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, 2016 and 2015
CityOn.Xi'an ⁽¹⁾		50/30%
CityOn.Zhengzhou (under construction)		Note 2
Country Club Plaza ⁽²⁾		50/0
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


(1)	In April 2016, the joint venture effectively acquired the 40% noncontrolling interest in the project. As a result of the acquisition, the Company's effective ownership is 50% (Note 2).


(2)	In March 2016, the Company acquired a 50% ownership interest in Country Club Plaza (Note 2).

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 regional 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 and 2015 excludes the balances of CityOn.Zhengzhou which is currently under construction (Note 2). In addition, the combined information of the Unconsolidated Joint Ventures as of December 31, 2015 excluded the balances of CityOn.Xi'an and Starfield Hanam, which were under construction as of December 31, 2015 (Note 2). Beneficial interest is calculated based on the Operating Partnership's ownership interest in each of the Unconsolidated Joint Ventures.



	December 31 2016			December 31 2015
Assets:
Properties ⁽¹⁾	$	3,371,216		$	1,628,492
Accumulated depreciation and amortization	(661,611		)	(589,145		)
	$	2,709,605		$	1,039,347
Cash and cash equivalents	83,882			36,047
Accounts and notes receivable, less allowance for doubtful accounts of $1,965 and $1,602 in 2016 and 2015	87,612			42,361
Deferred charges and other assets ⁽²⁾	67,167			32,660
	$	2,948,266		$	1,150,415

Liabilities and accumulated deficiency in assets:
Notes payable, net ⁽²⁾⁽³⁾	$	2,706,628		$	1,994,298
Accounts payable and other liabilities	359,814			70,539
TRG's accumulated deficiency in assets	(166,226		)	(512,256		)
Unconsolidated Joint Venture Partners' accumulated deficiency in assets	48,050			(402,166		)
	$	2,948,266		$	1,150,415

TRG's accumulated deficiency in assets (above)	$	(166,226	)	$	(512,256	)
TRG's investment in centers under construction (Note 2)	112,861			296,847
TRG basis adjustments, including elimination of intercompany profit	126,240			132,218
TCO's additional basis	51,070			53,016
Net Investment in Unconsolidated Joint Ventures	$	123,945		$	(30,175	)
Distributions in excess of investments in and net income of Unconsolidated Joint Ventures	480,863			464,086
Investment in Unconsolidated Joint Ventures	$	604,808		$	433,911


(1)	The December 31, 2016 amount includes $63.5 million related to an office tower, which is expected to be sold in the first half of 2017.


(2)	The December 31, 2015 balance has been retrospectively adjusted in connection with the Company's adoption of ASU No. 2015-03 "Imputation of Interest: Simplifying the presentation of Debt Issuance Costs" (Note 1).

(3)

The Notes Payable, net amount excludes the construction financing outstanding for CityOn.Zhengzhou of $70.5 million ($34.5 million at TRG's share) and $44.7 million ($14.2 million at TRG's share) as of December 31, 2016 and 2015, respectively. The balances presented also exclude the construction financing outstanding for Starfield Hanam of $52.9 million ($18.1 million at TRG's share) as of December 31, 2015, and the related debt issuance costs.



	Year Ended December 31
	2016			2015			2014
Revenues	$	477,458		$	378,280		$	338,017
Maintenance, taxes, utilities, promotion, and other operating expenses	$	172,325		$	118,909		$	106,249
Interest expense	103,973			85,198			74,806
Depreciation and amortization	95,051			55,318			47,377
Total operating costs	$	371,349		$	259,425		$	228,432
Nonoperating income (expense)	317			(1		)	(22		)
Income tax expense	(375		)
Net income	$	106,051		$	118,854		$	109,563

Net income attributable to TRG	$	61,561		$	65,384		$	60,690
Realized intercompany profit, net of depreciation on TRG’s basis adjustments	10,086			4,542			3,258
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	$	69,701		$	56,226		$	62,002

Beneficial interest in Unconsolidated Joint Ventures’ operations:
Revenues less maintenance, taxes, utilities, promotion, and other operating expenses	$	178,009		$	147,905		$	132,652
Interest expense	(54,674		)	(45,564		)	(40,416		)
Depreciation and amortization	(53,012		)	(34,361		)	(30,234		)
Income tax expense	(622		)
Beneficial interest in UJV impairment charge - Miami Worldcenter				(11,754		)
Equity in income of Unconsolidated Joint Ventures	$	69,701		$	56,226		$	62,002

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. 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 $43.2 million as of December 31, 2016 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.