act, a Michigan corporation may not make a distribution if, after giving effect to the distribution, the corporation would not be
able to pay its debts as the debts become due in the usual course of business, or the corporation’s total assets would be less than
the sum of its total liabilities plus the amount that would be needed, if the corporation were dissolved at the time of the distribution,
to satisfy the preferential rights upon dissolution of shareowners whose preferential rights are superior to those receiving the
distribution. Accordingly, we may not make a distribution on our stock if, after giving effect to the distribution, we would not be
able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total
liabilities plus the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of any shares of
our preferred stock then outstanding.
We may incur additional indebtedness, which may harm our financial position and cash flow and potentially impact our ability
to pay dividends on our stock.
Our governing documents do not limit us from incurring additional indebtedness and other liabilities; however, certain loan
covenants include certain restrictions regarding future indebtedness. As of December 31, 2014, we had $2.0 billion of consolidated
indebtedness outstanding, and our beneficial interest in both our consolidated debt and the debt of our unconsolidated joint ventures
was $2.9 billion. We may incur additional indebtedness and become more highly leveraged, which could harm our financial position
and potentially limit our cash available to pay dividends.
We may change the distribution policy for our common stock in the future.
The decision to declare and pay dividends on our common stock in the future, as well as the timing, amount, and composition
of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, funds from
operations, liquidity, financial condition, capital requirements, contractual prohibitions, or other limitations under our indebtedness
and preferred shares, the annual dividend requirements under the REIT provisions of the Code, state law and such other factors
as our board of directors deems relevant. Further, we have regularly issued new shares of common stock as compensation to our
employees, and we have periodically issued new shares pursuant to public offerings or acquisitions. Any future issuances may
substantially increase the cash required to pay dividends at current or higher levels. Our actual dividend payable will be determined
by our board of directors based upon the circumstances at the time of declaration. Although we have regularly paid dividends on
a quarterly basis on our common and preferred stock in the past, we do not guarantee we will continue to do so in the future. Any
change in our dividend policy could have a material adverse effect on the market price of our common stock.
21
Item 1B. UNRESOLVED STAFF COMMENTS.
None.
Item 2. PROPERTIES.
Ownership
The following table sets forth certain information about each of the centers. The table includes only centers in operation at
December 31, 2014. Centers are owned in fee other than Beverly Center (Beverly), Cherry Creek Shopping Center, City Creek
Center, and International Plaza, which are held under ground leases expiring between 2042 and 2104.
Certain of the centers are partially owned through joint ventures. Generally, our joint venture partners have ongoing rights
with regard to the disposition of our interest in the joint ventures, as well as the approval of certain major matters.
Center
Consolidated Businesses:
Beverly Center
Los Angeles, CA
Anchors
Bloomingdale’s, Macy’s
Sq. Ft of GLA/
Mall GLA as of
12/31/14
Year
Opened/
Expanded
Year
Acquired
Ownership
% as of
12/31/14
886,000
562,000
1982
Cherry Creek Shopping Center
Macy’s, Neiman Marcus, Nordstrom
1,032,000
(1)
1990/1998
Denver, CO
City Creek Center
Salt Lake City, UT
Dolphin Mall
Miami, FL
Macy's, Nordstrom
Bass Pro Shops Outdoor World,
Bloomingdale's Outlet, Burlington Coat Factory
Cobb Theatres, Dave & Buster's,
Marshalls, Neiman Marcus-Last Call,
Saks Off 5th, Polo Ralph Lauren Factory Store,
The Sports Authority
The Gardens on El Paseo/ El Paseo Village
Saks Fifth Avenue
Palm Desert, CA
Great Lakes Crossing Outlets
AMC Theatres, Bass Pro Shops Outdoor World,
Auburn Hills, MI
Lord & Taylor Outlet, Neiman Marcus-Last Call,
(Detroit Metropolitan Area)
Saks Off 5th
The Mall at Green Hills
Dillard's, Macy's, Nordstrom
Nashville, TN
The Mall at Short Hills
Short Hills, NJ
Bloomingdale’s, Macy’s, Neiman Marcus,
Nordstrom, Saks Fifth Avenue
Taubman Prestige Outlets Chesterfield
Polo Ralph Lauren Factory Store,
Restoration Hardware
Chesterfield, MO
(St. Louis Metropolitan Area)
Twelve Oaks Mall
Novi, MI
(Detroit Metropolitan Area)
538,000
624,000
344,000
1,396,000
671,000
236,000
186,000
1,354,000
535,000
869,000
357,000
1,409,000
546,000
307,000
307,000
2012
2001/2007
1980/1994/
1995
2013
1998/2010
2011
100%
1998
100%
1955/2011
2011
100%
100%
50%
100%
100%
100%
100%
100%
JCPenney, Lord & Taylor, Macy's,
Nordstrom, Sears
1,519,000
550,000
1977/1978/
2007/2008
Total GLA
Total Mall GLA
TRG% of Total GLA
TRG% of Total Mall GLA
9,632,000
4,596,000
9,116,000
4,327,000
22
Center
Anchors
Sq. Ft of GLA/
Mall GLA as o4
12/31/14
Year
Opened/
Expanded
Year
Acquired
Ownership
% as of
12/31/14
JCPenney, Lord & Taylor,
Macy’s (two locations), Sears
1,557,000
561,000
1980/1987/
1988/2000
Unconsolidated Joint Ventures:
Fair Oaks
Fairfax, VA
(Washington, DC Metropolitan Area)
International Plaza
Tampa, FL
The Mall at Millenia
Orlando, FL
Stamford Town Center
Stamford, CT
Sunvalley
Concord, CA
Dillard’s, Lifetime Athletic, Neiman Marcus,
Nordstrom
Bloomingdale’s, Macy’s, Neiman Marcus
Macy’s
JCPenney, Macy’s (two locations), Sears
(San Francisco Metropolitan Area)
The Mall at University Town Center
Dillard's, Macy's, Saks Fifth Avenue
Nordstrom, Saks Fifth Avenue
Sarasota, FL
Waterside Shops
Naples, FL
Westfarms
West Hartford, CT
50%
50%
50%
50%
2001
2002
(2)
1982/2007
1,221,000
578,000
1,120,000
520,000
765,000
442,000
1,334,000
494,000
859,000
439,000
336,000
196,000
1967/1981
2002
50%
2014
50%
1992/2006/
2003
50%
2008
JCPenney, Lord & Taylor, Macy’s,
Macy’s Men’s Store/Furniture Gallery,
1,276,000
506,000
1974/1983/
1997
79%
Nordstrom
Total GLA
Total Mall GLA
TRG% of Total GLA
TRG% of Total Mall GLA
Grand Total GLA
Grand Total Mall GLA
TRG% of Total GLA
TRG% of Total Mall GLA
8,468,000
3,736,000
4,604,000
2,015,000
18,100,000
8,332,000
13,720,000
6,342,000
(1) GLA includes the former Saks Fifth Avenue store, which closed in March 2011. This space is currently under development. See "Business - Potential for
Growth - Internal Growth"
(2) GLA includes the former Saks Fifth Avenue store, which closed in March 2014. Saks Fifth Avenue announced that a Saks Off 5th store is scheduled to
open in this location in June 2015.
23
Anchors
The following table summarizes certain information regarding the anchors at the operating centers (excluding the value and
outlet centers) as of December 31, 2014:
Name
Macy’s
Bloomingdale’s (1)
Macy’s
Macy’s Men’s Store/Furniture Gallery
Total
Nordstrom
Dillard’s
JCPenney
Sears
Neiman Marcus (2)
Lord & Taylor (3)
Saks (4)
Lifetime Athletic
Total
Number of
Anchor Stores
GLA
(in thousands
of square feet)
% of GLA
3
14
1
18
8
3
4
3
4
3
4
1
618
2,932
80
3,630
1,164
607
745
679
405
392
295
56
24.1%
7.7%
4.0%
5.0%
4.5%
2.7%
2.6%
2.0%
0.4%
48
7,973
53.0% (5)
(1) Excludes one Bloomingdale's Outlet store at a value center.
(2) Excludes two Neiman Marcus-Last Call stores at value and outlet centers.
(3) Excludes one Lord & Taylor Outlet store at an outlet center.
(4) Excludes two Saks Off 5th stores at value and outlet centers.
(5) Percentages in table may not add due to rounding.
24
Mortgage Debt
The following table sets forth certain information regarding the mortgages encumbering the centers as of December 31, 2014.
All mortgage debt in the table below is nonrecourse to the Operating Partnership except for the TRG $65 million revolving credit
facility and the debt encumbering The Mall of San Juan. The Operating Partnership has provided limited guarantees regarding
the mortgage debt encumbering City Creek Center and The Mall at University Town Center. In addition, the entities that own
Beverly Center, Dolphin Mall, and Twelve Oaks Mall are guarantors under our $475 million corporate unsecured term loan and
$1.1 billion unsecured primary revolving line of credit. See "Note 8 - Notes Payable - Debt Covenants and Guarantees" to our
consolidated financial statements for more details on loan guarantees.
Stated
Interest
Rate
5.24%
4.37%
4.42%
6.10%
3.60%
LIBOR+1.60%
Centers Consolidated in
TCO’s Financial Statements
Cherry Creek Shopping Center (50%)
City Creek Center
El Paseo Village
The Gardens on El Paseo
Great Lakes Crossing Outlets
The Mall at Green Hills
The Mall of San Juan
The Mall at Short Hills
Other Consolidated Secured Debt
Principal
Balance as
of 12/31/14
(thousands)
Annual
Debt
Service
(thousands)
Maturity
Date
Balance
Due on
Maturity
(thousands)
Earliest
Prepayment
Date Without
Penalty
$
280,000
Interest Only
6/8/2016
$
280,000
83,189
5,090 (2)
8/1/2023
(3)
(5)
(6)
15,932 (5)
1,024 (2)
12/6/2015
83,059 (6)
Interest Only
6/11/2016
217,281
150,000
12,277 (2)
1/6/2023
Interest Only
12/1/2018
3/8/2016
5/1/2023
10/6/2015
3/11/2016
9/6/2022
12/1/2017
(1)
(4)
(7)
(9)
68,575
15,565
81,480
177,038
150,000
163,779
540,000
(8)
(10)
LIBOR+ 2.00% (10)
163,779 (10)
Interest Only
4/2/2017
5.47%
540,000
Interest Only
12/14/2015
At Any Time
9/15/2015
(11)
Taubman BHO Headquarters
5.90%
(12)
17,265 (12)
1,441 (2)
4/1/2015
16,974
2/1/2015
TRG $65M Revolving Credit Facility
LIBOR+1.40% (13)
—
Interest Only
4/30/2016
—
At Any Time
Centers Owned by Unconsolidated Joint Ventures/TRG’s % Ownership
Fair Oaks (50%)
LIBOR+1.70% (14)
International Plaza (50.1%)
4.85%
International Plaza (50.1%)
LIBOR+1.75% (16)
The Mall at Millenia (50%)
Sunvalley (50%)
Taubman Land Associates (50%)
4.00%
4.44%
3.84%
273,413
325,000
175,000
350,000
183,097
23,102
15,307 (14)
7/13/2018
20,580 (2)
12/1/2021
8,710 (16)
12/1/2021
Interest Only (18)
10/15/2024
11,471 (2)
9/1/2022
1,349 (2)
11/1/2022
The Mall at University Town Center (50%)
LIBOR+1.70% (20)
187,819 (20)
Interest Only (20)
10/28/2016
(20)
Waterside Shops (50%)
Westfarms (79%)
5.54%
4.50%
165,000
307,116
Interest Only
10/7/2016
19,457 (2)
7/1/2022
257,516
285,503
151,267
293,748
153,642
19,001
187,819
165,000
256,944
At Any Time
9/2/2021
(11) (15)
12/1/2019
7/17/2024
6/1/2022
6/1/2022
At Any Time
4/7/2016
4/2/2022
(17)
(11)
(19)
(11)
(1) All loans may be prepaid with penalty or defeased as of December 31, 2014 unless otherwise indicated.
(2) Amortizing principal based on 30-years.
(3) If the loan is not repaid on or before August 1, 2023, the loan may continue until April 1, 2024. If this occurs, the interest rate becomes the greater of (i) the
stated 4.37% interest rate plus 5% and (ii) the then current 10-year treasury rate plus 5%.
(4) Debt may be defeased on or after October 28, 2015, or debt may be prepaid with a prepayment penalty equal to greater of yield maintenance or 0.5% of
principal prepaid until the date indicated.
(5) Debt includes $0.1 million of purchase accounting premium from December 2011 acquisition, which reduces the stated rate on the debt of 4.42% to an
effective rate of 3.89%.
(6) Debt includes $1.6 million of purchase accounting premium from December 2011 acquisition, which reduces the stated rate on the debt of 6.10% to an
effective rate of 4.64%.
(7) Debt may not be defeased until March 2015.
(8) A one-year extension option is available.
(9) From December 2014 through November 2016, debt may be prepaid with a prepayment penalty of 0.5% of principal prepaid. From December 2016 through
November 2017, the prepayment penalty decreases to 0.25% of principal prepaid. There is no prepayment fee thereafter.
(10) $320 million construction facility. Rate decreases to LIBOR + 1.75% upon achieving certain performance measures. The loan has two one-year extension
options available.
(11) Debt may be prepaid with a prepayment penalty equal to greater of yield maintenance or 1% of principal prepaid until the date indicated.
(12) Debt includes $0.2 million of purchase accounting premium from February 2014 acquisition which reduces the stated rate on the debt of 5.90% to an effective
rate of 1.71%.
(13) The facility is a $65 million revolving line of credit and is secured by an indirect interest in 40% of Short Hills.
(14) The debt is swapped to an effective rate of 4.10% through April 2018. Principal payments are based on a 7.5% interest rate and 25-year amortization.
(15) Debt may not be prepaid until April 2015.
(16) The debt is swapped to an effective rate of 3.58% until maturity. Principal payments are based on a 4.0% interest rate and 30-year amortization.
(17) Through mid-December 2016, debt may be prepaid with a prepayment penalty of 2.0% of principal prepaid. From mid-December 2016 through mid-
December 2017, the prepayment penalty decreases to 1% of principal repaid and in mid-December 2017 it changes to 0.5% of the principal repaid until
December 1, 2019 when it can be prepaid without penalty.
25
(18) The loan is interest only until November 2016 at which time monthly principal payments are due based on a 30-year amortization. At our option on or before
April 30, 2016, provided that The Mall at Millenia meets a required NOI for calendar year 2015, the interest only period may be extended until maturity.
(19) Debt may not be defeased until February 2015.
(20) $225 million construction facility. Rate decreases to LIBOR + 1.60% upon achieving certain performance measures. The loan has four one-year extension
options. During each extension period, debt service payments also include principal payments based on a 6.0% interest rate and a 30-year amortization.
For additional information regarding the centers and their operations, see the responses to Item 1 of this report.
Item 3. LEGAL PROCEEDINGS.
In December 2014, we settled with two restaurant owners, their two restaurants, and their principal regarding tenant leases at
The Pier Shops. No material losses were incurred as a result of the settlement. See “Note 15 – Commitments and Contingencies
– Litigation” to our consolidated financial statements for information regarding outstanding litigation.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
26
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
PURCHASES OF EQUITY SECURITIES.
The common stock of Taubman Centers, Inc. is listed and traded on the New York Stock Exchange (Symbol: TCO). As of
February 23, 2015, the 63,315,227 outstanding shares of Common Stock were held by 451 holders of record. A substantially
greater number of holders are beneficial owners whose shares are held of record by banks, brokers, and other financial institutions.
The closing price per share of the Common Stock on the New York Stock Exchange on February 23, 2015 was $74.50.
The following table presents the dividends declared on our Common Stock and the range of closing share prices of our Common
Stock for each quarter of 2014 and 2013:
2014 Quarter Ended
March 31
June 30
September 30
December 31
Market Quotations
High
Low
Dividends
$
71.02
$
63.34
$
0.54
76.80
76.98
80.06
70.40
72.27
72.75
0.54
0.54
0.54 (1)
(1) Amount excludes a special dividend of $4.75 per share, which was declared as a result of the sale of centers to Starwood in October 2014.
2013 Quarter Ended
March 31
June 30
September 30
December 31
Market Quotations
High
Low
Dividends
$
82.29
$
75.02
$
0.50
88.95
80.61
71.56
73.67
65.37
63.65
0.50
0.50
0.50
The restrictions on our ability to pay dividends on our Common Stock are set forth in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations – Liquidity and Capital Resources – Dividends.”
27
Shareowner Return Performance Graph
The following line graph sets forth the cumulative total returns on a $100 investment in each of our Common Stock, the MSCI
US REIT Index, the FTSE NAREIT Equity Retail Index, the S&P 500 Index, and the S&P 400 MidCap Index for the period
December 31, 2009 through December 31, 2014 (assuming in all cases, the reinvestment of dividends):
12/31/2009
12/31/2010
12/31/2011
12/31/2012
12/31/2013
12/31/2014
Taubman Centers Inc.
MSCI US REIT Index
FTSE NAREIT Equity Retail Index
S&P 500 Index
S&P 400 MidCap Index
$
100.00
$
146.77
$
186.26
$
241.99
$
202.06
$
100.00
100.00
100.00
100.00
128.48
133.41
115.06
126.64
139.65
149.69
117.49
124.45
164.46
189.71
136.30
146.69
168.52
193.24
180.42
195.77
264.53
219.72
246.61
205.11
214.83
Note: The stock performance shown on the graph above is not necessarily indicative of future price performance.
28
Equity Purchases
In August 2013, the Company’s Board of Directors authorized a share repurchase program under which the Company may
repurchase up to $200 million of its outstanding common stock on the open market or in privately negotiated transactions or
otherwise. No stock repurchases were made during the fourth quarter of 2014. As of December 31, 2014, the Company repurchased
787,071 shares of our common stock on the open market at an average price of $66.45 per share, for a total of $52.3 million under
the authorization. As of December 31, 2014, $147.7 million remained available for purchase under the program. All shares
repurchased have been cancelled. For each share of stock repurchased, an equal number of Operating Partnership units were
redeemed. Repurchases of common stock were financed through general corporate funds, including borrowings under existing
lines of credit.
The restrictions on our ability to pay dividends on our common stock are set forth in "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital Resources - Dividends".
29
Item 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data and should be read in conjunction with the financial statements and notes
thereto and MD&A included in this report.
STATEMENT OF OPERATIONS DATA:
Rents, recoveries, and other shopping center revenues
Income from continuing operations (1)
Discontinued operations (2)
Net income (1) (3)
Net income attributable to noncontrolling interests
Distributions to participating securities of TRG
Preferred dividends
Net income attributable to Taubman Centers, Inc. common
shareowners
Net income per common share – diluted (1)
Dividends declared per common share (4)
Weighted average number of common shares outstanding –
basic
Weighted average number of common shares outstanding –
diluted
Number of common shares outstanding at end of period
Year Ended December 31
2014
2013
2012
2011
2010
(in thousands, except per share and per square foot data)
$
679,129
$
767,154
$
747,974
$
644,918
$
626,427
1,278,122
189,368
157,817
1,278,122
(385,109)
(6,018)
(23,138)
189,368
(56,778)
(1,749)
(20,933)
157,817
(51,643)
(1,612)
(21,051)
141,399
145,999
287,398
(94,527)
(1,536)
(14,634)
863,857
109,908
83,511
176,701
13.47
2.16
1.71
2.00
1.37
1.85
3.03
1.76
122,606
(20,279)
102,327
(38,459)
(1,635)
(14,634)
47,599
0.86
1.68
63,267,800
63,591,523
59,884,455
56,899,966
54,569,618
64,921,064
63,324,409
64,575,412
63,101,614
61,376,444
63,310,148
58,529,089
58,022,475
55,702,813
54,696,054
Ownership percentage of TRG at end of period
72%
71%
71%
69%
68%
BALANCE SHEET DATA:
Real estate before accumulated depreciation
Total assets
Total debt
SUPPLEMENTAL INFORMATION:
Funds from Operations attributable to TCO (1)(5)
Mall tenant sales - all centers (6)(7)(8)
Sales per square foot (6)(7)(8)(10)
Number of shopping centers at end of period
Ending Mall GLA in thousands of square feet
Leased space - all centers (7)(8)(9)(11)(12)
Ending occupancy - all centers (7)(8)(9)(12)
Average base rent per square foot (9):
Consolidated businesses (7)(8)(12)
Unconsolidated Joint Ventures (12)
Combined (7)(8)(12)
3,262,505
3,214,901
2,025,505
4,485,090
3,506,222
3,058,053
4,246,000
3,268,495
2,952,030
4,020,954
3,336,792
3,145,602
3,528,297
2,546,873
2,656,560
200,356
4,969,462
236,662
6,180,095
197,671
6,008,265
285,400
5,164,916
160,138
4,619,896
809
18
8,332
96.0%
94.1%
819
25
708
24
641
23
564
23
11,677
11,360
11,009
10,942
96.7%
95.8%
97.5%
96.6%
96.8%
95.5%
96.7%
95.1%
43.63
43.73
43.66
$
$
61.96
58.65
60.58
$
59.88
52.68
57.33
$
46.86
45.44
46.42
$
45.53
44.58
45.22
30
(1)
In 2014, income from continuing operations and net income include a $629.7 million gain on the dispositions of the seven centers to Starwood and a $476.9
million gain, net of tax, from the dispositions of interests in International Plaza, Arizona Mills, and land in Syosset, New York related to the former Oyster
Bay project. In 2014, net income and Funds from Operations (FFO) include expenses related to the sale of seven centers to Starwood completed in October
2014. Specifically, these measures reflect charges of $36.4 million ($36.0 million at our beneficial share) related to the loss on extinguishment of debt certain
of these centers; charges of $7.8 million ($7.4 million at our beneficial share) related to the discontinuation of hedge accounting on the interest rate swap
previously designated to hedge the MacArthur note payable; and a restructuring charge of $3.7 million and disposition costs of $3.3 million incurred related
to the sale. FFO is defined and discussed in “MD&A – Results of Operations – Use of Non-GAAP Measures."
(2) Discontinued operations includes the operations of Regency Square and The Pier Shops at Caesars (The Pier Shops). In 2011, discontinued operations
includes the gains on extinguishment of debt of $174.2 million related to the dispositions of The Pier Shops and Regency Square. In 2014, we early adopted
Accounting Standards Update (ASU) No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity". The
operations of the centers sold to Starwood and the gain on disposition are included in continuing operations pursuant to the application of ASU Update
2014-08.
In 2012, net income and FFO include $6.4 million of charges upon redemption of Series G and H Cumulative Redeemable Preferred Stock, the $1.6 million
loss on extinguishment of debt at The Mall at Millenia, and the $3.2 million PRC tax on sale of Taubman TCBL assets. See “MD&A – Results of Operations
–Other Equity Transactions", “MD&A – Results of Operations –Debt Transactions" and “MD&A – Results of Operations –Taubman Asia" for further
information. In 2011, net income and FFO include the gains on extinguishment of debt of $174.2 million related to the dispositions of The Pier Shops and
Regency Square and $5.3 million of acquisition costs related to the acquisitions of The Mall at Green Hills, The Gardens on El Paseo and El Paseo Village,
and Taubman TCBL.
(3)
(4) Amount excludes a special dividend of $4.75 per share in 2014, which was declared as a result of the sale of seven centers to Starwood, and $0.1834 per
share in 2010, as a result of the taxation of a capital gain incurred from a restructuring of the Company’s ownership in International Plaza, including liquidation
of the Operating Partnership’s private REIT.
(5) Reconciliations of net income attributable to TCO common shareowners to FFO for 2014, 2013, and 2012 are provided in “MD&A – Reconciliation of Net
Income Attributable to Taubman Centers, Inc. Common Shareowners to Funds from Operations and Adjusted Funds from Operations.” For 2011, net income
attributable to TCO common shareowners of $176.7 million, adding back depreciation and amortization of $152.3 million, noncontrolling interests of
$80.5 million, and distributions to participating securities of $1.5 million arrives at TRG’s FFO of $411.1 million, of which TCO’s share was $285.4 million.
For 2010, net income attributable to TCO common shareowners of $47.6 million, adding back depreciation and amortization of $161.9 million, noncontrolling
interests of $26.2 million, and distributions to participating securities of $1.6 million arrives at TRG’s FFO of $237.3 million, of which TCO’s share was
$160.1 million.
(6) Based on reports of sales furnished by mall tenants.
(7) Amounts in 2014 have been adjusted to exclude the mall tenant sales of the centers sold to Starwood in October 2014. "All centers" statistics for 2013 and
prior include sales for the Starwood sale portfolio.
(8) Amounts in 2011 and 2010 exclude The Pier Shops and Regency Square.
(9) See “MD&A – Rental Rates and Occupancy” for information regarding this statistic.
(10) For all periods presented, this amount represents sales per square foot of comparable centers, which are defined as all centers that were owned and opened
for the entire current and preceding period. This statistic for 2013 was restated for 2014 comparable centers.
(11) Leased space comprises both occupied space and space that is leased but not yet occupied.
(12) Occupancy and leased space statistics include TILS and all prior periods presented have been restated to include TILs.
(13) Amounts exclude spaces greater than 10,000 square feet.
31
Item 7. 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 and performance. Actual results may differ materially from those expected because of various risks and
uncertainties. The forward-looking statements included in this report are made as of the date hereof. Except as required by law,
we assume no obligation to update these forward looking statements, even if new information becomes available in the future.
The following discussion should be read in conjunction with the accompanying consolidated financial statements of Taubman
Centers, Inc. and the notes thereto, as well as "Risk Factors" elsewhere in this report.
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 that 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 and interests
therein. 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.
The comparability of information used in measuring performance is affected by the opening of Taubman Prestige Outlets
Chesterfield (Chesterfield) in August 2013, the opening of The Mall at University Town Center (University Town Center) in
October 2014 (See "Results of Operations - U.S. Development"), the disposition of our interest in Arizona Mills in January 2014
(see "Results of Operations - Dispositions - Arizona Mills/Oyster Bay"), and the sale of seven centers to an affiliate of Starwood
Capital Group (Starwood) in October 2014 (see "Disposition to Starwood Capital Group" below). Additional "comparable center"
statistics that exclude the centers noted above are provided to present the performance of comparable centers. Comparable centers
are generally defined as centers that were owned and open for the entire current and preceding period. Comparable center statistics
for 2013 have been restated to include comparable centers to 2014. Subsequent to the sale of a total of 49.9% of our interests in
the entity that owns International Plaza, we began accounting for our remaining interest in International Plaza under the equity
method of accounting. This affects the comparability of operating results for Consolidated Businesses and Unconsolidated Joint
Ventures period over period.
Disposition to Starwood Capital Group
In October 2014, we disposed of a portfolio of seven centers (see "Note 2 - Dispositions, Acquisitions, and Developments -
Dispositions - Sale of Centers to Starwood" to our consolidated financial statements and "Results of Operations - Dispositions -
Sale of Centers to Starwood"). The centers sold (Sale Centers) include MacArthur Center (MacArthur), Stony Point Fashion Park
(Stony Point), Northlake Mall, The Mall at Wellington Green, The Shops at Willow Bend, The Mall at Partridge Creek, and Fairlane
Town Center. This transaction, combined with our substantial development and redevelopment pipelines, is consistent with our
strategy to recycle capital for growth. The remaining post-sale portfolio is expected to be significantly more productive on a relative
basis, consisting of highly productive assets with average tenant sales higher by over $100 per square foot. Net Operating Income
long-term growth in the post-sale portfolio is expected to improve by about 0.50%.
32
Overall Summary of Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our primary source of revenue is from the leasing of space in our shopping centers. Generally these leases are long term, with
our average lease term of new leases at approximately seven and eight years during 2014 and 2013, respectively, excluding temporary
leases. Therefore general economic trends most directly impact our tenants’ sales and consequently their ability to perform under
their existing lease agreements and expand into new locations as well as our ability to find new tenants for our shopping centers
and increase rent per square foot.
For the fourth quarter of 2014, tenant sales per square foot increased 0.7% from the corresponding period in the prior year. For
all of 2014, tenant sales per square foot were $809, a 1.2% decrease from 2013 (see "Mall Tenant Sales and Center Revenues").
Ending occupancy, which includes temporary in-line tenants (TILs), was 95.4% for comparable centers at December 31, 2014,
down 0.9% from 2013. We anticipate 2015 year-end comparable center occupancy will be about 96%, including Chesterfield.
Average rent per square foot increased 5.7% in 2014. We expect that average rents per square foot in 2015 will be up in comparison
to 2014 by about 3.5%. The rents we are able to achieve are affected by economic trends and tenants’ expectations thereof, as
described under “Rental Rates and Occupancy.” The spread between rents on openings and closings may not be indicative of future
periods, as this statistic is not computed on comparable tenant spaces, and can vary significantly from period to period depending
on the total amount, location, and average size of tenant space opening and closing in the period. Mall tenant sales, occupancy
levels, and our resulting revenues are seasonal in nature (see “Seasonality").
Our analysis of our financial results begins under “Results of Operations” and we provide information about transactions that
affected the periods presented or will affect operations in the future.
In October 2014, we disposed of a portfolio of seven centers to Starwood (see "Results of Operations - Dispositions - Sale of
Centers to Starwood").
In January 2014, we sold a total of 49.9% of our interests in the entity that owns International Plaza, which we had 100% ownership
of as the result of acquiring a 49.9% ownership interest in 2012 (See "Results of Operations - Dispositions - International Plaza").
Also in January 2014, we sold our 50% interest in Arizona Mills and land in Syosset, New York related to our former Oyster Bay
project (See "Results of Operations - Dispositions - Arizona Mills/Oyster Bay"). In 2012, we acquired an additional 25% interest
in Waterside Shops (See "Results of Operations - U.S. Acquisitions").
We have been active in developing our U.S. shopping center portfolio, including the openings of University Town Center in
October 2014, Chesterfield in 2013, and City Creek Center (City Creek) in 2012. We also have two U.S. development projects
under construction: The Mall of San Juan, which is scheduled to open in March 2015, and International Market Place. In addition,
we are progressing on our project in Miami, Florida (see "Results of Operations - U.S. Development" and "Liquidity and Capital
Resources - Capital Spending - New Developments").
We also describe our growth activities in Asia with updates on our investments in new development projects, including
CityOn.Xi'an, CityOn.Zhengzhou, and Hanam Union Square, as well as service agreements for IFC Mall in South Korea and the
Studio City retail project in the Cotai region of Macau, China (see “Results of Operations – Taubman Asia”). In 2012, we sold
assets of the Taubman TCBL business (see "Results of Operations - Taubman Asia").
We provide discussions of results of center operations and management, leasing, and development services, as well as provide
expectations for NOI and net management, leasing, and development income in 2015 (See "Results of Operations - Center
Operations" and "Results of Operations - Management, Leasing, and Development Services").
We have certain additional sources of income beyond our rental revenues, recoveries from tenants, and revenue from management,
leasing, and development services. We disclose our share of these sources of income under “Results of Operations – Other Income.”
Expectations about general and administrative and pre-development expenses in 2015 are discussed under "Results of Operations
- Other Expenses."
We have been very active in managing our balance sheet and beneficial interest in debt, completing construction loans and other
financings. We also discuss our expectation of our share of consolidated and unconsolidated interest expense in 2015 (see “Results
of Operations – Debt Transactions”).
33
In addition, as a result of the Starwood sale in 2014, we prepaid or defeased our then outstanding loans on Northlake Mall, The
Mall at Wellington Green, MacArthur Center, and The Mall at Partridge Creek (See "Result of Operations - Dispositions - Sale of
Centers to Starwood").
During 2013, we repurchased $52.3 million of common stock under a share repurchase program. Also in 2013, we completed a
preferred stock offering of $170 million of 6.25% Series K Cumulative Redeemable Preferred Stock (Series K Preferred Stock)
(see "Results of Operations - Other Equity Transactions"). In 2012, we redeemed the Series G and H Cumulative Redeemable
Preferred Stock (Series G and H Preferred Stock), completed a preferred stock offering of $192.5 million of 6.5% Series J Cumulative
Redeemable Preferred Stock (Series J Preferred Stock), and a common equity offering of 2,875,000 common shares (see "Results
of Operations - Other Equity Transactions").
As information useful to understanding our results, we have described the reasons for our use of non-GAAP measures such as
Beneficial Interest in EBITDA and Funds from Operations (FFO) under “Results of Operations – Use of Non-GAAP Measures.”
With all the preceding information as background, we then provide insight and explanations for variances in our financial results
for 2014, 2013, and 2012 under “Comparison of 2014 to 2013” and “Comparison of 2013 to 2012.” We then discuss our application
of critical accounting policies and then provide reconciliations from net income and net income allocable to common shareowners
to our non-GAAP measures.
Our discussion of sources and uses of capital resources under “Liquidity and Capital Resources” begins with a brief overview of
our financial position as of December 31, 2014. We then discuss our capital activities and transactions that occurred in 2014. After
that, analysis of specific operating, investing, and financing activities is provided in more detail.
Specific analysis of our fixed and floating rates and periods of interest rate risk exposure is provided under “Liquidity and Capital
Resources – Beneficial Interest in Debt.” Completing our analysis of our exposure to rates are the effects of changes in interest
rates on our cash flows and fair values of debt contained under “Liquidity and Capital Resources – Sensitivity Analysis.” Also see
“Liquidity and Capital Resources – Loan Commitments and Guarantees” for a discussion of compliance with debt covenants.
In conducting our business, we enter into various contractual obligations, including those for debt, operating leases for land and
office space, purchase obligations, and other long-term commitments. Detail of these obligations, including expected settlement
periods, is contained under “Liquidity and Capital Resources – Contractual Obligations.” Property-level debt represents the largest
single class of obligations. Described under “Liquidity and Capital Resources – Loan Commitments and Guarantees” and “Liquidity
and Capital Resources – Cash Tender Agreement” are our significant guarantees and commitments.
We have development projects including The Mall of San Juan, International Market Place, CityOn.Xi'an, CityOn.Zhengzhou,
and Hanam Union Square, all of which are expected to open over the next few years. We also provide information on our capital
spending in 2014 and 2013, as well as planned capital spending for 2015 and spending scheduled for all new center projects through
their anticipated opening dates (see "Liquidity and Capital Resources - Capital Spending").
Dividends and distributions are also significant uses of our capital resources. The factors considered when determining the amount
of our dividends, including requirements arising because of our status as a REIT, are described under “Liquidity and Capital
Resources – Dividends.” As a result of the sale of centers to Starwood, we paid a special dividend of $4.75 per share in 2014 (see
"Liquidity and Capital Resources - Dividends").
34
Mall Tenant Sales and Center Revenues
Our mall tenants reported a 0.7% increase in sales per square foot in the fourth quarter of 2014 compared to the corresponding
period in the prior year. For all of 2014, our tenant sales decreased 1.2% over 2013 to $809 per square foot.
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 mall tenant sales determine the amount of rent, percentage
rent, and recoverable expenses, excluding utilities (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.
We believe that the ability of tenants to pay occupancy costs and earn profits over long periods of time increases as tenant sales
per square foot increase, whether through inflation or real growth in customer spending. Because most mall tenants have certain
fixed expenses, the occupancy costs that they can afford to pay and still be profitable are a higher percentage of tenant sales at
higher sales per square foot.
Tenant sales directly impact the amount of percentage rents certain tenants and anchors pay. The effects of increases or declines
in tenant sales on our operations are moderated by the relatively minor share of total rents that percentage rents represent. Over
the last five years, percentage rent as a share of total rent has ranged from 4% to 7%.
In negotiating lease renewals, we generally intend to maximize the minimum rentals we achieve. As a result, a tenant will
generally pay a higher amount of minimum rent and an initially lower amount of percentage rent upon renewal.
While tenant 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.
The following table summarizes occupancy costs, excluding utilities, for mall tenants as a percentage of mall tenant sales:
Mall tenant sales - all centers (in thousands)
Mall tenant sales - comparable (in thousands)
Sales per square foot
Consolidated Businesses: (3)
Minimum rents
Percentage rents
Expense recoveries
Mall tenant occupancy costs as a percentage of mall tenant sales
Unconsolidated Joint Ventures: (3)
Minimum rents
Percentage rents
Expense recoveries
Mall tenant occupancy costs as a percentage of mall tenant sales
Combined: (3)
Minimum rents
Percentage rents
Expense recoveries
Mall tenant occupancy costs as a percentage of mall tenant sales
2014 (1) (2)
$ 4,969,462
2013 (1)
$ 6,180,095
2012 (1)
$ 6,008,265
4,871,423
4,991,010
809
819
708
8.8%
0.6
4.4
13.8%
8.6%
0.5
4.2
13.3%
8.8%
0.5
4.3
13.6%
8.3%
0.6
4.3
13.2%
8.1%
0.5
4.0
12.6%
8.2%
0.5
4.3
13.0%
8.1%
0.6
4.1
12.8%
7.7%
0.5
4.0
12.2%
8.0%
0.5
4.2
12.7%
(1) Based on reports of sales furnished by mall tenants.
(2) Due to the closing of the Starwood sale in October 2014, tenant sales data for the sale portfolio is not included in 2014 mall tenant sales or analyses of
occupancy costs as a percentage of sales.
(3) Occupancy costs as a percentage of sales statistics are based on mall tenant sales of all centers reported during that period.
35
Rental Rates and Occupancy
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. Average rent per square foot statistics reflect the contractual rental terms of the lease currently
in effect and include the impact of rental concessions. 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. Average rent per square foot in 2015 is expected to be
up about 3.5%. Rent per square foot information for centers in our Consolidated Businesses and Unconsolidated Joint Ventures
follows:
Average rent per square foot:
Consolidated Businesses
Unconsolidated Joint Ventures
Combined
Opening base rent per square foot:
Consolidated Businesses
Unconsolidated Joint Ventures
Combined
Square feet of GLA opened:
Consolidated Businesses
Unconsolidated Joint Ventures
Combined
Closing base rent per square foot:
Consolidated Businesses
Unconsolidated Joint Ventures
Combined
Square feet of GLA closed:
Consolidated Businesses
Unconsolidated Joint Ventures
Combined
Releasing spread per square foot:
Consolidated Businesses
Unconsolidated Joint Ventures
Combined
Releasing spread per square foot growth:
Consolidated Businesses
Unconsolidated Joint Ventures
Combined
2014 (1) (2)
2013 (1) (2)
2012 (1) (2)
$
$
$
$
61.96
58.65
60.58
74.15
63.19
69.47
420,326
313,575
733,901
57.19
46.84
52.57
459,689
371,391
831,080
16.96
16.35
16.90
29.7%
34.9%
32.1%
$
$
$
59.88
52.68
57.33
62.41
62.07
62.27
489,165
346,134
835,299
55.11
48.98
52.67
$
$
$
46.86
45.44
46.42
55.78
54.95
55.59
932,775
278,651
1,211,426
45.94
50.50
47.07
497,011
327,608
824,619
916,345
301,724
1,218,069
$
7.30
$
13.09
9.60
13.2%
26.7%
18.2%
9.84
4.45
8.52
21.4%
8.8%
18.1%
(1) Statistics exclude non-comparable centers. Comparable center statistics for 2014 and 2013 exclude Arizona Mills, Taubman Prestige Outlets Chesterfield,
The Mall at University Town Center, and the Sale Centers. Comparable center statistics for 2012 exclude City Creek Center.
(2) Opening and closing statistics exclude spaces greater than or equal to 10,000 square feet.
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.
36
Mall tenant ending occupancy and leased space rates including TILS are as follows:
Ending occupancy - all centers
Ending occupancy - comparable centers
Leased space - all centers
Leased space - comparable centers
2014 (1)
2013 (1)
2012 (1)
94.1%
95.4
96.0
96.7
95.8%
96.3
96.7
97.5
96.6%
97.5
(1) Beginning December 31, 2014, all occupancy and leased space statistics for all periods presented include TILs. Occupancy statistics also include anchor
spaces at value and outlet centers (Arizona Mills, Dolphin Mall, Great Lakes Crossing Outlets, and Chesterfield). Arizona Mills is included in "all centers"
prior to March 31, 2014 and Chesterfield is included in "all centers" for periods ending on or after September 30, 2013. "All centers" statistics as of December
31, 2013 and prior include the Sale Centers.
We expect 2015 year-end comparable center occupancy will be about 96%, including Chesterfield. Tenant bankruptcy filings
as a percentage of the total number of tenant leases were 1.6% in 2014, compared to 0.3% in 2013, and 0.7% in 2012.
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.
Mall tenant sales (1)
Comparable (2)
All Centers (3)
Revenues and nonoperating income (expense):
2014
Total
4th quarter
3rd quarter
2nd quarter
1st quarter
(in thousands, except occupancy and leased space data)
$ 4,871,423
4,969,462
$ 1,527,103
1,601,162
$ 1,111,848
1,121,619
$ 1,120,819
1,129,184
$ 1,111,653
1,117,497
Consolidated Businesses
Unconsolidated Joint Ventures
636,322
337,995
118,842
99,830
176,935
80,649
164,664
80,289
175,881
77,227
Ending occupancy (4):
Comparable
All Centers
Leased Space (2):
Comparable
All centers
95.4%
94.1
96.7%
96.0
95.4%
94.1
96.7%
96.0
94.1%
93.0
96.5%
95.3
93.8%
92.6
96.4%
95.3
93.9%
93.0
96.6%
95.5
(1) Based on reports of sales furnished by mall tenants.
(2) Statistics for all periods exclude the Sale Centers, Taubman Prestige Outlets Chesterfield, University Town Center, and Arizona Mills.
(3) Due to the closing of the Starwood sale in October 2014, tenant sales data for the sale portfolio was excluded for all periods presented.
(4) Occupancy and leased space statistics include TILs. Prior period occupancy and leased space statistics have been restated to include TILs.
37
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, excluding utilities) as a percentage of sales are
considerably higher in the first three quarters than they are in the fourth quarter.
Consolidated Businesses:
Minimum rents
Percentage rents
Expense recoveries
Mall tenant occupancy costs
Unconsolidated Joint Ventures:
Minimum rents
Percentage rents
Expense recoveries
Mall tenant occupancy costs
Combined:
Minimum rents
Percentage rents
Expense recoveries
Mall tenant occupancy costs
Total
4th quarter
2014 (1)
3rd quarter
2nd quarter
1st quarter
8.8%
0.6
4.4
13.8%
8.6%
0.5
4.2
13.3%
8.8%
0.5
4.3
13.6%
6.8%
1.0
3.5
11.4%
7.5%
0.8
4.0
12.3%
7.1%
0.9
3.8
11.7%
9.6%
0.5
4.8
15.0%
9.6%
0.4
4.5
14.5%
9.6%
0.5
4.7
14.8%
9.5%
0.1
4.6
14.3%
9.6%
0.2
4.4
14.2%
9.6%
0.2
4.5
14.2%
9.7%
0.5
4.7
15.0%
9.0%
0.4
4.2
13.6%
9.4%
0.5
4.5
14.5%
(1) Based on reports of sales furnished by mall tenants of all centers reported during that period. Due to the closing of the Starwood sale in October 2014, tenant
sales data for the sale portfolio was excluded from all periods presented.
(2) Amounts in this table may not add due to rounding.
38
Results of Operations
In addition to the results and trends in our operations discussed in the preceding sections, the following sections discuss certain
transactions that affected operations in 2014, 2013, and 2012, or are expected to affect operations in the future.
Dispositions
Sale of Centers to Starwood
In October 2014, we completed the disposition of a portfolio of seven centers (Sale Centers) to Starwood for consideration of
$1.4 billion. A gain of $630 million ($606 million at our beneficial share) was recognized as a result of the transaction, which
represented the excess of the sales price over our book value basis in the centers sold. As part of the sale, we defeased or prepaid
loans including accrued interest, totaling $623 million secured by Northlake Mall, The Mall at Wellington Green, MacArthur
Center, and The Mall at Partridge Creek. See "Note 2 - Dispositions, Acquisitions, and Developments - Dispositions - Sale of
Centers to Starwood" to our consolidated financial statements for further information on the sale.
During 2014, in connection with the sale, we recognized debt extinguishment costs of $36.4 million ($36.0 million at our
beneficial share), and incurred $7.8 million of expenses ($7.4 million at our beneficial share) related to the discontinuation of
hedge accounting on the interest rate swap previously designated to hedge the MacArthur note payable. We also incurred disposition
costs of $3.3 million related to the sale. These costs were classified as Nonoperating Income (Expense) on the Consolidated
Statement of Operations and Comprehensive Income. In addition, we incurred a restructuring charge of $3.7 million related to a
reduction in our workforce as a result of the sale, separately classified as a Restructuring Charge on the Consolidated Statement
of Operations and Comprehensive income. As a result of the sale, we paid a special dividend of $4.75 per share on December 31,
2014 (See "Liquidity and Capital Resources - Dividends").
In 2014, we early adopted Accounting Standards Update (ASU) No. 2014-08, "Reporting Discontinued Operations and
Disclosures of Disposals of Components of an Entity". The operations of the centers sold to Starwood and the gain on disposition
are included in continuing operations pursuant to the application of ASU Update 2014-08.
International Plaza
In January 2014, we sold a total of 49.9% of our interests in the entity that owns International Plaza, including certain governance
rights, for $499 million (excluding transaction costs), which consisted of $337 million of cash and approximately $162 million
of beneficial interest in debt. A gain of $368 million (net of tax of $9.7 million) was recognized on the transaction, which represented
the excess of the sales price over our book basis in the interests sold. Our book basis in the interests was not impacted by the
December 2012 acquisition of an additional interest in the center, which was accounted for as an equity transaction (see Note 2 -
"Dispositions, Acquisitions, and Developments" to our consolidated financial statements). The disposition decreased our ownership
in the center to a noncontrolling 50.1% interest. We now account for our remaining interest in International Plaza under the equity
method of accounting.
