e10vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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þ |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009.
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-11530
TAUBMAN CENTERS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Michigan
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38-2033632 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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200 East Long Lake Road, Suite 300 |
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Bloomfield Hills, Michigan
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48304-2324 |
(Address of principal executive office)
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(Zip Code) |
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Registrants telephone number, including area code:
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(248) 258-6800 |
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange |
Title of each class |
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on which registered |
Common Stock,
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New York Stock Exchange |
$0.01 Par Value |
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8% Series G Cumulative
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New York Stock Exchange |
Redeemable Preferred Stock, |
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No Par Value |
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7.625% Series H Cumulative
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New York Stock Exchange |
Redeemable Preferred Stock, |
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No Par Value |
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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. þ Yes
o 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. o Yes
þ 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. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). o Yes o 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
registrants 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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Large Accelerated Filer þ
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Accelerated Filer o
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Non-Accelerated Filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
The aggregate market value of the 52,059,790 shares of Common Stock held by non-affiliates of the registrant as of June 30, 2009 was $1.4 billion, based upon the
closing price $26.86 per share on the New York Stock Exchange composite tape on June 30, 2009. (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 24, 2010, there were outstanding 54,326,934 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be held in 2010 are incorporated by reference into Part III.
TAUBMAN CENTERS, INC.
CONTENTS
1
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 best judgment based upon current information, these
statements are qualified by important factors that could cause actual results to differ materially
from those in the forward-looking statements, including those risks, uncertainties, and factors
detailed from time to time in reports filed with the SEC, and in particular those set forth under
Risk Factors in this Annual Report on Form 10-K.
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, which owns direct
or indirect interests in all of our real estate properties. In this report, the terms we, us
and our refer to TCO, the Operating Partnership, and/or the Operating Partnerships subsidiaries
as the context may require.
We own, lease, acquire, dispose of, develop, expand, and manage regional and super-regional
shopping centers. Our portfolio as of December 31, 2009 consisted of 23 owned urban and suburban
shopping centers in ten 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). See the table on
pages 17 and 18 of this report for information regarding the centers.
Taubman Asia, which is the platform for our expansion into the Asia-Pacific region, 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 Partnerships 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 Partnerships sale of an asset) that will satisfy the REIT
provisions of the Code.
Recent Developments
For a discussion of business developments that occurred in 2009, see Managements Discussion
and Analysis of Financial Condition and Results of Operations (MD&A). The loan encumbering The
Pier Shops at Caesars (The Pier Shops) is currently in default, and the loan obligation will be
extinguished upon transfer of the title of the center, which is expected to occur in 2010 (see
MD&A Results of Operations Impairment Charges The Pier Shops at Caesars). Consequently, The
Pier Shops has been excluded from operating statistics in 2009 and 2008 and certain other
information as indicated.
The Shopping Center Business
There are several types of retail shopping centers, varying primarily by size and marketing
strategy. Retail shopping centers range from neighborhood centers of less than 100,000 square feet
of GLA to regional and super-regional shopping centers. Retail shopping centers in excess of
400,000 square feet of GLA are generally referred to as regional shopping centers, while those
centers having in excess of 800,000 square feet of GLA are generally referred to as
super-regional shopping centers. 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.
2
Business of the Company
We are engaged in the ownership, management, leasing, acquisition, disposition, development,
and expansion of regional shopping centers.
The centers:
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are strategically located in major metropolitan areas, many in communities that are among
the most affluent in the country, including Charlotte, Dallas, Denver, Detroit, Los Angeles,
Miami, New York City, Orlando, Phoenix, San Francisco, Tampa, and Washington, D.C.; |
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range in size between 295,000 and 1.6 million square feet of GLA and between 197,000 and
636,000 square feet of Mall GLA. The smallest center has approximately 60 stores, and the
largest has over 200 stores. Of the 23 centers, 18 are super-regional shopping centers; |
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have approximately 3,000 stores operated by their mall tenants under approximately
900 trade names; |
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have 68 anchors, operating under 15 trade names; |
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lease over 90% of leased Mall GLA to national chains, including subsidiaries or divisions
of Forever 21 (Forever 21, For Love 21, XXI Forever, and others), The Gap (Gap, Gap Kids/Baby
Gap, Banana Republic, Old Navy, and others), and Limited Brands (Bath & Body Works/White Barn
Candle, Pink, Victorias Secret, and others); and |
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are among the most productive (measured by mall tenants average sales per square foot) in
the United States. In 2009, mall tenants reported average sales per square foot of $498,
excluding The Pier Shops, which is higher than the average for all regional shopping centers
owned by public companies. |
The most important factor affecting the revenues generated by the centers is leasing to mall
tenants (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
23 owned centers, 20 had annual rent rolls at December 31, 2009 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.
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:
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offer retailers a location where they can maximize their profitability; |
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offer a large, diverse selection of retail stores in each center to give customers a broad
selection of consumer goods and variety of price ranges; |
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endeavor to increase overall mall tenants sales by leasing space to a constantly changing
mix of tenants, thereby increasing achievable rents; |
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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 |
3
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provide innovative initiatives, including those that utilize technology and the Internet,
to increase revenues, heighten the shopping experience, build customer loyalty, and increase
tenant sales. Our Taubman center website program connects shoppers and retailers through an
interactive content-driven website. We also offer our shoppers a robust direct email program,
which allows them to receive, each week, information featuring whats on sale and whats new
at the stores they select. |
The centers compete for retail consumer spending through diverse, in-depth presentations of
predominantly fashion merchandise in an environment intended to facilitate customer shopping. While
the majority of our centers include stores that target high-end, upscale customers, each center is
individually merchandised in light of the demographics of its potential customers within convenient
driving distance.
Our leasing strategy involves assembling a diverse mix of mall tenants in each of the centers
in order to attract customers, thereby generating higher sales by mall tenants. High sales by mall
tenants make the centers attractive to prospective tenants, thereby increasing the rental rates
that prospective tenants are willing to pay. We implement an active leasing strategy to increase
the centers productivity and to set minimum rents at higher levels. Elements of this strategy
include renegotiating existing leases and leasing space to prospective tenants that would enhance a
centers retail mix.
In 2005, we began a new leasing strategy to have our tenants pay a fixed charge rather than
pay their share of common area maintenance (CAM) costs, allowing the retailer greater
predictability for a modest premium. From a financial perspective, our analysis shows the premium
will balance our additional risk. Over time there will be significantly less matching of CAM income
with CAM expenditures, which can vary considerably from period to period. Approximately 37% of
leases in our portfolio as of December 31, 2009 have fixed CAM provisions.
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. However, the U.S. recession and global credit environment
have continued to negatively impact certain of our planned development projects and the potential
for new projects. We have reduced spending on development projects by slowing down or by putting
projects on hold. Consistent with this reduction, in 2009, we went through the process of
downsizing our organization, reducing our overall workforce by about 40 positions. See MD&A -
Results of Operations Restructuring for further information. This primarily impacted the areas
that directly or indirectly support these development initiatives. We believe we are now right
sized to efficiently pursue targeted growth opportunities in this environment, while ensuring we
have sufficient support within all of our teams to maintain the strength of our core assets. We do
not know how long the effects of the recession will continue to impact our operations and prospects
for new projects, but we believe the regional mall business will continue to prove its resiliency
and its unique value proposition to the customer. See MD&A -Overall Summary of Managements
Discussion and Analysis of Financial Condition and Results of Operations for more details.
Internal Growth
We expect that over time the majority of our future growth will come from our existing core
portfolio and business. We have always had a culture of intensively managing our assets and
maximizing the rents from tenants.
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.
New Centers
We have finalized the majority of agreements, subject to certain conditions, regarding City
Creek Center, a mixed-use project in Salt Lake City, Utah and continue to work toward an early 2012
opening. The 0.7 million square foot retail component of the project will include Macys and
Nordstrom as anchors. We are currently providing development and leasing services and will be the
manager for the retail space, which we will own under a participating lease. See MD&A Liquidity
and Capital Resources Capital Spending regarding additional information on City Creek Center.
4
In addition, we continue to work on and evaluate various development possibilities for new
centers both in the United States and Asia. We expect however, that with current economic and
capital market conditions, few new retail centers will be built in the U.S. over the next two
years. We expect that in three to five years, with growth in population, there will be more demand
for new centers. We are also working with a consultant with deep expertise in Asia to reassess the
market opportunity and address the geographies, products, and services we intend to pursue.
We generally do not intend to 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 do not intend to begin
construction until a sufficient number of anchor stores have agreed to operate in the shopping
center, such that we are confident that the projected tenant sales and rents from Mall GLA are
sufficient to earn a return on invested capital in excess of our cost of capital. Having
historically followed these principles, our experience indicates that, on average, less than 10% of
the costs of the development of a regional shopping center will be incurred prior to the
construction period. However, no assurance can be given that we will continue to be able to so
limit pre-construction costs.
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 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.
Strategic Acquisitions
Given the current economic conditions there may be opportunities to acquire existing centers,
or interests in existing centers, from other companies at attractive prices. 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. We plan to carefully evaluate our future capital needs along with our strategic plans
and pricing requirements.
Expansions of the Centers
Another potential element of growth over time is the strategic expansion of existing
properties to update and enhance their market positions, by replacing or adding new anchor stores
or increasing mall tenant space. Most of the centers have been designed to accommodate expansions.
Expansion projects can be as significant as new shopping center construction in terms of scope and
cost, requiring governmental and existing anchor store approvals, design and engineering
activities, including rerouting utilities, providing additional parking areas or decking, acquiring
additional land, and relocating anchors and mall tenants (all of which must take place with a
minimum of disruption to existing tenants and customers).
In September 2007, a 165,000 square foot Nordstrom opened at Twelve Oaks Mall (Twelve Oaks)
along with approximately 97,000 square feet of additional new store space. In 2008, Macys
renovated its store and added 60,000 square feet of store space.
A lifestyle component addition to Stamford Town Center (Stamford), on the site once occupied
by Filenes Department store, opened in November 2007. The project consists of a mix of signature
retail and restaurant offerings, creating significantly greater visibility to the city and much
needed pedestrian access to the center. In addition, we renovated the seventh level in 2007, adding
a 450-seat food court and interactive childrens play area. The food court tenants opened in
early 2008.
Nordstrom opened as an anchor at Waterside Shops (Waterside) in November 2008 and an expansion
and full renovation of the current anchor, Saks Fifth Avenue, was completed in the second half of
2008.
5
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. In periods of increasing sales, rents on new
leases will generally tend to rise. In periods of slower growth or declining sales, as we are
experiencing now, 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 tables contain certain information regarding per square foot minimum rent in our
Consolidated Businesses and Unconsolidated Joint Ventures at the comparable centers (centers that
had been owned and open for the current and preceding year). The amounts in the table exclude The
Pier Shops, and in 2009 and 2008, exclude spaces with greater than 10,000 square feet:
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2009 |
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2008 |
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2007 |
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2006 |
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2005 |
Average rent per square foot: |
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Consolidated Businesses |
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$ |
43.31 |
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$ |
43.95 |
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$ |
43.39 |
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$ |
42.77 |
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$ |
41.41 |
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Unconsolidated Joint Ventures |
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44.49 |
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44.61 |
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41.89 |
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41.03 |
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42.28 |
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Opening base rent per square foot: |
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Consolidated Businesses |
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$ |
45.19 |
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$ |
54.78 |
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$ |
53.35 |
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$ |
41.25 |
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$ |
42.38 |
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Unconsolidated Joint Ventures |
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51.10 |
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59.36 |
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48.05 |
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42.98 |
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44.90 |
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Square feet of GLA opened: |
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Consolidated Businesses |
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681,773 |
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589,730 |
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885,982 |
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1,007,419 |
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682,305 |
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Unconsolidated Joint Ventures |
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218,953 |
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340,275 |
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394,316 |
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306,461 |
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400,477 |
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Closing base rent per square foot: |
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Consolidated Businesses |
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$ |
41.70 |
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$ |
49.60 |
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$ |
45.39 |
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$ |
39.57 |
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$ |
40.59 |
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Unconsolidated Joint Ventures |
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48.64 |
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48.72 |
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48.63 |
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42.49 |
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44.26 |
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Square feet of GLA closed: |
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Consolidated Businesses |
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832,451 |
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650,607 |
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807,899 |
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911,986 |
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650,701 |
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Unconsolidated Joint Ventures |
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259,457 |
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342,698 |
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345,122 |
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246,704 |
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366,932 |
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Releasing spread per square foot: |
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Consolidated Businesses |
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$ |
3.49 |
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$ |
5.18 |
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$ |
7.96 |
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$ |
1.68 |
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$ |
1.79 |
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Unconsolidated Joint Ventures |
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2.46 |
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10.64 |
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(0.58 |
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0.49 |
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0.64 |
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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. Openings in 2009 were generally negotiated in a declining sales and tight
capital environment, whereas openings in 2008 and 2007 were generally negotiated in a rising sales
environment. However, the releasing spread per square foot of the Unconsolidated Joint Ventures in
2007 was adversely impacted by the opening of large tenant spaces.
6
Lease Expirations
The following table shows scheduled lease expirations for mall tenants based on information
available as of December 31, 2009 for the next ten years for all owned centers in operation at that
date, with the exception of The Pier Shops:
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Percent of |
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Annualized Base |
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Total Leased |
Lease |
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Number of |
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Annualized Base Rent |
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Rent Under |
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Square Footage |
Expiration |
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Leases |
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Leased Area in |
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Under Expiring Leases |
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Expiring Leases |
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Represented by |
Year |
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Expiring |
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Square Footage |
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(in thousands of dollars) |
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Per Square Foot |
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Expiring Leases |
2010 (1) |
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149 |
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467,010 |
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14,626 |
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$ |
31.32 |
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4.1 |
% |
2011 |
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441 |
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1,421,747 |
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51,215 |
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36.02 |
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12.4 |
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2012 |
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358 |
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1,364,090 |
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52,753 |
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38.67 |
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11.9 |
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2013 |
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359 |
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1,427,653 |
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51,080 |
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35.78 |
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12.5 |
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2014 |
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263 |
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943,793 |
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34,860 |
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36.94 |
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8.2 |
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2015 |
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283 |
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1,018,630 |
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38,836 |
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38.13 |
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8.9 |
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2016 |
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252 |
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917,124 |
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36,851 |
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40.18 |
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8.0 |
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2017 |
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298 |
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1,258,726 |
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53,269 |
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42.32 |
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11.0 |
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2018 |
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207 |
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937,719 |
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40,906 |
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43.62 |
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8.2 |
|
2019 |
|
|
164 |
|
|
|
754,341 |
|
|
|
29,228 |
|
|
|
38.75 |
|
|
|
6.6 |
|
|
|
|
(1) |
|
Excludes leases that expire in 2010 for which renewal leases or leases with replacement
tenants have been executed as of December 31, 2009. |
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 2004 to 2009 was approximately one year. The average term of leases signed was
approximately six years during 2009 and approximately seven years during 2008.
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
2009, tenants representing 4.1% of leases filed for bankruptcy during the year compared to 2.5% in
2008. This statistic has ranged from 0.4% to 4.5% since we went public in 1992. Since 1991, the
annual provision for losses on accounts receivable has been less than 2% of annual revenues.
Occupancy
Occupancy statistics include value center anchors. The 2009 and 2008 statistics exclude The
Pier Shops.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
Leased space |
|
|
91.6 |
% |
|
|
92.0 |
% |
|
|
93.8 |
% |
|
|
92.5 |
% |
|
|
91.7 |
% |
Ending occupancy |
|
|
89.6 |
|
|
|
90.5 |
|
|
|
91.2 |
|
|
|
91.3 |
|
|
|
90.0 |
|
Average occupancy |
|
|
89.0 |
|
|
|
90.5 |
|
|
|
90.0 |
|
|
|
89.2 |
|
|
|
88.9 |
|
Major Tenants
No single retail company represents 10% or more of our Mall GLA or revenues. The combined
operations of Forever 21 accounted for less than 4% of Mall GLA as of December 31, 2009 and less
than 3% of 2009 minimum rent. No other single retail company accounted for more than 3.5% of Mall
GLA as of December 31, 2009 or 5% of 2009 minimum rent.
7
The following table shows the ten mall tenants who occupy the most space at our centers and
their square footage as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of |
|
Square |
|
% of |
Tenant |
|
Stores |
|
Footage |
|
Mall GLA |
Forever 21 (Forever 21, For Love 21, XXI Forever, and others) |
|
|
32 |
|
|
|
403,206 |
|
|
|
3.7 |
% |
The Gap (Gap, Gap Kids, Baby Gap, Banana Republic, Old Navy, and others) |
|
|
44 |
|
|
|
381,760 |
|
|
|
3.5 |
|
Limited Brands (Bath & Body Works/White Barn Candle, Pink, Victorias Secret, and others) |
|
|
46 |
|
|
|
293,298 |
|
|
|
2.7 |
|
Abercrombie & Fitch (Abercrombie & Fitch, Hollister, and others) |
|
|
38 |
|
|
|
277,963 |
|
|
|
2.5 |
|
Williams-Sonoma (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, and others) |
|
|
25 |
|
|
|
193,458 |
|
|
|
1.8 |
|
Foot Locker (Foot Locker, Lady Foot Locker, Champs Sports, Foot Action USA, and others) |
|
|
45 |
|
|
|
190,605 |
|
|
|
1.7 |
|
Ann Taylor (Ann Taylor, Ann Taylor Loft, and others) |
|
|
32 |
|
|
|
184,340 |
|
|
|
1.7 |
|
H&M |
|
|
10 |
|
|
|
175,351 |
|
|
|
1.6 |
|
Express (Express, Express Men) |
|
|
19 |
|
|
|
171,230 |
|
|
|
1.6 |
|
American Eagle Outfitters (American Eagle Outfitters, Aerie, and Martin + Osa) |
|
|
25 |
|
|
|
147,397 |
|
|
|
1.3 |
|
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 yet have material long-lived assets located in foreign countries.
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) provides similar services for Taubman Asia.
As of December 31, 2009, the Manager and TAM had 590 full-time employees. The following table
provides a breakdown of employees by operational areas as of December 31, 2009:
|
|
|
|
|
|
|
Number of Employees |
Center Operations |
|
|
241 |
|
Property Management |
|
|
153 |
|
Financial Services |
|
|
64 |
|
Leasing and Tenant Coordination |
|
|
52 |
|
Development |
|
|
20 |
|
Other |
|
|
60 |
|
|
|
|
|
|
Total |
|
|
590 |
|
|
|
|
|
|
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 SECs
website at www.sec.gov.
8
The economic performance and value of our shopping centers are dependent on many factors.
The economic performance and value of our shopping centers are dependent on various factors.
Additionally, these same factors will influence our decision whether to go forward on the
development of new centers and may affect the ultimate economic performance and value of projects
under construction. Adverse changes in the economic performance and value of our shopping centers
would adversely affect our income and cash available to pay dividends.
Such factors include:
|
|
|
changes in the national, regional, and/or local economic and geopolitical climates,
which as in the current economic environment of high unemployment, uncertain recovery, and
credit availability, may significantly impact our anchors, tenants and prospective
customers of our shopping 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, which may significantly reduce our ability to obtain
financing or refinance existing debt at current amounts, interest rates, and other terms or
may affect our ability to finance improvements to a property; |
|
|
|
|
decreases in other operating income, including sponsorship, garage and other income; |
|
|
|
|
increases in operating costs; |
|
|
|
|
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. |
In addition, the value and performance of our shopping centers may be adversely affected by
certain other factors discussed below including the global economic condition and weakness in the
financial markets, the current state of the capital markets, unscheduled closings or bankruptcies
of our tenants, competition, uninsured losses, and environmental liabilities.
The global economic and financial market downturn has had and may continue to have a negative
effect on our business and operations.
The global economic and financial market downturn has caused, 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, all of which has had and may continue to have a negative effect on our business, results of
operations, financial condition and liquidity. Many of our tenants have been affected by the
current economic conditions. We expect that the economy will continue to strain the resources of
our tenants and their customers. The timing and nature of any recovery in the credit and financial
markets remains uncertain, and there can be no assurance that market conditions will improve in the
near future or that our results will not continue to be adversely affected. Such conditions make it
very difficult to forecast operating results, make business decisions and identify and address
material business risks. The foregoing conditions may also 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. In
2009, we concluded that the book values of the investments in The Pier Shops and Regency Square
were impaired, which resulted in a non-cash charge of $166.7 million (or $160.8 million at our
share). In 2008, we recognized an impairment charge of $8.3 million related to our Sarasota
project, which was put on hold due to the current economic and retail environment (see MD&A -
Results of Operations Impairment Charges).
9
Capital markets are currently experiencing a period of disruption and instability, which has had
and could continue to have a negative impact on the availability and cost of capital.
The general disruption in the U.S. capital markets has impacted the broader worldwide
financial and credit markets and reduced the availability of capital for the market as a whole.
These global conditions could persist for a prolonged period of time or worsen in the future. Our
ability to access the capital markets may be restricted at a time when we would like, or need, to
access those markets, which could have an impact on our flexibility to react to changing economic
and business conditions. The resulting 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 these market conditions.
Credit market developments may reduce availability under our credit agreements.
Due to the current volatile state of the credit markets, there is risk that lenders, even
those with strong balance sheets and sound lending practices, could fail or refuse to honor their
legal commitments and obligations under existing credit commitments, including but not limited to
extending credit up to the maximum permitted by a credit facility and/or honoring loan commitments.
Twelve banks participate in our $550 million line of credit and the failure of one bank to fund a
draw on our line does not negate the obligation of the other banks to fund their pro-rata shares.
However, if one or more of our lenders fail to honor their legal commitments under our credit
facilities, it could be difficult in the current environment to replace such lenders and/or our
credit facilities on similar terms. Although we believe that our operating cash flow, access to
capital markets, two unencumbered center properties and existing credit facilities will give us the
ability to satisfy our liquidity needs, the failure of one or more of the lenders under our credit
facilities may impact our ability to finance our operating or investing activities.
We are in a competitive business.
There are numerous shopping facilities that compete with our properties in attracting
retailers to lease space. In addition, retailers at our properties face continued competition from
discount shopping centers, lifestyle centers, outlet malls, wholesale and discount shopping clubs,
direct mail, telemarketing, television shopping networks and shopping via the Internet. Competition
of this type could adversely affect our revenues and cash available for distribution to
shareowners.
We compete with other major real estate investors with significant capital for attractive
investment opportunities. These competitors include other REITs, investment banking firms and
private institutional investors. This competition may impair our ability to make suitable property
acquisitions on favorable terms in the future.
The bankruptcy or early termination of our tenants and anchors could adversely affect us.
We could be adversely affected by the bankruptcy or early termination of tenants and anchors.
The bankruptcy of a mall tenant could result in the termination of its lease, which would lower the
amount of cash generated by that mall. In addition, if a department store operating as an anchor at
one of our shopping centers were to go into bankruptcy and cease operating, we may experience
difficulty and delay in replacing the anchor. In addition, the anchors 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 of mall
tenants or anchors for reasons other than bankruptcy could have a similar impact on the operations
of our centers. (See MD&A Rental Rates and Occupancy).
The bankruptcy 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.
Our investments are subject to credit and market risk.
We occasionally extend credit to third parties in connection with the sale of land or other
transactions. We have occasionally made investments in marketable and other equity securities. We
are exposed to risk in the event the values of our investments and/or our loans decrease due to
overall market conditions, business failure, and/or other nonperformance by the investees or
counterparties.
10
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. In
addition, under TRGs partnership agreement, upon the sale of a center or TRGs interest in a
center, TRG may be required to distribute to its partners all of the cash proceeds received by TRG
from such sale. If TRG made such a distribution, the sale proceeds would not be available to
finance TRGs activities, and the sale of a center may result in a decrease in funds generated by
continuing operations and in distributions to TRGs partners, including us. Further, pursuant to
TRGs 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.
We may acquire or develop new properties, and these activities are subject to various risks.
We actively pursue development and acquisition activities as opportunities arise, and these
activities are subject to the following risks:
|
|
|
the pre-construction phase for a regional center typically extends over several years,
and the time to obtain anchor commitments, zoning and regulatory approvals, and public
financing can vary significantly from project to project; |
|
|
|
we may not be able to obtain the necessary zoning or other governmental approvals for a
project, or we may determine that the expected return on a project is not sufficient; if we
abandon our development activities with respect to a particular project, we may incur a
loss on our investment; |
|
|
|
construction and other project costs may exceed our original estimates because of
increases in material and labor costs, delays and costs to obtain anchor and tenant
commitments; |
|
|
|
we may not be able to obtain financing or to refinance construction loans, which are
generally recourse to TRG; and |
|
|
|
occupancy rates and rents, as well as occupancy costs and expenses, at a completed
project may not meet our projections, and the costs of development activities that we
explore but ultimately abandon will, to some extent, diminish the overall return on our
completed development projects. |
In addition, adverse impacts of the global economic and market downturn may reduce viable
development and acquisition opportunities that meet our unlevered return requirements.
Our pursuit of new opportunities in Asia may pose risks.
We have an office in Hong Kong and we are pursuing and evaluating management, leasing and
development service and investment opportunities in various Asian markets. These activities are
subject to risks that may reduce our financial return. In addition to the general risks related to
development and acquisition 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 foreign political environments; |
|
|
|
difficulties of complying with a wide variety of foreign laws including laws affecting
corporate governance, operations, taxes, and litigation; |
|
|
|
changes in and/or difficulties in 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 |
|
|
|
obstacles to the repatriation of earnings and cash. |
Although our international activities are currently limited in their scope, to the extent that
we expand them, 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.
11
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 lease and other
contract claims, that generally are not insured. If an uninsured loss or a loss in excess of
insured limits occurs, we could lose all or a portion of the capital we have invested in a
property, as well as the anticipated future revenue from the property. If this happens, we might
nevertheless remain obligated for any mortgage debt or other financial obligations related to the
property.
In November 2002, Congress passed the Terrorism Risk Insurance Act of 2002 (TRIA), which
required insurance companies to offer terrorism coverage to all existing insured companies for an
additional cost. As a result, our property insurance policies are currently provided without a
sub-limit for terrorism, eliminating the need for separate terrorism insurance policies.
In 2007, Congress extended the expiration date of TRIA by seven years to December 31, 2014.
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.
We hold investments in joint ventures in which we do not control all decisions, and we may have
conflicts of interest with our joint venture partners.
Some of our shopping centers are partially owned by non-affiliated partners through joint
venture arrangements. As a result, we do not control all decisions regarding those shopping centers
and may be required to take actions that are in the interest of the joint venture partners but not
our best interests. Accordingly, we may not be able to favorably resolve any issues 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.
12
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 Internal Revenue Code of 1986, as amended
(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 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 between the REIT, the REITs tenants, and the taxable
REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some
state and local jurisdictions may tax some of our income even though as a REIT we are not subject
to federal income tax on that income, because not all states and localities follow the federal
income tax treatment of REITs. To the extent that we and our affiliates are required to pay
federal, state and local taxes, we will have less cash available for distributions to our
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.
Whereas corporate dividends have traditionally been taxed at ordinary income rates, the
maximum tax rate on certain corporate dividends received by individuals through December 31, 2010,
has been reduced from 35% to 15%. This change has reduced substantially the so-called double
taxation (that is, taxation at both the corporate and shareowner levels) that had generally
applied to non-REIT C corporations but did not apply to REITs. Generally, dividends from REITs do
not qualify for the dividend tax reduction because REITs generally do not pay corporate-level tax
on income that they distribute currently to shareowners. REIT dividends are eligible for the lower
dividend rates only in the limited circumstances in which the dividends are attributable to income
that has already been subject to corporate tax, such as income from a prior taxable 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.
13
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 Internal Revenue 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 Internal Revenue Code, certain other tax-exempt entities described in the
Articles, or an entity that owns 10% or more of the equity of any tenant from which we or TRG
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 persons 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 can not 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.
Although Mr. A. Alfred Taubman beneficially owns 28% of our stock, which is entitled to vote
on shareowner matters (Voting Stock), most of his Voting Stock consists of Series B Preferred
Stock. 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, Mr. A. Alfred Taubmans significant ownership of Voting Stock does not violate the
ownership limitations set forth in our charter.
14
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, 2009, A.
Alfred Taubman and the members of his family have the power to vote approximately 31% of the
outstanding shares of our common stock and our Series B preferred stock, considered together as a
single class, and approximately 92% 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. Taubmans son, Robert S. Taubman, serves as our Chairman of the
Board, President and Chief Executive Officer. Mr. Taubmans 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.
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 dividends received on our
interests in TRG. Additionally, the terms of some of the debt to which TRG is a party limits its
ability to make some types of payments and other dividends to us. This in turn limits our ability
to make some types of payments, including payment of dividends on our stock, unless we meet certain
financial tests or such payments or dividends are required to maintain our qualification as a REIT.
As a result, if we are unable to meet the applicable financial tests, we may not be able to pay
dividends on our stock in one or more periods 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 corporations 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. As of December 31, 2009, we had approximately $2.7 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 cannot assure that we will be able to pay dividends regularly, although we have done so in the
past.
Our ability to pay dividends in the future is dependent on our ability to operate profitably
and to generate cash from our operations. Although we have done so in the past, we cannot guarantee
that we will be able to pay dividends on a regular quarterly basis or at the same level in the
future. In addition, we may choose to pay a portion in stock dividends. Furthermore, any new shares
of common stock issued will increase the cash required to continue to pay cash dividends at current
levels. Any common stock or preferred stock that may in the future be issued to finance
acquisitions, upon exercise of stock options or otherwise, would have a similar effect.
15
|
|
|
Item 1B. |
|
UNRESOLVED STAFF COMMENTS. |
None.
Ownership
The following table sets forth certain information about each of the centers. The table
includes only centers in operation at December 31, 2009. Centers are owned in fee other than
Beverly Center (Beverly), Cherry Creek Shopping Center (Cherry Creek), International Plaza,
MacArthur Center, and The Pier Shops, which are held under ground leases expiring between 2049 and
2083.
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.
16
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Sq. Ft of |
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GLA/Mall |
|
Year |
|
|
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|
|
Ownership |
|
|
|
|
GLA as of |
|
Opened/ |
|
Year |
|
% as of |
Center |
|
Anchors |
|
12/31/09 |
|
Expanded |
|
Acquired |
|
12/31/09 |
Consolidated Businesses: |
|
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|
Beverly Center |
|
Bloomingdales, Macys |
|
|
880,000 |
|
|
|
1982 |
|
|
|
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|
|
|
100 |
% |
Los Angeles, CA |
|
|
|
|
572,000 |
|
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|
Cherry Creek Shopping Center |
|
Macys, Neiman Marcus, Nordstrom, |
|
|
1,038,000 |
|
|
|
1990/1998 |
|
|
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|
50 |
% |
Denver, CO |
|
Saks Fifth Avenue |
|
|
547,000 |
|
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|
Dolphin Mall |
|
Bass Pro Shops Outdoor World, |
|
|
1,399,000 |
|
|
|
2001/2007 |
|
|
|
|
|
|
|
100 |
% |
Miami, FL |
|
Burlington Coat Factory, Cobb Theatres, |
|
|
636,000 |
|
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|
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|
Dave & Busters, Marshalls, |
|
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|
Neiman Marcus-Last Call, Off 5th Saks, |
|
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|
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|
|
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|
|
|
The Sports Authority |
|
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|
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|
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|
|
|
|
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|
|
|
|
|
|
|
|
Fairlane Town Center |
|
JCPenney, Macys, Sears |
|
|
1,384,000 |
(1) |
|
|
1976/1978/ |
|
|
|
|
|
|
|
100 |
% |
Dearborn, MI |
|
|
|
|
587,000 |
|
|
|
1980/2000 |
|
|
|
|
|
|
|
|
|
(Detroit Metropolitan Area) |
|
|
|
|
|
|
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|
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|
Great Lakes Crossing |
|
AMC Theatres, Bass Pro Shops Outdoor World, |
|
|
1,354,000 |
|
|
|
1998 |
|
|
|
|
|
|
|
100 |
% |
Auburn Hills, MI |
|
GameWorks, Neiman Marcus-Last Call, |
|
|
537,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Detroit Metropolitan Area) |
|
Off 5th Saks |
|
|
|
|
|
|
|
|
|
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|
International Plaza |
|
Dillards, Neiman Marcus, Nordstrom, |
|
|
1,204,000 |
|
|
|
2001 |
|
|
|
|
|
|
|
50 |
% |
Tampa, FL |
|
Robb & Stucky |
|
|
583,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MacArthur Center |
|
Dillards, Nordstrom |
|
|
937,000 |
|
|
|
1999 |
|
|
|
|
|
|
|
95 |
% |
Norfolk, VA |
|
|
|
|
523,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northlake Mall |
|
Belk, Dicks Sporting Goods, Dillards, Macys |
|
|
1,071,000 |
|
|
|
2005 |
|
|
|
|
|
|
|
100 |
% |
Charlotte, NC |
|
|
|
|
465,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Mall at Partridge Creek |
|
Nordstrom, Parisian |
|
|
599,000 |
|
|
|
2007/2008 |
|
|
|
|
|
|
|
100 |
% |
Clinton Township, MI |
|
|
|
|
365,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Detroit Metropolitan Area) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Pier Shops at Caesars (2) |
|
|
|
|
295,000 |
|
|
|
2006 |
|
|
|
|
|
|
|
78 |
% |
Atlantic City, NJ |
|
|
|
|
295,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regency Square |
|
JCPenney, Macys (two locations), Sears |
|
|
818,000 |
|
|
|
1975/1987 |
|
|
|
1997 |
|
|
|
100 |
% |
Richmond, VA |
|
|
|
|
231,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Mall at Short Hills |
|
Bloomingdales, Macys, Neiman Marcus, |
|
|
1,340,000 |
|
|
|
1980/1994/ |
|
|
|
|
|
|
|
100 |
% |
Short Hills, NJ |
|
Nordstrom, Saks Fifth Avenue |
|
|
518,000 |
|
|
|
1995 |
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Stony Point Fashion Park |
|
Dillards, Dicks Sporting Goods, |
|
|
662,000 |
|
|
|
2003 |
|
|
|
|
|
|
|
100 |
% |
Richmond, VA |
|
Saks Fifth Avenue |
|
|
296,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Oaks Mall |
|
JCPenney, Lord & Taylor, Macys, |
|
|
1,512,000 |
|
|
|
1977/1978/ |
|
|
|
|
|
|
|
100 |
% |
Novi, MI |
|
Nordstrom, Sears |
|
|
547,000 |
|
|
|
2007/2008 |
|
|
|
|
|
|
|
|
|
(Detroit Metropolitan Area) |
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
The Mall at Wellington Green |
|
City Furniture and Ashley Furniture Home Store, |
|
|
1,273,000 |
|
|
|
2001/2003 |
|
|
|
|
|
|
|
90 |
% |
Wellington, FL |
|
Dillards, JCPenney, Macys, Nordstrom |
|
|
460,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Palm Beach County) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Shops at Willow Bend |
|
Dillards, Macys, Neiman Marcus, |
|
|
1,379,000 |
(3) |
|
|
2001/2004 |
|
|
|
|
|
|
|
100 |
% |
Plano, TX |
|
Saks Fifth Avenue |
|
|
521,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
(Dallas Metropolitan Area) |
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
Total GLA |
|
|
17,145,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mall GLA |
|
|
7,683,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRG% of Total GLA |
|
|
15,785,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRG% of Total Mall GLA |
|
|
6,981,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sq. Ft of |
|
|
|
|
|
|
|
|
|
|
|
|
GLA/Mall |
|
Year |
|
|
|
|
|
Ownership |
|
|
|
|
GLA as of |
|
Opened/ |
|
Year |
|
% as of |
Center |
|
Anchors |
|
12/31/09 |
|
Expanded |
|
Acquired |
|
12/31/09 |
Unconsolidated Joint Ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arizona Mills |
|
GameWorks, Harkins Cinemas, |
|
|
1,214,000 |
|
|
|
1997 |
|
|
|
|
|
|
|
50 |
% |
Tempe, AZ |
|
JCPenney Outlet, Neiman Marcus-Last Call, |
|
|
527,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Phoenix Metropolitan Area) |
|
Off 5th Saks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Oaks |
|
JCPenney, Lord & Taylor, |
|
|
1,570,000 |
|
|
|
1980/1987/ |
|
|
|
|
|
|
|
50 |
% |
Fairfax, VA |
|
Macys (two locations), Sears |
|
|
566,000 |
|
|
|
1988/2000 |
|
|
|
|
|
|
|
|
|
(Washington, DC Metropolitan
Area) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Mall at Millenia |
|
Bloomingdales, Macys, Neiman Marcus |
|
|
1,116,000 |
|
|
|
2002 |
|
|
|
|
|
|
|
50 |
% |
Orlando, FL |
|
|
|
|
516,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stamford Town Center |
|
Macys, Saks Fifth Avenue |
|
|
772,000 |
|
|
|
1982/2007 |
|
|
|
|
|
|
|
50 |
% |
Stamford, CT |
|
|
|
|
449,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunvalley |
|
JCPenney, Macys (two locations), Sears |
|
|
1,331,000 |
|
|
|
1967/1981 |
|
|
|
2002 |
|
|
|
50 |
% |
Concord, CA |
|
|
|
|
491,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(San Francisco Metropolitan Area) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waterside Shops |
|
Nordstrom, Saks Fifth Avenue |
|
|
337,000 |
|
|
|
1992/2006/ |
|
|
|
2003 |
|
|
|
25 |
% |
Naples, FL |
|
|
|
|
197,000 |
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westfarms |
|
JCPenney, Lord & Taylor, Macys, |
|
|
1,287,000 |
|
|
|
1974/1983/ |
|
|
|
|
|
|
|
79 |
% |
West Hartford, CT |
|
Macys Mens Store/Furniture Gallery, Nordstrom |
|
|
517,000 |
|
|
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GLA |
|
|
7,627,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mall GLA |
|
|
3,263,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRG% of Total GLA |
|
|
4,102,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRG% of Total Mall GLA |
|
|
1,732,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total GLA |
|
|
24,772,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total Mall GLA |
|
|
10,946,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRG% of Total GLA |
|
|
19,887,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRG% of Total Mall GLA |
|
|
8,713,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
GLA includes the former Lord & Taylor store, which closed on June 24, 2006. |
|
(2) |
|
The center is attached to Caesars casino integrated resort. The loan at The Pier Shops
is currently in default, and we expect to transfer title of the center in 2010 (see MD&A -
Results of Operations Impairment Charges The Pier Shops at Caesars). |
|
(3) |
|
A Crate & Barrel store is expected to open in March 2011 as part of the redevelopment
of the former Lord & Taylor space. |
18
Anchors
The following table summarizes certain information regarding the anchors at the operating
centers (excluding the value centers) as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/09 GLA |
|
|
|
|
Number of |
|
(in thousands |
|
|
Name |
|
Anchor Stores |
|
of square feet) |
|
% of GLA |
Belk |
|
|
1 |
|
|
|
180 |
|
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
City Furniture and Ashley Furniture Home Store |
|
|
1 |
|
|
|
140 |
|
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dicks Sporting Goods |
|
|
2 |
|
|
|
159 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dillards |
|
|
6 |
|
|
|
1,335 |
|
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
JCPenney |
|
|
7 |
|
|
|
1,266 |
|
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Lord & Taylor |
|
|
3 |
|
|
|
397 |
|
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Macys |
|
|
|
|
|
|
|
|
|
|
|
|
Bloomingdales |
|
|
3 |
|
|
|
614 |
|
|
|
|
|
Macys |
|
|
17 |
|
|
|
3,454 |
|
|
|
|
|
Macys Mens Store/Furniture Gallery |
|
|
1 |
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
21 |
|
|
|
4,148 |
|
|
|
19.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Neiman Marcus (1) |
|
|
5 |
|
|
|
556 |
|
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nordstrom |
|
|
9 |
|
|
|
1,294 |
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Parisian |
|
|
1 |
|
|
|
116 |
|
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Robb & Stucky |
|
|
1 |
|
|
|
119 |
|
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Saks (2) |
|
|
6 |
|
|
|
487 |
|
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sears |
|
|
5 |
|
|
|
1,104 |
|
|
|
5.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
68 |
|
|
|
11,301 |
|
|
|
54.3 |
%(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes three Neiman Marcus-Last Call stores at value centers. |
|
(2) |
|
Excludes three Off 5th Saks stores at value centers. |
|
(3) |
|
Percentages in table may not add due to rounding. |
19
Mortgage Debt
The following table sets forth certain information regarding the mortgages encumbering the
centers as of December 31, 2009. All mortgage debt in the table below is nonrecourse to the
Operating Partnership except for debt encumbering Dolphin Mall (Dolphin), Fairlane Town Center
(Fairlane), and Twelve Oaks. The Operating Partnership has guaranteed the payment of all or a
portion of the principal and interest on the mortgage debt of these centers, all of which are
wholly owned. See MD&A Liquidity and Capital Resources Loan Commitments and Guarantees for
more information on guarantees and covenants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Annual |
|
|
|
|
|
Balance |
|
|
|
|
|
|
|
|
Balance as |
|
Debt |
|
|
|
|
|
Due on |
|
|
|
|
Stated |
|
of 12/31/09 |
|
Service |
|
|
|
|
|
Maturity |
|
Earliest |
Centers Consolidated in |
|
Interest |
|
(thousands |
|
(thousands |
|
Maturity |
|
(thousands |
|
Prepayment |
TCOs Financial Statements |
|
Rate |
|
of dollars) |
|
of dollars) |
|
Date |
|
of dollars) |
|
Date |
Beverly Center |
|
|
5.28 |
% |
|
|
328,365 |
|
|
|
23,101 |
(1) |
|
|
02/11/14 |
|
|
|
303,277 |
|
|
30 Days Notice(2) |
Cherry Creek Shopping Center (50%) |
|
|
5.24 |
% |
|
|
280,000 |
|
|
Interest Only |
|
|
06/08/16 |
|
|
|
280,000 |
|
|
30 Days Notice(2) |
Dolphin Mall |
|
LIBOR+0.70% |
|
|
64,000 |
(3) |
|
Interest Only |
|
|
02/14/11 |
(4) |
|
|
64,000 |
|
|
2 Days Notice(5) |
Fairlane Town Center |
|
LIBOR+0.70% |
|
|
80,000 |
(3) |
|
Interest Only |
|
|
02/14/11 |
(4) |
|
|
80,000 |
|
|
2 Days Notice(5) |
Great Lakes Crossing |
|
|
5.25 |
% |
|
|
135,144 |
|
|
|
10,006 |
(1) |
|
|
03/11/13 |
|
|
|
125,507 |
|
|
30 Days Notice(2) |
International Plaza (50.1%) |
|
LIBOR+1.15%(6) |
|
|
325,000 |
|
|
Interest Only |
(6) |
|
|
01/08/11 |
(6) |
|
|
325,000 |
|
|
3 Days Notice(5) |
MacArthur Center (95%) |
|
|
7.59 |
%(7) |
|
|
129,358 |
(7) |
|
|
12,400 |
(1) |
|
|
10/01/10 |
|
|
|
126,884 |
|
|
30 Days Notice(2) |
Northlake Mall |
|
|
5.41 |
% |
|
|
215,500 |
|
|
Interest Only |
|
|
02/06/16 |
|
|
|
215,500 |
|
|
30 Days Notice(8) |
The Mall at Partridge Creek |
|
LIBOR+1.15% |
|
|
73,770 |
|
|
Interest Only |
|
|
09/07/10 |
|
|
|
73,770 |
|
|
3 Days Notice(5) |
The Pier Shops at Caesars (77.5%) |
|
|
(9) |
|
|
|
135,000 |
(9) |
|
|
|
(9) |
|
|
|
(9) |
|
|
|
(9) |
|
|
|
(9) |
Regency Square |
|
|
6.75 |
% |
|
|
74,085 |
|
|
|
6,421 |
(1) |
|
|
11/01/11 |
|
|
|
71,569 |
|
|
60 Days Notice(10) |
The Mall at Short Hills |
|
|
5.47 |
% |
|
|
540,000 |
|
|
Interest Only |
|
|
12/14/15 |
|
|
|
540,000 |
|
|
|
01/01/11 |
(11) |
Stony Point Fashion Park |
|
|
6.24 |
% |
|
|
107,237 |
|
|
|
8,488 |
(1) |
|
|
06/01/14 |
|
|
|
98,585 |
|
|
30 Days Notice(8) |
Twelve Oaks Mall |
|
LIBOR+0.70% |
|
|
|
(3) |
|
Interest Only |
|
|
02/14/11 |
(4) |
|
|
|
|
|
2 Days Notice(5) |
The Mall at Wellington Green (90%) |
|
|
5.44 |
% |
|
|
200,000 |
|
|
Interest Only |
|
|
05/06/15 |
|
|
|
200,000 |
|
|
30 Days Notice(8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Consolidated Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRG Credit Facility |
|
Variable
Bank Rate(12) |
|
|
3,560 |
|
|
Interest Only |
|
|
02/14/11 |
|
|
|
3,560 |
|
|
At Any Time(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centers Owned by Unconsolidated
Joint Ventures/TRGs % Ownership |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arizona Mills (50%) |
|
|
7.90 |
% |
|
|
132,073 |
|
|
|
12,728 |
(1) |
|
|
10/05/10 |
|
|
|
130,419 |
|
|
30 Days Notice(2) |
Fair Oaks (50%) |
|
LIBOR+1.40%(13) |
|
|
250,000 |
|
|
Interest Only(13) |
|
|
04/01/11 |
(13) |
|
|
250,000 |
|
|
3 Days Notice(5) |
The Mall at Millenia (50%) |
|
|
5.46 |
% |
|
|
205,458 |
|
|
|
14,245 |
(1) |
|
|
04/09/13 |
|
|
|
195,255 |
|
|
30 Days Notice(2) |
Sunvalley (50%) |
|
|
5.67 |
% |
|
|
121,387 |
|
|
|
9,372 |
(1) |
|
|
11/01/12 |
|
|
|
114,056 |
|
|
30 Days Notice(2) |
Taubman Land Associates (50%) |
|
LIBOR+0.90%(14) |
|
|
30,000 |
|
|
Interest Only |
|
|
11/01/12 |
|
|
|
30,000 |
|
|
At Any Time(5) |
Waterside Shops (25%) |
|
|
5.54 |
% |
|
|
165,000 |
|
|
Interest Only |
|
|
10/07/16 |
|
|
|
165,000 |
|
|
30 Days Notice(10) |
Westfarms (79%) |
|
|
6.10 |
% |
|
|
188,718 |
|
|
|
15,272 |
(1) |
|
|
07/11/12 |
|
|
|
179,028 |
|
|
30 Days Notice(2) |
|
|
|
(1) |
|
Amortizing principal based on 30 years. |
|
(2) |
|
No defeasance deposit required if paid within three months of maturity date. |
|
(3) |
|
Subfacility in $550 million revolving line of credit. Facility may be increased to
$650 million subject to available lender commitments and additional secured collateral. |
|
(4) |
|
The maturity date may be extended one year. |
|
(5) |
|
Prepayment can be made without penalty. |
|
(6) |
|
The debt is swapped to an effective rate of 5.01% to the maturity date. The debt has 2 one
year extension options and is interest only except during the second one year extension (if
elected). |
|
(7) |
|
Debt includes $0.6 million of purchase accounting premium from acquisition which reduces the
stated rate on the debt of 7.59% to an effective rate of 6.96%. |
|
(8) |
|
No defeasance deposit required if paid within four months of maturity date. |
|
(9) |
|
As of December 2009 The Pier Shops loan is in default. Interest is accruing at the default
rate of 10.01% versus the original stated rate of 6.01% and accumulating in interest payable.
