TAUBMAN CENTERS INC, 10-K filed on 2/27/2018
Annual Report
Document and Entity Information Document (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Feb. 26, 2018
Jun. 30, 2017
Entity Information [Line Items]
 
 
 
Entity Registrant Name
TAUBMAN CENTERS INC. 
 
 
Entity Central Index Key
0000890319 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
60,909,479 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Share Price
$ 65.43 
 
$ 59.55 
Entity Public Float
 
 
$ 3.5 
CONSOLIDATED BALANCE SHEET (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Assets:
 
 
Properties (Notes 4 and 8)
$ 4,461,045 
$ 4,173,954 
Accumulated depreciation and amortization
(1,276,916)
(1,147,390)
Real Estate Investment Property, Net
3,184,129 
3,026,564 
Investment in Unconsolidated Joint Ventures (Note 5)
605,629 
604,808 
Cash and cash equivalents
42,499 
40,603 
Restricted cash (Note 1)
2,742 
932 
Accounts and notes receivable, less allowance for doubtful accounts of $10,237 and $4,311 in 2017 and 2016 (Note 6)
78,566 
60,174 
Accounts receivable from related parties (Note 12)
1,365 
2,103 
Deferred charges and other assets (Note 7)
299,662 
275,728 
Total Assets
4,214,592 
4,010,912 
Liabilities:
 
 
Notes payable, net (Note 8)
3,555,228 
3,255,512 
Accounts payable and accrued liabilities
307,041 
336,536 
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures (Note 5)
494,851 
480,863 
Total Liabilities
4,357,120 
4,072,911 
Commitments and contingencies (Notes 8, 9, 10, 11, 13, and 15)
   
   
Redeemable noncontrolling interests (Note 9)
7,500 
8,704 
Equity:
 
 
Series B Non-Participating Convertible Preferred Stock, $0.001 par and liquidation value, 40,000,000 shares authorized, 24,938,114 and 25,029,059 shares issued and outstanding at December 31, 2017 and 2016
25 
25 
Common Stock, $0.01 par value, 250,000,000 shares authorized, 60,832,918 and 60,430,613 shares issued and outstanding at December 31, 2017 and 2016
608 
604 
Additional paid-in capital
675,333 
657,281 
Accumulated other comprehensive income (loss) (Note 19)
(6,919)
(35,916)
Dividends in excess of net income
(646,807)
(549,914)
Stockholders' Equity Attributable to Parent
22,240 
72,080 
Noncontrolling interests (Note 9)
(172,268)
(142,783)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest
(150,028)
(70,703)
Total Liabilities and Equity
$ 4,214,592 
$ 4,010,912 
CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
Dec. 31, 2017
Dec. 31, 2016
Allowance for doubtful accounts
$ 10,237,000 
$ 4,311,000 
Common stock, par value per share
$ 0.01 
$ 0.01 
Common stock, shares authorized
250,000,000 
250,000,000 
Common stock, shares issued
60,832,918 
60,430,613 
Common stock, shares outstanding
60,832,918 
60,430,613 
Series B Preferred Stock [Member]
 
 
Preferred Stock, par value
$ 0.001 
$ 0.001 
Preferred Stock, liquidation value per share
$ 0.001 
$ 0.001 
Preferred Stock, shares authorized
40,000,000 
40,000,000 
Preferred Stock, shares issued
24,938,114 
25,029,059 
Preferred Stock, shares outstanding
24,938,114 
25,029,059 
Series J Preferred Stock [Member]
 
 
Preferred Stock, par value
$ 0 
$ 0 
Preferred Stock, liquidation preference, value
192,500,000 
192,500,000 
Preferred Stock, shares authorized
7,700,000 
7,700,000 
Preferred Stock, shares issued
7,700,000 
7,700,000 
Preferred Stock, shares outstanding
7,700,000 
7,700,000 
Series K Preferred Stock [Member]
 
 
Preferred Stock, par value
$ 0 
$ 0 
Preferred Stock, liquidation preference, value
$ 170,000,000 
$ 170,000,000 
Preferred Stock, shares authorized
6,800,000 
6,800,000 
Preferred Stock, shares issued
6,800,000 
6,800,000 
Preferred Stock, shares outstanding
6,800,000 
6,800,000 
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Revenues:
 
 
 
Minimum rents
$ 345,557 
$ 333,325 
$ 310,831 
Overage rents
16,923 
20,020 
20,233 
Expense recoveries
211,625 
202,467 
188,023 
Management, leasing, and development services (Note 2)
4,383 
28,059 
13,177 
Other
50,677 
28,686 
24,908 
Total Revenues
629,165 
612,557 
557,172 
Expenses:
 
 
 
Maintenance, taxes, utilities, and promotion
167,091 
156,506 
145,118 
Other operating
94,513 
78,794 
58,131 
Management, leasing, and development services
2,157 
4,042 
5,914 
General and administrative (Note 13)
39,018 
48,056 
45,727 
Restructuring charge (Note 1)
13,848 
   
   
Costs associated with shareowner activism (Note 1)
14,500 
3,000 
 
Interest expense
108,572 
86,285 
63,041 
Depreciation and amortization
167,806 
138,139 
106,355 
Total Expenses
607,505 
514,822 
424,286 
Nonoperating income, net (Notes 7, 10, and 15)
23,828 
22,927 
5,256 
Income before income tax expense, equity in income of Unconsolidated Joint Ventures, and gain on dispositions, net of tax
45,488 
120,662 
138,142 
Income tax expense (Note 3)
(105)
(2,212)
(2,248)
Equity in income of Unconsolidated Joint Ventures (Note 5)
67,374 
69,701 
56,226 
Income before gain on dispositions, net of tax
112,757 
188,151 
192,120 
Gain on dispositions, net of tax (Note 3)
   
   
437 
Net income
112,757 
188,151 
192,557 
Net income attributable to noncontrolling interests (Note 9)
(32,052)
(55,538)
(58,430)
Net income attributable to Taubman Centers, Inc.
80,705 
132,613 
134,127 
Distributions to participating securities of TRG (Note 13)
(2,300)
(2,117)
(1,969)
Preferred stock dividends (Note 14)
(23,138)
(23,138)
(23,138)
Net income attributable to Taubman Centers, Inc. common shareowners
55,267 
107,358 
109,020 
Other comprehensive income (Note 19):
 
 
 
Unrealized loss on interest rate instruments and other
(471)
(3,880)
(13,668)
Fair value adjustment for marketable equity securities
528 
(428)
 
Cumulative translation adjustment
33,303 
(17,339)
(15,279)
Reclassification adjustment for amounts recognized in net income
7,564 
9,339 
12,021 
Other Comprehensive Income (Loss), Net of Tax
40,924 
(12,308)
(16,926)
Comprehensive income
153,681 
175,843 
175,631 
Comprehensive income attributable to noncontrolling interests
(43,956)
(51,927)
(53,458)
Comprehensive income attributable to Taubman Centers, Inc.
$ 109,725 
$ 123,916 
$ 122,173 
Basic earnings per common share (Note 16)
$ 0.91 
$ 1.78 
$ 1.78 
Diluted earnings per common share (Note 16)
$ 0.91 
$ 1.77 
$ 1.76 
Weighted average number of common shares outstanding – basic
60,675,129 
60,363,416 
61,389,113 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Other Comprehensive Income [Member]
Accumulated Distributions in Excess of Net Income [Member]
Noncontrolling Interest [Member]
Former Taubman Asia President Redeemable Noncontrolling Interest [Member]
Balance at Dec. 31, 2014
$ 419,943 
$ 25 
$ 633 
$ 815,961 
$ (15,068)
$ (483,188)
$ 101,580 
 
Balance, shares at Dec. 31, 2014
 
39,617,000 
63,324,409 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15)
 
(1)
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15), shares
 
(72,061)
73,295 
 
 
 
 
 
Repurchase of common stock (Note 14)
(252,633)
 
(35)
(252,598)
 
 
 
 
Repurchase of common stock (Note 14), shares
 
 
(3,460,796)
 
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13)
19,252 
 
19,249 
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13), shares
 
 
296,653 
 
 
 
 
 
Adjustments of noncontrolling interests (Note 9)
(9,296)
 
 
69,521 
(198)
 
(78,619)
 
Dividends and distributions (excludes $7,150 of distributions attributable to redeemable noncontrolling interest) (Note 9)
(231,502)
 
 
 
 
163,087 
 
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
 
 
 
 
 
 
(68,415)
 
Other
(584)
 
 
14 
 
(598)
   
 
Net income
192,557 
 
 
 
 
134,127 
58,430 
 
Unrealized loss on interest rate instruments and other
(13,668)
 
 
 
(9,653)
 
(4,015)
 
Cumulative translation adjustment
(15,279)
 
 
 
(10,790)
 
(4,489)
 
Reclassification adjustment for amounts recognized in net income
12,021 
 
 
 
8,489 
 
3,532 
 
Balance at Dec. 31, 2015
120,811 
25 
602 
652,146 
(27,220)
(512,746)
8,004 
 
Balance, shares at Dec. 31, 2015
 
39,544,939 
60,233,561 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15)
 
   
   
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15), shares
 
(15,880)
15,880 
 
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13)
17,030 
 
17,028 
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13), shares
 
 
181,172 
 
 
 
 
 
Former Taubman Asia President redeemable equity adjustment (Note 9)
(13,854)
 
 
(13,854)
 
 
 
13,854 
Adjustments of noncontrolling interests (Note 9)
(656)
 
 
1,959 
 
(2,616)
 
Dividends and distributions (excludes $7,150 of distributions attributable to redeemable noncontrolling interest) (Note 9)
(369,742)
 