Arizona Mills/Oyster Bay
Also in January 2014, we completed the sale of our 50% interest in Arizona Mills, an Unconsolidated Joint Venture, and land
in Syosset, New York related to the former Oyster Bay project, to Simon Property Group (SPG). The consideration, excluding
transaction costs, consisted of $60 million of cash and 555,150 partnership units in Simon Property Group Limited Partnership.
The number of partnership units received was determined based on a value of $154.91 per unit. The number of partnership units
subsequently increased to 590,124, in lieu of our participation in a distribution of certain partnership units of another entity by
SPG and Simon Property Group Limited Partnership. The increase in the number of partnership units was neutral to the market
value of our holdings as of the transaction date. As a result of the sale, we were relieved of our $84 million share of the $167
million mortgage loan outstanding on Arizona Mills at the time of the sale. A gain of $109 million was recognized as a result of
the transaction.
The gains on the dispositions described above are excluded from FFO. See "Use of Non-GAAP Measures" for the definition of
FFO.
39
U.S. Development
In October 2014, The Mall at University Town Center opened in Sarasota, Florida over 90% leased. We expect an 8% to 8.5%
unlevered stabilized return on our share of the approximately $315 million total project cost.
In August 2013, a new outlet center, Taubman Prestige Outlets Chesterfield, opened in the western St. Louis suburb of
Chesterfield, Missouri. In September 2013, we redeemed our outlet joint venture partner's 10% interest in this business, increasing
our ownership to 100%. Also, City Creek Center, a mixed-use project in Salt Lake City, Utah, opened in March 2012.
Our United States development currently includes two projects that are under construction: The Mall of San Juan, which is
scheduled to open in March 2015, and International Market Place. In addition, we are progressing on our project in Miami, Florida.
See "Liquidity and Capital Resources - Capital Spending - New Developments" for more information on these developments.
In 2015, we are expecting approximately $0.08 per share of FFO contribution from The Mall at University Town Center. This
return is expected to be offset by approximately $0.07 of negative FFO from The Mall of San Juan. After considering the impact
of depreciation, these centers will impact net income attributable to common shareholders (EPS) by approximately $(0.23). At
The Mall of San Juan, we expect to be 80% leased at opening, with occupancy building over the months following opening, and
we believe we will have no net operating income from this center in 2015.
U.S. Acquisitions
In December 2012, we acquired an additional 49.9% interest in International Plaza, located in Tampa, Florida, bringing our
ownership in the shopping center to 100%. The $437 million purchase price for the outside partner's interest in the consolidated
joint venture that owns the center consisted of $275 million of cash and approximately $162 million of beneficial interest in debt.
The excess of the purchase price over the net book value of the interest acquired was accounted for as a reduction of additional
paid-in-capital and equity of the noncontrolling partners in TRG. Subsequently, in January 2014, we sold 49.9% of our interests
in the entity that owns the center (See "Results of Operations - Dispositions - International Plaza").
Also in December 2012, we acquired an additional 25% interest in Waterside Shops, which brought our ownership interest in
the center to 50%. The $155 million purchase price for 50% of the center consisted of $72.5 million of cash and $82.5 million of
beneficial interest in debt. Our share of the consideration for the additional interest was $77.5 million, which consisted of cash
and beneficial interest in debt of $36.3 million and $41.3 million, respectively. Our share of the difference between the purchase
price and the net book value of the additional interest in the Unconsolidated Joint Venture was $52.7 million, which was allocated
to land, buildings, improvements, and equipment. Beneficial interest in debt was increased by a $3.9 million purchase accounting
premium to record the debt at fair value. The premium is being amortized as a reduction of interest expense over the remaining
term of the debt and had a $1.8 million balance at December 31, 2014.
Taubman Asia
We currently have two joint ventures with Beijing Wangfujing Department Store (Group) Co., Ltd (Wangfujing), one of China's
largest department store chains. The first joint venture will own a 60% controlling interest in and manage CityOn.Xi'an, an
approximately 1.0 million square foot shopping center to be located at Xi'an Saigao City Plaza, a large-scale mixed-use development
in Xi'an, China. We will beneficially own a 30% interest in CityOn.Xi'an, which is scheduled to open in late 2015. The second
joint venture with Wangfujing owns a majority interest in and will manage a 65% majority interest in CityOn.Zhengzhou, a
shopping center in Zhengzhou, China. We beneficially own a 32% interest in the 1.0 million square foot shopping center, which
is scheduled to open in spring 2016. See "Liquidity and Capital Resources - Capital Spending - New Developments" for more
information on these developments.
40
Also, we have invested in a shopping mall project in Hanam, Gyeonggi Province, South Korea (Hanam Union Square) in which
we have formed a joint venture with Shinsegae Group (Shinsegae), South Korea's largest retailer. In August 2014, Taubman Asia
partnered with a major institution in Asia to acquire an additional interest in the project, bringing our effective ownership to 34.3%
(See "Liquidity and Capital Resources - Capital Spending - New Developments").
In August 2012, IFC Mall opened in Yeouido, South Korea. We provide management and leasing services for the 0.4 million
square foot mall. We recognized the first installment of the leasing success fee in 2011, the second installment in 2012, and the
final installment in September 2013.
We are providing management, leasing, and development services for the retail portion of Studio City, a cinematically-themed
integrated entertainment, retail and gaming resort developed by Melco Crown Entertainment Limited in the Cotai region of Macau,
China. We have no ownership interest in the center.
In November 2012, we sold assets of Taubman TCBL, which eliminated our ownership of the third party business of this
company. The assets were sold for $15.5 million, an amount approximately equal to our investment in Taubman TCBL. The
purchase price was adjusted for certain working capital and other costs. In connection with the sale, we incurred People's Republic
of China (PRC) taxes of $3.2 million.
Center Operations
For the year ended December 31, 2014, NOI excluding lease cancellation income was up 2.7% from 2013. We estimate that
NOI of our comparable centers, excluding lease cancellation income, will be up about 3% in 2015. We expect that this growth
will be driven primarily by increases in minimum rents. See “Results of Operations – Use of Non-GAAP Measures” for the
definition and discussion of NOI and see “Reconciliation of Net Income to Net Operating Income.”
Management, Leasing and Development Services
Net management, leasing, and development income was approximately $6 million in 2014, a decrease from about $11 million
in 2013, largely due to the final leasing fee for IFC Mall recognized in 2013. We expect such income to be about $7 million to
$7.5 million in 2015. See "Taubman Asia" above regarding the IFC Mall service fees, service fees for Studio City and the disposition
of Taubman TCBL's third party business. Our management and leasing services to Woodfield Mall in Schaumburg, Illinois were
terminated in November 2012.
Other Income
We have certain additional sources of income beyond our rental revenues, recoveries from tenants, and revenues from
management, leasing, and development services, as summarized in the following table. Shopping center related revenues include
parking, sponsorship, and other income. Lease cancellation revenue is primarily dependent on the overall economy and performance
of particular retailers in specific locations and can vary significantly. In 2014, our share of lease cancellation income was $10.9
million, an increase of $5.8 million from 2013. Our share of lease cancellation income over the last five years ranged from 2011's
$2.6 million to 2010’s $21.6 million. In 2015, we are currently estimating our share of lease cancellation income to be $3 million
to $4 million.
Gains on peripheral land sales can also vary significantly from year-to-year, depending on the results of negotiations with
potential purchasers of land, as well as the economy and the timing of the transactions. In February 2013, we closed on a peripheral
land sale with a $0.9 million gain. There were no sales of peripheral land in 2014. We are not expecting peripheral land sale gains,
if any, in 2015 to be significant.
41
2014
2013
2012
Consolidated
Businesses
Unconsolidated
Joint Ventures
Consolidated
Businesses
Unconsolidated
Joint Ventures
Consolidated
Businesses
Unconsolidated
Joint Ventures
(Operating Partnership’s share in millions)
22.3
8.6
30.8
$
$
3.9
2.3
6.3
$
$
26.6
$
4.2
30.8
$
3.5
0.8
4.3
$
$
25.7
$
3.3
29.1
$
3.1
0.8
3.8
$
$
$
Other income:
Shopping center related
revenues
Lease cancellation revenue
Nonoperating income
(expense):
Early extinguishment of debt
charge (2)
Discontinuation of hedge
accounting - MacArthur (2)
Disposition costs related to the
Starwood sale (2)
Dividend income
Gain on sale of marketable
securities
Gains on sales of peripheral
land
Interest income
Other nonoperating income
(expense)
(36.0)
(7.4)
(3.3)
2.4
1.4
0.8
$
(42.1)
(1) Amounts in this table may not add due to rounding.
(2) Refer to "Dispositions - Sale of Centers to Starwood" for further details.
Other Expenses
$
$
1.3
0.9
0.2
(1.0)
1.3
$
$
0.3
0.3
During 2014, we incurred $48.3 million of general and administrative expenses. Our 2015 quarterly general and administrative
expense run rate is expected to average between $12 million and $13 million, including both U.S. and Asia costs.
We expense all costs relating to a potential development, including payroll, until it is considered probable the development of
the project will go forward. In 2014, we incurred $4.2 million of pre-development costs. In 2015, we expect pre-development
expense, including that for both the U.S. and Asia, to be in the range of $5 million to $6 million.
In 2013, we began classifying certain Asia expenses in general and administrative expense, as opposed to pre-development
expense. We moved from mainly a pursuit and third party business to one that is primarily executing investments in new projects.
This is consistent with the presentation of our U.S. business.
42
Debt Transactions
A series of debt financings were completed in the three-year period ended December 31, 2014 as follows:
Stated
Interest Rate
Maturity Date(1)
Date
December 2014
International Plaza
TRG primary revolving credit facility (3) November 2014
The Mall of San Juan
April 2014
TRG secondary revolving credit facility
TRG term loan (5)
The Mall at Green Hills
March 2014
November 2013
November 2013
The Mall at University Town Center
October 2013
City Creek Center
July 2013
Initial Loan
Balance/Facility
Amount
(in millions)
$
175
1,100
320 (4)
65
475
150
225
85
LIBOR + 1.75% (2)
LIBOR + 1.15% (3)
LIBOR + 2.00% (4)
LIBOR + 1.40%
LIBOR + 1.35% (5)
LIBOR + 1.60%
LIBOR + 1.70% (6)
4.37%
TRG primary revolving credit facility
February 2013
1,100
LIBOR + 1.45%
Great Lakes Crossing Outlets
Taubman Land Associates
The Mall at Millenia (7)
Sunvalley
Westfarms
TRG secondary revolving credit facility
January 2013
November 2012
October 2012
August 2012
June 2012
April 2012
225
24
350
190
320
65
3.60%
3.84%
4.00%
4.44%
4.50%
LIBOR + 1.40%
December 2021
February 2019
April 2017
April 2016
February 2019
December 2018
October 2016
August 2023
March 2017
January 2023
November 2022
October 2024
September 2022
July 2022
April 2014
(1) Excludes any options to extend the maturities (see the footnotes to our financial statements regarding extension options).
(2) The loan has been swapped to an effective rate of 3.58% through maturity.
(3) The loan includes an accordion feature that would increase the borrowing capacity to as much as $1.5 billion, if fully exercised, subject to obtaining additional
lender commitments, customary closing conditions, and covenant compliance for the unencumbered asset pool. As of December 31, 2014, we could not
fully utilize the accordion feature unless additional assets were added to our unencumbered asset pool. The loan bears interest at a range of LIBOR plus
1.15% to LIBOR plus 1.70% based on our total leverage ratio.
(4) The interest rate may decrease to LIBOR plus 1.75% upon achieving certain performance measures.
(5) The $475 million unsecured term loan includes an accordion feature that would increase the borrowing capacity up to $600 million, if fully exercised. subject
to obtaining additional lender commitments, customary closing conditions, and covenant compliance for the unencumbered asset pool. As of December 31,
2014, we could not fully utilize the accordion feature unless additional assets were added to our unencumbered asset pool. The loan bears interest at a range
of LIBOR plus 1.35% to LIBOR plus 1.90% based on our total leverage ratio. The LIBOR interest rate is swapped to 1.65% until maturity.
(6) The interest rate decreases to LIBOR + 1.60% upon the achievement of certain performance measures.
(7) Since the refinancing of this loan was earlier than allowed under the agreement, the joint venture incurred a $3.2 million defeasance charge, of which $1.6
million was our share.
In October 2014, as part of the sale of centers to Starwood, we prepaid or defeased our then outstanding loans on Northlake
Mall, The Mall at Wellington Green, MacArthur, and The Mall at Partridge Creek. See "Note 2 - Dispositions, Acquisitions, and
Developments - Dispositions - Sale of Centers to Starwood" to our consolidated financial statements for further details.
In January 2014, we used funds from the sale of a total of 49.9% of our interests in the entity that owns International Plaza to
pay down the $99.5 million loan on Stony Point Fashion Park that was scheduled to mature in June 2014 (See "Liquidity and
Capital Resources").
In January 2014, we were relieved of our $84 million share of the $167 million mortgage loan outstanding on Arizona Mills at
the time of the sale.
In November 2013, we used proceeds from the unsecured term loan to pay off the $305 million mortgage payable on Beverly
Center.
In December 2012, our beneficial interest in debt of International Plaza increased by $162 million upon the acquisition of a
49.9% additional interest in this center, but decreased in January 2014 by this same amount upon the disposition of a total of 49.9%
of our interests. As of December 31, 2013, International Plaza was consolidated in our financial statements; therefore, the center's
$325 million mortgage debt was presented at 100% in our consolidated balance sheet as of these dates.
43
Also in December 2012, we assumed $41.3 million of additional beneficial interest in debt as part of our purchase of an additional
25% interest in the Unconsolidated Joint Venture Waterside Shops (see "Results of Operations - U.S. Acquisitions").
Our beneficial share of consolidated and unconsolidated interest expense for 2015 is expected to be between $100 million to
$105 million, which includes the interest expense impacts from the openings of University Town Center and The Mall of San
Juan.
Other Equity Transactions
In September 2013, we began repurchasing common shares under a $200 million share repurchase program. Repurchases of
common stock were financed through general corporate funds, including borrowings under existing revolving lines of credit. As
of December 31, 2014, we repurchased 787,071 shares of our common stock at an average price of $66.45 per share, for a total
of $52.3 million under the authorization. All shares repurchased have been cancelled. For each share of our stock repurchased, an
equal number of our Operating Partnership units were redeemed. As of December 31, 2014, $147.7 million remained of the August
2013 authorization.
In March 2013, we issued 6,800,000 shares or $170 million of 6.25% Series K Cumulative Redeemable Preferred Stock (Series
K Preferred Stock). Offering costs of $5.6 million were incurred in connection with this issuance. Net proceeds after offering costs
of $164.4 million were used to reduce outstanding borrowings under our revolving lines of credit.
In August 2012, we issued 7,700,000 shares or $192.5 million of 6.5% Series J Preferred Stock. Proceeds from the issuance
were used to redeem all of our $100 million 8.00% Series G Preferred Stock and $87 million 7.625% Series H Preferred Stock in
September 2012. We recognized a $6.4 million charge representing the difference in the book values over the redemption amounts
of the Series G and Series H Preferred Stock redeemed.
We sold 2,875,000 of our common shares in August 2012. The proceeds from the offering were used to acquire an equal number
of Operating Partnership units and the Operating Partnership paid all offering costs. The Operating Partnership used the net proceeds
of $208.9 million to reduce outstanding borrowings under our revolving lines of credit.
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 straight-
line adjustments of minimum rent) less maintenance, taxes, utilities, promotion, ground rent (including straight-line adjustments),
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 the following table include the supplemental earnings measures of Beneficial Interest in EBITDA and
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.
44
The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (computed in accordance with
Generally Accepted Accounting Principles (GAAP)), excluding gains (or losses) from extraordinary items and sales of properties
and impairment write-downs of depreciable real estate, 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. In addition to the reasons noted above for each measure, we believe the
disclosure of the adjusted items is similarly useful to investors and others to understand management's view on comparability of
such measures between periods. In 2014, FFO was adjusted for expenses related to the sale of seven centers to Starwood completed
in October 2014. Specifically, these measures were adjusted for the loss on early extinguishment of debt at certain centers sold to
Starwood; charges related to the discontinuation of hedge accounting on the interest rate swap previously designated to hedge the
MacArthur note payable; and a restructuring charge and disposition costs incurred related to the sale. In 2012, FFO was adjusted
for the charge upon redemption of our Series G and H Preferred Stock, the PRC tax on sale of assets of Taubman TCBL, and the
loss on extinguishment of debt related to the refinancing of The Mall at Millenia. FFO was not adjusted in 2013.
Our presentations of NOI, Beneficial Interest in EBITDA, FFO, and adjusted versions of these measures, if any, 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
“Application of Critical Accounting Policies.”
45
Comparison of 2014 to 2013
The following table sets forth operating results for 2014 and 2013, showing the results of the Consolidated Businesses and Unconsolidated
Joint Ventures:
2014
2013
CONSOLIDATED
BUSINESSES
UNCONSOLIDATED
JOINT VENTURES
AT 100%(1)
CONSOLIDATED
BUSINESSES
UNCONSOLIDATED
JOINT VENTURES
AT 100%(1)
(in millions)
REVENUES:
Minimum rents
Percentage rents
Expense recoveries
Management, leasing, and development services
Other
Total revenues
EXPENSES:
Maintenance, taxes, utilities, and promotion
Other operating
Management, leasing, and development services
General and administrative
Restructuring charge
Interest expense
Depreciation and amortization (2)
Total expenses
Nonoperating income (expense) (3)
Income before income tax expense, equity in income of
Unconsolidated Joint Ventures, and gain on dispositions, net of tax
Income tax expense
Equity in income of Unconsolidated Joint Ventures (3)
Gain on dispositions, net of tax (4)
Net income
Net income attributable to noncontrolling interests:
Noncontrolling share of income of consolidated joint ventures
Noncontrolling share of income of TRG
Distributions to participating securities of TRG (5)
Preferred stock dividends
Net income attributable to Taubman Centers, Inc. common
shareowners
SUPPLEMENTAL INFORMATION (6):
EBITDA - 100% (7)
EBITDA - outside partners' share
Beneficial interest in EBITDA (7)
Beneficial share of the gain on dispositions
Beneficial interest expense
Beneficial income tax expense - TRG and TCO
Beneficial income tax expense - TCO
Non-real estate depreciation
Preferred dividends and distributions
Funds from Operations contribution
$
$
$
$
$
$
$
$
$
$
371.5
22.9
239.8
12.3
32.6
679.1
190.1
65.1
6.2
48.3
3.7
90.8
120.2
524.5
(42.8)
111.8
(2.3)
62.0
171.6
1,106.6
1,278.1
(34.2)
(350.9)
(6.0)
(23.1)
863.9
1,439.1
(46.8)
1,392.4
(1,092.9)
(82.7)
(2.3)
0.4
(3.5)
(23.1)
188.3
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
198.0
11.0
118.1
11.0
338.0
84.0
19.1
73.7
49.9
226.7
—
111.3
234.9
(102.2)
132.7
(40.4)
92.2
$
$
$
$
$
$
417.7
28.5
272.5
16.1
32.3
767.2
215.8
71.2
5.3
50.0
130.0
155.8
628.2
1.3
140.3
(3.4)
52.5
189.4
189.4
(10.3)
(46.4)
(1.7)
(20.9)
109.9
426.1
(24.1)
402.0
$
$
(121.4)
(3.4)
0.2
(3.0)
(20.9)
253.5
172.3
10.3
104.2
8.0
294.7
75.0
15.4
67.9
39.3
197.7
—
97.0
204.3
(89.4)
114.9
(37.6)
$
77.4
(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. International Plaza's operations were consolidated through the disposition
date. Subsequent to the disposition, our remaining 50.1% interest is accounted for under the equity method of accounting within Unconsolidated Joint Ventures. In addition, Arizona
Mills' operations were accounted for under equity method accounting through the disposition in January 2014.
(2) Amortization of our additional basis in the Operating Partnership included in depreciation and amortization was $4.7 million in 2014 and $4.9 million in 2013. Also, amortization
of our additional basis included in equity in income of Unconsolidated Joint Ventures was $1.9 million in both 2014 and 2013.
(3) Nonoperating income (expense) for the year ended December 31, 2014 includes $36.4 million for the loss on the early extinguishment of debt, $7.8 million in connection with
the discontinuation of hedge accounting related to the MacArthur interest rate swap, and $3.3 million of disposition costs related to the sale of seven centers to Starwood.
(4) Amount represents the gain on dispositions of interests in International Plaza, Arizona Mills, land in Syosset, New York related to the former Oyster Bay project, and the sale of
centers to Starwood. The gain reported is net of income tax expense of $9.7 million.
(5) During the year ended December 31, 2014, the distributions to participating securities of TRG include the special dividend of $4.75 per deferred unit.
(6)
(7)
See “Results of Operations– Use of Non-GAAP Measures” for the definition and discussion of EBITDA and FFO.
For the year ended December 31, 2014, EBITDA includes our $486.6 million (before tax) gain from the dispositions of interests in International Plaza, Arizona Mills, and land in
Syosset, New York related to the former Oyster Bay project and $629.7 million, $606.2 million at our beneficial share, related to the gain from the sale of centers to Starwood.
(8) Amounts in this table may not add due to rounding.
46
Consolidated Businesses
Total revenues for the year ended December 31, 2014 were $679.1 million, a $88.1 million or 11.5% decrease from 2013.
Minimum rents decreased due to the reclassification of International Plaza into Unconsolidated Joint Ventures, the Starwood sale,
and a decrease in occupancy, partially offset by an increase in average rent per square foot, and the full year's operations of
Chesterfield. Percentage rents decreased due to the reclassification of International Plaza and decreases in tenant sales at various
centers, as well as the Starwood sale. Expense recoveries decreased due to the reclassification of International Plaza, as well as
the Starwood sale, partially offset by Chesterfield and an increase in recoveries for property taxes and other recoverable expenses.
Management, leasing, and development income decreased primarily due to an incentive fee in 2013 for our leasing of IFC Mall
in Seoul, South Korea, as well as decreases in reimbursable costs, partially offset by increases in fees for the Macau contract.
Other income increased as a result of increased lease cancellation revenue, partially offset by the reclassification of International
Plaza and the Starwood sale.
Total expenses were $524.5 million, a $103.7 million or 16.5% decrease from 2013. Maintenance, taxes, utilities, and promotion
expense decreased primarily due to the reclassification of International Plaza and the Starwood sale, partially offset by Chesterfield
and increased snow removal and other maintenance costs at certain centers in 2014. Other operating expense decreased due to a
reduction in pre-development expenses, the reclassification of International Plaza, and the Starwood sale, partially offset by
increased professional services fees, Chesterfield, and increased bad debt expense. General and administrative expense decreased
due to reduced rental expense as a result of the acquisition of our U.S. headquarters building, as well as certain reductions of Asia
administrative expenses. In 2014, we incurred a restructuring charge related to a reduction in our workforce as a result of the
Starwood sale. Interest expense decreased primarily as a result of the reclassification of International Plaza, the Starwood sale,
payoffs of our loans on Beverly Center and Stony Point with lower cost debt, interest capitalization on U.S. development projects,
and the refinancing of the loan at The Mall at Green Hills. These decreases were partially offset by increased interest upon the
opening of Chesterfield. Depreciation expense decreased primarily due to the Starwood sale, as well as the reclassification of
International Plaza, partially offset by Chesterfield.
Net nonoperating income (expense) in 2014 included expenses related to the early extinguishment of debt related to the Starwood
sale, discontinuation of hedge accounting on the interest rate swap previously designated to hedge the MacArthur note payable,
and disposition costs related to the Starwood sale (see "Dispositions - Sale of Centers to Starwood"), offset by distributions on
the SPG partnership units received as a result of the Arizona Mills/Oyster Bay sale. In 2013, nonoperating income included a gain
on sale of marketable securities and the gain on sale of peripheral land.
In 2014, we recognized a $629.7 million gain on the disposition of the sale of centers to Starwood. Also in 2014, we recognized
a $476.9 million gain on the dispositions of a total of 49.9% of our interest in the entity that owns International Plaza as well as
our investments in Arizona Mills and the Oyster Bay land.
In 2014, consolidated non-comparable centers contributed total operating revenues of $136.8 million, and incurred operating
expenses, excluding interest, depreciation, and amortization, of $70.4 million. In 2013, consolidated non-comparable centers
contributed total operating revenues of $173.7 million, and incurred operating expenses, excluding interest expense and
depreciation, of $82.2 million.
Unconsolidated Joint Ventures
Total revenues for the year ended December 31, 2014 were $338.0 million, a $43.3 million or 14.7% increase over 2013.
Minimum rents increased primarily due to the reclassification of International Plaza into Unconsolidated Joint Ventures, an increase
in average rent per square foot, and the opening of University Town Center, partially offset by the sale of Arizona Mills and a
decrease in occupancy. Expense recoveries increased primarily due to the reclassification of International Plaza, University Town
Center, and increases in recoverable expenses and property taxes at certain centers, partially offset by Arizona Mills. Other revenue
increased due to the reclassification of International Plaza as well as increased lease cancellation revenue, partially offset by
Arizona Mills.
Total expenses increased by $29.0 million or 14.7%, to $226.7 million for the year ended December 31, 2014. Maintenance,
taxes, utilities, and promotion expense increased due to the reclassification of International Plaza, University Town Center, and
increased snow removal, utilities, property taxes, and other maintenance costs at certain centers, partially offset by Arizona Mills.
Other operating expense and interest expense both increased primarily due to the reclassification of International Plaza, as well
as University Town Center, partially offset by Arizona Mills. Other operating expense also increased due to increased bad debt
expense. Depreciation expense increased due to the reclassification of International Plaza, as well as University Town Center,
partially offset by Arizona Mills and, in 2013, the depreciation of abandoned fixed assets at certain centers.
47
In 2014, unconsolidated non-comparable centers contributed total operating revenues of $9.9 million, and incurred operating
expenses, excluding interest, depreciation, and amortization, of $3.6 million. In 2013, unconsolidated non-comparable centers
contributed total operating revenues of $40.8 million, and incurred operating expenses, excluding interest expense and depreciation,
of $13.1 million.
As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by $14.3 million to $111.3 million. Our
equity in income of the Unconsolidated Joint Ventures was $62.0 million, a $9.5 million increase from 2013.
Net Income
Net income increased by $1.1 billion for the year ended December 31, 2014. After allocation of income to noncontrolling,
preferred, and participating interests, the net income attributable to common shareowners for 2014 was $863.9 million compared
to $109.9 million in 2013.
FFO and FFO per Share
Our FFO was $280.5 million for 2014 compared to $330.8 million for 2013. FFO per diluted share was $3.11 in 2014 compared
to $3.65 in 2013. Adjusted FFO in 2014, which excludes the loss on early extinguishment of debt, charges related to the
discontinuation of hedge accounting on the MacArthur interest rate swap, and a restructuring charge and disposition costs incurred
as a result of the sale of centers, was $330.8 million. See “Results of Operations – 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.”
48
Comparison of 2013 to 2012
The following table sets forth operating results for 2013 and 2012, showing the results of the Consolidated Businesses and
Unconsolidated Joint Ventures:
2013
2012
CONSOLIDATED
BUSINESSES
UNCONSOLIDATED
JOINT VENTURES
AT 100%(1)
CONSOLIDATED
BUSINESSES
UNCONSOLIDATED
JOINT VENTURES
AT 100%(1)
(in millions)
REVENUES:
Minimum rents
Percentage rents
Expense recoveries
Management, leasing, and development services
Other
Total revenues
EXPENSES:
Maintenance, taxes, utilities, and promotion
Other operating
Management, leasing, and development services
General and administrative
Interest expense (2)
Depreciation and amortization (3)
Total expenses
Nonoperating income (expense)
Income before income tax expense and equity in income of
Unconsolidated Joint Ventures
Income tax expense (4)
Equity in income of Unconsolidated Joint Ventures (3)
Net income
Net income attributable to noncontrolling interests:
Noncontrolling share of income of consolidated joint ventures
Noncontrolling share of income of TRG
Distributions to participating securities of TRG
Preferred stock dividends (5)
Net income attributable to Taubman Centers, Inc. common
shareowners
SUPPLEMENTAL INFORMATION (6):
EBITDA - 100%
EBITDA - outside partners' share
Beneficial interest in EBITDA
Beneficial interest expense (2)
Beneficial income tax expense - TRG and TCO
Beneficial income tax expense - TCO
Non-real estate depreciation
Preferred dividends and distributions (5)
Funds from Operations contribution
$
$
$
$
$
$
$
$
$
$
417.7
28.5
272.5
16.1
32.3
767.2
215.8
71.2
5.3
50.0
130.0
155.8
628.2
1.3
140.3
(3.4)
52.5
189.4
(10.3)
(46.4)
(1.7)
(20.9)
109.9
426.1
(24.1)
402.0
(121.4)
(3.4)
0.2
(3.0)
(20.9)
253.5
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
172.3
10.3
104.2
8.0
294.7
75.0
15.4
67.9
39.3
197.7
—
97.0
204.3
(89.4)
114.9
(37.6)
77.4
$
398.3
28.0
258.3
31.8
31.6
748.0
201.6
73.2
27.4
39.7
142.6
149.5
634.0
0.3
114.3
(5.0)
48.5
157.8
(11.9)
(39.7)
(1.6)
(21.1)
83.5
406.4
(38.3)
368.2
(126.0)
(4.9)
(2.7)
(21.1)
213.5
$
$
$
$
$
$
$
$
161.8
10.7
102.5
7.1
282.1
73.0
14.9
68.8
38.3
195.0
—
87.2
194.3
(87.2)
107.0
(35.9)
71.2
(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.
Includes a charge related to the early extinguishment of debt at The Mall at Millenia in October 2012 of $3.2 million, of which TRG's share is $1.6 million.
(2)
(3) Amortization of our additional basis in the Operating Partnership included in depreciation and amortization was $4.9 million in both 2013 and 2012. Also, amortization of our
additional basis included in equity in income of Unconsolidated Joint Ventures was $1.9 million in both 2013 and 2012.
Income tax expense for 2012 includes PRC taxes of $3.2 million on the sale of Taubman TCBL assets.
See "Results of Operations - Other Equity Transactions" for information regarding the Preferred Stock that was redeemed during 2012.
See “Results of Operations– Use of Non-GAAP Measures” for the definition and discussion of EBITDA and FFO.
(4)
(5)
(6)
(7) Amounts in this table may not add due to rounding.
49
Consolidated Businesses
Total revenues for the year ended December 31, 2013 were $767.2 million, a $19.2 million or 2.6% increase over 2012. Minimum
rents increased primarily due to increases in average rent per square foot and average occupancy, as well as City Creek and
Chesterfield. Expense recoveries increased primarily due to an increase in recoverable property taxes, an increase in fixed CAM
revenue, and City Creek and Chesterfield. Management, leasing, and development revenue decreased primarily due to the
elimination of the third party business of Taubman TCBL, the loss of the Woodfield Mall contract, and a decrease in reimbursable
costs, partially offset by our final leasing success fee for our leasing of IFC Mall in Seoul, South Korea and our services for Studio
City in the Cotai region of Macau, China.
Total expenses were $628.2 million, a $5.8 million or 0.9% decrease from 2012. Maintenance, taxes, utilities, and promotion
expense increased due to increased property taxes and maintenance costs at certain centers, as well as City Creek and Chesterfield.
Other operating expense decreased due to the reclassification of certain Asia costs to general and administrative expense (see
"Results of Options - Taubman Asia"), partially offset by an increase in pre-development expense and City Creek and Chesterfield.
Management, leasing and development expenses decreased primarily due to the elimination of the third party business of Taubman
TCBL, the loss of the Woodfield Mall contract, and a decrease in reimbursable costs. General and administrative expense increased
due to the reclassification of certain Asia costs to general and administrative expense. Interest expense decreased due to the 2012
and the 2013 equity offerings, capitalization of U.S. and Asia development projects, the payoff of the Beverly Center loan, and
the refinancing of our loan on The Mall at Green Hills. These decreases in interest expense were partially offset by interest on
borrowings for our acquisitions, the financing of City Creek Center, and the write-off of original deferred financing costs upon
the refinancing of our primary revolving line of credit. Depreciation expense increased primarily due to write-offs of fixed assets
at certain centers and changes in depreciable lives of tenant allowances in connection with early terminations.
In 2013, City Creek and Chesterfield contributed total operating revenues of $28.7 million, and incurred operating expenses,
excluding interest, depreciation, and amortization, of $18.4 million. In 2012, City Creek and Chesterfield contributed total operating
revenues of $19.7 million, and incurred operating expenses of $11.4 million.
Nonoperating income increased by $1.0 million in 2013 due to a gain on the sale of marketable securities as well as a gain on
the sale of peripheral land, and was offset by an increase in nonoperating expenses primarily related to the 2014 dispositions of
Arizona Mills and interests in International Plaza. Income tax expense decreased primarily as a result of the nonrecurring PRC
tax on sale of assets of Taubman TCBL in 2012.
Unconsolidated Joint Ventures
Total revenues for the year ended December 31, 2013 were $294.7 million, a $12.6 million or 4.5% increase from 2012. Minimum
rents increased primarily due to increased average rent per square foot partially offset by a decrease in average occupancy. Expense
recoveries increased due to increased recoverable property taxes and increased fixed CAM revenue.
Total expenses increased by $2.7 million or 1.4%, to $197.7 million for the year ended December 31, 2013. Maintenance, taxes,
utilities, and promotion expense increased primarily due to increased property taxes and electricity costs at certain centers. Interest
expense decreased due to the October 2012 refinancing of The Mall at Millenia which included the charge on the early
extinguishment of its debt, as well as the amortization of the Waterside Shops purchase accounting premium to record the debt at
fair value, offset by the refinancings of Westfarms and Sunvalley with larger loan amounts in 2012. Depreciation expense increased
primarily due to the depreciation of abandoned fixed assets at certain centers and the acquisition of the additional interest in
Waterside Shops.
As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by $9.8 million to $97.0 million. Our equity
in income of the Unconsolidated Joint Ventures was $52.5 million, a $4.0 million increase from 2012.
Net Income
Net income increased by $31.6 million for the year ended December 31, 2013. After allocation of income to noncontrolling,
preferred, and participating interests, the net income attributable to common shareowners for 2013 was $109.9 million compared
to $83.5 million in 2012.
50
FFO and FFO per Share
Our FFO was $330.8 million for 2013 compared to $284.7 million for 2012. FFO per diluted share was $3.65 in 2013 compared
to $3.21 in 2012. Adjusted FFO in 2012, which excludes charges upon redemption of the Series G and H Preferred Stock, the PRC
tax on sale of assets of Taubman TCBL, and the loss on extinguishment of debt related to The Mall at Millenia refinancing was
$295.8 million. See “Results of Operations – 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.”
Application of Critical Accounting Policies
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions
require application of difficult, subjective, and/or complex judgment, often about the effect of matters that are inherently uncertain
and that may change in subsequent periods. We are required to make such estimates and assumptions when applying the following
accounting policies.
Valuation of Shopping Centers
The viability of all projects under construction or development, including those owned by Unconsolidated Joint Ventures, are
regularly evaluated under applicable accounting requirements, including requirements relating to abandonment of assets or changes
in use. To the extent a project, or individual components of the project, are no longer considered to have value, the related capitalized
costs are charged against operations. Additionally, all properties are reviewed for impairment on an individual basis whenever
events or changes in circumstances indicate that their carrying value may not be recoverable. Impairment of a shopping center
owned by consolidated entities is recognized when the sum of expected cash flows (undiscounted and without interest charges)
is less than the carrying value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint
Venture is recognized when the carrying value is not considered recoverable based on evaluation of the severity and duration of
the decline in value, including the results of discounted cash flow and other valuation techniques. The expected cash flows of a
shopping center are dependent on estimates and other factors subject to change, including (1) changes in the national, regional,
global, and/or local economic climates, (2) competition from other shopping centers, stores, clubs, mailings, and the internet,
(3) increases in operating costs, (4) bankruptcy and/or other changes in the condition of third parties, including anchors and tenants,
(5) expected holding period, and (6) availability of and cost of financing. These factors could cause our expected future cash flows
from a shopping center to change, and, as a result, an impairment could be considered to have occurred. To the extent impairment
has occurred, the excess carrying value of the asset over its estimated fair value is charged to income.
No impairment charges were recognized in 2014, 2013 or 2012. As of December 31, 2014, the consolidated net book value of
our properties was $2.3 billion, representing approximately 71% of our consolidated assets. We also have varying ownership
percentages in the properties of Unconsolidated Joint Ventures with a total combined net book value of $1.0 billion. These amounts
include certain development costs that are described in the policy that follows.
Capitalization of Development Costs
In developing shopping centers, we typically obtain land or land options, zoning and regulatory approvals, anchor commitments,
and financing arrangements during a process that may take several years and during which we may incur significant costs. We
capitalize all development costs once it is considered probable that a project will reach a successful conclusion. Prior to this time,
we expense all costs relating to a potential development, including payroll, and include these costs in Funds from Operations (see
"Results of Operations – Use of Non-GAAP Measures").
On an ongoing basis, we continue to assess the probability of a project going forward and whether the asset is impaired. In
addition, we also assess whether there are sufficient substantive development activities in a given period to support the capitalization
of carrying costs, including interest capitalization.
Direct and indirect costs that are clearly related to the acquisition, development, construction, and improvement of properties
are capitalized. Compensation costs are allocated based on actual time spent on a project. Costs incurred on real estate for ground
leases, property taxes, insurance, and interest costs for qualifying assets are capitalized during periods in which activities necessary
to get the property ready for its intended use are in progress.
51
Many factors in the development of a shopping center are beyond our control, including (1) changes in the national, regional,
global, and/or local economic climates, (2) competition from other shopping centers, stores, clubs, mailings, and the Internet,
(3) availability and cost of financing, (4) changes in regulations, laws, and zoning, and (5) decisions made by third parties, including
anchors. These factors could cause our assessment of the probability of a development project reaching a successful conclusion
to change. If a project subsequently was considered less than probable of reaching a successful conclusion, a charge against
operations for previously capitalized development costs would occur.
As of December 31, 2014, our beneficial interest in construction work in process was $746.5 million, primarily representing
our share of capitalized project costs for our current U.S. and Asia development projects and ongoing redevelopments at certain
operating centers (See "Liquidity and Capital Resources - Capital Spending").
Pre-development charges in 2014, 2013, and 2012 were $4.2 million, $10.6 million, and $18.4 million, respectively. Of these
amounts, $0.7 million, $1.0 million, and $0.2 million related to projects with land under option in each of the respective periods.
We capitalized payroll costs of $14.0 million in connection with construction and development projects in 2014, $13.8 million
in 2013, and $5.9 million in 2012.
New Accounting Pronouncement
Refer to "Note 21 - New Accounting Pronouncement" in the consolidated financial statements, regarding our ongoing evaluation
of the recently issued Accounting Standards Update addressing revenue recognition, to be adopted in 2017.
52
t
i
n
U
s
t
i
n
U
/
e
r
a
h
S
r
e
P
/
s
e
r
a
h
S
d
e
t
u
l
i
D
n
i
s
r
a
l
l
o
D
s
n
o
i
l
l
i
m
/
e
r
a
h
S
r
e
P
t
i
n
U
d
e
t
u
l
i
D
s
t
i
n
U
/
s
e
r
a
h
S
n
i
s
r
a
l
l
o
D
s
n
o
i
l
l
i
m
/
e
r
a
h
S
r
e
P
t
i
n
U
d
e
t
u
l
i
D
s
t
i
n
U
/
s
e
r
a
h
S
n
i
s
r
a
l
l
o
D
s
n
o
i
l
l
i
m
2
1
0
2
3
1
0
2
4
1
0
2
9
3
.
1
$
5
5
4
,
4
8
8
,
9
5
5
.
3
8
$
3
7
.
1
$
3
2
5
,
1
9
5
,
3
6
9
.
9
0
1
$
5
6
.
3
1
$
0
0
8
,
7
6
2
,
3
6
9
.
3
6
8
7
3
.
1
1
1
.
0
$
4
4
4
,
6
7
3
,
1
6
9
8
9
,
1
9
4
,
1
7
.
0
2
.
4
8
9
.
6
$
1
7
.
1
1
1
.
0
—
9
8
8
,
3
8
9
5
.
0
2
6
2
,
1
7
8
2
0
0
,
2
8
7
$
2
1
4
,
5
7
5
,
4
6
4
.
0
1
1
$
7
4
.
3
1
$
4
6
0
,
1
2
9
,
4
6
9
.
6
2
.
0
0
1
.
0
8
1
.
0
1
0
.
0
0
.
6
9
.
4
7
.
6
9
.
1
1
4
.
0
8
.
4
7
8
$
$
8
4
.
1
$
4
4
4
,
6
7
3
,
1
6
1
.
1
9
$
2
8
.
1
$
2
1
4
,
5
7
5
,
4
6
5
.
7
1
1
$
7
7
.
3
1
$
4
6
0
,
1
2
9
,
4
6
7
.
3
9
8
$
2
6
2
,
1
7
8
1
0
8
,
1
2
4
,
6
2
6
.
1
7
.
9
3
2
6
2
,
1
7
8
3
8
4
,
1
3
2
,
5
2
7
.
1
4
.
6
4
2
4
0
,
1
4
1
,
5
2
9
.
0
5
3
d
n
a
s
m
e
t
i
s
i
s
a
b
l
a
n
o
i
t
i
d
d
a
O
C
T
g
n
i
d
u
l
c
x
e
,
s
r
e
n
w
o
e
r
a
h
s
n
o
m
m
o
c
O
C
T
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
m
o
c
n
i
t
e
N
G
R
T
f
o
s
e
i
t
i
r
u
c
e
s
g
n
i
t
a
p
i
c
i
t
r
a
p
o
t
s
n
o
i
t
u
b
i
r
t
s
i
D
G
R
T
f
o
e
m
o
c
n
i
f
o
e
r
a
h
s
g
n
i
l
l
o
r
t
n
o
c
n
o
: N
d
d
A
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
i
l
a
n
o
i
t
i
d
d
a
c
i
s
a
B
-
s
r
e
n
w
o
e
r
a
h
s
n
o
m
m
o
c
O
C
T
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
m
o
c
n
i
t
e
N
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
s
f
o
t
c
a
p
m
i
d
d
A
s
e
i
t
i
r
u
c
e
s
g
n
i
t
a
p
i
c
i
t
r
a
p
o
t
s
n
o
i
t
u
b
i
r
t
s
i
D
d
e
t
u
l
i
D
-
s
r
e
n
w
o
e
r
a
h
s
n
o
m
m
o
c
O
C
T
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
m
o
c
n
i
t
e
N
d
e
s
o
p
s
i
d
s
t
e
s
s
a
n
i
s
i
s
a
b
l
a
n
o
i
t
i
d
d
a
'
s
O
C
T
d
d
A
s
i
s
a
b
l
a
n
o
i
t
i
d
d
a
s
’
O
C
T
f
o
n
o
i
t
a
i
c
e
r
p
e
d
d
d
A
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
i
l
a
n
o
i
t
i
d
d
a
'
s
O
C
T
d
d
A
9
4
.
1
$
7
0
5
,
9
6
6
,
8
8
4
.
2
3
1
$
3
8
.
1
$
7
5
1
,
8
7
6
,
0
9
6
.
5
6
1
$
2
8
.
3
1
$
6
0
1
,
2
6
0
,
0
9
6
.
4
4
2
,
1
$
s
e
i
t
i
r
u
c
e
s
g
n
i
t
a
p
i
c
i
t
r
a
p
d
n
a
s
r
e
d
l
o
h
t
i
n
u
p
i
h
s
r
e
n
t
r
a
p
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
m
o
c
n
i
t
e
N
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
d
e
t
s
u
j
d
A
d
n
a
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
o
t
s
r
e
n
w
o
e
r
a
h
S
n
o
m
m
o
C
.
c
n
I
,
s
r
e
t
n
e
C
n
a
m
b
u
a
T
o
t
e
l
b
a
t
u
b
i
r
t
t
A
e
m
o
c
n
I
t
e
N
f
o
n
o
i
t
a
i
l
i
c
n
o
c
e
R
9
6
.
1
)
8
0
.
0
(
)
1
1
.
0
(
6
2
.
0
)
3
0
.
0
(
)
1
0
.
0
(
1
2
.
3
1
2
.
3
1
2
.
3
2
0
.
0
7
0
.
0
4
0
.
0
4
3
.
3
$
7
0
5
,
9
6
6
,
8
8
$
$
7
0
5
,
9
6
6
,
8
8
$
7
0
5
,
9
6
6
,
8
8
4
3
.
3
$
)
9
.
6
(
)
7
.
9
(
)
7
.
2
(
7
.
2
2
5
.
9
4
1
)
7
.
0
(
7
.
4
8
2
%
4
.
9
6
7
.
7
9
1
7
.
7
9
1
6
.
1
7
.
4
8
2
4
.
6
2
.
3
%
4
.
9
6
8
.
5
9
2
4
.
5
0
2
4
.
5
0
2
$
$
$
$
$
$
$
2
7
.
1
)
8
0
.
0
(
)
6
0
.
0
(
7
2
.
0
)
3
0
.
0
(
)
1
0
.
0
(
5
6
.
3
—
5
6
.
3
5
6
.
3
5
6
.
3
5
6
.
3
—
5
6
.
3
5
6
.
3
$
$
$
$
$
$
$
7
5
1
,
8
7
6
,
0
9
)
9
.
6
(
)
1
.
5
(
)
0
.
3
(
9
.
4
2
8
.
5
5
1
%
6
.
1
7
)
5
.
0
(
8
.
0
3
3
)
2
.
0
(
8
.
6
3
2
7
.
6
3
2
7
5
1
,
8
7
6
,
0
9
8
.
0
3
3
7
5
1
,
8
7
6
,
0
9
%
6
.