The debt obligation is expected to be extinguished in 2010 (see MD&A Results of Operations
- Impairment Charges The Pier Shops at Caesars). |
|
(10) |
|
No defeasance deposit required if paid within six months of maturity date. |
|
(11) |
|
Debt may be prepaid with a prepayment penalty equal to greater of yield maintenance or 1% of
principal prepaid. No prepayment penalty is due if prepaid within three months of maturity
date. 30 days notice required. |
|
(12) |
|
The facility is a $40 million line of credit and is secured by an indirect interest in 40% of
Short Hills. |
|
(13) |
|
The debt is swapped to an effective rate of 4.22% to the maturity date. The debt has 2 one
year extension options and is interest only except during the second one year extension (if
elected). |
|
(14) |
|
Debt is swapped to an effective rate of 5.95% to the maturity date. |
For additional information regarding the centers and their operations, see the responses
to Item 1 of this report.
20
|
|
|
Item 3. |
|
LEGAL PROCEEDINGS. |
On December 8, 2009, West Farms Associates and West Farms Mall, LLC (together, Westfarms)
and The Taubman Company LLC (together with Westfarms, the WFM Parties) entered into a settlement
agreement (the Settlement Agreement) with three developers of a project called Blue Back Square
in West Hartford, Connecticut. The Settlement Agreement relates to a lawsuit originally filed by
the developers against the WFM Parties and related persons in November 2007 in the Connecticut
Superior Court, Judicial District of Hartford at Hartford and subsequently transferred to the
Superior Court for the Judicial District of Waterbury at Waterbury. The developers alleged damages
in excess of $40 million and sought double, treble, and punitive damages, as well as attorneys
fees. Pursuant to the Settlement Agreement, the lawsuit was withdrawn with prejudice upon payment
by Westfarms of $34 million to the developers on December 15, 2009. We have a 79% investment in
Westfarms Associates, an unconsolidated joint venture which owns Westfarms mall, and our share of
the settlement was $26.8 million. The developers, for themselves and on behalf of related persons,
agreed to a full and general release for the benefit of the WFM Parties and related persons as of
December 8, 2009. There was no admission of liability or fault by any parties to the lawsuit or
related persons. In early November 2007, the Town of West Hartford and the West Hartford Town
Council (the Town) filed a substantially similar lawsuit against the same entities in the same
court, which was also subsequently transferred to the Superior Court for the Judicial District of
Waterbury at Waterbury. The Town alleged damages in excess of $5.5 million and sought double,
treble, and punitive damages, as well as attorneys fees. In January 2010, the WFM Parties executed
a settlement agreement with the Town, which provided for a full and general release for the benefit
of the WFM Parties upon payment by Westfarms of $4.5 million, or $3.6 million at our share, which
was recorded in 2009. There was no admission of liability or fault by any parties to the lawsuit or
related persons.
See Note 15 Commitments and Contingencies Litigation to our consolidated financial
statements for information regarding other outstanding litigation. While management does not
believe that an adverse outcome in the lawsuits described would have a material adverse effect on
our financial condition, there can be no assurance that adverse outcomes would not have material
effects on our results of operations for any particular period.
|
|
|
Item 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
21
PART II
|
Item 5. MARKET FOR REGISTRANTS 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 24, 2010, the 54,326,934 outstanding shares of Common Stock were
held by 548 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 24, 2010 was $38.69.
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 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Quotations |
|
|
2009 Quarter Ended |
|
High |
|
Low |
|
Dividends |
March 31 |
|
$ |
26.79 |
|
|
$ |
13.56 |
|
|
$ |
0.415 |
|
|
June 30 |
|
|
28.16 |
|
|
|
16.65 |
|
|
|
0.415 |
|
|
September 30 |
|
|
37.37 |
|
|
|
22.55 |
|
|
|
0.415 |
|
|
December 31 |
|
|
37.66 |
|
|
|
30.40 |
|
|
|
0.415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Quotations |
|
|
2008 Quarter Ended |
|
High |
|
Low |
|
Dividends |
March 31 |
|
$ |
55.70 |
|
|
$ |
43.93 |
|
|
$ |
0.415 |
|
|
June 30 |
|
|
58.05 |
|
|
|
48.65 |
|
|
|
0.415 |
|
|
September 30 |
|
|
55.40 |
|
|
|
43.35 |
|
|
|
0.415 |
|
|
December 31 |
|
|
48.19 |
|
|
|
18.69 |
|
|
|
0.415 |
|
The restrictions on our ability to pay dividends on our Common Stock are set forth in
Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity
and Capital Resources Dividends.
22
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 All REIT Index, Property Sector:
Retail, and the S&P Composite 500 Stock Index for the period December 31, 2004 through
December 31, 2009 (assuming in all cases, the reinvestment of dividends):
COMPARISON OF CUMULATIVE TOTAL RETURN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/04 |
|
|
|
12/31/05 |
|
|
|
12/31/06 |
|
|
|
12/31/07 |
|
|
|
12/31/08 |
|
|
|
12/31/09 |
|
|
|
Taubman Centers Inc. |
|
|
$ |
100.00 |
|
|
|
$ |
120.37 |
|
|
|
$ |
181.46 |
|
|
|
$ |
180.79 |
|
|
|
$ |
97.54 |
|
|
|
$ |
146.49 |
|
|
|
MSCI US REIT Index |
|
|
|
100.00 |
|
|
|
|
112.13 |
|
|
|
|
152.41 |
|
|
|
|
126.78 |
|
|
|
|
78.64 |
|
|
|
|
101.14 |
|
|
|
FTSE NAREIT All REIT Index,
Property Sector: Retail |
|
|
|
100.00 |
|
|
|
|
111.80 |
|
|
|
|
144.23 |
|
|
|
|
121.49 |
|
|
|
|
62.74 |
|
|
|
|
79.78 |
|
|
|
S&P 500 Index |
|
|
|
100.00 |
|
|
|
|
104.91 |
|
|
|
|
121.48 |
|
|
|
|
128.15 |
|
|
|
|
80.74 |
|
|
|
|
102.11 |
|
|
|
Note: The stock performance shown on the graph above is not necessarily indicative of future
price performance.
23
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. See Note 9 -
Noncontrolling Interests to our consolidated financial statements regarding reclassifications of
previously reported information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
|
|
|
|
|
(in thousands of dollars, except as noted) |
|
|
|
|
STATEMENT OF OPERATIONS DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rents, recoveries, and other shopping center revenues |
|
|
666,104 |
|
|
|
671,498 |
|
|
|
626,822 |
|
|
|
579,284 |
|
|
|
479,405 |
|
Income (loss) before gain on disposition of interest in center
(1) |
|
|
(79,161 |
) |
|
|
(8,052 |
) |
|
|
116,236 |
|
|
|
95,140 |
|
|
|
57,432 |
|
Gain on disposition of interest in center (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,799 |
|
Net income (loss) (1) |
|
|
(79,161 |
) |
|
|
(8,052 |
) |
|
|
116,236 |
|
|
|
95,140 |
|
|
|
110,231 |
|
Attributable to noncontrolling interests |
|
|
25,649 |
|
|
|
(62,527 |
) |
|
|
(51,782 |
) |
|
|
(48,919 |
) |
|
|
(37,491 |
) |
Distributions to participating securities of TRG |
|
|
(1,560 |
) |
|
|
(1,446 |
) |
|
|
(1,330 |
) |
|
|
(1,104 |
) |
|
|
(1,005 |
) |
Preferred dividends |
|
|
(14,634 |
) |
|
|
(14,634 |
) |
|
|
(14,634 |
) |
|
|
(23,723 |
) |
|
|
(27,622 |
) |
Net income (loss) attributable to Taubman Centers, Inc. common
shareowners |
|
|
(69,706 |
) |
|
|
(86,659 |
) |
|
|
48,490 |
|
|
|
21,394 |
|
|
|
44,113 |
|
Net income (loss) per common share diluted |
|
|
(1.31 |
) |
|
|
(1.64 |
) |
|
|
0.90 |
|
|
|
0.40 |
|
|
|
0.87 |
|
Dividends declared per common share |
|
|
1.66 |
|
|
|
1.66 |
|
|
|
1.54 |
|
|
|
1.29 |
|
|
|
1.16 |
|
Weighted average number of common shares
outstanding basic |
|
|
53,239,279 |
|
|
|
52,866,050 |
|
|
|
52,969,067 |
|
|
|
52,661,024 |
|
|
|
50,459,314 |
|
Weighted average number of common shares outstanding diluted |
|
|
53,239,279 |
|
|
|
52,866,050 |
|
|
|
53,622,017 |
|
|
|
52,979,453 |
|
|
|
50,530,139 |
|
Number of common shares outstanding at end of period |
|
|
54,321,586 |
|
|
|
53,018,987 |
|
|
|
52,624,013 |
|
|
|
52,931,594 |
|
|
|
51,866,184 |
|
Ownership percentage of TRG at end of period |
|
|
67 |
% |
|
|
67 |
% |
|
|
66 |
% |
|
|
65 |
% |
|
|
64 |
% |
BALANCE SHEET DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate before accumulated depreciation |
|
|
3,496,853 |
|
|
|
3,699,480 |
|
|
|
3,781,136 |
|
|
|
3,398,122 |
|
|
|
3,081,324 |
|
Total assets |
|
|
2,606,853 |
|
|
|
2,974,982 |
|
|
|
3,105,975 |
|
|
|
2,781,290 |
|
|
|
2,797,580 |
|
Total debt |
|
|
2,691,019 |
|
|
|
2,796,821 |
|
|
|
2,700,980 |
|
|
|
2,319,538 |
|
|
|
2,089,948 |
|
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from Operations attributable to TCO (1)(3) |
|
|
36,799 |
|
|
|
81,274 |
|
|
|
155,376 |
|
|
|
136,736 |
|
|
|
110,578 |
|
Mall tenant sales (4)(5) |
|
|
4,227,936 |
|
|
|
4,536,500 |
|
|
|
4,734,940 |
|
|
|
4,344,565 |
|
|
|
4,124,534 |
|
Sales per square foot (4)(5)(6) |
|
|
498 |
|
|
|
533 |
|
|
|
555 |
|
|
|
529 |
|
|
|
508 |
|
Number of shopping centers at end of period |
|
|
23 |
|
|
|
23 |
|
|
|
23 |
|
|
|
22 |
|
|
|
21 |
|
Ending Mall GLA in thousands of square feet |
|
|
10,946 |
|
|
|
10,937 |
|
|
|
10,879 |
|
|
|
10,448 |
|
|
|
10,029 |
|
Leased space (5)(7) |
|
|
91.6 |
% |
|
|
92.0 |
% |
|
|
93.8 |
% |
|
|
92.5 |
% |
|
|
91.7 |
% |
Ending occupancy (5) |
|
|
89.6 |
% |
|
|
90.5 |
% |
|
|
91.2 |
% |
|
|
91.3 |
% |
|
|
90.0 |
% |
Average occupancy (5) |
|
|
89.0 |
% |
|
|
90.5 |
% |
|
|
90.0 |
% |
|
|
89.2 |
% |
|
|
88.9 |
% |
Average base rent per square foot (5)(6): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated businesses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All mall tenants |
|
$ |
43.31 |
|
|
$ |
43.95 |
|
|
$ |
43.39 |
|
|
$ |
42.77 |
|
|
$ |
41.41 |
|
Stores opening during year (8) |
|
|
45.19 |
|
|
|
54.78 |
|
|
|
53.35 |
|
|
|
41.25 |
|
|
|
42.38 |
|
Stores closing during year(8) |
|
|
41.70 |
|
|
|
49.60 |
|
|
|
45.39 |
|
|
|
39.57 |
|
|
|
40.59 |
|
Unconsolidated Joint Ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All mall tenants |
|
$ |
44.49 |
|
|
$ |
44.61 |
|
|
$ |
41.89 |
|
|
$ |
41.03 |
|
|
$ |
42.28 |
|
Stores opening during year(8) |
|
|
51.10 |
|
|
|
59.36 |
|
|
|
48.05 |
|
|
|
42.98 |
|
|
|
44.90 |
|
Stores closing during year(8) |
|
|
48.64 |
|
|
|
48.72 |
|
|
|
48.63 |
|
|
|
42.49 |
|
|
|
44.26 |
|
|
|
|
(1) |
|
Funds from Operations (FFO) is defined and discussed in MD&A Presentation of
Operating Results. Net loss and FFO in 2009 include the $166.7 million (or $160.8 million at
our share) impairment charges related to the write down of The Pier Shops and Regency Square
to their fair values, the $30.4 million charges related to the litigation settlements at
Westfarms, and $2.5 million in restructuring charges which primarily represented the cost of
terminations of personnel. Net loss and FFO in 2008 include the impairment charges of
$126.3 million related to investments in our Oyster Bay and Sarasota projects. Net income and
FFO in 2006 include $3.1 million in connection with the write-off of financing costs related
to the respective pay-off and refinancing of the loans on The Shops at Willow Bend and Dolphin
Mall. In addition to these charges, FFO in 2006 includes a $4.7 million charge incurred in
connection with the redemption of $113 million of preferred stock. |
|
(2) |
|
In December 2005, a 50% owned unconsolidated joint venture sold its interest in
Woodland for $177.4 million. |
|
(3) |
|
Reconciliations of net income (loss) attributable to TCO common shareowners to FFO for
2009, 2008, and 2007 are provided in MD&A Presentation of Operating Results. For 2006, net
income attributable to TCO common shareowners of $21.4 million, adding back depreciation and
amortization of $147.3 million, noncontrolling interests of $40.7 million, and distributions
to participating securities of $1.1 million arrives at TRGs FFO of $210.4 million, of which
TCOs share was $136.7 million. For 2005, net income attributable to TCO common shareowners of
$44.1 million, less the gain on dispositions of interests in centers of $52.8 million, adding
back depreciation and amortization of $150.3 million, noncontrolling interests of
$35.0 million, and distributions to participating securities of $1.0 million arrives at TRGs
FFO of $177.7 million, of which TCOs share was $110.6 million. |
|
(4) |
|
Based on reports of sales furnished by mall tenants. |
|
(5) |
|
Amounts in 2009 and 2008 exclude The Pier Shops, which opened in 2006. See MD&A -
Results of Operations Impairment Charges The Pier Shops at Caesars for further
information. |
|
(6) |
|
See MD&A for information regarding this statistic. |
|
(7) |
|
Leased space comprises both occupied space and space that is leased but not yet
occupied. |
|
(8) |
|
Amounts in 2009 and 2008 exclude spaces greater than 10,000 square feet. |
24
Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following Managements Discussion and Analysis of Financial Condition and Results of
Operations contains various forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements represent our expectations or beliefs concerning future
events, including the following: statements regarding future developments and joint ventures,
rents, returns, and earnings; statements regarding the continuation of trends; and any statements
regarding the sufficiency of our cash balances and cash generated from operating, investing, and
financing activities for our future liquidity and capital resource needs. We caution that although
forward-looking statements reflect our good faith beliefs and reasonable judgment based upon
current information, these statements are qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements, because of risks,
uncertainties, and factors including, but not limited to, the continuing impacts of the U.S.
recession and global credit environment, other changes in general economic and real estate
conditions, changes in the interest rate environment and the availability of financing, and adverse
changes in the retail industry. Except as required by law, we assume no obligation to update these
forward-looking statements, even if new information becomes available in the future. Other risks
and uncertainties are detailed from time to time in reports filed with the SEC, and in particular
those set forth under Risk Factors of this Annual Report on Form 10-K. The following discussion
should be read in conjunction with the accompanying consolidated financial statements of Taubman
Centers, Inc. and the notes thereto.
General Background and Performance Measurement
Taubman Centers, Inc. (TCO) is a Michigan corporation that operates as a self-administered and
self-managed real estate investment trust (REIT). The Taubman Realty Group Limited Partnership (the
Operating Partnership or TRG) is a majority-owned partnership subsidiary of TCO, which owns direct
or indirect interests in all of our real estate properties. In this report, the terms we, us,
and our refer to TCO, the Operating Partnership, and/or the Operating Partnerships subsidiaries
as the context may require. We own, lease, acquire, dispose of, develop, expand, and manage
regional and super-regional shopping centers. The Consolidated Businesses consist of shopping
centers and entities that are controlled by ownership or contractual agreements, The Taubman
Company LLC (Manager), and Taubman Properties Asia LLC and its subsidiaries (Taubman Asia). In
September 2008, we acquired the interests of the owner of Partridge Creek (see Note 2 -
Acquisitions to our consolidated financial statements). Prior to the acquisition, we consolidated
the accounts of the owner of Partridge Creek, which qualified as a variable interest entity for
which the Operating Partnership was considered to be the primary beneficiary. 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.
Overall Summary of Managements 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 six years
during 2009 and approximately seven years during 2008, 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.
The real estate industry continues to face difficult times due to the impacts of the recent
recession and tough capital market and retail environment. Although there have been some positive
signs, unemployment continues to be very high and there is considerable uncertainty as to how long
the impacts of the recession may continue. We have seen the negative effect on our business in
2009, and we expect that the economy will continue to strain the resources of our tenants and their
customers. A number of regional and national retailers have announced store closings or filed for
bankruptcy. During 2009, 4.1% of our tenants sought the protection of the bankruptcy laws, compared
to 2.5% and 0.5% in 2008 and 2007, respectively. The highest level of bankruptcies weve
experienced in the last 20 years for a full year was 4.5% in both 1992 and 2001.
25
Tenant sales per square foot were $498 in 2009, a 6.7% decrease from 2008. However, sales per
square foot increased by 3.8% in the fourth quarter of 2009. This is the first positive quarterly
tenant sales performance since the third quarter of 2008. We are expecting sales to be flat to 3%
to 4% up in 2010. See Mall Tenant Sales and Center Revenues.
Ending occupancy was 89.6% at December 31, 2009, down 0.9% from 2008. We anticipate occupancy
will end the year flat in 2010, although it is likely to be down as much as 1% in the first three
quarters of the year. Rent per square foot decreased 2.2% for the fourth quarter of 2009 and
decreased 1% for the year. We expect that average rents per square foot in 2010 will be down in
comparison to 2009 by approximately 2% to 2.5%. 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.
In the fourth quarter of 2009 we recognized $38.5 million of litigation charges related to
Westfarms mall, an Unconsolidated Joint Venture, of which our share was $30.4 million (see Results
of Operations Litigation Charges).
In the third quarter of 2009, we concluded that the book values of the investments in The Pier
Shops and Regency Square were impaired, which resulted in a non-cash charge of $166.7 million (or
$160.8 million at our share). We also recorded impairment charges in the fourth quarter of 2008 of
$126.3 million related to our Oyster Bay project in the Town of Oyster Bay, New York (Oyster Bay
project or Oyster Bay) and our Sarasota project. See Results of Operations Impairment Charges
for further discussion and the status of The Pier Shops loan, which is in default.
In the first half of 2009, in response to the decreased level of active projects due to the
downturn in the economy, we reduced our workforce by about 40 positions, primarily in areas that
directly or indirectly affect our development initiatives in the U.S. and Asia. The restructuring
charge was $2.5 million, and primarily represents the cost of terminations of personnel.
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.
We also describe the current status of our efforts to broaden our growth in Asia (see Results
of Operations Taubman Asia).
We then provide a discussion of the impact in 2009 of recently issued accounting
pronouncements including the new requirements for accounting for noncontrolling interests.
With all the preceding information as background, we then provide insight and explanations for
variances in our financial results for 2009, 2008, and 2007 under Comparison of 2009 to 2008 and
Comparison of 2008 to 2007. As information useful to understanding our results, we have described
the presentation of our noncontrolling interests, the presentation of certain interests in centers,
and the reasons for our use of non-GAAP measures such as Beneficial Interests in EBITDA and Funds
from Operations (FFO) under Results of Operations Use of Non-GAAP Measures. Reconciliations
from net income (loss) and net income (loss) allocable to common shareowners to these measures
follow the annual comparisons.
We then provide a discussion of our critical accounting policies and new accounting
pronouncements that will affect periods subsequent to 2009.
Our discussion of sources and uses of capital resources under Liquidity and Capital
Resources begins with a brief overview of current market conditions and our financial position. We
have no maturities on our current debt until fall 2010, when three loans mature with principal
amounts of $335 million at 100% and $262 million at our beneficial share and we are in discussions
with a variety of lenders to refinance these three loans. We then discuss our capital activities
and transactions that occurred in 2009. Analysis of specific operating, investing, and financing
activities is then provided in more detail.
26
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 discussion of
compliance with debt covenants.
In conducting our business, we enter into various contractual obligations, including those for
debt, capital leases for property improvements, 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.
Renovation and expansion of existing malls has been a significant use of our capital in recent
years, as described in Liquidity and Capital Resources Capital Spending and Liquidity and
Capital Resources Capital Spending Planned Capital Spending. Our City Creek Center project,
which we will own under a participating lease, is expected to open in early 2012 at which time a
$75 million payment will be made to the lessor. With our Sarasota project on hold and the continued
delays on our Oyster Bay and Asia projects, we expect capital spending in 2010 to consist primarily
of tenant allowances and other capital expenditures on our operating centers.
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.
Mall Tenant Sales and Center Revenues
Our mall tenant sales per square foot statistics have shown improvement since July 2009 and in
the fourth quarter of 2009 increased by 3.8% compared to the prior year. This is the first quarter
sales have been up since third quarter 2008. For 2009, our sales decreased 6.7% to a level of
$498 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 because mall tenant sales determine the amount of rent, percentage rent, and recoverable
expenses (together, total occupancy costs) that mall tenants can afford to pay. However, levels of
mall tenant sales can be considerably more volatile in the short run than total occupancy costs,
and may be impacted significantly, either positively or negatively, by the success or lack of
success of a small number of tenants or even a single tenant.
We believe that the ability of tenants to pay occupancy costs and earn profits over long
periods of time increases as sales per square foot increase, whether through inflation or real
growth in customer spending. Because most mall tenants have certain fixed expenses, the occupancy
costs that they can afford to pay and still be profitable are a higher percentage of sales at
higher sales per square foot.
Sales directly impact the amount of percentage rents certain tenants and anchors pay. The
effects of increases or declines in sales on our operations are moderated by the relatively minor
share of total rents that percentage rents represent of total rents (approximately 3% in 2009).
While sales are critical over the long term, the high quality regional mall business has been
a very stable business model with its diversity of income from thousands of tenants, its staggered
lease maturities, and high proportion of fixed rent. However, a sustained trend in sales does
impact, either negatively or positively, our ability to lease vacancies and negotiate rents at
advantageous rates.
27
The following table summarizes occupancy costs, excluding utilities, for mall tenants as a
percentage of mall tenant sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 (1) |
|
2008 (1) |
|
2007 |
Mall tenant sales (in thousands of dollars) |
|
|
4,227,936 |
|
|
|
4,536,500 |
|
|
|
4,734,940 |
|
Sales per square foot |
|
|
498 |
|
|
|
533 |
|
|
|
555 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Businesses: |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
|
10.2 |
% |
|
|
9.7 |
% |
|
|
8.9 |
% |
Percentage rents |
|
|
0.3 |
|
|
|
0.4 |
|
|
|
0.4 |
|
Expense recoveries |
|
|
5.7 |
|
|
|
5.3 |
|
|
|
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mall tenant occupancy costs as a percentage of mall tenant sales |
|
|
16.2 |
% |
|
|
15.4 |
% |
|
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated Joint Ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
|
9.6 |
% |
|
|
8.9 |
% |
|
|
8.0 |
% |
Percentage rents |
|
|
0.3 |
|
|
|
0.4 |
|
|
|
0.4 |
|
Expense recoveries |
|
|
5.0 |
|
|
|
4.6 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mall tenant occupancy costs as a percentage of mall tenant sales |
|
|
14.9 |
% |
|
|
13.9 |
% |
|
|
12.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Statistics exclude The Pier Shops. |
In 2009, mall tenant occupancy costs as a percentage of mall tenant sales increased
primarily due to the decline in sales during the year.
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. In periods of increasing sales, rents on new
leases will generally tend to rise. In periods of slower growth or declining sales, as we are
experiencing now, rents on new leases will grow more slowly or will decline for the opposite
reason, as tenants expectations of future growth become less optimistic. Rent per square foot
information for centers in our Consolidated Businesses (excluding The Pier Shops) and
Unconsolidated Joint Ventures follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 (1) |
|
2008 (1) |
|
2007 (2) |
Average rent per square foot,: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Businesses |
|
$ |
43.31 |
|
|
$ |
43.95 |
|
|
$ |
43.39 |
|
Unconsolidated Joint Ventures |
|
|
44.49 |
|
|
|
44.61 |
|
|
|
41.89 |
|
Opening base rent per square foot: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Businesses |
|
$ |
45.19 |
|
|
$ |
54.78 |
|
|
$ |
53.35 |
|
Unconsolidated Joint Ventures |
|
|
51.10 |
|
|
|
59.36 |
|
|
|
48.05 |
|
Square feet of GLA opened: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Businesses |
|
|
681,773 |
|
|
|
589,730 |
|
|
|
885,982 |
|
Unconsolidated Joint Ventures |
|
|
218,953 |
|
|
|
340,275 |
|
|
|
394,316 |
|
Closing base rent per square foot: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Businesses |
|
$ |
41.70 |
|
|
$ |
49.60 |
|
|
$ |
45.39 |
|
Unconsolidated Joint Ventures |
|
|
48.64 |
|
|
|
48.72 |
|
|
|
48.63 |
|
Square feet of GLA closed: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Businesses |
|
|
832,451 |
|
|
|
650,607 |
|
|
|
807,899 |
|
Unconsolidated Joint Ventures |
|
|
259,457 |
|
|
|
342,698 |
|
|
|
345,122 |
|
Releasing spread per square foot: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Businesses |
|
$ |
3.49 |
|
|
$ |
5.18 |
|
|
$ |
7.96 |
|
Unconsolidated Joint Ventures |
|
|
2.46 |
|
|
|
10.64 |
|
|
|
(0.58 |
) |
|
|
|
(1) |
|
Opening and closing statistics exclude spaces greater than 10,000 square feet. |
|
(2) |
|
Opening and closing statistics exclude spaces greater than 40,000 square feet. |
28
Average rent per square foot of the Consolidated Businesses in 2009 was impacted by
increases in rent relief. Rent per square foot in 2010 is expected to be down 2% to 2.5% due to the
annualization of rent relief granted in 2009. Average rent per square foot of the Unconsolidated
Joint Ventures in 2007 was impacted by prior year adjustments totaling $3.0 million (at 100%) in
2007, related to The Mills Corporations accounting for lease incentives at Arizona Mills, a 50%
owned joint venture. Excluding these adjustments, average rent per square foot of the
Unconsolidated Joint Ventures would have been $42.93 in 2007.
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. In 2007, the releasing spread per square foot of the Unconsolidated Joint
Ventures was impacted by the opening of large tenant spaces at a certain center.
Mall tenant leased space, ending occupancy, and average occupancy rates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 (1) |
|
2008 (1) |
|
2007 |
Leased space |
|
|
91.6 |
% |
|
|
92.0 |
% |
|
|
93.8 |
% |
Ending occupancy |
|
|
89.6 |
|
|
|
90.5 |
|
|
|
91.2 |
|
Average occupancy |
|
|
89.0 |
|
|
|
90.5 |
|
|
|
90.0 |
|
|
|
|
(1) |
|
Statistics exclude The Pier Shops. |
Ending occupancy was 89.6%, a 0.9% decrease from 90.5% in 2008. At 91.6%, leased space is
2.0% over the year end occupancy level, indicating a backlog of tenants who have committed to
opening stores in the future. We expect occupancy in 2010 to end the year flat with 2009, although
it is likely to be down as much as 1% in the first three quarters of 2010. Temporary tenant leasing
continues to be strong and ended the year at about 4.2% compared to 2.7% in 2008. Temporary
tenants, defined as those with lease terms less than 12 months, are not included in occupancy or
leased space statistics. Tenant bankruptcy filings as a percentage of the total number of tenant
leases was 4.1% in 2009, compared to 2.5% in 2008, and 0.5% in 2007.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4th |
|
3rd |
|
2nd |
|
1st |
|
|
Total |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
|
2009 |
|
2009 |
|
2009 |
|
2009 |
|
2009 |
|
|
(in thousands of dollars, except occupancy and leased space data) |
Mall tenant sales (1), (2) |
|
|
4,227,936 |
|
|
|
1,350,806 |
|
|
|
987,008 |
|
|
|
968,964 |
|
|
|
921,158 |
|
Revenues and gains on land sales
and other nonoperating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Businesses |
|
|
666,815 |
|
|
|
186,306 |
|
|
|
163,447 |
|
|
|
159,137 |
|
|
|
157,925 |
|
Unconsolidated Joint Ventures |
|
|
272,622 |
|
|
|
75,504 |
|
|
|
67,317 |
|
|
|
63,657 |
|
|
|
66,144 |
|
Occupancy and leased space (2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending occupancy |
|
|
89.6 |
% |
|
|
89.6 |
% |
|
|
88.7 |
% |
|
|
88.8 |
% |
|
|
88.8 |
% |
Average occupancy |
|
|
89.0 |
|
|
|
89.5 |
|
|
|
88.5 |
|
|
|
88.9 |
|
|
|
89.0 |
|
Leased space |
|
|
91.6 |
|
|
|
91.6 |
|
|
|
91.0 |
|
|
|
91.3 |
|
|
|
90.7 |
|
|
|
|
(1) |
|
Based on reports of sales furnished by mall tenants. |
|
(2) |
|
Excludes The Pier Shops. |
Because the seasonality of sales contrasts with the generally fixed nature of minimum
rents and recoveries, mall tenant occupancy costs (the sum of minimum rents, percentage rents, and
expense recoveries) as a percentage of sales are considerably higher in the first three quarters
than they are in the fourth quarter.
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4th |
|
3rd |
|
2nd |
|
1st |
|
|
Total |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
|
2009 |
|
2009 |
|
2009 |
|
2009 |
|
2009 |
Consolidated Businesses (1) : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
|
10.2 |
% |
|
|
8.0 |
% |
|
|
10.6 |
% |
|
|
10.8 |
% |
|
|
12.2 |
% |
Percentage rents |
|
|
0.3 |
|
|
|
0.5 |
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.3 |
|
Expense recoveries |
|
|
5.7 |
|
|
|
5.9 |
|
|
|
5.3 |
|
|
|
5.9 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mall tenant occupancy costs |
|
|
16.2 |
% |
|
|
14.4 |
% |
|
|
16.1 |
% |
|
|
16.8 |
% |
|
|
18.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated Joint Ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
|
9.6 |
% |
|
|
7.7 |
% |
|
|
10.3 |
% |
|
|
10.6 |
% |
|
|
10.9 |
% |
Percentage rents |
|
|
0.3 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
0.0 |
|
|
|
0.3 |
|
Expense recoveries |
|
|
5.0 |
|
|
|
4.8 |
|
|
|
5.0 |
|
|
|
5.1 |
|
|
|
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mall tenant occupancy costs |
|
|
14.9 |
% |
|
|
13.0 |
% |
|
|
15.6 |
% |
|
|
15.7 |
% |
|
|
16.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes The Pier Shops. |
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 the years ending
2009, 2008, and 2007, or are expected to affect operations in the future.
Impairment Charges
In 2009, we concluded that the book values of the investments in The Pier Shops and Regency
Square were impaired, which resulted in a non-cash charge of $166.7 million (or $160.8 million at
our share). In 2008, we recorded impairment charges of $126.3 million related to our Oyster Bay
project and our Sarasota project.
The Pier Shops at Caesars
The Pier Shops, located in Atlantic City, New Jersey, began opening in phases in June 2006.
Gordon Group Holdings LLC (Gordon) developed the center, and in January 2007, we assumed full
management and leasing responsibility for the center. In April 2007, we increased our ownership in
The Pier Shops to a 77.5% controlling interest. The remaining 22.5% interest continues to be held
by an affiliate of Gordon. We began consolidating The Pier Shops as of the April 2007 purchase
date. At closing, we made a $24.5 million equity investment in the center, bringing our total
equity investment to $28.5 million at that date. As of December 31, 2009, we had provided
$10.6 million of additional capital.
In September 2009, our Board of Directors concluded that given long term prospects for the
property, it was in our best interest to discontinue financial support of The Pier Shops. Cash
flows generated from the center are insufficient to cover debt service on the $135 million
non-recourse mortgage loan. As a result, the book value of The Pier Shops was written down by
$107.7 million (our share of which is $101.8 million) to a fair value of approximately $52 million.
The loan is now in default. Under the terms of the agreement, interest accrues at the original
stated rate of 6.01% plus a 4% default rate. Although we are no longer funding any cash shortfalls,
we continue to record the operations of the center, and interest on the loan, in our results until
title for the center has been transferred and our obligation for the loan is extinguished. While
the timing is uncertain as the foreclosure process is not in our control, we are hoping to transfer
ownership in the second quarter of 2010. We expect the non-cash impact of owning The Pier Shops
(including default interest) to result in an incremental earnings charge, excluding depreciation
and amortization, of approximately ($0.9) million per month in 2010. Including the impact of
depreciation and amortization, the impact on earnings is expected to be ($1.3) million per month.
Regency Square
In September 2009, we concluded that the book value of the investment in Regency Square was also impaired based on current estimates of future cash flows for the property, which will be
negatively impacted by necessary capital expenditures and declining net operating income. As a
result, the book value of the property was written down by $59 million to a fair value of
approximately $29 million. At the current level of cash flows, Regency Square intends to continue
to service its $74.1 million non-recourse mortgage loan.
The Pier Shops and Regency Square generate less than two percent of our net operating income.
See Note 4 Properties to our consolidated financial statements for additional information.