 
 
 
(168,988)
 
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
 
 
 
 
 
 
(200,754)
 
Payments for Repurchase of Redeemable Noncontrolling Interest
 
 
 
 
 
 
 
(7,150)
Other
(791)
 
 
 
(793)
   
 
Net income
188,151 
 
 
 
 
 
 
 
Net income (excludes net loss attributable to redeemable noncontrolling interest) (Note 9)
188,807 
 
 
 
 
132,613 
56,194 
 
Net Income (Loss) Attributable to Redeemable Noncontrolling Interest
(656)
 
 
 
 
 
 
(656)
Unrealized loss on interest rate instruments and other
(3,880)
 
 
 
(2,742)
 
(1,138)
 
Fair value adjustment for marketable equity securities
(428)
 
 
 
(302)
 
(126)
 
Cumulative translation adjustment
(17,339)
 
 
 
(12,251)
 
(5,088)
 
Reclassification adjustment for amounts recognized in net income
9,339 
 
 
 
6,598 
 
2,741 
 
Balance at Dec. 31, 2016
(70,703)
25 
604 
657,281 
(35,916)
(549,914)
(142,783)
 
Balance, shares at Dec. 31, 2016
 
39,529,059 
60,430,613 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15)
 
(1)
 
 
 
 
Issuance of stock pursuant to Continuing Offer (Notes 13, 14, and 15), shares
 
(90,945)
90,950 
 
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13)
18,049 
 
18,046 
 
 
 
 
Share-based compensation under employee and director benefit plans (Note 13), shares
 
 
311,355 
 
 
 
 
 
Former Taubman Asia President redeemable equity adjustment (Note 9)
1,204 
 
 
1,204 
 
 
 
(1,204)
Adjustments of noncontrolling interests (Note 9)
(924)
 
 
(1,197)
(23)
 
296 
 
Dividends and distributions (excludes $7,150 of distributions attributable to redeemable noncontrolling interest) (Note 9)
(251,927)
 
 
 
 
(177,266)
 
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
 
 
 
 
 
 
(74,661)
 
Other
(332)
 
 
   
 
(332)
   
 
Net income
112,757 
 
 
 
 
 
 
 
Net income (excludes net loss attributable to redeemable noncontrolling interest) (Note 9)
113,681 
 
 
 
 
80,705 
32,976 
 
Net Income (Loss) Attributable to Redeemable Noncontrolling Interest
(924)
 
 
 
 
 
 
(924)
Unrealized loss on interest rate instruments and other
(471)
 
 
 
(333)
 
(138)
 
Fair value adjustment for marketable equity securities
528 
 
 
 
374 
 
154 
 
Cumulative translation adjustment
33,303 
 
 
 
23,615 
 
9,688 
 
Reclassification adjustment for amounts recognized in net income
7,564 
 
 
 
5,364 
 
2,200 
 
Balance at Dec. 31, 2017
$ (150,028)
$ 25 
$ 608 
$ 675,333 
$ (6,919)
$ (646,807)
$ (172,268)
 
Balance, shares at Dec. 31, 2017
 
39,438,114 
60,832,918 
 
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash Flows From Operating Activities:
 
 
 
Net income
$ 112,757 
$ 188,151 
$ 192,557 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
167,806 
138,139 
106,355 
Provision for bad debts
11,025 
4,047 
1,994 
Gains on sales of peripheral land
(945)
(1,827)
 
Gains on SPG common share conversions (Note 7)
(11,613)
(11,069)
 
Other
17,285 
18,925 
15,799 
Increase (decrease) in cash attributable to changes in assets and liabilities:
 
 
 
Receivables, restricted cash, deferred charges, and other assets
(24,096)
(32,833)
(15,636)
Accounts payable and other liabilities
7,634 
1,490 
6,616 
Net Cash Provided By Operating Activities
279,853 
305,023 
307,685 
Cash Flows From Investing Activities:
 
 
 
Additions to properties
(353,322)
(504,864)
(440,678)
Proceeds from sales of peripheral land
1,300 
11,258 
 
Cash drawn from (provided to) escrow or deposits related to center construction projects (Note 7)
(9,606)
(69,680)
28,857 
Contributions to Unconsolidated Joint Ventures
(32,990)
(79,976)
(97,293)
Contribution for acquisition of Country Club Plaza (Note 2)
   
(314,245)
 
Distributions from Unconsolidated Joint Ventures in excess of income (Note 2)
70,847 
234,913 
5,755 
Other
86 
81 
(1,762)
Net Cash Used In Investing Activities
(323,685)
(722,513)
(505,121)
Cash Flows From Financing Activities:
 
 
 
Proceeds from revolving lines of credit, net
269,955 
234,700 
   
Debt proceeds
336,749 
758,991 
1,198,640 
Debt payments
(308,673)
(367,527)
(578,790)
Debt issuance costs
(6,665)
(1,620)
(12,743)
Repurchase of common stock (Note 14)
   
   
(252,633)
Issuance of common stock and/or TRG Units in connection with incentive plans
6,289 
1,806 
4,526 
Distributions to noncontrolling interests (Note 9)
(74,661)
(207,904)
(68,415)
Distributions to participating securities of TRG
(2,300)
(2,117)
(1,969)
Contributions from noncontrolling interests (Note 9)
   
2,000 
   
Cash dividends to preferred shareowners
(23,138)
(23,138)
(23,138)
Cash dividends to common shareowners
(151,828)
(143,733)
(137,830)
Net Cash Provided By Financing Activities
45,728 
251,458 
127,648 
Net Increase (Decrease) In Cash and Cash Equivalents
1,896 
(166,032)
(69,788)
Cash and Cash Equivalents at Beginning of Year
40,603 
206,635 
276,423 
Cash and Cash Equivalents at End of Year
$ 42,499 
$ 40,603 
$ 206,635 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Organization and Basis of Presentation

General

Taubman Centers, Inc. (the Company or TCO) is a Michigan corporation that operates as a self-administered and self-managed real estate investment trust (REIT). The Taubman Realty Group Limited Partnership (the Operating Partnership or TRG) is a majority-owned partnership subsidiary of TCO that owns direct or indirect interests in all of the Company’s real estate properties. In this report, the term "Company" refers to TCO, the Operating Partnership, and/or the Operating Partnership's subsidiaries as the context may require. The Company engages in the ownership, management, leasing, acquisition, disposition, development, and expansion of retail shopping centers and interests therein. The Company’s owned portfolio as of December 31, 2017 included 24 urban and suburban shopping centers operating in 11 U.S. states, Puerto Rico, South Korea, and China.

Taubman Properties Asia LLC and its subsidiaries (Taubman Asia), which is the platform for the Company’s operations in China and South Korea, as well as any developments in Asia, is headquartered in Hong Kong.

Dollar amounts presented in tables within the notes to the financial statements are stated in thousands, except share data or as otherwise noted.

Consolidation

The consolidated financial statements of the Company include all accounts of the Company, the Operating Partnership, and its consolidated subsidiaries, including The Taubman Company LLC (the Manager) and Taubman Asia. All intercompany transactions have been eliminated. The entities included in these consolidated financial statements are separate legal entities and maintain records and books of account separate from any other entity. However, inclusion of these separate entities in the consolidated financial statements does not mean that the assets and credit of each of these legal entities are available to satisfy the debts or other obligations of any other such legal entity included in the consolidated financial statements.

In determining the method of accounting for partially owned joint ventures, the Company evaluates the characteristics of associated entities and determines whether an entity is a variable interest entity (VIE), and, if so, determines whether the Company is the primary beneficiary by analyzing whether the Company has both the power to direct the entity's significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits. Significant judgments and assumptions inherent in this analysis include the nature of the entity's operations, the entity's financing and capital structure, and contractual relationship and terms, including consideration of governance and decision making rights. The Company consolidates a VIE when it has determined that it is the primary beneficiary. All of the Company’s consolidated joint ventures, including the Operating Partnership, meet the definition and criteria as VIEs, as either the Company or an affiliate of the Company is the primary beneficiary of each VIE.

The Company’s sole significant asset is its investment in the Operating Partnership and, consequently, substantially all of the Company’s consolidated assets and liabilities are assets and liabilities of the Operating Partnership. All of the Company’s debt (Note 8) is an obligation of the Operating Partnership or its consolidated subsidiaries. Note 8 also provides disclosure of guarantees provided by the Operating Partnership to certain consolidated joint ventures. Note 9 provides additional disclosures of the carrying balance of the noncontrolling interests in its consolidated joint ventures and other information, including a description of certain rights of the noncontrolling owners.

Investments in entities not controlled but over which the Company may exercise significant influence (Unconsolidated Joint Ventures or UJVs) are accounted for under the equity method. The Company has evaluated its investments in the Unconsolidated Joint Ventures under guidance for determining whether an entity is a VIE and has concluded that the ventures are not VIEs. Accordingly, the Company accounts for its interests in these entities under general accounting standards for investments in real estate ventures (including guidance for determining effective control of a limited partnership or similar entity). The Company’s partners or other owners in these Unconsolidated Joint Ventures have substantive participating rights including approval rights over annual operating budgets, capital spending, financing, admission of new partners/members, or sale of the properties and the Company has concluded that the equity method of accounting is appropriate for these interests. Specifically, the Company’s 79% and 50.1% investments in Westfarms and International Plaza, respectively, are through general partnerships in which the other general partners have participating rights over annual operating budgets, capital spending, refinancing, or sale of the property. The Company provides its beneficial interest in certain financial information of its Unconsolidated Joint Ventures (Notes 5 and 8). This beneficial information is derived as the Company's ownership interest in the investee multiplied by the specific financial statement item being presented. Investors are cautioned that deriving the Company's beneficial interest in this manner may not accurately depict the legal and economic implications of holding a noncontrolling interest in the investee.