1
7
8
.
0
3
3
)
2
.
0
(
8
.
6
3
2
7
.
6
3
2
$
$
$
$
$
$
$
3
3
.
1
)
7
0
.
0
(
)
5
0
.
0
(
4
3
.
0
)
4
0
.
0
(
)
3
1
.
0
(
)
5
0
.
0
(
1
1
.
3
)
3
0
.
2
1
(
—
1
1
.
3
1
1
.
3
1
1
.
3
0
4
.
0
4
0
.
0
8
0
.
0
4
0
.
0
7
6
.
3
—
7
6
.
3
7
6
.
3
$
$
$
$
$
$
$
6
0
1
,
2
6
0
,
0
9
6
0
1
,
2
6
0
,
0
9
6
0
1
,
2
6
0
,
0
9
)
7
.
6
(
)
4
.
4
(
)
5
.
3
(
2
.
0
3
)
9
.
1
1
(
2
.
0
2
1
)
1
.
3
8
0
,
1
(
%
6
.
1
7
)
9
.
4
(
5
.
0
8
2
)
4
.
0
(
7
.
0
0
2
4
.
0
0
2
3
.
3
4
.
7
7
.
3
0
.
6
3
5
.
0
8
2
%
6
.
1
7
8
.
0
3
3
)
4
.
0
(
8
.
6
3
2
4
.
6
3
2
$
$
$
$
$
$
$
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
i
l
a
n
o
i
t
i
d
d
a
g
n
i
d
u
l
c
x
e
,
O
C
T
o
t
e
l
b
a
t
u
b
i
r
t
t
a
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
i
l
a
n
o
i
t
i
d
d
a
'
s
O
C
T
s
s
e
L
O
C
T
o
t
e
l
b
a
t
u
b
i
r
t
t
a
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
r
u
h
t
r
A
c
a
M
-
g
n
i
t
n
u
o
c
c
a
e
g
d
e
h
f
o
n
o
i
t
a
u
n
i
t
n
o
c
s
i
d
f
o
e
r
a
h
s
l
a
i
c
i
f
e
n
e
B
e
l
a
s
d
o
o
w
r
a
t
S
e
h
t
o
t
d
e
t
a
l
e
r
s
t
s
o
c
n
o
i
t
i
s
o
p
s
i
d
f
o
e
r
a
h
s
l
a
i
c
i
f
e
n
e
B
)
2
(
e
g
r
a
h
c
t
b
e
d
f
o
t
n
e
m
h
s
i
u
g
n
i
t
x
e
y
l
r
a
e
f
o
e
r
a
h
s
l
a
i
c
i
f
e
n
e
B
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
s
e
g
r
a
h
c
n
o
i
t
p
m
e
d
e
r
k
c
o
t
S
d
e
r
r
e
f
e
r
P
H
d
n
a
G
s
e
i
r
e
S
s
t
e
s
s
a
L
B
C
T
n
a
m
b
u
a
T
f
o
e
l
a
s
n
o
s
e
x
a
t
C
R
P
G
R
T
f
o
e
g
a
t
n
e
c
r
e
p
p
i
h
s
r
e
n
w
o
e
g
a
r
e
v
a
'
s
O
C
T
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
d
e
t
s
u
j
d
A
e
g
r
a
h
c
g
n
i
r
u
t
c
u
r
t
s
e
R
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
i
l
a
n
o
i
t
i
d
d
a
g
n
i
d
u
l
c
x
e
,
O
C
T
o
t
e
l
b
a
t
u
b
i
r
t
t
a
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
d
e
t
s
u
j
d
A
O
C
T
o
t
e
l
b
a
t
u
b
i
r
t
t
a
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
d
e
t
s
u
j
d
A
e
s
n
e
p
x
e
x
a
t
e
m
o
c
n
i
l
a
n
o
i
t
i
d
d
a
'
s
O
C
T
s
s
e
L
s
e
r
u
t
n
e
v
t
n
i
o
j
d
e
t
a
d
i
l
o
s
n
o
c
n
i
s
r
e
n
t
r
a
p
g
n
i
l
l
o
r
t
n
o
c
n
o
N
s
i
s
a
b
l
a
n
o
i
t
i
d
d
a
s
’
O
C
T
f
o
n
o
i
t
a
i
c
e
r
p
e
D
%
0
0
1
t
a
s
e
s
s
e
n
i
s
u
b
d
e
t
a
d
i
l
o
s
n
o
C
:
)
1
(
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
i
c
e
r
p
e
d
)
s
s
e
l
(
d
d
A
s
e
r
u
t
n
e
V
t
n
i
o
J
d
e
t
a
d
i
l
o
s
n
o
c
n
U
f
o
e
r
a
h
S
n
o
i
t
a
i
c
e
r
p
e
d
e
t
a
t
s
e
l
a
e
r
-
n
o
N
d
e
s
o
p
s
i
d
s
t
e
s
s
a
n
i
s
i
s
a
b
l
a
n
o
i
t
i
d
d
a
'
s
O
C
T
s
s
e
L
s
n
o
i
t
i
s
o
p
s
i
d
n
o
n
i
a
g
f
o
e
r
a
h
s
l
a
i
c
i
f
e
n
e
b
s
s
e
L
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
s
f
o
t
c
a
p
m
i
s
s
e
L
G
R
T
f
o
e
g
a
t
n
e
c
r
e
p
p
i
h
s
r
e
n
w
o
e
g
a
r
e
v
a
'
s
O
C
T
s
n
o
i
t
a
r
e
p
O
m
o
r
f
s
d
n
u
F
2
1
0
2
.
d
o
o
w
r
a
t
S
o
t
s
r
e
t
n
e
c
f
o
e
l
a
s
e
h
t
f
o
t
l
u
s
e
r
a
s
a
k
e
e
r
C
e
g
d
i
r
t
r
a
P
t
a
l
l
a
M
e
h
t
d
n
a
,
r
u
h
t
r
A
c
a
M
,
n
e
e
r
G
n
o
t
g
n
i
l
l
e
W
t
a
l
l
a
M
e
h
T
,
l
l
a
M
e
k
a
l
h
t
r
o
N
n
o
s
n
a
o
l
o
t
d
e
t
a
l
e
r
t
b
e
d
f
o
t
n
e
m
h
s
i
u
g
n
i
t
x
e
y
l
r
a
e
n
o
s
s
o
l
e
h
t
o
t
d
e
t
a
l
e
r
s
e
g
r
a
h
c
s
e
d
u
l
c
n
i
t
n
u
o
m
a
4
1
0
2
.
y
l
e
v
i
t
c
e
p
s
e
r
,
2
1
0
2
d
n
a
,
3
1
0
2
,
4
1
0
2
e
h
t
r
o
f
n
o
i
t
a
z
i
t
r
o
m
a
e
c
n
a
w
o
l
l
a
t
n
a
n
e
t
l
l
a
m
f
o
n
o
i
l
l
i
m
7
.
3
2
$
d
n
a
,
n
o
i
l
l
i
m
4
.
3
2
$
,
n
o
i
l
l
i
m
4
.
9
1
$
s
e
d
u
l
c
n
i
n
o
i
t
a
i
c
e
r
p
e
D
)
1
(
)
2
(
.
a
i
n
e
l
l
i
M
t
a
l
l
a
M
e
h
T
n
o
t
b
e
d
f
o
t
n
e
m
h
s
i
u
g
n
i
t
x
e
y
l
r
a
e
e
h
t
o
t
d
e
t
a
l
e
r
s
e
g
r
a
h
c
s
e
d
u
l
c
n
i
t
n
u
o
m
a
.
g
n
i
d
n
u
o
r
o
t
e
u
d
e
t
a
l
u
c
l
a
c
e
r
t
o
n
y
a
m
e
l
b
a
t
s
i
h
t
n
i
s
t
n
u
o
m
A
)
3
(
3
5
Reconciliation of Net Income to Beneficial Interest in EBITDA
Net income
Add (less) depreciation and amortization:
Consolidated businesses at 100%
Noncontrolling partners in consolidated joint ventures
Share of Unconsolidated Joint Ventures
Add (less) interest expense and income tax expense:
Interest expense:
Consolidated businesses at 100%
Noncontrolling partners in consolidated joint ventures
Share of unconsolidated joint ventures
Share of income tax expense:
Income tax expense on dispositions of International Plaza, Arizona Mills,
and Oyster Bay
Other income tax expense (1)
Less noncontrolling share of income of consolidated joint ventures
2014
2013
2012
(in millions, except as indicated)
$
1,278.1
$
189.4
$
157.8
120.2
(4.4)
30.2
90.8
(8.1)
40.4
9.7
2.3
(34.2)
155.8
(5.1)
24.9
130.0
(8.7)
37.6
149.5
(9.7)
22.7
142.6
(16.6)
35.9
3.4
(10.3)
4.9
(11.9)
Beneficial interest in EBITDA
$
1,525.0
$
516.9
$
475.2
Add TCO's additional basis in assets disposed
11.9
Beneficial interest in EBITDA, before additional basis in assets disposed
$
1,536.9
$
516.9
$
475.2
TCO’s average ownership percentage of TRG
71.6%
71.6%
69.4%
Beneficial interest in EBITDA attributable to TCO, before additional basis in
assets disposed
$
1,099.8
$
370.1
$
329.9
Less TCO's additional basis in assets disposed
(11.9)
Beneficial interest in EBITDA attributable to TCO
$
1,087.9
$
370.1
$
329.9
(1) Income tax expense for 2012 includes $3.2 million of PRC taxes in connection with the sale of assets of the Taubman TCBL business.
(2) Amounts in this table may not add due to rounding.
54
Reconciliation of Net Income to Net Operating Income
Net income
Add (less) depreciation and amortization:
Consolidated businesses at 100%
Noncontrolling partners in consolidated joint ventures
Share of Unconsolidated Joint Ventures
Add (less) interest expense and income tax expense:
Interest expense:
Consolidated businesses at 100%
Noncontrolling partners in consolidated joint ventures
Share of Unconsolidated Joint Ventures
Share of income tax expense:
Income tax expense on dispositions of International Plaza, Arizona Mills, and
Oyster Bay
Other income tax expense (1)
2014
2013
(in millions)
2012
$
1,278.1
$
189.4
$
157.8
120.2
(4.4)
30.2
90.8
(8.1)
40.4
9.7
2.3
155.8
(5.1)
24.9
130.0
(8.7)
37.6
149.5
(9.7)
22.7
142.6
(16.6)
35.9
3.4
4.9
Less noncontrolling share of income of consolidated joint ventures
(34.2)
(10.3)
(11.9)
Add EBITDA attributable to outside partners:
EBITDA attributable to noncontrolling partners in consolidated joint ventures
EBITDA attributable to outside partners in Unconsolidated Joint Ventures
46.8
102.2
24.1
89.4
38.3
87.2
EBITDA at 100%
$
1,674.0
$
630.4
$
600.7
Add (less) items excluded from shopping center Net Operating Income:
General and administrative expenses
Management, leasing, and development services, net
Straight-line of rents
Gain on dispositions
Early extinguishment of debt charge
Discontinuation of hedge accounting - MacArthur
Restructuring charge
Disposition costs related to the Starwood sale
Gain on sale of peripheral land
Gain on sale of marketable securities
Dividend income
Interest income
Other nonoperating expense (income)
Non-center specific operating expenses and other
Net Operating Income at 100% - all centers
Less - Net Operating Income of non-comparable centers (2)
Net Operating Income at 100% - comparable centers
Lease cancellation income
Net Operating Income at 100% - comparable centers excluding lease cancellation
income (3)
$
$
$
48.3
(6.1)
(5.4)
(1,116.3)
36.4
7.8
3.7
3.3
(2.4)
(1.4)
(0.8)
19.9
660.9
(72.3)
588.6
(12.6)
$
$
50.0
(10.8)
(7.3)
39.7
(4.4)
(6.5)
(0.9)
(1.3)
(0.2)
1.0
24.4
685.3
(119.3)
566.0
(5.3)
$
$
(0.3)
31.4
660.5
(8.0)
652.5
(4.9)
576.1
$
560.7
$
647.6
(1)
(2)
Income tax expense for 2012 includes $3.2 million of PRC taxes in connection with the sale of assets of the Taubman TCBL business.
Includes The Mall at University Town Center, Taubman Prestige Outlets Chesterfield, Arizona Mills, and the Sale Centers in 2014. Includes City Creek
Center and Taubman Prestige Outlets Chesterfield for 2013. Includes City Creek Center for 2012.
(3) See "Results of Operations - Use of Non-GAAP Measures" for a discussion of the use and utility of Net Operating Income excluding lease cancellation
income as a performance measure.
(4) Amounts in this table may not add due to rounding.
55
Liquidity and Capital Resources
General
Our internally generated funds and distributions from operating centers and other investing activities, augmented by use of our
existing revolving 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 or near maturity and funding major capital
investments. From time to time, we also may access the equity markets or sell interests in operating properties to raise additional
funds or refinance existing obligations on a strategic basis.
Property Encumbrances
We are primarily financed with property-specific secured debt and currently have five unencumbered center properties. The
entities that own Beverly Center, Dolphin Mall, and Twelve Oaks Mall are guarantors under our unsecured primary revolving
credit facility and unsecured term loan and are unencumbered assets under the facility and term loan. Any of the assets may be
removed from the facility unencumbered asset pool and encumbered upon notice to lender that there is no default and the required
covenant calculations are met on a pro forma basis. Additionally, besides the three centers previously noted, Chesterfield and
Stamford Town Center, a 50% owned Unconsolidated Joint Venture property, are unencumbered.
Cash and Revolving Lines of Credit
As of December 31, 2014, we had a consolidated cash balance of $276.4 million. We also have an unsecured revolving line of
credit of $1.1 billion and a secured revolving line of credit of $65 million. The availability under these facilities as of December 31,
2014, after considering then outstanding loan balances and outstanding letters of credit, was $1.161 billion. Seventeen banks
participate in our $1.1 billion revolving 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. The unsecured line includes an accordion feature that would increase
the borrowing capacity to as much as $1.5 billion if fully exercised, subject to obtaining additional lender commitments, customary
closing conditions, and covenant compliance for the unencumbered asset pool. As of December 31, 2014, we could not fully utilize
the accordion feature unless additional assets were added to our unencumbered asset pool. In November 2014, we amended our
primary revolving line of credit. The line now matures in February 2019, with a one-year extension option. The amended agreement
provides for a lower credit spread and facility fees that will vary based on our total leverage ratio. As of December 31, 2014, the
leverage ratio resulted in a rate of LIBOR plus 1.15%.
During the second half of 2015, we expect to complete a refinancing of the loan on The Mall at Short Hills. The existing $540.0
million, 5.47% fixed rate loan is scheduled to mature in December 2015 and is prepayable without penalty in September 2015.
Also in 2015, we expect to complete a refinancing of the U.S headquarters building loan. The existing $17.3 million, 5.9% fixed
rate loan is scheduled to mature in April 2015.
The $15.9 million, 4.42% fixed rate loan on El Paseo Village matures in December 2015. We expect to pay off the loan in
October 2015, the earliest prepayment date without penalty.
Construction Financings
In addition to the lines of credit described above, we have a $225 million construction facility for The Mall at University Town
Center, an Unconsolidated Joint Venture. As of December 31, 2014, $37.2 million was available under the construction facility.
The construction facility is interest only during the initial three-year term at LIBOR plus 1.70%, which decreases to LIBOR plus
1.60% upon the achievement of certain performance measures. The facility has four, one-year extension options.
We also have a $320 million construction facility for The Mall of San Juan, a consolidated joint venture. As of December 31,
2014, $156.2 million was available under the construction facility. The facility, which matures in April 2017 and has two one-year
extension options, is interest only for the entire term and bears interest at LIBOR plus 2.00%, which may decrease to LIBOR plus
1.75% upon achieving certain performance measures.
Refer to "Note 8 - Notes Payable" to our consolidated financial statements for further details of our construction financings and
related guarantees.
56
Term Loan
Our $475 million unsecured term loan matures in February 2019. The loan includes an accordion feature that increases the
borrowing capacity to as much as $600 million if fully exercised, subject to obtaining additional lender commitments, customary
closing conditions, and covenant compliance for the unencumbered asset pool. As of December 31, 2014, we could not fully utilize
the accordion feature unless additional assets were added to our unencumbered asset pool. As of December 31, 2014, the loan
leverage ratio resulted in a rate of LIBOR plus 1.35%.
Dispositions
In October 2014, we disposed of a portfolio of seven centers to Starwood (see "Results of Operations - Dispositions - Sale of
Centers to Starwood"). As a result of the Starwood sale, we used the excess proceeds from the sale to pay down borrowings on
our primary revolving line of credit and pay a special dividend of $4.75 per common share (see "Dividends"). The remaining net
proceeds are included in Cash and Cash Equivalents on our Consolidated Balance Sheet.
In early 2014, we completed two dispositions that served as sources of additional capital. In January 2014, we sold a total of
49.9% of our interests in the entity that owns International Plaza (see "Results of Operations - Dispositions - International Plaza").
A portion of the proceeds were used to pay off the $99.5 million loan on Stony Point, which was scheduled to mature in June 2014.
Also in January 2014, we sold our 50% interest in an entity that owns Arizona Mills as well as land in Syosset, New York related
to the former Oyster Bay project (see "Results of Operations - Dispositions - Arizona Mills/Oyster Bay").
Summaries of 2014 Capital, Debt, and Equity Activities and Transactions
See "Results of Operations - Dispositions - Sale of Centers to Starwood" for information regarding our prepayment or defeasance
of the then-outstanding loans on Northlake Mall, The Mall at Wellington Green, MacArthur, and The Mall at Partridge Creek.
Also, see "Results of Operations - Debt Transactions" for a summary of debt financings in 2014.
Also see our Consolidated Statement of Cash Flows for additional capital, debt, and equity transactions.
Operating Activities
Our net cash provided by operating activities was $363.7 million in 2014, compared to $371.4 million in 2013 and $324.3 million
in 2012. See “Results of Operations” for descriptions of 2014, 2013, and 2012 transactions affecting operating cash flow.
Investing Activities
Net cash provided by investing activities was $1.3 billion in 2014, compared to $371.4 million used in 2013 and $126.3 million
provided in 2012. Additions to properties in 2014 and 2013 related primarily to the costs of new centers under development as
well as capital and tenant improvements at existing centers. In 2014, additions also include the acquisition of our headquarters
building. Additions to properties in 2012 related primarily to the costs of the new centers under development, $75 million paid
upon the opening of City Creek Center, tenant improvements at existing centers, and other capital items. A tabular presentation
of 2014 and 2013 capital spending is shown in “Capital Spending.” Cash escrowed or deposited in connection with certain
construction projects was $70.6 million in 2014. Proceeds from the Starwood and January 2014 dispositions, net of transaction
costs, were $1.8 billion in 2014.
Restricted cash in 2012 was used to repay the $281.5 million of installment notes that were issued as part of the consideration
for the acquisition of The Mall at Green Hills, The Gardens on El Paseo, and El Paseo Village in 2011. Collection of the remaining
consideration from the sale of assets of the Taubman TCBL business provided $12.9 million in 2013. We collected $4.4 million
in 2012 from the sale.
Contributions to Unconsolidated Joint Ventures in 2014 of $46.0 million primarily consisted of funding our Taubman Asia
project costs, including the acquisition of additional interests in Hanam Union Square (see "Capital Spending - New
Developments"). Contributions to Unconsolidated Joint Ventures in 2013 of $108.9 million primarily consisted of funding of our
University Town Center and Taubman Asia project costs (see "Capital Spending - New Developments"). In 2012, we contributed
$146.5 million primarily for funding of our Taubman Asia project costs and acquiring an additional 25% in Waterside Shops.
Distributions in excess of income from Unconsolidated Joint Ventures was $68.4 million in 2014 and $220.7 million in 2012. The
2012 amount included $216.7 million of excess proceeds from refinancings at certain centers.
57
Financing Activities
Net cash used in financing activities was $1.4 billion in 2014 with significant uses of cash in 2014 related to the Starwood
transaction, as further described in the following paragraphs, compared to $9.0 million provided in 2013 and $442.7 million used
in 2012. In 2014, $658.1 million was paid to extinguish debt in connection with the Starwood transaction. Other payments of debt
and issuance costs, net of proceeds from the issuance of debt were $109.3 million in 2014. Proceeds from the issuance of debt,
net of payments and issuance costs, were $102.9 million in 2013 and $89.6 million in 2012. In 2012, we repaid installments notes
used in connection with the acquisitions of centers in 2011.
In 2013, $52.3 million was paid to repurchase common stock. In 2012, $208.9 million was received from issuing new shares
of common stock, net of offering costs. In 2014, $0.9 million was paid in connection with incentive plans compared to $1.6 million
paid in 2013 and $6.5 million received in 2012. In 2013, net proceeds of $164.4 million, after offering costs, were received from
the issuance of the Series K Preferred Stock. In 2012, we used the $186.2 million of net proceeds from the issuance of Series J
Preferred Stock to redeem the $187.0 million Series G and H Preferred Stock.
Borrowings of $275 million from our revolving line of credit were used to acquire the noncontrolling interest in International
Plaza in 2012. Total dividends and distributions paid were $674.8 million, $208.0 million, and $195.1 million in 2014, 2013, and
2012, respectively. Included in 2014 dividends and distributions was a special dividend of $4.75 per common share and a
corresponding distribution to partnership unitholders (see "Dividends"). Contributions from noncontrolling interests were $22.3
million in 2014 compared to $4.7 million in 2013 and $4.8 million in 2012. Contributions in 2014 included funds for a redevelopment
project at Cherry Creek Shopping Center.
58
Beneficial Interest in Debt
At December 31, 2014, the Operating Partnership's debt and its beneficial interest in the debt of its Consolidated Businesses
and Unconsolidated Joint Ventures totaled $2,938.7 million, with an average interest rate of 3.99% 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 includes non-cash amortization of premiums relating to acquisitions. On an annualized basis, this amortization of
acquisition premiums is equal to 0.10% 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 $746.5 million as of December 31, 2014, which
includes $729.5 million of assets on which interest is being capitalized. The following table presents information about our beneficial
interest in debt as of December 31, 2014:
Fixed rate debt
Floating rate debt:
Swapped through April 2018
Swapped through February 2019
Swapped through November 2021
Floating month to month
Total floating rate debt
Total beneficial interest in debt
Amortization of financing costs (2)
Average all-in rate
Amount
(in millions)
1,864.4
$
Interest Rate
Including Spread
4.66% (1)
(3)
136.7
475.0
87.7
699.4
374.9
1,074.3
2,938.7
$
$
4.10%
3.00%
3.58%
3.28% (1)
1.92% (1)
2.81% (1)
3.99% (1)
0.28%
4.27%
(1) Represents weighted average interest rate before amortization of financing costs.
(2)
(3)
(4) Amounts in table may not add due to rounding.
Financing costs include debt issuance costs and costs related to interest rate agreements of certain fixed rate debt.
Includes non-cash amortization of premiums related to acquisitions.
Sensitivity Analysis
We have exposure to interest rate risk on our debt obligations and interest rate instruments. We use derivative instruments
primarily to manage exposure to interest rate risks inherent in variable rate debt and refinancings. We routinely use cap, swap, and
treasury lock agreements to meet these objectives. Based on the Operating Partnership's beneficial interest in floating rate debt in
effect at December 31, 2014, a one percent increase on this floating rate debt would decrease cash flows by approximately
$3.7 million, and due to the effect of capitalized interest, decrease annual earnings by approximately $2.5 million. A one percent
decrease in interest rates (or to zero percent for LIBOR rates that are below one percent) would increase cash flows by approximately
$0.6 million, and due to the effect of capitalized interest, increase annual earnings by approximately $0.4 million. Based on our
consolidated debt and interest rates in effect at December 31, 2014, a one percent increase in interest rates would decrease the fair
value of debt by approximately $29.6 million, while a one percent decrease in interest rates would increase the fair value of debt
by approximately $31.2 million.
59
Contractual Obligations
In conducting our business, we enter into various contractual obligations, including those for debt, operating leases for land and
office space, purchase obligations (primarily for construction), and other long-term commitments. Detail of these obligations as
of December 31, 2014 for our consolidated businesses, including expected settlement periods, is contained below:
Debt (1)
Interest payments (1)
Operating leases
Purchase obligations:
Planned capital spending (2)
Other purchase obligations (3)
Other long-term liabilities and
commitments (4)
Total
Payments due by period
Total
Less than 1
year (2015)
1-3 years
(2016-2017)
(in millions)
3-5 years
(2018-2019)
More than 5
years (2020+)
$
2,023.7
$
578.8
$
537.6
$
638.4
$
238.0
817.3
609.3
3.7
86.3
9.9
500.5
1.6
75.9
26.1
108.8
1.7
43.2
25.9
0.4
268.9
32.6
755.3
56.4
3,748.3
$
5.0
1,182.1
$
$
6.0
756.1
$
6.8
714.8
$
38.5
1,095.3
(1) The settlement periods for debt do not consider extension options. Amounts relating to interest on floating rate debt are calculated based on the debt balances
and interest rates as of December 31, 2014. Debt excludes $1.8 million in unamortized debt premiums related to the acquisitions of The Gardens on El Paseo,
El Paseo Village, and our U.S. headquarters building.
(2) This disclosure includes planned capital spending related to our consolidated businesses only. We have investments in Unconsolidated Joint Ventures through
which material construction activities will be occurring. Refer to "Capital Spending - New Developments" for discussion of those projects.
(3) Excludes purchase agreements with cancellation provisions of 90 days or less.
(4) Other long-term liabilities consist of various accrued liabilities, most significantly assessment bond obligations and long-term incentive compensation, as
well as energy contracts at certain centers.
(5) Amounts in this table may not add due to rounding.
Loan Commitments and Guarantees
Certain loan agreements contain various restrictive covenants, including the following corporate covenants on our unsecured
primary revolving line of credit, unsecured term loan, and the construction facilities on The Mall at University Town Center and
The Mall of San Juan: a minimum net worth requirement, a maximum total leverage ratio, a maximum secured leverage ratio, a
minimum fixed charge coverage ratio, a maximum recourse secured debt ratio, and a maximum payout ratio. In addition, our
primary revolving line of credit and term loan have unencumbered pool covenants, which currently apply to Beverly Center,
Dolphin Mall, and Twelve Oaks Mall on a combined basis. These covenants include a minimum number and minimum value of
eligible unencumbered assets, a maximum unencumbered leverage ratio, a minimum unencumbered interest coverage ratio and a
minimum unencumbered asset occupancy ratio. As of December 31, 2014, the corporate minimum fixed charge coverage ratio is
the most restrictive covenant. We are in compliance with all of our covenants and loan obligations as of December 31, 2014. The
maximum payout ratio covenant limits the payment of distributions generally to 95% of funds from operations, as defined in the
loan agreements, except as required to maintain our tax status, pay preferred distributions, and for distributions related to the sale
of certain assets. See "Note 8 - Notes Payable - Debt Covenants and Guarantees" to our consolidated financial statements for more
details on loan guarantees.
Cash Tender Agreement
A. Alfred Taubman has the annual right to tender units of partnership interest 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 15 – Commitments and Contingencies – Cash Tender” to our consolidated financial statements
for more details.
60
Capital Spending
New Developments
The Mall at University Town Center in Sarasota, Florida opened in October 2014. The 0.9 million square foot center is anchored
by Saks Fifth Avenue, Macy's, and Dillard's (See "Results of Operations - U.S. Development").
Our United States development currently includes two projects that are under construction: The Mall of San Juan and International
Market Place. In addition, we are progressing on our project in Miami, Florida. We also have investments in three projects in Asia:
CityOn.Xi'an and CityOn.Zhengzhou in China and Hanam Union Square in South Korea. Internally generated funds and excess
proceeds from refinancings of maturing debt obligations, as well as borrowings under our revolving lines of credit would be
sufficient to finance the anticipated costs of these projects, but we also expect construction loan financing to be available in addition
to the existing construction loans on The Mall at University Town Center and The Mall of San Juan.
The Mall of San Juan, part of a mixed-use development anticipated to include a hotel/casino and retail, is under construction in
San Juan, Puerto Rico. The 0.7 million square foot of retail will be anchored by the Caribbean's first Nordstrom and Saks Fifth
Avenue. We expect a March 2015 opening. We are responsible for management, leasing, and development of the retail portion of
the center. We had capitalized costs of $384.4 million in the project as of December 31, 2014. We have an 80% interest in the retail
portion of the project and are now expecting an after-tax unlevered stabilized return of about 6% on the approximately $475 million
total project cost. The remaining spending on the project is generally expected to be funded using the $320 million construction
facility (see "Liquidity and Capital Resources - Construction Financings").
International Market Place, a 0.4 million square foot center, in Waikiki, Honolulu, Hawaii, is under construction. We are
responsible for management, leasing, and development of the center. The center will be anchored by the only full-line Saks Fifth
Avenue in Hawaii, and is expected to open in spring 2016. We have a 93.5% interest in the project and are funding all construction
costs. We had capitalized costs of $107.6 million in the project as of December 31, 2014. We now expect total project costs of
$465 million, reducing the expected return on our share of costs to about 7%. This project is subject to a participating ground
lease.
In 2013, we announced our involvement in The Mall at Miami Worldcenter, which will be developed in partnership with the
Forbes Company. We will own at least one-third of the project, and as much as one-half, depending on the participation of the
land owner. The center will be part of a mixed-use development offering a hotel, convention and entertainment space, office,
residential, and retail. The 0.7 million square foot center will feature Macy's and Bloomingdale's.
Our joint venture with Beijing Wangfujing Department Store (Group) Co., Ltd (Wangfujing), one of China's largest department
store chains, will own a 60% controlling interest in and manage a shopping center, CityOn.Xi'an, to be located at Xi'an Saigao
City Plaza, a large-scale mixed-use development in Xi'an, China. It is scheduled to open in late 2015 and is part of a 5.9 million
square foot mixed-use project. We are investing in the retail portion only, which will be about 1.0 million square feet with over
half of that in mall specialty stores. As of December 31, 2014, our share of total project costs was $75.1 million, as increased by
$0.6 million of cumulative currency translation adjustments. Our total anticipated investment will be approximately $115 million
for a 30% equity interest. We are expecting a 6% to 6.5% unlevered return at stabilization.
Our second joint venture with Wangfujing owns a majority interest in and will manage a shopping center to be located in
Zhengzhou, China. Currently under construction, the approximately 1.0 million square foot shopping mall, CityOn.Zhengzhou,
is expected to open in spring 2016. As of December 31, 2014, our share of total project costs was $41.2 million, including an
immaterial impact of cumulative currency translation adjustments. Our total anticipated investment will be approximately $115
million for a 32% equity interest. We are expecting a 6% to 6.5% unlevered return at stabilization.
We have invested with Shinsegae Group (Shinsegae), South Korea's largest retailer, in a 1.7 million square foot shopping mall
project in Hanam, Gyeonggi Province, South Korea (Hanam Union Square). The center is scheduled to open in late 2016. In August
2014, Taubman Asia partnered with a major institution in Asia to acquire an additional 19% interest from Shinsegae. This partnership
now has a 49% ownership interest in Hanam Union Square. The institutional partner owns 14.7% of the project, bringing our
effective ownership to 34.3%, an increase from our previous 30% share. As of December 31, 2014, our share of total project costs
was $132.3 million, as decreased by $1.0 million of cumulative currency translation adjustments. Our total anticipated investment
including capitalized interest will be about $380 million for our 34.3% equity interest in the retail portion of the project. We are
expecting a 7% to 7.5% unlevered return at stabilization.
61
Sales growth rates are expected to be in excess of 10% in China. Combined with shorter lease terms than the U.S., returns on
our investments in China are expected to equal those earned in the U.S. by the seventh or eighth year. Estimates of total project
costs in Asia exclude fluctuations in foreign currency exchange rates.
2014 and 2013 Capital Spending
Capital spending for routine maintenance of the shopping centers is generally recovered from tenants. Capital spending during
2014 is summarized in the following table:
2014 (1)
Consolidated
Businesses
Beneficial
Interest in
Consolidated
Businesses
Unconsolidated
Joint Ventures
Beneficial
Interest in
Unconsolidated
Joint Ventures
New development projects - U.S. (2)
New development projects - Asia (3) (4)
Existing Centers:
Projects with incremental GLA or anchor
replacement
Projects with no incremental GLA and other
Mall tenant allowances
Asset replacement costs recoverable from tenants
Corporate office building and improvements,
technology, equipment, and other (5)
$
320.8
$
271.4
$
(in millions)
46.8
21.6
9.9
29.1
22.6
38.9
21.5
9.9
27.7
22.6
$
144.9
62.6
8.8
3.7
7.3
31.1
76.1
62.6
4.4
1.8
3.9
18.3
Total
$
450.7
$
391.9
$
258.3
$
167.1
(1) Costs are net of intercompany profits and are computed on an accrual basis.
(2)
(3)
Includes costs related to The Mall of San Juan, International Market Place, and The Mall at University Town Center.
Includes costs related to CityOn.Xi'an, Hanam Union Square, and CityOn.Zhengzhou. Asia spending is included at our beneficial interest in both the
Unconsolidated Joint Ventures and Beneficial Interest in Unconsolidated Joint Ventures columns.
(4) Asia costs exclude $7.2 million of net unfavorable translation adjustments.
(5)
Includes acquisition of U.S. headquarters building.
(6) Amounts in this table may not add due to rounding.
The following table presents a reconciliation of the Consolidated Businesses’ capital spending shown above (on an accrual basis)
to additions to properties (on a cash basis) as presented in our Consolidated Statement of Cash Flows for the year ended December 31,
2014:
Consolidated Businesses’ capital spending
$
Acquisition of U.S. headquarters building - non-cash
Other differences between cash and accrual basis
Additions to properties
(in millions)
450.7
(17.6)
9.9
443.0
62
Capital spending during 2013 is summarized in the following table:
2013 (1)
Consolidated
Businesses
Beneficial
Interest in
Consolidated
Businesses
Unconsolidated
Joint Ventures
Beneficial
Interest in
Unconsolidated
Joint Ventures
New development projects - U.S. (2)
New development projects - Asia (3) (4)
Existing Centers:
Projects with incremental GLA or anchor
replacement
Projects with no incremental GLA and other
Mall tenant allowances
Asset replacement costs recoverable from tenants
Corporate office improvements, technology,
equipment, and other
$
204.9
$
182.2
$
171.7
$
(in millions)
61.3
—
5.6
7.3
19.9
5.2
16.5
15.9
33.2
5.2
4.7
15.6
15.5
26.6
5.2
85.7
61.3
—
3.0
4.0
12.9
Total
$
281.0
$
249.9
$
266.0
$
166.9
(1) Costs are net of intercompany profits and are computed on an accrual basis.
(2)
(3)
Includes costs related to The Mall of San Juan, Taubman Prestige Outlets Chesterfield, International Market Place, and The Mall at University Town Center.
Includes costs related to CityOn.Xi'an, Hanam Union Square, and CityOn.Zhengzhou. Asia spending is included at our beneficial interest in both the
Unconsolidated Joint Ventures and Beneficial Interest in Unconsolidated Joint Ventures columns.
(4) Asia costs exclude $4.1 million in net favorable currency translation adjustments.
(5) Amounts in this table may not add due to rounding.
Our share of mall tenant allowances per square foot leased, committed under contracts during the year, excluding new
developments and expansion space, was $10.74 in 2014 and $12.26 in 2013. In the past five years, average tenant allowances per
square foot have ranged from a low of $10.74 in 2014 and a high of $37.56 in 2010. Average tenant allowances per square foot
can vary significantly from year to year due to the type, size, and location of tenants signed. Our share of capitalized leasing and
tenant coordination costs excluding new developments was $7.6 million in 2014 and $10.6 million in 2013, or $6.24 and $6.62,
in 2014 and 2013, respectively, per square foot leased.
63
Planned Capital Spending
The following table summarizes planned capital spending for 2015:
2015 (1)
Consolidated
Businesses
Beneficial
Interest in
Consolidated
Businesses
Unconsolidated
Joint Ventures
Beneficial
Interest in
Unconsolidated
Joint Ventures
New development projects - U.S. (2)
New development projects - Asia (3) (4)
Existing Centers:
$
334.2
$
301.7
$
(in millions)
Projects with incremental GLA or anchor replacement
Projects with no incremental GLA and other
Mall tenant allowances
Asset replacement costs reimbursable by tenants
Corporate office improvements, technology, equipment,
and other
106.7
29.7
12.5
13.6
3.8
88.3
28.6
12.0
13.2
3.8
3.7
$
205.1
24.8
3.4
13.6
10.5
1.8
205.1
12.4
1.7
7.1
5.5
Total
$
500.5
$
447.6
$
261.0
$
233.6
(1) Costs are net of intercompany profits and are computed on an accrual basis.
(2)
Includes costs related to The Mall of San Juan, International Market Place, and The Mall at University Town Center. Excludes costs related to The Mall at
Miami Worldcenter.
Includes costs related to CityOn.Xi'an, Hanam Union Square, and CityOn.Zhengzhou. Asia spending is included at our beneficial interest in both the
Unconsolidated Joint Ventures and Beneficial Interest in Unconsolidated Joint Ventures columns.
(3)
(4) Asia costs exclude currency translation adjustments.
(5) Amounts in this table may not add due to rounding.
We anticipate that our share of costs incurred for new center development projects included in the table above will be $260
million in 2016.
We have planned redevelopment or expansion projects at Beverly Center, Cherry Creek Shopping Center, Dolphin Mall, The
Mall at Green Hills, International Plaza, and Sunvalley that will add approximately 343,000 square feet of incremental GLA with
completion dates ranging from 2015 to 2018. Our share of these projects will cost a total of approximately $275 million, and we
expect a weighted average return of 7.5% to 8% on the projects.
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, (12) early lease terminations and bankruptcies, and
(13) fluctuations in foreign currency exchange rates. In addition, estimates of capital spending will change as new projects are
approved by our board of directors.
64
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.
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.
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 December 2, 2014, we declared a quarterly dividend of $0.54 per common share, $0.40625 per share on our 6.5% Series J
Preferred Stock, and $0.390625 per share on our 6.25% Series K Preferred Stock, all of which were paid on December 31, 2014
to shareowners of record on December 15, 2014.
As no synergistic assets for a Section 1031 exchange were identified for the centers sold in October 2014 (see "Results of
Operations - Dispositions - Sale of Centers to Starwood"), a special dividend of $4.75 per share was declared on December 2,
2014, which was paid on December 31, 2014 to shareowners of record on December 15, 2014. A corresponding distribution was
also made to Operating Partnership unitholders.
65
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this Item is included in this report at Item 7 under the caption “Liquidity and Capital Resources.”
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Financial Statements of Taubman Centers, Inc. and the Reports of Independent Registered Public Accounting Firm thereon
are filed pursuant to this Item 8 and are included in this report at Item 15.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
Item 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this annual report, 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 December 31, 2014, 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.
Management’s Annual Report on Internal Control over Financial Reporting
Management’s Annual Report on Internal Control over Financial Reporting accompanies the Company’s financial statements
included in Item 15 of this annual report.
Report of the Independent Registered Public Accounting Firm
The report issued by the Company’s independent registered public accounting firm, KPMG LLP, accompanies the Company’s
financial statements included in Item 15 of this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting identified in connection with the Company’s
fourth quarter 2014 evaluation of such internal control that have materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
Item 9B. OTHER INFORMATION.
Not applicable.
66
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
The information required by this item is hereby incorporated by reference to the material appearing in the 2015 Proxy Statement
under the captions “Proposal 1 – Election of Directors,” “Board Matters – Committees of the Board,” "Board Matters – Corporate
Governance,” “Executive Officers,” and “Additional Information – Section 16(a) Beneficial Ownership Reporting Compliance.”
Item 11. EXECUTIVE COMPENSATION.
The information required by this item is hereby incorporated by reference to the material appearing in the 2015 Proxy Statement
under the captions "Board Matters – Director Compensation,” “Compensation Committee Interlocks and Insider Participation,”
“Compensation Discussion and Analysis,” “Compensation Committee Report,” and “Named Executive Officer Compensation
Tables.”
67
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The following table sets forth certain information regarding the Company’s current and prior equity compensation plans as of
December 31, 2014:
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants, and Rights
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants,
and Rights
Number of Securities
Remaining Available for
Future Issuances Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(a)
(b)
(c)
Equity compensation plans approved by security
holders:
The Taubman Company 2008 Omnibus Long-Term
Incentive Plan: (1)
Performance Share Units (2) (3)
Restricted Share Units (3)
1992 Incentive Option Plan (3) (5)
877,874
293,651
521,293
$
39.20
1,692,818
Equity compensation plan not approved by security
holders -
Non-Employee Directors’ Deferred Compensation
Plan (6)
113,839
(4)
(4)
(7)
1,487,277 (1)
1,487,277
(8)
1,806,657
$
39.20
1,487,277
(1) Under The Taubman Company 2008 Omnibus Long-Term Incentive Plan (as amended), directors, officers, employees, and other service providers of the
Company may receive restricted shares, restricted share units, restricted units of limited partnership in TRG (“TRG Units”), restricted TRG Units, options
to purchase common stock or TRG Units, share appreciation rights, unrestricted shares of common stock or TRG Units, and other awards to acquire up to
an aggregate of 8,500,000 shares of common stock or TRG Units. No further awards will be made under the 1992 Incentive Option Plan.
(2) Amount represents 140,730 and 113,921 performance share units (PSU) at their maximum payout ratio of 300% and 400%, respectively. This amount may
overstate dilution to the extent actual performance is different than such assumption. The actual number of PSU that may ultimately vest will range from 0-
300% and 0-400% based on the Company’s total shareholder return relative to that of a peer group.
(3) See "Note 13 - Share-Based Compensation and Other Employee Plans" to our consolidated financial statements for further details related to the modification
of grants in 2014 as a result of the payment of the $4.75 special dividend per share of common stock.
(4) Excludes restricted stock units and performance share units issued under the Omnibus Plan because they are converted into common stock on a one-for-one
basis at no additional cost.
(5) Under the 1992 Incentive Option Plan, employees received TRG Units upon the exercise of their vested options, and each TRG Unit generally will be
converted into one share of common stock under the Continuing Offer. Excludes 871,262 deferred units, the receipt of which were deferred by Robert S.
Taubman at the time he exercised options in 2002; the options were initially granted under TRG's 1992 Incentive Option Plan (See “Note 13 – Share Based
Compensation and Other Employee Plans” to our consolidated financial statements included at Item 15 (a) (1)).
(6) The Deferred Compensation Plan, which was approved by the Board in May 2005, gives each non-employee director of the Company the right to defer the
receipt of all or a portion of his or her annual director retainer until the termination of such director's service on the Board and for such deferred compensation
to be denominated in restricted stock units. The number of restricted stock units received equals the deferred retainer fee divided by the fair market value of
the common stock on the business day immediately before the date the director would otherwise have been entitled to receive the retainer fee. The restricted
stock units represent the right to receive equivalent shares of common stock at the end of the deferral period. During the deferral period, when the Company
pays cash dividends on the common stock, the directors' deferral accounts are credited with dividend equivalents on their deferred restricted stock units,
payable in additional restricted stock units based on the fair market value of the common stock on the business day immediately before the record date of
the applicable dividend payment. Each Director's account is 100% vested at all times.
(7) The restricted stock units are excluded because they are converted into common stock on a one-for-one basis at no additional cost.
(8) The number of securities available for future issuance is unlimited and will reflect whether non-employee directors elect to defer all or a portion of their
annual retainers.
Additional information required by this item is hereby incorporated by reference to the information appearing in the Proxy
Statement under the caption “Security Ownership of Certain Beneficial Owners and Management – Ownership Table.”
68
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this item is hereby incorporated by reference to the information appearing in the 2015 Proxy
Statement under the caption “Related Person Transactions,” and "Proposal 1 – Election of Directors – Director Independence.”
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this item is hereby incorporated by reference to the material appearing in the 2015 Proxy Statement
under the caption “Audit Committee Matters.”
69
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
15(a)(1)
The following financial statements of Taubman Centers, Inc. and the Reports of Independent Registered
Public Accounting Firm thereon are filed with this report:
PART IV
TAUBMAN CENTERS, INC.
Management's Annual Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheet as of December 31, 2014 and 2013
Consolidated Statement of Operations and Comprehensive Income for the years ended December
31, 2014, 2013, and 2012
Consolidated Statement of Changes in Equity for the years ended December 31, 2014, 2013, and
2012
Consolidated Statement of Cash Flows for the years ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
15(a)(2)
The following is a list of the financial statement schedules required by Item 15(d):
TAUBMAN CENTERS, INC.
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2014, 2013,
and 2012
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2014
Page
F-2
F-3
F-5
F-6
F-7
F-9
F-10
F-53
F-54
15(a)(3)
Exhibit
Number
2.1
2.2
2.3
2.4
3.1
3.2
4.1
4.2
4.3
Incorporated by Reference
Exhibit
10.1
Filing Date
January 30, 2014
Filed
Herewith
10.2
January 30, 2014
2.1
June 18, 2014
2.2
3.1
3.1
4.1
June 18, 2014
December 16, 2009
March 15, 2013
December 16, 2005
4.2
December 16, 2005
4.3
December 16, 2005
Exhibit Description
Purchase and Sale Agreement dated as of
January 29, 2014 between Woodland
Shopping Center Limited Partnership and T-C
International Plaza Investor LP LLC.**
Purchase and Sale Agreement dated as of
January 29, 2014 between International Plaza
Holding Company and T-C International Plaza
Investor GP LLC.**
Purchase and Sale Agreement, dated June 17,
2014, by and among the Parties listed in
Exhibit A (Sellers) and SRP TM Holdings, L.P.
(Purchaser).
Purchase and Sale Agreement, dated June 17,
2014, by and among Partridge Creek Fashion
Park LLC and Purchaser.