30
Oyster Bay
In January 2009, the Appellate Division of the Supreme Court of the State of New York, Second
Department, reversed the Supreme Courts order directing the Town Board of the Town of Oyster Bay
to issue a special use permit for the construction of The Mall at Oyster Bay. The court also held
that the Town Boards request for a supplemental environmental impact statement was proper. We
determined in February 2009 that we would recognize in the fourth quarter of 2008 a charge to
income of $117.9 million relating to the Oyster Bay project, including $4.6 million in costs, which
were paid in 2009, associated with obligations under existing contracts related to the project.
This determination was reached after an overall assessment of the probability of the development of
the mall as designed and a review of our previously capitalized project costs. The charge included
the costs of previous development activities as well as holding and other costs that management
believes will likely not benefit the development if and when we obtain the rights to build the
center. In June 2009, the Court of Appeals of the State of New York denied our motion for leave to
appeal the January 2009 decision of the Appellate Division of the Supreme Court of the State of New
York. We have been expensing costs relating to Oyster Bay since the fourth quarter of 2008 and will
continue to do so until it is probable that we will be able to successfully move forward with a
project. Our remaining capitalized investment in the project as of December 31, 2009 is
$39.8 million, consisting of land and site improvements. If we are ultimately unsuccessful in
obtaining the right to build the center, it is uncertain whether we would be able to recover the
full amount of this capitalized investment through alternate uses of the land.
Sarasota
In May 2008, we entered into agreements to jointly develop University Town Center, a regional
mall in Sarasota, Florida. Under the agreements, we would own a noncontrolling 25% interest in the
project. Due to the economic and retail environment, we announced in December 2008 that the project
had been put on hold. Although we continue to believe it should be a very attractive opportunity
longer term, we do not know if or when we will acquire an interest in the land and move forward
with the project. Due to this uncertainty, we recognized an $8.3 million charge to income in the
fourth quarter of 2008. The charge to income represented our share of total project costs. We have
no asset remaining and will continue to expense any additional costs related to the monitoring of
the project until a definitive agreement is reached by the parties on going forward with the
project.
Litigation Charges
In the fourth quarter of 2009, we recognized litigation charges relating to the settlement of
two lawsuits related to Westfarms, our center in West Hartford, Connecticut. The settlements
include $34 million settled in December 2009 and $4.5 million settled in January 2010, of which our
share of the total settlements was $30.4 million (see Note 15 Commitments and Contingencies -
Litigation).
Restructuring
In the first half of 2009, in response to the decreased level of active projects due to the
downturn in the economy, we reduced our workforce by about 40 positions, primarily in areas that
directly or indirectly affect our development initiatives in the U.S. and Asia. The restructuring
charge was $2.5 million, and primarily represents the cost of terminations of personnel.
Center Operations
The impacts of the recession, which negatively impacted our operating statistics in 2009 as
discussed in the previous sections, are expected to continue to affect operations in 2010. We
expect that net operating income (NOI) of our centers, excluding lease cancellation income, could
decrease by 2% to 4% in 2010. The expected NOI decrease is impacted by over 1% related to
recoveries of CAM capital expenditures as we manage our tenants CAM costs to reduce overall
expenses. We also expect rent relief to have a significant negative impact in 2010 as rent relief
contracted in 2009 is fully annualized.
31
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. Lease cancellation revenue is primarily dependent on the overall economy and
performance of particular retailers in specific locations and can vary significantly. 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. During the year ended December 31, 2009, we recognized our approximately $18.7
million and $1.8 million share of the Consolidated Businesses and Unconsolidated Joint Ventures
lease cancellation revenue, respectively. Lease cancellation income over the last five years ranged
from $8 million to this years record high, and is likely to be much lower in 2010 at about $9
million to $11 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
|
|
Consolidated |
|
Unconsolidated |
|
Consolidated |
|
Unconsolidated |
|
Consolidated |
|
Unconsolidated |
|
|
Businesses |
|
Joint Ventures |
|
Businesses |
|
Joint Ventures |
|
Businesses |
|
Joint Ventures |
|
|
|
|
|
|
(Operating Partnerships share in millions of dollars) |
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center related revenues |
|
|
22.5 |
|
|
|
2.7 |
|
|
|
26.9 |
|
|
|
3.0 |
|
|
|
23.1 |
|
|
|
2.5 |
|
Lease cancellation revenue |
|
|
18.7 |
|
|
|
1.8 |
|
|
|
9.7 |
|
|
|
2.5 |
|
|
|
10.9 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41.2 |
|
|
|
4.5 |
|
|
|
36.6 |
|
|
|
5.5 |
|
|
|
33.9 |
|
|
|
4.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on land sales and other
nonoperating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sales of peripheral land |
|
|
|
|
|
|
|
|
|
|
2.8 |
|
|
|
|
|
|
|
0.7 |
|
|
|
|
|
Interest income |
|
|
0.6 |
|
|
|
|
|
|
|
1.5 |
|
|
|
0.4 |
|
|
|
2.2 |
|
|
|
0.8 |
|
Gains on discontinued hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
|
|
4.3 |
|
|
|
0.4 |
|
|
|
3.1 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts in this table may not add due to rounding. |
Taubman Asia
In 2008, Taubman Asia entered into agreements to acquire a 25% interest in The Mall at Studio
City, the retail component of Macao Studio City, a major mixed-use project on the Cotai Strip in
Macao, China. In August 2009, our Macao agreements terminated and our $54 million initial cash
payment was returned to us because the financing for the project was not completed. In the fourth
quarter of 2009 we recognized approximately $7 million of development fees collected for services
performed primarily prior to 2009 on the Macao project.
In 2007, we entered into an agreement to provide development services for a 1.1 million square
foot retail and entertainment complex called Riverstone in Songdo International Business District
(Songdo), Incheon, South Korea. We also finalized an agreement to provide management and leasing
services for Riverstone. The shopping center will be anchored by Lotte Department Store, Tesco
Homeplus, and a nine-screen MegaBox multiplex. Construction has been completed on the mall
infrastructure and parking, including the subway station that will connect the mall to Seoul.
However, the project financing of Riverstone remains unresolved due to market conditions and the
overall complexity and scale of the broader Songdo financings. Once financing is complete, full
construction will begin and we will make a determination about an investment in this center.
Debt Transactions
We completed a series of debt financings in 2008 and 2007 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Loan |
|
Stated |
|
|
|
|
Date |
|
Balance/Facility |
|
Interest Rate |
|
Maturity Date (1) |
|
|
(in millions of dollars) |
|
|
Fair Oaks |
|
April 2008 |
|
250 |
|
LIBOR+1.40%(2) |
|
April 2011 |
International Plaza |
|
January 2008 |
|
325 |
|
LIBOR+1.15%(3) |
|
January 2011 |
TRG revolving credit facility (4) |
|
November 2007 |
|
550 |
|
LIBOR+0.70% |
|
February 2011 |
The Pier Shops at Caesars |
|
April 2007 |
|
135 |
|
6.01% |
|
May 2017 |
|
|
|
(1) |
|
Excludes any options to extend the maturities (see the footnotes to our financial
statements regarding extension options). |
|
(2) |
|
The loan is swapped at 4.22% for the initial three-year term of the loan agreement. |
|
(3) |
|
The loan is swapped at 5.01% for the initial three-year term of the loan agreement. |
|
(4) |
|
In November 2007, we increased the borrowing limit on the TRG revolving credit facility by
$200 million and extended the maturity date by two years, with a one-year extension option. |
32
Borrowings under TRGs revolving credit facility are primary obligations of the entities
owning Dolphin, Fairlane, and Twelve Oaks, which are collateral for the line of credit. The
Operating Partnership and the entities owning Fairlane and Twelve Oaks are guarantors under the
credit agreement.
Partnership Unit Redemptions and Common Share Repurchases
We also completed a series of partnership unit redemptions and common share repurchases in
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
|
|
|
# of shares |
|
Amount |
|
per share |
|
Date |
|
|
(in millions of dollars) |
|
|
|
|
Stock repurchases (1) |
|
|
987,180 |
|
|
|
50.0 |
|
|
$ |
50.65 |
|
|
August 2007 |
Stock repurchases (1) |
|
|
923,364 |
|
|
|
50.0 |
|
|
|
54.15 |
|
|
May - June 2007 |
|
|
|
(1) |
|
For each common share repurchased, a unit of TRG partnership interest is similarly
redeemed. See Note 14 Common and Preferred Stock and Equity of TRG to our consolidated
financial statements regarding the repurchase of our common stock. |
Presentation of Operating Results
The following table contains the operating results of our Consolidated Businesses and the
Unconsolidated Joint Ventures. On January 1, 2009, we adopted the new requirements of ASC Topic 810
Consolidation as it relates to noncontrolling interests (formerly Statement of Financial
Accounting Standards (SFAS) No. 160 Noncontrolling Interests in Consolidated Financial Statements
- an amendment of Accounting Research Bulletin (ARB) No. 51.) The new requirements of ASC 810
amended prior accounting and reporting standards for the noncontrolling interest (previously
referred to as a minority interest) in a subsidiary. Consequently, the noncontrolling interests in
the Operating Partnership and certain consolidated joint ventures no longer need to be carried at
zero balances in our balance sheet. As a result, the income allocated to these noncontrolling
interests is no longer required to be equal, at a minimum, to their share of distributions, which
results in a material increase to our net income. Prior to 2009, under the previous accounting for
noncontrolling interests, the income allocated to the Operating Partnership noncontrolling
unitholders was equal to their share of distributions as long as the net equity of the Operating
Partnership was less than zero. Similarly, the income allocated to the noncontrolling partners in
consolidated joint ventures with net equity balances less than zero was equal to their share of
operating distributions. The net equity balances of the Operating Partnership and certain of the
consolidated joint ventures were less than zero because of accumulated distributions in excess of
net income and not as a result of operating losses. Distributions to partners were usually greater
than net income because net income includes non-cash charges for depreciation and amortization. Our
average ownership percentage of the Operating Partnership was 67% in 2009 and 2008, and 66% in
2007.
Upon our adoption of the new accounting for noncontrolling interests, net income was
reclassified to include the amounts attributable to the noncontrolling interests. However, as the
new accounting is applicable beginning with the January 1, 2009 adoption date, the interests of
these noncontrolling interests for prior periods have not been remeasured.
The results of The Pier Shops are presented within the Consolidated Businesses for periods
beginning April 13, 2007, as a result of our acquisition of a controlling interest in the center.
Prior to the acquisition date, the results of The Pier Shops are included within the Unconsolidated
Joint Ventures.
Use of Non-GAAP Measures
We use net operating income (NOI) as an alternative measure to evaluate the operating
performance of centers, both on individual and stabilized portfolio bases. We define NOI as
property-level operating revenues (includes rental income excluding straightline adjustments of
minimum rent) less maintenance, taxes, utilities, ground rent, and other property operating
expenses. Since NOI excludes general and administrative expenses, pre-development charges, interest
income and expense, depreciation and amortization, impairment charges, restructuring charges, and
gains from land and property dispositions, it provides a performance measure that, when compared
period over period, reflects the revenues and expenses most directly associated with owning and
operating rental properties, as well as the impact on their operations from trends in tenant sales,
occupancy and rental rates, and operating costs.
33
The operating results in the following table include the supplemental earnings measures of
Beneficial Interest in EBITDA and Funds from Operations (FFO). Beneficial Interest in EBITDA
represents our share of the earnings before interest, income taxes, and depreciation and
amortization of our consolidated and unconsolidated businesses. We believe Beneficial Interest in
EBITDA provides a useful indicator of operating performance, as it is customary in the real estate
and shopping center business to evaluate the performance of properties on a basis unaffected by
capital structure.
The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income
(loss) (computed in accordance with Generally Accepted Accounting Principles (GAAP)), excluding
gains (or losses) from extraordinary items and sales of properties, plus real estate related
depreciation and after adjustments for unconsolidated partnerships and joint ventures. We believe
that FFO is a useful supplemental measure of operating performance for REITs. Historical cost
accounting for real estate assets implicitly assumes that the value of real estate assets
diminishes predictably over time. Since real estate values instead have historically risen or
fallen with market conditions, we and most industry investors and analysts have considered
presentations of operating results that exclude historical cost depreciation to be useful in
evaluating the operating performance of REITs. We primarily use FFO in measuring performance and in
formulating corporate goals and compensation.
Our presentations of Beneficial Interest in EBITDA and FFO 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 (loss) or as an
indicator of our operating performance. Additionally, neither represents cash flows from operating,
investing or financing activities as defined by GAAP. Reconciliations of Net Income (Loss)
Allocable to Common Shareowners to Funds from Operations and Net Income (Loss) to Beneficial
Interest in EBITDA are presented following the Comparison of 2008 to 2007.
34
Comparison of 2009 to 2008
The following table sets forth operating results for 2009 and 2008, showing the results of the
Consolidated Businesses and Unconsolidated Joint Ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
|
|
|
|
|
UNCONSOLIDATED |
|
|
|
|
|
UNCONSOLIDATED |
|
|
CONSOLIDATED |
|
JOINT VENTURES |
|
CONSOLIDATED |
|
JOINT VENTURES |
|
|
BUSINESSES |
|
AT 100%(1) |
|
BUSINESSES |
|
AT 100%(1) |
|
|
(in millions of dollars) |
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
|
341.9 |
|
|
|
157.1 |
|
|
|
353.2 |
|
|
|
157.1 |
|
Percentage rents |
|
|
10.8 |
|
|
|
5.1 |
|
|
|
13.8 |
|
|
|
6.6 |
|
Expense recoveries |
|
|
246.4 |
|
|
|
101.7 |
|
|
|
248.6 |
|
|
|
98.5 |
|
Management, leasing, and development services |
|
|
21.2 |
|
|
|
|
|
|
|
15.9 |
|
|
|
|
|
Other |
|
|
45.8 |
|
|
|
8.7 |
|
|
|
40.1 |
|
|
|
9.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
666.1 |
|
|
|
272.5 |
|
|
|
671.5 |
|
|
|
271.8 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance, taxes, and utilities |
|
|
189.1 |
|
|
|
68.1 |
|
|
|
189.2 |
|
|
|
66.8 |
|
Other operating |
|
|
67.2 |
|
|
|
24.0 |
|
|
|
79.6 |
|
|
|
22.5 |
|
Management, leasing, and development services |
|
|
7.9 |
|
|
|
|
|
|
|
8.7 |
|
|
|
|
|
General and administrative |
|
|
27.9 |
|
|
|
|
|
|
|
28.1 |
|
|
|
|
|
Litigation charges |
|
|
|
|
|
|
38.5 |
|
|
|
|
|
|
|
|
|
Impairment charges |
|
|
166.7 |
|
|
|
|
|
|
|
117.9 |
|
|
|
|
|
Restructuring charge |
|
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
145.7 |
|
|
|
64.4 |
|
|
|
147.4 |
|
|
|
65.0 |
|
Depreciation and amortization (2) |
|
|
147.3 |
|
|
|
39.3 |
|
|
|
147.4 |
|
|
|
40.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
754.1 |
|
|
|
234.3 |
|
|
|
718.4 |
|
|
|
195.0 |
|
Gains on land sales and other nonoperating income |
|
|
0.7 |
|
|
|
0.1 |
|
|
|
4.6 |
|
|
|
0.7 |
|
Impairment loss on marketable securities |
|
|
(1.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38.3 |
|
|
|
|
|
|
|
77.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax expense and equity in
income of Unconsolidated Joint Ventures |
|
|
(89.0 |
) |
|
|
|
|
|
|
(42.3 |
) |
|
|
|
|
Income tax expense |
|
|
(1.7 |
) |
|
|
|
|
|
|
(1.1 |
) |
|
|
|
|
Equity in income of Unconsolidated Joint Ventures (2) |
|
|
11.5 |
|
|
|
|
|
|
|
35.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(79.2 |
) |
|
|
|
|
|
|
(8.1 |
) |
|
|
|
|
Net (income) loss attributable to noncontrolling
interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling share of income of consolidated
joint ventures |
|
|
(3.1 |
) |
|
|
|
|
|
|
(7.4 |
) |
|
|
|
|
Distributions in excess of noncontrolling share of
income of consolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
(8.6 |
) |
|
|
|
|
TRG Series F preferred distributions |
|
|
(2.5 |
) |
|
|
|
|
|
|
(2.5 |
) |
|
|
|
|
Noncontrolling share of loss of TRG |
|
|
31.2 |
|
|
|
|
|
|
|
11.3 |
|
|
|
|
|
Distributions in excess of noncontrolling share of
loss of TRG |
|
|
|
|
|
|
|
|
|
|
(55.4 |
) |
|
|
|
|
Distributions to participating securities of TRG |
|
|
(1.6 |
) |
|
|
|
|
|
|
(1.4 |
) |
|
|
|
|
Preferred stock dividends |
|
|
(14.6 |
) |
|
|
|
|
|
|
(14.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to Taubman Centers, Inc.
common shareowners |
|
|
(69.7 |
) |
|
|
|
|
|
|
(86.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA 100% |
|
|
204.0 |
|
|
|
142.0 |
|
|
|
244.2 |
|
|
|
183.2 |
|
EBITDA outside partners share |
|
|
(35.3 |
) |
|
|
(74.2 |
) |
|
|
(40.0 |
) |
|
|
(82.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial interest in EBITDA |
|
|
168.7 |
|
|
|
67.8 |
|
|
|
204.2 |
|
|
|
101.1 |
|
Beneficial interest expense |
|
|
(125.8 |
) |
|
|
(33.4 |
) |
|
|
(127.8 |
) |
|
|
(33.8 |
) |
Beneficial income tax expense |
|
|
(1.7 |
) |
|
|
|
|
|
|
(1.1 |
) |
|
|
|
|
Non-real estate depreciation |
|
|
(3.4 |
) |
|
|
|
|
|
|
(3.3 |
) |
|
|
|
|
Preferred dividends and distributions |
|
|
(17.1 |
) |
|
|
|
|
|
|
(17.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from Operations contribution |
|
|
20.6 |
|
|
|
34.4 |
|
|
|
54.9 |
|
|
|
67.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
With the exception of the Supplemental Information, amounts include 100% of the
Unconsolidated Joint Ventures. Amounts are net of intercompany transactions. The
Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their
performance as a whole, without regard to our ownership interest. In our consolidated
financial statements, we account for investments in the Unconsolidated Joint Ventures under
the equity method. |
|
(2) |
|
Amortization of our additional basis in the Operating Partnership included in
depreciation and amortization was $4.9 million in both 2009 and 2008. Also, amortization of
our additional basis included in equity in income of Unconsolidated Joint Ventures was
$1.9 million in both 2009 and 2008. |
|
(3) |
|
Amounts in this table may not add due to rounding. |
35
Consolidated Businesses
Total revenues for the year ended December 31, 2009 were $666.1 million, a $5.4 million or
0.8% decrease over 2008. Minimum rents decreased by $11.3 million, due to decreases in rent per
square foot, primarily as a result of rent relief, and decreased average occupancy. Percentage
rents decreased due to lower tenant sales. Expense recoveries decreased primarily due to decreases
in occupancy and the lower level of recoveries from in-place tenants. Management, leasing, and
development revenue increased primarily due to the collection of development fees on the Macao
project. Other income increased primarily due to an increase in lease cancellation revenue, which
was partially offset by decreases in parking-related revenue and sponsorship income.
Total expenses were $754.1 million, a $35.7 million or 5.0% increase from 2008. Other
operating expense decreased due to a reduction in pre-development costs, lower costs related to
marketing and promotion, and decreased bad debt expense. In 2009, we incurred $12.3 million on
pre-development activities and we expect to incur about $15 million in 2010. General and
administrative expense was relatively flat with 2008. In 2010, we expect general and administrative
expense to be comparable to 2009. In 2009, we recognized a $2.5 million restructuring charge (see
Results of Operations Restructuring). Also in 2009, we recognized impairment charges of
$166.7 million on The Pier Shops and Regency Square. In 2008, we recognized a $117.9 million
impairment charge on our Oyster Bay project (see Results of Operations Impairment Charges).
Interest expense decreased due to the lower rates on floating rate debt and lower outstanding debt
as a result of the return of the Macao deposit, offset partially by the termination of interest
capitalization on the Oyster Bay project in the fourth quarter of 2008.
Gains on land sales and other nonoperating income decreased by $3.9 million in 2009. There
were no gains on land sales in 2009, compared to $2.8 million of gains in 2008. In 2010, gains on
land sales are expected to be approximately $1 million to $2 million. Interest income declined in
2009 due to overall lower average interest rates.
Unconsolidated Joint Ventures
Total revenues for the year ended December 31, 2009 were $272.5 million, a $0.7 million or
0.3% increase from 2008. Percentage rents decreased primarily due to lower tenant sales. Expense
recoveries increased primarily due to increases in property taxes and electricity recoveries,
increased revenue from marketing and promotion services, and adjustments in 2008 to prior estimated
recoveries at certain centers.
Total expenses increased by $39.3 million or 20.2%, to $234.3 million for the year ended
December 31, 2009, primarily due to litigation charges of $38.5 million recognized in 2009 (see
Results of Operations Litigation Charges). Maintenance, taxes, and utilities expense increased
due to higher property taxes, partially offset by decreased electricity expense. Other operating
expense increased primarily due to professional fees. Depreciation expense decreased primarily due
to changes in depreciable lives of tenant allowances in connection with early terminations.
As a result of the foregoing, income of the Unconsolidated Joint Ventures decreased by
$39.2 million to $38.3 million. Our equity in income of the Unconsolidated Joint Ventures was
$11.5 million, a $23.9 million decrease from 2008. In 2008, we recognized an impairment charge of
$8.3 million related to our investment in University Town Center (see Results of Operations -
Impairment Charges). The charge to income represented our share of our Sarasota joint venture
project costs.
Net Income (Loss)
Net loss increased by $71.1 million to a $79.2 million loss in 2009, due to the increased
impairment charges and the litigation charges. After allocation of income to noncontrolling and
preferred interests, the net loss allocable to common shareowners for 2009 was a loss of
$69.7 million compared to a loss of $86.7 million in 2008.
36
Comparison of 2008 to 2007
The following table sets forth operating results for 2008 and 2007, showing the results of the
Consolidated Businesses and Unconsolidated Joint Ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2007 |
|
|
|
|
|
|
UNCONSOLIDATED |
|
|
|
|
|
UNCONSOLIDATED |
|
|
CONSOLIDATED |
|
JOINT VENTURES |
|
CONSOLIDATED |
|
JOINT VENTURES |
|
|
BUSINESSES |
|
AT 100%(1) |
|
BUSINESSES |
|
AT 100%(1) |
|
|
(in millions of dollars) |
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
|
353.2 |
|
|
|
157.1 |
|
|
|
329.4 |
|
|
|
150.9 |
|
Percentage rents |
|
|
13.8 |
|
|
|
6.6 |
|
|
|
14.8 |
|
|
|
8.4 |
|
Expense recoveries |
|
|
248.6 |
|
|
|
98.5 |
|
|
|
228.4 |
|
|
|
94.9 |
|
Management, leasing and development services |
|
|
15.9 |
|
|
|
|
|
|
|
16.5 |
|
|
|
|
|
Other |
|
|
40.1 |
|
|
|
9.6 |
|
|
|
37.7 |
|
|
|
8.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
671.5 |
|
|
|
271.8 |
|
|
|
626.8 |
|
|
|
262.6 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance, taxes, and utilities |
|
|
189.2 |
|
|
|
66.8 |
|
|
|
175.9 |
|
|
|
66.6 |
|
Other operating |
|
|
79.6 |
|
|
|
22.5 |
|
|
|
69.6 |
|
|
|
20.7 |
|
Management, leasing and development services |
|
|
8.7 |
|
|
|
|
|
|
|
9.1 |
|
|
|
|
|
General and administrative |
|
|
28.1 |
|
|
|
|
|
|
|
30.4 |
|
|
|
|
|
Impairment charge |
|
|
117.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
147.4 |
|
|
|
65.0 |
|
|
|
131.7 |
|
|
|
66.2 |
|
Depreciation and amortization (2) |
|
|
147.4 |
|
|
|
40.7 |
|
|
|
137.9 |
|
|
|
39.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
718.4 |
|
|
|
195.0 |
|
|
|
554.7 |
|
|
|
193.0 |
|
Gains on land sales and other nonoperating income |
|
|
4.6 |
|
|
|
0.7 |
|
|
|
3.6 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77.5 |
|
|
|
|
|
|
|
71.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax expense and equity in
income of Unconsolidated Joint Ventures |
|
|
(42.3 |
) |
|
|
|
|
|
|
75.7 |
|
|
|
|
|
Income tax expense |
|
|
(1.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of Unconsolidated Joint Ventures (2) |
|
|
35.4 |
|
|
|
|
|
|
|
40.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(8.1 |
) |
|
|
|
|
|
|
116.2 |
|
|
|
|
|
Net (income) loss attributable to noncontrolling
interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling share of income of consolidated joint
ventures |
|
|
(7.4 |
) |
|
|
|
|
|
|
(5.0 |
) |
|
|
|
|
Distributions in excess of noncontrolling share of
income of consolidated joint ventures |
|
|
(8.6 |
) |
|
|
|
|
|
|
(3.0 |
) |
|
|
|
|
TRG Series F preferred distributions |
|
|
(2.5 |
) |
|
|
|
|
|
|
(2.5 |
) |
|
|
|
|
Noncontrolling share of (income) loss of TRG |
|
|
11.3 |
|
|
|
|
|
|
|
(33.2 |
) |
|
|
|
|
Distributions in excess of noncontrolling share of
income (loss) of TRG |
|
|
(55.4 |
) |
|
|
|
|
|
|
(8.1 |
) |
|
|
|
|
Distributions to participating securities of TRG |
|
|
(1.4 |
) |
|
|
|
|
|
|
(1.3 |
) |
|
|
|
|
Preferred stock dividends |
|
|
(14.6 |
) |
|
|
|
|
|
|
(14.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Taubman Centers, Inc.
common shareowners |
|
|
(86.7 |
) |
|
|
|
|
|
|
48.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA 100% |
|
|
244.2 |
|
|
|
183.2 |
|
|
|
345.3 |
|
|
|
176.8 |
|
EBITDA outside partners share |
|
|
(40.0 |
) |
|
|
(82.2 |
) |
|
|
(36.6 |
) |
|
|
(80.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial interest in EBITDA |
|
|
204.2 |
|
|
|
101.1 |
|
|
|
308.7 |
|
|
|
96.8 |
|
Beneficial interest expense |
|
|
(127.8 |
) |
|
|
(33.8 |
) |
|
|
(117.4 |
) |
|
|
(33.3 |
) |
Beneficial income tax expense |
|
|
(1.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Non-real estate depreciation |
|
|
(3.3 |
) |
|
|
|
|
|
|
(2.7 |
) |
|
|
|
|
Preferred dividends and distributions |
|
|
(17.1 |
) |
|
|
|
|
|
|
(17.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from Operations contribution |
|
|
54.9 |
|
|
|
67.3 |
|
|
|
171.6 |
|
|
|
63.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
With the exception of the Supplemental Information, amounts include 100% of the
Unconsolidated Joint Ventures. Amounts are net of intercompany transactions. The
Unconsolidated Joint Ventures are presented at 100% in order to allow for measurement of their
performance as a whole, without regard to our ownership interest. In our consolidated
financial statements, we account for investments in the Unconsolidated Joint Ventures under
the equity method. |
|
(2) |
|
Amortization of our additional basis in the Operating Partnership included in depreciation
and amortization was $4.9 million in both 2008 and 2007. Also, amortization of our additional
basis included in equity in income of Unconsolidated Joint Ventures was $1.9 million in both
2008 and 2007. |
|
(3) |
|
Amounts in this table may not add due to rounding. |
37
Consolidated Businesses
Total revenues for the year ended December 31, 2008 were $671.5 million, a $44.7 million or
7.1% increase over 2007. Minimum rents increased $23.8 million, primarily due to the October 2007
opening of Partridge Creek, the September 2007 expansion at Twelve Oaks, and The Pier Shops, which
we began consolidating in April 2007 upon the acquisition of a controlling interest in the center.
Minimum rents also increased due to tenant rollovers and increases in average occupancy. Percentage
rents decreased due to lower tenant sales. Expense recoveries increased primarily due to Partridge
Creek, Twelve Oaks, and The Pier Shops, as well as increased CAM capital expenditures and
recoverable costs at certain centers. Management, leasing, and development revenue decreased
primarily due to lower revenue on the Songdo development contract, which in the first quarter of
2007 included revenue related to 2006 services, and was partially offset by increased revenue from
our Salt Lake City project. Other income increased primarily due to increases in parking-related
and sponsorship revenue, which were partially offset by a decrease in lease cancellation revenue.
Total expenses were $718.4 million, a $163.7 million or 29.5% increase from 2007. Maintenance,
taxes, and utilities expense increased primarily due to Partridge Creek, The Pier Shops, and Twelve
Oaks, as well as increases in maintenance costs and property taxes at certain centers. Other
operating expense increased due to increased pre-development costs and bad debt expense, The Pier
Shops, and Partridge Creek. General and administrative expense decreased primarily due to a
significant decrease in bonus expense. In addition to a significant reduction in annual bonus plan
expense due to financial performance, our deferred long-term compensation grants were marked to
market quarterly based on our stock price. In 2008, we recognized a $117.9 million impairment
charge on our Oyster Bay project (see Results of Operations Impairment Charges). Interest
expense increased primarily due to the January 2008 refinancing at International Plaza, Partridge
Creek, and The Pier Shops. Interest expense also increased due to the termination of interest
capitalization on our Oyster Bay project in the fourth quarter of 2008, the repurchase of common
stock in 2007, the escrowed Macao payment, and the expansion at Twelve Oaks. These increases were
partially offset by decreases in floating interest rates. Depreciation expense increased due to
Partridge Creek, The Pier Shops, and Twelve Oaks.
Gains on land sales and other nonoperating income increased primarily due to $2.8 million of
gains on land sales and land-related rights in 2008, compared to $0.7 million of gains in 2007.
This increase was partially offset by decreased interest income.
Income tax expense in 2008 consists of taxes related to the Michigan Business Tax Act, which
became effective January 1, 2008 (see Results of Operations Application of Critical Accounting
Policies Valuation of Deferred Tax Assets). The new tax replaced the Michigan Single Business
Tax, which was previously classified within Other Operating expense on our Consolidated Statement
of Operations.
38
Unconsolidated Joint Ventures
Total revenues for the year ended December 31, 2008 were $271.8 million, a $9.2 million or
3.5% increase from 2007. Minimum rents increased by $6.2 million, primarily due to tenant
rollovers, the November 2007 expansion at Stamford, increased income from specialty retailers, and
prior year adjustments at Arizona Mills in 2007. These increases were partially offset by the
reduction due to the consolidation of The Pier Shops and decreases due to frictional vacancy on
spaces that opened in the second half of the year. Percentage rents decreased due to lower tenant
sales. Expense recoveries increased primarily due to increased maintenance costs at certain
centers, Stamford, and an increase in revenue from marketing and promotion services, which were
partially offset by The Pier Shops and decreases due to adjustments in 2007 to prior estimated
recoveries at certain centers. Other income increased primarily due to Stamford and increases in
lease cancellation revenue.
Total expenses increased by $2.0 million or 1.0%, to $195.0 million for the year ended
December 31, 2008. Maintenance, taxes, and utilities expense remained relatively flat, with
increases due to Stamford and increased maintenance costs at certain centers being offset by The
Pier Shops. Other operating expense increased primarily due to Stamford and increased professional
fees, which were partially offset by The Pier Shops. Interest expense decreased due to The Pier
Shops, which was partially offset by the refinancing at Fair Oaks. Depreciation expense increased
due to the expansion at Stamford and higher depreciation on CAM assets, which were partially offset
by The Pier Shops.
As a result of the foregoing, income of the Unconsolidated Joint Ventures increased by
$6.3 million to $77.5 million. We had an effective 6% interest in The Pier Shops based on relative
equity contributions, prior to our acquisition of a controlling interest in April 2007. Our equity
in income of the Unconsolidated Joint Ventures was $35.4 million, a $5.1 million decrease from
2007. In 2008, we recognized an impairment charge of $8.3 million related to our investment in
University Town Center (see Results of Operations Impairment Charges). The charge to income
represents our share of our Sarasota joint venture project costs.
Net Income (Loss)
Net income (loss) decreased by $124.3 million to a $8.1 million loss for 2008, due to the
impairment charges. After allocation of income to noncontrolling and preferred interests, the net
income (loss) allocable to common shareowners for 2008 was a loss of $86.7 million compared to
$48.5 million of income in 2007.
39
Application of Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the financial statements and disclosures. Some of these estimates and assumptions require
application of difficult, subjective, and/or complex judgment, often about the effect of matters
that are inherently uncertain and that may change in subsequent periods. We are required to make
such estimates and assumptions when applying the following accounting policies.
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, 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 credit. 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.
In 2009, we recognized impairment charges of $107.7 million and $59.0 million related to The
Pier Shops and Regency Square, respectively. In 2008, we recognized impairment charges of
$117.9 million and $8.3 million related to our Oyster Bay and Sarasota projects, respectively (see
Results of Operations Impairment Charges). There were no impairment charges recognized in 2007.
As of December 31, 2009, the consolidated net book value of our properties was $2.4 billion,
representing over 90% of our consolidated assets. We also have varying ownership percentages in the
properties of Unconsolidated Joint Ventures with a total combined net book value of $0.7 billion.
These amounts include certain development costs that are described in the policy that follows.
Capitalization of Development Costs
In developing shopping centers, we typically obtain land or land options, zoning and
regulatory approvals, anchor commitments, and financing arrangements during a process that may take
several years and during which we may incur significant costs. We capitalize all development costs
once it is considered probable that a project will reach a successful conclusion. Prior to this
time, we expense all costs relating to a potential development, including payroll, and include
these costs in Funds from Operations (see Presentation of Operating Results).
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, in that period.
Many factors in the development of a shopping center are beyond our control, including
(1) changes in the national, regional, and/or local economic climates, (2) competition from other
shopping centers, stores, clubs, mailings, and the internet, (3) availability and cost of
financing, (4) changes in regulations, laws, and zoning, and (5) decisions made by third parties,
including anchors. These factors could cause our assessment of the probability of a development
project reaching a successful conclusion to change. If a project subsequently was considered less
than probable of reaching a successful conclusion, a charge against operations for previously
capitalized development costs would occur.
40
Our $64 million balance of development pre-construction costs as of December 31, 2009 consists
primarily of $40 million of costs relating to our Oyster Bay project. The balance also includes
approximately $24 million of land and improvement costs for a parcel in North Atlanta, Georgia,
which was acquired for future development. A portion of this land is expected to be sold for
various uses. See Impairment Charges regarding the status of the Oyster Bay project.
Valuation of Accounts and Notes Receivable
Rents and expense recoveries from tenants are our principal source of income; they represent
approximately 90% of our revenues. In generating this income, we will routinely have accounts
receivable due from tenants. The collectibility of tenant receivables is affected by bankruptcies,
changes in the economy, and the ability of the tenants to perform under the terms of their lease
agreements. While we estimate potentially uncollectible receivables and provide for them through
charges against income, actual experience may differ from those estimates. Also, if a tenant were
not able to perform under the terms of its lease agreement, receivable balances not previously
provided for may be required to be charged against operations. Bad debt expense was less than 1% of
total revenues in 2009, while bankruptcy filings affected 4.1% of tenant leases during the year.
Since 1991, the annual provision for losses on accounts receivable has been less than 2% of annual
revenues.
Notes receivable at December 31, 2009 totaled $9.2 million. Valuation of the recoverability of
notes receivable is dependent on managements estimates of the collectibility of contractual
principal and interest payments, which are inherently judgmental.
Valuation of Deferred Tax Assets
We currently have deferred tax assets, reflecting 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. Our temporary differences primarily relate to deferred
compensation, net operating loss carryforwards and depreciation. We reduce our deferred tax assets
through valuation allowances to the amount where realization is more likely than not assured,
considering all available evidence, including expected future taxable earnings and potential tax
planning strategies. Expected future taxable earnings and the implementation of tax planning
strategies require certain significant judgments and estimates, including those relating to our
management companys profitability, the timing and amounts of gains on land sales, the
profitability of our Asian operations, the profitability of the unitary filing group for the
Michigan Business Tax, and other factors affecting the results of operations of our taxable REIT
subsidiaries. Changes in any of these factors could cause our estimates of the realization of
deferred tax assets to change materially. In July 2007, the State of Michigan signed into law the
Michigan Business Tax Act, replacing the Michigan single business tax with a business income tax
and modified gross receipts tax. These new taxes became effective on January 1, 2008, and are
subject to the accounting requirements for income taxes. As of December 31, 2009, we had a net
federal, state and foreign deferred tax asset of $7.6 million, after a valuation allowance of
$9.1 million.
Valuations for Acquired Property and Intangibles
Upon acquisition of an investment property, including that of an additional interest in an
asset already partially owned, we make an assessment of the valuation and composition of assets and
liabilities acquired. These assessments consider fair values of the respective assets and
liabilities and are determined based on estimated future cash flows using appropriate discount and
capitalization rates and other commonly accepted valuation techniques. The estimated future cash
flows that are used for this analysis reflect the historical operations of the property, known
trends and changes expected in current market and economic conditions which would impact the
propertys operations, and our plans for such property. These estimates of cash flows and
valuations are particularly important for the recording of the acquisition at fair value, and
allocation of purchase price between land, building and improvements, and other identifiable
intangibles.
41
New Accounting Pronouncements
In June 2009, the FASB made changes to ASC Topic 810 Consolidation (ASC 810). These changes
eliminate certain scope exceptions previously permitted, provide additional guidance for
determining whether an entity is a variable interest entity, and require companies to more
frequently reassess whether they must consolidate variable interest entities. The changes also
replace the previously required quantitative approach to determining the primary beneficiary of a
variable interest entity with a requirement for an enterprise to perform a qualitative analysis to
determine whether the enterprises variable interest or interests give it a controlling financial
interest in a variable interest entity. Changes are effective as of the beginning of the first
annual reporting period that begins after November 15, 2009, for interim periods within that first
annual reporting period, and for interim and annual reporting periods thereafter. Earlier
application is prohibited. We anticipate the Statement will not have an effect on our results of
operations or financial position, as we do not currently have any variable interest or interests
that give us a controlling financial interest in a variable interest entity in accordance with ASC
810.
In September 2009, the FASB ratified the EITFs consensus on Multiple-Deliverable Revenue
Arrangements, contained in Accounting Standards Update No. 2009-13. This consensus amends previous
accounting guidance on separating consideration in multiple-deliverable arrangements. This
consensus eliminates the residual method of allocation in previous guidance and requires that
arrangement consideration be allocated at the inception of the arrangement to all deliverables
using the relative selling price. This consensus also establishes a selling price hierarchy based
on available evidence for determining the selling price of a deliverable, (i) first on
vendor-specific objective evidence, (ii) then third party evidence, and (iii) then the estimated
selling price. This consensus also requires that a vendor determine its best estimate of selling
price in a manner that is consistent with that used to determine the price to sell the deliverable
on a standalone basis. This consensus is effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. We are currently evaluating the application of the EITFs consensus on our results of
operations and financial position.