The Operating Partnership

At December 31, 2017 and 2016, the Operating Partnership’s equity included two classes of preferred equity (Series J and K Preferred Equity) (Note 14) and the net equity of the TRG unitholders. Net income and distributions of the Operating Partnership are allocable first to the preferred equity interests, and the remaining amounts to the general and limited partners in the Operating Partnership in accordance with their percentage ownership. The Series J and K Preferred Equity are owned by the Company and are eliminated in consolidation.

The partnership equity of the Operating Partnership and the Company's ownership therein are shown below:
Year
 
TRG Units outstanding at December 31
 
TRG Units owned by TCO at December 31(1)
 
TRG Units owned by noncontrolling interests at December 31
 
TCO's % interest in TRG at December 31
 
TCO's average interest % in TRG
2017
 
85,788,252

 
60,832,918

 
24,955,334

 
71%
 
71%
2016
 
85,476,892

 
60,430,613

 
25,046,279

 
71
 
71
2015
 
85,295,720

 
60,233,561

 
25,062,159

 
71
 
71

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

Outstanding voting securities of the Company at December 31, 2017 consisted of 24,938,114 shares of Series B Preferred Stock (Note 14) and 60,832,918 shares of common stock.

Revenue Recognition

Shopping center space is generally leased to tenants under short and intermediate term leases that are accounted for as operating leases. Minimum rents are recognized on the straight-line method. Overage rent is accrued when lessees' specified sales targets have been met. For traditional net leases, where tenants reimburse the landlord for an allocation of reimbursable costs incurred, the Company recognizes revenue in the period the applicable costs are chargeable to tenants. For tenants paying a fixed common area maintenance charge (which typically includes fixed increases over the lease term), the Company recognizes revenue on a straight-line basis over the lease terms. Management, leasing, and development revenue is recognized as services are rendered, when fees due are determinable, and collectibility is reasonably assured. Fees for management, leasing, and development services are established under contracts and are generally based on negotiated rates, percentages of cash receipts, and/or actual costs incurred. Fixed-fee development services contracts are generally accounted for under the percentage-of-completion method, using cost to cost measurements of progress. Profits on real estate sales are recognized whenever (1) a sale is consummated, (2) the buyer has demonstrated an adequate commitment to pay for the property, (3) the Company’s receivable is not subject to future subordination, and (4) the Company has transferred to the buyer the risks and rewards of ownership. Other revenues, including fees paid by tenants to terminate their leases, are recognized when fees due are determinable, no further actions or services are required to be performed by the Company, and collectibility is reasonably assured. Taxes assessed by government authorities on revenue-producing transactions, such as sales, use, and value-added taxes, are primarily accounted for on a net basis on the Company’s income statement. See Note 21 - New Accounting Pronouncements, for the Company's evaluation of the impact of Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers" and ASU No. ASU No. 2016-02, "Leases."

Allowance for Doubtful Accounts and Notes

The Company records a provision for losses on accounts receivable to reduce them to the amount estimated to be collectible. The Company records a provision for losses on notes receivable to reduce them to the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the collateral if the loans are collateral dependent.

Depreciation and Amortization

Buildings, improvements, and equipment are primarily depreciated on straight-line bases over the estimated useful lives of the assets, which generally range from 3 to 50 years. Capital expenditures that are recoverable from tenants are generally depreciated over the estimated recovery period. Intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. Tenant allowances are depreciated on a straight-line basis over the shorter of the useful life of the leasehold improvements or the lease term. Deferred leasing costs are amortized on a straight-line basis over the lives of the related leases. In the event of early termination of such leases, the unrecoverable net book values of the assets are recognized as depreciation and amortization expense in the period of termination.

Capitalization

Direct and indirect costs that are clearly related to the acquisition, development, construction, and improvement of properties are capitalized. Compensation costs are allocated based on actual time spent on a project. Costs incurred on real estate for ground leases, property taxes, insurance, and interest costs for qualifying assets are capitalized during periods in which activities necessary to get the property ready for its intended use are in progress.

The viability of all projects under construction or development, including those owned by Unconsolidated Joint Ventures, are regularly evaluated on an individual basis under the accounting for abandonment of assets or changes in use. To the extent a project, or individual components of the project, are no longer considered to have value, the related capitalized costs are charged against operations. Additionally, all properties are reviewed for impairment on an individual basis whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Impairment of a shopping center owned by consolidated entities is recognized when the sum of expected cash flows (undiscounted and without interest charges) is less than the carrying value of the property. Other than temporary impairment of an investment in an Unconsolidated Joint Venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value, including the results of discounted cash flow and other valuation techniques. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income.

In the fourth quarter of 2015, the Company recognized an impairment charge on previously capitalized pre-development costs related to its enclosed shopping mall project that was intended to be part of the Miami Worldcenter mixed-use, urban development in Miami, Florida (Note 5).
In leasing a shopping center space, the Company may provide funding to the lessee through a tenant allowance. In accounting for a tenant allowance, the Company determines whether the allowance represents funding for the construction of leasehold improvements and evaluates the ownership, for accounting purposes, of such improvements. If the Company is considered the owner of the leasehold improvements for accounting purposes, the Company capitalizes the amount of the tenant allowance and depreciates it over the shorter of the useful life of the leasehold improvements or the lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue. Factors considered during this evaluation usually include (1) who holds legal title to the improvements, (2) evidentiary requirements concerning the spending of the tenant allowance, and (3) other controlling rights provided by the lease agreement (e.g. unilateral control of the tenant space during the build-out process). Determination of the accounting for a tenant allowance is made on a case-by-case basis, considering the facts and circumstances of the individual tenant lease. Substantially all of the Company’s tenant allowances have been determined to be leasehold improvements.

Cash and Cash Equivalents and Restricted Cash

Cash equivalents consist of highly liquid investments with a maturity of 90 days or less at the date of purchase. The Company deposits cash and cash equivalents with institutions with high credit quality. From time to time, cash and cash equivalents may be in excess of FDIC insurance limits. Substantially all cash equivalents at December 31, 2017 were not insured or guaranteed by the FDIC or any other government agency and were invested across two separate financial institutions as of December 31, 2017.

The Company is required to escrow cash balances for specific uses stipulated by certain of its lenders and other various agreements. As of December 31, 2017 and 2016, the Company’s cash balances restricted for these uses were $2.7 million and $0.9 million, respectively. Included in restricted cash is $2.5 million at December 31, 2017 on deposit in excess of the FDIC insured limit.

Acquisitions

The Company recognizes the assets acquired, the liabilities assumed, and any noncontrolling interests in the acquiree at their fair values as of the acquisition date. The cost of acquiring a controlling ownership interest or an additional ownership interest (if not already consolidated) is allocated to the tangible assets acquired (such as land and building) and to any identifiable intangible assets based on their estimated fair values at the date of acquisition. The fair value of a property is determined on an "as-if-vacant" basis. Management considers various factors in estimating the "as-if-vacant" value including an estimated lease up period, lost rents, and carrying costs. The identifiable intangible assets would include the estimated value of "in-place" leases, above and below market "in-place" leases, and tenant relationships. The portion of the purchase price that management determines should be allocated to identifiable intangible assets is amortized in depreciation and amortization or as an adjustment to rental revenue, as appropriate, over the estimated life of the associated intangible asset (for instance, the remaining life of the associated tenant lease). Costs related to the acquisition of a controlling interest, including due diligence costs, professional fees, and other costs to effect an acquisition, are capitalized.

Deferred Charges and Other Assets

Direct costs related to successful leasing activities are capitalized and amortized on a straight-line basis over the lives of the related leases. Cash expenditures for leasing costs are recognized in the Consolidated Statement of Cash Flows as operating activities. Debt issuance costs incurred in connection with the Company's revolving lines of credit are deferred and amortized on a straight line basis, which approximates the effective interest method. All other deferred charges are amortized on a straight-line basis over the terms of the agreements to which they relate.

Share-Based Compensation Plans

The cost of share-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized over the requisite employee service period which is generally the vesting period of the grant. The Company recognizes compensation costs for awards with graded vesting schedules on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. The Company recognizes compensation costs for awards with net operating income performance conditions based on the grant date fair value of the award that coincides with the expected outcome of the condition, as updated for actual results (see "Note 13 - Share-Based Compensation and Other Employee Plans - Valuation Methodologies").



Interest Rate Hedging Agreements

All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If a derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (OCI) and are recognized in the income statement when the hedged item affects income. Ineffective portions of changes in the fair value of a cash flow hedge are recognized in the Company’s income generally as interest expense (Note 10).

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items.

Insurance Accounting

The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to property damage and business interruption. The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is not recorded until the proceeds are received. Insurance recoveries for business interruption for lost revenue or profit are accounted for as gain contingencies in their entirety, and therefore are not recorded in income until the proceeds are received.

During the year ended December 31, 2017, the Company recorded insurance proceeds related to property damage incurred at The Mall of San Juan as a result of Hurricane Maria (Note 15).