Restated By-Laws of Taubman Centers, Inc.
Form
Period Ending
8-K
8-K
8-K
8-K
8-K
Amended
and Restated Articles
Incorporation of Taubman Centers, Inc.
of
8-K
Amended and Restated Promissory Note A-1,
dated December 14, 2005, by Short Hills
Associates L.L.C.
to Metropolitan Life
Insurance Company.
Amended and Restated Promissory Note A-2,
dated December 14, 2005, by Short Hills
Associates L.L.C.
to Metropolitan Life
Insurance Company.
Amended and Restated Promissory Note A-3,
dated December 14, 2005, by Short Hills
to Metropolitan Life
Associates L.L.C.
Insurance Company.
8-K
8-K
8-K
70
Incorporated by Reference
Exhibit
Number
4.4
4.5
4.6
4.6.1
4.6.2
4.7
4.7.1
4.8
4.8.1
4.9
Exhibit Description
Form
Period Ending
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
to Metropolitan Life
Amended and Restated Mortgage, Security
Agreement and Fixture Filings, dated
December 14, 2005 by Short Hills Associates
L.L.C.
Insurance
Company.
Amended and Restated Assignment of Leases,
dated December 14, 2005, by Short Hills
Associates L.L.C.
to Metropolitan Life
Insurance Company.
Revolving Credit Agreement, dated as of
February 28, 2013, by and among The
Taubman Realty Group Limited Partnership
and JPMorgan Chase Bank N.A., as
Administrative, and the various lenders and
agents on the signature pages thereto.
Amendment No. 1 to Revolving Credit
Agreement, dated as of November 12, 2013,
by and among The Taubman Realty Group
Limited Partnership and JP Morgan Chase
Bank N.A., as an Administrative Agent, and
the various lenders and agents on the signatures
pages thereto.
Amendment No. 2 to the Revolving Credit
Agreement, dated as of November 20, 2014,
by and among The Taubman Realty Group
Limited Partnership and JPMorgan Chase
Bank N.A., as Administrative Agent, and the
various lenders on the signatures pages thereto.
Guaranty, dated as of February 28, 2013, by
and among Dolphin Mall Associates LLC,
Fairlane Town Center LLC, Twelve Oaks Mall,
LLC, and Willow Bend Shopping Center
Limited Partnership in favor of JPMorgan
Chase Bank, N.A.,
its capacity as
Administrative Agent for the Lenders under
the Revolving Credit Agreement.
in
Release of Guaranty, dated October 16, 2014,
by and among Fairlane Town Center LLC,
Willow Bend Shopping Center Limited
Partnership, and JPMorgan Chase Bank, N.A.,
in its capacity as Administrative Agent for the
the Revolving Credit
Lenders under
Agreement.
Term Loan Agreement, dated as of November
12, 2013, by and among The Taubman Realty
Group Limited Partnership and JPMorgan
Chase Bank N.A., as Administrative Agent,
and the various lenders and agents on the
signatures pages thereto.
Amendment No. 1
the Term Loan
Agreement, dated as of November 20, 2014,
by and among The Taubman Realty Group
Limited Partnership and JPMorgan Chase
Bank N.A., as Administrative Agent, and the
various lenders on the signatures pages thereto.
to
Guaranty, dated as of November 12, 2013, by
and among Dolphin Mall Associates LLC,
Fairlane Town Center LLC, Twelve Oaks Mall,
LLC, Willow Bend Shopping Center Limited
Partnership, and La Cienega Partners Limited
Partnership, in favor of JPMorgan Chase Bank,
N.A., in its capacity as Administrative Agent
for
the Term Loan
Agreement.
the Lenders under
Exhibit
4.4
Filing Date
December 16, 2005
Filed
Herewith
4.5
December 16, 2005
4.1
March 1, 2013
4.3
November 13, 2013
4.1
November 25, 2014
4.2
March 1, 2013
4.1
October 20, 2014
4.1
November 13, 2013
4.2
November 25, 2014
4.2
November 13, 2013
Exhibit
Number
4.9.1
4.10
4.10.1
4.10.2
4.11
4.12
*10.1
*10.1.1
*10.1.2
*10.1.3
*10.1.4
*10.1.5
*10.1.6
10.2
10.2.1
10.2.2
Exhibit Description
Release of Guaranty, dated October 16, 2014,
by and among Fairlane Town Center LLC,
Willow Bend Shopping Center Limited
Partnership, and JPMorgan Chase Bank, N.A.,
in its capacity as Administrative Agent for the
Lenders under the Term Loan Agreement.
Amended and Restated Mortgage, Security
Agreement and Fixture Filing, dated as of
November 4, 2011, by Tampa Westshore
Associates Limited Partnership, in favor of
Metropolitan Life Insurance Company.
Assignment of Leases, dated as of November
4, 2011, by Tampa Westshore Associates
Limited Partnership (Assignor), a Delaware
limited partnership, in favor of Metropolitan
Life Insurance Company.
Guaranty Agreement, dated as of November 4,
2011, by The Taubman Realty Group Limited
Partnership, in favor of Metropolitan Life
Insurance Company.
Form of certificate evidencing 6.500% Series
J Cumulative Redeemable Preferred Stock,
Liquidation Preference $25.00 Per Share.
Form of certificate evidencing 6.25% Series K
Cumulative Redeemable Preferred Stock,
Liquidation Preference $25.00 Per Share.
The Taubman Realty Group Limited
Partnership 1992 Incentive Option Plan, as
Amended and Restated Effective as of
September 30, 1997.
First Amendment to The Taubman Realty
Group Limited Partnership 1992 Incentive
Option Plan as Amended and Restated
Effective as of September 30, 1997.
Second Amendment to The Taubman Realty
Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of
September 30, 1997.
Third Amendment to The Taubman Realty
Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of
September 30, 1997.
Fourth Amendment to The Taubman Realty
Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of
September 30, 1997.
Fifth Amendment to The Taubman Realty
Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of
September 30, 1997.
The Form of The Taubman Realty Group
Limited Partnership 1992 Incentive Option
Plan Option Agreement.
Master Services Agreement between The
Taubman Realty Group Limited Partnership
and the Manager.
First Amendment to the Master Services
Agreement between The Taubman Realty
Group Limited Partnership and the Manager,
dated September 30, 1998.
Second Amendment to the Master Services
Agreement between The Taubman Realty
Group Limited Partnership and the Manager,
dated December 23, 2008.
Incorporated by Reference
Form
Period Ending
8-K
8-K
8-K
8-K
Exhibit
4.2
Filing Date
October 20, 2014
Filed
Herewith
4.1
November 9, 2011
4.2
November 9, 2011
4.3
November 9, 2011
8-A12B
8-A12B
4.1
4.1
August 13, 2012
March 14, 2013
10-K
December 31,
1997
10(b)
10-K
December 31,
2001
10(b)
10-K
December 31,
2004
10(c)
10-K
December 31,
2004
10(d)
10-Q
March 31, 2007
10(a)
10-K
10-K
10-K
10-K
December 31,
2004
December 31,
1992
10(e)
10(f)
December 31,
2008
10(au)
10-K
December 31,
2008
10(an)
X
Exhibit
Number
10.3
Exhibit Description
and Restated Cash Tender
Amended
Agreement among Taubman Centers, Inc., The
Taubman Realty Group Limited Partnership,
and A. Alfred Taubman, A. Alfred Taubman,
acting not individually but as Trustee of the A.
Alfred Taubman Restated Revocable Trust,
and TRA Partners.
*10.4
Supplemental Retirement Savings Plan.
*10.4.1
*10.5
*10.5.1
*10.6
*10.6.1
*10.6.2
First Amendment to The Taubman Company
Supplemental Retirement Savings Plan, dated
December 12, 2008 (revised for Code Section
409A compliance).
Employment Agreement
between The
Taubman Company Limited Partnership and
Lisa A. Payne.
Amendment to Employment Agreement, dated
December 22, 2008, for Lisa A. Payne (revised
for Code Section 409A compliance).
Amended and Restated Change of Control
Employment Agreement, dated December 18,
2008, by and among the Company, Taubman
Realty Group Limited Partnership, and Lisa A.
Payne (revised for Code Section 409A
compliance).
Form of Amended and Restated Change of
Control Employment Agreement, dated
December 18, 2008 (revised for Code Section
409A compliance).
Amendment to The Taubman Centers, Inc.
Change of Control Severance Program, dated
December 12, 2008 (revised for Code Section
409A compliance).
Incorporated by Reference
Form
10-Q
Period Ending
June 30, 2000
Exhibit
10(a)
Filing Date
Filed
Herewith
10-K
10-K
December 31,
1994
December 31,
2008
10(i)
10(aq)
10-Q
March 31, 1997
10
10-K
10-K
December 31,
2008
10(at)
December 31,
2008
10(o)
10-K
December 31,
2008
10(p)
10-K
December 31,
2008
10(ar)
*10.6.3
Form of Amendment to Change of Control
Employment Agreement.
8-K
10.1
May 8, 2014
10.7
10.8
*10.9
10.10
10.10.1
10.11
10.11.1
*10.12
Second Amended and Restated Continuing
Offer, dated as of May 16, 2000.
10-Q
June 30, 2000
10(b)
The Third Amendment and Restatement of
Agreement of Limited Partnership of The
Taubman Realty Group Limited Partnership
dated December 12, 2012.
S-3
10.3
December 27, 2012
The Taubman Realty Group Limited
Partnership and The Taubman Company LLC
Election and Option Deferral Agreement, as
Amended and Restated Effective as of January
27, 2011.
10-Q
March 31, 2011
10(b)
Operating Agreement of Taubman Land
Associates, a Delaware Limited Liability
Company, dated October 20, 2006.
10-K
December 31,
2006
10(ab)
First Amendment to Operating Agreement of
Taubman Land Associates, a Delaware
Limited Liability Company, dated October 20,
2006.
Amended and Restated Agreement of
Partnership of Sunvalley Associates, a
California general partnership.
First Amendment to Amended and Restated
Agreement of Partnership of Sunvalley
Associates, a California general partnership.
Summary of Compensation for the Board of
Directors of Taubman Centers, Inc., effective
January 1, 2013.
10-Q
March 31, 2013
10
10-Q/A June 30, 2002
10(a)
10-K
10-K
December 31,
2012
10.11.1
December 31,
2012
10.12.1
Exhibit
Number
*10.12.1
*10.13
*10.13.1
*10.13.2
*10.13.3
*10.14
*10.15
*10.15.1
*10.15.2
*10.15.3
*10.15.4
*10.15.5
*10.15.6
*10.16
10.17
*10.18
*10.19
*10.20
Incorporated by Reference
Form
Period Ending
Exhibit
Filing Date
Filed
Herewith
X
8-K
8-K
10
10
May 18, 2005
May 18, 2005
10-Q
June 30, 2008
10(c)
10-K
December 31,
2008
10(ap)
8-K
10.1
May 5, 2014
Exhibit Description
Summary of Compensation for the Board of
Directors of Taubman Centers, Inc., effective
January 1, 2015.
The Taubman Centers, Inc. Non-Employee
Directors' Deferred Compensation Plan.
The Form of The Taubman Centers, Inc. Non-
Employee Directors' Deferred Compensation
Plan.
First Amendment to the Taubman Centers, Inc.
Deferred
Non-Employee
Compensation Plan.
Directors'
Form of Taubman Centers,
Inc. Non-
Employee Directors' Deferred Compensation
Plan Amendment Agreement (revised for
Code Section 409A compliance).
Fourth Amended and Restated Limited
Liability Company Agreement of Taubman
Properties Asia LLC dated April 30, 2014 by,
between,
among Taubman Asia
Management II LLC, René Tremblay, and
Taubman Properties Asia LLC.
and
The Taubman Company 2008 Omnibus Long-
Term Incentive Plan, as amended and restated
as of May 21, 2010.
DEF 14
Form of The Taubman Company LLC 2008
Omnibus
Plan
Restricted Share Unit Award Agreement.
Long-Term
Incentive
Form of The Taubman Company LLC 2008
Omnibus Long-Term Incentive Plan Option
Award Agreement.
Form of The Taubman Company LLC 2008
Omnibus
Plan
Restricted and Performance Share Unit Award
Agreement.
Long-Term
Incentive
8-K
8-K
8-K
A
March 31, 2010
10(a)
March 10, 2009
10(b)
March 10, 2009
10(c)
March 10, 2009
Form of The Taubman Company LLC 2008
Omnibus
Plan
Performance Share Unit Award Agreement
(Five-Year Vesting).
Long-Term
Incentive
10-Q
March 31, 2012
10
2015 Form of The Taubman Company LLC
2008 Omnibus Long-Term Incentive Plan
Restricted Share Unit Award Agreement.
2015 Form of The Taubman Company LLC
2008 Omnibus Long-Term Incentive Plan
Performance Share Unit Award Agreement.
X
X
The Form of Fair Competition Agreement, by
and between the Company and various officers
of the Company.
10-Q
September 30,
2009
10(a)
Partnership
Interest Purchase Agreement
dated as of December 17, 2012 between CSAT,
L.P., and Woodland Shopping Center Limited
Partnership.
Amended
and Restated Employment
Agreement dated April 30, 2014 between
Taubman Asia Management Limited and René
Tremblay.
Employment Agreement
Taubman Company LLC and David Joseph.
between The
Change of Control Employment Agreement,
dated April 29, 2013, by and among the
Company, Taubman Centers Inc., and David
Joseph.
8-K
8-K
10-K
10-K
10
December 20, 2012
10.2
May 5, 2014
December 31,
2013
December 31,
2013
10.20
10.21
Exhibit
Number
*10.20.1
12
21
23
31.1
31.2
32.1
32.2
99.1
99.2
Exhibit Description
Amendment
of Control
to Change
Employment Agreement, dated March 17,
2014, by and among Taubman Centers Inc.,
The Taubman Realty Group Limited
Partnership, and David Joseph.
Statement Re: Computation of Taubman
Centers, Inc. Ratio of Earnings to Combined
Fixed Charges and Preferred Dividends.
Subsidiaries of Taubman Centers, Inc.
Consent of Independent Registered Public
Accounting Firm.
Certification of Chief Executive Officer
pursuant to 15 U.S.C. Section 10A, as adopted
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of Chief Financial Officer
pursuant to 15 U.S.C. Section 10A, as adopted
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Debt Maturity Schedule.
Real Estate and Accumulated Depreciation
Schedule of the Unconsolidated Joint Ventures
of The Taubman Realty Group Limited
Partnership.
101.INS
XBRL Instance Document.
XBRL Taxonomy Extension
Document.
Schema
XBRL Taxonomy Extension Calculation
Linkbase Document.
XBRL Taxonomy Extension Label Linkbase
Document.
XBRL Taxonomy Extension Presentation
Linkbase Document.
XBRL Taxonomy Extension Definition
Linkbase Document.
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
*
**
Incorporated by Reference
Form
Period Ending
8-K
Exhibit
10.1
Filing Date
March 20, 2014
Filed
Herewith
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
A management contract or compensatory plan or arrangement required to be filed.
Certain exhibits and schedules to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A
copy of any omitted exhibits or schedules will be furnished to the Securities and Exchange Commission upon request.
Note: The Company has not filed certain instruments with respect to long-term debt that did not exceed 10% of the Company’s total assets on
a consolidated basis. A copy of such instruments will be furnished to the Securities and Exchange Commission upon request.
TAUBMAN CENTERS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and consolidated financial statement schedules are included in Item 8 of this
Annual Report on Form 10-K:
CONSOLIDATED FINANCIAL STATEMENTS
Management’s Annual Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheet as of December 31, 2014 and 2013
Consolidated Statement of Operations and Comprehensive Income for the years ended December 31, 2014,
2013, and 2012
Consolidated Statement of Changes in Equity for the years ended December 31, 2014, 2013, and 2012
Consolidated Statement of Cash Flows for the years ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2014, 2013, and 2012
Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2014
F-2
F-3
F-5
F-6
F-7
F-9
F-10
F-53
F-54
F-1
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Taubman Centers, Inc. is responsible for the preparation and integrity of the financial statements and
financial information reported herein. This responsibility includes the establishment and maintenance of adequate internal control
over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance that
assets are safeguarded, transactions are properly authorized and recorded, and that the financial records and accounting policies
applied provide a reliable basis for the preparation of financial statements and financial information that are free of material
misstatement.
The management of Taubman Centers, Inc. is required to assess the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2014. Management bases this assessment of the effectiveness of its internal control on
recognized control criteria, the Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Management has completed its assessment as of December 31, 2014.
Based on its assessment, management believes that Taubman Centers, Inc. maintained effective internal control over financial
reporting as of December 31, 2014. The independent registered public accounting firm, KPMG LLP, that audited the financial
statements included in this annual report has issued their report on the Company’s system of internal control over financial reporting,
also included herein.
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareowners
Taubman Centers, Inc.:
We have audited the accompanying consolidated balance sheet of Taubman Centers, Inc. (the Company) as of December 31, 2014
and 2013, and the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for
each of the years in the
period ended December 31, 2014. In connection with our audits of the consolidated financial
statements, we also have audited financial statement schedules listed in the Index at Item 15(a)(2). These consolidated financial
statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Taubman Centers, Inc. as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of
the years in the
period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.
Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, Taubman Centers, Inc. has changed its method for reporting
discontinued operations in 2014 due to the adoption of Accounting Standards Update No. 2014-08, Reporting Discontinued
Operations and Disclosures of Disposals of Components of an Entity.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Taubman Centers, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal
Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated February 24, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
/s/ KPMG LLP
Chicago, Illinois
February 24, 2015
F-3
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareowners
Taubman Centers, Inc.:
We have audited Taubman Centers, Inc.’s (the Company) internal control over financial reporting as of December 31, 2014, based
on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Taubman Centers, Inc.’s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Taubman Centers, Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of the Company as of December 31, 2014 and 2013, and the related consolidated statements of operations
and comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31,
2014, and our report dated February 24, 2015 expressed an unqualified opinion on those consolidated financial statements. Our
report refers to a change in the method of reporting discontinued operations.
/s/ KPMG LLP
Chicago, Illinois
February 24, 2015
F-4
TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
Assets:
Properties (Notes 4 and 8)
Accumulated depreciation and amortization
Investment in Unconsolidated Joint Ventures (Notes 2 and 5)
Cash and cash equivalents
Restricted cash (Note 8)
Accounts and notes receivable, less allowance for doubtful accounts of $2,927 and $1,934
in 2014 and 2013 (Note 6)
Accounts receivable from related parties (Note 12)
Deferred charges and other assets (Note 7)
Total Assets
Liabilities:
Notes payable (Note 8)
Accounts payable and accrued liabilities
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures
(Note 5)
Commitments and contingencies (Notes 2, 8, 9, 10, 11, 13, and 15)
Equity:
Taubman Centers, Inc. Shareowners’ Equity (Note 14):
Series B Non-Participating Convertible Preferred Stock, $0.001 par and liquidation
value, 40,000,000 shares authorized, 25,117,000 and 25,151,069 shares issued and
outstanding at December 31, 2014 and 2013
Series J Cumulative Redeemable Preferred Stock, 7,700,000 shares authorized, no
par, $192.5 million liquidation preference, 7,700,000 shares issued and outstanding at
December 31, 2014 and 2013
Series K Cumulative Redeemable Preferred Stock, 6,800,000 shares authorized, no
par, $170.0 million liquidation preference, 6,800,000 shares issued and outstanding at
December 31, 2014 and 2013
Common Stock, $0.01 par value, 250,000,000 shares authorized, 63,324,409 and
63,101,614 shares issued and outstanding at December 31, 2014 and 2013
Additional paid-in capital
Accumulated other comprehensive income (loss) (Note 19)
Dividends in excess of net income
Noncontrolling interests (Note 9)
Total Liabilities and Equity
See notes to consolidated financial statements.
December 31
2014
December 31
2013
$
$
$
$
$
$
$
$
$
3,262,505
(970,045)
2,292,460
370,004
276,423
37,502
49,245
832
188,435
3,214,901
2,025,505
292,802
476,651
2,794,958
$
$
$
$
$
4,485,090
(1,516,982)
2,968,108
327,692
40,993
5,046
73,193
1,804
89,386
3,506,222
3,058,053
292,280
371,549
3,721,882
25
$
25
633
815,961
(15,068)
(483,188)
318,363
101,580
419,943
3,214,901
$
$
$
631
796,787
(8,914)
(908,656)
(120,127)
(95,533)
(215,660)
3,506,222
F-5
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except share data)
Revenues:
Minimum rents
Percentage rents
Expense recoveries
Management, leasing, and development services
Other
Expenses:
Maintenance, taxes, utilities, and promotion
Other operating
Management, leasing, and development services
General and administrative
Restructuring charge (Note 2)
Interest expense
Depreciation and amortization
Nonoperating income (expense) (Notes 2 and 10)
Income before income tax expense, equity in income of Unconsolidated Joint Ventures, and gain
on dispositions, net of tax
Income tax expense (Note 3)
Equity in income of Unconsolidated Joint Ventures (Note 5)
Income before gain on dispositions, net of tax
Gain on dispositions, net of tax (Note 2)
Net income
Net income attributable to noncontrolling interests (Note 9)
Net income attributable to Taubman Centers, Inc.
Distributions to participating securities of TRG (Note 13)
Preferred stock dividends (Note 14)
Net income attributable to Taubman Centers, Inc. common shareowners
Net income
Other comprehensive income (Note 19):
Unrealized gain (loss) on interest rate instruments and other
Cumulative translation adjustment
Reclassification adjustment for amounts recognized in net income
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Taubman Centers, Inc.
Basic earnings per common share (Note 16)
Diluted earnings per common share (Note 16)
Year Ended December 31
2013
2012
2014
$
$
$
$
$
$
$
$
$
$
$
$
$
$
371,454
22,929
239,782
12,349
32,615
679,129
190,119
65,142
6,220
48,292
3,706
90,803
120,207
524,489
(42,807)
111,833
(2,267)
62,002
171,568
1,106,554
1,278,122
(385,109)
893,013
(6,018)
(23,138)
863,857
1,278,122
(18,004)
(7,193)
16,729
(8,468)
1,269,654
(382,825)
886,829
13.65
13.47
$
$
$
$
$
$
$
$
$
$
$
$
$
$
417,729
28,512
272,494
16,142
32,277
767,154
215,825
71,235
5,321
50,014
130,023
155,772
628,190
1,348
140,312
(3,409)
52,465
189,368
189,368
(56,778)
132,590
(1,749)
(20,933)
109,908
189,368
8,817
4,407
5,583
18,807
208,175
(62,443)
145,732
1.73
1.71
$
$
$
$
$
$
$
$
$
$
$
$
$
$
398,306
28,026
258,252
31,811
31,579
747,974
201,552
73,203
27,417
39,659
142,616
149,517
633,964
277
114,287
(4,964)
48,494
157,817
157,817
(51,643)
106,174
(1,612)
(21,051)
83,511
157,817
(4,506)
2,644
793
(1,069)
156,748
(51,238)
105,510
1.39
1.37
Weighted average number of common shares outstanding – basic
63,267,800
63,591,523
59,884,455
See notes to consolidated financial statements.
F-6
F
-
7
S
e
e
n
o
t
e
s
t
o
c
o
n
s
o
l
i
d
a
t
e
d
f
i
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
.
B
a
l
a
n
c
e
,
D
e
c
e
m
b
e
r
3
1
,
2
0
1
3
3
9
,
6
5
1
,
0
6
9
$
2
5
6
3
,
1
0
1
,
6
1
4
$
6
3
1
$
7
9
6
,
7
8
7
$
(
8
,
9
1
4
)
$
(
9
0
8
,
6
5
6
)
$
(
9
5
,
5
3
3
)
$
(
2
1
5
,
6
6
0
)
O
t
h
e
r
N
e
t
i
n
c
o
m
e
D
i
v
i
d
e
n
d
s
a
n
d
d
i
s
t
r
i
b
u
t
i
o
n
s
C
o
n
t
r
i
b
u
t
i
o
n
s
f
r
o
m
n
o
n
c
o
n
t
r
o
l
l
i
n
g
i
n
t
e
r
e
s
t
s
A
d
j
u
s
t
m
e
n
t
s
o
f
n
o
n
c
o
n
t
r
o
l
l
i
n
g
i
n
t
e
r
e
s
t
s
(
N
o
t
e
9
)
T
a
x
i
m
p
a
c
t
o
f
s
h
a
r
e
-
b
a
s
e
d
c
o
m
p
e
n
s
a
t
i
o
n
(
N
o
t
e
3
)
C
u
m
u
l
a
t
i
v
e
t
r
a
n
s
l
a
t
i
o
n
a
d
j
u
s
t
m
e
n
t
O
t
h
e
r
c
o
m
p
r
e
h
e
n
s
i
v
e
i
n
c
o
m
e
(
N
o
t
e
1
9
)
:
U
n
r
e
a
l
i
z
e
d
g
a
i
n
o
n
i
n
t
e
r
e
s
t
r
a
t
e
i
n
s
t
r
u
m
e
n
t
s
a
n
d
o
t
h
e
r
R
e
c
l
a
s
s
i
f
i
c
a
t
i
o
n
a
d
j
u
s
t
m
e
n
t
f
o
r
a
m
o
u
n
t
s
r
e
c
o
g
n
i
z
e
d
i
n
n
e
t
i
n
c
o
m
e
R
e
p
u
r
c
h
a
s
e
o
f
c
o
m
m
o
n
s
t
o
c
k
(
N
o
t
e
1
4
)
I
s
s
u
a
n
c
e
o
f
S
e
r
i
e
s
K
P
r
e
f
e
r
r
e
d
S
t
o
c
k
,
n
e
t
o
f
o
f
f
e
r
i
n
g
c
o
s
t
s
(
N
o
t
e
1
4
)
I
s
s
u
a
n
c
e
o
f
s
t
o
c
k
p
u
r
s
u
a
n
t
t
o
C
o
n
t
i
n
u
i
n
g
O
f
f
e
r
(
N
o
t
e
s
1
3
,
1
4
,
a
n
d
1
5
)
S
h
a
r
e
-
b
a
s
e
d
c
o
m
p
e
n
s
a
t
i
o
n
u
n
d
e
r
e
m
p
l
o
y
e
e
a
n
d
d
i
r
e
c
t
o
r
b
e
n
e
f
i
t
p
l
a
n
s
(
N
o
t
e
1
3
)
6
,
8
0
0
,
0
0
0
(
1
7
6
,
6
3
0
)
4
0
1
,
6
3
1
(
7
8
6
,
8
0
5
)
1
7
6
,
6
4
0
4
(
8
)
2
(
1
,
0
5
0
)
1
5
,
1
2
9
1
3
,
0
5
1
4
7
2
(
5
2
,
2
7
9
)
1
6
4
,
3
9
5
(
2
)
3
,
8
7
5
3
,
1
5
0
6
,
1
1
7
8
1
3
2
,
5
9
0
(
1
7
6
)
(
1
4
9
,
7
8
7
)
5
6
,
7
7
8
1
8
9
,
3
6
8
(
1
,
2
2
6
)
(
5
8
,
2
6
0
)
(
2
0
8
,
0
4
7
)
1
,
7
0
8
1
,
2
5
7
2
,
7
0
0
5
,
5
8
3
4
,
4
0
7
8
,
8
1
7
4
,
7
2
9
(
1
5
,
1
3
7
)
4
,
7
2
9
1
3
,
0
5
5
4
7
2
(
5
2
,
2
8
7
)
1
6
4
,
3
9
5
B
a
l
a
n
c
e
,
D
e
c
e
m
b
e
r
3
1
,
2
0
1
2
3
3
,
0
2
7
,
6
9
9
$
2
5
6
3
,
3
1
0
,
1
4
8
$
6
3
3
$
6
5
7
,
0
7
1
$
(
2
2
,
0
6
4
)
$
(
8
9
1
,
2
8
3
)
$
(
8
9
,
3
0
8
)
$
(
3
4
4
,
9
2
6
)
C
u
m
u
l
a
t
i
v
e
t
r
a
n
s
l
a
t
i
o
n
a
d
j
u
s
t
m
e
n
t
R
e
c
l
a
s
s
i
f
i
c
a
t
i
o
n
a
d
j
u
s
t
m
e
n
t
f
o
r
a
m
o
u
n
t
s
r
e
c
o
g
n
i
z
e
d
i
n
n
e
t
i
n
c
o
m
e
a
t
t
r
i
b
u
t
a
b
l
e
U
n
r
e
a
l
i
z
e
d
t
o
r
e
d
e
e
m
a
b
l
e
n
o
n
c
o
n
t
r
o
l
l
i
n
g
i
n
t
e
r
e
s
t
s
)
(
N
o
t
e
9
)
l
o
s
s
o
n
i
n
t
e
r
e
s
t
r
a
t
e
i
n
s
t
r
u
m
e
n
t
s
a
n
d
o
t
h
e
r
(
e
x
c
l
u
d
e
s
$
4
9
o
f
o
t
h
e
r
c
o
m
p
r
e
h
e
n
s
i
v
e
l
o
s
s
O
t
h
e
r
c
o
m
p
r
e
h
e
n
s
i
v
e
i
n
c
o
m
e
(
N
o
t
e
1
9
)
:
N
e
t
i
n
c
o
m
e
(
e
x
c
l
u
d
e
s
$
9
7
6
o
f
n
e
t
l
o
s
s
a
t
t
r
i
b
u
t
a
b
l
e
t
o
r
e
d
e
e
m
a
b
l
e
n
o
n
c
o
n
t
r
o
l
l
i
n
g
i
n
t
e
r
e
s
t
s
)
(
N
o
t
e
9
)
O
t
h
e
r
i
n
t
e
r
e
s
t
s
)
(
N
o
t
e
9
)
T
a
x
i
m
p
a
c
t
o
f
s
h
a
r
e
-
b
a
s
e
d
c
o
m
p
e
n
s
a
t
i
o
n
(
N
o
t
e
3
)
A
c
q
u
i
s
i
t
i
o
n
o
f
a
d
d
i
t
i
o
n
a
l
o
w
n
e
r
s
h
i
p
i
n
t
e
r
e
s
t
i
n
I
n
t
e
r
n
a
t
i
o
n
a
l
P
l
a
z
a
E
x
p
i
r
a
t
i
o
n
o
f
r
e
d
e
m
p
t
i
o
n
f
e
a
t
u
r
e
o
n
r
e
d
e
e
m
a
b
l
e
n
o
n
c
o
n
t
r
o
l
l
i
n
g
i
n
t
e
r
e
s
t
s
(
N
o
t
e
9
)
r
e
d
e
e
m
a
b
l
e
n
o
n
c
o
n
t
r
o
l
l
i
n
g
i
n
t
e
r
e
s
t
s
)
(
N
o
t
e
9
)
C
o
n
t
r
i
b
u
t
i
o
n
s
f
r
o
m
n
o
n
c
o
n
t
r
o
l
l
i
n
g
i
n
t
e
r
e
s
t
s
(
e
x
c
l
u
d
e
s
$
2
3
1
o
f
c
o
n
t
r
i
b
u
t
i
o
n
s
a
t
t
r
i
b
u
t
a
b
l
e
t
o
D
i
v
i
d
e
n
d
s
a
n
d
d
i
s
t
r
i
b
u
t
i
o
n
s
(
e
x
c
l
u
d
e
s
$
2
,
4
5
6
o
f
d
i
v
i
d
e
n
d
s
a
t
t
r
i
b
u
t
a
b
l
e
t
o
r
e
d
e
e
m
a
b
l
e
n
o
n
c
o
n
t
r
o
l
l
i
n
g
A
d
j
u
s
t
m
e
n
t
s
o
f
n
o
n
c
o
n
t
r
o
l
l
i
n
g
i
n
t
e
r
e
s
t
s
(
N
o
t
e
s
2
a
n
d
9
)
(
1
,
9
0
0
)
S
h
a
r
e
-
b
a
s
e
d
c
o
m
p
e
n
s
a
t
i
o
n
u
n
d
e
r
e
m
p
l
o
y
e
e
a
n
d
d
i
r
e
c
t
o
r
b
e
n
e
f
i
t
p
l
a
n
s
(
N
o
t
e
1
3
)
1
,
2
8
0
,
2
4
9
R
e
d
e
m
p
t
i
o
n
o
f
S
e
r
i
e
s
G
a
n
d
H
P
r
e
f
e
r
r
e
d
S
t
o
c
k
(
N
o
t
e
1
4
)
I
s
s
u
a
n
c
e
o
f
c
o
m
m
o
n
s
t
o
c
k
,
n
e
t
o
f
o
f
f
e
r
i
n
g
c
o
s
t
s
(
N
o
t
e
1
4
)
I
s
s
u
a
n
c
e
o
f
S
e
r
i
e
s
J
P
r
e
f
e
r
r
e
d
S
t
o
c
k
,
n
e
t
o
f
o
f
f
e
r
i
n
g
c
o
s
t
s
(
N
o
t
e
1
4
)
I
s
s
u
a
n
c
e
o
f
s
t
o
c
k
p
u
r
s
u
a
n
t
t
o
C
o
n
t
i
n
u
i
n
g
O
f
f
e
r
(
N
o
t
e
s
1
3
,
1
4
,
a
n
d
1
5
)
(
7
,
4
8
0
,
0
0
0
)
7
,
7
0
0
,
0
0
0
(
1
,
1
3
2
,
3
5
9
)
(
1
)
1
,
1
3
2
,
4
2
4
2
,
8
7
5
,
0
0
0
1
3
1
1
2
9
1
4
,
9
0
3
(
3
3
9
,
1
7
0
)
7
2
,
0
3
5
1
,
0
2
0
1
9
,
8
3
3
(
1
8
0
,
5
8
8
)
1
8
6
,
2
1
5
2
0
8
,
9
1
0
(
1
0
)
1
,
8
8
8
5
6
6
(
3
,
1
1
7
)
1
0
6
,
1
7
4
(
1
4
0
)
(
1
3
4
,
2
7
7
)
2
2
7
7
5
6
2
,
6
4
4
7
9
3
(
1
,
3
4
0
)
(
4
,
4
5
7
)
5
2
,
6
1
9
1
5
8
,
7
9
3
(
1
4
0
)
(
6
4
,
8
6
8
)
(
1
9
9
,
1
4
5
)
4
,
5
6
7
4
,
5
6
7
6
,
2
1
2
(
2
1
,
1
1
5
)
6
4
,
1
7
0
(
2
7
5
,
0
0
0
)
7
2
,
0
3
5
1
,
0
2
0
1
9
,
8
4
6
(
1
8
0
,
5
8
8
)
1
8
6
,
2
1
5
2
0
8
,
9
3
9
B
a
l
a
n
c
e
,
J
a
n
u
a
r
y
1
,
2
0
1
2
3
3
,
9
4
1
,
9
5
8
$
2
6
5
8
,
0
2
2
,
4
7
5
$
5
8
0
$
6
7
3
,
9
2
3
$
(
2
7
,
6
1
3
)
$
(
8
6
3
,
0
4
0
)
$
(
1
2
4
,
3
2
4
)
$
(
3
4
0
,
4
4
8
)
(
i
n
t
h
o
u
s
a
n
d
s
,
e
x
c
e
p
t
s
h
a
r
e
d
a
t
a
)
Y
E
A
R
S
E
N
D
E
D
D
E
C
E
M
B
E
R
3
1
,
2
0
1
4
,
2
0
1
3
,
A
N
D
2
0
1
2
C
O
N
S
O
L
I
D
A
T
E
D
S
T
A
T
E
M
E
N
T
O
F
C
H
A
N
G
E
S
I
N
E
Q
U
I
T
Y
T
A
U
B
M
A
N
C
E
N
T
E
R
S
,
I
N
C
.
P
r
e
f
e
r
r
e
d
S
t
o
c
k
C
o
m
m
o
n
S
t
o
c
k
S
h
a
r
e
s
A
m
o
u
n
t
S
h
a
r
e
s
A
m
o
u
n
t
C
a
p
i
t
a
l
P
a
i
d
-
I
n
I
n
c
o
m
e
(
L
o
s
s
)
C
o
m
p
r
e
h
e
n
s
i
v
e
A
c
c
u
m
u
l
a
t
e
d
O
t
h
e
r
T
a
u
b
m
a
n
C
e
n
t
e
r
s
,
I
n
c
.
S
h
a
r
e
o
w
n
e
r
s
’
E
q
u
i
t
y
I
n
c
o
m
e
E
x
c
e
s
s
o
f
N
e
t
D
i
v
i
d
e
n
d
s
i
n
I
n
t
e
r
e
s
t
s
N
o
n
c
o
n
t
r
o
l
l
i
n
g
N
o
n
-
R
e
d
e
e
m
a
b
l
e
E
q
u
i
t
y
T
o
t
a
l
.
C
N
I
,
S
R
E
T
N
E
C
N
A
M
B
U
A
T
Y
T
I
U
Q
E
N
I
S
E
G
N
A
H
C
F
O
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
2
1
0
2
D
N
A
,
3
1
0
2
,
4
1
0
2
,
1
3
R
E
B
M
E
C
E
D
D
E
D
N
E
S
R
A
E
Y
)
a
t
a
d
e
r
a
h
s
t
p
e
c
x
e
,
s
d
n
a
s
u
o
h
t
n
i
(
l
a
t
o
T
y
t
i
u
q
E
e
l
b
a
m
e
e
d
e
R
-
n
o
N
g
n
i
l
l
o
r
t
n
o
c
n
o
N
s
t
s
e
r
e
t
n
I
n
i
s
d
n
e
d
i
v
i
D
t
e
N
f
o
s
s
e
c
x
E
e
m
o
c
n
I
r
e
h
t
O
d
e
t
a
l
u
m
u
c
c
A
e
v
i
s
n
e
h
e
r
p
m
o
C
)
s
s
o
L
(
e
m
o
c
n
I
n
I
-
d
i
a
P
l
a
t
i
p
a
C
t
n
u
o
m
A
s
e
r
a
h
S
t
n
u
o
m
A
s
e
r
a
h
S
k
c
o
t
S
n
o
m
m
o
C
k
c
o
t
S
d
e
r
r
e
f
e
r
P
y
t
i
u
q
E
’
s
r
e
n
w
o
e
r
a
h
S
.
c
n
I
,
s
r
e
t
n
e
C
n
a
m
b
u
a
T
)
0
6
6
,
5
1
2
(
$
)
3
3
5
,
5
9
(
$
)
6
5
6
,
8
0
9
(
$
)
4
1
9
,
8
(
$
7
8
7
,
6
9
7
$
1
3
6
$
4
1
6
,
1
0
1
,
3
6
5
2
$
9
6
0
,
1
5
6
,
9
3
3
1
0
2
,
1
3
r
e
b
m
e
c
e
D
,
e
c
n
a
l
a
B
)
7
1
(
7
8
2
3
9
,
8
1
5
4
3
,
2
2
5
4
3
,
2
2
)
5
8
6
,
4
7
6
(
)
4
5
9
,
7
0
2
(
)
3
1
7
(
0
1
2
2
1
,
8
7
2
,
1
9
0
1
,
5
8
3
)
4
0
0
,
8
1
(
)
3
9
1
,
7
(
9
2
7
,
6
1
)
1
2
2
,
5
(
)
5
4
0
,
2
(
2
8
9
,
4
)
1
3
7
,
6
6
4
(
)
4
1
8
(
3
1
0
,
3
9
8
)
3
8
7
,
2
1
(
)
8
4
1
,
5
(
7
4
7
,
1
1
)
3
1
1
(
0
3
)
7
1
(
0
3
9
,
8
1
2
)
6
6
2
(
0
0
5
,
5
3
1
6
5
,
7
8
1
)
0
0
5
,
5
3
(
)
5
1
d
n
a
,
4
1
,
3
1
s
e
t
o
N
(
r
e
f
f
O
g
n
i
u
n
i
t
n
o
C
o
t
t
n
a
u
s
r
u
p
k
c
o
t
s
f
o
e
c
n
a
u
s
s
I
)
3
1
e
t
o
N
(
s
n
a
l
p
t
i
f
e
n
e
b
r
o
t
c
e
r
i
d
d
n
a
e
e
y
o
l
p
m
e
r
e
d
n
u
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
S
)
4
1
e
t
o
N
(
k
c
o
t
s
n
o
m
m
o
c
f
o
e
s
a
h
c
r
u
p
e
R
7
8
3
8
1
9
1
3
4
,
1
e
m
o
c
n
i
t
e
n
n
i
d
e
z
i
n
g
o
c
e
r
s
t
n
u
o
m
a
r
o
f
t
n
e
m
t
s
u
j
d
a
n
o
i
t
a
c
i
f
i
s
s
a
l
c
e
R
r
e
h
t
o
d
n
a
s
t
n
e
m
u
r
t
s
n
i
e
t
a
r
t
s
e
r
e
t
n
i
n
o
s
s
o
l
d
e
z
i
l
a
e
r
n
U
:
)
9
1
e
t
o
N
(
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
t
n
e
m
t
s
u
j
d
a
n
o
i
t
a
l
s
n
a
r
t
e
v
i
t
a
l
u
m
u
C
)
3
e
t
o
N
(
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
s
f
o
t
c
a
p
m
i
x
a
T
)
9
e
t
o
N
(
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
f
o
s
t
n
e
m
t
s
u
j
d
A
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
m
o
r
f
s
n
o
i
t
u
b
i
r
t
n
o
C
s
n
o
i
t
u
b
i
r
t
s
i
d
d
n
a
s
d
n
e
d
i
v
i
D
e
m
o
c
n
i
t
e
N
r
e
h
t
O
3
4
9
,
9
1
4
$
0
8
5
,
1
0
1
$
)
8
8
1
,
3
8
4
(
$
)
8
6
0
,
5
1
(
$
1
6
9
,
5
1
8
$
3
3
6
$
9
0
4
,
4
2
3
,
3
6
5
2
$
0
0
0
,
7
1
6
,
9
3
4
1
0
2
,
1
3
r
e
b
m
e
c
e
D
,
e
c
n
a
l
a
B
.
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
i
f
d
e
t
a
d
i
l
o
s
n
o
c
o
t
s
e
t
o
n
e
e
S
8
-
F
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Provision for bad debts
Gain on dispositions (Note 2)
Debt extinguishment costs (Note 2)
Discontinuation of hedge accounting (Note 10)
Income from Unconsolidated Joint Ventures in excess of distributions
Other
Increase (decrease) in cash attributable to changes in assets and liabilities:
Receivables, restricted cash, deferred charges, and other assets
Accounts payable and other liabilities
Net Cash Provided By Operating Activities
Cash Flows From Investing Activities:
Additions to properties
Cash in escrow or deposits related to center construction projects (Notes 7 and 8)
Proceeds from dispositions, net of transaction costs (Note 2)
Release of restricted cash (Note 2)
Collection and release of TCBL related proceeds (Note 2)
Contributions to Unconsolidated Joint Ventures (Note 2)
Distributions from Unconsolidated Joint Ventures in excess of income
Other
Net Cash Provided By (Used In) Investing Activities
Cash Flows From Financing Activities:
Debt proceeds
Extinguishment of debt (Note 2)
Other debt payments
Repayment of installment notes
Debt issuance costs
Repurchase of common stock (Note 14)
Issuance of common stock, net of offering costs
Issuance of common stock and/or partnership units in connection with incentive plans
Issuance of Series K Preferred Stock, net of offering costs
Issuance of Series J Preferred Stock, net of offering costs
Redemptions of Series G and H Preferred Stock
Acquisition of noncontrolling interest in International Plaza
Distributions to noncontrolling interests
Distributions to participating securities of TRG (Note 2)
Contributions from noncontrolling interests
Cash dividends to preferred shareowners
Cash dividends to common shareowners (Note 2)
Other
Net Cash Provided By (Used In) Financing Activities
Net Increase In Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
Year Ended December 31
2013
2012
2014
$
1,278,122
$
189,368
$
157,817
155,772
489
149,517
1,397
(3,076)
11,315
(595)
16,476
363,686
$
(12,053)
29,557
371,372
$
12,165
(24,445)
27,898
324,349
120,207
2,900
(1,116,287)
36,372
7,763
18,728
(442,991) $
(70,607)
1,776,394
(45,974)
68,388
7,329
1,292,539
163,779
(658,092)
(264,884)
$
$
$
(8,208)
(17)
(943)
(283,864) $
(247,637)
12,903
(108,918)
8,446
$
(371,433) $
289,389
4,414
(146,458)
220,662
5,974
126,344
429,745
$
105,740
(317,365)
(9,479)
(52,287)
(1,644)
164,395
(11,462)
(281,467)
(4,711)
208,939
6,503
186,215
(187,000)
(275,000)
(67,325)
(1,612)
4,798
(14,639)
(111,543)
(105)
(442,669)
8,024
24,033
32,057
(207,954)
(6,018)
22,345
(23,138)
(437,665)
(1,420,795) $
235,430
$
40,993
(58,260)
(1,749)
4,729
(20,933)
(127,105)
(1,050)
8,997
8,936
32,057
$
$
276,423
$
40,993
$
$
$
$
$
$
$
$
$
See notes to consolidated financial statements.
F-9
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Organization and Basis of Presentation
General
Taubman Centers, Inc. (the Company or TCO) is a Michigan corporation that operates as a self-administered and self-managed
real estate investment trust (REIT). The Taubman Realty Group Limited Partnership (the Operating Partnership or TRG) is a
majority-owned partnership subsidiary of TCO that owns direct or indirect interests in all of the Company’s real estate properties.
In this report, the term “Company" refers to TCO, the Operating Partnership, and/or the Operating Partnership's subsidiaries as
the context may require. The Company engages in the ownership, management, leasing, acquisition, disposition, development,
and expansion of regional and super-regional retail shopping centers and interests therein. The Company’s owned portfolio as of
December 31, 2014 included 18 urban and suburban shopping centers operating in 10 states.