42
Reconciliation of Net Income (Loss) Attributable to Taubman Centers, Inc. Common Shareowners to
Funds from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
|
|
(in millions of dollars, except as indicated) |
Net income (loss) attributable to TCO common shareowners |
|
|
(69.7 |
) |
|
|
(86.7 |
) |
|
|
48.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (less) depreciation and amortization (1): |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated businesses at 100% |
|
|
147.3 |
|
|
|
147.4 |
|
|
|
137.9 |
|
Noncontrolling partners in consolidated joint ventures |
|
|
(12.4 |
) |
|
|
(13.0 |
) |
|
|
(17.3 |
) |
Share of Unconsolidated Joint Ventures |
|
|
22.9 |
|
|
|
23.6 |
|
|
|
23.0 |
|
Non-real estate depreciation |
|
|
(3.4 |
) |
|
|
(3.3 |
) |
|
|
(2.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Add noncontrolling interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling share of income (loss) of TRG |
|
|
(31.2 |
) |
|
|
(11.3 |
) |
|
|
33.2 |
|
Distributions in excess of noncontrolling share of income/loss of TRG |
|
|
|
|
|
|
55.4 |
|
|
|
8.1 |
|
Distributions in excess of noncontrolling share of income of
consolidated joint ventures |
|
|
|
|
|
|
8.6 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add distributions to participating securities of TRG |
|
|
1.6 |
|
|
|
1.4 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from Operations |
|
|
55.0 |
|
|
|
122.2 |
|
|
|
235.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCOs average ownership percentage of TRG |
|
|
66.8 |
% |
|
|
66.6 |
% |
|
|
66.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from Operations attributable to TCO |
|
|
36.8 |
|
|
|
81.3 |
|
|
|
155.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Depreciation and amortization includes $15.5 million, $14.1 million, and $11.3 million of
mall tenant allowance amortization for the years ended December 31, 2009, 2008, and 2007,
respectively. |
|
(2) |
|
Amounts in this table may not add due to rounding. |
Reconciliation of Net Income (Loss) to Beneficial Interest in EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
|
|
(in millions of dollars, except as indicated) |
Net income (loss) |
|
|
(79.2 |
) |
|
|
(8.1 |
) |
|
|
116.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (less) depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated businesses at 100% |
|
|
147.3 |
|
|
|
147.4 |
|
|
|
137.9 |
|
Noncontrolling partners in consolidated joint ventures |
|
|
(12.4 |
) |
|
|
(13.0 |
) |
|
|
(17.3 |
) |
Share of Unconsolidated Joint Ventures |
|
|
22.9 |
|
|
|
23.6 |
|
|
|
23.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (less) interest expense and income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated businesses at 100% |
|
|
145.7 |
|
|
|
147.4 |
|
|
|
131.7 |
|
Noncontrolling partners in consolidated joint ventures |
|
|
(19.8 |
) |
|
|
(19.6 |
) |
|
|
(14.3 |
) |
Share of unconsolidated joint ventures |
|
|
33.4 |
|
|
|
33.8 |
|
|
|
33.3 |
|
Income tax expense |
|
|
1.7 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less noncontrolling share of income of consolidated joint ventures |
|
|
(3.1 |
) |
|
|
(7.4 |
) |
|
|
(5.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial interest in EBITDA |
|
|
236.5 |
|
|
|
305.3 |
|
|
|
405.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCOs average ownership percentage of TRG |
|
|
66.8 |
% |
|
|
66.6 |
% |
|
|
66.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial interest in EBITDA allocable to TCO |
|
|
158.1 |
|
|
|
203.2 |
|
|
|
268.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts in this table may not add due to rounding. |
43
Liquidity and Capital Resources
Our internally generated funds from operating activities, distributions from operating centers
and other investing activities, augmented by use of our existing lines of credit, provide resources
to maintain our current operations and assets, and pay dividends. Generally, our need to access the
capital markets is limited to refinancing debt obligations at maturity and funding major capital
investments. See MD&A Liquidity and Capital Resources Capital Spending for more details.
Market conditions may continue to limit our sources of funds for these financing activities and our
ability to refinance our debt obligations at present principal amounts, interest rates, and other
terms.
We are financed with property-specific secured debt and we have two unencumbered center
properties (Willow Bend and Stamford, a 50% owned Unconsolidated Joint Venture property). We have
no maturities on our current debt until fall 2010, when $335 million at 100% and $262 million at
our beneficial share of three loans mature. Further, of the $649 million at 100% and $362 million
at our beneficial share of additional debt that matures in 2011 (excluding our lines of credit,
which are discussed below), $575 million at 100% and $288 million at our beneficial share can be
extended at our option to 2013, subject to certain covenants. We hope to finalize the refinancing
on the Partridge Creek loan during the first half of 2010, extending the maturity for three years
with a one-year extension option. We expect a 2% LIBOR floor and a spread of 3.5%, which with fees
would result in an all-in rate of nearly 6%. We are in discussions with a variety of lenders to
refinance the MacArthur and Arizona Mills loans that also mature in 2010.
Summaries of 2009 Capital Activities and Transactions
As of December 31, 2009, we had a consolidated cash balance of $19.6 million, of which
$3.5 million is restricted to specific uses stipulated by our lenders. We also have secured lines
of credit of $550 million and $40 million. As of December 31, 2009, the total amount utilized of
the $550 million and $40 million lines of credit was $148 million. Both lines of credit mature in
February 2011. The $550 million line of credit has a one-year extension option. Twelve banks
participate in our $550 million line of credit and the failure of one bank to fund a draw on our
line does not negate the obligation of the other banks to fund their pro-rata shares.
Our $135 million loan at The Pier Shops is currently in default. Under the terms of the
agreement, interest accrues at 10.01%, the original stated rate of 6.01% plus 4% due to the
default. See Note 4 Properties The Pier Shops at Caesars to our consolidated financial
statements.
Operating Activities
Our net cash provided by operating activities was $236.2 million in 2009, compared to
$253.4 million in 2008 and $257.8 million in 2007. See also Results of Operations for
descriptions of 2009, 2008, and 2007 transactions affecting operating cash flow.
Investing Activities
Net cash provided by investing activities was $6.3 million in 2009, compared to $111.1 million
used in 2008 and $227.7 million used in 2007. Cash used in investing activities was impacted by the
timing of capital expenditures. Additions to properties in 2009 related to additions to existing
centers, site improvements, and other capital items. Additions to properties in 2008 related to the
construction of Partridge Creek, our Oyster Bay Project, and the expansion and renovation at Twelve
Oaks, as well as other development activities and other capital items. Additions to properties in
2007 related to the construction of Partridge Creek, the expansion and renovation at Twelve Oaks,
the acquisition of land for future development, and our Oyster Bay Project, as well as other
development activities and other capital items. Additions to properties in 2007 also included costs
to complete construction at The Pier Shops, paid subsequent to our acquisition of a controlling
interest. A tabular presentation of 2009 and 2008 capital spending is shown in Capital Spending.
44
In 2008, we exercised our option to purchase interests in Partridge Creek from the third-party
owner for $11.8 million (see Note 2 Acquisitions The Mall at Partridge Creek to our
consolidated financial statements). During April 2007, we purchased a controlling interest in The
Pier Shops for $24.5 million in cash and upon its consolidation we included its $33.4 million
balance of cash on our balance sheet. In 2008, a $54.3 million contribution was made related to our
acquisition of a 25% interest in The Mall at Studio City. In 2009, the $54.3 million was returned
to us when our agreements terminated because the financing for the project was not completed. See
Note 7 Deferred Charges and Other Assets to our consolidated financial statements for more
details regarding these transactions. In 2008 and 2007, $2.7 million and $3.4 million,
respectively, were used to acquire marketable equity securities and other assets. During 2009, we
issued $7.2 million in notes receivable to fund the noncontrolling partners share of the
settlement at Westfarms that was paid in December 2009 (see Note 15 Commitments and
Contingencies Litigation to our consolidated financial statements). Also in 2009, we received a
$4.5 million repayment of a note receivable. During 2007, we issued $2.2 million in notes
receivable in connection with the construction of certain tenant leasehold improvements and in 2008
we received $0.2 million in payments on the notes. Contributions to Unconsolidated Joint Ventures
of $28.7 million and $12.1 million in 2009 and 2008, respectively, included $1.0 million and
$7.2 million, respectively, of funding and costs related to our Sarasota joint venture.
Contributions to Unconsolidated Joint Ventures in 2009 also included $26.8 million to fund our
share of the settlement at Westfarms that was paid in December 2009. Contributions to
Unconsolidated Joint Ventures of $15.2 million in 2007 were made primarily to fund the expansions
at Stamford and Waterside.
Sources of cash used in funding these investing activities, other than cash flows from
operating activities, included distributions from Unconsolidated Joint Ventures, as well as the
transactions described under Financing Activities. Distributions in excess of earnings from
Unconsolidated Joint Ventures provided $36.9 million in 2009, compared to $63.3 million in 2008 and
$3.0 million in 2007. The amount in 2008 included excess proceeds from the Fair Oaks refinancing.
Net proceeds from sales of peripheral land were $6.3 million and $1.1 million in 2008 and 2007,
respectively. The timing of land sales is variable and proceeds from land sales can vary
significantly from period to period.
Financing Activities
Net cash used in financing activities was $284.9 million in 2009 compared to $127.3 million in
2008 and $9.3 million in 2007. Net cash used in financing activities was primarily impacted by cash
requirements of the investing activities described in the preceding section. Payments of debt, net
of proceeds from issuances, were $105.0 million in 2009, and were funded in part using the returned
deposit from The Mall at Studio City. Proceeds from the issuance of debt, net of payments and
issuance costs, were $93.2 million in 2008 and $244.2 million in 2007. Repurchases of common stock
totaled $100.0 million in 2007. In 2009, $14.7 million was received in connection with incentive
plans, compared to $3.8 million and $0.4 million in 2008 and 2007, respectively. Total dividends
and distributions paid were $192.5 million, $221.3 million, and $149.7 million in 2009, 2008, and
2007, respectively. Common dividends paid in 2009 increased primarily due to a change in the timing
of quarterly dividend payments. Distributions to noncontrolling interests in 2008 included
$51.3 million of excess proceeds from the refinancing of International Plaza.
45
Beneficial Interest in Debt
At December 31, 2009, the Operating Partnerships debt and its beneficial interest in the debt
of its Consolidated Businesses and Unconsolidated Joint Ventures totaled $2,891.8 million, with an
average interest rate of 5.39% excluding amortization of debt issuance costs and interest rate
hedging costs. These costs are reported as interest expense in the results of operations. Interest
expense for the year ended December 31, 2009 includes $0.8 million of non-cash amortization
relating to acquisitions, or 0.03% of the average all-in rate. Beneficial interest in debt includes
debt used to fund development and expansion costs. Beneficial interest in construction work in
progress totaled $69.1 million as of December 31, 2009, which includes $24.9 million of assets on
which interest is being capitalized. Beneficial interest in capitalized interest was $1.3 million
for 2009. The following table presents information about our beneficial interest in debt as of
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate |
|
|
Amount |
|
Including Spread |
|
|
(in millions of dollars) |
|
|
|
|
Fixed rate debt |
|
|
2,367.6 |
|
|
|
5.87 |
%(1)(2) |
|
|
|
|
|
|
|
|
|
Floating rate debt: |
|
|
|
|
|
|
|
|
Swapped through December 2010 |
|
|
162.8 |
|
|
|
5.01 |
% |
Swapped through March 2011 |
|
|
125.0 |
|
|
|
4.22 |
% |
Swapped through October 2012 |
|
|
15.0 |
|
|
|
5.95 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
302.8 |
|
|
|
4.73 |
%(1) |
Floating month to month |
|
|
221.5 |
|
|
|
1.09 |
%(1) |
|
|
|
|
|
|
|
|
|
Total floating rate debt |
|
|
524.3 |
|
|
|
3.19 |
%(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total beneficial interest in debt |
|
|
2,891.8 |
|
|
|
5.39 |
%(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of financing costs (3) |
|
|
|
|
|
|
0.19 |
% |
|
|
|
|
|
|
|
|
|
Average all-in rate |
|
|
|
|
|
|
5.58 |
%(2) |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents weighted average interest rate before amortization of financing costs. |
|
(2) |
|
The Pier Shops loan is in default. As of December 2009 interest is accruing at the default
rate of 10.01% versus the original stated rate of 6.01% and accumulating in interest payable.
Excluding our beneficial interest in The Pier Shops debt of $104.6 million from the table
changes the average fixed rate to 5.68% and the average all-in rate to 5.41%. |
|
(3) |
|
Financing costs include financing fees and costs related to interest rate agreements of
certain fixed rate debt. |
|
(4) |
|
Amounts in table may not add due to rounding. |
Sensitivity Analysis
We have exposure to interest rate risk on our debt obligations and interest rate instruments.
We use derivative instruments primarily to manage exposure to interest rate risks inherent in
variable rate debt and refinancings. We routinely use cap, swap, and treasury lock agreements to
meet these objectives. Based on the Operating Partnerships beneficial interest in floating rate
debt in effect at December 31, 2009, a one percent increase in interest rates on this floating rate
debt would decrease cash flows and, due to the effect of capitalized interest, annual earnings by
approximately $2.2 million, while a one percent decrease in interest rates on this floating rate
debt would increase cash flows and, due to the effect of capitalized interest, annual earnings by
approximately $2.1 million. Based on our consolidated debt and interest rates in effect at
December 31, 2009, a one percent increase in interest rates would decrease the fair value of debt
by approximately $80.4 million, while a one percent decrease in interest rates would increase the
fair value of debt by approximately $84.7 million.
46
Contractual Obligations
In conducting our business, we enter into various contractual obligations, including those for
debt, capital leases for property improvements, 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, 2009 for our consolidated businesses, including expected settlement
periods, is contained below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
|
|
|
Less than 1 |
|
1-3 years |
|
3-5 years |
|
More than 5 |
|
|
Total |
|
year (2010) |
|
(2011-2012) |
|
(2013-2014) |
|
years (2015+) |
|
|
(in millions of dollars) |
Debt (1) (2) |
|
|
2,691.0 |
|
|
|
349.8 |
|
|
|
567.6 |
|
|
|
538.1 |
|
|
|
1,235.5 |
|
Interest payments (1) (2) |
|
|
569.6 |
|
|
|
132.9 |
|
|
|
200.6 |
|
|
|
164.8 |
|
|
|
71.3 |
|
Capital lease obligations |
|
|
0.4 |
|
|
|
0.3 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
Operating leases (3) |
|
|
364.3 |
|
|
|
9.7 |
|
|
|
15.1 |
|
|
|
14.3 |
|
|
|
325.2 |
|
Purchase obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Planned capital spending |
|
|
77.2 |
|
|
|
77.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other purchase obligations (3)(4) |
|
|
13.6 |
|
|
|
3.1 |
|
|
|
5.2 |
|
|
|
4.7 |
|
|
|
0.6 |
|
Other long-term liabilities and
commitments(5) |
|
|
66.3 |
|
|
|
3.3 |
|
|
|
2.1 |
|
|
|
2.5 |
|
|
|
58.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,782.5 |
|
|
|
576.3 |
|
|
|
790.5 |
|
|
|
724.5 |
|
|
|
1,691.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2009. |
|
(2) |
|
The Pier Shops loan is in default and is shown as an obligation in the current year. The
debt is accruing interest at the default rate. Other than the interest accrued at
December 31, 2009, interest related to The Pier Shops loan is excluded from the table
because of the uncertain length of time the debt will remain outstanding. See Note 4 -
Properties The Pier Shops at Caesars to our consolidated financial statements. |
|
(3) |
|
Excludes The Pier Shops. |
|
(4) |
|
Excludes purchase agreements with cancellation provisions of 90 days or less. |
|
(5) |
|
Other long-term liabilities consist of various accrued liabilities, most significantly
assessment bond obligations and long-term incentive compensation. |
|
(6) |
|
Amounts in this table may not add due to rounding. |
Loan Commitments and Guarantees
Certain loan agreements contain various restrictive covenants, including a minimum net worth
requirement, a maximum payout ratio on distributions, a minimum debt yield ratio, a maximum
leverage ratio, minimum interest coverage ratios, and a minimum fixed charges coverage ratio, the
latter being the most restrictive. This covenant requires that we maintain a minimum fixed charges
coverage ratio of more than 1.5 over a trailing 12-month period. As of December 31, 2009, our
minimum fixed charges coverage ratio was 2.2. Other than The Pier Shops loan, which is in default,
we are in compliance with all of our covenants and loan obligations as of December 31, 2009. The
default on this loan did not trigger any cross defaults on our lines of credit or any other
indebtedness (see Note 4 Properties to our consolidated financial statements). The maximum
payout ratio on distributions covenant limits the payment of distributions generally to 95% of
funds from operations, as defined in the loan agreements, except as required to maintain our tax
status, pay preferred distributions, and for distributions related to the sale of certain assets.
See Note 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 to our consolidated financial statements for more
details.
47
Capital Spending
City Creek Center
We have finalized the majority of agreements, subject to certain conditions, regarding City
Creek Center, a mixed-use project in Salt Lake City, Utah. The 0.7 million square foot retail
component of the project will include Macys and Nordstrom as anchors. We are currently providing
development and leasing services and will be the manager for the retail space, which we will own
under a participating lease. City Creek Reserve, Inc. (CCRI), an affiliate of the LDS Church, is
the participating lessor and will provide all of the construction financing. We expect an
approximately 11% to 12% return on our approximately $76 million investment, of which $75 million
will be paid to CCRI upon opening of the retail center. Upon completion of all agreements, we will
be required to maintain a $25 million letter of credit until the $75 million is paid to CCRI. As of
December 31, 2009, the capitalized cost of this project was $0.9 million. Construction is
progressing and we are leasing space for an early 2012 opening.
2009 and 2008 Capital Spending
Capital spending for routine maintenance of the shopping centers is generally recovered from
tenants. Capital spending during 2009 is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 (1) |
|
|
|
|
|
|
Beneficial |
|
|
|
|
|
Beneficial |
|
|
|
|
|
|
Interest in |
|
|
|
|
|
Interest in |
|
|
Consolidated |
|
Consolidated |
|
Unconsolidated |
|
Unconsolidated |
|
|
Businesses |
|
Businesses |
|
Joint Ventures |
|
Joint Ventures |
|
|
(in millions of dollars) |
Site improvements (2) |
|
|
2.5 |
|
|
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing Centers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projects with incremental GLA |
|
|
11.5 |
|
|
|
6.5 |
|
|
|
0.4 |
|
|
|
0.1 |
|
Projects with no incremental GLA and other |
|
|
4.9 |
|
|
|
4.6 |
|
|
|
2.4 |
|
|
|
1.2 |
|
Mall tenant allowances (3) |
|
|
19.0 |
|
|
|
17.3 |
|
|
|
4.0 |
|
|
|
2.3 |
|
Asset replacement costs reimbursable by tenants |
|
|
14.2 |
|
|
|
12.2 |
|
|
|
5.5 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate office improvements, technology, and
equipment |
|
|
0.6 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to properties |
|
|
52.8 |
|
|
|
43.7 |
|
|
|
12.3 |
|
|
|
6.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Costs are net of intercompany profits and are computed on an accrual basis. |
|
(2) |
|
Includes costs related to land acquired for future development in North Atlanta, Georgia. |
|
(3) |
|
Excludes initial lease-up costs. |
|
(4) |
|
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, 2009:
|
|
|
|
|
|
|
(in millions of dollars) |
Consolidated Businesses capital spending |
|
|
52.8 |
|
Differences between cash and accrual basis |
|
|
1.8 |
|
|
|
|
|
|
Additions to properties |
|
|
54.6 |
|
|
|
|
|
|
48
Capital spending during 2008, excluding acquisitions, is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 (1) |
|
|
|
|
|
|
Beneficial |
|
|
|
|
|
Beneficial |
|
|
|
|
|
|
Interest in |
|
|
|
|
|
Interest in |
|
|
Consolidated |
|
Consolidated |
|
Unconsolidated |
|
Unconsolidated |
|
|
Businesses |
|
Businesses |
|
Joint Ventures |
|
Joint Ventures |
|
|
(in millions of dollars) |
New Development Projects: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-construction development activities (2) |
|
|
16.4 |
|
|
|
16.4 |
|
|
|
6.5 |
|
|
|
4.0 |
|
New centers (3) |
|
|
1.7 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing Centers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projects with incremental GLA |
|
|
12.3 |
|
|
|
10.7 |
|
|
|
18.8 |
|
|
|
6.7 |
|
Projects with no incremental GLA and other |
|
|
1.3 |
|
|
|
1.1 |
|
|
|
4.8 |
|
|
|
2.9 |
|
Mall tenant allowances (4) |
|
|
9.4 |
|
|
|
8.9 |
|
|
|
11.7 |
|
|
|
7.3 |
|
Asset replacement costs reimbursable by tenants |
|
|
11.0 |
|
|
|
9.6 |
|
|
|
12.2 |
|
|
|
7.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate office improvements, technology, and
equipment (5) |
|
|
4.2 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to properties |
|
|
56.3 |
|
|
|
52.6 |
|
|
|
54.1 |
|
|
|
28.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Costs are net of intercompany profits and are computed on an accrual basis. |
|
(2) |
|
Primarily includes costs related to Oyster Bay and Sarasota projects through September 30,
2008, all of which were written off as part of the fourth quarter 2008 impairment charges.
Excludes $54.3 million escrow deposit paid in 2008 relating to the Macao project. |
|
(3) |
|
Includes costs related to The Mall at Partridge Creek. |
|
(4) |
|
Excludes initial lease-up costs. |
|
(5) |
|
Includes U.S. and Asia offices. |
|
(6) |
|
Amounts in this table may not add due to rounding. |
The Operating Partnerships share of mall tenant allowances per square foot leased,
committed under contracts during the year, excluding expansion space and new developments, was
$21.50 in 2009 and $18.09 in 2008. In addition, the Operating Partnerships share of capitalized
leasing and tenant coordination costs excluding new developments, was $6.6 million and $7.6 million
in 2009 and 2008, respectively, or $6.85 and $7.76, in 2009 and 2008, respectively, per square foot
leased.
Planned Capital Spending
The following table summarizes planned capital spending for 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 (1) |
|
|
|
|
|
|
Beneficial |
|
|
|
|
|
Beneficial |
|
|
|
|
|
|
Interest in |
|
|
|
|
|
Interest in |
|
|
Consolidated |
|
Consolidated |
|
Unconsolidated |
|
Unconsolidated |
|
|
Businesses |
|
Businesses |
|
Joint Ventures |
|
Joint Ventures |
|
|
(in millions of dollars) |
Existing centers (2) |
|
|
76.2 |
|
|
|
73.2 |
|
|
|
12.9 |
|
|
|
7.1 |
|
Corporate office improvements, technology, and
equipment |
|
|
1.0 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
77.2 |
|
|
|
74.2 |
|
|
|
12.9 |
|
|
|
7.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Costs are net of intercompany profits. |
|
(2) |
|
Primarily includes costs related to renovations, mall tenant allowances, and asset
replacement costs reimbursable by tenants. |
|
(3) |
|
Amounts in this table may not add due to rounding. |
Estimates of future capital spending include only projects approved by our Board of
Directors and, consequently, estimates will change as new projects are approved.
49
Disclosures regarding planned capital spending, including estimates regarding timing of
openings, capital expenditures, occupancy, and returns on new developments are forward-looking
statements and certain significant factors could cause the actual results to differ materially,
including but not limited to (1) actual results of negotiations with anchors, tenants, and
contractors, (2) timing and outcome of litigation and entitlement processes, (3) changes in the
scope, number, and valuation of projects, (4) cost overruns, (5) timing of expenditures,
(6) availability of and cost of financing and other financing considerations, (7) actual time to
start construction and complete projects, (8) changes in economic climate, (9) competition from
others attracting tenants and customers, (10) increases in operating costs, (11) timing of tenant
openings, and (12) early lease terminations and bankruptcies.
Dividends
We pay regular quarterly dividends to our common and Series G and Series H preferred
shareowners. Dividends to our common shareowners are at the discretion of the Board of Directors
and depend on the cash available to us, our financial condition, capital and other requirements,
and such other factors as the Board of Directors deems relevant. To qualify as a REIT, we must
distribute at least 90% of our REIT taxable income 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. We intend to continue to
pay dividends in cash in 2010, subject to our Board of Directors approval.
Any inability of the Operating Partnership or its Joint Ventures to secure financing as
required to fund maturing debts, capital expenditures and changes in working capital, including
development activities and expansions, may require the utilization of cash to satisfy such
obligations, thereby possibly reducing distributions to partners of the Operating Partnership and
funds available to us for the payment of dividends.
On December 3, 2009, we declared a quarterly dividend of $0.415 per common share, $0.50 per
share on our 8% Series G Preferred Stock, and $0.4765625 on our 7.625% Series H Preferred Stock,
all of which were paid on December 31, 2009 to shareowners of record on December 15, 2009.
50
|
|
|
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, 2009, 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.
Managements Annual Report on Internal Control over Financial Reporting
Managements Annual Report on Internal Control over Financial Reporting accompanies the
Companys financial statements included in Item 15 of this annual report.
Report of the Independent Registered Public Accounting Firm
The report issued by the Companys independent registered public accounting firm, KPMG LLP,
accompanies the Companys financial statements included in Item 15 of this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in the Companys internal control over financial reporting identified in
connection with the Companys fourth quarter 2009 evaluation of such internal control that have
materially affected, or are reasonably likely to materially affect, the Companys internal control
over financial reporting.
|
|
|
Item 9B. |
|
OTHER INFORMATION. |
Not applicable.
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 Proxy Statement under the captions Proposal 1 Election of Directors -
Directors, Proposal 1 Election of Directors Committees of the Board, Proposal 1 Election
of Directors 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 Proxy Statement under the captions Proposal 1 Election of Directors Director
Compensation, Compensation Committee Interlocks and Insider Participation, Compensation
Discussion and Analysis, Compensation Committee Report, Proposal 1 Election of Directors -
Committees of the Board, and Named Executive Officer Compensation Tables.
51
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
The following table sets forth certain information regarding the Companys current and prior
equity compensation plans as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Number of Securities |
|
|
|
Securities to be |
|
|
Weighted- |
|
|
Remaining Available for |
|
|
|
Issued Upon |
|
|
Average Exercise |
|
|
Future Issuances Under |
|
|
|
Exercise of |
|
|
Price of |
|
|
Equity Compensation |
|
|
|
Outstanding |
|
|
Outstanding |
|
|
Plans (Excluding |
|
|
|
Options, Warrants, |
|
|
Options, Warrants, |
|
|
Securities Reflected in |
|
|
|
and Rights |
|
|
and Rights |
|
|
Column (a)) |
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
Equity compensation plans approved by security holders: |
|
|
|
|
|
|
|
|
|
|
|
|
The Taubman Company 2008 Omnibus Long-Term
Incentive Plan: (1) |
|
|
|
|
|
|
|
|
|
|
1,935,211 |
(1) |
Options |
|
|
309,132 |
|
|
$ |
15.24 |
|
|
|
|
|
Performance Share Units (2) |
|
|
590,829 |
|
|
|
|
(3) |
|
|
|
|
Restricted Share Units |
|
|
363,001 |
|
|
|
|
(3) |
|
|
|
|
1992 Incentive Option Plan (4) |
|
|
1,320,477 |
|
|
|
39.92 |
|
|
|
|
|
The Taubman Company 2005 Long-Term Incentive Plan (5) |
|
|
204,109 |
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,787,548 |
|
|
|
|
|
|
|
1,935,211 |
|
Equity compensation plan not approved by security holders - |
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee Directors Deferred Compensation Plan (6) |
|
|
43,467 |
|
|
|
|
(7) |
|
|
|
(8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,831,015 |
|
|
$ |
35.24 |
|
|
|
1,935,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Under The Taubman Company 2008 Omnibus Long-Term Incentive Plan, directors, officers,
employees, and other service providers of the Company 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
6,100,000 shares of common stock or TRG Units. No further awards will be made under the 1992
Incentive Option Plan, The Taubman Company 2005 Long-Term Incentive Plan, or the Non-Employee
Directors Stock Grant Plan. |
|
(2) |
|
Amount represents 196,943 performance share units (PSU) at their maximum payout ratio of
300%. 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%
based on the Companys market performance relative to that of a peer group. |
|
(3) |
|
Excludes restricted stock units issued under the Long-Term Incentive Plan and Omnibus Plan
and performance share units under the Omnibus Plan because they are converted into common
stock on a one-for-one basis at no additional cost. |
|
(4) |
|
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 TRGs 1992 Incentive Option Plan (See Note 13 to our consolidated
financial statements included at Item 15 (a) (1)). |
|
(5) |
|
Under The Taubman Company 2005 Long-Term Incentive Plan, employees received restricted stock
units, which represent the right to one share of common stock upon vesting. |
|
(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 directors 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 then-fair
market value of the common stock. Each Directors 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.
|
|
|
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 Proxy Statement under the caption Related Person Transactions, and Proposal 1 -
Election of Directors Directors.
|
|
|
Item 14. |
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
The information required by this item is hereby incorporated by reference to the material
appearing in the Proxy Statement under the caption Audit Committee Disclosure.
52
PART IV
|
|
|
Item 15. |
|
EXHIBITS, 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: |
|
|
|
|
|
|
|
Page |
|
TAUBMAN CENTERS, INC. |
|
|
|
|
Managements Annual Report on Internal Control Over Financial Reporting |
|
|
F-2 |
|
Reports of Independent Registered Public Accounting Firm |
|
|
F-3 |
|
Consolidated Balance Sheet as of December 31, 2009 and 2008 |
|
|
F-5 |
|
Consolidated Statement of Operations for the years ended December 31, 2009,
2008, and 2007 |
|
|
F-6 |
|
Consolidated Statement of Changes in Equity for the years ended December 31,
2009, 2008, and 2007 |
|
|
F-7 |
|
Consolidated Statement of Cash Flows for the years ended December 31, 2009,
2008, and 2007 |
|
|
F-8 |
|
Notes to Consolidated Financial Statements |
|
|
F-9 |
|
|
|
|
|
|
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,
2009, 2008, and 2007 |
|
|
F-43 |
|
Schedule III Real Estate and Accumulated Depreciation as of December 31, 2009 |
|
|
F-44 |
|
|
|
|
|
|
15(a)(3) |
|
|
|
|
|
|
|
|
|
3(a)
|
|
|
|
Restated By-Laws of Taubman Centers, Inc. (incorporated herein by reference to
Exhibit 3.1 filed with the Registrants Current Report on Form 8-K dated December
16, 2009). |
|
|
|
|
|
3(b)
|
|
|
|
Restated Articles of Incorporation of Taubman Centers, Inc. (incorporated herein
by reference to Exhibit 3 filed with the Registrants Quarterly Report on Form
10-Q for the quarter ended June 30, 2006). |
|
|
|
|
|
4(a)
|
|
|
|
Loan Agreement dated as of January 15, 2004 among La Cienega Associates, as
Borrower, Column Financial, Inc., as Lender (incorporated herein by reference to
Exhibit 4 filed with the Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (2004 First Quarter Form 10-Q)). |
|
|
|
|
|
4(b)
|
|
|
|
Assignment of Leases and Rents, La Cienega Associates, Assignor, and Column
Financial, Inc., Assignee, dated as of January 15, 2004 (incorporated herein by
reference to Exhibit 4 filed with the 2004 First Quarter Form 10-Q). |
|
|
|
|
|
4(c)
|
|
|
|
Leasehold Deed of Trust, with Assignment of Leases and Rents, Fixture Filing, and
Security Agreement, dated as of January 15, 2004, from La Cienega Associates,
Borrower, to Commonwealth Land Title Company, Trustee, for the benefit of Column
Financial, Inc., Lender (incorporated herein by reference to Exhibit 4 filed with
the 2004 First Quarter Form 10-Q). |
|
|
|
|
|
4(d)
|
|
|
|
Amended and Restated Promissory Note A-1, dated December 14, 2005, by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 4.1 filed with the Registrants Current Report on Form 8-K
dated December 16, 2005). |
|
|
|
|
|
4(e)
|
|
|
|
Amended and Restated Promissory Note A-2, dated December 14, 2005, by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 4.2 filed with the Registrants Current Report on Form 8-K
dated December 16, 2005). |
|
|
|
|
|
4(f)
|
|
|
|
Amended and Restated Promissory Note A-3, dated December 14, 2005, by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 4.3 filed with the Registrants Current Report on Form 8-K
dated December 16, 2005). |
53
|
|
|
|
|
4(g)
|
|
|
|
Amended and Restated Mortgage,
Security Agreement and Fixture
Filings, dated December 14, 2005 by
Short Hills Associates L.L.C. to
Metropolitan Life Insurance Company
(incorporated by reference to Exhibit
4.4 filed with the Registrants
Current Report on Form 8-K dated
December 16, 2005). |
|
|
|
|
|
4(h)
|
|
|
|
Amended and Restated Assignment of
Leases, dated December 14, 2005, by
Short Hills Associates L.L.C. to
Metropolitan Life Insurance Company
(incorporated by reference to Exhibit
4.5 filed with the Registrants
Current Report on Form 8-K dated
December 16, 2005). |
|
|
|
|
|
4(i)
|
|
|
|
Second Amended and Restated Secured
Revolving Credit Agreement, dated as
of November 1, 2007, by and among
Dolphin Mall Associates Limited
Partnership, Fairlane Town Center LLC
and Twelve Oaks Mall, LLC, as
Borrowers, Eurohypo AG, New York
Branch, as Administrative Agent and
Lead Arranger, and the various
lenders and agents on the signature
pages thereto (incorporated herein by
reference to Exhibit 4.1 filed with
the Registrants Current Report on
Form 8-K dated November 1, 2007). |
|
|
|
|
|
4(j)
|
|
|
|
Third Amended and Restated Mortgage,
Assignment of Leases and Rents and
Security Agreement, dated as of
November 1, 2007, by and between
Dolphin Mall Associates Limited
Partnership and Eurohypo AG, New York
Branch, as Administrative Agent
(incorporated herein by reference to
Exhibit 4.5 filed with the
Registrants Current Report on Form
8-K dated November 1, 2007). |
|
|
|
|
|
4(k)
|
|
|
|
Second Amended and Restated Mortgage,
dated as of November 1, 2007, by and
between Fairlane Town Center LLC and
Eurohypo AG, New York Branch, as
Administrative Agent (incorporated
herein by reference to Exhibit 4.3
filed with the Registrants Current
Report on Form 8-K dated November 1,
2007). |
|
|
|
|
|
4(l)
|
|
|
|
Second Amended and Restated Mortgage,
dated as of November 1, 2007, by and
between Twelve Oaks Mall, LLC and
Eurohypo AG, New York Branch, as
Administrative Agent (incorporated
herein by reference to Exhibit 4.4
filed with the Registrants Current
Report on Form 8-K dated November 1,
2007). |
|
|
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4(m)
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Guaranty of Payment, dated as of November 1, 2007, by and among The Taubman
Realty Group Limited Partnership, Fairlane Town Center LLC and Twelve Oaks Mall,
LLC (incorporated herein by reference to Exhibit 4.2 filed with the Registrants
Current Report on Form 8-K dated November 1, 2007). |
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4(n)
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Loan Agreement dated January 8, 2008, by and between Tampa Westshore
Associates Limited Partnership and Eurohypo AG, New York Branch, as
Administrative Agent, Joint Lead Arranger and Joint Book Runner and the various
lenders and agents on the signature pages thereto (incorporated herein by
reference to Exhibit 4.1 filed with the Registrants Current Report on Form 8-K
dated January 8, 2008). |
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4(o)
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Amended and Restated Leasehold Mortgage, Security Agreement and Financing
Statement dated January 8, 2008, by Tampa Westshore Associates Limited
Partnership, in favor of Eurohypo AG, New York Branch, as Administrative Agent
(incorporated herein by reference to Exhibit 4.2 filed with the Registrants
Current Report on Form 8-K dated January 8, 2008). |
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4(p)
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Assignment of Leases and Rents dated January 8, 2008, by Tampa Westshore
Associates Limited Partnership, in favor of Eurohypo AG, New York Branch, as
Administrative Agent (incorporated herein by reference to Exhibit 4.3 filed with
the Registrants Current Report on Form 8-K dated January 8, 2008). |
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4(q)
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Carveout Guaranty dated January 8, 2008, by The Taubman Realty Group Limited
Partnership to and for the benefit of Eurohypo AG, New York Branch, as
Administrative Agent (incorporated herein by reference to Exhibit 4.4 filed with
the Registrants Current Report on Form 8-K dated January 8, 2008). |
54
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*10(a)
|
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|
The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan, as
Amended and Restated Effective as of September 30, 1997 (incorporated herein by
reference to Exhibit 10(b) filed with the Registrants Annual Report on Form 10-K
for the year ended December 31, 1997). |
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*10(b)
|
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|
First Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive
Option Plan as Amended and Restated Effective as of September 30, 1997, effective
January 1, 2002 (incorporated herein by reference to Exhibit 10(b) filed with the
Registrants Annual Report on Form 10-K for the year ended December 31, 2001
(2001 Form 10-K)). |
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*10(c)
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|
Second Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of September 30, 1997 (incorporated
herein by reference to Exhibit 10(c) filed with the Registrants Annual Report on
Form 10-K for the year ended December 31, 2004 (2004 Form 10-K)). |
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*10(d)
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|
Third Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of September 30, 1997 (incorporated
herein by reference to Exhibit 10(d) filed with the 2004 Form 10-K). |
|
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*10(e)
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|
Fourth Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of September 30, 1997 (incorporated
herein by reference to Exhibit 10(a) filed with the Registrants Quarterly Report
on Form 10-Q for the quarter ended March 31, 2007). |
|
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*10(f)
|
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|
The Form of The Taubman Realty Group Limited Partnership 1992 Incentive Option
Plan Option Agreement (incorporated herein by reference to Exhibit 10(e) filed
with the 2004 Form 10-K). |
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10(g)
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Master Services Agreement between The Taubman Realty Group Limited Partnership
and the Manager (incorporated herein by reference to Exhibit 10(f) filed with the
Registrants Annual Report on Form 10-K for the year ended December 31, 1992). |
|
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10(h)
|
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Amended and Restated Cash Tender Agreement among Taubman Centers, Inc., The
Taubman Realty Group Limited Partnership, and A. Alfred Taubman, A. Alfred
Taubman, acting not individually but as Trustee of the A. Alfred Taubman Restated
Revocable Trust, and TRA Partners, (incorporated herein by reference to Exhibit
10 (a) filed with the Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000 (2000 Second Quarter Form 10-Q)). |
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*10(i)
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|
Supplemental Retirement Savings Plan (incorporated herein by reference to Exhibit
10(i) filed with the Registrants Annual Report on Form 10-K for the year ended
December 31, 1994). |
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*10(j)
|
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|
The Taubman Company Long-Term Compensation Plan (as amended and restated
effective January 1, 2000) (incorporated herein by reference to Exhibit 10 (c)
filed with the 2000 Second Quarter Form 10-Q). |
|
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|
*10(k)
|
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|
First Amendment to the Taubman Company Long-Term Compensation Plan (as amended
and restated effective January 1, 2000)(incorporated herein by reference to
Exhibit 10(m) filed with the 2004 Form 10-K). |
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*10(l)
|
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|
Second Amendment to the Taubman Company Long-Term Performance Compensation Plan
(as amended and restated effective January 1, 2000)(incorporated herein by
reference to Exhibit 10(n) filed with the Registrants Annual Report on Form 10-K
for the year ended December 31, 2005). |
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*10(m)
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|
The Taubman Company 2005 Long-Term Incentive Plan (incorporated herein by
reference to the Form DEF14A filed with the Securities and Exchange Commission on
April 5, 2005). |
|
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*10(n)
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|
Employment Agreement between The Taubman Company Limited Partnership and Lisa A.
Payne (incorporated herein by reference to Exhibit 10 filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997). |
55
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*10(o)
|
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|
|
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) (incorporated herein by
reference to Exhibit 10(o) filed with the 2008 Form 10-K). |
|
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|
*10(p)
|
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|
Form of Amended and Restated Change of Control Employment Agreement, dated
December 18, 2008 (revised for Code Section 409A compliance) (incorporated herein
by reference to Exhibit 10(p) filed with the 2008 Form 10-K). |
|
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10(q)
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|
Second Amended and Restated Continuing Offer, dated as of May 16, 2000.
(incorporated herein by reference to Exhibit 10 (b) filed with the 2000 Second
Quarter Form 10-Q). |
|
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10(r)
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|
The Second Amendment and Restatement of Agreement of Limited Partnership of the
Taubman Realty Group Limited Partnership dated September 30, 1998 (incorporated
herein by reference to Exhibit 10 filed with the Registrants Quarterly Report on
Form 10-Q dated September 30, 1998). |
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10(s)
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|
Annex to Second Amendment to the Second Amendment and Restatement of Agreement of
Limited Partnership of The Taubman Realty Group Limited Partnership. |
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10(t)
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|
Annex II to Second Amendment to the Second Amendment and Restatement of Agreement
of Limited Partnership of The Taubman Realty Group Limited Partnership
(incorporated herein by reference to Exhibit 10(p) filed with Registrants Annual
Report on Form 10-K for the year ended December 31, 1999). |
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10(u)
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|
Annex III to The Second Amendment and Restatement of Agreement of Limited
Partnership of The Taubman Realty Group Limited Partnership, dated as of May 27,
2004 (incorporated by reference to Exhibit 10(c) filed with the 2004 Second
Quarter Form 10-Q). |
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10(v)
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|
First Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of The Taubman Realty Group Limited Partnership effective as of
September 30, 1998. |
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10(w)
|
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|
Second Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of The Taubman Realty Group Limited Partnership effective as of
September 3, 1999 (incorporated herein by reference to Exhibit 10(a) filed with
the Registrants Quarterly Report on Form 10-Q for the quarter ended September
30, 1999). |
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10(x)
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|
|
Third Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated May 2, 2003
(incorporated herein by reference to Exhibit 10(a) filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30, 2003). |
|
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|
10(y)
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|
|
Fourth Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated December 31,
2003 (incorporated herein by reference to Exhibit 10(x) filed with the
Registrants Annual Report on Form 10-K for the year ended December 31, 2003). |
|
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|
10(z)
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|
|
Fifth Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated February 1,
2005 (incorporated herein by reference to Exhibit 10.1 filed with the
Registrants Current Report on Form 8-K filed on February 7, 2005). |
|
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10(aa)
|
|
|
|
Sixth Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated March 29, 2006
(incorporated herein by reference to Exhibit 10 filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006). |
|
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10(ab)
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|
|
Seventh Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated December 14,
2007 (incorporated herein by reference to Exhibit 10(z) filed with the
Registrants Annual Report on Form 10-K for the year ended December 31, 2007). |
56
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10(ac)
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|
|
Amended and Restated Shareholders Agreement dated as of October 30, 2001 among
Taub-Co Management, Inc., The Taubman Realty Group Limited Partnership, The A.