Income Taxes

The Company operates in such a manner as to qualify as a REIT under the applicable provisions of the Internal Revenue Code. To qualify as a REIT, the Company must distribute at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains, to its shareowners and meet certain other requirements. As a REIT, the Company is entitled to a dividends paid deduction for the dividends it pays to its shareowners. Therefore, the Company will generally not be subject to federal income taxes under current Federal income tax law as long as it currently distributes to its shareowners an amount equal to or in excess of its taxable income. REIT qualification reduces but does not eliminate the amount of state and local taxes paid by the Company. In addition, a REIT may be subject to certain excise taxes if it engages in certain activities.
No provision for federal income taxes for consolidated partnerships has been made; as such taxes are the responsibility of the individual partners under current Federal income tax law. There are certain state income taxes incurred which are provided for in the Company’s financial statements.
The Company has made Taxable REIT Subsidiary (TRS) elections for all of its corporate subsidiaries pursuant to section 856 (I) of the Internal Revenue Code. The TRSs are subject to corporate level income taxes, including federal, state, and certain foreign income taxes for foreign operations, which are provided for in the Company’s financial statements.
Deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence, including expected taxable earnings. The Company’s temporary differences primarily relate to deferred compensation, depreciation, and net operating loss carryforwards.
In connection with the new 21% Federal corporate income tax rate under the Tax Cuts and Jobs Act of 2017 (2017 Tax Act), the Company adjusted its net Federal deferred tax asset to reflect the change in tax rate (Note 3). Future changes to tax laws could affect the taxation of the REIT, partnerships and Taxable REIT subsidiaries, possibly having a significant impact on the current and deferred income taxes of the Company.





Severance Policies and Restructuring Charge

The Company has severance policies in place for its employees, which it accounts for as a post-employment benefit. The Company recognizes a liability and expense when it is probable that employees will be entitled to benefits under the severance policies and the amount can be reasonably estimated.

The Company has been undergoing a restructuring to reduce its workforce and reorganize various areas of the organization in response to the completion of another major development cycle and the current near-term challenges facing the U.S. mall industry. During the year ended December 31, 2017, the Company incurred $13.8 million of expenses related to the restructuring. These expenses have been separately classified as Restructuring Charge on the Consolidated Statement of Operations and Comprehensive Income. As of December 31, 2017, $7.1 million of the restructuring costs recognized during 2017 were unpaid and remained accrued.    

Costs Associated with Shareowner Activism

During the years ended December 31, 2017 and 2016, the Company incurred $14.5 million and $3.0 million, respectively, of expense associated with activities related to shareowner activism, largely legal and advisory services. Also included in these costs is a retention program for certain employees. Given the uncertainties associated with shareowner activism and to ensure the retention of top talent in key positions within the Company, certain key employees were provided certain incentive benefits in the form of cash and/or equity retention awards. The Company and the Board of Directors believe these benefits are instrumental in ensuring the continued success of the Company. Due to the unusual and infrequent nature of these expenses in the Company's history, they have been separately classified as Costs Associated with Shareowner Activism in the Company's Consolidated Statement of Operations and Comprehensive Income.

Noncontrolling Interests
Noncontrolling interests in the Company are comprised of the ownership interests of (1) noncontrolling interests in the Operating Partnership and (2) the noncontrolling interests in joint ventures controlled by the Company through ownership or contractual arrangements. Consolidated net income and comprehensive income includes amounts attributable to the Company and the noncontrolling interests. Transactions that change the Company's ownership interest in a subsidiary are accounted for as equity transactions if the Company retains its controlling financial interest in the subsidiary.
The Company evaluates whether noncontrolling interests are subject to any redemption features outside of the Company's control that would result in presentation outside of permanent equity pursuant to general accounting standards regarding the classification and measurement of redeemable equity instruments. Certain noncontrolling interests in the Operating Partnership and consolidated ventures of the Company qualify as redeemable noncontrolling interests (Note 9). To the extent such noncontrolling interests are currently redeemable or it is probable that they will eventually become redeemable, these interests are adjusted to the greater of their redemption value or their carrying value at each balance sheet date.

Foreign Currency Translation
The Company has certain entities in Asia for which the functional currency is the local currency. The assets and liabilities of the entities are translated from their functional currency into U.S. Dollars at the rate of exchange in effect on the balance sheet date. Income statement accounts are generally translated using the average exchange rate for the period. Income statement amounts of significant transactions are translated at the rate in effect as of the date of the transaction. The Company's share of unrealized gains and losses resulting from the translation of the entities' financial statements are reflected in shareowners' equity as a component of Accumulated Other Comprehensive Income (Loss) in the Company's Consolidated Balance Sheet (Note 19).
Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Segments and Related Disclosures

The Company has one reportable operating segment: it owns, develops, and manages 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 global chains), are operated using consistent business strategies, and are expected to exhibit similar long-term financial performance. Net Operating Income (NOI) is often used by the Company's chief operating decision makers in assessing segment operating performance. NOI is believed to be a useful indicator of operating performance as it is customary in the real estate and shopping center business to evaluate the performance of properties on a basis unaffected by capital structure.

No single retail company represents 5% or more of the Company's revenues. The Company's consolidated revenues and assets do not have any material amounts derived from countries other than the United States, as the Company's investments in Asia are in Unconsolidated Joint Ventures that are accounted for under the equity method.

Management's Responsibility to Evaluate the Company's Ability to Continue as a Going Concern

When preparing financial statements for each annual and interim reporting period, management has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued. No such conditions or events were identified as of the issuance date of the financial statements contained in this Annual Report on Form 10-K.
Acquisition, Redevelopments, Developments, and Service Agreement
Acquisition, Redevelopments, Developments, and Service Agreement [Text Block]
Acquisition, Redevelopments, Developments, and Service Agreement

Acquisition

Country Club Plaza

In March 2016, a joint venture that the Company formed with The Macerich Company acquired Country Club Plaza, a mixed-use retail and office property in Kansas City, Missouri, from Highwood Properties for $660 million ($330 million at TRG's share) in cash, excluding transaction costs. The Company has a 50% ownership interest in the center, which is jointly managed by both companies. The Company's ownership interest in the center is accounted for as an Unconsolidated Joint Venture under the equity method. The joint venture determined the fair value of assets acquired and liabilities assumed upon acquisition. Also, in March 2016, a 10-year, $320 million ($160 million at TRG's share) non-recourse financing was completed for this center. The proceeds from the financing were distributed to the joint venture partners based on the partnership agreement ownership percentages. In March 2017, the joint venture sold the Valencia Place office tower at Country Club Plaza for $75.2 million ($37.6 million at TRG's share), which was a component of the mixed-use property acquired.

Redevelopments

The Company has ongoing redevelopment projects at Beverly Center and The Mall at Green Hills, which are expected to be completed in 2018 and 2019, respectively. In total, these two redevelopment projects are expected to cost approximately $700 million. As of December 31, 2017, the Company's total capitalized costs related to these redevelopment projects were $385.3 million.

U.S. Development

International Market Place

International Market Place, a shopping center located in Waikiki, Honolulu, Hawaii, opened in August 2016.

Asia Developments

Operating Centers

The Company has opened three shopping centers in Asia: CityOn.Xi’an, located in Xi’an, China; Starfield Hanam, located in Hanam, South Korea; and CityOn.Zhengzhou, located in Zhengzhou, China. The shopping centers opened in April 2016, September 2016, and March 2017, respectively (Note 5). These investments are classified within Investment in Unconsolidated Joint Ventures on the Consolidated Balance Sheet.

South Korea Project

The Company was previously exploring a second development opportunity in South Korea with Shinsegae Group, the Company's partner in Starfield Hanam. In March 2017, the Company made a refundable deposit of $11.0 million relating to a potential development site. After performing due diligence, the Company has decided not to proceed with the project. The deposit, including a 5% return, was returned to the Company in November 2017.

Service Agreement

The Shops at Crystals

In April 2016, the third party leasing agreement for The Shops at Crystals was terminated in connection with a change in ownership of the center. As a result, the Company recognized management, leasing, and development services revenue for the lump sum payment of $21.7 million received in May 2016 in connection with the termination.
Income Taxes
Income Taxes
Income Taxes

Income Tax Expense (Benefit)

The Company’s income tax expense (benefit) for the years ended December 31, 2017, 2016, and 2015 consisted of the following:
 
2017
 
2016

2015
Federal current
$
(2,509
)
 
$
2,238


$
1,931

Federal deferred
1,632

(1) 
(1,310
)

(34
)
Foreign current
849


404


628

Foreign deferred
158


293


(114
)
State current
(208
)
 
782

 
(528
)
State deferred
183

 
(195
)
 
(72
)
Total income tax expense
$
105

 
$
2,212


$
1,811

Add income tax benefit allocated to Gain on Dispositions (2)

 


437

Income tax expense as reported on the Consolidated Statement of Operations and Comprehensive Income
$
105


$
2,212

(3) 
$
2,248



(1)
Reflects $0.3 million of expense related to the restatement of the net Federal deferred tax asset at December 31, 2017 at the new 21% Federal corporate income tax rate under the 2017 Tax Act.
(2)
Amount represents a reduction of the income taxes incurred as part of the Company's sale of interests in International Plaza in January 2014, which is classified within Gain on Dispositions, Net of Tax on the Consolidated Statement of Operations and Comprehensive Income.
(3)
Includes $0.5 million of income taxes recognized at the time of conversion of a portion of the Company's investment in partnership units in Simon Property Group Limited Partnership to common shares of Simon Property Group (Note 7).

On December 22, 2017, the 2017 Tax Act was signed into law making significant changes to the Internal Revenue Code. The 2017 Tax Act reduces the corporate tax rate to 21% effective January 1, 2018. Consequently, the Company's Federal deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate. We have recorded a decrease related to the TRS net Federal deferred tax asset of $0.3 million, with a corresponding net adjustment to deferred income tax expense of $0.3 million for the year ended December 31, 2017. With the exception of the reduction in the corporate tax rate, the Company did not identify any other items for which the accounting for the income tax effects of the 2017 Tax Act have not been completed.

The 2017 Tax Act requires a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company believes that no such tax will be due as there are no accumulated foreign earnings applicable to the mandatory deemed repatriation.