Taubman Properties Asia LLC and its subsidiaries (Taubman Asia), which is the platform for the Company’s operations and
developments in China and South Korea, is headquartered in Hong Kong.
Dollar amounts presented in tables within the notes to the financial statements are stated in thousands, except share data or as
otherwise noted.
Consolidation
The consolidated financial statements of the Company include all accounts of the Company, the Operating Partnership, and its
consolidated subsidiaries, including The Taubman Company LLC (the Manager) and Taubman Asia. All intercompany transactions
have been eliminated. The entities included in these consolidated financial statements are separate legal entities and maintain
records and books of account separate from any other entity. However, inclusion of these separate entities in the consolidated
financial statements does not mean that the assets and credit of each of these legal entities are available to satisfy the debts or other
obligations of any other such legal entity included in the consolidated financial statements.
Investments in entities not controlled but over which the Company may exercise significant influence (Unconsolidated Joint
Ventures or UJVs) are accounted for under the equity method. The Company has evaluated its investments in the Unconsolidated
Joint Ventures under guidance for determining whether an entity is a variable interest entity and has concluded that the ventures
are not variable interest entities. Accordingly, the Company accounts for its interests in these entities under general accounting
standards for investments in real estate ventures (including guidance for determining effective control of a limited partnership or
similar entity). The Company’s partners or other owners in these Unconsolidated Joint Ventures have substantive participating
rights including approval rights over annual operating budgets, capital spending, financing, admission of new partners/members,
or sale of the properties and the Company has concluded that the equity method of accounting is appropriate for these interests.
Specifically, the Company’s 79% and 50.1% investments in Westfarms and International Plaza, respectively, are through general
partnerships in which the other general partners have participating rights over annual operating budgets, capital spending,
refinancing, or sale of the property.
The Operating Partnership
At December 31, 2014 and December 31, 2013, the Operating Partnership’s equity included two classes of preferred equity
(Series J and K Preferred Equity) and the net equity of the partnership unitholders (Note 14). Net income and distributions of the
Operating Partnership are allocable first to the preferred equity interests, and the remaining amounts to the general and limited
partners in the Operating Partnership in accordance with their percentage ownership. The Series J and K Preferred Equity are
owned by the Company and are eliminated in consolidation.
F-10
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The partnership equity of the Operating Partnership and the Company's ownership therein are shown below:
TRG units
outstanding at
December 31
TRG units owned
by TCO at
December 31(1)
88,459,859
88,271,133
88,656,297
63,324,409
63,101,614
63,310,148
TRG units owned
by noncontrolling
interests at
December 31
25,135,450
25,169,519
25,346,149
TCO's %
interest in TRG
at December 31
72%
71
71
TCO's average
interest % in
TRG
72%
72
69
Year
2014
2013
2012
(1) There is a one-for-one relationship between TRG units owned by TCO and TCO common shares outstanding; amounts in this column are equal to
TCO’s common shares outstanding as of the specified dates.
Outstanding voting securities of the Company at December 31, 2014 consisted of 25,117,000 shares of Series B Preferred Stock
(Note 14) and 63,324,409 shares of Common Stock.
Revenue Recognition
Shopping center space is generally leased to tenants under short and intermediate term leases that are accounted for as operating
leases. Minimum rents are recognized on the straight-line method. Percentage rent is accrued when lessees' specified sales targets
have been met. For traditional net leases, where tenants reimburse the landlord for an allocation of reimbursable costs incurred,
the Company recognizes revenue in the period the applicable costs are chargeable to tenants. For tenants paying a fixed common
area maintenance charge (which typically includes fixed increases over the lease term), the Company recognizes revenue on a
straight-line basis over the lease terms. Management, leasing, and development revenue is recognized as services are rendered,
when fees due are determinable, and collectibility is reasonably assured. Fees for management, leasing, and development services
are established under contracts and are generally based on negotiated rates, percentages of cash receipts, and/or actual costs
incurred. Fixed-fee development services contracts are generally accounted for under the percentage-of-completion method, using
cost to cost measurements of progress. Profits on real estate sales are recognized whenever (1) a sale is consummated, (2) the
buyer has demonstrated an adequate commitment to pay for the property, (3) the Company’s receivable is not subject to future
subordination, and (4) the Company has transferred to the buyer the risks and rewards of ownership. Other revenues, including
fees paid by tenants to terminate their leases, are recognized when fees due are determinable, no further actions or services are
required to be performed by the Company, and collectibility is reasonably assured. Taxes assessed by government authorities on
revenue-producing transactions, such as sales, use, and value-added taxes, are primarily accounted for on a net basis on the
Company’s income statement.
Allowance for Doubtful Accounts and Notes
The Company records a provision for losses on accounts receivable to reduce them to the amount estimated to be collectible.
The Company records a provision for losses on notes receivable to reduce them to the present value of expected future cash flows
discounted at the loans’ effective interest rates or the fair value of the collateral if the loans are collateral dependent.
Depreciation and Amortization
Buildings, improvements, and equipment are primarily depreciated on straight-line bases over the estimated useful lives of the
assets, which generally range from 3 to 50 years. Capital expenditures that are recoverable from tenants are generally depreciated
over the estimated recovery period. Intangible assets are amortized on a straight-line basis over the estimated useful lives of the
assets. Tenant allowances are depreciated on a straight-line basis over the shorter of the useful life of the leasehold improvements
or the lease term. Deferred leasing costs are amortized on a straight-line basis over the lives of the related leases. In the event of
early termination of such leases, the unrecoverable net book values of the assets are recognized as depreciation and amortization
expense in the period of termination.
F-11
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalization
Direct and indirect costs that are clearly related to the acquisition, development, construction, and improvement of properties
are capitalized. Compensation costs are allocated based on actual time spent on a project. Costs incurred on real estate for ground
leases, property taxes, insurance, and interest costs for qualifying assets are capitalized during periods in which activities necessary
to get the property ready for its intended use are in progress.
The viability of all projects under construction or development, including those owned by Unconsolidated Joint Ventures, are
regularly evaluated on an individual basis under the accounting for abandonment of assets or changes in use. To the extent a project,
or individual components of the project, are no longer considered to have value, the related capitalized costs are charged against
operations. Additionally, all properties are reviewed for impairment on an individual basis whenever events or changes in
circumstances indicate that their carrying value may not be recoverable. Impairment of a shopping center owned by consolidated
entities is recognized when the sum of expected cash flows (undiscounted and without interest charges) is less than the carrying
value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint Venture is recognized when
the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline
in value, including the results of discounted cash flow and other valuation techniques. To the extent impairment has occurred, the
excess carrying value of the asset over its estimated fair value is charged to income.
In leasing a shopping center space, the Company may provide funding to the lessee through a tenant allowance. In accounting
for a tenant allowance, the Company determines whether the allowance represents funding for the construction of leasehold
improvements and evaluates the ownership, for accounting purposes, of such improvements. If the Company is considered the
owner of the leasehold improvements for accounting purposes, the Company capitalizes the amount of the tenant allowance and
depreciates it over the shorter of the useful life of the leasehold improvements or the lease term. If the tenant allowance represents
a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of
the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease
term as a reduction of rental revenue. Factors considered during this evaluation usually include (1) who holds legal title to the
improvements, (2) evidentiary requirements concerning the spending of the tenant allowance, and (3) other controlling rights
provided by the lease agreement (e.g. unilateral control of the tenant space during the build-out process). Determination of the
accounting for a tenant allowance is made on a case-by-case basis, considering the facts and circumstances of the individual tenant
lease. Substantially all of the Company’s tenant allowances have been determined to be leasehold improvements.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of 90 days or less at the date of purchase. The Company
deposits cash and cash equivalents with institutions with high credit quality. From time to time, cash and cash equivalents may
be in excess of FDIC insurance limits. Included in cash equivalents at December 31, 2014 was $251.0 million that is not insured
or guaranteed by the FDIC or any other government agency. The majority of the $251.0 million was invested across three separate
financial institutions as of December 31, 2014.
The Company is required to escrow cash balances for specific uses stipulated by certain of its lenders. As of December 31, 2014
and December 31, 2013, the Company’s cash balances restricted for these uses were $37.5 million and $5.0 million, respectively.
As of December 31, 2014, $33.6 million of the $37.5 million of restricted cash was required under certain debt agreements to be
in escrow for certain major construction projects. Included in restricted cash is $36.1 million at December 31, 2014 on deposit in
excess of the FDIC insured limit.
F-12
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquisitions
The Company recognizes the assets acquired, the liabilities assumed, and any noncontrolling interests in the acquiree at their
fair values as of the acquisition date. The cost of acquiring a controlling ownership interest or an additional ownership interest (if
not already consolidated) is allocated to the tangible assets acquired (such as land and building) and to any identifiable intangible
assets based on their estimated fair values at the date of acquisition. The fair value of a property is determined on an “as-if-vacant”
basis. Management considers various factors in estimating the "as-if-vacant" value including an estimated lease up period, lost
rents, and carrying costs. The identifiable intangible assets would include the estimated value of “in-place” leases, above and
below market “in-place” leases, and tenant relationships. The portion of the purchase price that management determines should
be allocated to identifiable intangible assets is amortized in depreciation and amortization or as an adjustment to rental revenue,
as appropriate, over the estimated life of the associated intangible asset (for instance, the remaining life of the associated tenant
lease). The Company records goodwill when the cost of an acquired entity exceeds the net of the amounts assigned to assets
acquired and liabilities assumed. Costs related to the acquisition of a controlling interest, including due diligence costs, professional
fees, and other costs to effect an acquisition, are expensed as incurred.
Deferred Charges and Other Assets
Direct financing costs are deferred and amortized on a straight-line basis, which approximates the effective interest method,
over the terms of the related agreements as a component of interest expense. Direct costs related to successful leasing activities
are capitalized and amortized on a straight-line basis over the lives of the related leases. Cash expenditures for leasing costs are
recognized in the Statement of Cash Flows as operating activities. All other deferred charges are amortized on a straight-line basis
over the terms of the agreements to which they relate.
Share-Based Compensation Plans
The cost of share-based compensation is measured at the grant date, based on the calculated fair value of the award, and is
recognized over the requisite employee service period which is generally the vesting period of the grant. The Company recognizes
compensation costs for awards with graded vesting schedules on a straight-line basis over the requisite service period for each
separately vesting portion of the award as if the award was, in-substance, multiple awards.
Interest Rate Hedging Agreements
All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If a derivative
is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other
comprehensive income (OCI) and are recognized in the income statement when the hedged item affects income. Ineffective portions
of changes in the fair value of a cash flow hedge are recognized in the Company’s income generally as interest expense (Note 10).
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk
management objectives and strategies for undertaking various hedge transactions. The Company assesses, both at the inception
of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in the cash flows of the hedged items.
F-13
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
The Company operates in such a manner as to qualify as a REIT under the applicable provisions of the Internal Revenue Code.
To qualify as a REIT, the Company must distribute at least 90% of its REIT taxable income, determined without regard to the
dividends paid deduction and excluding net capital gains, to its shareowners and meet certain other requirements. As a REIT, the
Company is entitled to a dividends paid deduction for the dividends it pays to its shareowners. Therefore, the Company will
generally not be subject to federal income taxes as long as it currently distributes to its shareowners an amount equal to or in
excess of its taxable income. REIT qualification reduces but does not eliminate the amount of state and local taxes paid by the
Company. In addition, a REIT may be subject to certain excise taxes if it engages in certain activities.
No provision for federal income taxes for consolidated partnerships has been made, as such taxes are the responsibility of the
individual partners. There are certain state income taxes incurred which are provided for in the Company’s financial statements.
The Company has made Taxable REIT Subsidiary (TRS) elections for all of its corporate subsidiaries pursuant to section 856
(I) of the Internal Revenue Code. The TRSs are subject to corporate level income taxes, including federal, state, and certain foreign
income taxes for foreign operations, which are provided for in the Company’s financial statements.
Deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for
financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced
by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence,
including expected taxable earnings. The Company’s temporary differences primarily relate to deferred compensation, depreciation,
and net operating loss carryforwards.
Noncontrolling Interests
Noncontrolling interests in the Company are comprised of the ownership interests of (1) noncontrolling interests in the Operating
Partnership and (2) the noncontrolling interests in joint ventures controlled by the Company through ownership or contractual
arrangements. Consolidated net income and comprehensive income includes amounts attributable to the Company and the
noncontrolling interests. Transactions that change the Company's ownership interest in a subsidiary are accounted for as equity
transactions if the Company retains its controlling financial interest in the subsidiary.
The Company evaluates whether noncontrolling interests are subject to any redemption features outside of the Company's control
that would result in presentation outside of permanent equity pursuant to general accounting standards regarding the classification
and measurement of redeemable equity instruments. Certain noncontrolling interests in the Operating Partnership and consolidated
ventures of the Company qualify as redeemable noncontrolling interests (Note 9). To the extent such noncontrolling interests are
currently redeemable or it is probable that they will eventually become redeemable, these interests are adjusted to the greater of
their redemption value or their carrying value at each balance sheet date.
Foreign Currency Translation
The Company has certain entities in Asia for which the functional currency is the local currency. The assets and liabilities of
the entities are translated from their functional currency into U.S. Dollars at the rate of exchange in effect on the balance sheet
date. Income statement accounts are generally translated using the average exchange rate for the period. Income statement amounts
of significant transactions are translated at the rate in effect as of the date of the transaction. The Company's share of unrealized
gains and losses resulting from the translation of the entities' financial statements are reflected in shareholders' equity as a component
of Accumulated Other Comprehensive Income (loss) in the Company's Consolidated Balance Sheet (Note 19).
Discontinued Operations
Prior to 2014, the Company reclassified to discontinued operations any material operations and gains or losses on disposal
related to properties that are held for sale or disposed of during the period in accordance with the applicable accounting standards.
In 2014 the Company early adopted Accounting Standards Update (ASU) No. 2014-08, "Reporting Discontinued Operations and
Disclosures of Disposals of Components of an Entity" issued by the Financial Accounting Standards Board (FASB). ASU No.
2014-08 changes the definition of a discontinued operation to include only those disposals of components of an entity that represent
a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The Company applied the
revised definition to all disposals on a prospective basis beginning January 1, 2014.
F-14
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Segments and Related Disclosures
The Company has one reportable operating segment: it owns, develops, and manages regional shopping centers. The Company
has aggregated its shopping centers into this one reportable segment, as the shopping centers share similar economic characteristics
and other similarities. The shopping centers are located in major metropolitan areas, have similar tenants (most of which are
national chains), are operated using consistent business strategies, and are expected to exhibit similar long-term financial
performance. Earnings before interest, income taxes, depreciation, and amortization (EBITDA) is often used by the Company's
chief operating decision makers in assessing segment operating performance. EBITDA is believed to be a useful indicator of
operating performance as it is customary in the real estate and shopping center business to evaluate the performance of properties
on a basis unaffected by capital structure.
No single retail company represents 10% or more of the Company's revenues. Although the Company does business in China
and South Korea, there are not yet any material revenues from customers or long-lived assets attributable to a country other than
the United States of America. At December 31, 2014, the Company's investments in Asia are in Unconsolidated Joint Ventures
and accounted for under the equity method.
F-15
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Dispositions, Acquisitions, and Developments
Dispositions
Sale of Centers to Starwood
In October 2014, the Company completed the disposition of a portfolio of seven centers to an affiliate of the Starwood Capital
Group (Starwood). The following centers (Sale Centers) were included in the agreements: MacArthur Center in Norfolk, Virginia,
Stony Point Fashion Park in Richmond, Virginia, Northlake Mall in Charlotte, North Carolina, The Mall at Wellington Green in
Wellington, Florida, The Shops at Willow Bend in Plano, Texas, The Mall at Partridge Creek in Clinton Township, Michigan, and
Fairlane Town Center in Dearborn, Michigan.
In connection with the sale, the Company received consideration of $1.4 billion. The proceeds were used to prepay or defease
$623 million of property-level debt and accrued interest and to pay $51.2 million of transaction and debt extinguishment costs.
The net cash proceeds were used to pay $424.3 million to shareholders and unitholders as a special dividend (Note 3). The debt
extinguished consisted of four loans secured by Northlake Mall, The Mall at Wellington Green, MacArthur Center, and The Mall
at Partridge Creek (Note 8).
The Company recognized a gain of $629.7 million ($606.2 million at TRG's beneficial share) as a result of the disposition of
the Sale Centers. In addition, the Company recorded debt extinguishment costs of $36.4 million, ($36.0 million at TRG's beneficial
share) which were classified as Nonoperating Expense on the Consolidated Statement of Operations and Comprehensive Income.
In 2014, the Company incurred $7.8 million of expenses ($7.4 million at TRG's beneficial share) related to the discontinuation
of hedge accounting on the swap previously designated to hedge the MacArthur Center note payable. In addition, the Company
incurred $3.3 million of disposition costs related to the Sale Centers. These expenses are included in Nonoperating Expense on
the Consolidated Statement of Operations and Comprehensive Income.
As a result of the sale, the Company underwent a restructuring plan to reduce its workforce across various areas of the organization.
In 2014, the Company incurred $3.7 million of expenses related to the reduction in workforce. These expenses are classified as
Restructuring Charge on the Consolidated Statement of Operations and Comprehensive Income. As of December 31, 2014, $1.7
million of restructuring costs were unpaid and remained accrued.
International Plaza
In January 2014, the Company sold a total of 49.9% of the Company's interests in the entity that owns International Plaza,
including certain governance rights, for $499 million (excluding transaction costs), which consisted of $337 million of cash and
approximately $162 million of beneficial interest in debt. A gain of $368 million (net of tax of $9.7 million) was recognized as a
result of the transaction. The Company's ownership in the center decreased to a noncontrolling 50.1% interest, which is accounted
for under the equity method subsequent to the disposition.
Arizona Mills/Oyster Bay
In January 2014, the Company completed the sale of its 50% interest in Arizona Mills, an Unconsolidated Joint Venture, and
land in Syosset, New York related to the former Oyster Bay project, to Simon Property Group (SPG). The consideration, excluding
transaction costs, consisted of $60 million of cash and 555,150 partnership units in Simon Property Group Limited Partnership.
The number of partnership units received was determined based on a value of $154.91 per unit. The fair value of the partnership
units recognized for accounting purposes was $77.7 million, after considering the one-year restriction on the sale of these partnership
units (Note 17). The number of partnership units subsequently increased to 590,124, in lieu of the Company's participation in a
distribution of certain partnership units of another entity by SPG and Simon Property Group Limited Partnership. The increase in
the number of partnership units was neutral to the market value of the Company's holdings as of the transaction date. The Company's
investment in the partnership units is classified within Deferred Charges and Other Assets on the Consolidated Balance Sheet. As
a result of the sale, the Company was relieved of its $84 million share of the $167 million mortgage loan outstanding on Arizona
Mills at the time of the sale. A gain of $109 million was recognized as a result of the transaction.
F-16
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TCBL
In November 2012, assets of the Taubman TCBL business were sold for $15.5 million. Additionally, the purchase price was
adjusted for certain working capital and other transition costs. The total sale consideration was approximately equal to Taubman's
investment in the business. As part of the sale, the non-controlling owners in Taubman TCBL relinquished the capital that was
credited to them in connection with the Company's 2011 acquisition of Taubman TCBL. In connection with the sale, the Company
received cash of approximately $4.4 million, while the remaining consideration consisted of approximately $3.6 million held in
an escrow account pending receipt of consideration in an equivalent amount of Chinese Renminbi, a note receivable of
approximately $8.5 million, and other receivables of approximately $0.8 million. Additionally, the Company incurred a tax liability
of $3.2 million, which is included within Income Tax Expense on the Consolidated Statement of Operations and Comprehensive
Income during 2012. In 2013, the Company collected the remaining consideration from the sale.
Acquisitions
Purchase of U.S. Headquarters Building
In February 2014, the Company purchased the U.S. headquarters building located in Bloomfield Hills, Michigan for
approximately $16.1 million from an affiliate of the Taubman family. In exchange for the building, the Company assumed the
$17.4 million, 5.90% fixed rate loan on the building, issued 1,431 Operating Partnership units (and a corresponding number of
shares of Series B Preferred Stock), and received $1.4 million in escrowed and other cash from the affiliate. A purchase accounting
premium adjustment of $0.7 million, recorded to recognize the loan at fair value, is being amortized as a reduction to interest
expense over the remaining term of the loan which matures April 1, 2015.
International Plaza
In December 2012, the Company acquired an additional 49.9% interest in International Plaza from CSAT, LP, which increased
the Company's ownership in the center to 100%. The $437 million purchase price for CSAT, LP's interest in the center consisted
of $275 million of cash and approximately $162 million of beneficial interest in debt. The acquisition of the additional interest in
a consolidated subsidiary was accounted for as an equity transaction. Consequently, the difference of $339.2 million between the
consideration paid for the interest and the book value of the noncontrolling interest was recognized as an adjustment to additional
paid-in-capital and the noncontrolling partners in TRG.
Waterside Shops
In December 2012, the Company acquired an additional 25% interest in Waterside Shops, which brought the Company's
ownership interest in the center to 50%. The acquisition of the additional interest was accomplished by purchasing an affiliate of
Oregon PERS' 50% interest in the center on a pari passu basis with an affiliate of The Forbes Company. The $155.0 million purchase
price for Oregon PERS' interest in the center consisted of $72.5 million of cash and $82.5 million of beneficial interest in debt.
The Company's share of the consideration for the additional interest was $77.5 million, which consisted of cash and beneficial
interest in debt of $36.3 million and $41.3 million, respectively. After the acquisition, the Company continues to recognize its
investment in Waterside Shops in Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet. The Company's
share of the difference between the purchase price and the net book value of the additional interest in the Unconsolidated Joint
Venture was $52.7 million, which was allocated to land, buildings, improvements, and equipment. In addition, beneficial interest
in debt was increased by a $3.9 million purchase accounting premium to record the debt at fair value. The premium is being
amortized as a reduction to interest expense over the remaining term of the debt and had a balance of $1.8 million as of December 31,
2014.
The Mall at Green Hills, The Gardens on El Paseo and El Paseo Village
In 2011 cash was drawn from the Company's revolving lines of credit primarily to collateralize the $281.5 million in installment
notes that were issued as part of the consideration for the acquisition of The Mall at Green Hills, The Gardens on El Paseo and El
Paseo Village. In 2012, the installment notes were repaid.
F-17
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. Development
International Market Place
International Market Place, a 0.4 million square foot center is under construction in Waikiki, Honolulu, Hawaii. The center will
be anchored by Saks Fifth Avenue and is expected to open in spring 2016. The Company owns a 93.5% interest in the project,
which is subject to a participating ground lease. As of December 31, 2014, the Company's capitalized costs for the project were
$107.6 million ($100.8 million at TRG's share).
The Mall of San Juan
The Mall of San Juan, a 0.7 million square foot center, is under construction in San Juan, Puerto Rico. The Company owns 80%
of the project. The center will be anchored by Nordstrom and Saks Fifth Avenue and is expected to open in March 2015. As of
December 31, 2014, the Company had capitalized costs of $384.4 million ($309.5 million at TRG's share).
The Mall at University Town Center
The Mall at University Town Center, a 0.9 million square foot center in Sarasota, Florida, opened in October 2014. The Company
owns a 50% interest in the project. As of December 31, 2014, the Company's share of project costs were $161.4 million. This
investment is classified within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.
Asia Development
CityOn.Zhengzhou
In 2013, the Company formed a joint venture with Beijing Wangfujing Department Store (Group) Co., Ltd (Wangfujing), one
of China's largest department store chains. The joint venture owns a majority interest in and will manage an approximately 1.0
million square foot multi-level shopping center (CityOn.Zhengzhou) under construction in Zhengzhou, China. Through this joint
venture, the Company beneficially owns a 32% interest in the shopping center, which is scheduled to open in spring 2016. As of
December 31, 2014, the Company's share of project costs were $41.2 million, as decreased for immaterial cumulative currency
translation adjustments. The investment is classified within Investment in Unconsolidated Joint Ventures on the Consolidated
Balance Sheet.
CityOn.Xi'an
In 2012, the Company formed a joint venture with Wangfujing. The joint venture will own a 60% controlling interest in and
manage an approximately 1.0 million square foot shopping center (CityOn.Xi'an) located at Xi'an Saigao City Plaza, a large-scale
mixed-use development under construction in Xi'an, China. Through this joint venture, the Company will beneficially own a 30%
interest in the shopping center, which is scheduled to open in late 2015. As of December 31, 2014, the Company's share of project
costs were $75.1 million, as increased by $0.6 million of cumulative currency translation adjustments. This investment is classified
within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.
Hanam Union Square
In 2011, the Company formed a joint venture with Shinsegae Group, South Korea's largest retailer, to develop an approximately
1.7 million square foot shopping mall (Hanam Union Square) under construction in Hanam, Gyeonggi Province, South Korea,
which is scheduled to open in late 2016. In August 2014, the Company partnered with a major institution in Asia to acquire an
additional 19% interest from Shinsegae Group, increasing the partnership ownership interest to 49%. The new institutional partner
owns 14.7% of the project, bringing the Company's effective ownership to 34.3%, an increase from the Company's previous 30%
share. As of December 31, 2014, the Company's share of project costs were $132.3 million, as decreased by $1.0 million of
cumulative currency translation adjustments. This investment is classified within Investment in Unconsolidated Joint Ventures on
the Consolidated Balance Sheet.
F-18
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Income Taxes
Income Tax Expense
The Company’s income tax expense for the years ended December 31, 2014, 2013, and 2012 consisted of the following:
State current
State deferred
Federal current
Federal deferred
Foreign current
Foreign deferred
Less income tax expense allocated to Gain on Dispositions (2)
Total income tax expense
2014
2013
2012
$
$
$
1,361
(3)
8,036
1,354
1,300
(48)
12,000
9,733
2,267
$
$
$
230
(77)
547
632
2,193
(116)
3,409
3,409
$
$
$
205
(13)
1,011
257
3,324 (1)
180 (1)
4,964
4,964
(1) The Company recognized $3.2 million of income tax expense related to the sale of Taubman TCBL's assets (Note 2), of which $2.8 million is included
in foreign current tax expense and $0.4 million is included in foreign deferred tax expense.
(2) Amount represents the income taxes incurred as part of the Company's sale of interests in International Plaza in January 2014. The tax on the sale is
classified within Gain on Dispositions, Net of Tax on the Consolidated Statement of Operations and Comprehensive Income.
Net Operating Loss Carryforwards
As of December 31, 2014, the Company had a foreign net operating loss carryforward of $5.1 million. Of the $5.1 million, $0.7
million had a carryforward period of 10 years and $4.4 million had an indefinite carryforward period.
Deferred Taxes
Deferred tax assets and liabilities as of December 31, 2014 and 2013 are as follows:
Deferred tax assets:
Federal
Foreign
State
Total deferred tax assets
Valuation allowances
Net deferred tax assets
Deferred tax liabilities:
Federal
Foreign
State
Total deferred tax liabilities
2014
2013
$
$
$
$
$
1,382
1,806
471
3,659
(1,703)
1,956
592
473
89
1,154
$
$
$
$
$
2,746
1,821
527
5,094
(1,831)
3,263
602
449
107
1,158
The Company believes that it is more likely than not the results of future operations will generate sufficient taxable income to
recognize the net deferred tax assets. These future operations are primarily dependent upon the Manager's profitability, the timing
and amounts of gains on peripheral land sales, the profitability of Taubman Asia's operations, and other factors affecting the results
of operations of the Taxable REIT Subsidiaries. The valuation allowances relate to net operating loss carryforwards and tax basis
differences where there is uncertainty regarding their realizability.
F-19
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
International Plaza
In November 2013, substantially all of the interest in International Plaza acquired by the Company in 2012 was transferred to
a Taxable REIT Subsidiary of the Company. Prior to the transfer in November 2013, substantially all of the interest was held by
a nontaxable subsidiary of the Company. No deferred taxes were recorded related to any book-tax basis differences related to this
transaction because of its intercompany nature.
Tax Status of Dividends
Dividends declared on the Company’s common and preferred stock and their tax status are presented in the following tables.
The tax status of the Company’s dividends in 2014, 2013, and 2012 may not be indicative of future periods.
Dividends per
common
share declared
Return of
capital
Ordinary
income
Long term
capital gain
Unrecaptured
Sec. 1250
capital gain
$
4.7500 (1) $
0.7057
$
0.0000
$
1.8748 (2) $
2.1600
2.0000
1.8500
0.3208
0.2636
0.5429
1.7773
1.7364
1.3071
0.0287 (2)
0.0000
0.0000
2.1695 (2)
0.0332 (2)
0.0000
0.0000
Year
2014
2014
2013
2012
(1)
Includes a special dividend of $4.75 per share of common stock declared and paid during December 2014, which was declared as a result of the
Company's disposition of a portfolio of seven centers to Starwood in October 2014 (Note 2).
(2) The portion of the per share common dividends paid on December 31, 2014 designated as capital gain (long term and unrecaptured Sec.
1250) dividends for tax purposes is $0.0619 per share of the $0.54 dividend and $4.0443 per share of the $4.75 dividend).
Dividends per
Series G
Preferred
share declared
1.350
$
Dividends per
Series H
Preferred
share declared
1.28672
$
Dividends per
Series J
Preferred
share declared
1.6250
$
1.6250
0.6184
Ordinary
income
Long term
capital gain
Unrecaptured
Sec. 1250
capital gain
$
1.350
$
0.0000
$
0.0000
Ordinary
income
Long term
capital gain
Unrecaptured
Sec. 1250
capital gain
$
1.28672
$
0.0000
$
0.0000
Ordinary
income
Long term
capital gain
Unrecaptured
Sec. 1250
capital gain
$
$
0.49072
1.6250
0.6184
0.52580 (1) $
0.0000
0.0000
0.60848 (1)
0.0000
0.0000
Year
2012
Year
2012
Year
2014
2013
2012
(1) The portion of the per share Series J preferred dividends designated as capital gain (long term and unrecaptured Sec.
1250) for tax purposes is as follows; $0.32178 per share of the $0.40625 paid on June 30, 2014, 0.40625 per share of the
$0.40625 paid on September 30, 2014, and $0.40625 per share of the $0.40625 paid on December 31, 2014.
F-20
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dividends per
Series K
Preferred
share declared
1.56250
$
1.24132
Ordinary
income
Long term
capital gain
Unrecaptured
Sec. 1250
capital gain
$
0.47185
1.24132
$
0.50558 (1) $
0.0000
0.58507 (1)
0.0000
Year
2014
2013
(1) The portion of the per share Series K preferred dividends designated as capital gain (long term and unrecaptured Sec.
1250) for tax purposes is as follows; $0.30939 per share of the $0.39063 paid on June 30, 2014, $0.39063 per share of the
$0.39063 paid on September 30, 2014, and $0.39063 per share of the $0.39063 paid on December 31, 2014.
Tax Benefits
During the years ended December 31, 2014, 2013, and 2012, the Company realized a $0.1 million, $0.5 million, and $1.0 million
tax benefit, respectively, as additional paid-in capital relating to the redemption of certain share-based compensation awards. This
benefit represents the amount of reduced Federal income tax attributed to the tax deduction that exceeds the recognized deferred
tax asset relating to the awards, which was based on their cumulative book compensation cost. This excess tax deduction is due
to changes in the fair value of the Company's shares between the grant date (the measurement date for book purposes) and the
exercise date (the measurement date for tax purposes) of the awards.
Uncertain Tax Positions
The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within
one year of December 31, 2014. The Company has no material interest or penalties relating to income taxes recognized in the
Consolidated Statement of Operations and Comprehensive Income for the years ended December 31, 2014, 2013, and 2012 or in
the Consolidated Balance Sheet as of December 31, 2014 and 2013. As of December 31, 2014, returns for the calendar years 2011
through 2014 remain subject to examination by U.S. and various state and foreign tax jurisdictions.
Note 4 - Properties
Properties at December 31, 2014 and December 31, 2013 are summarized as follows:
Land
Buildings, improvements, and equipment
Construction in process and pre-development costs
Accumulated depreciation and amortization
2014
2013
226,252
$
336,360
2,457,660
578,593
3,262,505
(970,045)
2,292,460
$
$
3,896,401
252,329
4,485,090
(1,516,982)
2,968,108
$
$
$
Depreciation expense for 2014, 2013, and 2012 was $110.1 million, $142.5 million, and $134.9 million, respectively.
The charge to operations in 2014, 2013, and 2012 for domestic and non-U.S. pre-development activities was $4.2 million, $10.6
million, and $19.8 million, respectively.
F-21
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Investments in Unconsolidated Joint Ventures
General Information
The Company owns beneficial interests in joint ventures that own shopping centers. The Operating Partnership is the sole direct
or indirect managing general partner or managing member of Fair Oaks, International Plaza, Stamford Town Center, Sunvalley,
and Westfarms. The Operating Partnership also provides certain management, leasing, and/or development services to the other
shopping centers noted below.
Shopping Center
Arizona Mills (Note 2)
CityOn.Xi'an (under construction)
CityOn.Zhengzhou (under construction)
Fair Oaks
Hanam Union Square (under construction)
International Plaza (Note 2)
The Mall at Millenia
Stamford Town Center
Sunvalley
The Mall at University Town Center (Note 2)
Waterside Shops
Westfarms
Ownership as of
December 31, 2014 and 2013
0/50%
Note 2
Note 2
50
Note 2
50.1/100
50
50
50
50
50
79
The Company's carrying value of its Investment in Unconsolidated Joint Ventures differs from its share of the partnership or
members’ equity reported in the combined balance sheet of the Unconsolidated Joint Ventures due to (i) the Company's cost of its
investment in excess of the historical net book values of the Unconsolidated Joint Ventures and (ii) the Operating Partnership’s
adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the Unconsolidated Joint
Ventures. The Company's additional basis allocated to depreciable assets is recognized on a straight-line basis over 40 years. The
Operating Partnership’s differences in bases are amortized over the useful lives or terms of the related assets and liabilities.
In its Consolidated Balance Sheet, the Company separately reports its investment in Unconsolidated Joint Ventures for which
accumulated distributions have exceeded investments in and net income of the Unconsolidated Joint Ventures. The net equity of
certain joint ventures is less than zero because distributions are usually greater than net income, as net income includes non-cash
charges for depreciation and amortization. In addition, any distributions related to refinancing of the centers further decrease the
net equity of the centers.
F-22
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. The combined
information of the Unconsolidated Joint Ventures as of December 31, 2014 and December 31, 2013 exclude the balances of Hanam
Union Square, CityOn.Xi'an, and CityOn.Zhengzhou, which are currently under construction (Note 2). Beneficial interest is
calculated based on the Operating Partnership's ownership interest in each of the Unconsolidated Joint Ventures.
Assets:
Properties
Accumulated depreciation and amortization
Cash and cash equivalents
Accounts and notes receivable, less allowance for doubtful accounts of $1,590 and $977 in
2014 and 2013
Deferred charges and other assets
Liabilities and accumulated deficiency in assets:
Mortgage notes payable
Accounts payable and other liabilities
TRG's accumulated deficiency in assets
Unconsolidated Joint Venture Partners' accumulated deficiency in assets
TRG's accumulated deficiency in assets (above)
TRG's investment in projects under development (Note 2)
TRG basis adjustments, including elimination of intercompany profit
TCO's additional basis
Net Investment in Unconsolidated Joint Ventures
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures
Investment in Unconsolidated Joint Ventures
December 31
2014
December 31
2013
$
$
1,580,926
(548,646)
1,032,280
$
$
49,765
38,788
33,200
1,305,658
(478,820)
826,838
28,782
33,626
28,095
$
1,154,033
$
917,341
$
1,989,546
$
1,551,161
103,161
(525,759)
(412,915)
1,154,033
$
(525,759) $
232,091
132,058
54,963
(106,647) $
476,651
370,004
$
$
$
$
$
70,226
(412,204)
(291,842)
917,341
(412,204)
193,306
118,132
56,909
(43,857)
371,549
327,692
F-23
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenues
Year Ended December 31
2014
2013
2012
$ 338,017
$ 294,720
$ 282,136
Maintenance, taxes, utilities, promotion, and other operating expenses
$ 106,249
$
92,901
$
91,094
Interest expense
Depreciation and amortization
Total operating costs
Nonoperating income (expense)
Net income
Net income attributable to TRG
Realized intercompany profit, net of depreciation on TRG’s basis adjustments
Depreciation of TCO's additional basis
Equity in income of Unconsolidated Joint Ventures
Beneficial interest in Unconsolidated Joint Ventures’ operations:
74,806
47,377
68,998
36,644
68,760
37,342
$ 228,432
(22)
$ 109,563
$
60,690
3,258
(1,946)
62,002
$
$ 198,543
$ 197,196
$
$
$
96,177
53,166
1,245
(1,946)
52,465
$
$
$
18
84,958
47,763
2,677
(1,946)
48,494
Interest expense
Revenues less maintenance, taxes, utilities, promotion, and other operating expenses $ 132,652
(40,416)
(30,234)
62,002
Equity in income of Unconsolidated Joint Ventures
Depreciation and amortization
$
$ 114,939
(37,554)
(24,920)
52,465
$
$ 107,044
(35,862)
(22,688)
48,494
$
Other
The provision for losses on accounts receivable of the Unconsolidated Joint Ventures was $1.7 million, $0.6 million, and $0.3
million for the years ended December 31, 2014, 2013, and 2012, respectively.
Deferred charges and other assets of $33.2 million at December 31, 2014 were comprised of leasing costs of $37.2 million,
before accumulated amortization of $(16.6) million, net deferred financing costs of $9.6 million, and other net charges of $3.0
million. Deferred charges and other assets of $28.1 million at December 31, 2013 were comprised of leasing costs of $34.0 million,
before accumulated amortization of $(17.7) million, net deferred financing costs of $9.0 million, and other net charges of $2.8
million.
In December 2014, an additional $175 million financing was completed on International Plaza, a 50.1% owned Unconsolidated
Joint Venture. The loan has a seven-year term and bears interest at LIBOR plus 1.75%. In connection with this financing, the
Unconsolidated Joint Venture also entered into an interest rate swap to fix the rate on the loan at 3.58% (Note 10).
The estimated fair value of the Unconsolidated Joint Ventures’ mortgage notes payable was $2.0 billion and $1.5 billion at
December 31, 2014 and 2013, respectively. The methodology for determining this fair value is consistent with that used for
determining the fair value of consolidated mortgage notes payable (Note 17).
Depreciation expense on properties for 2014, 2013, and 2012 was $40.9 million, $35.6 million, and $31.1 million, respectively.
F-24
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Accounts and Notes Receivable
Accounts and notes receivable at December 31, 2014 and December 31, 2013 are summarized as follows:
Trade
Notes
Straight-line rent and recoveries
Less: Allowance for doubtful accounts
2014
2013
$
$
$
24,757
$
2,037
25,378
52,172
(2,927)
49,245
$
$
32,162
9,407
33,558
75,127
(1,934)
73,193
Notes receivable as of December 31, 2013 included a $7.4 million note related to a February 2013 sale of peripheral land. In
January 2014, the $7.4 million note was repaid in full.
Note 7 - Deferred Charges and Other Assets
Deferred charges and other assets at December 31, 2014 and December 31, 2013 are summarized as follows:
Leasing costs
Accumulated amortization
In-place leases, net
Investment in SPG partnership units (Notes 2 and 17)
Deferred financing costs, net
Insurance deposit (Note 17)
Deposits
Prepaid expenses
Deferred tax asset, net
Other, net
2014
2013
$
$
27,454
(10,659)
16,795
$
$
11,765
77,711
15,815
13,059
40,257
5,496
1,956
5,581
39,529
(16,807)
22,722
16,651
16,319
12,225
4,320
4,952
3,263
8,934
$
188,435
$
89,386
As of December 31, 2014, the Company had $37.0 million in restricted deposits related to its Asia investments.
F-25
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Notes Payable
Notes payable at December 31, 2014 and December 31, 2013 consist of the following:
2014
2013
Stated Interest Rate
Cherry Creek Shopping Center
$
City Creek Center
El Paseo Village
The Gardens on El Paseo
Great Lakes Crossing Outlets
The Mall at Green Hills
International Plaza
MacArthur Center
Northlake Mall
The Mall at Partridge Creek
The Mall of San Juan
The Mall at Short Hills
Stony Point Fashion Park
The Mall at Wellington Green
$
280,000
83,189 (1)
15,932 (2)
83,059 (3)
217,281
150,000
163,779 (7)
540,000
U.S. Headquarters Building
17,265 (9)
280,000
84,560 (1)
16,322 (2)
84,197 (3)
221,541
150,000
325,000 (5)
129,205 (6)
215,500 (6)
79,162 (6)
540,000
99,526 (8)
200,000 (6)
$65M Revolving Credit Facility
$65M Revolving Credit Facility
$1.1B Revolving Credit Facility
$1.1B Revolving Credit Facility
$475M Unsecured Term Loan
475,000 (12) (13)
33,040
(11) (12)
125,000 (11)
475,000 (13)
5.24%
4.37%
4.42%
6.10%
3.60%
LIBOR+1.60%
4.85%
LIBOR + 2.35%
5.41%
6.15%
LIBOR + 2.00%
5.47%
6.24%
5.44%
5.90%
LIBOR + 1.40%
LIBOR + 1.40%
LIBOR + 1.15% (11)
LIBOR + 1.45% (11)
LIBOR + 1.35% (13)
Maturity
Date
06/08/16
08/01/23
12/06/15
06/11/16
01/06/23
12/01/18
04/02/17
12/14/15
04/01/15
04/30/16
04/30/14
02/28/19
03/29/17
02/28/19
Balance
Due on
Maturity
$280,000
68,575
15,565
81,480
177,038
150,000
163,779
540,000
16,974
33,040
125,000
475,000
(4)
(7)
(10)
(11)
Facility
Amount
$ 320,000
65,000 (10)
65,000
1,100,000 (11)
1,100,000
$ 2,025,505
$ 3,058,053
(1) The Operating Partnership has provided a limited guarantee of the repayment of the City Creek loan, which could be triggered only upon a decline in
center occupancy to a level that the Company believes is remote.
(2) Balance includes purchase accounting adjustment of $0.1 million and $0.2 million premium in 2014 and 2013, respectively, for an above market interest
rate upon acquisition of the center in December 2011.
(3) Balance includes purchase accounting adjustment of $1.6 million and $2.7 million premium in 2014 and 2013, respectively, for an above market interest
rate upon acquisition of the center in December 2011.
(4) Has a one-year extension option.
(5)
(6)
In January 2014, the Company sold a total of 49.9% of its interests in the entity that owns International Plaza (Note 2).
In October 2014, the remaining debt on the center was prepaid or defeased in connection with the Company's disposition of a portfolio of seven centers
to Starwood (Note 2).
(7) The Operating Partnership has provided an unconditional guaranty of the principal balance and all accrued but unpaid interest during the term of the
loan. Loan has two one-year extension options.
In January 2014, the Company paid off the mortgage note payable on Stony Point Fashion Park.
(8)
(9) Balance includes purchase accounting adjustment of $0.2 million for an above market interest rate upon acquisition of the building in February 2014
(Note 2).
(10) In March 2014, the maturity date on the Company's $65 million secondary revolving line of credit was extended through April 2016. The unused
borrowing capacity at December 31, 2014 was $60.8 million, after considering $4.2 million of letters of credit outstanding on the facility.
(11) TRG is the borrower under the $1.1 billion unsecured revolving credit facility with an accordion feature to increase the borrowing capacity to $1.5
billion, subject to certain conditions including having the borrowing capacity based on the unencumbered asset pool EBITDA and obtaining lender
commitments. As of December 31, 2014, the Company cannot fully utilize the accordion feature unless additional assets are added to the unencumbered
asset pool. The facility bears interest at a range of LIBOR plus 1.15% to LIBOR plus 1.70% and a facility fee of 0.20% to 0.30% based on the Company's
total leverage ratio. Prior to the amendment of the facility in November 2014, the interest rate was at a range of LIBOR plus 1.45% to LIBOR plus
1.85%. The facility has a one-year extension option. The unused borrowing capacity at December 31, 2014 was $1.1 billion.
(12) As of December 31, 2014, the entities that own Beverly Center, Dolphin Mall, and Twelve Oaks Mall are guarantors under the $475 million unsecured
term loan and the $1.1 billion unsecured revolving credit facility.
(13) TRG is the borrower under the $475 million unsecured term loan with an accordion feature to increase the borrowing capacity to $600 million, subject
to certain conditions including having the borrowing capacity based on the unencumbered asset pool EBITDA and obtaining lender commitments. As
of December 31, 2014, the Company cannot fully utilize the accordion feature unless additional assets are added to the unencumbered asset pool. The
loan bears interest at a range of LIBOR plus 1.35% to LIBOR plus 1.90% based on the Company's total leverage ratio. From January 2014 until maturity,
the LIBOR rate is swapped to a fixed rate of 1.65%, resulting in an effective rate in the range of 3.00% to 3.55% (Note 10).
Notes payable are collateralized by properties with a net book value of $1.4 billion at December 31, 2014.
F-26
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents scheduled principal payments on notes payable as of December 31, 2014:
2015
2016
2017
2018
2019
Thereafter
Total principal maturities
Net unamortized debt premiums
Total notes payable
$
$
$
578,790
367,527
170,095 (1)
156,563 (2)
481,820
268,874
2,023,669
1,836
2,025,505
(1)
(2)
Includes 163.8 million with two one-year extension options.
Includes $150.0 million with one-year extension option.
2015 Maturities
During the second half of 2015, the Company expects to complete a refinancing of the loan on The Mall at Short Hills. The
existing $540.0 million, 5.47% fixed rate loan is scheduled to mature in December 2015 and is prepayable without penalty beginning
September 2015. Also in 2015, the Company expects to complete a refinancing on the U.S headquarters building loan. The existing
$17.3 million, 5.9% fixed rate loan on the U.S. headquarters building is scheduled to mature in April 2015.