Alfred Taubman Restated Revocable Trust, and Taub-Co Holdings LLC (incorporated
herein by reference to Exhibit 10(q) filed with the 2001 Form 10-K). |
|
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|
*10(ad)
|
|
|
|
The Taubman Realty Group Limited Partnership and The Taubman Company LLC Election
and Option Deferral Agreement (incorporated herein by reference to Exhibit 10(r)
filed with the 2001 Form 10-K). |
|
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|
10(ae)
|
|
|
|
Operating Agreement of Taubman Land Associates, a Delaware Limited Liability
Company, dated October 20, 2006 (incorporated herein by reference to Exhibit
10(ab) filed with the Registrants Annual Report on Form 10-K for the year ended
December 31, 2006 (2006 Form 10-K)). |
|
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10(af)
|
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|
|
Amended and Restated Agreement of Partnership of Sunvalley Associates, a
California general partnership (incorporated herein by reference to Exhibit 10(a)
filed with the Registrants Amended Quarterly Report on Form 10-Q/A for the
quarter ended June 30, 2002). |
|
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*10(ag)
|
|
|
|
Summary of Compensation for the Board of Directors of Taubman Centers, Inc.
(incorporated herein by reference to Exhibit 10(ae) filed with the 2006 Form
10-K). |
|
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|
*10(ah)
|
|
|
|
The Form of The Taubman Company Restricted Stock Unit Award Agreement
(incorporated by reference to Exhibit 10 filed with the Registrants Current
Report on Form 8-K dated May 18, 2005). |
|
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|
*10(ai)
|
|
|
|
The Taubman Centers, Inc. Non-Employee Directors Deferred Compensation Plan
(incorporated by reference to Exhibit 10 filed with the Registrants Current
Report on Form 8-K dated May 18, 2005). |
|
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|
*10(aj)
|
|
|
|
The Form of The Taubman Centers, Inc. Non-Employee Directors Deferred
Compensation Plan (incorporated by reference to Exhibit 10 filed with the
Registrants Current Report on Form 8-K dated May 18, 2005). |
|
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|
*10(ak)
|
|
|
|
Amended and Restated Limited Liability Company Agreement of Taubman Properties
Asia LLC, a Delaware Limited Liability Company (incorporated herein by reference
to Exhibit 10(a) filed with the Registrants Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008). |
|
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|
|
*10(al)
|
|
|
|
First Amendment to the Taubman Centers, Inc. Non-Employee Directors Deferred
Compensation Plan (incorporated herein by reference to Exhibit 10(c) filed with
the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30,
2008). |
|
|
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|
|
*10(am)
|
|
|
|
The Taubman Company 2008 Omnibus Long-Term Incentive Plan (incorporated herein by
reference to Appendix A to the Registrants Proxy Statement on Schedule 14A,
filed with the Commission on April 15, 2008). |
|
|
|
|
|
*10(an)
|
|
|
|
Letter Agreement regarding the Amended and Restated Limited Liability Company
Agreement of Taubman Properties Asia LLC, a Delaware Limited Liability Company,
dated November 25, 2008 (incorporated herein by reference to Exhibit 10(am) filed
with the 2008 Form 10-K). |
|
|
|
|
|
*10(ao)
|
|
|
|
Second Amendment to the Master Services Agreement between The Taubman Realty
Group Limited Partnership and the Manager, dated December 23, 2008 (incorporated
herein by reference to Exhibit 10(an) filed with the 2008 Form 10-K). |
|
|
|
|
|
*10(ap)
|
|
|
|
Form of Taubman Centers, Inc. Non-Employee Directors Deferred Compensation Plan
Amendment Agreement (revised for Code Section 409A compliance) (incorporated
herein by reference to Exhibit 10(ap) filed with the 2008 Form 10-K). |
|
|
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|
|
*10(aq)
|
|
|
|
First Amendment to The Taubman Company Supplemental Retirement Savings Plan, dated December 12, 2008 (revised for Code Section 409A compliance) (incorporated herein by reference to
Exhibit 10(aq) filed with the 2008 Form 10-K). |
57
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|
|
*10(ar)
|
|
|
|
Amendment to The Taubman Centers, Inc. Change of Control Severance Program, dated
December 12, 2008 (revised for Code Section 409A compliance) (incorporated herein
by reference to Exhibit 10(ar) filed with the 2008 Form 10-K). |
|
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|
|
*10(as)
|
|
|
|
Form of The Taubman Company Long-Term Performance Compensation Plan Amendment
Agreement (revised for Code Section 409A compliance) (incorporated herein by
reference to Exhibit 10(as) filed with the 2008 Form 10-K). |
|
|
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|
*10(at)
|
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|
|
Amendment to Employment Agreement, dated December 22, 2008, for Lisa A. Payne
(revised for Code Section 409A compliance) (incorporated herein by reference to
Exhibit 10(at) filed with the 2008 Form 10-K). |
|
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|
|
*10(au)
|
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|
|
First Amendment to the Master Services Agreement between The Taubman Realty Group
Limited Partnership and the Manager, dated September 30, 1998 (incorporated
herein by reference to Exhibit 10(au) filed with the 2008 Form 10-K). |
|
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|
|
|
*10(av)
|
|
|
|
The Form of Fair Competition Agreement, by and between the Company and various officers of the Company
(incorporated herein by reference to Exhibit 10(a) filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2009). |
|
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|
*10(aw)
|
|
|
|
Separation Agreement and Release, dated October 4, 2009, for Morgan Parker. |
|
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|
*10(ax)
|
|
|
|
Assignment of Membership Interest in Taubman Properties Asia LLC between Morgan
Parker and Taubman Asia Management II LLC, dated October 4, 2009. |
|
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|
10(ay)
|
|
|
|
Settlement Agreement between Raymond Road Associates, LLC, BBS Development, LLC,
and Blue Back Square, LLC and The Taubman Company LLC, West Farms Associates, and
West Farms Mall, LLC, dated December 8, 2009. |
|
|
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|
|
*10(az)
|
|
|
|
Form of The Taubman Company LLC 2008 Omnibus Long-Term Incentive Plan Restricted
Share Unit Award Agreement (incorporated by reference to Exhibit 10(a) filed with
the Registrants Current Report on Form 8-K dated March 10, 2009). |
|
|
|
|
|
*10(ba)
|
|
|
|
Form of The Taubman Company LLC 2008 Omnibus Long-Term Incentive Plan Option
Award Agreement (incorporated by reference to Exhibit 10(b) filed with the
Registrants Current Report on Form 8-K dated March 10, 2009). |
|
|
|
|
|
*10(bb)
|
|
|
|
Form of The Taubman Company LLC 2008 Omnibus Long-Term Incentive Plan
Restricted and Performance Share Unit Award Agreement (incorporated by reference
to Exhibit 10(c) filed with the Registrants Current Report on Form 8-K dated
March 10, 2009). |
|
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|
*10(bc)
|
|
|
|
Summary of modification to the Employment Agreement between The Taubman Company Asia Limited and Morgan Parker (incorporated herein by reference to Exhibit 10(ao) filed with the 2008 Form 10-K). |
|
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|
|
12
|
|
|
|
Statement Re: Computation of Taubman Centers, Inc. Ratio of Earnings to Combined
Fixed Charges and Preferred Dividends. |
|
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21
|
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|
|
Subsidiaries of Taubman Centers, Inc. |
|
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23
|
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|
|
Consent of Independent Registered Public Accounting Firm. |
|
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|
31(a)
|
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|
|
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. |
|
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|
|
31(b)
|
|
|
|
Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
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|
|
32(a)
|
|
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
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|
|
32(b)
|
|
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
* |
|
A management contract or compensatory plan or arrangement required to be filed. |
58
|
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|
99(a)
|
|
|
|
Debt Maturity Schedule. |
|
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|
|
99(b)
|
|
|
|
Real Estate and Accumulated Depreciation Schedule of the Unconsolidated Joint
Ventures of The Taubman Realty Group Limited Partnership. |
|
15(b) |
|
The list of exhibits filed with this report is set forth in response to Item 15(a)(3). The
required exhibit index has been filed with the exhibits. |
|
|
15(c) |
|
The financial statement schedules of the Company listed at Item 15(a)(2) are filed pursuant to
this Item 15(c). |
Note: The Company has not filed certain instruments with respect to long-term debt that did not
exceed 10% of the Companys total assets on a consolidated basis. A copy of such instruments will
be furnished to the Commission upon request.
59
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:
|
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|
CONSOLIDATED FINANCIAL STATEMENTS |
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F-2 |
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F-3 |
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F-5 |
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F-6 |
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F-7 |
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F-8 |
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F-9 |
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|
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES |
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F-43 |
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F-44 |
|
F-1
MANAGEMENTS 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
Companys 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
Companys internal control over financial reporting as of December 31, 2009. Management bases this
assessment of the effectiveness of its internal control on recognized control criteria, the
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Management has completed its assessment as of December 31, 2009.
Based on its assessment, management believes that Taubman Centers, Inc. maintained effective
internal control over financial reporting as of December 31, 2009. The independent registered
public accounting firm, KPMG LLP, that audited the 2009 financial statements included in this
annual report have issued an audit report on the Companys system of internal controls over
financial reporting, also included herein.
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareowners
Taubman Centers, Inc.:
We have audited the accompanying consolidated balance sheet of Taubman Centers, Inc. (the
Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations,
changes in equity, and cash flows for each of the years in the three-year period ended December 31,
2009. 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 Companys 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, 2009 and
2008, and the results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2009, 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 9 to the
consolidated financial statements, Taubman Centers, Inc. has changed their method of accounting for noncontrolling interests due to the adoption of a new accounting pronouncement for noncontrolling
interests, as of January 1, 2009.
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, 2009, based on criteria established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated February 26, 2010 expressed an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting.
KPMG LLP
Chicago, Illinois
February 26, 2010
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, 2009, based on criteria established in Internal Control Integrated
Framework 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 Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Companys 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 companys 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 companys 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 companys 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, 2009, based on criteria established in Internal
Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
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,
2009 and 2008, and the related consolidated statements of operations, changes in equity, and cash
flows for each of the years in the three-year period ended December 31, 2009, and our report dated
February 26, 2010 expressed an unqualified opinion on those consolidated financial statements.
KPMG LLP
Chicago, Illinois
February 26, 2010
F-4
TAUBMAN CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
Assets: |
|
|
|
|
|
|
|
|
Properties (Notes 4 and 8) |
|
$ |
3,496,853 |
|
|
$ |
3,699,480 |
|
Accumulated depreciation and amortization |
|
|
(1,100,610 |
) |
|
|
(1,049,626 |
) |
|
|
|
|
|
|
|
|
|
$ |
2,396,243 |
|
|
$ |
2,649,854 |
|
Investment in Unconsolidated Joint Ventures (Note 5) |
|
|
89,804 |
|
|
|
89,933 |
|
Cash and cash equivalents |
|
|
19,640 |
|
|
|
62,126 |
|
Accounts and notes receivable, less allowance for doubtful accounts and notes
of $6,894 and $9,895 in 2009 and 2008 (Note 6) |
|
|
44,503 |
|
|
|
46,732 |
|
Accounts receivable from related parties (Note 12) |
|
|
1,558 |
|
|
|
1,850 |
|
Deferred charges and other assets (Note 7) |
|
|
55,105 |
|
|
|
124,487 |
|
|
|
|
|
|
|
|
|
|
$ |
2,606,853 |
|
|
$ |
2,974,982 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Notes payable (Note 8) |
|
$ |
2,691,019 |
|
|
$ |
2,796,821 |
|
Accounts payable and accrued liabilities |
|
|
230,276 |
|
|
|
262,226 |
|
Dividends payable |
|
|
|
|
|
|
22,002 |
|
Distributions in excess of investments in and net income of Unconsolidated
Joint Ventures (Note 5) |
|
|
160,305 |
|
|
|
154,141 |
|
|
|
|
|
|
|
|
|
|
$ |
3,081,600 |
|
|
$ |
3,235,190 |
|
Commitments and contingencies (Notes 4, 8, 10, 11, 13, and 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity (Note 14): |
|
|
|
|
|
|
|
|
Taubman Centers, Inc. Shareowners Equity: |
|
|
|
|
|
|
|
|
Series B Non-Participating Convertible Preferred Stock, $0.001 par and
liquidation value, 40,000,000 shares authorized, 26,359,235 and
26,429,235 shares issued and outstanding at December 31, 2009 and 2008 |
|
$ |
26 |
|
|
$ |
26 |
|
Series G Cumulative Redeemable Preferred Stock, 4,000,000 shares
authorized, no par, $100 million liquidation preference, 4,000,000 shares
issued and outstanding at December 31, 2009 and 2008 |
|
|
|
|
|
|
|
|
Series H Cumulative Redeemable Preferred Stock, 3,480,000 shares
authorized, no par, $87 million liquidation preference, 3,480,000 shares
issued and outstanding at December 31, 2009 and 2008 |
|
|
|
|
|
|
|
|
Common Stock, $0.01 par value, 250,000,000 shares authorized, 54,321,586
and 53,018,987 shares issued and outstanding at December 31, 2009 and
2008 |
|
|
543 |
|
|
|
530 |
|
Additional paid-in capital |
|
|
579,983 |
|
|
|
556,145 |
|
Accumulated other comprehensive income (loss) (Note 10) |
|
|
(24,443 |
) |
|
|
(29,778 |
) |
Dividends in excess of net income |
|
|
(884,666 |
) |
|
|
(726,097 |
) |
|
|
|
|
|
|
|
|
|
$ |
(328,557 |
) |
|
$ |
(199,174 |
) |
|
|
|
|
|
|
|
|
|
Noncontrolling interests (Note 9) |
|
|
(146,190 |
) |
|
|
(61,034 |
) |
|
|
|
|
|
|
|
|
|
$ |
(474,747 |
) |
|
$ |
(260,208 |
) |
|
|
|
|
|
|
|
|
|
$ |
2,606,853 |
|
|
$ |
2,974,982 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-5
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
$ |
341,914 |
|
|
$ |
353,200 |
|
|
$ |
329,420 |
|
Percentage rents |
|
|
10,818 |
|
|
|
13,764 |
|
|
|
14,817 |
|
Expense recoveries |
|
|
246,377 |
|
|
|
248,555 |
|
|
|
228,418 |
|
Management, leasing, and development services |
|
|
21,179 |
|
|
|
15,911 |
|
|
|
16,514 |
|
Other |
|
|
45,816 |
|
|
|
40,068 |
|
|
|
37,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
666,104 |
|
|
$ |
671,498 |
|
|
$ |
626,822 |
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance, taxes, and utilities |
|
$ |
189,061 |
|
|
$ |
189,162 |
|
|
$ |
175,948 |
|
Other operating |
|
|
67,182 |
|
|
|
79,595 |
|
|
|
69,638 |
|
Management, leasing, and development services |
|
|
7,862 |
|
|
|
8,710 |
|
|
|
9,080 |
|
General and administrative |
|
|
27,858 |
|
|
|
28,110 |
|
|
|
30,403 |
|
Impairment charges (Note 4) |
|
|
166,680 |
|
|
|
117,943 |
|
|
|
|
|
Restructuring charge (Note 12) |
|
|
2,512 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
145,670 |
|
|
|
147,397 |
|
|
|
131,700 |
|
Depreciation and amortization |
|
|
147,316 |
|
|
|
147,441 |
|
|
|
137,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
754,141 |
|
|
$ |
718,358 |
|
|
$ |
554,679 |
|
|
|
|
|
|
|
|
|
|
|
Gains on land sales and other nonoperating income |
|
|
711 |
|
|
|
4,569 |
|
|
|
3,595 |
|
Impairment loss on marketable securities (Note 17) |
|
|
(1,666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax expense and equity in income of
Unconsolidated Joint Ventures |
|
$ |
(88,992 |
) |
|
$ |
(42,291 |
) |
|
$ |
75,738 |
|
Income tax expense (Note 3) |
|
|
(1,657 |
) |
|
|
(1,117 |
) |
|
|
|
|
Equity in income of Unconsolidated Joint Ventures (Note 5) |
|
|
11,488 |
|
|
|
35,356 |
|
|
|
40,498 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(79,161 |
) |
|
$ |
(8,052 |
) |
|
$ |
116,236 |
|
Net (income) loss attributable to noncontrolling interests (Note 9) |
|
|
25,649 |
|
|
|
(62,527 |
) |
|
|
(51,782 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Taubman Centers, Inc. |
|
$ |
(53,512 |
) |
|
$ |
(70,579 |
) |
|
$ |
64,454 |
|
Distributions to participating securities of TRG (Note 13) |
|
|
(1,560 |
) |
|
|
(1,446 |
) |
|
|
(1,330 |
) |
Preferred stock dividends (Note 14) |
|
|
(14,634 |
) |
|
|
(14,634 |
) |
|
|
(14,634 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Taubman Centers, Inc. common shareowners |
|
$ |
(69,706 |
) |
|
$ |
(86,659 |
) |
|
$ |
48,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share (Note 16) |
|
$ |
(1.31 |
) |
|
$ |
(1.64 |
) |
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share (Note 16) |
|
$ |
(1.31 |
) |
|
$ |
(1.64 |
) |
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
|
$ |
1.660 |
|
|
$ |
1.660 |
|
|
$ |
1.540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding basic |
|
|
53,239,279 |
|
|
|
52,866,050 |
|
|
|
52,969,067 |
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-6
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taubman Centers, Inc. Shareowners Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Dividends in |
|
|
TCO |
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Excess of |
|
|
Shareowners |
|
|
Noncontrolling |
|
|
Total |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Net Income |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
Balance, January 1, 2007 |
|
|
35,593,897 |
|
|
$ |
28 |
|
|
|
52,931,594 |
|
|
$ |
529 |
|
|
$ |
635,304 |
|
|
$ |
(9,560 |
) |
|
$ |
(517,659 |
) |
|
$ |
108,642 |
|
|
$ |
(8,304 |
) |
|
$ |
100,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock pursuant to Continuing Offer (Notes 13, 14,
and 15) |
|
|
(1,589,662 |
) |
|
|
(1 |
) |
|
|
1,601,371 |
|
|
|
16 |
|
|
|
348 |
|
|
|
|
|
|
|
|
|
|
|
363 |
|
|
|
|
|
|
|
363 |
|
Repurchase of common stock (Note 14) |
|
|
|
|
|
|
|
|
|
|
(1,910,544 |
) |
|
|
(19 |
) |
|
|
(99,981 |
) |
|
|
|
|
|
|
|
|
|
|
(100,000 |
) |
|
|
|
|
|
|
(100,000 |
) |
Share-based compensation (Note 13) |
|
|
|
|
|
|
|
|
|
|
1,592 |
|
|
|
|
|
|
|
7,662 |
|
|
|
|
|
|
|
|
|
|
|
7,662 |
|
|
|
|
|
|
|
7,662 |
|
Purchase of additional interest in subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,370 |
|
|
|
13,370 |
|
Dividend equivalents (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(562 |
) |
|
|
(562 |
) |
|
|
|
|
|
|
(562 |
) |
Dividends and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(97,322 |
) |
|
|
(97,322 |
) |
|
|
(54,339 |
) |
|
|
(151,661 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,454 |
|
|
|
64,454 |
|
|
|
51,782 |
|
|
|
116,236 |
|
Other comprehensive income (loss) (Note 10): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on interest rate instruments and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(340 |
) |
|
|
|
|
|
|
(340 |
) |
|
|
(130 |
) |
|
|
(470 |
) |
Reclassification adjustment for amounts recognized in net
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,261 |
|
|
|
|
|
|
|
1,261 |
|
|
|
|
|
|
|
1,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
65,375 |
|
|
$ |
51,652 |
|
|
$ |
117,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007 |
|
|
34,004,235 |
|
|
$ |
27 |
|
|
|
52,624,013 |
|
|
$ |
526 |
|
|
$ |
543,333 |
|
|
$ |
(8,639 |
) |
|
$ |
(551,089 |
) |
|
$ |
(15,842 |
) |
|
$ |
2,379 |
|
|
$ |
(13,463 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock pursuant to Continuing Offer (Notes 13, 14,
and 15) |
|
|
(95,000 |
) |
|
|
(1 |
) |
|
|
95,004 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation (Note 13) |
|
|
|
|
|
|
|
|
|
|
299,970 |
|
|
|
3 |
|
|
|
12,812 |
|
|
|
|
|
|
|
|
|
|
|
12,815 |
|
|
|
|
|
|
|
12,815 |
|
Purchase of additional interest in subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,467 |
) |
|
|
(8,467 |
) |
Dividend equivalents (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(560 |
) |
|
|
(560 |
) |
|
|
|
|
|
|
(560 |
) |
Dividends and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(103,869 |
) |
|
|
(103,869 |
) |
|
|
(117,495 |
) |
|
|
(221,364 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,579 |
) |
|
|
(70,579 |
) |
|
|
62,527 |
|
|
|
(8,052 |
) |
Other comprehensive income (loss) (Note 10): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on interest rate instruments and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,399 |
) |
|
|
|
|
|
|
(22,399 |
) |
|
|
22 |
|
|
|
(22,377 |
) |
Reclassification adjustment for amounts recognized in net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,260 |
|
|
|
|
|
|
|
1,260 |
|
|
|
|
|
|
|
1,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(91,718 |
) |
|
$ |
62,549 |
|
|
$ |
(29,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008 |
|
|
33,909,235 |
|
|
$ |
26 |
|
|
|
53,018,987 |
|
|
$ |
530 |
|
|
$ |
556,145 |
|
|
$ |
(29,778 |
) |
|
$ |
(726,097 |
) |
|
$ |
(199,174 |
) |
|
$ |
(61,034 |
) |
|
$ |
(260,208 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock pursuant to Continuing Offer (Notes 13, 14,
and 15) |
|
|
(70,000 |
) |
|
|
|
|
|
|
84,762 |
|
|
|
1 |
|
|
|
(484 |
) |
|
|
|
|
|
|
|
|
|
|
(483 |
) |
|
|
483 |
|
|
|
|
|
Share-based compensation (Note 13) |
|
|
|
|
|
|
|
|
|
|
1,217,837 |
|
|
|
12 |
|
|
|
24,322 |
|
|
|
|
|
|
|
|
|
|
|
24,334 |
|
|
|
|
|
|
|
24,334 |
|
Dividend equivalents (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(345 |
) |
|
|
(345 |
) |
|
|
|
|
|
|
(345 |
) |
Dividends and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(104,712 |
) |
|
|
(104,712 |
) |
|
|
(65,810 |
) |
|
|
(170,522 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,512 |
) |
|
|
(53,512 |
) |
|
|
(25,649 |
) |
|
|
(79,161 |
) |
Other comprehensive income (loss) (Note 10): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate instruments and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,372 |
|
|
|
|
|
|
|
3,372 |
|
|
|
4,855 |
|
|
|
8,227 |
|
Reclassification adjustment for amounts recognized in net
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,117 |
|
|
|
|
|
|
|
1,117 |
|
|
|
549 |
|
|
|
1,666 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
846 |
|
|
|
|
|
|
|
846 |
|
|
|
416 |
|
|
|
1,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(48,177 |
) |
|
$ |
(19,829 |
) |
|
$ |
(68,006 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009 |
|
|
33,839,235 |
|
|
$ |
26 |
|
|
|
54,321,586 |
|
|
$ |
543 |
|
|
$ |
579,983 |
|
|
$ |
(24,443 |
) |
|
$ |
(884,666 |
) |
|
$ |
(328,557 |
) |
|
$ |
(146,190 |
) |
|
$ |
(474,747 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-7
TAUBMAN CENTERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(79,161 |
) |
|
$ |
(8,052 |
) |
|
$ |
116,236 |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
147,316 |
|
|
|
147,441 |
|
|
|
137,910 |
|
Impairment loss on marketable securities |
|
|
1,666 |
|
|
|
|
|
|
|
|
|
Impairment charges |
|
|
166,680 |
|
|
|
117,943 |
|
|
|
|
|
Provision for bad debts |
|
|
2,081 |
|
|
|
6,088 |
|
|
|
1,830 |
|
Gains on sales of land and land-related rights |
|
|
|
|
|
|
(2,816 |
) |
|
|
(668 |
) |
Other |
|
|
11,281 |
|
|
|
10,770 |
|
|
|
9,592 |
|
Increase (decrease) in cash attributable to changes in assets and
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Receivable, deferred charges, and other assets |
|
|
5,613 |
|
|
|
(5,596 |
) |
|
|
(22,652 |
) |
Accounts payable and other liabilities |
|
|
(19,304 |
) |
|
|
(12,358 |
) |
|
|
15,588 |
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities |
|
$ |
236,172 |
|
|
$ |
253,420 |
|
|
$ |
257,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to properties |
|
$ |
(54,592 |
) |
|
$ |
(99,964 |
) |
|
$ |
(219,847 |
) |
Acquisition of interests in The Mall at Partridge Creek (Note 2) |
|
|
|
|
|
|
(11,838 |
) |
|
|
|
|
Acquisition of additional interest in The Pier Shops (Note 2) |
|
|
|
|
|
|
|
|
|
|
(24,504 |
) |
Cash transferred in upon consolidation of The Pier Shops (Note 2) |
|
|
|
|
|
|
|
|
|
|
33,388 |
|
Refund (funding) of The Mall at Studio City escrow (Note 7) |
|
|
54,334 |
|
|
|
(54,334 |
) |
|
|
|
|
Proceeds from sales of land and land-related rights |
|
|
|
|
|
|
6,268 |
|
|
|
1,138 |
|
Acquisition of marketable equity securities and other assets |
|
|
|
|
|
|
(2,655 |
) |
|
|
(3,435 |
) |
Repayments of notes receivable (Note 6) |
|
|
4,500 |
|
|
|
223 |
|
|
|
|
|
Issuances of notes receivable (Note 6) |
|
|
(7,160 |
) |
|
|
|
|
|
|
(2,228 |
) |
Contributions to Unconsolidated Joint Ventures |
|
|
(28,718 |
) |
|
|
(12,111 |
) |
|
|
(15,162 |
) |
Distributions from Unconsolidated Joint Ventures in excess of income |
|
|
36,903 |
|
|
|
63,269 |
|
|
|
2,990 |
|
Other |
|
|
985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By (Used In) Investing Activities |
|
$ |
6,252 |
|
|
$ |
(111,142 |
) |
|
$ |
(227,660 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Debt proceeds |
|
$ |
978 |
|
|
$ |
335,665 |
|
|
$ |
263,086 |
|
Debt payments |
|
|
(106,026 |
) |
|
|
(239,072 |
) |
|
|
(16,044 |
) |
Debt issuance costs |
|
|
|
|
|
|
(3,419 |
) |
|
|
(2,892 |
) |
Repurchase of common stock (Note 14) |
|
|
|
|
|
|
|
|
|
|
(100,000 |
) |
Issuance of common stock and/or partnership units in connection with
incentive plans (Notes 13 and 15) |
|
|
14,737 |
|
|
|
3,809 |
|
|
|
363 |
|
Distributions to noncontrolling interests in TRG (Note 9) |
|
|
(65,810 |
) |
|
|
(117,495 |
) |
|
|
(54,339 |
) |
Distributions to participating securities of TRG |
|
|
(1,560 |
) |
|
|
(1,446 |
) |
|
|
(1,330 |
) |
Cash dividends to preferred shareowners |
|
|
(14,634 |
) |
|
|
(14,634 |
) |
|
|
(14,634 |
) |
Cash dividends to common shareowners |
|
|
(110,492 |
) |
|
|
(87,679 |
) |
|
|
(79,384 |
) |
Other |
|
|
(2,103 |
) |
|
|
(3,047 |
) |
|
|
(4,118 |
) |
|
|
|
|
|
|
|
|
|
|
Net Cash Used In Financing Activities |
|
$ |
(284,910 |
) |
|
$ |
(127,318 |
) |
|
$ |
(9,292 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) In Cash and Cash Equivalents |
|
$ |
(42,486 |
) |
|
$ |
14,960 |
|
|
$ |
20,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at Beginning of Year |
|
|
62,126 |
|
|
|
47,166 |
|
|
|
26,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year |
|
$ |
19,640 |
|
|
$ |
62,126 |
|
|
$ |
47,166 |
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-8
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 its real estate properties. In this report,
the term Company refers to TCO, the Operating Partnership, and/or the Operating Partnerships
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 Companys owned portfolio as of December 31, 2009 included
23 urban and suburban shopping centers in ten states.
Taubman Properties Asia LLC and its subsidiaries (Taubman Asia), which is the platform for the
Companys expansion into the Asia-Pacific region, is headquartered in Hong Kong.
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. In September 2008, the Company acquired the interests of the owner of
The Mall at Partridge Creek (Partridge Creek) (Note 2). Prior to the acquisition, the Company
consolidated the accounts of the owner of Partridge Creek, which qualified as a variable interest
entity for which the Operating Partnership was considered to be the primary beneficiary. In
April 2007, the Company increased its ownership in The Pier Shops at Caesars (The Pier Shops) to a
77.5% controlling interest and began consolidating the entity that owns The Pier Shops (Note 2).
Prior to the acquisition date, the Company accounted for The Pier Shops under the equity method.
All intercompany transactions have been eliminated. See Note 9 for information relating to the
Companys policies on noncontrolling interests including the adoption of new requirements in 2009.
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 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 Companys 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 Companys 79% investment in Westfarms is through a general partnership in which
the other general partners have approval rights over annual operating budgets, capital spending,
refinancing, or sale of the property.
The Operating Partnership
At December 31, 2009, the Operating Partnerships equity included three classes of preferred
equity (Series F, G, and H) and the net equity of the partnership unitholders. Net income and
distributions of the Operating Partnership are allocable first to the preferred equity interests
(Note 14), and the remaining amounts to the general and limited partners in the Operating
Partnership in accordance with their percentage ownership. The Series G and Series H Preferred
Equity are owned by the Company and are eliminated in consolidation. The Series F Preferred Equity
is owned by an institutional investor and accounted for as a noncontrolling interest of the
Company.
F-9
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The partnership equity of the Operating Partnership and the Companys ownership therein are
shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRG units owned |
|
|
|
|
|
|
TRG units |
|
TRG units |
|
by noncontrolling |
|
TCOs % interest |
|
|
|
|
outstanding at |
|
owned by TCO at |
|
interests at |
|
in TRG at |
|
TCOs average |
Year |
|
December 31 |
|
December 31 (1) |
|
December 31 |
|
December 31 |
|
interest in TRG |
2009 |
|
|
80,699,271 |
|
|
|
54,321,586 |
|
|
|
26,377,685 |
|
|
|
67 |
% |
|
|
67 |
% |
2008 |
|
|
79,481,431 |
|
|
|
53,018,987 |
|
|
|
26,462,444 |
|
|
|
67 |
|
|
|
67 |
|
2007 |
|
|
79,181,457 |
|
|
|
52,624,013 |
|
|
|
26,557,444 |
|
|
|
66 |
|
|
|
66 |
|
|
|
|
(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 TCOs common shares outstanding as of the
specified dates. |
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. Most
expense recoveries, which include an administrative fee, are recognized as revenue in the period
applicable costs are chargeable to tenants. Management, leasing, and development revenue is
recognized as services are rendered, when fees due are determinable, and collectibility is
reasonably assured. Fees for management, leasing, and development services are established under
contracts and are generally based on negotiated rates, percentages of cash receipts, and/or actual
costs incurred. 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 Companys 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 Companys income statement.
Allowance for Doubtful Accounts and Notes
The Company records a provision for losses on accounts receivable to reduce them to the amount
estimated to be collectible. The Company records a provision for losses on notes receivable to
reduce them to the present value of expected future cash flows discounted at the loans effective
interest rates or the fair value of the collateral if the loans are collateral dependent.
Depreciation and Amortization
Buildings, improvements and equipment are primarily depreciated on straight-line bases over
the estimated useful lives of the assets, which generally range from 3 to 50 years. Capital
expenditures that are recoverable from tenants are depreciated over the estimated recovery period.
Intangible assets are amortized on a straight-line basis over the estimated useful lives of the
assets. Tenant allowances are depreciated, on a straight-line basis, over the shorter of the useful
life of the leasehold improvements or the lease term. Deferred leasing costs are amortized on a
straight-line basis over the lives of the related leases. In the event of early termination of such
leases, the unrecoverable net book values of the assets are recognized as depreciation and
amortization expense in the period of termination.
Capitalization
Direct and indirect costs that are clearly related to the acquisition, development,
construction and improvement of properties are capitalized. Compensation costs are allocated based
on actual time spent on a project. Costs incurred on real estate for ground leases, property taxes,
insurance, and interest costs for qualifying assets are capitalized during periods in which
activities necessary to get the property ready for its intended use are in progress.
F-10
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The viability of all projects under construction or development, including those owned by
Unconsolidated Joint Ventures, are regularly evaluated on an individual basis under the accounting
for abandonment of assets or changes in use. To the extent a project, or individual components of
the project, are no longer considered to have value, the related capitalized costs are charged
against operations. Additionally, all properties are reviewed for impairment on an individual basis
whenever events or changes in circumstances indicate that their carrying value may not be
recoverable. Impairment of a shopping center owned by consolidated entities is recognized when the
sum of expected cash flows (undiscounted and without interest charges) is less than the carrying
value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint
Venture is recognized when the carrying value of the investment is not considered recoverable based
on evaluation of the severity and duration of the decline in value, including the results of
discounted cash flow and other valuation techniques. To the extent impairment has occurred, the
excess carrying value of the asset over its estimated fair value is charged to income. In the third
quarter of 2009, the Company recognized impairment charges on its investments in The Pier Shops and
Regency Square (Note 4). In the fourth quarter of 2008, the Company recognized impairment charges
on its Oyster Bay project (Note 4) and its Sarasota joint venture project (Note 5).
In leasing a shopping center space, the Company may provide funding to the lessee through a
tenant allowance. In accounting for a tenant allowance, the Company determines whether the
allowance represents funding for the construction of leasehold improvements and evaluates the
ownership, for accounting purposes, of such improvements. If the Company is considered the owner of
the leasehold improvements for accounting purposes, the Company capitalizes the amount of the
tenant allowance and depreciates it over the shorter of the useful life of the leasehold
improvements or the lease term. If the tenant allowance represents a payment for a purpose other
than funding leasehold improvements, or in the event the Company is not considered the owner of the
improvements for accounting purposes, the allowance is considered to be a lease incentive and is
recognized over the lease term as a reduction of rental revenue. Factors considered during this
evaluation usually include (1) who holds legal title to the improvements, (2) evidentiary
requirements concerning the spending of the tenant allowance, and (3) other controlling rights
provided by the lease agreement (e.g. unilateral control of the tenant space during the build-out
process). Determination of the accounting for a tenant allowance is made on a case-by-case basis,
considering the facts and circumstances of the individual tenant lease. Substantially all of the
Companys 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. Cash equivalents include $11.3 million at December 31, 2009 invested in a
single investment companys money market funds, which are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
Acquisition of Interests in Centers
The cost of acquiring an ownership interest or an additional ownership interest in a center is
allocated to the tangible assets acquired (such as land and building) and to any identifiable
intangible assets based on their estimated fair values at the date of acquisition. The fair value
of the property is determined on an as-if-vacant basis. Management considers various factors in
estimating the as-if-vacant value including an estimated lease up period, lost rents and carrying
costs. The identifiable intangible assets would include the estimated value of in-place leases,
above and below market in-place leases, and tenant relationships. The portion of the purchase
price that management determines should be allocated to identifiable intangible assets is amortized
in depreciation and amortization over the estimated life of the associated intangible asset (for
instance, the remaining life of the associated tenant lease).
Deferred Charges and Other Assets
Direct financing costs are deferred and amortized on a straight-line basis, which approximates
the effective interest method, over the terms of the related agreements as a component of interest
expense. Direct costs related to successful leasing activities are capitalized and amortized on a
straight-line basis over the lives of the related leases. All other deferred charges are amortized
on a straight-line basis over the terms of the agreements to which they relate.
F-11
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 Companys income
as interest expense.
The Company formally documents all relationships between hedging instruments and hedged items,
as well as its risk management objectives and strategies for undertaking various hedge
transactions. The Company assesses, both at the inception of the hedge and on an ongoing basis,
whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in the cash flows of the hedged items.
Income Taxes
The Company operates in such a manner as to qualify as a REIT under the applicable provisions
of the Internal Revenue Code; therefore, REIT taxable income is included in the taxable income of
its shareowners, to the extent distributed by the Company. To qualify as a REIT, the Company must
distribute at least 90% of its REIT taxable income prior to net capital gains to its shareowners
and meet certain other requirements. Additionally, no provision for federal income taxes for
consolidated partnerships has been made, as such taxes are the responsibility of the individual
partners. There are certain state income taxes incurred which are provided for in the Companys
financial statements.
In connection with the Tax Relief Extension Act of 1999, the Company made Taxable REIT
Subsidiary elections for all of its corporate subsidiaries pursuant to section 856(I) of the
Internal Revenue Code. The Companys Taxable REIT Subsidiaries are subject to corporate level
income taxes, including certain foreign income taxes for foreign operations, which are provided for
in the Companys financial statements.
Deferred tax assets and liabilities reflect the impact of temporary differences between the
amounts of assets and liabilities for financial reporting purposes and the bases of such assets and
liabilities as measured by tax laws. Deferred tax assets are reduced by a valuation allowance to
the amount where realization is more likely than not assured after considering all available
evidence, including expected taxable earnings and potential tax planning strategies. The Companys
temporary differences primarily relate to deferred compensation, depreciation and net operating
loss carryforwards.
In July 2007, the State of Michigan signed into law the Michigan Business Tax Act, replacing
the Michigan single business tax with a business income tax and modified gross receipts tax. These
new taxes became effective January 1, 2008, and, because they are based on or derived from
income-based measures, the accounting requirements for income taxes, apply as of the enactment
date. In September 2007, an amendment to the Michigan Business Tax Act was also signed into law
establishing a deduction to the business income tax base if temporary differences associated with
certain assets result in a net deferred tax liability as of September 30, 2007. The tax effect of
this deduction, which was equal to the amount of the aggregate deferred tax liability as of
September 30, 2007, has an indefinite carryforward period.
F-12
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Finite Life Entities
ASC Topic 480, Distinguishing Liabilities from Equity establishes standards for classifying
and measuring as liabilities certain financial instruments that embody obligations of the issuer
and have characteristics of both liabilities and equity. At December 31, 2009, the Company held
controlling majority interests in consolidated entities with specified termination dates in 2081
and 2083. The noncontrolling owners interests in these entities are to be settled upon termination
by distribution or transfer of either cash or specific assets of the underlying entity. The
estimated fair value of these noncontrolling interests were approximately $107.1 million at
December 31, 2009, compared to a book value of $(98.9) million, which was classified as
Noncontrolling Interests in the Companys Consolidated Balance Sheet.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
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 Companys chief operating decision makers in assessing
segment performance. EBITDA is believed to be a useful indicator of operating performance as it is
customary in the real estate and shopping center business to evaluate the performance of properties
on a basis unaffected by capital structure.
No single retail company represents 10% or more of the Companys revenues. Although the
Company operates a subsidiary headquartered in Hong Kong, there are not yet any material revenues
from customers or long-lived assets attributable to a country other than the United States of
America.
Other
Dollar amounts presented in tables within the notes to the consolidated financial statements
are stated in thousands, except share data or as otherwise noted.