Net Operating Loss Carryforwards

As of December 31, 2017, the Company had a foreign net operating loss carryforward of $6.5 million. Of the $6.5 million, $0.6 million had a carryforward period of 10 years, and the remaining had an indefinite carryforward period.

Deferred Taxes

Deferred tax assets and liabilities as of December 31, 2017 and 2016 were as follows:
 
2017
 
2016
Deferred tax assets:
 
 
 
Federal
$
503

(1) 
$
3,230

Foreign
1,788

 
1,673

State
545

 
935

Total deferred tax assets
$
2,836

 
$
5,838

Valuation allowances
(1,620
)
 
(1,812
)
Net deferred tax assets
$
1,216

 
$
4,026

Deferred tax liabilities:
 

 
 

Federal


 


Foreign
$
1,517

 
1,124

State


 


Total deferred tax liabilities
$
1,517

 
$
1,124



(1)
Includes a $0.3 million reduction in the net Federal deferred tax asset due to the new 21% Federal corporate income tax rate under the 2017 Tax Act.

The Company believes that it is more likely than not the results of future operations will generate sufficient taxable income to recognize the net deferred tax assets. These future operations are primarily dependent upon the Manager's profitability, the timing and amounts of gains on peripheral land sales, the profitability of Taubman Asia's operations, and other factors affecting the results of operations of the taxable REIT subsidiaries. The valuation allowances relate to net operating loss carryforwards and tax basis differences where there is uncertainty regarding their realizability.

Tax Status of Dividends

Dividends declared on the Company’s common and preferred stock and their tax status are presented in the following tables. The tax status of the Company’s dividends in 2017, 2016, and 2015 may not be indicative of future periods. The portion of the per share dividends paid in 2017 and each year detailed in each table below as capital gains (long term and unrecaptured Sec. 1250) are designated as capital gain dividends as required by Internal Revenue Code Section 857(b)(3)(c).

Year
 
Dividends per common share declared
 
Return of capital
 
Ordinary income
 
Long term capital gain
 
Unrecaptured Sec. 1250 capital gain
2017
 
$
2.5000

 
$
0.4775

 
$
1.3927

 
$
0.4397

 
$
0.1901

2016
 
2.3800

 

 
1.8427

 
0.3929

 
0.1444

2015
 
2.2600

 
0.0972

 
2.1621

 
0.0004

 
0.0003



Year

Dividends per Series J Preferred share declared

Ordinary income

Long term capital gain

Unrecaptured Sec. 1250 capital gain
2017

$
1.6250


$
1.0505


$
0.4011


$
0.1734

2016

1.6250


1.2581


0.2683


0.0986

2015
 
1.6250

 
1.6245

 
0.0003

 
0.0002



Year
 
Dividends per Series K Preferred share declared
 
Ordinary income
 
Long term capital gain
 
Unrecaptured Sec. 1250 capital gain
2017
 
$
1.5625

 
$
1.0101

 
$
0.3857

 
$
0.1667

2016
 
1.5625

 
1.2097

 
0.2580

 
0.0948

2015
 
1.5625

 
1.5620

 
0.0003

 
0.0002



Uncertain Tax Positions

The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2017. The Company has no material interest or penalties relating to income taxes recognized in the Consolidated Statement of Operations and Comprehensive Income for the years ended December 31, 2017, 2016, and 2015 or in the Consolidated Balance Sheet as of December 31, 2017 and 2016. As of December 31, 2017, returns for the calendar years 2014 through 2017 remain subject to examination by U.S. and various state and foreign tax jurisdictions.
Properties
Real Estate Disclosure [Text Block]
Properties

Properties at December 31, 2017 and 2016 are summarized as follows:
 
2017
 
2016
Land
$
232,970


$
233,303

Buildings, improvements, and equipment
3,838,862


3,639,256

Construction in process and pre-development costs
389,213


301,395

 
$
4,461,045


$
4,173,954

Accumulated depreciation and amortization
(1,276,916
)

(1,147,390
)
 
$
3,184,129


$
3,026,564



Depreciation expense for 2017, 2016, and 2015 was $161.1 million, $130.4 million, and $98.8 million, respectively.

The charge to operations in 2017, 2016, and 2015 for domestic and non-U.S. pre-development activities was $5.6 million, $5.0 million, and $4.3 million, respectively.
Investments in Unconsolidated Joint Ventures
Investments in Unconsolidated Joint Ventures
Investments in Unconsolidated Joint Ventures

General Information

The Company owns beneficial interests in joint ventures that own shopping centers. The Operating Partnership is the sole direct or indirect managing general partner or managing member of Fair Oaks, International Plaza, Stamford Town Center, Sunvalley, The Mall at University Town Center, and Westfarms. The Operating Partnership also provides certain management, leasing, and/or development services to the other shopping centers noted below.
Shopping Center
 
Ownership as of
December 31, 2017 and 2016
CityOn.Xi'an
 
50%
CityOn.Zhengzhou
 
49
Country Club Plaza
 
50
Fair Oaks
 
50
International Plaza
 
50.1
The Mall at Millenia
 
50
Stamford Town Center
 
50
Starfield Hanam
 
34.3
Sunvalley
 
50
The Mall at University Town Center
 
50
Waterside Shops
 
50
Westfarms
 
79



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

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

The Mall at Miami Worldcenter

In 2015, the Company made a decision not to move forward with an enclosed shopping mall that was intended to be part of the Miami Worldcenter mixed-use, urban development in Miami, Florida. As a result of this decision, an impairment charge of $11.8 million was recognized in the fourth quarter of 2015, which represents previously capitalized costs related to the pre-development of the enclosed mall plan. The impairment charge was recorded within Equity in Income of Unconsolidated Joint Ventures on the Consolidated Statement of Operations and Comprehensive Income.
Combined Financial Information

Combined balance sheet and results of operations information is presented in the following table for the Unconsolidated Joint Ventures, followed by the Operating Partnership's beneficial interest in the combined operations information. The combined information of the Unconsolidated Joint Ventures as of December 31, 2016 excludes the balances of CityOn.Zhengzhou, which opened in March 2017. Beneficial interest is calculated based on the Operating Partnership's ownership interest in each of the Unconsolidated Joint Ventures.
 
December 31 2017
 
December 31 2016
Assets:
 
 
 
Properties
$
3,756,890

 
$
3,371,216

Accumulated depreciation and amortization
(767,678
)
 
(661,611
)
 
$
2,989,212

 
$
2,709,605

Cash and cash equivalents
147,102

 
83,882

Accounts and notes receivable, less allowance for doubtful accounts of $4,706 and $1,965 in 2017 and 2016
121,173

 
87,612

Deferred charges and other assets
136,837

 
67,167

 
$
3,394,324

 
$
2,948,266

 


 
 
Liabilities and accumulated deficiency in assets:
 

 
 

Notes payable, net (1)
$
2,860,384

 
$
2,706,628

Accounts payable and other liabilities
471,948

 
359,814

TRG's accumulated deficiency in assets
(48,338
)
 
(166,226
)
Unconsolidated Joint Venture Partners' accumulated deficiency in assets
110,330

 
48,050

 
$
3,394,324

 
$
2,948,266

 


 
 
TRG's accumulated deficiency in assets (above)
$
(48,338
)
 
$
(166,226
)
TRG's investment in and advances to CityOn.Zhengzhou
46,106

 
112,861

TRG basis adjustments, including elimination of intercompany profit
63,886

 
126,240

TCO's additional basis
49,124

 
51,070

Net Investment in Unconsolidated Joint Ventures
$
110,778

 
$
123,945

Distributions in excess of investments in and net income of Unconsolidated Joint Ventures
494,851

 
480,863

Investment in Unconsolidated Joint Ventures
$
605,629

 
$
604,808


(1)
The Notes Payable, net amount excludes the construction financing outstanding for CityOn.Zhengzhou of $70.5 million ($34.5 million at TRG's share) as of December 31, 2016.
 
Year Ended December 31
 
2017
 
2016
 
2015
Revenues
$
586,499

 
$
477,458

 
$
378,280

Maintenance, taxes, utilities, promotion, and other operating expenses
$
218,004

 
$
172,325

 
$
118,909

Interest expense
130,339

 
103,973

 
85,198

Depreciation and amortization
127,625

 
95,051

 
55,318

Total operating costs
$
475,968

 
$
371,349

 
$
259,425

Nonoperating income (expense)
2,894

 
317

 
(1
)
Income tax expense
(5,226
)
 
(375
)
 


Gain on disposition, net of tax (1)
3,713

 


 


Net income
$
111,912

 
$
106,051

 
$
118,854

 


 
 
 
 
Net income attributable to TRG
$
59,994

 
$
61,561

 
$
65,384

Realized intercompany profit, net of depreciation on TRG’s basis adjustments
9,326

 
10,086

 
4,542

Depreciation of TCO's additional basis
(1,946
)
 
(1,946
)
 
(1,946
)
Beneficial interest in UJV impairment charge - Miami Worldcenter


 


 
(11,754
)
Equity in income of Unconsolidated Joint Ventures
$
67,374

 
$
69,701

 
$
56,226

 
 
 
 
 
 
Beneficial interest in Unconsolidated Joint Ventures’ operations:
 

 
 

 
 

Revenues less maintenance, taxes, utilities, promotion, and other operating expenses
$
202,332

 
$
178,009

 
$
147,905

Interest expense
(67,283
)
 
(54,674
)
 
(45,564
)
Depreciation and amortization
(66,933
)
 
(53,012
)
 
(34,361
)
Income tax expense
(2,825
)
 
(622
)
 


Gain on disposition, net of tax (1)
2,083

 


 


Beneficial interest in UJV impairment charge - Miami Worldcenter


 


 
(11,754
)
Equity in income of Unconsolidated Joint Ventures
$
67,374

 
$
69,701

 
$
56,226



(1)Amount represents the gain related to the sale of the Valencia Place office tower at Country Club Plaza in March 2017 (Note 2).