The $15.9 million, 4.42% fixed rate loan on El Paseo Village matures in December 2015. The Company expects to pay off the
loan in October 2015, the earliest prepayment date without penalty.
Debt Covenants and Guarantees
Certain loan agreements contain various restrictive covenants, including the following corporate covenants on the Company’s
unsecured primary revolving line of credit, unsecured term loan, and the construction facilities on The Mall at University Town
Center and The Mall of San Juan: a minimum net worth requirement, a maximum total leverage ratio, a maximum secured leverage
ratio, a minimum fixed charge coverage ratio, a maximum recourse secured debt ratio and a maximum payout ratio. In addition,
the Company’s primary revolving line of credit and term loan have unencumbered pool covenants, which currently apply to Beverly
Center, Dolphin Mall, and Twelve Oaks Mall on a combined basis. These covenants include a minimum number and minimum
value of eligible unencumbered assets, a maximum unencumbered leverage ratio, a minimum unencumbered interest coverage
ratio and a minimum unencumbered asset occupancy ratio. As of December 31, 2014, the corporate minimum fixed charge coverage
ratio is the most restrictive covenant. The Company was in compliance with all of its covenants and loan obligations as of
December 31, 2014. The maximum payout ratio covenant limits the payment of distributions generally to 95% of funds from
operations, as defined in the loan agreements, except as required to maintain the Company’s tax status, pay preferred distributions,
and for distributions related to the sale of certain assets
In connection with the financing of the construction facility at The Mall at University Town Center, owned by an Unconsolidated
Joint Venture, the Operating Partnership provided an unconditional guarantee of 25% of the principal balance and 50% of all
accrued but unpaid interest. The maximum amount of the construction facility is $225 million. The outstanding balance of the
Mall at University Town Center construction financing facility as of December 31, 2014 was $187.8 million. Accrued but unpaid
interest as of December 31, 2014 was $0.3 million. The principal guaranty may be reduced to 12.5% of the outstanding principal
balance upon achievement of certain performance measures. Upon stabilization, the unconditional guaranty may be released. The
Company believes the likelihood of a payment under the guarantee to be remote.
In connection with the financing of the construction facility at The Mall of San Juan, the Operating Partnership has provided
an unconditional guarantee of the construction loan principal balance and all accrued but unpaid interest during the term of the
loan. In addition, the Operating Partnership has provided a guarantee as to the completion of the center. The outstanding balance
of The Mall of San Juan construction financing facility as of December 31, 2014 was $163.8 million. Accrued but unpaid interest
as of December 31, 2014 was $0.2 million. The center is expected to open in March 2015 and the Company believes the likelihood
of a payment under the guarantees to be remote.
F-27
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the December 2014 additional $175 million financing at International Plaza, which is owned by an
Unconsolidated Joint Venture, the Operating Partnership provided an unconditional and several guarantee of 50.1% of all obligations
and liabilities related to an interest rate swap that was required on the debt for the term of the loan. As of December 31, 2014, the
interest rate swap was in an asset position and had unpaid interest of $0.1 million. The Company believes the likelihood of a
payment under the guarantee to be remote.
Other
The Company is required to escrow cash balances for specific uses stipulated by certain of its lenders. As of December 31, 2014
and December 31, 2013, the Company's cash balances restricted for these uses were $37.5 million and $5.0 million, respectively.
The Company is required under certain debt agreements to escrow cash for certain major construction projects. As of December 31,
2014, $33.6 million of the $37.5 million of restricted cash was required under certain debt agreements to be in escrow for certain
major construction projects.
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%),
The Mall at Wellington Green (10%), and MacArthur Center (5%). In October 2014, the Company disposed of The Mall at
Wellington Green and MacArthur Center as part of the sale to Starwood (Note 2).
Debt as of:
December 31, 2014
December 31, 2013
Capitalized interest:
Year Ended December 31, 2014
Year Ended December 31, 2013
Interest expense:
Year Ended December 31, 2014
Year Ended December 31, 2013
At 100%
At Beneficial Interest
Consolidated
Subsidiaries
Unconsolidated
Joint Ventures
Consolidated
Subsidiaries
Unconsolidated
Joint Ventures
$ 2,025,505
$
1,989,546
$ 1,852,749
$
1,085,991
3,058,053
1,551,161
2,891,592
868,942
$
27,255 (1) $
3,121
$
16,385 (1)
587
26,227
15,839
$
1,578
320
$
90,803
$
130,023
74,806
68,998
$
82,702
$
121,353
40,416
37,554
(1) The Company capitalizes interest costs incurred in funding its equity contributions to development projects accounted for as UJVs. The capitalized
interest cost is included in the Company's basis in its investment in UJVs. Such capitalized interest reduces interest expense in the Company's Consolidated
Statement of Operations and Comprehensive Income and in the table above is included within Consolidated Subsidiaries.
F-28
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Noncontrolling Interests
Redeemable Noncontrolling Interests
The Company's president of Taubman Asia (the Asia President) has an ownership interest in Taubman Asia, a consolidated
subsidiary. The Asia President is entitled to 10% of Taubman Asia's dividends, with 85% of his dividends being withheld as
contributions to capital. These withholdings will continue until he contributes and maintains his capital consistent with a 10%
ownership interest, including all capital funded by the Operating Partnership for Taubman Asia's operating and investment activities
subsequent to the Asia President obtaining his ownership interest. The Operating Partnership will have a preferred investment in
Taubman Asia to the extent the Asia President has not yet contributed capital commensurate with his ownership interest. This
preferred investment will accrue an annual preferential return equal to the Operating Partnership's average borrowing rate (with
the preferred investment and accrued return together being referred to herein as the preferred interest). In April 2014, the Taubman
Asia operating agreement was amended to provide that so long as the Taubman Asia President is employed by Taubman Asia on
April 1, 2016, then during the month ended April 30, 2016, he will have the right to exercise an option to put up to 40% of his
ownership interest for cash in December 2016 at a valuation determined as of October 31, 2016. In addition, under the amended
agreement, Taubman Asia has the ability to call, and the Asia President has the ability to put, the Asia President’s ownership interest
upon specified terminations of the Asia President’s employment, although such put or call right may not be exercised for specified
time periods after certain termination events. The redemption price for the ownership interest is 50% (increasing to 100% as early
as June 2017) of the fair value of the ownership interest less the amount required to return the Operating Partnership's preferred
interest. The Company has determined that the Asia President's ownership interest in Taubman Asia qualifies as an equity award,
considering its specific redemption provisions, and accounts for it as a contingently redeemable noncontrolling interest, with a
carrying value of zero at December 31, 2014 and December 31, 2013. Any adjustments to the redemption value are recorded
through equity.
The Company owns a 93.5% controlling interest in a joint venture that is redeveloping International Market Place in Waikiki,
Honolulu, Hawaii. The 6.5% joint venture partner has no obligation nor the right to contribute capital. The Company is entitled
to a preferential return on its capital contributions. The Company has the right to purchase the joint venture partner's interest and
the joint venture partner has the right to require the Company to purchase the joint venture partner's interest after the third anniversary
of the opening of the center, and annually thereafter. The purchase price of the joint venture partner's interest will be based on fair
value. Considering the redemption provisions, the Company accounts for the joint venture partner's interest as a contingently
redeemable noncontrolling interest with a carrying value of zero at December 31, 2014 and December 31, 2013. Any adjustments
to the redemption value are recorded through equity.
Partnership Units Issued in Connection with 2011 Acquisition
In December 2011, the Company acquired The Mall at Green Hills and The Gardens on El Paseo and El Paseo Village from
affiliates of Davis Street Properties, LLC (Note 2). The purchase price consideration included 1.3 million Operating Partnership
units determined based on a value of $55 per unit. These partnership units became eligible to be converted into the Company's
common shares in December 2012 pursuant to the Continuing Offer (Note 15). Prior to that date, the holders had the ability to put
the units back to the Operating Partnership for cash at the lesser of the current market price of the Company's common shares or
$55 per share. Considering the redemption provisions, the Company accounted for these Operating Partnership units as a redeemable
noncontrolling interest through December 2012 when they became subject to the Continuing Offer. In December 2012, upon the
expiration of the redemption right of these redeemable noncontrolling interests, the carrying value of these units were classified
within Noncontrolling Interests on the Consolidated Balance Sheet. As of December 31, 2014, of the 1.3 million Operating
Partnership units originally issued as consideration, approximately 1.0 million units were tendered under the Continuing Offer.
F-29
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of Redeemable Noncontrolling Interests
Balance January 1
Contributions
Distributions
Allocation of net income (loss)
Allocation of other comprehensive income (loss)
Capital relinquished in connection with TCBL disposition (Note 2)
Transfer to nonredeemable equity
Adjustments of redeemable noncontrolling interests
Balance December 31
2012
84,235
231
(2,456)
(976)
(49)
(8,855)
(72,035)
(95)
—
$
$
There was no significant activity regarding redeemable noncontrolling interests during the years ended December 31, 2014 or
December 31, 2013.
Equity Balances of Nonredeemable Noncontrolling Interests
The net equity balance of the nonredeemable noncontrolling interests as of December 31, 2014 and December 31, 2013 includes
the following:
Non-redeemable noncontrolling interests:
Noncontrolling interests in consolidated joint ventures
Noncontrolling interests in partnership equity of TRG
Income Allocable to Noncontrolling Interests
2014
2013
$
$
(14,796) $
116,376
101,580
$
(37,191)
(58,342)
(95,533)
Net income attributable to the noncontrolling interests for the years ended December 31, 2014, 2013, and 2012 includes the
following:
Net income (loss) attributable to noncontrolling interests:
Non-redeemable noncontrolling interests:
Noncontrolling share of income of consolidated joint ventures
Noncontrolling share of income of TRG
Redeemable noncontrolling interests
2014
2013
2012
$
$
$
34,239
350,870
385,109
385,109
$
$
$
10,344
46,434
56,778
56,778
$
$
$
14,867
37,752
52,619
(976)
51,643
F-30
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Equity Transactions
The following schedule presents the effects of changes in Taubman Centers, Inc.’s ownership interest in consolidated subsidiaries
on Taubman Centers, Inc.’s equity for the years ended December 31, 2014, 2013, and 2012:
Net income attributable to Taubman Centers, Inc. common shareowners
Transfers (to) from the noncontrolling interest:
Increase (Decrease) in Taubman Centers, Inc.’s paid-in capital for the
adjustments of noncontrolling interest (1)
Decrease in Taubman Centers, Inc.’s paid-in capital related to the acquisition
of additional ownership interest in International Plaza
Decrease in Taubman Centers, Inc.’s paid-in capital related to the acquisition
of additional ownership interest in an outlet joint venture
Net transfers (to) from noncontrolling interests
Change from net income attributable to Taubman Centers, Inc. and transfers (to)
from noncontrolling interests
2014
$ 863,857
2013
$ 109,908
2012
$
83,511
83
15,129
14,903
(339,170)
(1,050)
14,079
83
(324,267)
$ 863,940
$ 123,987
$ (240,756)
(1)
In 2014, 2013, and 2012, adjustments of the noncontrolling interest were made as a result of changes in the Company's ownership of the Operating
Partnership in connection with the Company's share-based compensation under employee and director benefit plans (Note 13), issuances of stock
pursuant to the continuing offer (Note 15), issuances of common stock in 2012 (Note 14), the acquisition of additional ownership interest in International
Plaza in 2012, redemption of the outlet joint venture partner's interest in 2013, 2013 stock repurchases (Note 14), issuances of Operating Partnership
units in connection with the acquisition of centers (Note 2), and redemptions of certain redeemable Operating Partnership Units.
Finite Life Entities
Accounting Standards Codification Topic 480, “Distinguishing Liabilities from Equity” establishes standards for classifying
and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both
liabilities and equity. At December 31, 2014, the Company held a controlling interest in a consolidated entity with a specified
termination date in 2083. The noncontrolling owners’ interest in this entity is to be settled upon termination by distribution or
transfer of either cash or specific assets of the underlying entity. The estimated fair value of this noncontrolling interest was
approximately $430 million at December 31, 2014, compared to a book value of $(23.0) million that is classified in Noncontrolling
Interests in the Company’s Consolidated Balance Sheet. The fair value of the noncontrolling interest was calculated as the
noncontrolling interest's ownership shares of the underlying property's fair value. The property's fair value was estimated by
considering its in-place net operating income, current market capitalization rate, and mortgage debt outstanding.
F-31
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Derivative and Hedging Activities
Risk Management Objective and Strategies for Using Derivatives
The Company uses derivative instruments, such as interest rate swaps and interest rate caps, primarily to manage exposure to
interest rate risks inherent in variable rate debt and refinancings. The Company may also enter into forward starting swaps or
treasury lock agreements to set the effective interest rate on a planned fixed-rate financing. The Company’s interest rate swaps
involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over
the life of the agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable-
rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.
In a forward starting swap or treasury lock agreement that the Company cash settles in anticipation of a fixed rate financing or
refinancing, the Company will receive or pay an amount equal to the present value of future cash flow payments based on the
difference between the contract rate and market rate on the settlement date.
The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are
not designated as hedging instruments under the accounting requirements for derivatives and hedging.
As of December 31, 2014, the Company had the following outstanding interest rate derivatives that were designated and are
expected to be effective as cash flow hedges of the interest payments on the associated debt.
Instrument Type
Ownership
Notional
Amount
Swap Rate
Credit
Spread on
Loan
Total
Swapped
Rate on
Loan
Maturity Date
Consolidated Subsidiaries:
Receive variable (LIBOR) /
pay-fixed swap (1)
Receive variable (LIBOR) /
pay-fixed swap (1)
Receive variable (LIBOR) /
pay-fixed swap (1)
Unconsolidated Joint Ventures:
Receive variable (LIBOR) /
pay-fixed swap (2)
Receive variable (LIBOR) /
pay-fixed swap (2)
Receive variable (LIBOR) /
pay-fixed swap (3)
100% $ 200,000
1.64%
1.35% (1)
2.99% (1)
February 2019
100%
175,000
1.65%
1.35% (1)
3.00% (1)
February 2019
100%
100,000
1.64%
1.35% (1)
2.99% (1)
February 2019
50%
136,706
2.40%
1.70%
4.10%
April 2018
50%
136,706
2.40%
1.70%
4.10%
April 2018
50.1%
175,000
1.83%
1.75%
3.58%
December 2021
(1) The hedged forecasted transaction for each of these swaps is the first previously unhedged one-month LIBOR-indexed interest payments accrued and
made each month on a debt principal amount equal to the swap notional, regardless of the specific debt agreement from which they may flow. The
Company is currently using these swaps to manage interest rate risk on the $475 million TRG Term Loan. The credit spread on this loan can also vary
within a range of 1.35% to 1.90%, depending on the Company's leverage ratio at the measurement date.
(2) The notional amount on each of these swaps is equal to 50% of the outstanding principal balance of the loan on Fair Oaks Mall.
(3) The notional amount on this swap is equal to the outstanding principal balance of the floating rate loan on International Plaza, which begins amortizing
in February 2015 (Note 5).
F-32
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-designated Derivatives
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate
movements and other identified risks but do not meet the strict hedge accounting requirements. Changes in the fair value of
derivatives not designated in hedging relationships are recorded directly in earnings.
In June 2014, in connection with entering into the Starwood Purchase and Sale Agreement, the Company discontinued hedge
accounting on the MacArthur Center swap and accelerated the reclassification of amounts in Accumulated Other Comprehensive
Income (Loss) (AOCI) to earnings as a result of it becoming probable that the center's debt would be early extinguished and the
hedged interest payments would not occur. The accelerated amount was a loss of $4.9 million recorded as a component of
Nonoperating Expense on the Consolidated Statement of Operations and Comprehensive Income. The Company also recorded a
loss of $2.9 million to Nonoperating Expense for the year ended December 31, 2014 for changes in the fair value of this swap
subsequent to the June 2014 discontinuation of hedge accounting. In October 2014, this swap was terminated and the debt was
paid off with the proceeds from the sale to Starwood (Note 2). As of December 31, 2014, the Company does not have any derivatives
not designated as hedging instruments.
Cash Flow Hedges of Interest Rate Risk
For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the unrealized gain or
loss on the derivative is reported as a component of Other Comprehensive Income (OCI). The ineffective portion of the change
in fair value, if any, is recognized directly in earnings. Net realized gains or losses resulting from derivatives that were settled in
conjunction with planned fixed-rate financings or refinancings continue to be included in 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 $10.5 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.
F-33
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables present the effect of derivative instruments on the Company’s Consolidated Statement of Operations and
Comprehensive Income for the years ended December 31, 2014, 2013, and 2012. The tables include the amount of gains or losses
on outstanding derivative instruments recognized in OCI in cash flow hedging relationships and the location and amount of gains
or losses reclassified from AOCI into income resulting from outstanding derivative instruments and settled derivative instruments
associated with hedged debt.
During the year ended December 31, 2014, the Company had an immaterial amount of hedge ineffectiveness related to the swap
on MacArthur Center (prior to discontinuation of hedge accounting), which was classified as Nonoperating Income on the
Consolidated Statement of Operations and Comprehensive Income. For the years ended December 31, 2013, and December 31,
2012 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)
2014
2013
2012
Location of Gain or
(Loss) Reclassified from
AOCI into Income
(Effective Portion)
Amount of Gain or (Loss)
Reclassified from AOCI into
Income (Effective Portion)
2014
2013
2012
Derivatives in cash flow
hedging relationships:
Interest rate contracts –
consolidated subsidiaries (1)
Interest rate contracts –
consolidated subsidiaries (1)
Interest rate contracts –
UJVs
Total derivatives in
cash flow hedging
relationships
Realized losses on settled
cash flow hedges:
Interest rate contracts –
consolidated subsidiaries
Interest rate contract –
UJVs
Total realized losses on
settled cash flow
hedges
Nonoperating Expense (1)
$ (4,880)
$ (7,362) $ 9,990
$ (2,821)
Interest Expense (1)
$ (8,663) $ (3,221) $ (3,190)
893
5,083
(1,976) Equity in Income of UJVs
(3,186)
(3,080)
(3,600)
$ (6,469) $ 15,073
$ (4,797)
$(16,729) $ (6,301) $ (6,790)
Interest Expense
$
(605) $
(605)
Equity in Income of UJVs
(188)
$
— $
(605) $
(793)
(1) Includes the MacArthur Center swap for the period that it was effective as a hedge until June 2014, when hedge accounting was discontinued.
F-34
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
December 31, 2014 and 2013.
Consolidated Balance Sheet Location
Fair Value
December 31
2014
December 31
2013
Derivatives designated as hedging instruments:
Asset derivatives:
Interest rate contracts – consolidated
subsidiaries
Interest rate contracts - UJVs
Total assets designated as hedging
instruments
Liability derivatives:
Interest rate contracts – consolidated
subsidiaries
Interest rate contracts – UJVs
Total liabilities designated as hedging
instruments
Contingent Features
Deferred Charges and Other Assets
$
1,543
Investment in UJVs
Accounts Payable and Accrued Liabilities
Investment in UJVs
$
$
$
$
109
109
$
1,543
(4,044) $
(5,154)
(3,418)
(5,938)
(9,198) $
(9,356)
Two 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. One of the Company's outstanding derivatives
contain provisions that state if the hedged entity defaults on any of its recourse indebtedness in excess of $50 million, then the
derivative obligation could also be declared in default. Three of the Company’s outstanding derivatives contain provisions that
state if the Operating Partnership defaults on any of its recourse indebtedness in excess of $50 million, then the derivative obligation
could also be declared in default. As of December 31, 2014, the Company is not in default on any indebtedness that would trigger
a credit risk related default on its current outstanding derivatives.
As of December 31, 2014 and 2013, the fair value of derivative instruments with credit-risk-related contingent features that are
in a liability position was $9.2 million and $9.4 million, respectively. As of December 31, 2014 and 2013, 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 17 for fair value information on derivatives.
F-35
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Leases
Shopping center space is leased to tenants and certain anchors pursuant to lease agreements. Tenant leases typically provide for
minimum rent, percentage rent, and other charges to cover certain operating costs. Future minimum rent under operating leases
in effect at December 31, 2014 for operating centers assuming no new or renegotiated leases or option extensions on anchor
agreements, is summarized as follows:
2015
2016
2017
2018
2019
Thereafter
$
282,484
260,605
233,552
207,722
182,095
535,127
Certain shopping centers, as lessees, have ground and building leases expiring at various dates through the year 2104. In addition,
one center has an option to extend the term for three 10-year periods and another center has the option to extend the lease term
for one additional 10-year period. Ground rent is recognized on a straight-line basis over the lease terms.
The Company also leases certain of its office facilities and certain equipment. Office facility and equipment leases expire at
various dates through the year 2019.
Rental expense on a straight-line basis under operating leases was $12.6 million in 2014, $13.4 million in 2013, and $12.0
million in 2012. Included in these amounts are related party office rental expense of $2.5 million in 2013 and $2.2 million in 2012.
As a result of the Company's purchase of the U.S. headquarters building in February 2014 (Note 2), which was previously rented
from an affiliate of the Taubman family, related party office rental expense decreased to $0.2 million in 2014. Contingent rent
expense under operating leases was $1.7 million in 2014, $1.4 million in 2013, and $0.9 million in 2012. Payables representing
straight-line rent adjustments under lease agreements were $44.8 million and $41.2 million, as of December 31, 2014, and 2013,
respectively.
The following is a schedule of future minimum rental payments required under operating leases:
2015
2016
2017
2018
2019
Thereafter
$
9,935
12,834
13,240
13,200
12,737
755,342
City Creek Center, a mixed-use project in Salt Lake City, Utah, opened in March 2012. The Company owns the retail space
subject to a long-term participating lease. City Creek Reserve, Inc. (CCRI), an affiliate of the LDS Church is the participating
lessor. The Company owns 100% of the leasehold interest in the retail buildings and property. CCRI has an option to purchase the
Company’s interest at fair value at various points in time over the term of the lease. In addition to the minimum rent included in
the table above, the Company pays contingent rent based on the performance of the center.
International Market Place, a regional mall redevelopment project located in Waikiki, Honolulu, Hawaii, is expected to open in
spring 2016. The project is subject to a long-term participating ground lease. In addition to minimum rent included in the table
above, the Company will pay contingent rent based on the performance of the center.
F-36
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - The Manager
The Taubman Company LLC (the Manager), which is 99% beneficially owned by the Operating Partnership, provides property
management, leasing, development, and other administrative services to the Company, the shopping centers, Taubman affiliates,
and other third parties. Accounts receivable from related parties include amounts due from Unconsolidated Joint Ventures or other
affiliates of the Company, primarily relating to services performed by the Manager. These receivables include certain amounts
due to the Manager related to reimbursement of third party (non-affiliated) costs.
A. Alfred Taubman and certain of his affiliates receive various management services from the Manager. For such services, Mr.
Taubman and affiliates paid the Manager approximately $2.9 million, $3.1 million, and $3.2 million in 2014, 2013, and 2012,
respectively. These amounts are classified in Management, Leasing, and Development Services revenues within the Consolidated
Statement of Operations and Comprehensive Income.
Other related party transactions are described in Note 13 and Note 15.
Note 13 - Share-Based Compensation and Other Employee Plans
The Taubman Company 2008 Omnibus Long-Term Incentive Plan (2008 Omnibus Plan), as amended, which is shareowner
approved, 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 8.5 million Company common
shares or Operating Partnership units. In addition, non-employee directors have the option to defer their compensation under a
deferred compensation plan.
Non-option awards granted after an amendment of the 2008 Omnibus Plan in 2010 are deducted at a ratio of 1.85 Company
common shares or Operating Partnership units, while non-option awards granted prior to the amendment are 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 and non-employee directors' stock grant and deferred compensation plans.
The compensation cost charged to income for the Company’s share-based compensation plans was $17.1 million, $12.9 million,
and $11.9 million for the years ended December 31, 2014, 2013, and 2012, respectively. Compensation cost capitalized as part of
properties and deferred leasing costs was $2.0 million, $1.6 million, and $1.1 million for the years ended December 31, 2014,
2013, and 2012, respectively.
The Company estimated the grant-date fair values of options, performance share units, and restricted share units using the
methods discussed in the separate sections below for each type of grant. Expected volatility and dividend yields are based on
historical volatility and yields of the Company’s common stock, respectively, as well as other factors. The risk-free interest rates
used are based on the U.S. Treasury yield curves in effect at the times of grants. The Company assumes no forfeitures of options
or performance share units due to the small number of participants and low turnover rate.
F-37
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Modification of Grants for Special Dividend
In December 2014, the Company paid a special dividend of $4.75 per share of common stock to all shareholders of record as
of the close of business on December 15, 2014. In connection with this special dividend, the Board of Directors approved award
adjustments to all outstanding PSU and RSU grants and to options that had not been exercised prior to the ex-dividend date for
the special dividend to ensure that the holders were in a neutral economic position after giving effect to the payment of the special
dividend.
The number of units subject to each such PSU and RSU grant was increased and for option holders, the exercise price was
decreased, so that each grant or option had the same intrinsic value to the holder before and after giving effect to the payment of
the special dividend.
The total additional compensation related to the award adjustments was approximately $4.5 million, which will be recognized
over the remaining vesting period, if any, of the grants. Amounts relating to vested options were recognized immediately.
Options
Options are granted to purchase units of limited partnership interest in the Operating Partnership, which are exchangeable for
new shares of the Company’s stock under the Continuing Offer (Note 15). The options have ten-year contractual terms.
A summary of option activity for the years ended December 31, 2014, 2013, and 2012 is presented below:
Outstanding at January 1, 2012
Exercised
Outstanding at December 31, 2012
Exercised
Outstanding at December 31, 2013
Exercised
Outstanding at December 31, 2014
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (in years)
Range of Exercise
Prices
37.13
31.28
42.50
36.67
43.81
42.16
39.20
4.8
$ 13.83 - $ 55.90
3.8
$ 24.74 - $ 55.90
2.6
$ 31.31 - $ 55.90
1.6
$ 26.56 - $ 51.15 (1)
Number of
Options
1,321,990
$
(632,188)
689,802
$
(126,366)
563,436
$
(42,143)
521,293
$
Fully vested options at December 31, 2014
521,293
$
39.20
1.6
(1) Range of exercise prices as of December 31, 2014 reflects adjustments to the exercise price as a result of the grant modification in December 2014.
As of December 31, 2014 and 2013, all options outstanding were fully vested and there was no unrecognized compensation
cost related to options.
The aggregate intrinsic value (the difference between the period end stock price and the option exercise price) of in-the-money
options outstanding was $19.4 million as of December 31, 2014.
The total intrinsic value of options exercised during the years ended December 31, 2014, 2013, and 2012 was $1.4 million, $4.8
million, and $28.7 million, respectively. Cash received from option exercises for the years ended December 31, 2014, 2013, and
2012 was $1.8 million, $4.6 million, and $19.8 million, respectively.
F-38
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, including the special distribution, in the form of cash payments. Under an amendment executed in
January 2011, beginning in December 2017 (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.
In December 2014, the Company modified all outstanding option awards to ensure that holders were in a neutral economic
position after giving effect to the payment of the special dividend by decreasing the exercise price of each award by $4.75. With
the exception of the decrease to the exercise price, all terms of the modified awards remained the same as the original awards.
The Company estimated the incremental fair values of the modification as of the modification date using a Black-Scholes valuation
model considering: the Company’s common stock price at the modification date; before and after modification exercise prices
ranging from $31.31 to $55.90 and $26.56 to $51.15, respectively; expected volatility of 13.62% to 19.14%, expected dividend
yield of 2.70%, remaining contractual term (in years) of 0.46 to 3.24, and a risk-free interest rate of 0.07% to 0.98%. Expected
volatility and dividend yields are based on historical volatility and yields of the Company’s common stock, respectively. The risk-
free interest rates used are based on the U.S. Treasury yield curves in effect on the modification date.
Performance Share Units
In 2014, 2013, and 2012 the Company granted Performance Share Units (PSU) under the 2008 Omnibus Plan. 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 March 2017, March 2016, and March
2015, for the 2014, 2013, and 2012 grants, respectively, if continuous service has been provided, or upon retirement or certain
other events (such as death or disability) if earlier. No dividends accumulate during the vesting period.
The Company estimated the value of the PSU granted in 2014, 2013, and 2012 using a Monte Carlo simulation, considering
the Company’s common stock price at the grant date less the present value of the expected dividends during the vesting periods,
historical returns of the Company and the peer group of companies, and risk-free interest rates and measurement periods existing
at the grant dates. Specific assumptions and the valuation results are shown below.
Risk-free interest rate
Measurement period
Weighted average grant-date fair value
2014
0.70%
3 years
$93.07
Grant Dates
2013
2012
0.30% to 0.40%
0.35% to 0.45%
3 years
$103.37
3 years
$107.45
In 2013, the Company also granted additional PSU under the 2008 Omnibus Plan that represent the right to receive, upon vesting,
shares of the Company’s common stock ranging from 0-400% of the PSU based on the Company’s market performance relative
to that of a peer group. The units vest in March 2017, if continuous service has been provided, or upon certain other events (such
as death or disability) if earlier. No dividends accumulate during the vesting period. The Company estimated the value of these
PSU granted using a Monte Carlo simulation, considering the Company’s common stock price at the grant date less the present
value of the expected dividends during the vesting periods, historical returns of the Company and the peer group of companies, a
risk-free interest rate of 0.46% to 0.62%, and a measurement period of approximately four years. The resulting weighted average
grant-date fair value was $171.05 per PSU.
In 2012, the Company also granted additional PSU under the 2008 Omnibus Plan that represent the right to receive, upon vesting,
shares of the Company’s common stock ranging from 0-400% of the PSU based on the Company’s market performance relative
to that of a peer group. The units vest in March 2017, if continuous service has been provided, or upon certain other events (such
as death or disability) if earlier. No dividends accumulate during the vesting period. The Company estimated the value of these
PSU granted using a Monte Carlo simulation, considering the Company’s common stock price at the grant date less the present
value of the expected dividends during the vesting period, historical returns of the Company and the peer group of companies, a
risk-free interest rate of 0.70% to 0.90%, and a measurement period of five years. The resulting weighted average grant-date fair
value was $189.23 per PSU.
F-39
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December 2014, the Company modified all outstanding PSU grants to ensure that holders were in a neutral economic position
after giving effect to the payment of the special dividend by increasing the number of PSU granted in each award. With the
exception of the number of PSU granted, all terms of the modified awards remained the same as the original awards. The Company
estimated the incremental fair values of the modification as of the modification date using a Monte Carlo simulation, considering
the Company’s common stock price at the modification date less the special dividend and the present value of the expected dividends
during the remaining vesting periods, historical returns of the Company and the peer group of companies, a risk-free interest rate
of 0.03% to 0.65%, and a measurement period of 0.24 to 2.25 years.
A summary of PSU activity for the years ended December 31, 2014, 2013, and 2012 is presented below:
Outstanding at January 1, 2012
Granted (three-year vesting)
Granted (five-year vesting)
Forfeited
Vested
Outstanding at December 31, 2012
Granted (three-year vesting)
Granted (four-year vesting)
Forfeited
Vested
Outstanding at December 31, 2013
Granted
Forfeited
Vested
Special dividend adjustment (2)
Outstanding at December 31, 2014
Number of
Performance
Stock Units
Weighted Average
Grant Date Fair
Value
$
$
$
$
326,151
$
50,041
108,224
(24,733)
(196,943) (1)
262,740
42,178
15,444
(12,240)
(73,259) (1)
234,863
49,157
(771)
(43,858) (1)
15,260
$
$
254,651
$
38.20
107.45
189.23
123.41
15.60
122.52
103.37
171.05
140.49
65.29
139.18
93.07
160.09
85.40
57.00
132.86
(1) Based on the Company's market performance relative to that of a peer group, the actual number of shares of common stock
issued upon vesting during the year ended December 31, 2014, 2013, and 2012 equaled 172%, 300%, and 240%, respectively,
of the number of PSU awards vested in the table above.
(2) Represents an adjustment made to the PSU as a result of the grant modification in December 2014.
The total intrinsic value of PSU vested during the years ended December 31, 2014, 2013, and 2012 was $5.3 million, $16.9
million, and $32.8 million, respectively.
None of the PSU outstanding at December 31, 2014 were vested. As of December 31, 2014, there was $14.6 million of total
unrecognized compensation cost related to nonvested PSU outstanding. This cost is expected to be recognized over an average
period of 1.93 years.
F-40
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Share Units
In 2014, 2013, and 2012, restricted share units (RSU) were issued under the 2008 Omnibus Plan and represent the right to
receive upon vesting one share of the Company’s common stock. The vesting date is March 2017, March 2016, and March 2015
for the 2014, 2013, and 2012 grants, respectively, if continuous service has been provided through that period, or upon retirement
or certain other events if earlier. No dividends accumulate during the vesting period.
The Company estimated the values of the RSU granted in 2014 using the Company’s common stock at the grant dates deducting
the present value of expected dividends during the vesting periods using a risk-free rate of 0.70%. The result of the Company’s
valuations was a weighted average grant-date fair value of $63.95 per RSU granted during 2014. The Company estimated the
value of the RSU granted in 2013 using the Company’s common stock at the grant dates deducting the present value of expected
dividends during the vesting period using a risk-free rate of 0.30% to 0.49%. The result of the Company’s valuations was a weighted
average grant-date fair value of $71.67 per RSU granted during 2013. The Company estimated the value of the RSU granted in
2012 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 interest rate of 0.35% to 0.50%. The result of the Company's valuation was a weighted average grant-date
fair value of $65.14 per RSU granted 2012.
In 2014, Restricted Share Units (RSU) were granted under the 2008 Omnibus Plan and represent the right to receive upon vesting
one share of the Company’s common stock. The units vest in March 2017, if continuous service has been provided, or upon
retirement or certain other events (such as death or disability) if earlier. No dividends accumulate during the vesting period. The
Company estimated the values of these RSU using the Company’s common stock at the grant dates deducting the present value
of expected dividends during the vesting periods using a risk-free interest rate of 0.70%. The result of the Company’s valuation
was a weighted average grant-date fair value of $63.95 per RSU.
In 2014, the Company also granted a limited number of additional RSU that represent the right to receive upon vesting one
share of the Company’s common stock. The units have staggered vesting dates from March 2015 to March 2017, if continuous
service has been provided through those periods, or upon retirement or certain other events (such as death or disability) if earlier.
No dividends accumulate during the vesting periods. The Company estimated the value of these additional RSU using the Company's
common stock price at the grant date deducting the present value of expected dividends during the vesting periods using a risk-
free interest rate of 0.13% to 0.71%. The result of the Company's valuation was a weighted average grant-date fair value of $66.19
per RSU.
In 2013, the Company also granted a limited number of additional RSU that represent the right to receive upon vesting one
share of the Company’s common stock. The units have staggered vesting dates from March 2014 to March 2015, if continuous
service has been provided through those periods, or upon retirement or certain other events (such as death or disability) if earlier.
No dividends accumulate during the vesting periods. The Company estimated the value of these additional RSU using the Company's
common stock price at the grant date deducting the present value of expected dividends during the vesting periods using a risk-
free interest rate of 0.10% to 0.19%. The result of the Company's valuation was a weighted average grant-date fair value of $81.38
per RSU.
In December 2014, the Company modified all outstanding RSU grants to ensure that holders were in a neutral economic position
after giving effect to the payment of the special dividend by increasing the number of RSU granted in each award. With the
exception of the number of RSU granted, all terms of the modified awards remained the same as the original awards. The Company
estimated the incremental fair values of the modification as of the modification date using the Company’s common stock price at
the modification date less the special dividend and the present value of the expected dividends during the remaining vesting periods
using a risk free interest rate of 0.03% to 0.65% and a measurement period of 0.24 to 2.25 years.
F-41
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of RSU activity for the years ended December 31, 2014, 2013, and 2012 is presented below:
Outstanding at January 1, 2012
Granted
Forfeited
Vested
Outstanding at December 31, 2012
Granted (three-year vesting)
Granted (staggered vesting)
Forfeited
Vested
Outstanding at December 31, 2013
Granted (three-year vesting)
Granted (staggered vesting)
Forfeited
Vested
Special dividend adjustment (1)
Outstanding at December 31, 2014
Number of
Restricted Stock
Units
Weighted average
Grant Date Fair
Value
$
$
$
$
605,927
$
107,653
(26,665)
(364,610)
322,305
92,103
5,197
(11,678)
(138,028)
269,899
106,540
8,505
(4,843)
(104,302)
17,852
293,651
$
$
$
22.06
65.14
46.48
9.90
48.19
71.67
81.38
57.60
37.03
62.00
63.95
66.19
65.44
51.96
72.27
67.00 .
(1) Represents an adjustment made to the RSU as a result of the grant modification in December 2014.
Based on an analysis of historical employee turnover, the Company has made an annual forfeiture assumption of approximately
2.02% of grants when recognizing compensation costs relating to the RSU.
The total intrinsic value of RSU vested during the years ended December 31, 2014, 2013, and 2012 was $7.4 million, $10.6
million, and $25.2 million, respectively.
None of the RSU outstanding at December 31, 2014 were vested. As of December 31, 2014, there was $7.9 million of total
unrecognized compensation cost related to nonvested RSU outstanding. This cost is expected to be recognized over an average
period of 1.58 years.
Non-Employee Directors’ Stock Grant and Deferred Compensation
The 2008 Omnibus Plan provides a quarterly grant to each non-employee director of the Company shares of the Company's
common stock based on the fair value of the Company's common stock on the last business day of the preceding quarter. The
annual fair market value of the grant was $120,000 in 2014 and 2013, and $70,000 in 2012. As of December 31, 2014, 11,106 shares
have been issued under the 2008 Omnibus Plan. Certain directors have elected to defer receipt of their shares as described below.
The Non-Employee Directors’ Deferred Compensation Plan (DCP), which was approved by the Company’s Board of Directors,
allows each non-employee director of the Company the right to defer the receipt of all or a portion of his or her annual director
retainer until the termination of his or her service on the Company’s Board of Directors and for such deferred compensation to be
denominated in restricted stock units. The number of restricted stock units received equals the deferred retainer fee divided by the
fair market value of the common stock on the business day immediately before the date the director would otherwise have been
entitled to receive the retainer fee. The restricted stock units represent the right to receive equivalent shares of common stock at
the end of the deferral period. During the deferral period, when the Company pays cash dividends on its common stock, including
special dividends, the directors’ deferral accounts will be credited with dividend equivalents on their deferred restricted stock
units, payable in additional restricted stock units based on the fair market value of the Company’s common stock on the business
day immediately before the record date of the applicable dividend payment. There were 113,839 restricted stock units outstanding
under the DCP at December 31, 2014.
F-42
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Employee Plans
As of December 31, 2014 and 2013, the Company had fully vested awards outstanding for 11,508 and 10,536 notional shares
of stock, respectively, under a previous long-term performance compensation plan. These awards will be settled in cash based on
a twenty day average of the market value of the Company's common stock. The liability for the eventual payout of these awards
is marked to market quarterly based on the twenty day average of the Company's stock price. The Company recorded compensation
costs related to the plan of $0.2 million for the year ended December 31, 2014, $0.1 million in 2013, and $0.3 million in 2012. In
2012, $0.7 million was paid out under this plan. No awards under this plan were paid out during 2014 or 2013.
The Company has a voluntary retirement savings plan established in 1983 and amended and restated effective January 1, 2012
(the Plan). The Company believes the Plan is qualified in accordance with Section 401(k) of the Internal Revenue Code (the Code).
The Company contributes an amount equal to 2% of the qualified wages of all qualified employees and matches employee
contributions in excess of 2% up to 7% of qualified wages. In addition, the Company may make discretionary contributions within
the limits prescribed by the Plan and imposed in the Code. The Company’s contributions and costs relating to the Plan were $3.3
million in 2014, $3.2 million in 2013, and $3.0 million in 2012.
Note 14 - Common and Preferred Stock and Equity of TRG
Common Stock
In August 2013, the Company’s Board of Directors authorized a share repurchase program under which the Company may
repurchase up to $200 million of its outstanding common stock. The Company plans to repurchase shares from time to time on
the open market or in privately negotiated transactions or otherwise, depending on market prices and other conditions. As of
December 31, 2014, the Company repurchased 787,071 shares of its common stock at an average price of $66.45 per share for a
total of $52.3 million under the authorization. All shares repurchased have been cancelled. For each share of the Company’s stock
repurchased, an equal number of the Company’s Operating Partnership units are redeemed. Repurchases of common stock were
financed through general corporate funds, including borrowings under existing lines of credit.
In August 2012, the Company sold 2,875,000 of its common shares. The proceeds were used by the Company to acquire an
equal number of Operating Partnership units. The Operating Partnership paid all offering costs. The Operating Partnership used
the net proceeds, after offering costs, of $208.9 million to reduce outstanding borrowings under its revolving lines of credit. No
common shares were sold in 2014 or 2013.
Preferred Stock
The Company is obligated to issue to the noncontrolling partners of TRG, upon subscription, one share of Series B Non-
Participating Convertible Preferred Stock (Series B Preferred Stock) for each of the Operating Partnership units held by the
noncontrolling partners. Each share of Series B Preferred Stock entitles the holder to one vote on all matters submitted to the
Company's shareowners. The holders of Series B Preferred Stock, voting as a class, have the right to designate up to four nominees
for election as directors of the Company. On all other matters, including the election of directors, the holders of Series B Preferred
Stock will vote with the holders of common stock. The holders of Series B Preferred Stock are not entitled to dividends or earnings
of the Company. The Series B Preferred Stock is convertible into common stock at a ratio of 14,000 shares of Series B Preferred
Stock for one share of common stock. During the years ended December 31, 2014, 2013, and 2012, 35,500 shares, 176,630 shares,
and 1,132,359 shares of Series B Preferred Stock, respectively, were converted to one share, 10 shares, and 65 shares of the
Company’s common stock, respectively, as a result of tenders of units under the Continuing Offer (Note 15).
F-43
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In March 2013, the Company issued 6,800,000 shares of 6.25% Series K Preferred Stock. Net proceeds from the offering were
$164.4 million, net of offering costs of $5.6 million. The Series K Preferred Stock has no stated maturity, sinking fund, or mandatory
redemption requirements and generally is not convertible into any other security of the Company. The Series K Preferred Stock
has a liquidation preference of $170.0 million ($25 per share). Dividends are cumulative and are paid in arrears on the last day of
each calendar quarter. The Series K Preferred Stock will be redeemable by the Company at par, $25 per share, plus accrued
dividends, generally beginning in March 2018. The Company owns corresponding Series K 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 K Preferred Stock. The Series K Preferred Stock is generally non-voting. The
Company's Series K Preferred Stock ranks on parity with its Series J Preferred Stock with respect to the payment of dividends
and distributions of assets upon liquidation, dissolution or winding up of its affairs.
In September 2012, the Company redeemed the 8% Series G Cumulative Redeemable Preferred Stock (Series G Preferred Stock)
and 7.625% Series H Cumulative Redeemable Preferred Stock (Series H Preferred Stock) at prices per share of $25.35 and $25.33,
respectively, which include accrued and unpaid dividends. The Company previously had 4,000,000 shares (par value $100 million)
of its Series G Preferred Stock outstanding and 3,480,000 shares (par value $87 million) of its Series H Preferred Stock outstanding.
As a result of the redemptions in 2012, the Company recognized charges of $3.3 million and $3.1 million, representing the difference
between the carrying values and the redemption prices of its Series G Preferred Stock and Series H Preferred Stock, respectively.
These charges are included within Preferred Stock Dividends on the Consolidated Statement of Operations and Comprehensive
Income for the year ended December 31, 2012. The Series G Preferred Stock had no stated maturity, sinking fund, or mandatory
redemption requirements. Dividends were cumulative and payable on the last day of each calendar quarter. The Series H Preferred
Stock had no stated maturity, sinking fund, or mandatory redemption requirements. Dividends were cumulative and payable in
arrears on or before the last day of each calendar quarter.
The Series G Preferred Stock and Series H Preferred Stock were redeemed with the net proceeds of $186.2 million from the
issuance of 7,700,000 shares of 6.5% Series J Cumulative Redeemable Preferred Stock (Series J Preferred Stock) in August 2012.
Offering costs of $6.3 million were incurred in connection with this issuance. The Series J Preferred Stock has no stated maturity,
sinking fund, or mandatory redemption requirements and generally is not convertible into any other security of the Company. The
Series J Preferred Stock has a liquidation preference of $192.5 million ($25 per share). Dividends are cumulative and are paid on
the last business day of each calendar quarter. All accrued dividends have been paid. The Series J Preferred Stock will be redeemable
by the Company at par, $25 per share, plus accrued dividends, generally beginning in August 2017. The Company owns
corresponding Series J 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 J Preferred Stock. The
Series J Preferred Stock is generally non-voting.
F-44
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - 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 December 31, 2014 of $76.42 per share for the Company's common stock, the aggregate value of
interests in the Operating Partnership that may be tendered under the Cash Tender Agreement was $1.8 billion. The purchase of
these interests at December 31, 2014 would have resulted in the Company owning an additional 27% 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 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 ratio of 14,000 shares of Series B Preferred Stock for one share of common stock.
Litigation
In December 2014, the Company settled a previously ongoing litigation in the United States District Court for the Eastern
District of Pennsylvania (Case No. 09-CV-01619 and Case No. 11-CV-05676) related to The Pier Shops. No material losses were
incurred as a result of the settlement.
The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to personal injury
claims. We believe the Company's insurance policy terms and conditions and limits are appropriate and adequate given the relative
risk of loss and industry practice. However, there are certain types of losses, such as punitive damage awards, that may not be
covered by insurance, and not all potential losses are insured against.