Note 2 Acquisitions
The Mall at Partridge Creek
Partridge Creek, a 0.6 million square foot center, opened in October 2007 in Clinton Township,
Michigan. In May 2006, the Company engaged the services of a third-party investor to acquire
certain property associated with the project, in order to facilitate a Section 1031 like-kind
exchange to provide flexibility for disposing of assets in the future. The third-party investor was
the owner of the project and leased the land from a subsidiary of the Company. In turn, the owner
leased the project back to the Company. The Company provided approximately 45% of the project
funding under a junior subordinated financing, which was repaid in September 2008. The owner
provided $9 million in equity. Funding for the remaining project costs was provided by the owners
third-party recourse construction loan. In September 2008, the Company exercised its option to
purchase the third-party owners interests in Partridge Creek. The purchase price of $11.8 million
included the original owners equity contribution of $9 million plus a 12% cumulative return. The
excess of the purchase price over the book value of the interests acquired was approximately
$3.8 million and was allocated principally to building and improvements. The Company assumed all of
the obligations and was assigned all of the owners rights under the ground lease, the operating
lease, and any remaining obligations under the loans.
F-13
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Pier Shops at Caesars
The Pier Shops, located in Atlantic City, New Jersey, began opening in phases in June 2006.
Gordon Group Holdings LLC (Gordon) developed the center, and in January 2007, the Company assumed
full management and leasing responsibility for the center. In April 2007, the Company increased its
ownership in The Pier Shops to a 77.5% controlling interest. The remaining 22.5% interest continues
to be held by an affiliate of Gordon. The Company began consolidating The Pier Shops as of the
April 2007 purchase date. At closing, the Company made a $24.5 million equity investment in the
center, bringing its total equity investment, at that date, to $28.5 million. At the purchase date,
the book values of the centers assets and liabilities were $229.7 million and $171.3 million,
respectively. The excess of the book value of the net assets acquired over the purchase price was
approximately $17 million, which was allocated principally to building and improvements. In 2009,
the Company recorded an impairment of its investment in The Pier Shops (Note 4).
Note 3 Income Taxes
Income Tax Expense
The Companys income tax expense for the years ended December 31, 2009 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
State: |
|
|
|
|
|
|
|
|
Current |
|
$ |
1,017 |
|
|
$ |
775 |
|
Deferred |
|
|
385 |
|
|
|
342 |
|
Foreign: |
|
|
|
|
|
|
|
|
Current |
|
|
255 |
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense |
|
$ |
1,657 |
|
|
$ |
1,117 |
|
|
|
|
|
|
|
|
The Company had no federal income tax during these years as a result of net operating losses
incurred by the Companys Taxable REIT Subsidiaries.
Net Operating Loss Carryforwards
As of December 31, 2009, the Company has a total federal net operating loss carryforward of
$15.4 million, expiring as follows:
|
|
|
|
|
|
|
|
|
Tax Year |
|
Expiration |
|
Amount |
2002 |
|
|
2022 |
|
|
$ |
56 |
|
2003 |
|
|
|
|
|
|
|
|
2004 |
|
|
2024 |
|
|
|
3,009 |
|
2005 |
|
|
2025 |
|
|
|
380 |
|
2006 |
|
|
2026 |
|
|
|
176 |
|
2007 |
|
|
2027 |
|
|
|
3,304 |
|
2008 |
|
|
2028 |
|
|
|
5,326 |
|
2009 |
|
|
2029 |
|
|
|
3,168 |
|
The Company also has a foreign net operating loss carryforward of $3.4 million, $0.7 million
of which has an indefinite carryforward period, $0.9 million expires in 2013, and $1.8 million
expires in 2019.
F-14
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred Taxes
Deferred tax assets and liabilities as of December 31, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Federal |
|
$ |
8,697 |
|
|
$ |
9,188 |
|
Foreign |
|
|
1,513 |
|
|
|
1,183 |
|
State |
|
|
6,467 |
|
|
|
3,910 |
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
$ |
16,677 |
|
|
$ |
14,281 |
|
Valuation allowance |
|
|
(9,090 |
) |
|
|
(7,535 |
) |
|
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
7,587 |
|
|
$ |
6,746 |
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Federal |
|
$ |
615 |
|
|
$ |
33 |
|
State |
|
|
4,396 |
|
|
|
3,769 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
$ |
5,011 |
|
|
$ |
3,802 |
|
|
|
|
|
|
|
|
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 Managers profitability, the timing and amounts of
gains on land sales, the profitability of the Companys Asian operations, the future profitability
of the Companys unitary filing group for Michigan Business Tax purposes, and other factors
affecting the results of operations of the Taxable REIT Subsidiaries. The valuation allowances
relate to net operating loss carryforwards or tax basis differences where there is uncertainty
regarding their realizability.
Tax Status of Dividends
Dividends declared on the Companys common and preferred stock and their tax status are
presented in the following tables. The tax status of the Companys dividends in 2009, 2008, and
2007 may not be indicative of future periods. The portion of dividends paid in 2008 shown below as
capital gains are designated as capital gain dividends for tax purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
15% Rate |
|
Unrecaptured |
|
|
per common |
|
Return |
|
Ordinary |
|
long term |
|
Sec. 1250 |
Year |
|
share declared |
|
of capital |
|
income |
|
capital gain |
|
capital gain |
2009 |
|
$ |
1.660 |
|
|
$ |
0.6467 |
|
|
$ |
1.0133 |
|
|
$ |
0.0000 |
|
|
$ |
0.0000 |
|
2008 |
|
|
1.660 |
|
|
|
0.0000 |
|
|
|
1.3324 |
|
|
|
0.3011 |
|
|
|
0.0265 |
|
2007 |
|
|
1.540 |
|
|
|
0.0000 |
|
|
|
1.5385 |
|
|
|
0.0015 |
|
|
|
0.0000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per |
|
|
|
|
|
15% Rate |
|
Unrecaptured |
|
|
Series G Preferred |
|
Ordinary |
|
long term |
|
Sec. 1250 |
Year |
|
share declared |
|
income |
|
capital gain |
|
capital gain |
2009 |
|
$ |
2.000 |
|
|
$ |
2.0000 |
|
|
$ |
0.0000 |
|
|
$ |
0.0000 |
|
2008 |
|
|
2.000 |
|
|
|
1.6053 |
|
|
|
0.3628 |
|
|
|
0.0319 |
|
2007 |
|
|
2.000 |
|
|
|
1.9981 |
|
|
|
0.0019 |
|
|
|
0.0000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per |
|
|
|
|
|
15% Rate |
|
Unrecaptured |
|
|
Series H Preferred |
|
Ordinary |
|
long term |
|
Sec. 1250 |
Year |
|
share declared |
|
income |
|
capital gain |
|
capital gain |
2009 |
|
$ |
1.9063 |
|
|
$ |
1.9063 |
|
|
$ |
0.0000 |
|
|
$ |
0.0000 |
|
2008 |
|
|
1.9060 |
|
|
|
1.5300 |
|
|
|
0.3457 |
|
|
|
0.0303 |
|
2007 |
|
|
1.9060 |
|
|
|
1.9042 |
|
|
|
0.0018 |
|
|
|
0.0000 |
|
F-15
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Uncertain Tax Positions
The Company had no unrecognized tax benefits as of or during the three year period ended
December 31, 2009. The Company expects no significant increases or decreases in unrecognized tax
benefits due to changes in tax positions within one year of December 31, 2009. The Company has no
material interest or penalties relating to income taxes recognized in the Consolidated Statement of
Operations for the years ended December 31, 2009, 2008, and 2007 or in the Consolidated Balance
Sheet as of December 31, 2009 and 2008. As of December 31, 2009, returns for the calendar years
2006 through 2009 remain subject to examination by U.S. and various state and foreign tax
jurisdictions.
Note 4 Properties
Properties at December 31, 2009 and December 31, 2008 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Land |
|
$ |
254,994 |
|
|
$ |
263,619 |
|
Buildings, improvements, and equipment |
|
|
3,173,724 |
|
|
|
3,363,638 |
|
Construction in process |
|
|
4,040 |
|
|
|
10,650 |
|
Development pre-construction costs |
|
|
64,095 |
|
|
|
61,573 |
|
|
|
|
|
|
|
|
|
|
$ |
3,496,853 |
|
|
$ |
3,699,480 |
|
Accumulated depreciation and amortization |
|
|
(1,100,610 |
) |
|
|
(1,049,626 |
) |
|
|
|
|
|
|
|
|
|
$ |
2,396,243 |
|
|
$ |
2,649,854 |
|
|
|
|
|
|
|
|
Buildings, improvements, and equipment under capital leases were $0.4 million and $2.5 million
at December 31, 2009 and 2008, respectively. Amortization of assets under capital leases is
included within depreciation expense.
Depreciation expense for 2009, 2008, and 2007 was $139.7 million, $138.7 million, and
$128.4 million, respectively.
The charge to operations in 2009, 2008, and 2007 for domestic and non-U.S. pre-development
activities was $12.3 million, $18.5 million, and $11.9 million, respectively.
The Pier Shops at Caesars
In September 2009, the Company concluded that the carrying value (book value) of the
investment in the consolidated joint venture that owns The Pier Shops was impaired and recognized a
non-cash charge of $107.7 million, which was allocated primarily to buildings and improvements. The
charge represents the excess of The Pier Shops book value of the investment over its fair value of
approximately $52 million. The Operating Partnerships share of the charge was $101.8 million. The
Companys conclusion was based on a decision by its Board of Directors, in connection with a review
of the Companys capital plan, to discontinue the Companys financial support of The Pier Shops.
The $135 million loan encumbering the center was turned over to the special servicer and is
currently in default. The Company will continue to record the operations of the center in its
results until the loan obligation is extinguished upon transfer of the title of The Pier Shops.
The Boards decision considered that The Pier Shops current cash flows, as well as estimates
of future cash flows, are insufficient to cover debt service and operating costs due to economic
conditions, tenant sales performance, high capital requirements to complete the propertys
lease-up, high operating costs, and the anticipated refinancing shortfall at the loans maturity in
May 2017. The default on this loan did not trigger any cross defaults on the Companys lines of
credit or any other indebtedness.
F-16
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Regency Square
In September 2009, the Company concluded that the carrying value of the investment in Regency
Square was also impaired and recognized a non-cash charge of $59.0 million, of which $9.6 million
was allocated to land and $49.4 million to buildings and improvements. The charge represents the
excess book value of the investment over its fair value of approximately $29 million. The Companys
conclusion was based on current estimates of future cash flows for the property, which will be
negatively impacted by necessary capital expenditures and declining net operating income. At the
current level of cash flow, Regency Square intends to continue to service its non-recourse mortgage
loan. This loan has a principal balance of $74.1 million as of December 31, 2009, with
$71.6 million due on this amortizing loan at its maturity in November 2011.
Oyster Bay
In January 2009, the Appellate Division of the Supreme Court of the State of New York, Second
Department, reversed the Supreme Courts order directing the Town Board of the Town of Oyster Bay
to issue a special use permit for the construction of The Mall at Oyster Bay. The court also held
that the Town Boards request for a supplemental environmental impact statement was proper. The
Company determined in February 2009 that it would recognize in the fourth quarter of 2008 a charge
to income of $117.9 million relating to the Oyster Bay project. This determination was reached
after an overall assessment of the probability of the development of the mall as designed and a
review of the Companys previously capitalized project costs. The charge included the costs of
previous development activities as well as holding and other costs that management believes will
likely not benefit the development if and when the Company obtains the rights to build the center.
In June 2009, the Court of Appeals of the State of New York denied the Companys motion for leave
to appeal the January 2009 decision of the Appellate Division of the Supreme Court of the State of
New York. The Company is expensing costs relating to Oyster Bay until it is probable that it will
be able to successfully move forward with a project. The Company began expensing carrying costs as
incurred in the fourth quarter of 2008. The Companys remaining capitalized investment in the
project as of December 31, 2009 is $39.8 million, consisting of land and site improvements. If the
Company is ultimately unsuccessful in obtaining the right to build the center, it is uncertain
whether the Company would be able to recover the full amount of this capitalized investment through
alternate uses of the land.
Other
One shopping center pays annual special assessment levies of a Community Development District
(CDD), for which the Company has capitalized the related infrastructure assets and improvements
(Note 17).
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 direct or indirect managing general partner or managing member of
these Unconsolidated Joint Ventures, except for the ventures that own Arizona Mills, The Mall at
Millenia, and Waterside Shops (Waterside).
|
|
|
|
|
|
|
Ownership as of |
Shopping Center |
|
December 31, 2009 and 2008 |
Arizona Mills |
|
|
50 |
% |
Fair Oaks |
|
|
50 |
|
The Mall at Millenia |
|
|
50 |
|
Stamford Town Center |
|
|
50 |
|
Sunvalley |
|
|
50 |
|
Waterside Shops |
|
|
25 |
|
Westfarms |
|
|
79 |
|
F-17
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Companys 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 Companys cost of its investment in excess of the
historical net book values of the Unconsolidated Joint Ventures and (ii) the Operating
Partnerships adjustments to the book basis, including intercompany profits on sales of services
that are capitalized by the Unconsolidated Joint Ventures. The Companys additional basis allocated
to depreciable assets is recognized on a straight-line basis over 40 years. The Operating
Partnerships differences in bases are amortized over the useful lives of the related assets.
In its Consolidated Balance Sheet, the Company separately reports its investment in
Unconsolidated Joint Ventures for which accumulated distributions have exceeded investments in and
net income of the Unconsolidated Joint Ventures. The net equity of certain Unconsolidated 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.
University Town Center
In May 2008, the Company entered into agreements to jointly develop University Town Center, a
regional mall in Sarasota, Florida. Under the agreements, the Company would have owned a
noncontrolling 25% interest in the project. Due to the current economic and retail environment, in
December 2008 the Company announced that the project had been put on hold. The Company does not
know if or when it will acquire an interest in the land and move forward with the project. Due to
this uncertainty, the Company recognized an $8.3 million charge to income in the fourth quarter of
2008. This charge is included in Equity in Income of Unconsolidated Joint Ventures on the
Consolidated Statement of Operations and represents the Companys share of project costs and its
total investment in the project. The contribution payable to the University Town Center joint
venture that existed at December 31, 2008 represented the Companys share of previously unpaid
costs, which were funded in 2009.
Westfarms
See Note 15 for information on the litigation charges recognized in 2009 relating to the
Westfarms joint venture.
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 Partnerships beneficial
interest in the combined information. Beneficial interest is calculated based on the Operating
Partnerships ownership interest in each of the Unconsolidated Joint Ventures. Amounts related to
The Pier Shops are included in the combined information of the Unconsolidated Joint Ventures
through the date of the Companys acquisition of a controlling interest in April 2007 (Note 2). The
Operating Partnerships investment in The Pier Shops represented an effective 6% interest based on
relative equity contributions prior to the Company acquiring a controlling interest.
F-18
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
Assets: |
|
|
|
|
|
|
|
|
Properties |
|
$ |
1,094,963 |
|
|
$ |
1,087,341 |
|
Accumulated depreciation and amortization |
|
|
(396,518 |
) |
|
|
(366,168 |
) |
|
|
|
|
|
|
|
|
|
$ |
698,445 |
|
|
$ |
721,173 |
|
Cash and cash equivalents |
|
|
23,117 |
|
|
|
28,946 |
|
Accounts and notes receivable, less allowance for doubtful accounts
of $1,703 and $1,419 in 2009 and 2008 |
|
|
26,982 |
|
|
|
26,603 |
|
Deferred charges and other assets |
|
|
17,737 |
|
|
|
20,098 |
|
|
|
|
|
|
|
|
|
|
$ |
766,281 |
|
|
$ |
796,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and accumulated deficiency in assets: |
|
|
|
|
|
|
|
|
Notes payable |
|
$ |
1,092,806 |
|
|
$ |
1,103,903 |
|
Accounts payable and other liabilities |
|
|
50,615 |
|
|
|
61,570 |
|
TRGs accumulated deficiency in assets |
|
|
(205,566 |
) |
|
|
(201,466 |
) |
Unconsolidated Joint Venture Partners accumulated deficiency
in assets |
|
|
(171,574 |
) |
|
|
(167,187 |
) |
|
|
|
|
|
|
|
|
|
$ |
766,281 |
|
|
$ |
796,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRGs accumulated deficiency in assets (above) |
|
$ |
(205,566 |
) |
|
$ |
(201,466 |
) |
Contribution payable |
|
|
|
|
|
|
(1,005 |
) |
TRG basis adjustments, including elimination of intercompany profit |
|
|
70,371 |
|
|
|
71,623 |
|
TCOs additional basis |
|
|
64,694 |
|
|
|
66,640 |
|
|
|
|
|
|
|
|
Net Investment in Unconsolidated Joint Ventures |
|
$ |
(70,501 |
) |
|
$ |
(64,208 |
) |
Distributions in excess of investments in and net income of
Unconsolidated Joint Ventures |
|
|
160,305 |
|
|
|
154,141 |
|
|
|
|
|
|
|
|
Investment in Unconsolidated Joint Ventures |
|
$ |
89,804 |
|
|
$ |
89,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Revenues |
|
$ |
272,535 |
|
|
$ |
271,813 |
|
|
$ |
262,587 |
|
|
|
|
|
|
|
|
|
|
|
Maintenance, taxes, utilities, and other operating expenses |
|
$ |
95,775 |
|
|
$ |
93,218 |
|
|
$ |
90,782 |
|
Litigation charges (Note 15) |
|
|
38,500 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
64,405 |
|
|
|
65,002 |
|
|
|
66,232 |
|
Depreciation and amortization |
|
|
38,396 |
|
|
|
39,756 |
|
|
|
37,355 |
|
|
|
|
|
|
|
|
|
|
|
Total operating costs |
|
$ |
237,076 |
|
|
$ |
197,976 |
|
|
$ |
194,369 |
|
|
|
|
|
|
|
|
|
|
|
Nonoperating income |
|
|
87 |
|
|
|
683 |
|
|
|
1,587 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
35,546 |
|
|
$ |
74,520 |
|
|
$ |
69,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to TRG |
|
$ |
10,748 |
|
|
$ |
41,857 |
|
|
$ |
40,518 |
|
Realized intercompany profit, net of depreciation on TRGs
basis adjustments |
|
|
2,686 |
|
|
|
3,770 |
|
|
|
1,924 |
|
Depreciation of TCOs additional basis |
|
|
(1,946 |
) |
|
|
(1,948 |
) |
|
|
(1,944 |
) |
Impairment charge |
|
|
|
|
|
|
(8,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of Unconsolidated Joint Ventures |
|
$ |
11,488 |
|
|
$ |
35,356 |
|
|
$ |
40,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial interest in Unconsolidated Joint Ventures operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues less maintenance, taxes, utilities, and other
operating expenses |
|
$ |
67,815 |
|
|
$ |
101,089 |
|
|
$ |
96,844 |
|
Interest expense |
|
|
(33,427 |
) |
|
|
(33,777 |
) |
|
|
(33,311 |
) |
Depreciation and amortization |
|
|
(22,900 |
) |
|
|
(23,633 |
) |
|
|
(23,035 |
) |
Impairment charge |
|
|
|
|
|
|
(8,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of Unconsolidated Joint Ventures |
|
$ |
11,488 |
|
|
$ |
35,356 |
|
|
$ |
40,498 |
|
|
|
|
|
|
|
|
|
|
|
F-19
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Other
The provision for losses on accounts receivable of the Unconsolidated Joint Ventures was
$0.9 million, $1.0 million, and $1.2 million for the years ended December 31, 2009, 2008, and 2007,
respectively.
Deferred charges and other assets of $17.7 million at December 31, 2009 were comprised of
leasing costs of $26.6 million, before accumulated amortization of $(13.7) million, net deferred
financing costs of $2.6 million, and other net charges of $2.2 million. Deferred charges and other
assets of $20.1 million at December 31, 2008 were comprised of leasing costs of $27.4 million,
before accumulated amortization of $(13.5) million, net deferred financing costs of $3.9 million,
and other net charges of $2.3 million.
The estimated fair value of the Unconsolidated Joint Ventures notes payable was $1.1 billion
at both December 31, 2009 and 2008.
Depreciation expense on properties for 2009, 2008, and 2007 was $33.8 million, $36.1 million,
and $33.2 million.
In January 2008 and the first quarter of 2007, the Company received adjustments relating to
accounting policies and procedures of The Mills Corporation for years prior to 2007. These prior
period adjustments, including $3.0 million of reductions to minimum rent related to tenant
inducements, $0.8 million reduction to depreciation and amortization, and other adjustments,
totaled to a net $2.0 million reduction in income. The Companys share was a $1.0 million reduction
to income for the year ended December 31, 2007. The Company received audited financial statements
for Arizona Mills as of and for the year ended December 31, 2007 from Simon Property Group, Inc.
There were no material adjustments recognized relating to the Companys investment in Arizona Mills
as a result of the finalization of these financial statements.
Condensed Financial Information of Individually Significant Unconsolidated Joint
Venture
The following is summarized financial information for West Farms Associates, an individually
significant Unconsolidated Joint Venture in 2009. This information is provided as of December 31,
2009 and 2008 and for the years ended December 31, 2009, 2008, and 2007. The Company owns a 79%
general partnership interest in West Farms Associates, owner of Westfarms mall located in West
Hartford, Connecticut. West Farms Associates qualified as an individually significant subsidiary in
2009 under Regulation S-Xs computational tests as a result of the litigation charges incurred
during the year.
|
|
|
|
|
|
|
|
|
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
Assets: |
|
|
|
|
|
|
|
|
Properties |
|
$ |
167,332 |
|
|
$ |
165,657 |
|
Accumulated depreciation and amortization |
|
|
(81,734 |
) |
|
|
(76,492 |
) |
|
|
|
|
|
|
|
|
|
$ |
85,598 |
|
|
$ |
89,165 |
|
Cash and cash equivalents |
|
|
2,784 |
|
|
|
6,441 |
|
Accounts and notes receivable, less allowance for doubtful accounts
of $193 and $242 in 2009 and 2008 |
|
|
1,592 |
|
|
|
1,306 |
|
Deferred charges and other assets |
|
|
3,290 |
|
|
|
3,907 |
|
|
|
|
|
|
|
|
|
|
$ |
93,264 |
|
|
$ |
100,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and accumulated deficiency in assets: |
|
|
|
|
|
|
|
|
Notes payable |
|
$ |
188,888 |
|
|
$ |
192,591 |
|
Accounts payable and other liabilities |
|
|
10,835 |
|
|
|
11,706 |
|
TRGs accumulated deficiency in assets |
|
|
(82,272 |
) |
|
|
(79,918 |
) |
Other general partners accumulated deficiency
in assets |
|
|
(24,187 |
) |
|
|
(23,560 |
) |
|
|
|
|
|
|
|
|
|
$ |
93,264 |
|
|
$ |
100,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRGs accumulated deficiency in assets (above) |
|
$ |
(82,272 |
) |
|
$ |
(79,918 |
) |
TRG basis adjustments, including elimination of intercompany profit |
|
|
(3,919 |
) |
|
|
(4,319 |
) |
TCOs additional basis |
|
|
22,685 |
|
|
|
23,368 |
|
|
|
|
|
|
|
|
Investment in West Farms Associates |
|
$ |
(63,506 |
) |
|
$ |
(60,869 |
) |
|
|
|
|
|
|
|
F-20
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
$ |
34,079 |
|
|
$ |
31,888 |
|
|
$ |
32,434 |
|
Expense recoveries |
|
|
17,033 |
|
|
|
16,476 |
|
|
|
15,626 |
|
Other |
|
|
1,517 |
|
|
|
3,075 |
|
|
|
1,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
52,629 |
|
|
$ |
51,439 |
|
|
$ |
50,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Repairs and maintenance |
|
$ |
7,945 |
|
|
$ |
7,791 |
|
|
$ |
7,678 |
|
Real estate taxes |
|
|
2,020 |
|
|
|
2,009 |
|
|
|
2,148 |
|
Other operating |
|
|
10,498 |
|
|
|
8,664 |
|
|
|
8,191 |
|
Litigation charges (Note 15) |
|
|
38,500 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
12,366 |
|
|
|
12,557 |
|
|
|
12,820 |
|
Depreciation and amortization |
|
|
6,475 |
|
|
|
6,738 |
|
|
|
6,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
77,804 |
|
|
$ |
37,759 |
|
|
$ |
37,395 |
|
|
|
|
|
|
|
|
|
|
|
Nonoperating income |
|
|
18 |
|
|
|
102 |
|
|
|
136 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(25,157 |
) |
|
$ |
13,782 |
|
|
$ |
12,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to TRG |
|
$ |
(19,861 |
) |
|
$ |
10,879 |
|
|
$ |
10,085 |
|
Realized intercompany profit, net of depreciation on TRGs
basis adjustments |
|
|
1,593 |
|
|
|
1,813 |
|
|
|
1,535 |
|
Depreciation of TCOs additional basis |
|
|
(683 |
) |
|
|
(684 |
) |
|
|
(684 |
) |
|
|
|
|
|
|
|
|
|
|
Equity in income (loss) of West Farms Associates |
|
$ |
(18,951 |
) |
|
$ |
12,008 |
|
|
$ |
10,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(25,157 |
) |
|
$ |
13,782 |
|
|
$ |
12,776 |
|
Depreciation and amortization |
|
|
6,475 |
|
|
|
6,738 |
|
|
|
6,558 |
|
Increase (decrease) in cash attributable to changes
in assets and liabilities |
|
|
1,749 |
|
|
|
(366 |
) |
|
|
1,096 |
|
Other |
|
|
476 |
|
|
|
476 |
|
|
|
487 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
(16,457 |
) |
|
$ |
20,630 |
|
|
$ |
20,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Used In Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to mall facilities |
|
$ |
(5,197 |
) |
|
$ |
(10,063 |
) |
|
$ |
(2,261 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage and other notes payable |
|
$ |
(3,703 |
) |
|
$ |
(3,491 |
) |
|
$ |
(3,418 |
) |
Cash contributions |
|
|
34,000 |
|
|
|
|
|
|
|
|
|
Cash distributions |
|
|
(12,300 |
) |
|
|
(4,500 |
) |
|
|
(14,500 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
$ |
17,997 |
|
|
$ |
(7,991 |
) |
|
$ |
(17,918 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
(3,657 |
) |
|
$ |
2,576 |
|
|
$ |
738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the year |
|
|
6,441 |
|
|
|
3,865 |
|
|
|
3,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year |
|
$ |
2,784 |
|
|
$ |
6,441 |
|
|
$ |
3,865 |
|
|
|
|
|
|
|
|
|
|
|
F-21
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 6 Accounts and Notes Receivable
Accounts and notes receivable at December 31, 2009 and December 31, 2008 are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Trade |
|
$ |
21,767 |
|
|
$ |
29,378 |
|
Notes |
|
|
9,175 |
|
|
|
7,471 |
|
Straight-line rent and recoveries |
|
|
20,455 |
|
|
|
19,690 |
|
Other |
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
$ |
51,397 |
|
|
$ |
56,627 |
|
Less: Allowance for doubtful accounts
and notes |
|
|
(6,894 |
) |
|
|
(9,895 |
) |
|
|
|
|
|
|
|
|
|
$ |
44,503 |
|
|
$ |
46,732 |
|
|
|
|
|
|
|
|
Notes receivable as of December 31, 2009 provide interest at a range of interest rates from
2.9% to 7.5% (with a weighted average interest rate of 3.9%) and mature at various dates through
December 2019. The balances at December 31, 2009 and 2008 included $2.0 million of notes receivable
from three tenants at The Pier Shops. The Company has recorded a provision of $1.4 million against
these notes, which was charged to income in 2008. The balance at December 31, 2009 included $7.2
million related to the joint venture partners at Westfarms for their share of the litigation charges
that were paid in 2009 (Note 15).
Note 7 Deferred Charges and Other Assets
Deferred charges and other assets at December 31, 2009 and December 31, 2008 are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Leasing costs |
|
$ |
33,991 |
|
|
$ |
38,700 |
|
Accumulated amortization |
|
|
(15,286 |
) |
|
|
(19,872 |
) |
|
|
|
|
|
|
|
|
|
$ |
18,705 |
|
|
$ |
18,828 |
|
The Mall at Studio City escrow |
|
|
|
|
|
|
54,334 |
|
Deferred financing costs, net |
|
|
5,679 |
|
|
|
9,739 |
|
Intangibles, net |
|
|
1,247 |
|
|
|
2,241 |
|
Insurance deposit (Note 17) |
|
|
9,689 |
|
|
|
8,957 |
|
Investments (Note 17) |
|
|
1,665 |
|
|
|
4,351 |
|
Deferred tax asset, net |
|
|
7,587 |
|
|
|
6,746 |
|
Prepaid expenses |
|
|
3,302 |
|
|
|
3,387 |
|
Other, net |
|
|
7,231 |
|
|
|
15,904 |
|
|
|
|
|
|
|
|
|
|
$ |
55,105 |
|
|
$ |
124,487 |
|
|
|
|
|
|
|
|
Intangible assets are primarily comprised of the fair value of in-place leases recognized in
connection with acquisitions.
In 2008, Taubman Asia entered into agreements to acquire a 25% interest in The Mall at Studio
City, the retail component of Macao Studio City, a major mixed-use project on the Cotai Strip in
Macao, China. In addition, Taubman Asia entered into long-term agreements to perform development,
management, and leasing services for the shopping center. In August 2009, the Companys Macao
agreements were terminated and its initial $54 million cash payment was returned because the
financing for the project was not completed.
F-22
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 8 Notes Payable
Notes payable at December 31, 2009 and December 31, 2008 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stated |
|
|
|
Balance Due |
|
|
Facility |
|
|
|
2009 |
|
|
2008 |
|
|
Interest Rate |
|
Maturity Date |
|
on Maturity |
|
|
Amount |
|
Beverly Center |
|
$ |
328,365 |
|
|
$ |
333,736 |
|
|
5.28% |
|
02/11/14 |
|
$ |
303,277 |
|
|
|
|
|
Cherry Creek Shopping Center |
|
|
280,000 |
|
|
|
280,000 |
|
|
5.24% |
|
06/08/16 |
|
|
280,000 |
|
|
|
|
|
Cherry Creek Shopping Center |
|
|
|
|
|
|
245 |
|
|
Prime |
|
12/20/09 |
|
|
|
|
|
$ |
2,000 |
|
Dolphin Mall |
|
|
64,000 |
|
|
|
139,000 |
|
|
LIBOR + 0.70% |
|
02/14/11 |
(1) |
|
64,000 |
|
|
|
|
(1) |
Fairlane Town Center |
|
|
80,000 |
|
|
|
80,000 |
|
|
LIBOR + 0.70% |
|
02/14/11 |
(1) |
|
80,000 |
|
|
|
|
(1) |
Great Lakes Crossing |
|
|
135,144 |
|
|
|
137,877 |
|
|
5.25% |
|
03/11/13 |
|
|
125,507 |
|
|
|
|
|
International Plaza |
|
|
325,000 |
|
|
|
325,000 |
|
|
LIBOR +1.15% (2) |
|
01/08/11 |
(2) |
|
325,000 |
|
|
|
|
|
MacArthur Center |
|
|
129,358 |
|
|
|
132,500 |
|
|
7.59% |
|
10/01/10 |
|
|
126,884 |
|
|
|
|
|
Northlake Mall |
|
|
215,500 |
|
|
|
215,500 |
|
|
5.41% |
|
02/06/16 |
|
|
215,500 |
|
|
|
|
|
The Mall at Partridge Creek |
|
|
73,770 |
|
|
|
72,791 |
|
|
LIBOR + 1.15% |
|
09/07/10 |
|
|
73,770 |
|
|
|
81,000 |
|
The Pier Shops at Caesars (Note 4) |
|
|
135,000 |
|
|
|
135,000 |
|
|
(3) |
|
|
(3) |
|
|
(3) |
|
|
|
|
Regency Square |
|
|
74,085 |
|
|
|
75,388 |
|
|
6.75% |
|
11/01/11 |
|
|
71,569 |
|
|
|
|
|
The Mall at Short Hills |
|
|
540,000 |
|
|
|
540,000 |
|
|
5.47% |
|
12/14/15 |
|
|
540,000 |
|
|
|
|
|
Stony Point Fashion Park |
|
|
107,237 |
|
|
|
108,884 |
|
|
6.24% |
|
06/01/14 |
|
|
98,585 |
|
|
|
|
|
Twelve Oaks Mall |
|
|
|
|
|
|
10,000 |
|
|
LIBOR + 0.70% |
|
02/14/11 |
(1) |
|
|
|
|
|
|
(1) |
The Mall at Wellington Green |
|
|
200,000 |
|
|
|
200,000 |
|
|
5.44% |
|
05/06/15 |
|
|
200,000 |
|
|
|
|
|
Line of Credit |
|
|
3,560 |
|
|
|
10,900 |
|
|
Variable Bank Rate |
|
02/14/11 |
|
|
3,560 |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,691,019 |
|
|
$ |
2,796,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Dolphin, Fairlane, and Twelve Oaks are the borrowers and collateral for the $550 million
revolving credit facility. The unused borrowing capacity at December 31, 2009 was
$406 million. Sublimits may be reallocated quarterly but not more often than twice a year. The
facility has a one year extension option. |
|
(2) |
|
Stated interest rate is swapped to an effective rate of 5.01%. The loan has two one-year
extension options. |
|
(3) |
|
As of December 31, 2009, The Pier Shops loan is in default. Interest accrues at the default
rate of 10.01% rather than the original stated rate of 6.01% (Note 4). |
Notes payable are collateralized by properties with a net book value of $2.1 billion at
December 31, 2009.
The following table presents scheduled principal payments on notes payable as of December 31,
2009:
|
|
|
|
|
2010 |
|
$ |
349,816 |
(1) |
2011 |
|
|
556,141 |
(2) |
2012 |
|
|
11,413 |
|
2013 |
|
|
134,802 |
|
2014 |
|
|
403,347 |
|
Thereafter |
|
|
1,235,500 |
|
|
|
|
|
|
|
$ |
2,691,019 |
|
|
|
|
|
|
|
|
(1) |
|
The Pier Shops loan is in default. Debt maturity is included in 2010 when the debt
obligation is expected to be extinguished upon transfer of the title to the center. |
|
(2) |
|
Includes $144 million with a one year extension option and $325 million with two one-year
extension options. |
Refinancing
The Company expects to complete the refinancing on the Partridge Creek loan during the first
half of 2010, extending the maturity for three years with a one-year extension option. The Company
expects a 2% LIBOR floor and a spread of 3.5%, which with fees would result in an all-in rate of
nearly 6%. The Company is in discussions with a variety of lenders to refinance the MacArthur and
Arizona Mills loans that also mature in 2010.
F-23
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Debt Covenants and Guarantees
Certain loan agreements contain various restrictive covenants, including a minimum net worth
requirement, a maximum payout ratio on distributions, a minimum debt yield ratio, a maximum
leverage ratio, minimum interest coverage ratios and a minimum fixed charges coverage ratio, the
latter being the most restrictive. Other than The Pier Shops loan, which is in default, the
Operating Partnership is in compliance with all of its covenants and loan obligations as of
December 31, 2009. The default on this loan did not trigger any cross defaults on the Companys
lines of credit or any other indebtedness. The maximum payout ratio on distributions covenant
limits the payment of distributions generally to 95% of funds from operations, as defined in the
loan agreements, except as required to maintain the Companys tax status, pay preferred
distributions, and for distributions related to the sale of certain assets.
Payments of principal and interest on the loans in the following table are guaranteed by the
Operating Partnership as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRGs |
|
Amount of |
|
|
|
|
|
|
|
|
|
|
beneficial |
|
loan balance |
|
% of loan |
|
|
|
|
Loan |
|
interest in loan |
|
guaranteed by |
|
balance |
|
% of interest |
|
|
balance as |
|
balance as |
|
TRG as |
|
guaranteed |
|
guaranteed |
Center |
|
of 12/31/09 |
|
of 12/31/09 |
|
of 12/31/09 |
|
by TRG |
|
by TRG |
|
|
(in millions of dollars) |
|
|
|
|
|
|
|
|
Dolphin Mall |
|
|
64.0 |
|
|
|
64.0 |
|
|
|
64.0 |
|
|
|
100 |
% |
|
|
100 |
% |
Fairlane Town Center |
|
|
80.0 |
|
|
|
80.0 |
|
|
|
80.0 |
|
|
|
100 |
% |
|
|
100 |
% |
Twelve Oaks Mall |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
The Operating Partnership has also guaranteed certain obligations of Partridge Creek, which is
encumbered by a $73.8 million recourse construction loan (Note 2).
The Company is required to escrow cash balances for specific uses stipulated by its lenders.
As of December 31, 2009 and December 31, 2008, the Companys cash balances restricted for these
uses were $3.5 million and $2.9 million, respectively. Such amounts are included within cash and
cash equivalents in the Companys Consolidated Balance Sheet.
Beneficial Interest in Debt and Interest Expense
The Operating Partnerships 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 Partnerships beneficial interest in the
consolidated subsidiaries excludes debt and interest related to the noncontrolling interests in
Cherry Creek (50%), International Plaza (49.9%), The Pier Shops (22.5%), The Mall at Wellington
Green (10%), and MacArthur Center (5%).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 100% |
|
At Beneficial Interest |
|
|
|
|
|
|
Unconsolidated |
|
|
|
|
|
Unconsolidated |
|
|
Consolidated |
|
Joint |
|
Consolidated |
|
Joint |
|
|
Subsidiaries |
|
Ventures |
|
Subsidiaries |
|
Ventures |
Debt as of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
$ |
2,691,019 |
|
|
$ |
1,092,806 |
|
|
$ |
2,332,030 |
|
|
$ |
559,817 |
|
December 31, 2008 |
|
|
2,796,821 |
|
|
|
1,103,903 |
|
|
|
2,437,590 |
|
|
|
566,437 |
|
Capitalized interest: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009 |
|
$ |
1,257 |
|
|
$ |
23 |
|
|
$ |
1,246 |
|
|
$ |
11 |
|
Year ended December 31, 2008 |
|
|
7,972 |
|
|
|
139 |
|
|
|
7,819 |
|
|
|
101 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009 |
|
$ |
145,670 |
|
|
$ |
64,405 |
|
|
$ |
125,823 |
|
|
$ |
33,427 |
|
Year ended December 31, 2008 |
|
|
147,397 |
|
|
|
65,002 |
|
|
|
127,769 |
|
|
|
33,777 |
|
F-24
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 9 Noncontrolling Interests
New Accounting Requirements Background and Reclassifications
On January 1, 2009, the Company adopted the new requirements of ASC 810 as it relates to
noncontrolling interests (formerly Statement of Financial Accounting Standards (SFAS) No. 160
Noncontrolling Interests in Consolidated Financial Statements an amendment of Accounting
Research Bulletin (ARB) No. 51). The new requirements amended prior accounting and reporting
standards for the noncontrolling interest (previously referred to as a minority interest) in a
subsidiary. The requirements generally require noncontrolling interests to be treated as a separate
component of equity (not as a liability or other item outside of permanent equity) and consolidated
net income and comprehensive income to include the noncontrolling interests share. The calculation
of earnings per share continues to be based on income amounts attributable to the parent. The
requirements also contain a single method of accounting for transactions that change a parents
ownership interest in a subsidiary by requiring that all such transactions be accounted for as
equity transactions if the parent retains its controlling financial interest in the subsidiary.
The consolidated financial statements presented include reclassifications to previously
reported amounts to conform to the new presentation requirements. These reclassifications did not
affect the amounts previously reported as net income attributable to common shareowners or earnings
per share.
Presentation
As of December 31, 2009 and 2008, 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. On January 1, 2009, balances attributable to these noncontrolling
interests, including amounts previously included in Deferred Charges and Other Assets, were
reclassified to become a separate component of equity as of all dates presented. Also, consolidated
net income and comprehensive income were reclassified to include the amounts attributable to the
noncontrolling interests. These noncontrolling interests reported in equity are not subject to any
mandatory redemption requirements or other redemption features outside of the Companys control
that would result in presentation outside of permanent equity pursuant to general accounting
standards regarding the classification and measurement of the redeemable equity instruments.
Measurement
Prior to adoption of the new requirements for noncontrolling interests, the net equity of the
Operating Partnership noncontrolling unitholders was less than zero. The net equity balances of the
noncontrolling partners in certain of the consolidated joint ventures were also less than zero.
Therefore, under previous accounting standards for noncontrolling interests, the interests of the
noncontrolling unitholders of the Operating Partnership and outside partners with net equity
balances in the consolidated joint ventures of less than zero were recognized as zero balances
within the Companys Consolidated Balance Sheet. As a result of the need to present these
noncontrolling interests as zero balances, it was previously required that income be allocated to
these interests equal, at a minimum, to their share of distributions. The net equity balances of
the Operating Partnership and certain of the consolidated joint ventures were less than zero
because of accumulated operating distributions in excess of net income and not as a result of
operating losses. Operating distributions to partners are usually greater than net income because
net income includes non-cash charges for depreciation and amortization.