Related Party

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

In 2016, the Company issued a note receivable to one of its Unconsolidated Joint Ventures for purposes of funding development costs. The balance of the note receivable was $46.1 million and $43.2 million as of December 31, 2017 and 2016, respectively, and was classified within Investments in Unconsolidated Joint Ventures on the Consolidated Balance Sheet and within Contributions to Unconsolidated Joint Ventures on the Consolidated Statement of Cash Flows.
Accounts and Notes Receivable
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
Accounts and Notes Receivable

Accounts and notes receivable at December 31, 2017 and 2016 are summarized as follows:

 
2017
 
2016
Trade
$
51,416

 
$
31,958

Notes
4,031

 
2,959

Straight-line rent and recoveries
33,356

 
29,568

 
$
88,803

 
$
64,485

Less: Allowance for doubtful accounts
(10,237
)
 
(4,311
)
 
$
78,566

 
$
60,174



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

Deferred charges and other assets at December 31, 2017 and 2016 are summarized as follows:

 
2017
 
2016
Leasing costs
$
39,252


$
35,939

Accumulated amortization
(9,223
)

(10,519
)
 
$
30,029


$
25,420

In-place leases, net
4,462


6,264

Investment in Simon Property Group Limited Partnership Units (Note 17)



44,792

Investment in Simon Property Group common shares (Note 17)
101,348

 
44,418

Revolving credit facilities' deferred financing costs, net
6,456


3,995

Insurance deposit (Note 17)
16,703


15,440

Deposits
122,878


116,809

Prepaid expenses
6,362


4,557

Deferred tax asset, net
1,216


4,026

Other, net
10,208


10,007

 
$
299,662


$
275,728



As of December 31, 2017 and 2016, the Company had $119.2 million and $111.4 million, respectively, in restricted deposits related to its Asia investments.

Simon Property Group Limited Partnership Unit Conversions

In December 2017 and 2016, the Company converted investments in 340,124 and 250,000 partnership units of Simon Property Group Limited Partnership (SPG LP Units) to Simon Property Group (SPG) common shares, respectively. Upon conversion, the Company recognized gains of $11.6 million and $11.1 million in 2017 and 2016, respectively, which were included within Nonoperating Income, Net in the Consolidated Statement of Operations and Comprehensive Income. The gains were calculated based on the change in fair value of the SPG share prices at the dates of conversion from the carrying value. The SPG LP Units were previously accounted for at cost. The SPG common shares are recorded in Deferred Charges and Other Assets on the Consolidated Balance Sheet at December 31, 2017 and 2016 based on the common share price at each date and are accounted for as available-for-sale marketable securities at fair value. Changes in fair value from conversion date to December 31, 2017 and 2016 are recorded in Other Comprehensive Income in the Consolidated Statement of Operations and Comprehensive Income.
Notes Payable, Net
Debt Disclosure [Text Block]
Notes Payable, Net

Notes payable, net at December 31, 2017 and 2016 consist of the following:
 
2017
 
2016
 
Stated Interest Rate as of 12/31/17
 
Maturity Date
 
Number of Extension Options
 
Facility Amount
 
Cherry Creek Shopping Center
$
550,000


$
550,000

 
3.85%
 
06/01/28
 
 
 
 
 
City Creek Center
78,703

(1) 
80,269

(1) 
4.37%
 
08/01/23
 
 
 
 
 
Great Lakes Crossing Outlets
203,553


208,303

 
3.60%
 
01/06/23
 
 
 
 

 
The Mall at Green Hills
150,000


150,000

 
LIBOR+1.60%
 
12/01/18

Two, one-year options
(2) 
 
 
International Market Place
293,801


257,052

 
LIBOR + 1.75%
 
08/14/18

Two, one-year options
 
$
330,890

 
The Mall of San Juan


 
302,357

(3) 
 
 
 
 
 
 
 
 
The Mall at Short Hills
1,000,000


1,000,000

 
3.48%
 
10/01/27
 
 
 
 
 
U.S. Headquarters
12,000


12,000

 
LIBOR + 1.40% Swapped to 3.49%
 
03/01/24
 
 
 
 
 
$65M Revolving Credit Facility
19,655

 
24,700

 
LIBOR + 1.40%
 
04/28/18
 
 
 
65,000

(4) 
$1.1B Revolving Credit Facility
485,000

(5) (6) 
210,000

 
LIBOR + 1.45%
(5) 
02/01/21
(5) 
Two, six-month options
(5) 
1,100,000

(5)( 6) 
$475M Unsecured Term Loan
475,000

(7) 
475,000

(7) 
LIBOR + 1.60%
(7) 
02/28/19
 
 
 
 
 
$300M Unsecured Term Loan
300,000

(6) (8) 

(8) 
LIBOR + 1.60%
(8) 
02/01/22
 
 
 
 
 
Deferred Financing Costs, Net
(12,484
)
 
(14,169
)
 
 
 
 
 
 
 
 
 
 
$
3,555,228

 
$
3,255,512

 
 
 
 
 
 
 
 

 


(1)
The Operating Partnership has provided a limited guarantee of the repayment of the City Creek Center loan, which could be triggered only upon a decline in center occupancy to a level that the Company believes is remote.
(2)
In July 2017, the Company added an additional one-year extension option to The Mall at Green Hills loan, providing the option to extend the maturity date to December 2020.
(3)
In March 2017, the Company repaid the outstanding balance of $302.4 million on the construction facility for The Mall of San Juan, which was scheduled to mature in April 2017. The rate on the loan was LIBOR + 2.00%. The Company funded the repayment using its revolving lines of credit.
(4)
The unused borrowing capacity at December 31, 2017 was $40.8 million, after considering $4.6 million of letters of credit outstanding on the facility.
(5)
In February 2017, the Company amended its $1.1 billion primary unsecured revolving credit facility extending the maturity date to February 2021, with two six-month extension options. As of December 31, 2017, the interest rate on the facility was a range of LIBOR plus 1.15% to LIBOR plus 1.70% and a facility fee of 0.20% to 0.25% based on the Company's total leverage ratio. The unused borrowing capacity at December 31, 2017 was $499.3 million.
(6)
The $1.1 billion primary unsecured revolving line of credit includes an accordion feature, which in combination with the $300 million unsecured term loan would increase the Company's maximum aggregate total commitment to $2.0 billion between the two facilities if fully exercised, subject to obtaining additional lender commitments, customary closing conditions, covenant compliance, and minimum asset values for the unencumbered asset pool. As of December 31, 2017, the Company could not fully utilize the accordion feature unless additional assets were added to the unencumbered asset pool.
(7)
TRG is the borrower under the $475 million unsecured term loan with an accordion feature to increase the borrowing capacity to $600 million, subject to obtaining additional lender commitments, customary closing conditions, covenant compliance, and minimum asset values for the unencumbered asset pool. As of December 31, 2017, the Company could not fully utilize the accordion feature unless additional assets were added to the unencumbered asset pool. The loan bears interest at a range of LIBOR plus 1.35% to LIBOR plus 1.90% based on the Company's total leverage ratio. The LIBOR rate is swapped to a fixed interest rate of 1.65%, resulting in an effective interest rate in the range of 3.00% to 3.55% (Note 10).
(8)
In February 2017, TRG completed a $300 million unsecured term loan that bears interest at a range of LIBOR plus 1.25% to LIBOR plus 1.90% based on the Company's total leverage ratio. Beginning January 2018, the LIBOR rate was swapped through maturity to a fixed rate of 2.14%, which will result in an effective interest rate in the range of 3.39% to 4.04% (Note 10).
(9)
Amounts in table may not add due to rounding.

Notes payable are collateralized by properties with a net book value of $1.6 billion at December 31, 2017.

The following table presents scheduled principal payments on notes payable as of December 31, 2017:

2018
$
470,019

(1) 
2019
481,820

 
2020
7,058

 
2021
492,363

(2) 
2022
307,652

 
Thereafter
1,808,800

 
Total principal maturities
$
3,567,712

 
Net unamortized deferred financing costs
(12,484
)
 
Total notes payable, net
$
3,555,228

 

(1)
Includes a total of $443.8 million with two, one-year extension options.
(2)
Includes $485.0 million with two six-month extension options.

2018 Maturities

The construction facility for International Market Place matures in August 2018. As of December 31, 2017, the outstanding balance of this construction facility was $293.8 million. The Company is currently evaluating options related to refinancing or exercising the initial one-year extension option.

The loan for The Mall at Green Hills matures in December 2018. The Company plans to exercise the initial one-year extension option upon maturity.

Debt Covenants and Guarantees

Certain loan agreements contain various restrictive covenants, including the following corporate covenants on the Company’s primary unsecured revolving line of credit, $475 million and $300 million unsecured term loans, and the construction facility on International Market Place: a minimum net worth requirement, a maximum total leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a maximum recourse secured debt ratio, and a maximum payout ratio. In addition, the Company’s primary unsecured revolving line of credit and unsecured term loans have unencumbered pool covenants, which applied to Beverly Center, Dolphin Mall, The Gardens on El Paseo, and Twelve Oaks Mall on a combined basis as of December 31, 2017. These covenants include a minimum number and minimum value of eligible unencumbered assets, a maximum unencumbered leverage ratio, a minimum unencumbered interest coverage ratio, and a minimum unencumbered asset occupancy ratio. As of December 31, 2017, the corporate total leverage ratio was the most restrictive covenant. The Company was in compliance with all of its covenants and loan obligations as of December 31, 2017. The maximum payout ratio covenant limits the payment of distributions generally to 95% of funds from operations, as defined in the loan agreements, except as required to maintain the Company’s tax status, pay preferred distributions, and for distributions related to the sale of certain assets.

