Noncontrolling Interests

Redeemable Noncontrolling Interests

Taubman Asia President

The Company's president of Taubman Asia (the Asia President) has an ownership interest in Taubman Asia, a consolidated subsidiary. As of June 30, 2016, this interest entitled the Asia President to 5% of Taubman Asia's dividends, with 85% of his dividends being withheld as contributions to capital. These withholdings will continue until he contributes and maintains his capital consistent with his percentage ownership interest, including all capital funded by the Operating Partnership for Taubman Asia's operating and investment activities subsequent to the Asia President obtaining his ownership interest. The Operating Partnership has a preferred investment in Taubman Asia to the extent the Asia President has not yet contributed capital commensurate with his ownership interest. This preferred investment 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 Asia President has the ability to put, the Asia President’s ownership interest upon specified terminations of the Asia President’s employment, although such put or call right may not be exercised for specified time periods after certain termination events. The redemption price for the ownership interest is 50% (increasing to 100% as early as June 2017) of the fair value of the ownership interest less the amount required to return the Operating Partnership's preferred interest. The Company has determined that the Asia President's ownership interest in Taubman Asia qualifies as an equity award, considering its specific redemption provisions, and accounts for it as a contingently redeemable noncontrolling interest. 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, taking into account the proportion of the Asia President's services rendered before he is fully vested. As of June 30, 2016, the carrying amount of this redeemable equity was $8.2 million. Any adjustments to the redemption value are recorded through equity.

In April 2016, the Company reacquired half of the Asia President’s ownership interest in Taubman Asia for $7.2 million. The 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 Asia President's election on or after the third anniversary of the opening of specified Asia projects. The Asia President’s remaining 5% interest is puttable beginning in 2019 at the earliest, upon reaching certain specified milestones, 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.

International Market Place

The Company owns a 93.5% controlling interest in a joint venture that is redeveloping International Market Place in Waikiki, Honolulu, Hawaii. The 6.5% joint venture partner has no obligation nor the right to contribute capital. The Company is entitled to a preferential return on its capital contributions. The Company has the right to purchase the joint venture partner's interest and the joint venture partner has the right to require the Company to purchase the joint venture partner's interest after the third anniversary of the opening of the center, and annually thereafter. The purchase price of the joint venture partner's interest will be based on fair value. Considering the redemption provisions, the Company accounts for the joint venture partner's interest as a contingently redeemable noncontrolling interest with a carrying value of zero at both June 30, 2016 and December 31, 2015. Any adjustments to the redemption value are recorded through equity.

Reconciliation of Redeemable Noncontrolling Interest



	2016
Balance, January 1
Taubman Asia President vested redeemable equity	$	13,310
Distributions	(7,150		)
Contributions	2,000
Allocation of net loss	(245		)
Adjustments of redeemable noncontrolling interest	245
Balance, June 30	$	8,160

Equity Balances of Non-redeemable Noncontrolling Interests

The net equity balance of the non-redeemable noncontrolling interests as of June 30, 2016 and December 31, 2015 included the following:



	2016			2015
Non-redeemable noncontrolling interests:
Noncontrolling interests in consolidated joint ventures	$	(157,418	)	$	(23,569	)
Noncontrolling interests in partnership equity of TRG	22,309			31,573
	$	(135,109	)	$	8,004

Net Income (Loss) Attributable to Noncontrolling Interests

Net income (loss) attributable to the noncontrolling interests for the three months ended June 30, 2016 and June 30, 2015 included the following:



	2016			2015
Net income (loss) attributable to noncontrolling interests:
Non-redeemable noncontrolling interests:
Noncontrolling share of income of consolidated joint ventures	$	1,875		$	2,672
Noncontrolling share of income of TRG	15,087			10,153
	$	16,962		$	12,825
Redeemable noncontrolling interest:	(245		)
	$	16,717		$	12,825

Net income (loss) attributable to the noncontrolling interests for the six months ended June 30, 2016 and June 30, 2015 included the following:



	2016			2015
Net income (loss) attributable to noncontrolling interests:
Non-redeemable noncontrolling interests:
Noncontrolling share of income of consolidated joint ventures	$	4,396		$	5,263
Noncontrolling share of income of TRG	25,986			22,664
	$	30,382		$	27,927
Redeemable noncontrolling interest:	(245		)
	$	30,137		$	27,927

Equity Transactions

The following table presents the effects of changes in Taubman Centers, Inc.’s ownership interest in consolidated subsidiaries on Taubman Centers, Inc.’s equity for the six months ended June 30, 2016 and June 30, 2015:



	2016		2015
Net income attributable to Taubman Centers, Inc. common shareowners	$	59,331	$	52,852
Transfers from the noncontrolling interest:
Increase in Taubman Centers, Inc.’s paid-in capital for adjustments of noncontrolling interest ⁽¹⁾	2,191		56,610
Net transfers from noncontrolling interests	2,191		56,610
Change from net income attributable to Taubman Centers, Inc. and transfers from noncontrolling interests	$	61,522	$	109,462

(1) In 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 9) and issuances of stock pursuant to the Continuing Offer (Note 10). In 2016, adjustments of the noncontrolling interest were also made in connection with the accounting for the Asia President's redeemable ownership interest. In 2015, adjustments of the noncontrolling interest were also made as a result of share repurchases (Note 6).

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 June 30, 2016, 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 June 30, 2016, compared to a book value of $(157.4) million that is classified in Noncontrolling Interests on the Company’s Consolidated Balance Sheet. The fair value of the noncontrolling interest was calculated as the noncontrolling interest's ownership shares of the underlying property's fair value. The property's fair value was estimated by considering its in-place net operating income, current market capitalization rate, and mortgage debt outstanding.