Upon adoption of the new requirements for noncontrolling interests, the interests of the
noncontrolling unitholders of the Operating Partnership and the outside partners with net equity
balances in the consolidated joint ventures of less than zero generally no longer need to be
carried at zero balances in the Companys Consolidated Balance Sheet and this previous income
allocation methodology described above is generally no longer applicable. However, as the new
measurement provisions of ASC 810 are applicable beginning with the January 1, 2009 adoption date,
the interests of these noncontrolling interests for prior periods have not been remeasured.
F-25
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The net equity balance of the noncontrolling interests as of December 31, 2009 and
December 31, 2008 includes the following:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Noncontrolling interests: |
|
|
|
|
|
|
|
|
Noncontrolling interests in consolidated joint ventures |
|
$ |
(100,014 |
) |
|
$ |
(90,251 |
) |
Noncontrolling interests in partnership equity of TRG |
|
|
(75,393 |
) |
|
|
|
|
Preferred equity of TRG |
|
|
29,217 |
|
|
|
29,217 |
|
|
|
|
|
|
|
|
|
|
$ |
(146,190 |
) |
|
$ |
(61,034 |
) |
|
|
|
|
|
|
|
Income attributable to the noncontrolling interests for the year ended December 31, 2009,
2008, and 2007 includes the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Net (income) loss attributable to noncontrolling interests: |
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling share of income of consolidated joint
ventures |
|
$ |
(3,115 |
) |
|
$ |
(7,441 |
) |
|
$ |
(5,031 |
) |
Distributions in excess of noncontrolling share of income of
consolidated joint ventures |
|
|
|
|
|
|
(8,594 |
) |
|
|
(3,007 |
) |
TRG Series F preferred distributions |
|
|
(2,460 |
) |
|
|
(2,460 |
) |
|
|
(2,460 |
) |
Noncontrolling share of (income) loss of TRG |
|
|
31,224 |
|
|
|
11,338 |
|
|
|
(33,210 |
) |
Distributions in excess of noncontrolling share of income of TRG |
|
|
|
|
|
|
(55,370 |
) |
|
|
(8,074 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
25,649 |
|
|
$ |
(62,527 |
) |
|
$ |
(51,782 |
) |
|
|
|
|
|
|
|
|
|
|
Pro forma results
Net loss attributable to Taubman Centers, Inc. common shareowners for the year ended
December 31, 2009 would have been $(153.5) million, or $(2.88) per common share, if accounted for
under the previous method of accounting for noncontrolling interests.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Net income (loss) attributable to Taubman Centers, Inc.
common shareowners |
|
$ |
(69,706 |
) |
|
$ |
(86,659 |
) |
|
$ |
48,490 |
|
Transfers (to) from the noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
Increase in Taubman Centers, Inc.s paid-in capital
for the
acquisition of additional units of TRG under the Continuing Offer |
|
|
483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net transfers (to) from noncontrolling interests |
|
|
483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change from net income (loss) attributable to Taubman
Centers, Inc. and transfers (to) from noncontrolling
interests |
|
$ |
(69,223 |
) |
|
$ |
(86,659 |
) |
|
$ |
48,490 |
|
|
|
|
|
|
|
|
|
|
|
In 2008 and 2007, there was no impact to the equity of Taubman Centers, Inc. common
shareowners resulting from the acquisition of additional units under the Continuing Offer because
the equity balance of the noncontrolling partners was maintained at zero.
F-26
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Taubman Asia
In October 2009, the Companys President of The Taubman Company Asia Limited (the Asia
President) resigned and assigned his 10% membership interest in Taubman Properties Asia, LLC to an
affiliate of the Company for a nominal amount. The Asia President had obtained this ownership
interest in January 2008. The Operating Partnership had a preferred investment in Taubman Asia to
the extent the Asia President had not yet contributed capital commensurate with his ownership
interest. The Asia Presidents interest in Taubman Asia was accounted for as a noncontrolling
interest, which had a zero balance at the date of assignment.
International Plaza Refinancing
In January 2008, International Plaza refinanced its debt and distributed a portion of the
excess proceeds to its partners. The noncontrolling partners share of the distributions was $51.3
million.
Note 10 Derivative and Hedging Activities
Risk Management Objective and Strategies for Using Derivatives
The Company uses derivative instruments primarily to manage exposure to interest rate risks
inherent in variable rate debt and refinancings. Interest rate swaps and interest rate caps are
entered into to manage interest rate risk inherent in the Companys variable rate borrowings 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 Companys 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, 2009, the Company has exposure to three outstanding derivatives. Two of the
derivatives are receive-variable/pay-fixed interest rate swaps held by 50% owned Unconsolidated
Joint Ventures that have a total notional balance of $280 million. The third derivative is a
receive-variable/pay-fixed interest rate swap held by a 50.1% owned consolidated joint venture with
a total notional balance of $325 million. All three of the swaps have been designated and are
expected to be effective as cash flow hedges of the interest payments on the associated debt.
Cash Flow Hedges of Interest Rate Risk
For derivative instruments that are designated and qualify as a cash flow hedge, the effective
portion of the unrealized gain or loss on the derivative is reported as a component of Other
Comprehensive Income (OCI). The ineffective portion of the change in fair value is recognized
directly in earnings. Net realized gains or losses resulting from derivatives that were settled in
conjunction with planned fixed-rate financings or refinancings continue to be included in
Accumulated Other Comprehensive Income (loss) (AOCI) during the term of the hedged debt
transaction.
Amounts reported in AOCI related to currently outstanding derivatives are recognized as a
reduction to income as interest payments are made on the Companys 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 $15.5 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-27
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 2009, the Company had $3.9 million of net realized losses included in AOCI
resulting from discontinued cash flow hedges related to settled derivative instruments that are
being recognized as a reduction of income over the term of the hedged debt.
The tables below present the effect of derivative instruments on the Companys Consolidated
Statement of Operations for the years ended December 31, 2009, 2008, and 2007. The tables include
the location and amount of unrealized gains and losses on outstanding derivative instruments in
cash flow hedging relationships and the location and amount of realized losses reclassified from
AOCI into income resulting from settled derivative instruments associated with hedged debt.
During the years ended December 31, 2009, 2008, and 2007 the Company did not have any hedge
ineffectiveness or amounts that were excluded from the assessment of hedge effectiveness recorded
in earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain or |
|
|
|
|
|
|
Amount of Gain or (Loss) |
|
|
(Loss) |
|
|
Amount of Gain or |
|
|
|
Recognized in OCI on |
|
|
Reclassified from AOCI |
|
|
(Loss) Reclassified |
|
|
|
Derivative |
|
|
into Income |
|
|
from AOCI into |
|
|
|
(Effective Portion) |
|
|
(Effective Portion) |
|
|
Income (Effective Portion) |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Derivatives in cash flow hedging
relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contract
consolidated subsidiaries |
|
$ |
6,402 |
|
|
$ |
(16,138 |
) |
|
$ |
805 |
|
|
Interest Expense |
|
$ |
(11,474 |
) |
|
$ |
(3,267 |
) |
|
|
|
|
Interest rate contracts UJVs |
|
|
1,516 |
|
|
|
(5,309 |
) |
|
|
(618 |
) |
|
Equity in Income of UJVs |
|
|
(3,761 |
) |
|
|
(383 |
) |
|
$ |
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives in cash
flow hedging
relationships |
|
$ |
7,918 |
|
|
$ |
(21,447 |
) |
|
$ |
187 |
|
|
|
|
|
|
$ |
(15,235 |
) |
|
$ |
(3,650 |
) |
|
$ |
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized losses on settled
cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
consolidated subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
$ |
(886 |
) |
|
$ |
(885 |
) |
|
$ |
(885 |
) |
Interest rate contract UJVs |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Income of UJVs |
|
|
(376 |
) |
|
|
(375 |
) |
|
|
(376 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total realized losses on
settled cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,262 |
) |
|
$ |
(1,260 |
) |
|
$ |
(1,261 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2006, the Operating Partnership entered into three forward starting swaps for $150
million to partially hedge interest rate risk associated with a planned long-term refinancing of
International Plaza in January 2008. The Operating Partnership terminated the swaps in September
2007. As the swaps were no longer effective as hedges of the planned refinancing, the Operating
Partnership recognized its $0.2 million share of the $0.4 million gain on the termination, included
in Gains on land sales and other nonoperating income within results of operations.
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 Companys derivative
financial instruments as reported in the Consolidated Balance Sheet as of December 31, 2009 and
2008. As of December 31, 2009 and 2008 the Company does not have any derivatives in an asset
position.
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
Liability Derivatives |
|
|
|
Balance |
|
December 31 |
|
|
December 31 |
|
|
|
Sheet Location |
|
2009 |
|
|
2008 |
|
Derivatives designated as hedging
instruments: |
|
|
|
|
|
|
|
|
|
|
Interest
rate contract consolidated subsidiaries |
|
Accounts Payable and Accrued Liabilities |
|
$ |
10,786 |
|
|
$ |
17,188 |
|
Interest rate contracts UJVs |
|
Investment in UJVs |
|
|
4,458 |
|
|
|
5,974 |
|
|
|
|
|
|
|
|
|
|
Total designated as hedging
instruments |
|
|
|
$ |
15,244 |
|
|
$ |
23,162 |
|
|
|
|
|
|
|
|
|
|
Total derivatives |
|
|
|
$ |
15,244 |
|
|
$ |
23,162 |
|
|
|
|
|
|
|
|
|
|
F-28
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Contingent Features
As of December 31, 2009 and 2008, all three of the Companys outstanding derivatives contain
provisions that state if the hedged entity defaults on any of its indebtedness in excess of
$1 million, then the derivative obligation could also be declared in default. In addition, one of
the three outstanding derivatives contains a provision that if the Operating Partnership defaults
on any of its indebtedness in excess of $1 million, then the derivative obligation could also be
declared in default. Although the Company is currently in default on the debt relating to The Pier
Shops, the Company is not in default on any debt obligations that would trigger a credit risk
related default on its current outstanding derivatives.
As of December 31, 2009 and 2008, the fair value of derivative instruments with
credit-risk-related contingent features that are in a liability position was $15.2 million and
$23.2 million, respectively. As of December 31, 2009 and 2008, 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.
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, 2009
for operating centers assuming no new or renegotiated leases or option extensions on anchor
agreements, is summarized as follows:
|
|
|
|
|
2010 |
|
$ |
314,645 |
|
2011 |
|
|
285,008 |
|
2012 |
|
|
251,003 |
|
2013 |
|
|
224,375 |
|
2014 |
|
|
197,238 |
|
Thereafter |
|
|
623,151 |
|
The table above excludes $7.1 million in 2010 and $60.9 million thereafter for The Pier Shops.
Certain shopping centers, as lessees, have ground leases expiring at various dates through the
year 2107. In addition, one center has the option to extend the lease term for five 10 year
periods. Ground rent expense is recognized on a straight-line basis over the lease terms. The
Company also leases its office facilities and certain equipment. Office facility leases expire at
various dates through the year 2015. Additionally, two of the leases have 5 year extension options
and one lease has a 3 year extension option. The Companys U.S. headquarters is rented from an
affiliate of the Taubman family under a 10 year lease, with a 5 year extension option. Rental
expense on a straight-line basis under operating leases was $9.9 million in 2009, $10.8 million in
2008, and $9.5 million in 2007. Included in these amounts are related party office rental expense
of $2.3 million in 2009 and 2008, and $2.2 million in 2007. Payables representing straightline rent
adjustments under lease agreements were $36.7 million and $32.7 million as of December 31, 2009 and
2008, respectively.
The following is a schedule of future minimum rental payments required under operating leases,
excluding The Pier Shops:
|
|
|
|
|
2010 |
|
$ |
9,678 |
|
2011 |
|
|
7,871 |
|
2012 |
|
|
7,185 |
|
2013 |
|
|
7,197 |
|
2014 |
|
|
7,137 |
|
Thereafter |
|
|
325,214 |
|
The table above includes $2.5 million in 2010 and $2.6 million in each year from 2011 through
2014 of related party amounts. The Pier Shops is subject to a ground lease with base rentals of
$1.0 million plus percentage rent until 2081. We anticipate that the ground lease obligation will
be transferred along with the title to The Pier Shops upon extinguishment of the loan obligation
(Note 4).
F-29
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Certain shopping centers have entered into lease agreements for property improvements that
qualify as capital leases. As of December 31, 2009, future minimum lease payments for these capital
leases are as follows:
|
|
|
|
|
2010 |
|
$ |
312 |
|
2011 |
|
|
78 |
|
|
|
|
|
Total minimum lease payments |
|
$ |
390 |
|
Less amount representing interest |
|
|
(19 |
) |
|
|
|
|
Capital lease obligations |
|
$ |
371 |
|
|
|
|
|
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 $1.6 million,
$2.2 million, and $2.1 million in 2009, 2008, and 2007, respectively.
Other related party transactions are described in Notes 11, 13, and 15.
In 2009, in response to the decreased level of active projects due to the downturn in the
economy, the Company reduced its workforce by about 40 positions, primarily in areas that directly
or indirectly affect its development initiatives in the U.S. and Asia. A restructuring charge of
$2.5 million was recorded in 2009, which primarily represents the cost of terminations of
personnel. Substantially all of the costs were paid in 2009.
Note 13 Share-Based Compensation and Other Employee Plans
In 2008, the Companys shareowners approved The Taubman Company 2008 Omnibus Long-Term
Incentive Plan (2008 Omnibus Plan). The 2008 Omnibus Plan provides for the award to directors,
officers, employees, and other service providers of the Company of restricted shares, restricted
units of limited partnership in the Operating Partnership, options to purchase shares or Operating
Partnership units, unrestricted Shares or Operating Partnership units, and other awards to acquire
up to an aggregate of 6,100,000 Company common shares or Operating Partnership units. In 2009, all
grants made were under the 2008 Omnibus Plan. In addition, non-employee directors have the option
to defer their compensation, other than their meeting fees, under a deferred compensation plan.
Under the 2008 Omnibus Plan, in arriving at the amount of shares or Operating Partnership
units available for future grants, the actual number of restricted stock units, performance share
units and unrestricted shares granted are deducted at a ratio of 2.85 to one. Options are deducted
on a one-for-one basis. The amount available for future grants is adjusted when the number of
contingently issuable shares or units are settled, for grants that are forfeited, and for options
that expire without being exercised.
Prior to the adoption of the 2008 Omnibus Plan, the Company provided share-based compensation
through an incentive option plan, a long-term incentive plan, and non-employee directors stock
grant and deferred compensation plans.
The compensation cost charged to income for the Companys share-based compensation plans was
$8.7 million, $7.6 million, and $6.8 million for the years ended December 31, 2009, 2008, and 2007,
respectively. Compensation cost capitalized as part of properties and deferred leasing costs was
$0.3 million, $0.9 million, and $0.8 million for the years ended December 31, 2009, 2008, and 2007,
respectively.
F-30
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company currently recognizes no tax benefits from the recognition of compensation cost or
tax deductions incurred upon the exercise or vesting of share-based awards. Any allocations of
compensation cost or deduction to the Companys corporate taxable REIT subsidiaries from the
Companys Manager, which is treated as a partnership for federal income tax purposes, have resulted
in a valuation allowance being recorded against its net deferred tax asset associated with the
temporary differences related to share-based compensation. This is primarily due to prior year
cumulative tax net operating losses incurred through the year ended December 31, 2009.
The Company estimated the 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 Companys
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.
Options
Options are granted to purchase units of limited partnership interest in the Operating
Partnership, which are exchangeable for new shares of the Companys stock under the Continuing
Offer (Note 15). The options have ten-year contractual terms.
In the first quarter of 2009, 1.4 million options were granted that vested during the third
quarter of 2009 due to the satisfaction of the vesting condition of the closing price of the
Companys common stock, as quoted on the New York Stock Exchange, being $30 or greater for ten
consecutive trading days. The remaining unamortized compensation cost was recognized upon the
satisfaction of the vesting condition.
In addition, the Company granted 40,000 options in the second quarter of 2009. These options
vest one third each year over three years, if continuous service has been provided or upon
retirement or certain other events if earlier.
The Company estimated the value of the options granted during the first quarter 2009 using a
Monte Carlo simulation due to the market-based vesting condition. The Company estimated the values
of the options issued during the second quarter of 2009 and the years ended December 31, 2008, and
2007 using a Black-Scholes valuation model. Significant assumptions employed include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Quarter |
|
2nd Quarter |
|
|
|
|
|
|
2009 |
|
2009 |
|
2008 |
|
2007 |
Expected volatility |
|
|
29.61 |
% |
|
|
40.65 |
% |
|
|
24.33 |
% |
|
|
20.76 |
% |
Expected dividend yield |
|
|
8.00 |
% |
|
|
7.00 |
% |
|
|
3.50 |
% |
|
|
3.00 |
% |
Expected term (in years) |
|
|
N/A |
|
|
|
6 |
|
|
|
6 |
|
|
|
7 |
|
Risk-free interest rate |
|
|
2.83 |
% |
|
|
2.57 |
% |
|
|
3.08 |
% |
|
|
4.45 |
% |
Weighted average grant-date fair value |
|
$ |
1.35 |
|
|
$ |
5.04 |
|
|
$ |
9.31 |
|
|
$ |
11.77 |
|
F-31
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of option activity for the years ended December 31, 2009, 2008, and 2007 is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
|
|
Number |
|
Weighted Average |
|
Contractual Term |
|
Range of Exercise |
|
|
of Options |
|
Exercise Price |
|
(in years) |
|
Prices |
Outstanding at January 1, 2007 |
|
|
1,115,376 |
|
|
|
$32.55 |
|
|
|
8.5 |
|
|
$ |
29.38 - $40.39 |
|
Granted |
|
|
226,875 |
|
|
|
55.90 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(11,605 |
) |
|
|
31.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007 |
|
|
1,330,646 |
|
|
|
$36.54 |
|
|
|
7.8 |
|
|
$ |
29.38 - $55.90 |
|
Granted |
|
|
230,567 |
|
|
|
50.65 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(210,736 |
) |
|
|
31.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008 |
|
|
1,350,477 |
|
|
|
$39.73 |
|
|
|
7.2 |
|
|
$ |
29.38 - $55.90 |
|
Granted |
|
|
1,439,135 |
|
|
|
14.13 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,140,003 |
) |
|
|
13.98 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(20,000 |
) |
|
|
31.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
1,629,609 |
|
|
|
$35.24 |
|
|
|
6.8 |
|
|
$ |
13.83 - $55.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully vested options at December 31, 2009 |
|
|
980,280 |
|
|
|
$33.36 |
|
|
|
7.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were 1.6 million options that vested during the year ended December 31, 2009.
Of the 1.6 million total options outstanding excluding 0.3 million granted in the first
quarter of 2009, 0.9 million have vesting schedules with one-third vesting at each of the first,
second, and third years of the grant anniversary, if continuous service has been provided or upon
retirement or certain other events if earlier. Substantially all of the other 0.4 million options
outstanding have vesting schedules with one-third vesting at each of the third, fifth, and seventh
years of the grant anniversary, if continuous service has been provided and certain conditions
dependent on the Companys market performance in comparison to its competitors have been met, or
upon retirement or certain events if earlier.
The aggregate intrinsic value (the difference between the period end stock price and the
option exercise price) of in-the-money options outstanding and in-the-money fully vested options as
of December 31, 2009 was $10.1 million and $7.3 million, respectively.
The total intrinsic value of options exercised during the years ended December 31, 2009, 2008,
and 2007 was $22.6 million, $4.1 million, and $0.3 million, respectively. Cash received from option
exercises for the years ended December 31, 2009, 2008, and 2007 was $15.9 million, $6.6 million,
and $0.4 million, respectively.
As of December 31, 2009 there were 0.6 million nonvested options outstanding, and $0.8 million
of total unrecognized compensation cost related to nonvested share-based compensation arrangements
granted under the Plan. That cost is expected to be recognized over a weighted average period of
1.4 years.
Under both the prior option plan and the 2008 Omnibus Plan, vested unit options can be
exercised by tendering mature units with a market value equal to the exercise price of the unit
options. In 2002, Robert S. Taubman, the Companys chief executive officer, exercised options for
3.0 million units by tendering 2.1 million mature units and deferring receipt of 0.9 million units
under the unit option deferral election. As the Operating Partnership pays distributions, the
deferred option units receive their proportionate share of the distributions in the form of cash
payments. Beginning with the ten year anniversary of the date of exercise (unless Mr. Taubman
retires earlier), the deferred partnership units will be issued in ten annual installments. The
deferred units are accounted for as participating securities of the Operating Partnership.
F-32
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Performance Share Units
In 2009, the Company granted Performance Share Units (PSU) under the 2008 Omnibus Plan. Each
PSU represents the right to receive, upon vesting, one share of the Companys common stock, subject
to adjustments. The vesting date is three years from the grant date if continuous service has been
provided or upon retirement or certain other events if earlier. The actual number of PSU that may
ultimately vest will range from 0 300% based on the Companys market performance relative to that
of a peer group. No dividends accumulate during the vesting period.
The Company estimated the value of the PSU granted during the year ended December 31, 2009
using a Monte Carlo simulation based on the following assumptions and resulting in the grant date
fair value shown below. When used in the simulation, the value of the Companys stock at the grant
date was reduced by the discounted present value of expected dividends during the vesting period.
|
|
|
|
|
Expected volatility |
|
|
42.53 |
% |
Risk-free interest rate |
|
|
1.3 |
% |
Weighted average grant-date fair value |
|
$ |
15.60 |
|
A summary of PSU activity for the year ended December 31, 2009 is presented below:
|
|
|
|
|
Outstanding at January 1, 2009 |
|
|
|
|
Granted |
|
|
196,943 |
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
196,943 |
|
|
|
|
|
|
None of the PSU outstanding at December 31, 2009 were vested. No PSU were granted in 2008 and
2007. As of December 31, 2009, there was $2.2 million of total unrecognized compensation cost
related to nonvested PSU outstanding. This cost is expected to be recognized over an average period
of 2.1 years.
Restricted Share Units
In 2009, restricted share units (RSU) were issued under the 2008 Omnibus Plan and represent
the right to receive upon vesting one share of the Companys common stock. The 2009 RSU vest three
years from the grant date if continuous service has been provided for that period, or upon
retirement or certain other events if earlier. No dividends accumulate during the vesting period.
The Company estimated the value of the RSU granted during the year ended December 31, 2009
using the Companys common stock price at the grant date deducting the present value of expected
dividends during the vesting period using a risk-free interest rate of 1.3%. The result of the
Companys valuation was a weighted average grant-date fair value of $8.99.
Prior to 2009, RSU were issued under the Taubman Company 2005 Long-Term Incentive Plan (LTIP),
which was shareowner approved. Each of these RSU represents the right to receive upon vesting one
share of the Companys common stock plus a cash payment equal to the aggregate cash dividends that
would have been paid on such share of common stock from the date of grant of the award to the
vesting date. These RSU vest three years from the grant date if continuous service has been
provided for that period, or upon retirement or certain other events if earlier. Each of these RSU
were valued at the closing price of the Companys common stock on the grant date.
F-33
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of RSU activity for the years ended December 31, 2009, 2008, and 2007 is presented
below:
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted |
|
Weighted average |
|
|
Stock Units |
|
Grant Date Fair Value |
Outstanding at January 1, 2007 |
|
|
261,685 |
|
|
|
35.79 |
|
Granted |
|
|
102,905 |
|
|
|
56.54 |
|
Forfeited |
|
|
(5,621 |
) |
|
|
43.71 |
|
Redeemed |
|
|
(672 |
) |
|
|
34.93 |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007 |
|
|
358,297 |
|
|
|
41.63 |
|
Granted |
|
|
121,037 |
|
|
|
50.65 |
|
Forfeited |
|
|
(8,256 |
) |
|
|
48.69 |
|
Redeemed |
|
|
(136,200 |
) |
|
|
32.15 |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008 |
|
|
334,878 |
|
|
|
48.57 |
|
Granted |
|
|
368,588 |
|
|
|
8.99 |
|
Forfeited |
|
|
(17,532 |
) |
|
|
37.00 |
|
Redeemed |
|
|
(118,824 |
) |
|
|
40.38 |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
567,110 |
|
|
|
24.92 |
|
|
|
|
|
|
|
|
|
|
Based on an analysis of historical employee turnover, the Company has made an annual
forfeiture assumption of 2.4% of grants when recognizing compensation costs relating to the RSU.
All of the RSU outstanding at December 31, 2009 were nonvested. As of December 31, 2009, there
was $4.5 million of total unrecognized compensation cost related to nonvested RSU outstanding. This
cost is expected to be recognized over an average period of 1.6 years.
Non-Employee Directors Stock Grant and Deferred Compensation Plans
The Non-Employee Directors Stock Grant Plan (SGP), which was shareowner approved, provided
for the annual grant to each non-employee director of the Company shares of the Companys common
stock based on the fair value of the Companys common stock on the last business day of the
preceding quarter. Quarterly grants beginning in July 2008 were made under the 2008 Omnibus Plan.
The annual fair market value of the grant was $50,000 in 2009, 2008, and 2007. As of December 31,
2009, 2,875 shares have been issued under the SGP and 2,540 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
Companys 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 Companys Board of Directors and for such deferred compensation to be
denominated in restricted stock units, representing the right to receive shares of the Companys
common stock at the end of the deferral period. During the deferral period, when the Company pays
cash dividends on its common stock, the directors deferral accounts will be credited with dividend
equivalents on their deferred restricted stock units, payable in additional restricted stock units
based on the then-fair market value of the Companys common stock. There were 43,467 restricted
stock units outstanding under the DCP at December 31, 2009.
Other Employee Plans
As of December 31, 2009 and 2008 the Company had fully vested awards outstanding for
17,803 and 82,718 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 Companys common stock. The liability for the eventual payout of these awards is
marked to market quarterly based on the twenty day average of the Companys stock price. The
Company recorded compensation costs of $0.2 million, $(1.9) million, and $0.2 million relating to
these awards for the years ended December 31, 2009, 2008, and 2007, respectively. The majority of
the awards were paid out in early 2009. No payments were made in 2008 and 2007.
F-34
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has a voluntary retirement savings plan established in 1983 and amended and
restated effective January 1, 2001 (the Plan). The Plan is qualified in accordance with Section
401(k) of the Internal Revenue Code (the Code). The Company contributes an amount equal to 2% of
the qualified wages of all qualified employees and matches employee contributions in excess of 2%
up to 7% of qualified wages. In addition, the Company may make discretionary contributions within
the limits prescribed by the Plan and imposed in the Code. The Companys contributions and costs
relating to the Plan were $2.6 million in 2009, $2.0 million in 2008, and $1.9 million in 2007.
Note 14 Common and Preferred Stock and Equity of TRG
Outstanding Preferred Stock and Equity
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 Companys
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, 2009, 2008, and 2007, 70,000 shares, 95,000 shares, and 1,589,662 shares of Series B
Preferred Stock, respectively, were converted to 3 shares, 4 shares, and 104 shares of the
Companys common stock, respectively, as a result of tenders of units under the Continuing Offer
(Note 15).
The Operating Partnerships $30 million 8.2% Cumulative Redeemable Preferred Partnership
Equity (Series F Preferred Equity) is owned by institutional investors, and has no stated maturity,
sinking fund, or mandatory redemption requirements. As of May 2009, the Company can redeem the
Series F Preferred Equity. The holders of Series F Preferred Equity have the right, beginning in
2014, to exchange $100 in liquidation value of such equity for one share of Series F Preferred
Stock. The terms of the Series F Preferred Stock are substantially similar to those of the Series F
Preferred Equity. The Series F Preferred Stock is non-voting.
The 8.0% Series G Cumulative Redeemable Preferred Stock (Series G Preferred Stock), which was
issued in 2004, has no stated maturity, sinking fund, or mandatory redemption requirements and is
not convertible into any other security of the Company. The Series G Preferred Stock has
liquidation preferences of $100 million ($25 per share). Dividends are cumulative and are payable
in arrears on or before the last day of each calendar quarter. All accrued dividends have been
paid. As of November 2009, the Series G Preferred Stock can be redeemed by the Company at $25 per
share, plus accrued dividends. The Company owns corresponding Series G Preferred Equity interests
in the Operating Partnership that entitle the Company to income and distributions (in the form of
guaranteed payments) in amounts equal to the dividends payable on the Companys Series G Preferred
Stock. The Series G Preferred Stock is non-voting.
The $87 million 7.625% Series H Cumulative Redeemable Preferred Stock (Series H Preferred
Stock), which was issued in 2005, has no stated maturity, sinking fund, or mandatory redemption
requirements and is not convertible into any other security of the Company. Dividends are
cumulative and are payable in arrears on or before the last day of each calendar quarter. All
accrued dividends have been paid. The Series H Preferred Stock will be redeemable by the Company at
$25 per share (par), plus accrued dividends, beginning in July 2010. The Company owns corresponding
Series H Preferred Equity interests in the Operating Partnership that entitle the Company to income
and distributions (in the form of guaranteed payments) in amounts equal to the dividends payable on
the Companys Series H Preferred Stock. The Series H Preferred Stock is non-voting.
F-35
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Common Stock and Equity
In July 2007, the Companys Board of Directors authorized the repurchase of $100 million of
the Companys common stock on the open market or in privately negotiated transactions. During
August 2007, the Company repurchased 987,180 shares of its common stock at an average price of
$50.65 per share, for a total of $50 million under the authorization. During May and June 2007, the
Company repurchased 923,364 shares of its common stock on the open market at an average price of
$54.15 per share, for a total of $50 million, the maximum amount permitted under the program
approved by the Board of Directors in December 2005. All shares repurchased have been cancelled.
For each share of stock repurchased, an equal number of Operating Partnership units owned by the
Company were redeemed. Repurchases of common stock were financed through general corporate funds,
including borrowings under existing lines of credit. As of December 31, 2009, $50 million remained
of the July 2007 authorization.
Note 15 Commitments and Contingencies
Cash Tender
At the time of the Companys 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 units of partnership interest in the
Operating Partnership (provided that the aggregate value is at least $50 million) and cause the
Company to purchase the tendered interests at a purchase price based on a market valuation of the
Company on the trading date immediately preceding the date of the tender. At A. Alfred Taubmans
election, his family and certain others 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 Companys 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 Companys 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, 2009 of $35.91 per common share, the aggregate value
of interests in the Operating Partnership that may be tendered under the Cash Tender Agreement was
approximately $913 million. The purchase of these interests at December 31, 2009 would have
resulted in the Company owning an additional 32% 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), 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 Companys 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 Companys common stock at a rate of 14,000 shares of Series B Preferred Stock
for one common share.
F-36
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Indemnification
The disposition of Woodland in 2005 by one of the Companys Unconsolidated Joint Ventures was
structured in a tax efficient manner to facilitate the investment of the Companys share of the
sales proceeds in a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code
and the regulations thereunder. The structuring of the disposition has included the continued
existence and operation of the partnership that previously owned the shopping center. In connection
with the disposition, the Company entered into a tax indemnification agreement with the Woodland
joint venture partner, a life insurance company. Under this tax indemnification agreement, the
Company has agreed to indemnify the joint venture partner in the event an unfavorable tax
determination is received as a result of the structuring of the sale in the tax efficient manner
described. The maximum amount that the Company could be required to pay under the indemnification
is equal to the taxes incurred by the joint venture partner as a result of the unfavorable tax
determination by the IRS or the state of Michigan within their respective three and four year
statutory assessment limitation periods, in excess of those that would have otherwise been due if
the Unconsolidated Joint Venture had sold Woodland, distributed the cash sales proceeds, and
liquidated the owning entities. The Company cannot reasonably estimate the maximum amount of the
indemnity, as the Company is not privy to or does not have knowledge of its joint venture partners
tax basis or tax attributes in the Woodland entities or its life insurance-related assets. However,
the Company believes that the probability of having to perform under the tax indemnification
agreement is remote. The Company and the Woodland joint venture partner have also indemnified each
other for their shares of costs or revenues of operating or selling the shopping center in the
event additional costs or revenues are subsequently identified.
Litigation
In September 2009, a restaurant owner filed a lawsuit in Superior Court of the State of
California for the County of Los Angeles (Case No. BC 421212) against Taubman Centers, Inc., the
Operating Partnership, and the Manager. The plaintiff is alleging breach of oral agreement,
promissory estoppel, specific performance, and fraud related to a proposed lease. The plaintiff is
seeking damages exceeding $10 million, lost profits, restitution on its current lease, exemplary or
punitive damages, and specific performance. The lawsuit is in its early legal stages and the
Company is vigorously defending it. The outcome of this lawsuit cannot be predicted with any
certainty and management is currently unable to estimate an amount or range of potential loss that
could result if an unfavorable outcome occurs.
In April 2009, two restaurant owners, their two restaurants, and their principal filed a
lawsuit in United States District Court for the Eastern District of Pennsylvania (Case No. CV01619)
against Atlantic Pier Associates LLC (APA, the owner of The Pier Shops), the Operating
Partnership, Taubman Centers, Inc., the owners of APA and certain affiliates of such owners, and a
former employee of one of such affiliates. The plaintiffs are alleging the defendants
misrepresented and concealed the status of certain tenant leases at The Pier Shops and that such
status was relied upon by the plaintiffs in making decisions about their own leases. The plaintiffs
are seeking damages exceeding $20 million, rescission of their leases, exemplary or punitive
damages, costs and expenses, attorneys fees, return of certain rent, and other relief as the court
may determine. The lawsuit is in its early legal stages and the defendants are vigorously defending
it. The outcome of this lawsuit cannot be predicted with any certainty and management is currently
unable to estimate an amount or range of potential loss that could result if an unfavorable outcome
occurs.
While management does not believe that an adverse outcome in either or both of the above
lawsuits would have a material adverse effect on the Companys financial condition, there can be no
assurance that adverse outcomes would not have material effects on the Companys results of
operations for any particular period.
F-37
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On December 8, 2009, West Farms Associates and West Farms Mall, LLC (together, Westfarms)
and The Taubman Company LLC (together with Westfarms, the WFM Parties) entered into a settlement
agreement (the Settlement Agreement) with three developers of a project called Blue Back Square
in West Hartford, Connecticut. The Settlement Agreement relates to a lawsuit originally filed by
the developers against the WFM Parties and related persons in November 2007 in the Connecticut
Superior Court, Judicial District of Hartford at Hartford and subsequently transferred to the
Superior Court for the Judicial District of Waterbury at Waterbury. The developers alleged damages
in excess of $40 million and sought double, treble, and punitive damages, as well as attorneys
fees. Pursuant to the Settlement Agreement, the lawsuit was withdrawn with prejudice upon payment
by Westfarms of $34 million to the developers on December 15, 2009. The Company has a 79%
investment in Westfarms Associates, an unconsolidated joint venture which owns Westfarms mall, and
the Companys share of the settlement was $26.8 million. The developers, for themselves and on
behalf of related persons, agreed to a full and general release for the benefit of the WFM Parties
and related persons as of December 8, 2009. There was no admission of liability or fault by any
parties to the lawsuit or related persons. In early November 2007, the Town of West Hartford and
the West Hartford Town Council (the Town) filed a substantially similar lawsuit against the same
entities in the same court, which was also subsequently transferred to the Superior Court for the
Judicial District of Waterbury at Waterbury. The Town alleged damages in excess of $5.5 million and
sought double, treble, and punitive damages, as well as attorneys fees. In January 2010, the WFM
Parties executed a settlement agreement with the Town, which provided for a full and general
release for the benefit of the WFM Parties upon payment by Westfarms of $4.5 million, or
$3.6 million at the Companys share, which was recorded in 2009. There was no admission of
liability or fault by any parties to the lawsuit or related persons.
See Note 4 regarding The Pier Shops loan and the Companys Oyster Bay project, Note 8 for the
Operating Partnerships guarantees of certain notes payable and other obligations, Note 10 for
contingent features relating to derivative instruments, and Note 13 for obligations under existing
share-based compensation plans.
Note 16 Earnings (Loss) 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 units of partnership interest, RSU, PSU,
and deferred shares under the Non-Employee Directors Deferred Compensation Plan (Note 13), and
unissued partnership units under unit option deferral election. In computing the potentially
dilutive effect of potential common stock, partnership units are assumed to be exchanged for common
shares under the Continuing Offer, increasing the weighted average number of shares outstanding.
The potentially dilutive effects of partnership units outstanding and/or issuable under the unit
option deferral elections are calculated using the if-converted method, while the effects of other
potential common stock are calculated using the treasury stock method.
As of December 31, 2009, there were 8.7 million partnership units outstanding and 0.9 million
unissued partnership units under unit option deferral elections, that may be exchanged for common
shares of the Company under the Continuing Offer (Note 15). These outstanding partnership units and
unissued units were excluded from the computation of diluted earnings per share as they were
anti-dilutive in all periods presented. Also, there were 0.7 million and 0.5 million shares
representing the potentially dilutive effect of potential common stock under share-based
compensation plans (Note 13) excluded from the computation of diluted EPS for the years ended
December 31, 2009 and 2008, respectively, because they were anti-dilutive due to net losses in 2009
and 2008.
F-38
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Net income (loss) attributable to Taubman Centers,
Inc. common shareowners (Numerator) |
|
$ |
(69,706 |
) |
|
$ |
(86,659 |
) |
|
$ |
48,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares (Denominator) basic |
|
|
53,239,279 |
|
|
|
52,866,050 |
|
|
|
52,969,067 |
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
652,950 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares (Denominator) diluted |
|
|
53,239,279 |
|
|
|
52,866,050 |
|
|
|
53,622,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(1.31 |
) |
|
$ |
(1.64 |
) |
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(1.31 |
) |
|
$ |
(1.64 |
) |
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
|
Note 17 Fair Value Disclosures
This note contains required fair value disclosures for assets and liabilities remeasured at
fair value on a recurring basis, assets that were remeasured at fair value on a nonrecurring basis
during the period, 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 Companys 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 Companys own nonperformance risk and the respective counterpartys nonperformance
risk.
Marketable Securities
The Companys valuations of marketable securities, which are considered to be
available-for-sale, and an insurance deposit utilize unadjusted quoted prices determined by active
markets for the specific securities the Company has invested in, and therefore fall into Level 1 of
the fair value hierarchy.
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 |
|
|
Fair Value Measurements as of |
|
|
|
December 31, 2009 Using |
|
|
December 31, 2008 Using |
|
|
|
Quoted Prices in |
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
|
Active Markets for |
|
|
Significant Other |
|
|
Active Markets for |
|
|
Observable |
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
|
Identical Assets |
|
|
Inputs |
|
Description |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 1) |
|
|
(Level 2) |
|
Available-for-sale securities |
|
$ |
1,665 |
|
|
|
|
|
|
$ |
4,351 |
|
|
|
|
|
Insurance deposit |
|
|
9,689 |
|
|
|
|
|
|
|
8,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
11,354 |
|
|
|
|
|
|
$ |
13,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative interest rate contract (Note 10) |
|
|
|
|
|
$ |
(10,786 |
) |
|
|
|
|
|
$ |
(17,188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
$ |
(10,786 |
) |
|
|
|
|
|
$ |
(17,188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-39
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The insurance deposit shown above represents an escrow account maintained in connection with a
property and casualty insurance arrangement for the Companys shopping centers, and is classified
within Deferred Charges and Other Assets. Corresponding deferred revenue relating to amounts billed
to tenants for this arrangement has been classified within Accounts Payable and Other Liabilities.
The available-for-sale securities shown above consist of $1.7 million at December 31, 2009 and
$1.4 million at December 31, 2008 of marketable securities that represent shares in a Vanguard REIT
fund that were purchased to facilitate a tax efficient structure for the 2005 disposition of
Woodland mall. In the second quarter of 2009, the Company concluded that a decrease in value was
other than temporary, and therefore recognized a $1.7 million impairment loss.
Nonrecurring Valuations
The Pier Shops, Regency Square, and Oyster Bay investments represent the remaining book values
after recognizing non-cash impairment charges to write the investments to their fair values. The
fair values of the investments were determined based on discounted future cash flows, using
managements estimates of cash flows from operations, necessary capital expenditures, the eventual
disposition of the investments, and appropriate discount and capitalization rates (Note 4).