In connection with the financing of the construction facility at International Market Place, the Operating Partnership has provided an unconditional guarantee of the construction loan principal balance and all accrued but unpaid interest during the term of the loan. The Operating Partnership has also provided a guarantee as to the completion of construction of the center. The maximum amount of the construction facility is $330.9 million. The outstanding balance of the International Market Place construction financing facility as of December 31, 2017 was $293.8 million. Accrued but unpaid interest as of December 31, 2017 was $0.8 million. The Company believes the likelihood of a payment under the guarantees to be remote.

In connection with the $175 million additional financing at International Plaza, which is owned by an Unconsolidated Joint Venture, the Operating Partnership provided an unconditional and several guarantee of 50.1% of all obligations and liabilities related to an interest rate swap that was required on the debt for the term of the loan. As of December 31, 2017, the interest rate swap was in an asset position and had unpaid interest of $0.1 million. The Company believes the likelihood of a payment under the guarantee to be remote.





Beneficial Interest in Debt and Interest Expense

The Operating Partnership's beneficial interest in the debt, capitalized interest, and interest expense of its consolidated subsidiaries and its Unconsolidated Joint Ventures is summarized in the following table. The Operating Partnership's beneficial interest in the consolidated subsidiaries excludes debt and interest related to the noncontrolling interests in Cherry Creek Shopping Center (50%), International Market Place (6.5%), and The Mall of San Juan (5%) through its loan payoff in March 2017.
 
At 100%
 
At Beneficial Interest
 
 
Consolidated Subsidiaries
 
Unconsolidated Joint Ventures
 
Consolidated Subsidiaries
 
Unconsolidated Joint Ventures
 
Debt as of:
 
 
 
 
 
 
 
 
December 31, 2017
$
3,555,228


$
2,860,384


$
3,261,777


$
1,459,854

 
December 31, 2016
3,255,512


2,777,162


2,949,440


1,425,511

 












 
Capitalized interest:
 


 


 


 

 
Year Ended December 31, 2017
$
12,402

(1) 
$
456

(2) 
$
12,326

(1) 
$
456

(2) 
Year Ended December 31, 2016
21,864

(1) 
2,589

(2) 
21,728

(1) 
2,589

(2) 












 
Interest expense:
 


 


 


 

 
Year Ended December 31, 2017
$
108,572


$
130,339


$
96,630


$
67,283

 
Year Ended December 31, 2016
86,285


103,973


75,954


54,674

 

(1)
The Company capitalizes interest costs incurred in funding its equity contributions to development projects accounted for as Unconsolidated Joint Ventures. The capitalized interest cost is included in the Company's basis in its investment in Unconsolidated Joint Ventures. Such capitalized interest reduces interest expense in the Company's Consolidated Statement of Operations and Comprehensive Income and in the table above is included within Consolidated Subsidiaries.
(2)
Capitalized interest on the Asia Unconsolidated Joint Venture construction loans is presented at the Company's beneficial interest in both the Unconsolidated Joint Ventures (at 100%) and Unconsolidated Joint Ventures (at Beneficial Interest) columns.
Noncontrolling Interests
Noncontrolling Interests
Noncontrolling Interests

Redeemable Noncontrolling Interests

Taubman Asia

In September 2016, the Company announced the appointment of Peter Sharp (Successor Asia President) as president of Taubman Asia, a consolidated subsidiary, succeeding René Tremblay (Former Asia President) effective January 1, 2017. The Former Asia President was employed by the Company in another capacity through September 30, 2017.

The Former Asia President has an ownership interest in Taubman Asia. This interest entitled the Former Asia President to 5% of Taubman Asia's dividends, with 85% of his dividends relating to investment activities undergone prior to the Successor Asia President obtaining an ownership interest (see below) being withheld as contributions to capital. These withholdings will continue until he contributes and maintains his capital consistent with his percentage ownership interest, including all capital funded by the Operating Partnership for Taubman Asia's operating and investment activities subsequent to the Former Asia President obtaining his ownership interest. The Operating Partnership has a preferred investment in Taubman Asia to the extent the Former Asia President has not yet contributed capital commensurate with his ownership interest. This preferred investment accrues an annual preferential return equal to the Operating Partnership's average borrowing rate (with the preferred investment and accrued return together being referred to herein as the preferred interest). In addition, Taubman Asia has the ability to call, and the Former Asia President has the ability to put, the Former Asia President’s ownership interest upon Taubman Asia's properties reaching certain specified milestones. The redemption price for the ownership interest is the fair value of the ownership interest less the amount required to return the Operating Partnership's preferred interest. The Company has determined that the Former Asia President's ownership interest in Taubman Asia qualifies as an equity award, considering its specific redemption provisions, and accounts for it as a contingently redeemable noncontrolling interest. The Company presents as temporary equity at each balance sheet date an estimate of the redemption value of the ownership interest, therefore falling into level 3 of the fair value hierarchy. As of December 31, 2017 and 2016, the carrying amount of this redeemable equity was $7.5 million and $8.7 million, respectively. Any adjustments to the redemption value are recorded through equity.

In April 2016, the Company reacquired half of the Former Asia President's previous 10% ownership interest in Taubman Asia for $7.2 million. The Former Asia President contributed $2 million to Taubman Asia, which may be returned, in part or in whole, upon satisfaction of the re-evaluation of the full liquidation value of Taubman Asia as of April 2016; such re-evaluation will be performed at the Former Asia President's election on or after the third anniversary of the opening of specified Asia projects. The Former Asia President's current 5% interest is puttable beginning in 2019 at the earliest and was classified as Redeemable Noncontrolling Interest on the Consolidated Balance Sheet. The $7.2 million acquisition price is reflected as a distribution to noncontrolling interests on the Consolidated Statement of Cash Flows.

The Successor Asia President also has an ownership interest in Taubman Asia. This interest entitles the Successor Asia President to 3% of Taubman Asia's dividends for investment activities undergone by Taubman Asia subsequent to him obtaining his ownership interest, with all of his dividends being withheld as contributions to capital. These withholdings will continue until he contributes and maintains his capital consistent with his percentage ownership interest, including all capital funded by the Operating Partnership for Taubman Asia's operating and investment activities subsequent to the Successor Asia President obtaining his ownership interest. The Operating Partnership has a preferred investment in Taubman Asia to the extent the Successor Asia President has not yet contributed capital commensurate with his ownership interest. This preferred investment accrues an annual preferential return equal to the Operating Partnership's average borrowing rate (with the preferred investment and accrued return together being referred to herein as the preferred interest). In addition, Taubman Asia has the ability to call, and the Successor Asia President has the ability to put, the Successor Asia President’s ownership interest upon specified terminations of the Successor Asia President’s employment, although such put or call right may not be exercised for specified time periods after certain termination events. The redemption price for the ownership interest is 50% (increasing to 100% as early as January 2022) of the fair value of the ownership interest less the amount required to return the Operating Partnership's preferred interest. The Company has determined that the Successor Asia President's ownership interest in Taubman Asia qualifies as an equity award, considering its specific redemption provisions, and accounts for it as a contingently redeemable noncontrolling interest. As of December 31, 2017, the carrying amount of this redeemable equity was zero. Any adjustments to the redemption value are recorded through equity.






International Market Place

The Company owns a 93.5% controlling interest in a joint venture that owns International Market Place in Waikiki, Honolulu, Hawaii, which opened in August 2016. The 6.5% joint venture partner has no obligation nor the right to contribute capital. The Company is entitled to a preferential return on its capital contributions. The Company has the right to purchase the joint venture partner's interest and the joint venture partner has the right to require the Company to purchase the joint venture partner's interest after the third anniversary of the opening of the center, and annually thereafter. The purchase price of the joint venture partner's interest will be based on fair value. Considering the redemption provisions, the Company accounts for the joint venture partner's interest as a contingently redeemable noncontrolling interest with a carrying value of zero at both December 31, 2017 and 2016. Any adjustments to the redemption value are recorded through equity.