Other
See Note 8 for the Operating Partnership's guarantees of certain notes payable, including guarantees relating to Unconsolidated
Joint Ventures, Note 9 for contingent features relating to certain joint venture agreements, Note 10 for contingent features relating
to derivative instruments, and Note 13 for obligations under existing share-based compensation plans.
F-45
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16 - 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 15), 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 (Note 13). 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.
Net income attributable to Taubman Centers, Inc. common
shareowners (Numerator):
Basic
Impact of additional ownership of TRG
Diluted
Shares (Denominator) – basic
Effect of dilutive securities
Shares (Denominator) – diluted
Earnings per common share - basic
Earnings per common share - diluted
Year Ended December 31
2014
2013
2012
$
$
$
$
863,857
10,933
874,790
$
$
109,908
497
110,405
$
$
83,511
672
84,183
63,267,800
63,591,523
59,884,455
1,653,264
983,889
1,491,989
64,921,064
64,575,412
61,376,444
13.65
13.47
$
$
1.73
1.71
$
$
1.39
1.37
The calculation of diluted earnings per share in certain periods excluded certain potential common stock including outstanding
partnership units and unissued partnership units under a unit option deferral election, both of which may be exchanged for common
shares of the Company under the Continuing Offer. The table below presents the potential common stock excluded from the
calculation of diluted earnings per share as they were anti-dilutive in the period presented.
Weighted average noncontrolling partnership units outstanding
4,351,727
4,428,624
5,063.736
Unissued partnership units under unit option deferral elections
871,262
871,262
Year Ended December 31
2014
2013
2012
F-46
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17 - 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.
Other
The Company's valuation of an insurance deposit utilizes unadjusted quoted prices determined by active markets for the specific
securities the Company has invested in, and therefore falls into Level 1 of the fair value hierarchy.
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
December 31, 2014 Using
Fair Value Measurements as of
December 31, 2013 Using
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)
$
$
13,059
$
12,225
13,059
$
— $
12,225
$
$
$
$
1,543
1,543
(3,418)
(3,418)
Description
Insurance deposit
Derivative interest rate contracts (Note 10)
Total assets
Derivative interest rate contracts (Note 10)
Total liabilities
$
$
(4,044)
(4,044)
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 on the Consolidated
Balance Sheet. Corresponding deferred revenue relating to amounts billed to tenants for this arrangement has been classified
within Accounts Payable and Accrued Liabilities on the Consolidated Balance Sheet.
F-47
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments Carried at Other Than Fair Values
Simon Property Group Limited Partnership Units
As of December 31, 2014, the Company owned 590,124 partnership units in Simon Property Group Limited Partnership (Note
2). The fair value of the partnership units, derived from SPG's common stock price after considering the one-year restriction on
the sale of the units, and therefore falling into Level 2 of the fair value hierarchy, was $105.2 million at December 31, 2014. The
partnership units were classified as Deferred Charges and Other Assets on the Consolidated Balance Sheet and had a book value
of $77.7 million at December 31, 2014.
Notes Payable
The fair value of notes payable is estimated using cash flows discounted at current market rates and therefore falls into Level
2 of the fair value hierarchy. When selecting discount rates for purposes of estimating the fair value of notes payable at December 31,
2014 and 2013, the Company employed the credit spreads at which the debt was originally issued. For debt refinanced prior to
2010, excluding debt assumed from acquisitions, an additional 0.75% and 1.00% credit spread was added to the discount rate at
December 31, 2014 and December 31, 2013, respectively, to attempt 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 December 31, 2014 or 2013. To further assist financial statement users, the Company has included with its
fair value disclosures an analysis of interest rate sensitivity.
The estimated fair values of notes payable at December 31, 2014 and 2013 were as follows:
Notes payable
$
2,025,505
$
2,056,474
$
3,058,053
$
3,107,119
2014
2013
Carrying Value
Fair Value
Carrying Value
Fair Value
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 December 31, 2014
by $29.6 million or 1.4%.
Cash Equivalents and Notes Receivable
The fair value of cash equivalents and notes receivable approximates their carrying value due to their short maturity. The fair
value of cash equivalents is derived from quoted market prices and therefore falls into Level 1 of the fair value hierarchy. The fair
value of notes receivable are estimated using cash flows discounted at current market rates and therefore fall into Level 2 of the
fair value hierarchy.
See Note 5 regarding the fair value of the Unconsolidated Joint Ventures’ notes payable, and Note 10 regarding additional
information on derivatives.
F-48
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18 - Cash Flow Disclosures and Non-Cash Investing and Financing Activities
Interest paid in 2014, 2013, and 2012, net of amounts capitalized of $27.3 million, $16.4 million, and $3.6 million, respectively,
was $88.5 million, $128.2 million, and $142.0 million, respectively. In 2014, $11.9 million of income taxes were paid. Income
tax payments in 2013 and 2012 were immaterial. The following non-cash investing and financing activities occurred during 2014,
2013, and 2012. This table excludes any non-cash adjustments of noncontrolling interests as a result of equity transactions (Note
9).
Issuance of a note receivable in connection with the sale of peripheral land
$
7,411
Receipt of Simon Property Group Limited Partnership units in connection with the
sale of Arizona Mills (Note 2)
$
77,711
2014
2013
2012
Issuance of TRG partnership units in connection with the purchase of the U.S.
headquarters building (Note 2)
Assumption of debt in connection with the purchase of the U.S. headquarters
building (Note 2)
Issuance of note and other receivable in connection with the sale of Taubman
TCBL's assets (Note 2)
Receipt of escrow in connection with the sale of Taubman TCBL (Note 2)
Relinquishment of redeemable equity in connection with disposition of Taubman
TCBL (Note 2)
91
18,215
Other non-cash additions to properties
24,315
14,030
$
9,353
3,550
8,855
19,952
Other non-cash additions to properties primarily represent accrued construction and tenant allowance costs. Various assets and
liabilities were also adjusted upon the disposition of interests in International Plaza and the deconsolidation of the Company's
remaining interest (Note 2).
F-49
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19 - Accumulated Other Comprehensive Income
Changes in the balance of each component of Accumulated Other Comprehensive Income (AOCI) for the years ended
December 31, 2014, 2013, and 2012 were as follows:
Taubman Centers, Inc. AOCI
Noncontrolling Interests AOCI
Cumulative
translation
adjustment
Unrealized gains
(losses) on interest
rate instruments
and other
Total
Cumulative
translation
adjustment
Unrealized gains
(losses) on interest
rate instruments
and other
Total
January 1, 2012
Current Period Other
Comprehensive Income
Amounts due to changes in
ownership
December 31, 2012
$
$
Other comprehensive income/
(loss) before reclassifications
Amounts reclassified from
AOCI
Net current period other
comprehensive income
Adjustments due to changes in
ownership
$
(27,613) $ (27,613)
$
9,113
$
9,113
1,888
(2,551)
(663)
6,212
6,212
1,888
$
(23,952)
$ (22,064)
$
$
756
(1,162)
(406)
(6,212)
(6,212)
756
$
1,739
$ 2,495
3,150
6,117
9,267
1,257
2,700
3,957
3,150
2
3,875
3,875
1,708
1,708
9,992
13,142
1,257
4,408
5,665
6
8
(2)
(6)
(8)
December 31, 2013
$
5,040
$
(13,954)
$ (8,914)
$
2,011
$
6,141
$ 8,152
Other comprehensive income/
(loss) before reclassifications
Amounts reclassified from
AOCI
Net current period other
comprehensive income/(loss)
Adjustments due to changes in
ownership
(5,148)
(12,783)
(17,931)
(2,045)
(5,221)
(7,266)
11,747
11,747
4,982
4,982
(5,148)
(1,036)
(6,184)
(2,045)
(239)
(2,284)
December 31, 2014
$
(101)
$
(14,967)
$ (15,068)
$
7
23
30
(7)
(41)
(23)
(30)
$
5,879
$ 5,838
The following table presents reclassifications out of AOCI for the year ended December 31, 2014:
Details about AOCI Components
Amounts reclassified from AOCI
Affected line item in Consolidated
Statement of Operations
Losses on interest rate instruments and other:
Discontinuation of hedge accounting -
consolidated subsidiary
Realized loss on interest rate contracts -
consolidated subsidiaries
Realized loss on interest rate contracts -
UJVs
Total reclassifications for the period
$
$
4,880 Nonoperating Expense
8,663
Interest Expense
3,186 Equity in Income in UJVs
16,729
F-50
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents reclassifications out of AOCI for the year ended December 31, 2013:
Details about AOCI Components
Amounts reclassified from AOCI
Affected line item in Consolidated
Statement of Operations
(Gains)/losses on interest rate instruments
and other:
Realized loss on interest rate contracts -
consolidated subsidiaries
Realized loss on interest rate contracts -
UJVs
Realized gain on sale of securities
Total reclassifications for the period
$
$
3,826
Interest Expense
3,080 Equity in Income of UJVs
(1,323) Nonoperating Income
5,583
Note 20 - Quarterly Financial Data (Unaudited)
The following is a summary of quarterly results of operations for 2014 and 2013:
Revenues
Equity in income of Unconsolidated Joint Ventures
Net income
Net income attributable to TCO common shareowners
Earnings per common share – basic
Earnings per common share – diluted
Revenues
Equity in income of Unconsolidated Joint Ventures
Net income
Net income attributable to TCO common shareowners
Earnings per common share – basic
Earnings per common share – diluted
2014
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
$
174,778
12,068
526,157
369,125
5.84
5.74
$
$
$
169,985
14,675
39,054
21,344
0.34
0.33
$
$
$
176,044
14,479
56,637
33,682
0.53
0.53
$
$
$
158,322
20,780
656,274
439,706
6.94
6.86
2013
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
183,257
$
178,187
$
193,938
$
211,772
10,346
46,356
27,744
11,481
33,603
17,842
12,220
43,243
24,488
$
$
0.44
0.43
$
$
0.28
0.28
$
$
0.38
0.38
$
$
18,418
66,166
39,834
0.63
0.62
During the first quarter of 2014, the Company recognized a $476.9 million gain, net of tax, from the dispositions of interests in
International Plaza, Arizona Mills, and land in Syosset, New York related to the former Oyster Bay project. Subsequent to the
disposition, International Plaza was accounted for as an Unconsolidated Joint Venture and included in Equity in income of
Unconsolidated Joint Ventures.
During the fourth quarter of 2014, the Company recognized a $629.7 million gain on the dispositions of the seven centers to
Starwood. Also in the fourth quarter as a result of the Starwood disposition, the Company recognized an expense charge of $36.4
million related to the loss on extinguishment of debt at MacArthur Center, Northlake Mall, The Mall at Partridge Creek, and The
Mall at Wellington Green.
F-51
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 21 - New Accounting Pronouncement
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers". This standard provides a single
comprehensive model to use in accounting for revenue arising from contracts with customers and gains and losses arising from
transfers of non-financial assets including sales of property, plant, and equipment, real estate, and intangible assets. ASU No.
2014-09 supersedes most current revenue recognition guidance, including industry-specific guidance. ASU No. 2014-09 is effective
for financial statements issued for fiscal years and interim periods beginning after December 15, 2016. ASU No. 2014-09 may be
applied either retrospectively or as a cumulative effect adjustment as of the date of adoption. Early adoption is prohibited. The
Company is currently evaluating the application of this ASU and its effect on the Company's financial position and results of
operations.
F-52
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2014, 2013, and 2012
(in thousands)
Additions
Schedule II
Balance at
beginning
of year
Charged to
costs and
expenses
Charged to
other
accounts Write-offs
Transfers,
net
Balance at
end of
year
Year Ended December 31, 2014
Allowance for doubtful receivables
Year Ended December 31, 2013
Allowance for doubtful receivables
Year Ended December 31, 2012
Allowance for doubtful receivables
$
$
$
1,934
3,424
3,303
$
$
$
2,900
489
1,397
$
$
$
(1,145) $
(762) (1) $
2,927
(1,979)
(1,276)
$
$
1,934
3,424
(1) Amount represents balances associated with portfolio of seven centers sold to Starwood that were sold in the fourth quarter of 2014.
See accompanying report of independent registered public accounting firm.
F-53
I
I
I
e
l
u
d
e
h
c
S
.
C
N
I
,
S
R
E
T
N
E
C
N
A
M
B
U
A
T
I
N
O
I
T
A
C
E
R
P
E
D
D
E
T
A
L
U
M
U
C
C
A
D
N
A
E
T
A
T
S
E
L
A
E
R
4
1
0
2
,
1
3
r
e
b
m
e
c
e
D
)
s
d
n
a
s
u
o
h
t
n
i
(
e
s
o
l
C
t
a
d
e
i
r
r
a
C
h
c
i
h
W
t
a
t
n
u
o
m
A
s
s
o
r
G
d
o
i
r
e
P
f
o
e
l
b
a
i
c
e
r
p
e
D
e
f
i
L
r
a
e
Y
d
e
r
i
u
q
c
A
/
d
e
n
e
p
O
r
a
e
Y
d
e
d
n
a
p
x
E
s
e
c
n
a
r
b
m
u
c
n
E
t
s
o
C
l
a
t
o
T
D
A
/
f
o
t
e
N
d
e
t
a
l
u
m
u
c
c
A
n
o
i
t
a
i
c
e
r
p
e
D
)
D
A
/
(
l
a
t
o
T
E
&
B
I
d
n
a
L
t
s
o
C
d
e
z
i
l
a
t
i
p
a
C
o
t
t
n
e
u
q
e
s
b
u
S
n
o
i
t
i
s
i
u
q
c
A
,
s
g
n
i
d
l
i
u
B
,
s
t
n
e
m
e
v
o
r
p
m
I
t
n
e
m
p
i
u
q
E
d
n
a
d
n
a
L
y
n
a
p
m
o
C
o
t
t
s
o
C
l
a
i
t
i
n
I
s
r
a
e
y
0
4
s
r
a
e
y
0
4
s
r
a
e
y
0
3
s
r
a
e
y
0
5
/
s
r
a
e
Y
0
4
s
r
a
e
Y
8
4
s
r
a
e
y
0
5
s
r
a
e
y
0
4
1
1
0
2
1
1
0
2
/
5
5
9
1
0
0
0
,
0
5
1
0
6
9
,
2
6
3
8
5
3
,
1
3
8
1
3
,
4
9
3
7
6
7
,
5
4
3
1
5
5
,
8
4
6
0
5
,
3
1
1
6
2
,
2
3
3
1
5
5
,
8
4
s
r
a
e
y
0
4
s
r
a
e
y
0
5
s
r
a
e
y
0
5
5
9
9
1
/
4
9
9
1
/
0
8
9
1
0
0
0
,
0
4
5
7
8
3
,
3
8
1
5
6
5
,
5
7
1
2
5
9
,
8
5
3
8
3
8
,
3
3
3
4
1
1
,
5
2
3
4
2
,
6
6
1
5
9
5
,
7
6
1
4
1
1
,
5
2
3
1
0
2
/
8
7
9
1
/
7
7
9
1
8
0
0
2
/
7
0
0
2
5
9
6
,
8
1
1
5
7
0
,
7
0
7
7
,
5
2
1
1
9
6
,
9
0
1
9
7
0
,
6
1
7
5
7
4
3
9
,
8
0
1
9
7
0
,
6
1
4
0
0
,
1
6
1
2
3
3
,
4
4
1
6
3
3
,
5
0
3
6
2
9
,
9
7
2
0
1
4
,
5
2
1
7
4
,
9
8
5
5
4
,
0
9
1
0
1
4
,
5
2
s
r
a
e
y
5
3
4
1
0
2
)
2
(
5
6
2
,
7
1
9
7
7
,
3
6
1
0
6
2
,
4
2
0
2
1
,
8
2
7
7
3
3
9
5
,
8
7
5
8
9
8
,
4
3
0
4
4
,
7
2
3
4
7
3
8
5
,
7
2
0
0
7
,
1
5
0
2
1
,
8
2
0
2
1
,
8
2
7
7
5
,
6
4
3
2
1
,
5
8
5
0
,
4
3
9
1
5
,
2
1
1
8
4
,
2
6
0
2
1
,
1
2
1
5
,
8
5
0
2
1
,
1
9
6
9
,
3
3
9
5
,
8
7
5
1
1
2
,
5
4
5
2
8
3
,
3
3
0
1
6
,
8
7
1
0
6
,
6
6
4
2
1
5
,
8
5
0
2
1
,
1
3
2
1
,
5
0
2
1
,
8
2
2
8
3
,
3
3
9
6
9
,
3
0
6
4
,
2
9
2
,
2
$
5
4
0
,
0
7
9
$
)
3
(
5
0
5
,
2
6
2
,
3
$
0
7
8
,
2
0
0
,
3
$
5
3
6
,
9
5
2
$
2
3
5
,
8
3
7
$
8
3
3
,
4
6
2
,
2
$
5
3
6
,
9
5
2
$
4
5
-
F
1
1
0
2
0
1
0
2
/
8
9
9
1
)
1
(
2
3
9
,
5
1
/
9
5
0
,
3
8
8
3
6
,
9
4
1
3
9
7
,
1
1
1
3
4
,
1
6
1
1
3
9
,
7
3
1
0
0
5
,
3
2
3
7
0
,
6
8
5
8
,
1
3
1
0
0
5
,
3
2
8
9
9
1
1
8
2
,
7
1
2
9
6
3
,
8
2
1
5
7
3
,
2
2
1
4
4
7
,
0
5
2
8
3
2
,
5
3
2
6
0
5
,
5
1
5
6
4
,
6
4
3
7
7
,
8
8
1
6
0
5
,
5
1
s
t
e
l
t
u
O
g
n
i
s
s
o
r
C
s
e
k
a
L
t
a
e
r
G
I
M
,
s
l
l
i
H
n
r
u
b
u
A
/
o
e
s
a
P
l
E
n
o
s
n
e
d
r
a
G
e
h
T
e
g
a
l
l
i
V
o
e
s
a
P
l
E
A
C
,
t
r
e
s
e
D
m
l
a
P
s
l
l
i
H
n
e
e
r
G
t
a
l
l
a
M
e
h
T
N
T
,
e
l
l
i
v
h
s
a
N
s
l
l
i
H
t
r
o
h
S
t
a
l
l
a
M
e
h
T
J
N
,
s
l
l
i
H
t
r
o
h
S
d
l
e
i
f
r
e
t
s
e
h
C
s
t
e
l
t
u
O
e
g
i
t
s
e
r
P
n
a
m
b
u
a
T
O
M
,
d
l
e
i
f
r
e
t
s
e
h
C
l
l
a
M
s
k
a
O
e
v
l
e
w
T
I
M
,
i
v
o
N
:
r
e
h
t
O
s
e
i
t
i
l
i
c
a
F
e
c
i
f
f
O
d
n
a
L
l
a
r
e
h
p
i
r
e
P
s
t
s
o
c
n
o
i
t
c
u
r
t
s
n
o
c
-
e
r
p
-
d
n
a
s
s
e
c
o
r
P
n
i
n
o
i
t
c
u
r
t
s
n
o
C
t
n
e
m
p
o
l
e
v
e
D
s
n
o
i
t
a
g
i
l
b
O
D
D
C
r
e
d
n
u
s
t
e
s
s
A
r
e
h
t
O
l
a
t
o
T
8
9
9
1
/
0
9
9
1
0
0
0
,
0
8
2
$
0
5
9
,
7
9
7
9
2
,
1
4
1
7
4
2
,
9
3
2
7
4
2
,
9
3
2
0
6
1
,
0
4
1
7
8
0
,
9
9
2
1
0
2
9
8
1
,
3
8
3
3
5
,
8
6
9
6
5
,
7
7
0
0
2
/
1
0
0
2
7
1
5
,
2
2
2
6
6
0
,
3
0
1
2
0
1
,
6
7
3
8
5
,
5
2
3
2
0
1
,
6
7
2
0
7
,
0
9
2
1
8
8
,
4
3
$
1
0
4
,
8
6
3
7
8
9
2
2
,
5
7
1
0
3
,
2
2
2
2
8
9
1
9
5
1
,
3
3
1
$
9
4
8
,
9
6
1
$
8
0
0
,
3
0
3
$
8
0
0
,
3
0
3
$
5
1
9
,
3
9
$
3
9
0
,
9
0
2
$
1
8
8
,
4
3
$
L
F
,
i
m
a
i
M
,
l
l
a
M
n
i
h
p
l
o
D
r
e
t
n
e
C
g
n
i
p
p
o
h
S
k
e
e
r
C
y
r
r
e
h
C
O
C
,
r
e
v
n
e
D
r
e
t
n
e
C
g
n
i
p
p
o
h
S
k
e
e
r
C
y
t
i
C
T
U
,
y
t
i
C
e
k
a
L
t
l
a
S
:
s
r
e
t
n
e
C
g
n
i
p
p
o
h
S
A
C
,
s
e
l
e
g
n
A
s
o
L
r
e
t
n
e
C
y
l
r
e
v
e
B
F
-
5
5
S
e
e
a
c
c
o
m
p
a
n
y
i
n
g
r
e
p
o
r
t
o
f
i
n
d
e
p
e
n
d
e
n
t
r
e
g
i
s
t
e
r
e
d
p
u
b
l
i
c
a
c
c
o
u
n
t
i
n
g
f
i
r
m
.
(
6
)
(
5
)
(
4
)
(
3
)
(
2
)
m
i
l
l
i
o
n
,
r
e
s
p
e
c
t
i
v
e
l
y
,
o
f
p
u
r
c
h
a
s
e
a
c
c
o
u
n
t
i
n
g
p
r
e
m
i
u
m
s
.
B
a
l
a
n
c
e
i
n
c
l
u
d
e
s
p
u
r
c
h
a
s
e
a
c
c
o
u
n
t
i
n
g
a
d
j
u
s
t
m
e
n
t
o
f
$
0
.
2
m
i
l
l
i
o
n
.
T
h
e
u
n
a
u
d
i
t
e
d
a
g
g
r
e
g
a
t
e
c
o
s
t
f
o
r
f
e
d
e
r
a
l
i
n
c
o
m
e
t
a
x
p
u
r
p
o
s
e
s
a
s
o
f
D
e
c
e
m
b
e
r
3
1
,
2
0
1
4
w
a
s
$
3
.
5
1
3
b
i
l
l
i
o
n
.
P
r
i
m
a
r
i
l
y
r
e
p
r
e
s
e
n
t
s
t
h
e
b
o
o
k
b
a
l
a
n
c
e
s
o
f
t
h
e
S
a
l
e
C
e
n
t
e
r
s
t
h
a
t
w
e
r
e
s
o
l
d
t
o
S
t
a
r
w
o
o
d
i
n
t
h
e
f
o
u
r
t
h
q
u
a
r
t
e
r
o
f
2
0
1
4
(
N
o
t
e
2
)
.
P
r
i
m
a
r
i
l
y
r
e
p
r
e
s
e
n
t
s
t
h
e
b
o
o
k
v
a
l
u
e
o
f
t
h
e
C
o
m
p
a
n
y
s
'
a
c
q
u
i
s
i
t
i
o
n
o
f
t
h
e
U
S
.
.
H
e
a
d
q
u
a
r
t
e
r
s
b
u
i
l
d
i
n
g
i
n
F
e
b
r
u
a
r
y
2
0
1
4
(
N
o
t
e
2
)
.
'
C
o
m
p
a
n
y
s
o
w
n
e
r
s
h
i
p
i
n
t
h
e
c
e
n
t
e
r
t
o
a
n
o
n
c
o
n
t
r
o
l
l
i
n
g
5
0
.
1
%
i
n
t
e
r
e
s
t
.
S
u
b
s
e
q
u
e
n
t
t
o
t
h
e
d
i
s
p
o
s
i
t
i
o
n
,
I
n
t
e
r
n
a
t
i
o
n
a
l
P
l
a
z
a
i
s
a
c
c
o
u
n
t
e
d
f
o
r
a
s
a
n
U
n
c
o
n
s
o
l
i
d
a
t
e
d
J
o
i
n
t
V
e
n
t
u
r
e
.
P
r
i
m
a
r
i
l
y
r
e
p
r
e
s
e
n
t
s
t
h
e
b
o
o
k
b
a
l
a
n
c
e
s
o
f
I
n
t
e
r
n
a
t
i
o
n
a
l
P
l
a
z
a
.
I
n
J
a
n
u
a
r
y
2
0
1
4
,
t
h
e
C
o
m
p
a
n
y
s
o
l
d
a
t
o
t
a
l
o
f
4
9
.
9
%
o
f
i
t
s
i
n
t
e
r
e
s
t
s
i
n
t
h
e
e
n
t
i
t
y
t
h
a
t
o
w
n
s
I
n
t
e
r
n
a
t
i
o
n
a
l
P
l
a
z
a
.
T
h
e
d
i
s
p
o
s
i
t
i
o
n
d
e
c
r
e
a
s
e
d
t
h
e
(
1
)
B
a
l
a
n
c
e
s
r
e
p
r
e
s
e
n
t
t
h
e
t
w
o
d
i
f
f
e
r
e
n
t
m
o
r
t
g
a
g
e
n
o
t
e
s
h
e
l
d
s
e
p
a
r
a
t
e
l
y
o
n
T
h
e
G
a
r
d
e
n
s
o
n
E
l
P
a
s
e
o
a
n
d
E
l
P
a
s
e
o
V
i
l
l
a
g
e
f
o
r
$
8
3
.
1
m
i
l
l
i
o
n
a
n
d
$
1
5
.
9
m
i
l
l
i
o
n
,
r
e
s
p
e
c
t
i
v
e
l
y
,
w
h
i
c
h
i
n
c
l
u
d
e
$
1
.
6
m
i
l
l
i
o
n
a
n
d
$
0
.
1
$
3
,
2
6
2
,
5
0
5
$
4
,
4
8
5
,
0
9
0
$
4
,
2
4
6
,
0
0
0
T
r
a
n
s
f
e
r
s
I
n
/
(
O
u
t
)
B
a
l
a
n
c
e
,
e
n
d
o
f
y
e
a
r
D
i
s
p
o
s
a
l
s
/
W
r
i
t
e
-
o
f
f
s
N
e
w
d
e
v
e
l
o
p
m
e
n
t
a
n
d
i
m
p
r
o
v
e
m
e
n
t
s
4
4
8
,
4
6
2
A
c
q
u
i
s
i
t
i
o
n
s
1
7
,
6
4
2
(
4
)
(
1
,
3
0
8
,
5
2
9
)
(
5
)
(
3
8
0
,
1
6
0
)
(
6
)
(
5
,
9
1
8
)
(
3
5
,
9
6
4
)
2
8
0
,
9
7
2
(
1
1
,
9
7
2
)
T
r
a
n
s
f
e
r
s
(
I
n
)
/
O
u
t
2
3
7
,
8
7
7
D
i
s
p
o
s
a
l
s
/
W
r
i
t
e
-
o
f
f
s
D
e
p
r
e
c
i
a
t
i
o
n
(
1
1
0
,
1
2
9
)
1
2
6
,
1
5
0
5
3
0
,
9
1
6
(
6
)
(
5
)
2
1
,
3
5
2
(
1
4
2
,
4
5
8
)
1
0
,
9
2
5
(
1
3
4
,
8
5
8
)
(
8
5
9
)
B
a
l
a
n
c
e
,
e
n
d
o
f
y
e
a
r
$
(
9
7
0
,
0
4
5
)
$
(
1
,
5
1
6
,
9
8
2
)
$
(
1
,
3
9
5
,
8
7
6
)
B
a
l
a
n
c
e
,
b
e
g
i
n
n
i
n
g
o
f
y
e
a
r
$
4
,
4
8
5
,
0
9
0
$
4
,
2
4
6
,
0
0
0
$
4
,
0
2
0
,
9
5
4
B
a
l
a
n
c
e
,
b
e
g
i
n
n
i
n
g
o
f
y
e
a
r
$
(
1
,
5
1
6
,
9
8
2
)
$
(
1
,
3
9
5
,
8
7
6
)
$
(
1
,
2
7
1
,
9
4
3
)
2
0
1
4
2
0
1
3
2
0
1
2
2
0
1
4
2
0
1
3
2
0
1
2
T
o
t
a
l
R
e
a
l
E
s
t
a
t
e
A
s
s
e
t
s
A
c
c
u
m
u
l
a
t
e
d
D
e
p
r
e
c
i
a
t
i
o
n
D
e
c
e
m
b
e
r
3
1
,
2
0
1
4
(
i
n
t
h
o
u
s
a
n
d
s
)
R
E
A
L
E
S
T
A
T
E
A
N
D
A
C
C
U
M
U
L
A
T
E
D
D
E
P
R
E
C
A
T
I
O
N
I
T
A
U
B
M
A
N
C
E
N
T
E
R
S
,
I
N
C
.
T
h
e
c
h
a
n
g
e
s
i
n
t
o
t
a
l
r
e
a
l
e
s
t
a
t
e
a
s
s
e
t
s
a
n
d
a
c
c
u
m
u
l
a
t
e
d
d
e
p
r
e
c
i
a
t
i
o
n
f
o
r
t
h
e
y
e
a
r
s
e
n
d
e
d
D
e
c
e
m
b
e
r
3
1
,
2
0
1
4
,
2
0
1
3
,
a
n
d
2
0
1
2
a
r
e
a
s
f
o
l
l
o
w
s
:
S
c
h
e
d
u
l
e
I
I
I
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Date: February 24, 2015
By:
TAUBMAN CENTERS, INC.
/s/ Robert S. Taubman
Robert S. Taubman, Chairman of the Board, President, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Robert S. Taubman
Robert S. Taubman
/s/ Lisa A. Payne
Lisa A. Payne
/s/ William S. Taubman
William S. Taubman
/s/ Esther R. Blum
Esther R. Blum
/s/ Graham Allison
Graham Allison
/s/ Jerome A. Chazen
Jerome A. Chazen
/s/ Craig M. Hatkoff
Craig M. Hatkoff
/s/ Peter Karmanos, Jr.
Peter Karmanos, Jr.
/s/ William U. Parfet
William U. Parfet
/s/ Ronald W. Tysoe
Ronald W. Tysoe
Chairman of the Board, President,
Chief Executive Officer, and Director
(Principal Executive Officer)
February 24, 2015
Vice Chairman, Chief Financial
Officer, and Director (Principal Financial Officer)
February 24, 2015
Chief Operating Officer,
and Director
Senior Vice President, Controller, and
Chief Accounting Officer
Director
Director
Director
Director
Director
Director
February 24, 2015
February 24, 2015
February 24, 2015
February 24, 2015
February 24, 2015
February 24, 2015
February 24, 2015
February 24, 2015
TAUBMAN CENTERS, INC.
Exhibit 12
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
(in thousands, except ratios)
2014
2013
2012
2011
2010
Year Ended December 31
Income before income tax expense, equity in
income of Unconsolidated Joint Ventures, and
gain on dispositions, net of tax (1)
Add back:
Fixed charges
Amortization of previously capitalized interest
Distributed income of Unconsolidated Joint
Ventures
Deduct:
Capitalized interest
Preferred distributions (2)
Earnings available for fixed charges and
preferred dividends
Fixed charges:
Interest expense
Capitalized interest
Interest portion of rent expense
Preferred distributions (2)
Total fixed charges
Preferred dividends (3)
Total fixed charges and preferred dividends
$
111,833
$
140,312
$
114,287
$
95,945
$
77,928
123,223
3,121
152,438
4,438
152,517
4,427
127,128
4,401
139,410
4,411
62,002
49,389
48,494
46,064
45,412
(27,255)
(16,385)
(3,594)
$
$
272,924
90,803
27,255
5,165
$
$
330,192
130,023
16,385
6,030
$
$
316,131
142,616
3,594
6,307
(422)
372
(319)
(2,460)
$
$
273,488
122,277
422
4,801
(372)
264,382
132,362
319
4,269
2,460
123,223
$
152,438
$
152,517
$
127,128
$
139,410
23,138
20,933
21,051
14,634
14,634
146,361
$
173,371
$
173,568
$
141,762
$
154,044
$
$
$
$
Ratio of earnings to fixed charges and preferred
dividends (1)
1.9
1.9
1.8
1.9
1.7
(1) In 2014, the Company early adopted Accounting Standards Update (ASU) No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals
of Components of an Entity". The operations of the centers sold to Starwood and the gain on disposition are included in continuing operations pursuant
to the application of ASU Update 2014-08. In 2014, the gain on dispositions, net of tax, of $1.1 billion, which includes the gain on the sale of seven
centers to Starwood and the gain on dispositions of interests in International Plaza, Arizona Mills, and land in Syosset, New York related to the former
Oyster Bay project, has been excluded from earnings for purposes of calculating the ratio of earnings to fixed charges and preferred dividends.
In 2011, the Company disposed of The Pier Shops at Caesars and Regency Square. These centers are reported separately as discontinued operations in
the Consolidated Financial Statements in 2011. See "Note 2- Acquisitions, Dispositions, and Developments" to the Consolidated Financial Statements
for further discussion of our discontinued operations. All reported periods of the calculation of the ratio of earnings to fixed charges exclude discontinued
operations.
(2) In October 2011, the Company redeemed the Operating Partnership's 8.2% Series F Preferred Equity for $27 million, which represented a $2.2 million
discount from the book value.
(3) In September 2012, the Company redeemed its 8% Series G Preferred Stock and its 7.625% Series H Preferred Stock. As a result of these redemptions,
the Company recognized a charge of $6.4 million, which represents the difference between the carrying values and the redemption prices of the Series
G & H Preferred Stock. This charge is included in preferred dividends for the year ended December 31, 2012.
Exhibit 31.1
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.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Taubman Centers, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
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;
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)
b)
c)
d)
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;
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;
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
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)
b)
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
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: February 24, 2015
/s/ Robert S. Taubman
Robert S. Taubman
Chairman of the Board of Directors, President, and Chief
Executive Officer
Exhibit 31.2
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.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Taubman Centers, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
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;
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)
b)
c)
d)
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;
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;
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
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)
b)
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
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: February 24, 2015
/s/ Lisa A. Payne
Lisa A. Payne
Vice Chairman, Chief Financial Officer, and Director
(Principal Financial Officer)
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
Exhibit 32.1
I, Robert S. Taubman, Chief Executive Officer of Taubman Centers, Inc. (the "Registrant"), certify that based upon a review of
the Annual Report on Form 10-K for the year ended December 31, 2014 (the "Report"):
(i)
(ii)
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
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
Robert S. Taubman
Chairman of the Board of Directors, President, and Chief
Executive Officer
Date: February 24, 2015
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
Exhibit 32.2
I, Lisa A. Payne, Chief Financial Officer of Taubman Centers, Inc. (the "Registrant"), certify that based upon a review of the
Annual Report on Form 10-K for the year ended December 31, 2014 (the "Report"):
(i)
(ii)
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
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
Lisa A. Payne
Vice Chairman, Chief Financial Officer, and Director
(Principal Financial Officer)
Date: February 24, 2015
%
2
8
.
3
8
.
6
4
2
7
.
7
%
0
8
.
3
4
.
7
%
0
8
.
3
1
.
7
%
9
7
.
3
%
5
8
.
1
6
.
6
5
1
%
4
2
.
2
3
.
7
3
1
%
9
9
.
4
0
.
8
2
2
%
9
2
.
5
2
.
0
8
5
)
n
(
)
n
(
)
n
(
)
p
(
)
n
(
0
.
0
4
1
2
.
3
8
9
.
5
1
1
.
3
8
3
.
7
1
2
0
.
0
4
5
3
.
7
1
7
.
6
9
0
,
1
0
.
0
5
1
0
.
1
3
1
0
.
0
0
.
0
0
.
1
8
2
0
.
5
7
4
7
.
2
5
8
,
1
8
.
2
6
1
0
.
5
7
1
5
.
1
9
6
.
1
1
3
.
4
8
4
.
2
4
2
7
.
7
6
7
9
.
3
9
7
.
7
8
7
.
6
3
1
4
.
4
2
2
9
.
9
4
1
9
.
3
%
0
0
.
4
9
.
9
4
1
9
.
3
%
0
0
.
4
8
.
3
7
.
9
3
.
8
7
9
.
5
0
2
8
.
7
9
2
6
.
3
2
.
2
3
.
0
1
.
6
4
1
9
.
5
1
.
8
5
1
%
6
4
.
4
%
1
8
.
4
0
.
6
8
0
,
1
%
0
0
.
4
9
.
9
4
1
9
.
3
%
0
0
.
4
%
6
4
.
4
8
.
7
9
2
4
.
4
6
8
,
1
9
.
4
7
3
4
.
9
9
6
7
.
8
3
9
,
2
%
0
0
.
4
9
.
9
4
1
%
2
8
.
3
7
.
0
5
2
%
4
4
.
4
4
.
5
0
3
%
6
7
.
4
5
.
5
6
1
%
0
0
.
4
9
.
9
4
1
%
2
8
.
3
7
.
0
5
2
%
4
4
.
4
4
.
5
0
3
%
8
5
.
3
6
.
7
7
%
9
3
.
4
0
.
3
4
2
6
.
7
7
%
8
5
.
3
6
.
7
7
%
0
4
.
4
7
.
5
3
2
1
.
3
5
.
3
1
.
2
3
.
0
7
.
5
7
.
4
1
%
3
4
.
4
9
.
1
9
.
1
%
8
5
.
3
%
4
3
.
4
5
.
6
1
%
3
2
.
4
7
.
1
2
9
.
1
%
8
5
.
3
6
.
3
2
%
8
1
.
4
)
h
(
%
0
0
.
3
0
.
5
7
4
%
1
0
.
3
8
.
1
8
4
0
.
3
4
.
3
0
.
2
3
.
0
4
.
5
0
.
4
1
%
3
4
.
4
8
.
1
8
.
1
%
8
5
.
3
%
4
3
.
4
8
.
5
1
%
2
2
.
4
9
.
0
2
%
0
0
.
3
8
.
6
7
4
7
.
7
9
4
%
5
0
.
3
9
.
2
2
.
3
9
.
1
3
.
0
2
.
5
4
.
3
1
%
3
4
.
4
7
.
1
2
.
0
3
1
9
.
1
3
1
%
9
0
.
4
%
2
1
.
4
4
.
5
4
1
%
2
2
.
4
0
.
0
2
%
6
7
.
1
0
.
0
5
1
9
.
1
3
1
%
9
0
.
4
9
.
1
0
3
%
4
9
.
2
7
.
2
1
.
3
8
.
1
2
.
0
0
.
5
8
.
2
1
%
3
4
.
4
7
.
1
3
.
2
0
.
4
%
8
8
.
3
%
0
3
.
4
8
.
6
1
%
2
2
.
4
2
.
9
1
%
6
1
.
2
0
.
4
%
8
8
.
3
%
6
4
.
2
2
.
4
5
1
0
.
1
3
1
%
6
7
.
1
0
.
0
5
1
%
6
1
.
2
0
.
1
3
1
)
o
(
0
.
0
5
1
)
f
(
0
.
1
3
1
)
g
(
4
.
1
9
.
5
1
1
.
1
4
.
4
3
.
7
1
0
.
0
4
5
2
.
0
8
5
%
9
2
.
5
%
0
6
.
1
%
0
0
.
2
%
0
4
.
1
%
5
1
.
1
)
g
(
)
h
(
%
6
7
.
1
%
6
1
.
2
%
5
3
.
1
)
i
(
%
0
0
.
3
)
c
(
)
d
(
%
4
2
.
5
%
7
3
.
4
%
9
8
.
3
%
4
6
.
4
%
0
6
.
3
%
7
4
.
5
)
e
(
%
1
7
.
1
)
k
(
9
.
3
9
%
6
8
.
1
%
0
7
.
1
%
6
8
.
1
6
.
2
5
.
0
7
.
1
2
.
0
8
.
4
3
.
3
8
1
.
3
9
5
.
2
6
.
1
2
.
0
1
.
1
5
.
4
9
.
9
%
4
2
.
4
%
3
5
.
4
%
5
8
.
4
%
0
0
.
4
%
4
4
.
4
%
4
8
.
3
)
j
(
%
0
2
.
4
%
0
5
.
4
)
j
(
)
m
(
%
0
1
.
4
)
l
(
%
8
5
.
3
0
.
0
4
1
2
.
3
8
9
.
5
1
1
.
3
8
3
.
7
1
2
0
.
0
4
5
3
.
7
1
%
4
8
.
4
7
.
6
9
0
,
1
0
.
0
0
.
0
0
.
0
5
1
0
.
1
3
1
%
5
9
.
1
0
.
1
8
2
%
0
0
.
3
0
.
5
7
4
%
3
9
.
3
7
.
2
5
8
,
1
8
.
2
6
1
0
.
5
7
1
5
.
1
9
6
.
1
1
3
.
4
8
4
.
2
4
2
7
.
7
6
7
%
1
4
.
4
%
6
8
.
1
9
.
3
9
7
.
7
8
7
.
6
3
1
4
.
4
2
2
%
0
9
.
3
%
8
0
.
4
0
.
6
8
0
,
1
)
c
(
)
d
(
)
e
(
)
f
(
0
.
0
8
2
2
.
3
8
9
.
5
1
1
.
3
8
3
.
7
1
2
0
.
0
4
5
3
.
7
1
%
8
8
.
4
7
.
6
3
2
,
1
0
.
0
0
.
0
0
.
0
5
1
8
.
3
6
1
%
7
9
.
1
8
.
3
1
3
%
0
0
.
3
0
.
5
7
4
%
9
9
.
3
5
.
5
2
0
,
2
0
.
5
2
3
0
.
0
5
3
1
.
3
8
1
1
.
3
2
0
.
5
6
1
1
.
7
0
3
%
0
4
.
4
3
.
3
5
3
,
1
)
k
(
8
.
7
8
1
%
6
8
.
1
0
.
5
7
1
4
.
3
7
2
4
.
8
4
4
%
0
9
.
3
%
5
0
.
4
5
.
9
8
9
,
1
%
3
6
.
4
6
.
1
0
5
%
3
9
.
1
4
.
3
2
9
%
3
4
.
3
%
2
0
.
4
1
.
5
1
0
,
4
0
.
0
9
5
,
2
)
j
(
,
)
e
(
,
)
d
(
,
)
c
(
4
.
4
6
8
,
1
%
6
6
.
4
9
.
4
7
3
%
2
9
.
1
4
.
9
9
6
%
8
2
.
3
)
j
(
,
)
e
(
,
)
d
(
,
)
c
(
7
.
8
3
9
,
2
%
9
9
.
3
t
b
e
D
d
e
x
i
F
y
t
i
r
u
t
a
M
e
g
a
r
e
v
A
t
b
e
D
l
a
t
o
T
y
t
i
r
u
t
a
M
e
g
a
r
e
v
A
6
.
1
2
.
2
8
.
3
%
8
8
.
3
%
6
0
.
3
8
.
0
9
1
%
7
7
.
4
9
.
3
9
%
6
8
.
1
8
.
3
%
8
8
.
3
%
1
1
.
4
7
.
8
1
4
1
.
1
2
3
4
.
1
0
.
2
4
.
3
%
8
8
.
3
%
6
3
.
4
4
.
3
1
%
8
2
.
5
1
.
0
9
5
4
.
3
%
8
8
.
3
%
7
2
.
5
5
.
3
9
5
5
5
)
j
(
)
k
(
)
l
(
)
m
(
)
n
(
)
o
(
)
p
(
8
.
9
6
0
.
2
0
.
7
7
1
7
.
5
9
.
1
5
.
5
8
.
1
3
.
5
7
.
1
1
.
5
6
.
1
9
.
4
6
.
1
8
.
4
5
.
1
0
.
0
4
1
6
.
4
9
.
1
8
%
2
8
.
3
8
.
6
4
2
7
.
7
%
0
8
.
3
4
.
7
%
0
8
.
3
1
.
7
%
9
7
.
3
8
.
6
%
9
7
.
3
6
.
6
%
9
7
.
3
3
.
6
%
9
7
.
3
%
9
9
.
4
0
.
8
2
2
1
.
9
9
t
i
b
i
h
x
E
)
a
(
E
L
B
A
Y
A
P
S
E
T
O
N
R
E
H
T
O
D
N
A
E
G
A
G
T
R
O
M
4
1
0
2
,
1
3
R
E
B
M
E
C
E
D
T
A
S
E
T
A
R
T
S
E
R
E
T
N
I
E
G
A
R
E
V
A
D
E
T
H
G
I
E
W
G
N
I
D
U
L
C
N
I
s
e
i
t
i
r
u
t
a
M
t
b
e
D
d
n
a
n
o
i
t
a
z
i
t
r
o
m
A
l
a
p
i
c
n
i
r
P
l
a
t
o
T
4
2
0
2
3
2
0
2
2
2
0
2
1
2
0
2
0
2
0
2
9
1
0
2
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
R
O
B
I
L
e
t
a
R
d
a
e
r
p
S
)
b
(
4
1
0
2
/
1
3
/
2
1
e
v
i
t
c
e
f
f
e
t
a
R
E
l
a
i
c
i
f
e
n
e
B
t
s
e
r
e
t
n
I
4
1
0
2
/
1
3
/
2
1
%
0
0
1
4
1
0
2
/
1
3
/
2
1
%
0
0
.
0
5
%
0
0
.
0
8
%
0
1
.
0
5
%
0
0
.
0
5
%
0
0
.
0
5
%
0
0
.
0
5
%
0
0
.
0
5
%
4
9
.
8
7
%
0
0
.
0
5
%
0
1
.
0
5
%
0
0
.
0
5
)
g
n
i
d
n
u
o
r
o
t
e
u
d
d
d
a
t
o
n
y
a
m
s
t
n
u
o
m
a
,
s
r
a
l
l
o
d
f
o
s
n
o
i
l
l
i
m
n
i
(
.