For assets measured at fair value on a nonrecurring basis, quantitative disclosure of the fair
value for each major category of assets is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
Fair Value |
|
|
|
|
|
|
Fair Value |
|
|
|
|
|
|
Measurements |
|
|
|
|
|
|
Measurements |
|
|
|
|
|
|
Using Significant |
|
|
Total |
|
|
Using Significant |
|
|
Total |
|
|
|
Unobservable Inputs |
|
|
Impairment |
|
|
Unobservable Inputs |
|
|
Impairment |
|
Description |
|
(Level 3) |
|
|
Losses |
|
|
(Level 3) |
|
|
Losses |
|
The Pier Shops investment |
|
$ |
52,300 |
|
|
$ |
(107,652 |
) |
|
|
|
|
|
|
|
|
Regency Square investment |
|
|
28,800 |
|
|
|
(59,028 |
) |
|
|
|
|
|
|
|
|
Oyster Bay investment |
|
|
|
|
|
|
|
|
|
$ |
39,778 |
|
|
$ |
(117,943 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
81,100 |
|
|
$ |
(166,680 |
) |
|
$ |
39,778 |
|
|
$ |
(117,943 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments Carried at Other Than Fair Values
Community Development District Obligation
One shopping center pays annual special assessment levies of a Community Development District
(CDD), which provided certain infrastructure assets and improvements. As the amount and period of
the special assessments were determinable, the Company capitalized the infrastructure assets and
improvements and recognized an obligation for the future special assessments to be levied. At
December 31, 2009 and 2008, the book value of the infrastructure assets and improvements, net of
depreciation, was $45.8 million and $48.1 million, respectively. The related obligation is
classified within Accounts Payable and Accrued Liabilities and had a balance of $63.3 million and
$63.9 million at December 31, 2009 and 2008, respectively. The fair value of this obligation,
derived from quoted market prices, was $59.8 million at December 31, 2009 and $51.2 million at
December 31, 2008.
F-40
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Notes Payable
The fair value of notes payable is estimated based on quoted market prices, if available. If
no quoted market prices are available, the fair value of mortgages and other notes payable are
estimated using cash flows discounted at current market rates. When selecting discount rates for
purposes of estimating the fair value of notes payable at December 31, 2009 and 2008, the Company
employed the credit spreads at which the debt was originally issued plus an additional 2% credit
spread 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, 2009 or 2008. To further
assist financial statement users, the Company has included with its fair value disclosures an
analysis of interest rate sensitivity. The fair values of the loans on The Pier Shops and Regency
Square, at December 31, 2009, have been estimated at the fair value of the centers, which are
collateral for the loans (Note 4).
The estimated fair values of notes payable at December 31, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
|
Carrying Value |
|
Fair Value |
|
Carrying Value |
|
Fair Value |
Notes payable |
|
$ |
2,691,019 |
|
|
$ |
2,523,759 |
|
|
$ |
2,796,821 |
|
|
$ |
2,871,252 |
|
The fair values of the notes payable are dependent on the interest rates employed 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, 2009 by $80.4 million or
3.3%.
See Note 5 regarding the fair value of the Unconsolidated Joint Ventures notes payable, and
Note 10 regarding additional information on derivatives.
Note 18 Cash Flow Disclosures and Non-Cash Investing and Financing Activities
Interest paid in 2009, 2008, and 2007, net of amounts capitalized of $1.3 million,
$8.0 million, and $14.6 million, respectively, approximated $141.8 million, $144.3 million, and
$126.0 million, respectively. The following non-cash investing and financing activities occurred
during 2009, 2008, and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
2007 |
Non-cash additions to properties |
|
$ |
14,138 |
|
|
$ |
14,820 |
|
|
$ |
61,131 |
|
Additions to capital lease obligations |
|
|
|
|
|
|
|
|
|
|
2,138 |
|
Non-cash additions to properties primarily represent accrued construction and tenant allowance
costs. Additionally, consolidated assets and liabilities increased upon consolidation of the
accounts of The Pier Shops in 2007 (Note 2).
F-41
TAUBMAN CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 19 Quarterly Financial Data (Unaudited)
The following is a summary of quarterly results of operations for 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 (1) |
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
Revenues |
|
$ |
157,690 |
|
|
$ |
158,939 |
|
|
$ |
163,200 |
|
|
$ |
186,275 |
|
Equity in income (loss) of Unconsolidated Joint Ventures |
|
|
10,158 |
|
|
|
8,368 |
|
|
|
10,454 |
|
|
|
(17,492 |
) |
Net income (loss) |
|
|
24,526 |
|
|
|
20,866 |
|
|
|
(138,788 |
) |
|
|
14,235 |
|
Net income (loss) attributable to TCO common
shareowners |
|
|
11,499 |
|
|
|
8,908 |
|
|
|
(94,073 |
) |
|
|
3,960 |
|
Basic and diluted earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
0.22 |
|
|
$ |
0.17 |
|
|
$ |
(1.77 |
) |
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 (2) |
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
Revenues |
|
$ |
157,417 |
|
|
$ |
160,412 |
|
|
$ |
163,713 |
|
|
$ |
189,956 |
|
Equity in income of Unconsolidated Joint Ventures |
|
|
9,234 |
|
|
|
8,491 |
|
|
|
11,289 |
|
|
|
6,342 |
|
Net income (loss) |
|
|
23,516 |
|
|
|
21,414 |
|
|
|
27,836 |
|
|
|
(80,818 |
) |
Net income (loss) attributable to TCO common
shareowners |
|
|
4,547 |
|
|
|
373 |
|
|
|
9,197 |
|
|
|
(100,776 |
) |
Basic and diluted earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
0.09 |
|
|
$ |
0.01 |
|
|
$ |
0.17 |
|
|
$ |
(1.90 |
) |
|
|
|
(1) |
|
Amounts include the impairment charges recognized in the third quarter of 2009 of
$166.7 million related to the Companys investments in The Pier Shops and Regency Square
(Note 4) and litigation charges in the fourth quarter of 2009 related to Westfarms (Note
15). |
|
(2) |
|
Amounts include the impairment charges recognized in the fourth quarter of 2008 of
$117.9 million and $8.3 million related to the Companys investments in its Oyster Bay
and Sarasota projects, respectively (Notes 4 and 5). |
Note 20 New Accounting Pronouncements
In June 2009, the FASB made changes to ASC Topic 810 Consolidation (ASC 810). These changes
eliminate certain scope exceptions previously permitted, provide additional guidance for
determining whether an entity is a variable interest entity, and require companies to more
frequently reassess whether they must consolidate variable interest entities. The changes also
replace the previously required quantitative approach to determining the primary beneficiary of a
variable interest entity with a requirement for an enterprise to perform a qualitative analysis to
determine whether the enterprises variable interest or interests give it a controlling financial
interest in a variable interest entity. Changes are effective as of the beginning of the first
annual reporting period that begins after November 15, 2009, for interim periods within that first
annual reporting period, and for interim and annual reporting periods thereafter. Earlier
application is prohibited. The Company anticipates that the new accounting will not have an effect
on its results of operations or financial position, as the Company does not currently have any
variable interest or interests that give it a controlling financial interest in a variable interest
entity in accordance with ASC 810.
In September 2009, the FASB ratified the EITFs consensus on Multiple-Deliverable Revenue
Arrangements, contained in Accounting Standards Update No. 2009-13. This consensus amends previous
accounting guidance on separating consideration in multiple-deliverable arrangements. This
consensus eliminates the residual method of allocation in previous guidance and requires that
arrangement consideration be allocated at the inception of the arrangement to all deliverables
using the relative selling price. This consensus also establishes a selling price hierarchy based
on available evidence for determining the selling price of a deliverable, (i) first on
vendor-specific objective evidence, (ii) then third party evidence, and (iii) then the estimated
selling price. This consensus also requires that a vendor determine its best estimate of selling
price in a manner that is consistent with that used to determine the price to sell the deliverable
on a standalone basis. This consensus is effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. The Company is currently evaluating the application of the EITFs consensus on its
results of operations and financial position.
F-42
Schedule II
TAUBMAN CENTERS, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2009, 2008, and 2007
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Charged to costs |
|
|
Charged to |
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
beginning of year |
|
|
and expenses |
|
|
other accounts |
|
|
Write-offs |
|
|
Transfers, net |
|
|
end of year |
|
Year ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful receivables |
|
$ |
9,895 |
|
|
$ |
2,081 |
|
|
|
|
|
|
$ |
(5,082 |
) |
|
|
|
|
|
$ |
6,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful receivables |
|
$ |
6,694 |
|
|
$ |
6,088 |
|
|
|
|
|
|
$ |
(2,887 |
) |
|
|
|
|
|
$ |
9,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful receivables |
|
$ |
7,581 |
|
|
$ |
1,830 |
|
|
|
|
|
|
$ |
(3,423 |
) |
|
$ |
706 |
(1) |
|
$ |
6,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the transfer in of The Pier Shops. Prior to April 13, 2007, the Company
accounted for its interest in The Pier Shops under the equity method. |
See accompanying report of independent registered public accounting firm.
F-43
Schedule III
TAUBMAN CENTERS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2009
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of |
|
|
|
|
|
|
|
|
Buildings, |
|
|
Cost Capitalized |
|
|
Gross Amount at Which |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Completion of |
|
|
|
|
|
|
|
|
Improvements, |
|
|
Subsequent to |
|
|
Carried at Close of Period |
|
|
Depreciation |
|
|
Total Cost |
|
|
|
|
|
|
Construction |
|
Depreciable |
|
|
Land |
|
|
and Equipment |
|
|
Acquisition |
|
|
Land |
|
|
BI&E |
|
|
Total |
|
|
(A/D) |
|
|
Net of A/D |
|
|
Encumbrances |
|
|
or Acquisition |
|
Life |
Shopping Centers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beverly Center, Los Angeles, CA |
|
|
|
|
|
$ |
209,093 |
|
|
$ |
55,590 |
|
|
|
|
|
|
$ |
264,683 |
|
|
$ |
264,683 |
|
|
$ |
127,782 |
|
|
$ |
136,901 |
|
|
$ |
328,365 |
|
|
1982 |
|
40 Years |
Cherry Creek Shopping Center,
Denver, CO |
|
|
|
|
|
|
99,260 |
|
|
|
112,912 |
|
|
|
|
|
|
|
212,172 |
|
|
|
212,172 |
|
|
|
107,921 |
|
|
|
104,251 |
|
|
|
280,000 |
|
|
1990 |
|
40 Years |
Dolphin Mall, Miami, FL |
|
$ |
34,881 |
|
|
|
238,252 |
|
|
|
47,288 |
|
|
$ |
34,881 |
|
|
|
285,540 |
|
|
|
320,421 |
|
|
|
73,443 |
|
|
|
246,978 |
|
|
|
64,000 |
(1) |
|
2001 |
|
50 Years |
Fairlane Town Center, Dearborn, MI |
|
|
17,330 |
|
|
|
104,668 |
|
|
|
46,138 |
|
|
|
17,330 |
|
|
|
150,806 |
|
|
|
168,136 |
|
|
|
59,564 |
|
|
|
108,572 |
|
|
|
80,000 |
(1) |
|
1996 |
|
40 Years |
Great Lakes Crossing, Auburn Hills, MI |
|
|
15,506 |
|
|
|
194,093 |
|
|
|
27,744 |
|
|
|
15,506 |
|
|
|
221,837 |
|
|
|
237,343 |
|
|
|
93,896 |
|
|
|
143,447 |
|
|
|
135,144 |
|
|
1998 |
|
50 Years |
International Plaza, Tampa, FL |
|
|
|
|
|
|
307,592 |
|
|
|
32,092 |
|
|
|
|
|
|
|
339,684 |
|
|
|
339,684 |
|
|
|
90,445 |
|
|
|
249,239 |
|
|
|
325,000 |
|
|
2001 |
|
50 Years |
MacArthur Center, Norfolk, VA |
|
|
|
|
|
|
144,514 |
|
|
|
14,125 |
|
|
|
|
|
|
|
158,639 |
|
|
|
158,639 |
|
|
|
48,619 |
|
|
|
110,020 |
|
|
|
129,358 |
|
|
1999 |
|
50 Years |
Northlake Mall, Charlotte, NC |
|
|
22,540 |
|
|
|
146,285 |
|
|
|
1,979 |
|
|
|
22,540 |
|
|
|
148,264 |
|
|
|
170,804 |
|
|
|
40,061 |
|
|
|
130,743 |
|
|
|
215,500 |
|
|
2005 |
|
50 Years |
The Mall at Partridge Creek,
Clinton Township, MI |
|
|
14,097 |
|
|
|
120,625 |
|
|
|
12,173 |
|
|
|
14,097 |
|
|
|
132,798 |
|
|
|
146,895 |
|
|
|
20,051 |
|
|
|
126,844 |
|
|
|
73,770 |
|
|
2007 |
|
50 Years |
The Pier Shops at Caesars,
Atlantic City, NJ |
|
|
|
|
|
|
47,315 |
(2) |
|
|
3,798 |
|
|
|
|
|
|
|
51,113 |
|
|
|
51,113 |
|
|
|
947 |
(3) |
|
|
50,166 |
|
|
|
135,000 |
|
|
2006 |
|
50 Years |
Regency Square, Richmond, VA |
|
|
9,006 |
(2) |
|
|
6,657 |
(2) |
|
|
14,256 |
|
|
|
9,006 |
|
|
|
20,913 |
|
|
|
29,919 |
|
|
|
403 |
(3) |
|
|
29,516 |
|
|
|
74,085 |
|
|
1997 |
|
40 Years |
The Mall at Short Hills, Short Hills, NJ |
|
|
25,114 |
|
|
|
167,967 |
|
|
|
124,519 |
|
|
|
25,114 |
|
|
|
292,486 |
|
|
|
317,600 |
|
|
|
130,750 |
|
|
|
186,850 |
|
|
|
540,000 |
|
|
1980 |
|
40 Years |
Stony Point Fashion Park, Richmond, VA |
|
|
10,677 |
|
|
|
97,774 |
|
|
|
969 |
|
|
|
10,677 |
|
|
|
98,743 |
|
|
|
109,420 |
|
|
|
35,124 |
|
|
|
74,296 |
|
|
|
107,237 |
|
|
2003 |
|
50 Years |
Twelve Oaks Mall, Novi, MI |
|
|
25,410 |
|
|
|
191,185 |
|
|
|
76,041 |
|
|
|
25,410 |
|
|
|
267,226 |
|
|
|
292,636 |
|
|
|
97,803 |
|
|
|
194,833 |
|
|
|
|
(1) |
|
1977 |
|
50 Years |
The Mall at Wellington Green,
Wellington, FL |
|
|
18,967 |
|
|
|
191,698 |
|
|
|
8,926 |
|
|
|
21,439 |
|
|
|
198,152 |
|
|
|
219,591 |
|
|
|
69,183 |
|
|
|
150,408 |
|
|
|
200,000 |
|
|
2001 |
|
50 Years |
The Shops at Willow Bend, Plano, TX |
|
|
26,192 |
|
|
|
226,986 |
|
|
|
11,717 |
|
|
|
26,192 |
|
|
|
238,703 |
|
|
|
264,895 |
|
|
|
67,017 |
|
|
|
197,878 |
|
|
|
|
|
|
2001 |
|
50 Years |
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Facilities |
|
|
|
|
|
|
|
|
|
|
27,780 |
|
|
|
|
|
|
|
27,780 |
|
|
|
27,780 |
|
|
|
16,990 |
|
|
|
10,790 |
|
|
|
|
|
|
|
|
|
Peripheral Land |
|
|
28,638 |
|
|
|
|
|
|
|
|
|
|
|
28,638 |
|
|
|
|
|
|
|
28,638 |
|
|
|
|
|
|
|
28,638 |
|
|
|
|
|
|
|
|
|
Construction in Process and
Development Pre-Construction Costs |
|
|
|
|
|
|
64,095 |
(4) |
|
|
4,040 |
|
|
|
|
|
|
|
68,135 |
|
|
|
68,135 |
|
|
|
|
|
|
|
68,135 |
|
|
|
|
|
|
|
|
|
Assets under CDD obligations |
|
|
4,164 |
|
|
|
61,411 |
|
|
|
|
|
|
|
4,164 |
|
|
|
61,411 |
|
|
|
65,575 |
|
|
|
19,732 |
|
|
|
45,843 |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
2,774 |
|
|
|
|
|
|
|
|
|
|
|
2,774 |
|
|
|
2,774 |
|
|
|
879 |
|
|
|
1,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
252,522 |
|
|
$ |
2,622,244 |
|
|
$ |
622,087 |
|
|
$ |
254,994 |
|
|
$ |
3,241,859 |
|
|
$ |
3,496,853 |
(5) |
|
$ |
1,100,610 |
|
|
$ |
2,396,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in total real estate assets and accumulated depreciation for the years ended December
31, 2009, 2008, and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Real Estate Assets |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Balance, beginning of year |
|
$ |
3,699,480 |
|
|
$ |
3,781,136 |
|
|
$ |
3,398,122 |
|
New development and improvements |
|
|
52,772 |
|
|
|
58,259 |
|
|
|
229,199 |
|
Disposals/Write-offs |
|
|
(256,404 |
)(2)(3) |
|
|
(136,579 |
)(4) |
|
|
(23,179 |
) |
Transfers In/(Out) |
|
|
1,005 |
|
|
|
(3,336 |
) |
|
|
176,994 |
(6) |
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
3,496,853 |
|
|
$ |
3,699,480 |
|
|
$ |
3,781,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Balance, beginning of year |
|
$ |
(1,049,626 |
) |
|
$ |
(933,275 |
) |
|
$ |
(821,384 |
) |
Depreciation for year |
|
|
(139,658 |
) |
|
|
(138,741 |
) |
|
|
(128,358 |
) |
Disposals/Write-offs |
|
|
88,690 |
(3) |
|
|
22,425 |
|
|
|
23,179 |
|
Transfers In/(Out) |
|
|
(16 |
) |
|
|
(35 |
) |
|
|
(6,712 |
) |
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
(1,100,610 |
) |
|
$ |
(1,049,626 |
) |
|
$ |
(933,275 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These centers are collateral for the Companys $550 million line of credit. Borrowings
under the line of credit are primary obligations of the entities owning these centers. |
|
(2) |
|
In 2009, the Company wrote down The Pier Shops at Caesars and Regency Square to their fair
values. The impairment charges were $107.7 million and $59.0 million, respectively. |
|
(3) |
|
As a result of the impairments of The Pier Shops and Regency Square in 2009, the related
accumulated depreciation was set to zero. |
|
(4) |
|
In 2008, the Company recognized a $117.9 million impairment charge on the Oyster Bay project.
The remaining balance of $39.8 million as of December 31, 2009 is included in development
pre-construction costs. |
|
(5) |
|
The unaudited aggregate costs for federal income tax purposes as of December 31, 2009 was
$3.696 billion. |
|
(6) |
|
Includes costs related to The Pier Shops at Caesars, which became a consolidated center in
2007. |
See accompanying report of independent registered public accounting firm.
F-44
SIGNATURES
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.
|
|
|
|
|
|
TAUBMAN CENTERS, INC.
|
|
Date: February 26, 2010 |
By: |
/s/ Robert S. Taubman
|
|
|
|
Robert S. Taubman, Chairman of the Board, President, |
|
|
|
and Chief Executive Officer |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Robert S. Taubman
Robert S. Taubman
|
|
Chairman of the Board, President,
Chief
Executive Officer, and Director
(Principal Executive Officer)
|
|
February 26, 2010 |
|
|
|
|
|
/s/ Lisa A. Payne
Lisa A. Payne
|
|
Vice Chairman, Chief Financial Officer,
and Director (Principal Financial Officer)
|
|
February 26, 2010 |
|
|
|
|
|
/s/ William S. Taubman
William S. Taubman
|
|
Chief Operating Officer,
and
Director
|
|
February 26, 2010 |
|
|
|
|
|
/s/ Esther R. Blum
Esther R. Blum
|
|
Senior Vice President, Controller, and
Chief
Accounting Officer
|
|
February 26, 2010 |
|
|
|
|
|
/s/ Graham Allison
Graham Allison
|
|
Director
|
|
February 26, 2010 |
|
|
|
|
|
/s/ Jerome A. Chazen
Jerome A. Chazen
|
|
Director
|
|
February 26, 2010 |
|
|
|
|
|
/s/ Craig M. Hatkoff
Craig M. Hatkoff
|
|
Director
|
|
February 26, 2010 |
|
|
|
|
|
/s/ Peter Karmanos, Jr.
Peter Karmanos, Jr.
|
|
Director
|
|
February 26, 2010 |
|
|
|
|
|
/s/ William U. Parfet
William U. Parfet
|
|
Director
|
|
February 26, 2010 |
|
|
|
|
|
/s/ Ronald W. Tysoe
Ronald W. Tysoe
|
|
Director
|
|
February 26, 2010 |
EXHIBIT INDEX
|
|
|
|
|
Exhibit Number |
|
|
|
|
3(a)
|
|
|
|
Restated By-Laws of Taubman Centers, Inc. (incorporated herein by reference to
Exhibit 3.1 filed with the Registrants Current Report on Form 8-K dated December
16, 2009). |
|
|
|
|
|
3(b)
|
|
|
|
Restated Articles of Incorporation of Taubman Centers, Inc. (incorporated herein
by reference to Exhibit 3 filed with the Registrants Quarterly Report on Form
10-Q for the quarter ended June 30, 2006). |
|
|
|
|
|
4(a)
|
|
|
|
Loan Agreement dated as of January 15, 2004 among La Cienega Associates, as
Borrower, Column Financial, Inc., as Lender (incorporated herein by reference to
Exhibit 4 filed with the Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (2004 First Quarter Form 10-Q)). |
|
|
|
|
|
4(b)
|
|
|
|
Assignment of Leases and Rents, La Cienega Associates, Assignor, and Column
Financial, Inc., Assignee, dated as of January 15, 2004 (incorporated herein by
reference to Exhibit 4 filed with the 2004 First Quarter Form 10-Q). |
|
|
|
|
|
4(c)
|
|
|
|
Leasehold Deed of Trust, with Assignment of Leases and Rents, Fixture Filing, and
Security Agreement, dated as of January 15, 2004, from La Cienega Associates,
Borrower, to Commonwealth Land Title Company, Trustee, for the benefit of Column
Financial, Inc., Lender (incorporated herein by reference to Exhibit 4 filed with
the 2004 First Quarter Form 10-Q). |
|
|
|
|
|
4(d)
|
|
|
|
Amended and Restated Promissory Note A-1, dated December 14, 2005, by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 4.1 filed with the Registrants Current Report on Form 8-K
dated December 16, 2005). |
|
|
|
|
|
4(e)
|
|
|
|
Amended and Restated Promissory Note A-2, dated December 14, 2005, by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 4.2 filed with the Registrants Current Report on Form 8-K
dated December 16, 2005). |
|
|
|
|
|
4(f)
|
|
|
|
Amended and Restated Promissory Note A-3, dated December 14, 2005, by Short Hills
Associates L.L.C. to Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 4.3 filed with the Registrants Current Report on Form 8-K
dated December 16, 2005). |
|
|
|
|
|
4(g)
|
|
|
|
Amended and Restated Mortgage,
Security Agreement and Fixture
Filings, dated December 14, 2005 by
Short Hills Associates L.L.C. to
Metropolitan Life Insurance Company
(incorporated by reference to Exhibit
4.4 filed with the Registrants
Current Report on Form 8-K dated
December 16, 2005). |
|
|
|
|
|
4(h)
|
|
|
|
Amended and Restated Assignment of
Leases, dated December 14, 2005, by
Short Hills Associates L.L.C. to
Metropolitan Life Insurance Company
(incorporated by reference to Exhibit
4.5 filed with the Registrants
Current Report on Form 8-K dated
December 16, 2005). |
|
|
|
|
|
4(i)
|
|
|
|
Second Amended and Restated Secured
Revolving Credit Agreement, dated as
of November 1, 2007, by and among
Dolphin Mall Associates Limited
Partnership, Fairlane Town Center LLC
and Twelve Oaks Mall, LLC, as
Borrowers, Eurohypo AG, New York
Branch, as Administrative Agent and
Lead Arranger, and the various
lenders and agents on the signature
pages thereto (incorporated herein by
reference to Exhibit 4.1 filed with
the Registrants Current Report on
Form 8-K dated November 1, 2007). |
|
|
|
|
|
Exhibit Number |
|
|
|
|
4(j)
|
|
|
|
Third Amended and Restated Mortgage,
Assignment of Leases and Rents and
Security Agreement, dated as of
November 1, 2007, by and between
Dolphin Mall Associates Limited
Partnership and Eurohypo AG, New York
Branch, as Administrative Agent
(incorporated herein by reference to
Exhibit 4.5 filed with the
Registrants Current Report on Form
8-K dated November 1, 2007). |
|
|
|
|
|
4(k)
|
|
|
|
Second Amended and Restated Mortgage,
dated as of November 1, 2007, by and
between Fairlane Town Center LLC and
Eurohypo AG, New York Branch, as
Administrative Agent (incorporated
herein by reference to Exhibit 4.3
filed with the Registrants Current
Report on Form 8-K dated November 1,
2007). |
|
|
|
|
|
4(l)
|
|
|
|
Second Amended and Restated Mortgage,
dated as of November 1, 2007, by and
between Twelve Oaks Mall, LLC and
Eurohypo AG, New York Branch, as
Administrative Agent (incorporated
herein by reference to Exhibit 4.4
filed with the Registrants Current
Report on Form 8-K dated November 1,
2007). |
|
|
|
|
|
4(m)
|
|
|
|
Guaranty of Payment, dated as of November 1, 2007, by and among The Taubman
Realty Group Limited Partnership, Fairlane Town Center LLC and Twelve Oaks Mall,
LLC (incorporated herein by reference to Exhibit 4.2 filed with the Registrants
Current Report on Form 8-K dated November 1, 2007). |
|
|
|
|
|
4(n)
|
|
|
|
Loan Agreement dated January 8, 2008, by and between Tampa Westshore
Associates Limited Partnership and Eurohypo AG, New York Branch, as
Administrative Agent, Joint Lead Arranger and Joint Book Runner and the various
lenders and agents on the signature pages thereto (incorporated herein by
reference to Exhibit 4.1 filed with the Registrants Current Report on Form 8-K
dated January 8, 2008). |
|
|
|
|
|
4(o)
|
|
|
|
Amended and Restated Leasehold Mortgage, Security Agreement and Financing
Statement dated January 8, 2008, by Tampa Westshore Associates Limited
Partnership, in favor of Eurohypo AG, New York Branch, as Administrative Agent
(incorporated herein by reference to Exhibit 4.2 filed with the Registrants
Current Report on Form 8-K dated January 8, 2008). |
|
|
|
|
|
4(p)
|
|
|
|
Assignment of Leases and Rents dated January 8, 2008, by Tampa Westshore
Associates Limited Partnership, in favor of Eurohypo AG, New York Branch, as
Administrative Agent (incorporated herein by reference to Exhibit 4.3 filed with
the Registrants Current Report on Form 8-K dated January 8, 2008). |
|
|
|
|
|
4(q)
|
|
|
|
Carveout Guaranty dated January 8, 2008, by The Taubman Realty Group Limited
Partnership to and for the benefit of Eurohypo AG, New York Branch, as
Administrative Agent (incorporated herein by reference to Exhibit 4.4 filed with
the Registrants Current Report on Form 8-K dated January 8, 2008). |
|
|
|
|
|
*10(a)
|
|
|
|
The Taubman Realty Group Limited Partnership 1992 Incentive Option Plan, as
Amended and Restated Effective as of September 30, 1997 (incorporated herein by
reference to Exhibit 10(b) filed with the Registrants Annual Report on Form 10-K
for the year ended December 31, 1997). |
|
|
|
|
|
*10(b)
|
|
|
|
First Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive
Option Plan as Amended and Restated Effective as of September 30, 1997, effective
January 1, 2002 (incorporated herein by reference to Exhibit 10(b) filed with the
Registrants Annual Report on Form 10-K for the year ended December 31, 2001
(2001 Form 10-K)). |
|
|
|
|
|
*10(c)
|
|
|
|
Second Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of September 30, 1997 (incorporated
herein by reference to Exhibit 10(c) filed with the Registrants Annual Report on
Form 10-K for the year ended December 31, 2004 (2004 Form 10-K)). |
|
|
|
|
|
*10(d)
|
|
|
|
Third Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of September 30, 1997 (incorporated
herein by reference to Exhibit 10(d) filed with the 2004 Form 10-K). |
|
|
|
|
|
Exhibit Number |
|
|
|
|
*10(e)
|
|
|
|
Fourth Amendment to The Taubman Realty Group Limited Partnership 1992 Incentive
Plan as Amended and Restated Effective as of September 30, 1997 (incorporated
herein by reference to Exhibit 10(a) filed with the Registrants Quarterly Report
on Form 10-Q for the quarter ended March 31, 2007). |
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*10(f)
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The Form of The Taubman Realty Group Limited Partnership 1992 Incentive Option
Plan Option Agreement (incorporated herein by reference to Exhibit 10(e) filed
with the 2004 Form 10-K). |
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10(g)
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Master Services Agreement between The Taubman Realty Group Limited Partnership
and the Manager (incorporated herein by reference to Exhibit 10(f) filed with the
Registrants Annual Report on Form 10-K for the year ended December 31, 1992). |
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10(h)
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Amended and Restated Cash Tender Agreement among Taubman Centers, Inc., The
Taubman Realty Group Limited Partnership, and A. Alfred Taubman, A. Alfred
Taubman, acting not individually but as Trustee of the A. Alfred Taubman Restated
Revocable Trust, and TRA Partners, (incorporated herein by reference to Exhibit
10 (a) filed with the Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000 (2000 Second Quarter Form 10-Q)). |
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*10(i)
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Supplemental Retirement Savings Plan (incorporated herein by reference to Exhibit
10(i) filed with the Registrants Annual Report on Form 10-K for the year ended
December 31, 1994). |
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*10(j)
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The Taubman Company Long-Term Compensation Plan (as amended and restated
effective January 1, 2000) (incorporated herein by reference to Exhibit 10 (c)
filed with the 2000 Second Quarter Form 10-Q). |
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*10(k)
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First Amendment to the Taubman Company Long-Term Compensation Plan (as amended
and restated effective January 1, 2000)(incorporated herein by reference to
Exhibit 10(m) filed with the 2004 Form 10-K). |
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*10(l)
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Second Amendment to the Taubman Company Long-Term Performance Compensation Plan
(as amended and restated effective January 1, 2000)(incorporated herein by
reference to Exhibit 10(n) filed with the Registrants Annual Report on Form 10-K
for the year ended December 31, 2005). |
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*10(m)
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The Taubman Company 2005 Long-Term Incentive Plan (incorporated herein by
reference to the Form DEF14A filed with the Securities and Exchange Commission on
April 5, 2005). |
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*10(n)
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Employment Agreement between The Taubman Company Limited Partnership and Lisa A.
Payne (incorporated herein by reference to Exhibit 10 filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997). |
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*10(o)
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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) (incorporated herein by
reference to Exhibit 10(o) filed with the 2008 Form 10-K). |
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*10(p)
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Form of Amended and Restated Change of Control Employment Agreement, dated
December 18, 2008 (revised for Code Section 409A compliance) (incorporated herein
by reference to Exhibit 10(p) filed with the 2008 Form 10-K). |
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10(q)
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Second Amended and Restated Continuing Offer, dated as of May 16, 2000.
(incorporated herein by reference to Exhibit 10 (b) filed with the 2000 Second
Quarter Form 10-Q). |
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10(r)
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The Second Amendment and Restatement of Agreement of Limited Partnership of the
Taubman Realty Group Limited Partnership dated September 30, 1998 (incorporated
herein by reference to Exhibit 10 filed with the Registrants Quarterly Report on
Form 10-Q dated September 30, 1998). |
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10(s)
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Annex to Second Amendment to the Second Amendment and Restatement of Agreement of
Limited Partnership of The Taubman Realty Group Limited Partnership. |
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Exhibit Number |
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10(t)
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Annex II to Second Amendment to the Second Amendment and Restatement of Agreement
of Limited Partnership of The Taubman Realty Group Limited Partnership
(incorporated herein by reference to Exhibit 10(p) filed with Registrants Annual
Report on Form 10-K for the year ended December 31, 1999). |
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10(u)
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Annex III to The Second Amendment and Restatement of Agreement of Limited
Partnership of The Taubman Realty Group Limited Partnership, dated as of May 27,
2004 (incorporated by reference to Exhibit 10(c) filed with the 2004 Second
Quarter Form 10-Q). |
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10(v)
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First Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of The Taubman Realty Group Limited Partnership effective as of
September 30, 1998. |
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10(w)
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Second Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of The Taubman Realty Group Limited Partnership effective as of
September 3, 1999 (incorporated herein by reference to Exhibit 10(a) filed with
the Registrants Quarterly Report on Form 10-Q for the quarter ended September
30, 1999). |
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10(x)
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Third Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated May 2, 2003
(incorporated herein by reference to Exhibit 10(a) filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30, 2003). |
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10(y)
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Fourth Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated December 31,
2003 (incorporated herein by reference to Exhibit 10(x) filed with the
Registrants Annual Report on Form 10-K for the year ended December 31, 2003). |
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10(z)
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Fifth Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated February 1,
2005 (incorporated herein by reference to Exhibit 10.1 filed with the
Registrants Current Report on Form 8-K filed on February 7, 2005). |
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10(aa)
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Sixth Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated March 29, 2006
(incorporated herein by reference to Exhibit 10 filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006). |
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10(ab)
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Seventh Amendment to the Second Amendment and Restatement of Agreement of Limited
Partnership of the Taubman Realty Group Limited Partnership, dated December 14,
2007 (incorporated herein by reference to Exhibit 10(z) filed with the
Registrants Annual Report on Form 10-K for the year ended December 31, 2007). |
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10(ac)
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Amended and Restated Shareholders Agreement dated as of October 30, 2001 among
Taub-Co Management, Inc., The Taubman Realty Group Limited Partnership, The A.
Alfred Taubman Restated Revocable Trust, and Taub-Co Holdings LLC (incorporated
herein by reference to Exhibit 10(q) filed with the 2001 Form 10-K). |
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*10(ad)
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The Taubman Realty Group Limited Partnership and The Taubman Company LLC Election
and Option Deferral Agreement (incorporated herein by reference to Exhibit 10(r)
filed with the 2001 Form 10-K). |
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10(ae)
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Operating Agreement of Taubman Land Associates, a Delaware Limited Liability
Company, dated October 20, 2006 (incorporated herein by reference to Exhibit
10(ab) filed with the Registrants Annual Report on Form 10-K for the year ended
December 31, 2006 (2006 Form 10-K)). |
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10(af)
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Amended and Restated Agreement of Partnership of Sunvalley Associates, a
California general partnership (incorporated herein by reference to Exhibit 10(a)
filed with the Registrants Amended Quarterly Report on Form 10-Q/A for the
quarter ended June 30, 2002). |
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Exhibit Number |
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*10(ag)
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Summary of Compensation for the Board of Directors of Taubman Centers, Inc.
(incorporated herein by reference to Exhibit 10(ae) filed with the 2006 Form
10-K). |
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*10(ah)
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The Form of The Taubman Company Restricted Stock Unit Award Agreement
(incorporated by reference to Exhibit 10 filed with the Registrants Current
Report on Form 8-K dated May 18, 2005). |
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*10(ai)
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The Taubman Centers, Inc. Non-Employee Directors Deferred Compensation Plan
(incorporated by reference to Exhibit 10 filed with the Registrants Current
Report on Form 8-K dated May 18, 2005). |
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*10(aj)
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The Form of The Taubman Centers, Inc. Non-Employee Directors Deferred
Compensation Plan (incorporated by reference to Exhibit 10 filed with the
Registrants Current Report on Form 8-K dated May 18, 2005). |
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*10(ak)
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Amended and Restated Limited Liability Company Agreement of Taubman Properties
Asia LLC, a Delaware Limited Liability Company (incorporated herein by reference
to Exhibit 10(a) filed with the Registrants Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008). |
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*10(al)
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First Amendment to the Taubman Centers, Inc. Non-Employee Directors Deferred
Compensation Plan (incorporated herein by reference to Exhibit 10(c) filed with
the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30,
2008). |
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*10(am)
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The Taubman Company 2008 Omnibus Long-Term Incentive Plan (incorporated herein by
reference to Appendix A to the Registrants Proxy Statement on Schedule 14A,
filed with the Commission on April 15, 2008). |
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*10(an)
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Letter Agreement regarding the Amended and Restated Limited Liability Company
Agreement of Taubman Properties Asia LLC, a Delaware Limited Liability Company,
dated November 25, 2008 (incorporated herein by reference to Exhibit 10(am) filed
with the 2008 Form 10-K). |
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*10(ao)
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Second Amendment to the Master Services Agreement between The Taubman Realty
Group Limited Partnership and the Manager, dated December 23, 2008 (incorporated
herein by reference to Exhibit 10(an) filed with the 2008 Form 10-K). |
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*10(ap)
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Form of Taubman Centers, Inc. Non-Employee Directors Deferred Compensation Plan
Amendment Agreement (revised for Code Section 409A compliance) (incorporated
herein by reference to Exhibit 10(ap) filed with the 2008 Form 10-K). |
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*10(aq)
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First Amendment to The Taubman Company Supplemental Retirement Savings Plan,
dated December 12, 2008 (revised for Code Section 409A compliance) (incorporated
herein by reference to Exhibit 10(aq) filed with the 2008 Form 10-K). |
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*10(ar)
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Amendment to The Taubman Centers, Inc. Change of Control Severance Program, dated
December 12, 2008 (revised for Code Section 409A compliance) (incorporated herein
by reference to Exhibit 10(ar) filed with the 2008 Form 10-K). |
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*10(as)
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Form of The Taubman Company Long-Term Performance Compensation Plan Amendment
Agreement (revised for Code Section 409A compliance) (incorporated herein by
reference to Exhibit 10(as) filed with the 2008 Form 10-K). |
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*10(at)
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Amendment to Employment Agreement, dated December 22, 2008, for Lisa A. Payne
(revised for Code Section 409A compliance) (incorporated herein by reference to
Exhibit 10(at) filed with the 2008 Form 10-K). |
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*10(au)
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First Amendment to the Master Services Agreement between The Taubman Realty Group
Limited Partnership and the Manager, dated September 30, 1998 (incorporated
herein by reference to Exhibit 10(au) filed with the 2008 Form 10-K). |
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*10(av)
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The Form of Fair Competition Agreement, by and between the Company and various
officers of the Company (incorporated
herein by reference to Exhibit 10(a) filed with the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2009). |
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|
Exhibit Number |
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*10(aw)
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Separation Agreement and Release, dated October 4, 2009, for Morgan Parker. |
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*10(ax)
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|
Assignment of Membership Interest in Taubman Properties Asia LLC between Morgan
Parker and Taubman Asia Management II LLC, dated October 4, 2009. |
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10(ay)
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Settlement Agreement between Raymond Road Associates, LLC, BBS Development, LLC,
and Blue Back Square, LLC and The Taubman Company LLC, West Farms Associates, and
West Farms Mall, LLC, dated December 8, 2009. |
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*10(az)
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Form of The Taubman Company LLC 2008 Omnibus Long-Term Incentive Plan Restricted
Share Unit Award Agreement (incorporated by reference to Exhibit 10(a) filed with
the Registrants Current Report on Form 8-K dated March 10, 2009). |
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*10(ba)
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Form of The Taubman Company LLC 2008 Omnibus Long-Term Incentive Plan Option
Award Agreement (incorporated by reference to Exhibit 10(b) filed with the
Registrants Current Report on Form 8-K dated March 10, 2009). |
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*10(bb)
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Form of The Taubman Company LLC 2008 Omnibus Long-Term Incentive Plan
Restricted and Performance Share Unit Award Agreement (incorporated by reference
to Exhibit 10(c) filed with the Registrants Current Report on Form 8-K dated
March 10, 2009). |
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*10(bc)
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Summary of modification to the Employment Agreement between The Taubman Company Asia Limited and Morgan Parker
(incorporated herein by reference to Exhibit 10(ao) filed with the 2008 Form 10-K). |
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12
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|
Statement Re: Computation of Taubman Centers, Inc. Ratio of Earnings to Combined
Fixed Charges and Preferred Dividends. |
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21
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Subsidiaries of Taubman Centers, Inc. |
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23
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|
Consent of Independent Registered Public Accounting Firm. |
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31(a)
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|
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. |
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31(b)
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|
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. |
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32(a)
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|
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. |
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32(b)
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|
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. |
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99(a)
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Debt Maturity Schedule. |
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99(b)
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|
Real Estate and Accumulated Depreciation Schedule of the Unconsolidated Joint
Ventures of The Taubman Realty Group Limited Partnership. |
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* |
|
A management contract or compensatory plan or arrangement required to be filed. |
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Note: |
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The Company has not filed certain instruments with respect to long-term debt that did not
exceed 10% of the Companys total assets on a consolidated basis. A copy of such instruments will
be furnished to the Commission upon request. |