Reconciliation of Redeemable Noncontrolling Interest
 
2017
 
2016
Balance, January 1
$
8,704

 
 
Former Taubman Asia President vested redeemable equity
(1,204
)
 
$
13,854

Distributions
 
 
(7,150
)
Contributions
 
 
2,000

Allocation of net loss
(924
)
 
(656
)
Adjustments of redeemable noncontrolling interest
924

 
656

Balance, December 31
$
7,500

 
$
8,704



Equity Balances of Non-redeemable Noncontrolling Interests

The net equity balance of the non-redeemable noncontrolling interests as of December 31, 2017 and 2016 included the following:
 
2017
 
2016
Non-redeemable noncontrolling interests:
 
 
 
Noncontrolling interests in consolidated joint ventures
$
(160,359
)
 
$
(155,919
)
Noncontrolling interests in partnership equity of TRG
(11,909
)
 
13,136

 
$
(172,268
)
 
$
(142,783
)

Net Income (Loss) Attributable to Noncontrolling Interests

Net income (loss) attributable to the noncontrolling interests for the years ended December 31, 2017, 2016, and 2015 included the following:
 
2017
 
2016
 
2015
Net income (loss) attributable to non-redeemable noncontrolling interests:
 
 
 
 
 
Non-redeemable noncontrolling interests:
 
 
 
 
 
Noncontrolling share of income of consolidated joint ventures
$
7,699

 
$
8,761

 
$
11,222

Noncontrolling share of income of TRG
25,277

 
47,433

 
47,208

 
$
32,976

 
$
56,194

 
$
58,430

Redeemable noncontrolling interest:
(924
)
 
(656
)
 
 
 
$
32,052

 
$
55,538

 
$
58,430











Equity Transactions

The following schedule presents the effects of changes in Taubman Centers, Inc.’s ownership interest in consolidated subsidiaries on Taubman Centers, Inc.’s equity for the years ended December 31, 2017, 2016, and 2015:
 
2017
 
2016
 
2015
Net income attributable to Taubman Centers, Inc. common shareowners
$
55,267

 
$
107,358

 
$
109,020

Transfers (to) from the noncontrolling interest:
 

 
 

 
 
Increase (decrease) in Taubman Centers, Inc.’s paid-in capital for the adjustments of noncontrolling interest (1)
(1,197
)
 
1,959

 
69,521

Net transfers (to) from noncontrolling interests
(1,197
)
 
1,959

 
69,521

Change from net income attributable to Taubman Centers, Inc. and transfers (to) from noncontrolling interests
$
54,070

 
$
109,317

 
$
178,541


(1)
In 2017, 2016, and 2015, adjustments of the noncontrolling interest were made as a result of changes in the Company's ownership of the Operating Partnership in connection with the Company's share-based compensation under employee and director benefit plans (Note 13) and issuances of stock pursuant to the continuing offer (Note 15). In 2017 and 2016, adjustments of the noncontrolling interest were also made in connection with the accounting for the Former Asia President's redeemable ownership interest. In 2015, adjustments of the noncontrolling interest were also made as a result of share repurchases (Note 14).

Finite Life Entities

Accounting Standards Codification Topic 480, "Distinguishing Liabilities from Equity" establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. At December 31, 2017, the Company held a controlling interest in a consolidated entity with a specified termination date in 2083. The noncontrolling owners’ interest in this entity is to be settled upon termination by distribution or transfer of either cash or specific assets of the underlying entity. The estimated fair value of this noncontrolling interest was approximately $360 million at December 31, 2017, compared to a book value of $(160.4) million that is classified in Noncontrolling Interests in the Company’s Consolidated Balance Sheet. The fair value of the noncontrolling interest was calculated as the noncontrolling interest's effective ownership share of the underlying property's fair value. The property's fair value was estimated by considering its in-place net operating income, current market capitalization rate, and mortgage debt outstanding.
Derivative and Hedging Activities
Derivative and Hedging Activities
Derivative and Hedging Activities

Risk Management Objective and Strategies for Using Derivatives

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

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

As of December 31, 2017, the Company had the following outstanding derivatives that were designated and are expected to be effective as cash flow hedges of the interest payments and/or the currency exchange rate on the associated debt.
Instrument Type
 
Ownership
 
Notional Amount
 
Swap Rate
 
Credit Spread on Loan
 
Total Swapped Rate on Loan
 
Maturity Date
Consolidated Subsidiaries:
 
 
 
 
 
 
 
 
 
 
 
 
Receive variable (LIBOR) /pay-fixed swap (1)
 
100
%
 
$
200,000

 
1.64
%
 
1.60
%
(1) 
3.24
%
(1) 
February 2019
Receive variable (LIBOR) /pay-fixed swap (1)
 
100
%
 
175,000

 
1.65
%
 
1.60
%
(1) 
3.25
%
(1) 
February 2019
Receive variable (LIBOR) /pay-fixed swap (1)
 
100
%
 
100,000

 
1.64
%
 
1.60
%
(1) 
3.24
%
(1) 
February 2019
Receive variable (LIBOR) /pay-fixed swap (2)
 
100
%
 
100,000

 

(2) 


(2) 


(2) 
February 2022
Receive variable (LIBOR) /pay-fixed swap (2)
 
100
%
 
100,000

 
 
(2) 
 
(2) 
 
(2) 
February 2022
Receive variable (LIBOR) /pay-fixed swap (2)
 
100
%
 
50,000

 
 
(2) 
 
(2) 
 
(2) 
February 2022
Receive variable (LIBOR) /pay-fixed swap (2)
 
100
%
 
50,000

 
 
(2) 
 
(2) 
 
(2) 
February 2022
Receive variable (LIBOR) /pay-fixed swap (3)
 
100
%
 
12,000

 
2.09
%
(3) 
1.40
%
(3) 
3.49
%
(3) 
March 2024
Unconsolidated Joint Ventures:
 
 

 
 

 
 

 
 

 
 

 
 
Receive variable (LIBOR) /pay-fixed swap (4)
 
50
%
 
130,201

 
2.40
%
 
1.70
%
 
4.10
%
 
April 2018
Receive variable (LIBOR) /pay-fixed swap (4)
 
50
%
 
130,201

 
2.40
%
 
1.70
%
 
4.10
%
 
April 2018
Receive variable (LIBOR) /pay-fixed swap (5)
 
50.1
%
 
165,656

 
1.83
%
 
1.75
%
 
3.58
%
 
December 2021
Receive variable (LIBOR) USD/pay-fixed KRW cross-currency interest rate swap (6)
 
34.3
%
 
52,065 USD / 60,500,000 KRW

 
1.52
%
 
1.60
%
 
3.12
%
 
September 2020


(1)
The hedged forecasted transaction for each of these swaps is the first previously unhedged one-month LIBOR-indexed interest payments accrued and made each month on a debt principal amount equal to the swap notional amount, regardless of the specific debt agreement from which they may flow. The Company is currently using these swaps to manage interest rate risk on the $475 million unsecured term loan. The credit spread on this loan can also vary within a range of 1.35% to 1.90%, depending on the Company's leverage ratio at the measurement date, resulting in an effective rate in the range of 3.00% to 3.55% during the swap period.
(2)
The hedged forecasted transaction for each of these swaps is the first previously unhedged one-month LIBOR-indexed interest payments accrued and made each month on a debt principal amount equal to the swap notional amount, regardless of the specific debt agreement from which they may flow, beginning with the January 2018 effective date of the swaps. The Company began using these forward starting swaps to manage interest rate risk on the $300 million unsecured term loan in January 2018. Beginning in January 2018, the LIBOR rate was swapped to a fixed rate of 2.14%. The credit spread on this loan can vary within a range of 1.25% to 1.90%, depending on the Company's total leverage ratio at the measurement date, resulting in an effective rate in the range of 3.39% to 4.04% during the swap period.
(3)
The notional amount on this swap is equal to the outstanding principal balance of the floating rate loan on the U.S. headquarters building.
(4)
The notional amount on each of these swaps is equal to 50% of the outstanding principal balance of the loan on Fair Oaks.
(5)
The notional amount on this swap is equal to the outstanding principal balance of the floating rate loan on International Plaza.
(6)
The notional amount on this swap is equal to the outstanding principal balance of the U.S. dollar construction loan for Starfield Hanam. There is a cross-currency interest rate swap to fix the interest rate on the loan and swap the related principal and interest payments from U.S. dollars to KRW in order to reduce the impact of fluctuations in interest rates and exchange rates on the cash flows of the joint venture. The currency swap exchange rate is 1,162.0.

Cash Flow Hedges

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

Amounts reported in AOCI related to currently outstanding interest rate derivatives are recognized as an adjustment to income as interest payments are made on the Company’s variable-rate debt. Realized gains or losses on settled derivative instruments included in AOCI are recognized as an adjustment to income over the term of the hedged debt transaction. Amounts reported in AOCI related to the cross-currency interest rate swap are recognized as an adjustment to income as transaction gains or losses arising from the remeasurement of foreign currency denominated loans are recognized and as actual interest and principal obligations are repaid.

The Company expects that approximately $0.9 million of the AOCI of Taubman Centers, Inc. and the noncontrolling interests will be reclassified from AOCI and recognized as a reduction of income in the following 12 months.

The following tables present the effect of derivative instruments on the Company’s Consolidated Statement of Operations and Comprehensive Income for the years ended December 31, 2017, 2016, and 2015. The tables include the amount of gains or losses on outstanding derivative instruments recognized in OCI in cash flow hedging relationships and the location and amount of gains or losses reclassified from AOCI into income resulting from outstanding derivative instruments.

During the years ended December 31, 2017, 2016, and 2015, the Company recognized an inconsequential amount of hedge ineffectiveness related to the swaps used to hedge the $475 million unsecured term loan. The hedge ineffectiveness for each period was recorded in Nonoperating Income, Net on the Consolidated Statement of Operations and Comprehensive Income. In addition, during the year ended December 31, 2015, the Company recorded a loss of $0.2 million of hedge ineffectiveness expense in Equity in Income of Unconsolidated Joint Ventures on the Consolidated Statement of Operations and Comprehensive Income related to the Starfield Hanam swap prior to its hedge inception in September 2015 and an immaterial amount of hedge ineffectiveness expense after hedge inception.
 
Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)
 
Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
 
Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
 
2017
 
2016
 
2015
 
 
 
2017
 
2016
 
2015
Derivatives in cash flow hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts – consolidated subsidiaries
$
3,994


$
2,234

 
$
(1,730
)
 
Interest Expense
 
$
(2,879
)

$
(5,823
)
 
$
(7,211
)
Interest rate contracts – UJVs
2,898


2,478

 
71

 
Equity in Income of UJVs
 
(2,406
)

(3,775
)
 
(4,489
)
Cross-currency interest rate contract – UJV
201


(109
)
 
12

 
Equity in Income of UJVs
 
(2,279
)

259

 
(321
)
Total derivatives in cash flow hedging relationships
$
7,093