C
N
I
,
S
R
E
T
N
E
C
N
A
M
B
U
A
T
4
1
0
2
,
1
3
r
e
b
m
e
c
e
D
f
o
s
A
y
r
a
m
m
u
S
t
b
e
D
:
t
b
e
D
e
t
a
R
d
e
x
i
F
d
e
t
a
d
i
l
o
s
n
o
C
r
e
t
n
e
C
g
n
i
p
p
o
h
S
k
e
e
r
C
y
r
r
e
h
C
s
t
e
l
t
u
O
g
n
i
s
s
o
r
C
s
e
k
a
L
t
a
e
r
G
o
e
s
a
P
l
E
n
o
s
n
e
d
r
a
G
e
h
T
s
r
e
t
r
a
u
q
d
a
e
H
O
H
B
n
a
m
b
u
a
T
d
e
x
i
F
d
e
t
a
d
i
l
o
s
n
o
C
l
a
t
o
T
s
l
l
i
H
t
r
o
h
S
t
a
l
l
a
M
e
h
T
e
t
a
R
d
e
t
h
g
i
e
W
r
e
t
n
e
C
k
e
e
r
C
y
t
i
C
e
g
a
l
l
i
V
o
e
s
a
P
l
E
:
t
b
e
D
e
t
a
R
g
n
i
t
a
o
l
F
d
e
t
a
d
i
l
o
s
n
o
C
s
l
l
i
H
n
e
e
r
G
t
a
l
l
a
M
e
h
T
n
a
u
J
n
a
S
f
o
l
l
a
M
e
h
T
y
t
i
l
i
c
a
F
t
i
d
e
r
C
g
n
i
v
l
o
v
e
R
M
5
6
$
G
R
T
y
t
i
l
i
c
a
F
t
i
d
e
r
C
g
n
i
v
l
o
v
e
R
B
1
.
1
$
G
R
T
g
n
i
t
a
o
l
F
d
e
t
a
d
i
l
o
s
n
o
C
l
a
t
o
T
e
t
a
R
d
e
t
h
g
i
e
W
:
d
e
x
i
F
o
t
d
e
p
p
a
w
S
t
b
e
D
e
t
a
R
g
n
i
t
a
o
l
F
d
e
t
a
d
i
l
o
s
n
o
C
:
t
b
e
D
e
t
a
R
d
e
x
i
F
s
e
r
u
t
n
e
V
t
n
i
o
J
s
e
t
a
i
c
o
s
s
A
d
n
a
L
n
a
m
b
u
a
T
a
i
n
e
l
l
i
M
t
a
l
l
a
M
e
h
T
a
z
a
l
P
l
a
n
o
i
t
a
n
r
e
t
n
I
y
e
l
l
a
v
n
u
S
s
p
o
h
S
e
d
i
s
r
e
t
a
W
s
m
r
a
f
t
s
e
W
d
e
x
i
F
e
r
u
t
n
e
V
t
n
i
o
J
l
a
t
o
T
e
t
a
R
d
e
t
h
g
i
e
W
:
t
b
e
D
e
t
a
R
g
n
i
t
a
o
l
F
s
e
r
u
t
n
e
V
t
n
i
o
J
r
e
t
n
e
C
n
w
o
T
y
t
i
s
r
e
v
i
n
U
t
a
l
l
a
M
e
h
T
e
t
a
R
d
e
t
a
d
i
l
o
s
n
o
C
l
a
t
o
T
e
t
a
R
d
e
t
h
g
i
e
W
n
a
o
L
m
r
e
T
G
R
T
e
t
a
R
:
d
e
x
i
F
o
t
d
e
p
p
a
w
S
t
b
e
D
e
t
a
R
g
n
i
t
a
o
l
F
e
r
u
t
n
e
V
t
n
i
o
J
d
e
x
i
F
o
t
d
e
p
p
a
w
S
g
n
i
t
a
o
l
F
e
r
u
t
n
e
V
t
n
i
o
J
l
a
t
o
T
a
z
a
l
P
l
a
n
o
i
t
a
n
r
e
t
n
I
s
k
a
O
r
i
a
F
s
l
a
t
o
T
t
s
e
r
e
t
n
I
l
a
i
c
i
f
e
n
e
B
G
R
T
t
b
e
D
e
t
a
R
d
e
x
i
F
t
b
e
D
e
t
a
R
g
n
i
t
a
o
l
F
d
e
x
i
F
o
t
d
e
p
p
a
w
S
e
t
a
R
g
n
i
t
a
o
l
F
e
r
u
t
n
e
V
t
n
i
o
J
l
a
t
o
T
e
t
a
R
d
e
t
h
g
i
e
W
e
t
a
R
l
a
t
o
T
)
a
(
)
b
(
)
c
(
)
d
(
)
e
(
)
f
(
)
g
(
)
h
(
)
i
(
h
c
i
h
w
s
p
o
h
S
e
d
i
s
r
e
t
a
W
n
i
t
n
e
m
t
s
e
v
n
i
%
5
2
l
a
n
o
i
t
i
d
d
a
n
a
f
o
n
o
i
t
i
s
i
u
q
c
a
m
o
r
f
m
u
i
m
e
r
p
g
n
i
t
n
u
o
c
c
a
e
s
a
h
c
r
u
p
f
o
n
o
i
l
l
i
m
8
.
1
$
e
d
u
l
c
n
i
t
b
e
d
n
i
t
s
e
r
e
t
n
i
l
a
i
c
i
f
e
n
e
B
.
t
b
e
d
n
i
t
s
e
r
e
t
n
i
l
a
i
c
i
f
e
n
e
b
l
a
t
o
t
n
o
%
0
2
.
4
f
o
e
t
a
r
e
v
i
t
c
e
f
f
e
n
a
o
t
%
4
5
.
5
f
o
t
b
e
d
e
h
t
n
o
e
t
a
r
d
e
t
a
t
s
e
h
t
s
e
c
u
d
e
r
.
s
e
r
u
s
a
e
m
e
c
n
a
m
r
o
f
r
e
p
n
i
a
t
r
e
c
g
n
i
v
e
i
h
c
a
n
o
p
u
%
0
6
.
1
+
R
O
B
I
L
o
t
s
e
s
a
e
r
c
e
d
d
n
a
%
0
7
.
1
+
R
O
B
I
L
t
a
t
s
e
r
e
t
n
i
s
r
a
e
b
h
c
i
h
w
y
t
i
l
i
c
a
f
n
o
i
t
c
u
r
t
s
n
o
c
n
o
i
l
l
i
m
5
2
2
$
e
h
t
f
o
%
0
5
d
n
a
y
t
i
l
i
c
a
f
e
h
t
f
o
e
c
n
a
l
a
b
l
a
p
i
c
n
i
r
p
e
h
t
f
o
%
5
2
f
o
y
t
n
a
r
a
u
g
l
a
n
o
i
t
i
d
n
o
c
n
u
n
a
d
e
d
i
v
o
r
p
s
a
h
G
R
T
.
e
l
b
a
l
i
a
v
a
e
r
a
s
n
o
i
t
p
o
n
o
i
s
n
e
t
x
e
r
a
e
y
-
e
n
o
r
u
o
F
n
o
p
U
.
s
e
r
u
s
a
e
m
e
c
n
a
m
r
o
f
r
e
p
n
i
a
t
r
e
c
f
o
t
n
e
m
e
v
e
i
h
c
a
n
o
p
u
e
c
n
a
l
a
b
l
a
p
i
c
n
i
r
p
g
n
i
d
n
a
t
s
t
u
o
e
h
t
f
o
%
5
.
2
1
o
t
d
e
c
u
d
e
r
e
b
y
a
m
e
e
t
n
a
r
a
u
g
l
a
p
i
c
n
i
r
p
e
h
T
.
t
s
e
r
e
t
n
i
.
d
e
s
a
e
l
e
r
e
b
y
a
m
e
e
t
n
a
r
a
u
g
l
a
n
o
i
t
i
d
n
o
c
n
u
e
h
t
,
n
o
i
t
a
z
i
l
i
b
a
t
s
.
s
n
o
i
t
a
g
i
l
b
o
p
a
w
s
e
h
t
f
o
%
1
.
0
5
f
o
e
e
t
n
a
r
a
u
g
l
a
r
e
v
e
s
a
d
e
d
i
v
o
r
p
s
a
h
G
R
T
.
y
t
i
r
u
t
a
m
l
i
t
n
u
%
8
5
.
3
f
o
e
t
a
r
e
v
i
t
c
e
f
f
e
.
y
t
i
r
u
t
a
m
o
t
r
o
i
r
p
s
h
t
n
o
m
5
.
2
l
i
t
n
u
%
0
1
.
4
f
o
e
t
a
r
e
v
i
t
c
e
f
f
e
n
a
n
a
o
t
o
t
d
e
p
p
a
w
s
d
e
p
p
a
w
s
s
i
s
i
t
b
e
D
t
b
e
D
.
s
t
n
e
m
t
s
u
j
d
a
g
n
i
t
n
u
o
c
c
a
e
s
a
h
c
r
u
p
f
o
n
o
i
t
a
z
i
t
r
o
m
a
s
e
d
u
l
c
n
i
n
o
i
t
a
z
i
t
r
o
m
a
l
a
p
i
c
n
i
r
P
.
e
l
b
a
l
i
a
v
a
s
i
n
o
i
t
p
o
n
o
i
s
n
e
t
x
e
r
a
e
y
-
e
n
o
A
e
b
y
a
m
d
o
i
r
e
p
.
5
1
0
2
r
a
e
y
y
l
n
o
t
s
e
r
e
t
n
i
e
h
T
.
s
r
a
e
y
0
3
n
o
d
e
s
a
b
l
a
p
i
c
n
i
r
p
s
e
z
i
t
r
o
m
a
n
e
h
t
d
n
a
6
1
0
2
r
e
b
m
e
v
o
N
l
i
t
n
u
y
l
n
o
t
s
e
r
e
t
n
i
s
i
a
i
n
e
l
l
i
M
t
a
l
l
a
M
e
h
T
n
o
n
a
o
l
e
h
T
r
a
d
n
e
l
a
c
e
h
t
r
o
f
t
n
u
o
m
a
n
i
a
t
r
e
c
a
s
d
e
e
c
x
e
r
o
s
l
a
u
q
e
e
c
i
v
r
e
s
t
b
e
d
r
o
f
e
l
b
a
l
i
a
v
a
e
m
o
c
n
i
t
e
n
e
h
t
t
a
h
t
d
e
d
i
v
o
r
p
e
t
a
d
y
t
i
r
u
t
a
m
e
h
t
l
i
t
n
u
d
e
d
n
e
t
x
e
f
o
t
n
e
m
e
l
t
t
e
s
n
o
s
e
s
s
o
l
,
s
t
s
o
c
e
c
n
a
u
s
s
i
t
b
e
d
f
o
n
o
i
t
a
z
i
t
r
o
m
a
f
o
t
c
e
f
f
e
e
d
u
l
c
n
i
t
o
n
s
e
o
d
t
u
b
,
y
n
a
f
i
,
g
n
i
t
n
u
o
c
c
a
e
g
d
e
h
r
o
f
y
f
i
l
a
u
q
t
a
h
t
s
p
a
w
s
e
t
a
r
t
s
e
r
e
t
n
i
f
o
t
c
a
p
m
i
e
h
t
s
e
d
u
l
c
n
I
.
s
m
u
i
m
e
r
p
p
a
c
e
t
a
r
t
s
e
r
e
t
n
i
r
o
t
b
e
d
e
t
a
r
d
e
x
i
f
n
i
a
t
r
e
c
f
o
g
n
i
c
n
a
n
i
f
e
r
e
h
t
e
g
d
e
h
o
t
d
e
s
u
s
e
v
i
t
a
v
i
r
e
d
.
%
9
8
.
3
f
o
e
t
a
r
e
v
i
t
c
e
f
f
e
n
a
.
%
4
6
.
4
f
o
e
t
a
r
e
v
i
t
c
e
f
f
e
n
a
.
%
1
7
.
1
f
o
e
t
a
r
e
v
i
t
c
e
f
f
e
n
a
o
t
o
t
o
t
%
2
4
.
4
f
o
t
b
e
d
e
h
t
n
o
e
t
a
r
d
e
t
a
t
s
%
0
1
.
6
f
o
t
b
e
d
e
h
t
n
o
e
t
a
r
d
e
t
a
t
s
%
0
9
.
5
f
o
t
b
e
d
e
h
t
n
o
e
t
a
r
d
e
t
a
t
s
e
h
t
e
h
t
e
h
t
s
e
c
u
d
e
r
h
c
i
h
w
n
o
i
t
i
s
i
u
q
c
a
m
o
r
f
m
u
i
m
e
r
p
g
n
i
t
n
u
o
c
c
a
e
s
a
h
c
r
u
p
f
o
n
o
i
l
l
i
m
1
.
0
$
s
e
d
u
l
c
n
i
t
b
e
D
s
e
c
u
d
e
r
h
c
i
h
w
n
o
i
t
i
s
i
u
q
c
a
m
o
r
f
m
u
i
m
e
r
p
g
n
i
t
n
u
o
c
c
a
e
s
a
h
c
r
u
p
f
o
n
o
i
l
l
i
m
6
.
1
$
s
e
d
u
l
c
n
i
t
b
e
D
s
e
c
u
d
e
r
h
c
i
h
w
n
o
i
t
i
s
i
u
q
c
a
m
o
r
f
m
u
i
m
e
r
p
g
n
i
t
n
u
o
c
c
a
e
s
a
h
c
r
u
p
f
o
n
o
i
l
l
i
m
2
.
0
$
s
e
d
u
l
c
n
i
t
b
e
D
.
d
e
t
a
c
i
d
n
i
e
s
i
w
r
e
h
t
o
s
s
e
l
n
u
G
R
T
o
t
e
s
r
u
o
c
e
r
-
n
o
n
d
n
a
d
e
r
u
c
e
s
s
i
t
b
e
d
l
l
A
r
a
e
y
-
e
n
o
o
w
T
.
s
e
r
u
s
a
e
m
e
c
n
a
m
r
o
f
r
e
p
n
i
a
t
r
e
c
g
n
i
v
e
i
h
c
a
n
o
p
u
%
5
7
.
1
+
R
O
B
I
L
o
t
s
e
s
a
e
r
c
e
d
d
n
a
%
0
.
2
+
R
O
B
I
L
t
a
t
s
e
r
e
t
n
i
s
r
a
e
b
h
c
i
h
w
y
t
i
l
i
c
a
f
n
o
i
t
c
u
r
t
s
n
o
c
n
o
i
l
l
i
m
0
2
3
$
.
n
a
o
l
e
h
t
f
o
m
r
e
t
e
h
t
g
n
i
r
u
d
t
s
e
r
e
t
n
i
d
i
a
p
n
u
t
u
b
d
e
u
r
c
c
a
l
l
a
d
n
a
e
c
n
a
l
a
b
l
a
p
i
c
n
i
r
p
e
h
t
f
o
e
e
t
n
a
r
a
u
g
l
a
n
o
i
t
i
d
n
o
c
n
u
n
a
d
e
d
i
v
o
r
p
s
a
h
G
R
T
.
e
l
b
a
l
i
a
v
a
e
r
a
s
n
o
i
t
p
o
n
o
i
s
n
e
t
x
e
t
c
e
r
i
d
n
i
n
a
y
b
d
e
r
u
c
e
s
d
n
a
G
R
T
o
t
e
s
r
u
o
c
e
r
s
i
y
t
i
l
i
c
a
f
e
h
T
.
y
t
i
l
i
c
a
f
n
o
g
n
i
d
n
a
t
s
t
u
o
o
s
l
a
e
r
a
n
o
i
l
l
i
m
2
.
4
$
g
n
i
l
a
t
o
t
t
i
d
e
r
c
f
o
s
r
e
t
t
e
L
.
d
a
e
r
p
s
s
u
l
p
R
O
B
I
L
t
a
y
l
i
a
d
s
t
a
o
l
f
e
t
a
R
.
6
1
0
2
n
i
s
e
r
u
t
a
m
y
t
i
l
i
c
a
f
e
h
T
.
s
l
l
i
H
t
r
o
h
S
f
o
%
0
4
n
i
t
s
e
r
e
t
n
i
A
.
o
i
t
a
r
e
g
a
r
e
v
e
l
l
a
t
o
t
'
s
y
n
a
p
m
o
C
e
h
t
n
o
d
e
s
a
b
%
0
3
.
0
o
t
%
0
2
.
0
m
o
r
f
g
n
i
g
n
a
r
e
e
f
y
t
i
l
i
c
a
f
a
h
t
i
w
%
0
7
.
1
o
t
%
5
1
.
1
+
R
O
B
I
L
f
o
e
g
n
a
r
a
.
9
1
0
2
n
i
s
e
r
u
t
a
m
y
t
i
l
i
c
a
f
e
h
T
t
a
t
s
e
r
e
t
n
i
.
e
l
b
a
l
i
a
v
a
s
r
a
e
b
y
t
i
l
i
c
a
f
d
e
r
u
c
e
s
n
u
e
h
T
s
i
n
o
i
t
p
o
n
o
i
s
n
e
t
x
e
r
a
e
y
e
n
o
f
o
e
t
a
r
d
e
x
i
f
a
o
t
y
t
i
r
u
t
a
m
l
i
t
n
u
d
e
p
p
a
w
s
s
i
e
t
a
r
R
O
B
I
L
e
h
T
.
o
i
t
a
r
e
g
a
r
e
v
e
l
'
s
y
n
a
p
m
o
C
e
h
t
n
o
d
e
s
a
b
%
0
9
.
1
o
t
%
5
3
.
1
+
R
O
B
I
L
f
o
e
g
n
a
r
a
t
a
t
s
e
r
e
t
n
i
s
r
a
e
b
n
a
o
l
d
e
r
u
c
e
s
n
u
e
h
T
.
%
5
5
.
3
o
t
%
0
.
3
f
o
e
g
n
a
r
e
h
t
n
i
e
t
a
r
t
s
e
r
e
t
n
i
e
v
i
t
c
e
f
f
e
n
a
n
i
s
t
l
u
s
e
r
h
c
i
h
w
,
%
5
6
.
1
D
e
v
e
l
o
p
m
e
n
t
C
o
n
s
t
r
u
c
t
i
o
n
i
n
P
r
o
c
e
s
s
a
n
d
-
P
r
e
-
c
o
n
s
t
r
u
c
t
i
o
n
c
o
s
t
s
(
2
)
9
,
0
0
3
9
,
0
0
3
9
,
0
0
3
4
2
,
6
9
3
4
4
2
,
6
9
3
4
9
,
0
0
3
4
2
,
6
9
3
4
2
3
,
1
0
2
2
0
0
6
N
e
w
d
e
v
e
l
o
p
m
e
n
t
a
n
d
i
m
p
r
o
v
e
m
e
n
t
s
1
9
3
,
3
9
4
B
a
l
a
n
c
e
,
e
n
d
o
f
y
e
a
r
T
r
a
n
s
f
e
r
s
I
n
(
O
u
t
)
D
i
s
p
o
s
a
l
s
/
W
r
i
t
e
-
o
f
f
s
$
1
,
5
8
0
,
9
2
6
$
1
,
3
0
5
,
6
5
8
$
1
,
1
2
9
,
6
4
7
B
a
l
a
n
c
e
,
e
n
d
o
f
y
e
a
r
$
(
5
4
8
,
6
4
6
)
$
(
4
7
8
,
8
2
0
)
$
(
4
7
3
,
1
0
1
)
2
8
3
,
3
2
0
(
2
0
1
,
4
4
6
)
(
4
)
(
3
)
(
2
9
,
0
0
6
)
1
9
9
,
0
9
9
5
,
9
1
8
(
3
,
7
9
8
)
2
6
,
1
3
1
D
i
s
p
o
s
a
l
s
T
r
a
n
s
f
e
r
s
(
I
n
)
O
u
t
D
e
p
r
e
c
i
a
t
i
o
n
f
o
r
y
e
a
r
(
1
1
0
,
2
1
5
)
8
1
,
2
8
7
(
4
0
,
8
9
8
)
(
4
)
(
3
)
2
9
,
8
9
6
(
3
5
,
6
1
5
)
4
,
0
1
8
(
3
1
,
0
6
0
)
T
o
t
a
l
$
1
7
8
,
6
6
6
$
9
3
4
,
3
2
9
$
4
6
7
,
9
3
1
$
1
7
8
,
6
6
6
$
1
,
4
0
2
,
2
6
0
$
1
,
5
8
0
,
9
2
6
(
1
)
(
2
)
$
5
4
8
,
6
4
6
$
1
,
0
3
2
,
2
8
0
T
h
e
c
h
a
n
g
e
s
i
n
t
o
t
a
l
r
e
a
l
e
s
t
a
t
e
a
s
s
e
t
s
a
n
d
a
c
c
u
m
u
l
a
t
e
d
d
e
p
r
e
c
i
a
t
i
o
n
f
o
r
t
h
e
y
e
a
r
s
e
n
d
e
d
D
e
c
e
m
b
e
r
2
0
1
4
,
2
0
1
3
,
a
n
d
2
0
1
2
a
r
e
a
s
f
o
l
l
o
w
s
:
B
a
l
a
n
c
e
,
b
e
g
i
n
n
i
n
g
o
f
y
e
a
r
$
1
,
3
0
5
,
6
5
8
$
1
,
1
2
9
,
6
4
7
$
1
,
1
0
7
,
3
1
4
B
a
l
a
n
c
e
,
b
e
g
i
n
n
i
n
g
o
f
y
e
a
r
$
(
4
7
8
,
8
2
0
)
$
(
4
7
3
,
1
0
1
)
$
(
4
4
6
,
0
5
9
)
2
0
1
4
2
0
1
3
2
0
1
2
T
o
t
a
l
R
e
a
l
E
s
t
a
t
e
A
s
s
e
t
s
2
0
1
4
2
0
1
3
2
0
1
2
A
c
c
u
m
u
l
a
t
e
d
D
e
p
r
e
c
i
a
t
i
o
n
(
2
)
T
h
e
u
n
a
u
d
i
t
e
d
a
g
g
r
e
g
a
t
e
c
o
s
t
f
o
r
f
e
d
e
r
a
l
i
n
c
o
m
e
t
a
x
p
u
r
p
o
s
e
s
a
s
o
f
D
e
c
e
m
b
e
r
3
1
,
2
0
1
4
w
a
s
$
2
.
3
3
1
b
i
l
l
i
o
n
.
(
1
)
E
x
c
l
u
d
e
s
$
2
4
8
.
7
m
i
l
l
i
o
n
r
e
l
a
t
i
n
g
t
o
t
h
e
C
o
m
p
a
n
y
s
'
i
n
v
e
s
t
m
e
n
t
s
i
n
n
e
w
c
e
n
t
e
r
p
r
o
p
e
r
t
i
e
s
u
n
d
e
r
d
e
v
e
l
o
p
m
e
n
t
i
n
A
s
i
a
,
i
n
c
l
u
d
i
n
g
c
u
m
u
l
a
t
i
v
e
t
r
a
n
s
l
a
t
i
o
n
a
d
j
u
s
t
m
e
n
t
s
.
c
e
n
t
e
r
t
o
a
n
o
n
c
o
n
t
r
o
l
l
i
n
g
5
0
.
1
%
i
n
t
e
r
e
s
t
.
P
r
i
o
r
t
o
t
h
e
d
i
s
p
o
s
i
t
i
o
n
,
I
n
t
e
r
n
a
t
i
o
n
a
l
P
l
a
z
a
w
a
s
a
c
c
o
u
n
t
e
d
f
o
r
a
s
a
c
o
n
s
o
l
i
d
a
t
e
d
c
e
n
t
e
r
.
(
4
)
(
3
)
P
r
i
m
a
r
i
l
y
r
e
p
r
e
s
e
n
t
s
b
o
o
k
b
a
l
a
n
c
e
s
o
f
A
r
i
z
o
n
a
M
i
l
l
s
,
w
h
i
c
h
w
a
s
s
o
l
d
i
n
J
a
n
u
a
r
y
2
0
1
4
.
P
r
i
m
a
r
i
l
y
r
e
p
r
e
s
e
n
t
s
t
h
e
b
o
o
k
b
a
l
a
n
c
e
s
o
f
I
n
t
e
r
n
a
t
i
o
n
a
l
P
l
a
z
a
.
I
n
J
a
n
u
a
r
y
2
0
1
4
,
t
h
e
C
o
m
p
a
n
y
s
o
l
d
a
t
o
t
a
l
o
f
4
9
.
9
%
o
f
i
t
s
i
n
t
e
r
e
s
t
s
i
n
t
h
e
e
n
t
i
t
y
t
h
a
t
o
w
n
s
I
n
t
e
r
n
a
t
i
o
n
a
l
P
l
a
z
a
.
T
h
e
d
i
s
p
o
s
i
t
i
o
n
d
e
c
r
e
a
s
e
d
t
h
e
C
o
m
p
a
n
y
s
o
w
n
e
r
s
h
i
p
'
i
n
t
h
e
P
e
r
i
p
h
e
r
a
l
L
a
n
d
T
a
u
b
m
a
n
L
a
n
d
A
s
s
o
c
i
a
t
e
s
(
S
u
n
v
a
l
l
e
y
)
,
C
o
n
c
o
r
d
,
C
A
O
t
h
e
r
:
W
e
s
t
f
a
r
m
s
,
F
a
r
m
i
n
g
t
o
n
,
C
T
W
a
t
e
r
s
i
d
e
S
h
o
p
s
,
N
a
p
l
e
s
,
F
L
S
a
r
a
s
o
t
a
,
F
L
T
h
e
M
a
l
l
a
t
U
n
i
v
e
r
s
i
t
y
T
o
w
n
C
e
n
t
e
r
,
S
u
n
v
a
l
l
e
y
,
C
o
n
c
o
r
d
,
C
A
I
n
t
e
r
n
a
t
i
o
n
a
l
P
l
a
z
a
,
T
a
m
p
a
,
F
L
T
h
e
M
a
l
l
a
t
M
i
l
l
e
n
i
a
,
O
r
l
a
n
d
o
,
F
L
S
t
a
m
f
o
r
d
T
o
w
n
C
e
n
t
e
r
,
S
t
a
m
f
o
r
d
,
C
T
4
2
,
6
9
3
4
5
,
2
8
7
1
2
,
6
0
4
7
8
,
0
0
8
9
,
5
3
7
3
5
0
2
2
,
5
1
7
S
h
o
p
p
i
n
g
C
e
n
t
e
r
s
:
F
a
i
r
O
a
k
s
,
F
a
i
r
f
a
x
,
V
A
$
7
,
6
6
6
$
3
3
,
1
4
7
$
1
0
1
,
9
5
2
$
7
,
6
6
6
$
1
3
5
,
0
9
9
$
1
4
2
,
7
6
5
$
7
2
,
0
4
3
$
7
0
,
7
2
2
$
C
o
s
t
L
a
n
d
a
n
d
E
q
u
i
p
m
e
n
t
I
m
p
r
o
v
e
m
e
n
t
s
,
B
u
i
l
d
i
n
g
s
,
A
c
q
u
i
s
i
t
i
o
n
S
u
b
s
e
q
u
e
n
t
t
o
C
a
p
i
t
a
l
i
z
e
d
L
a
n
d
a
n
d
E
q
u
i
p
m
e
n
t
I
m
p
r
o
v
e
m
e
n
t
s
,
B
u
i
l
d
i
n
g
s
,
T
o
t
a
l
(
A
D
/
)
D
e
p
r
e
c
i
a
t
i
o
n
A
c
c
u
m
u
l
a
t
e
d
N
e
t
o
f
A
D
/
T
o
t
a
l
C
o
s
t
E
n
c
u
m
b
r
a
n
c
e
s
E
x
p
a
n
d
e
d
O
p
e
n
e
d
/
Y
e
a
r
A
c
q
u
i
r
e
d
Y
e
a
r
L
i
f
e
D
e
p
r
e
c
i
a
b
l
e
I
n
i
t
i
a
l
C
o
s
t
t
o
C
o
m
p
a
n
y
G
r
o
s
s
A
m
o
u
n
t
a
t
W
h
i
c
h
C
a
r
r
i
e
d
a
t
C
l
o
s
e
o
f
P
e
r
i
o
d
(
i
n
t
h
o
u
s
a
n
d
s
)
D
e
c
e
m
b
e
r
3
1
,
2
0
1
4
R
E
A
L
E
S
T
A
T
E
A
N
D
A
C
C
U
M
U
L
A
T
E
D
D
E
P
R
E
C
A
T
I
O
N
I
I
U
N
C
O
N
S
O
L
I
D
A
T
E
D
J
O
N
T
V
E
N
T
U
R
E
S
O
F
T
H
E
T
A
U
B
M
A
N
R
E
A
L
T
Y
G
R
O
U
P
L
I
M
I
T
E
D
P
A
R
T
N
E
R
S
H
I
P
E
x
h
i
b
i
t
9
9
.
2
6
6
,
9
3
0
7
2
,
7
9
0
1
2
,
6
0
4
1
3
9
,
7
2
0
1
5
2
,
3
2
4
2
3
1
,
7
8
0
6
5
,
7
4
0
4
0
,
0
4
4
1
7
6
,
5
7
7
2
8
1
,
4
7
3
4
,
0
1
8
3
6
,
4
0
9
9
0
,
7
8
9
9
,
5
3
7
3
5
0
7
0
5
2
2
,
5
1
7
1
0
2
,
1
4
9
1
3
0
,
8
3
3
1
7
7
,
2
8
2
2
8
5
,
4
9
1
1
0
2
,
4
9
9
1
4
0
,
3
7
0
1
9
9
,
7
9
9
2
8
5
,
4
9
1
7
8
,
0
0
8
2
3
1
,
7
8
0
3
0
9
,
7
8
8
4
9
,
0
8
6
2
,
9
8
6
6
2
,
2
4
2
6
7
,
6
3
2
7
0
,
8
0
3
1
1
7
,
9
8
1
1
0
3
,
2
3
8
3
0
6
,
8
0
2
4
0
,
2
5
7
7
2
,
7
3
8
1
2
8
,
9
9
6
1
6
7
,
5
1
0
3
8
,
6
3
8
1
5
2
,
2
6
5
5
,
2
8
7
1
9
0
,
9
0
3
1
9
6
,
1
9
0
1
0
5
,
8
7
3
9
0
,
3
1
7
3
0
7
,
1
1
6
1
9
7
4
/
1
9
8
3
1
9
9
7
1
6
5
,
0
0
0
1
9
9
2
/
2
0
0
6
2
0
0
8
/
/
2
0
0
3
5
0
Y
e
a
r
s
3
4
Y
e
a
r
s
3
5
0
,
0
0
0
5
0
0
,
0
0
0
2
7
3
,
4
1
2
2
0
0
2
2
0
0
1
1
9
8
8
/
2
0
0
0
1
9
8
0
/
1
9
8
7
/
1
8
7
,
8
1
9
2
0
1
4
1
8
3
,
0
9
7
1
9
6
7
1
9
8
2
/
/
1
9
8
1
2
0
0
7
2
0
0
2
5
0
Y
e
a
r
s
4
0
Y
e
a
r
s
4
0
Y
e
a
r
s
5
0
Y
e
a
r
s
5
0
Y
e
a
r
s
5
5
Y
e
a
r
s
PAGE INTENTIONALLY LEFT BLANK
NOTES AND RECONCILIATIONS FOR GRAPHS (pages 4, 5 and 6)
Funds from Operations (FFO) and Adjusted FFO Per Share: Reconciliation of Net Income (Loss) Attributable
to TCO Common Shareowners to FFO and Adjusted FFO per share (1)
Beneficial Interest in EBITDA and Adjusted Beneficial Interest in EBITDA: Reconciliation of Net Income (Loss) to
Beneficial Interest in EBITDA and Adjusted Beneficial Interest in EBITDA(1)
(in millions of dollars, except per share data; amounts may not add due to rounding)
Year Ended
2005
2006
2007
2008
2009
Net income (loss) attributable to TCO common shareowners
Depreciation and amortization
Noncontrolling interests and distributions to participating securities of TRG
Gain on dispositions of property and other
Impairment charges of depreciable real estate
Funds from Operations
Funds from Operations attributable to TCO
Funds from Operations per share
Funds from Operations
Early extinguishment of debt
Restructuring charge
Litigation charges
Impairment charges of non-depreciable real estate
Redemption of preferred stock/equity
Adjusted Funds from Operations
Adjusted Funds from Operations attributable to TCO
44.1
150.3
36.0
(52.8)
177.7
110.6
21.4
147.3
41.8
48.5
141.0
45.6
(86.7)
154.8
54.1
210.4
136.7
235.1
155.4
122.2
81.3
(69.7)
154.4
(29.7)
160.8
215.8
144.2
$ 2.17
$ 2.56
$ 2.88
$ 1.51
$ 2.66
177.7
12.7
210.4
3.1
235.1
122.2
215.8
3.1
4.7
193.5
120.5
218.2
141.7
235.1
155.4
2.5
30.4
248.7
166.3
126.3
248.5
165.5
Adjusted Funds from Operations per share
$ 2.36
$ 2.65
$ 2.88
$ 3.08
$ 3.06
Net income (loss)
Depreciation and amortization
Interest expense
Income taxes
Noncontrolling share of income of consolidated joint ventures
Gain on dispositions of property and other
Beneficial interest in EBITDA
Restructuring charge
Litigation charge
Impairment charges
110.2
152.4
153.7
95.1
150.2
146.9
116.2
143.7
150.7
(0.0)
(52.8)
(5.8)
(5.0)
(8.1)
158.1
161.5
1.1
(7.4)
363.5
386.5
405.6
305.3
(79.2)
157.8
159.3
1.7
(3.1)
236.5
2.5
30.4
160.8
430.2
126.3
431.5
Adjusted beneficial interest in EBITDA
363.5
386.5
405.6
(1) Refer to the Form 10-K for a definition of FFO and EBITDA and the company’s uses of these measures. The company presents adjusted versions of
FFO and EBITDA when used by management to evaluate operating performance when certain significant items have impacted results that affect
comparability with prior or future periods due to the nature or amounts of these items. The company believes the disclosure of the adjusted items is
similarly useful to investors and others to understand management’s view on comparability of such measures between periods.
TENANT SALES PER SQUARE FOOT
Excludes non-comparable centers. 2013 and 2014 exclude the portfolio of seven centers sold to Starwood Capital Group in October
2014. Excludes Arizona Mills in 2013 and 2012. Excludes The Pier Shops and Regency Square in 2011, 2010, and 2009. 2008
excludes The Pier Shops.
INTEREST ONLY/FIXED CHARGES COVERAGE RATIOS
Interest coverage ratio is calculated by dividing beneficial interest in EBITDA or adjusted beneficial interest in EBITDA by beneficial
interest expense. Fixed charges coverage ratio is calculated by dividing beneficial interest in EBITDA or adjusted beneficial interest in
EBITDA by beneficial interest expense and the sum of preferred dividends, distributions, and debt payments. For all years presented,
adjustments to EBITDA have been made for certain significant items that impact results and affect comparability with prior or future
periods due to the nature or amounts of these items.
TAUBMAN CENTERS, INC.
NOTES AND RECONCILIATIONS FOR GRAPHS (pages 4, 5 and 6)
Funds from Operations (FFO) and Adjusted FFO Per Share: Reconciliation of Net Income (Loss) Attributable
to TCO Common Shareowners to FFO and Adjusted FFO per share (1)
Beneficial Interest in EBITDA and Adjusted Beneficial Interest in EBITDA: Reconciliation of Net Income (Loss) to
Beneficial Interest in EBITDA and Adjusted Beneficial Interest in EBITDA(1)
(in millions of dollars, except per share data; amounts may not add due to rounding)
Year Ended
2010
2011
2012
2013
2014
Net income attributable to TCO common shareowners
Depreciation and amortization
Income taxes
Noncontrolling interests and distributions to participating securities of TRG
Gain on dispositions of property and other
47.6
161.8
176.7
152.3
83.5
159.8
27.9
82.1
41.3
109.9
172.6
0.2
48.2
237.3
411.1
284.7
330.8
160.1
285.4
197.7
236.7
$ 2.86
$ 4.86
$ 3.21
$ 3.65
$ 3.11
237.3
411.1
(174.2)
284.7
1.6
330.8
5.3
(2.2)
6.4
3.2
237.3
240.0
295.8
330.8
863.9
142.5
0.4
356.9
(1,083.1)
280.5
200.4
280.5
36.0
14.3
330.8
236.4
Funds from Operations
Funds from Operations attributable to TCO
Funds from Operations per share
Funds from Operations
Early extinguishment of debt
Disposition and related costs
Acquisition costs
Redemption of preferred stock/equity
PRC taxes on sale of Taubman TCBL assets
Adjusted Funds from Operations
Adjusted Funds from Operations attributable to TCO
160.1
166.9
205.4
236.7
Adjusted Funds from Operations per share
$ 2.86
$ 2.84
$ 3.34
$ 3.65
$ 3.67
Net income
Depreciation and amortization
Interest expense
Income taxes
Noncontrolling share of income of consolidated joint ventures
Beneficial interest in EBITDA
Gain on dispositions
Early extinguishment of debt
Disposition and related costs
Acquisition costs
102.3
165.5
164.6
0.7
(9.8)
287.4
155.0
163.2
0.6
(14.4)
157.8
162.5
161.9
4.9
(11.9)
189.4
175.6
158.9
3.4
(10.3)
1,278.1
146.0
123.1
12.0
(34.2)
423.4
591.8
475.2
516.9
1,525.0
(174.2)
5.3
(1,092.9)
36.0
14.3
Adjusted beneficial interest in EBITDA
423.4
422.9
475.2
516.9
482.5
(1) Refer to the Form 10-K for a definition of FFO and EBITDA and the company’s uses of these measures. The company presents adjusted versions
of FFO and EBITDA when used by management to evaluate operating performance when certain significant items have impacted results that affect
comparability with prior or future periods due to the nature or amounts of these items. The company believes the disclosure of the adjusted items is
similarly useful to investors and others to understand management’s view on comparability of such measures between periods.
OFFICERS AND DIRECTORS
TAUBMAN CENTERS, INC.
BOARD OF DIRECTORS
Graham T. Allison (3,4)
Professor
Harvard University
Jerome A. Chazen (1,2)
Chairman
Chazen Capital Partners
Chairman Emeritus
Fifth & Pacific Companies Inc.
(f.k.a. Liz Claiborne, Inc.)
Craig M. Hatkoff (2,3)
Co-founder
Tribeca Film Festival
Peter Karmanos, Jr. (2)
Chairman and Co-founder of
MadDog Technology
William U. Parfet (1,3)
Chairman and Chief Executive Officer
MPI Research
Lisa A. Payne
Vice Chairman
Chief Financial Officer
Taubman Centers, Inc.
Robert S. Taubman (4)
Chairman of the Board
President and Chief Executive Officer
Taubman Centers, Inc.
William S. Taubman
Chief Operating Officer
Taubman Centers, Inc.
Ronald W. Tysoe (1,2,4)
Former Vice Chairman
Finance and Real Estate
Federated Department Stores
(Now Macy’s, Inc.)
THE TAUBMAN COMPANY LLC
SENIOR EXECUTIVES AND
OPERATING COMMITTEE
FOUNDER
A. Alfred Taubman
Robert S. Taubman
Chairman of the Board
President and Chief Executive Officer
(1) Audit Committee Member
(2) Compensation Committee Member
(3) Nominating and Corporate
Governance Committee Member
(4) Executive Committee Member
(5) Also serves as Assistant
Secretary of Taubman Centers, Inc.
(6) Also serves as Treasurer of
Taubman Centers, Inc.
Lisa A. Payne
Vice Chairman
Chief Financial Officer
William S. Taubman
Chief Operating Officer
Denise Anton
Executive Vice President
Center Operations
Jong W. Chow
Senior Vice President
Chief Strategy Officer
Chris B. Heaphy (5)
Executive Vice President
General Counsel and Secretary
David S. Joseph II
Executive Vice President
Leasing
Stephen J. Kieras
Executive Vice President
Development
Holly A. Kinnear
Senior Vice President
Chief Human Resources Officer
Simon J. Leopold (6)
Executive Vice President
Capital Markets and Treasurer
Michael L. Osment
Senior Vice President
Chief Technology Officer
René Tremblay
President
Taubman Asia Management Limited
TAUBMAN CENTERS, INC. SHAREOWNER INFORMATION
CORPORATE HEADQUARTERS
Taubman Centers, Inc.
200 East Long Lake Road
Bloomfield Hills, MI 48304-2324
248.258.6800
TAUBMAN ASIA
Taubman Asia Management Limited
Suite 1308, 13/F, Two Pacific Place
88 Queensway, Admiralty, Hong Kong
852.3607.1333
USE OF TAUBMAN
For ease of use, references in this report
to “Taubman Centers,” “company,”
“Taubman” or an operating platform
mean Taubman Centers, Inc. and/or
one or more of a number of separate,
affiliated entities. Business is actually
conducted by an affiliated entity rather
than Taubman Centers, Inc. itself or the
named operating platform.
QUARTERLY SHARE PRICE AND
DIVIDEND INFORMATION
The common stock of Taubman
Centers, Inc. is listed and traded on the
New York Stock Exchange (Symbol
TCO). The following table represents
the dividends and range of share prices
for each quarter of 2014:
MARKET QUOTATIONS
High
2014 Quarter Ended
March 31
76.80
June 30
76.98
September 30
80.06
December 31
(1) Includes a special dividend paid of $4.75 per
Low Dividends
$ 71.02 $ 63.34 $ 0.54
0.54
0.54
5.29(1)
70.40
72.27
72.75
common share.
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP
Chicago, Illinois
SHAREHOLDER INQUIRIES
Barbara K. Baker, Vice President
Corporate Affairs & Investor Relations
Taubman
200 East Long Lake Road
Bloomfield Hills, Michigan 48304-2324
248.258.7367
bbaker@taubman.com
PUBLICATIONS
Taubman Centers’ annual report on
Form 10-K and quarterly reports on
Form 10-Q are available free of charge
from our Corporate Affairs Department
or can be viewed and downloaded
online at www.taubman.com. A Notice
of 2015 Annual Meeting of Sharehold-
ers and Proxy Statement is furnished in
advance of the annual meeting to all
shareowners entitled to vote at the
annual meeting.
ANNUAL MEETING
The 2015 Taubman Centers, Inc.
Annual Meeting will be held on Friday,
May 29 at The Townsend Hotel in
Birmingham, Michigan. The meeting
will begin at 11:00 a.m. Eastern Time.
TRANSFER AGENT AND REGISTRAR
Shareholder correspondence can be
mailed to:
Computershare
P.O. Box 30170
College Station, TX 77842
www-us.computershare.com/investor/
contact
Overnight correspondence can be
mailed to:
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
VISIT
http://investors.taubman.com/files/oar/2014
for more info on Taubman Centers’
TRANSFORMATION
OUR WEBSITE:
www.taubman.com
Investor information on our website
includes press releases, supplemental
investor information, corporate
governance information, our Code of
Business Conduct and Ethics, SEC
filings, and webcasts of quarterly
earnings conference calls.
CONFIDENTIAL HOTLINES
AND WEBSITES:
U.S.: 888.773.2513
Hong Kong: 800.96.4633
South Korea: 00798.1.1.002.5877
North China: 10.800.711.1152
South China: 10.800.110.1076
English Only:
www.reportlineweb.com/taubman
International Languages:
https://iwf.tnwgrc.com/taubman
Independently operated, confidential hot-
lines and websites can be used to report
concerns regarding possible accounting,
internal accounting control or auditing
matters, or fraudulent acts and/or illegal
activities involving our company which
may compromise our ethical standards.
Other means of reporting concerns are
identified in our Code of Business
Conduct and Ethics located in the
Investors/ Corporate Governance
section of our company’s website.
DIVIDEND REINVESTMENT AND
DIRECT STOCK PURCHASE PLAN
The Dividend Reinvestment and Direct
Stock Purchase Plan – sponsored and
administered by Computershare – pro-
vides owners of common stock a
convenient way to reinvest dividends and
purchase additional shares. In addition,
investors who do not currently own any
Taubman Centers’ stock can make an
initial investment through this program.
A plan description can be viewed online
on the Computershare website:
www.computershare.com/investor
(Once on the website click “Buy stock
direct” and follow the subsequent
instructions). For questions about this
plan or your account, or for a brochure
and enrollment form, call:
1.888.877.2889
S
S
E
R
P
E
T
T
E
H
C
N
A
L
B
:
g
n
i
t
n
i
r
p
R
E
L
L
I
M
Y
R
O
G
E
R
G
:
y
h
p
a
r
g
o
t
o
h
p
t
i
a
r
t
r
o
p
N
O
S
Y
N
N
E
T
R
E
H
P
O
T
S
I
R
H
C
:
l
a
i
r
o
t
i
d
e
.
C
N
I
E
L
P
I
T
L
U
M
:
n
g
i
s
e
d
TAUBMAN CENTERS, INC.
200 EAST LONG LAKE ROAD, BLOOMFIELD HILLS, MICHIGAN 48304-2324 WWW.TAUBMAN.COM
DIGITAL DISPLAYS
LIGHTING
PARKING
PAYMENT
BUILDING TECHNOLOGY
CONSUMER DEVICES
SHOPPER TECHNOLOGY
BUILDING MATERIALS
TENANT TECHNOLOGY
ENERGY MANAGEMENT
LOCATION ANALYTICS
COMMUNICATIONS
SECURITY
DATA / ANALYTICS
LEGAL
LEASING
SPECIALTY LEASING
TENANT COORDINATION
DEVELOPMENT
RISK MANAGEMENT
CONTRACT ADMINISTRATION
INFORMATION TECHNOLOGY
CORPORATE AFFAIRS
STRATEGY
TREASURY
TAX
EXECUTIVES
INTERNAL AUDIT
CENTER MANAGEMENT
MARKETING
ACCOUNTING
SPONSORSHIP
REAL ESTATE TAX
LEASING ADMINISTRATION
CENTER OPERATIONS