Non-Controlling Interests, Preferred Shares, Common Shares and Common Shares in Treasury

12 Months Ended

Dec. 31, 2012

Non-Controlling Interests, Preferred Shares, Common Shares and Common Shares in Treasury

10.    Non-Controlling Interests, Preferred Shares, Common Shares and Common Shares in Treasury

Non-Controlling Interests

Non-controlling interests consist of the following (in millions):

	December 31,
	2012		2011
Consolidated joint venture interests primarily outside the United States	$	13.8	$	21.6
Shopping centers and development parcels in various states		3.1		3.2
Operating partnership units		7.4		7.4
	$	24.3	$	32.2

In 2012, the Company’s consolidated joint venture sold its investment in land held for development in Russia (the “Yaroslavl Project”) (Notes 12 and 13).

At December 31, 2012 and 2011, the Company had 369,176 operating partnership units (“OP Units”) outstanding. These OP Units, issued to different partnerships, are exchangeable, at the election of the OP Unit holder, and under certain circumstances at the option of the Company, into an equivalent number of the Company’s common shares or for the equivalent amount of cash. Most of these OP Units have registration rights agreements equivalent to the number of OP Units held by the holder if the Company elects to settle in its common shares. The OP Units are classified on the Company’s balance sheet as non-controlling interests.

The OP Unit holders are entitled to receive distributions, per OP Unit, equal to the per share distributions on the Company’s common shares. At December 31, 2012 and 2011, the Company had 29,525 redeemable OP Units outstanding. Redeemable OP Units are presented at the greater of their carrying amount (for all periods presented) or redemption value at the end of each reporting period. Changes in the value from period to period are recorded to paid-in capital in the Company’s consolidated balance sheets.

Preferred Shares

The Company’s preferred shares outstanding at December 31 are as follows (in thousands):

	December 31,
	2012		2011
Class H — 7.375% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 410,000 shares issued and outstanding at December 31, 2012 and 2011	$	205,000	$	205,000
Class I — 7.5% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 340,000 shares issued and outstanding at December 31, 2011		—		170,000
Class J — 6.5% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 400,000 shares issued and outstanding at December 31, 2012		200,000		—
	$	405,000	$	375,000

In August 2012, the Company issued $200.0 million of its newly designated 6.50% Class J cumulative redeemable preferred shares (“Class J Preferred Shares”) at a price of $500.00 per share (or $25.00 per depositary share). In addition, in August 2012, the Company redeemed all outstanding shares of its 7.50% Class I cumulative redeemable preferred shares (“Class I Preferred Shares”) at a redemption price of $25.1875 per Class I depositary share (the sum of $25.00 per depositary share and dividends per depositary share of $0.1875 prorated to the redemption date). The Company recorded a charge of $5.8 million to net loss attributable to common shareholders related to the write-off of the Class I Preferred Shares’ original issuance costs.

The Class H and Class J depositary shares represent 1/20 of a Class H and Class J preferred share and have a stated value of $500 per share. The Class H depositary shares are redeemable by the Company and the Class J depositary shares are not redeemable by the Company prior to August 1, 2017, except in certain circumstances relating to the preservation of the Company’s status as a REIT.

The Company’s authorized preferred shares consist of the following:

• 750,000 Class A Cumulative Redeemable Preferred Shares, without par value*

• 750,000 Class B Cumulative Redeemable Preferred Shares, without par value*

• 750,000 Class C Cumulative Redeemable Preferred Shares, without par value*

• 750,000 Class D Cumulative Redeemable Preferred Shares, without par value*

• 750,000 Class E Cumulative Redeemable Preferred Shares, without par value*

• 750,000 Class F Cumulative Redeemable Preferred Shares, without par value*

• 750,000 Class G Cumulative Redeemable Preferred Shares, without par value*

• 750,000 Class H Cumulative Redeemable Preferred Shares, without par value

• 750,000 Class I Cumulative Redeemable Preferred Shares, without par value**

• 750,000 Class J Cumulative Redeemable Preferred Shares, without par value***

• 750,000 Class K Cumulative Redeemable Preferred Shares, without par value*

• 750,000 Non-Cumulative Preferred Shares, without par value*

• 2,000,000 Cumulative Voting Preferred Shares, without par value*

* None outstanding at December 31, 2012 or 2011.

** None outstanding at December 31, 2012.

*** None outstanding at December 31, 2011.

Common Shares

The Company’s common shares have a $0.10 per share par value. Dividends declared per share of common stock were $0.48, $0.22 and $0.08 for 2012, 2011 and 2010, respectively, which were paid in cash.

The Company issued common shares, including through the use of its continuous equity programs, for the years ended December 31, 2012, 2011 and 2010, as follows (amounts in millions, except per share):

	Number of Shares Sold		Average Price Per Share		Net Proceeds
2012		36.5	$	13.98	$	493.2
2011		9.5	$	13.71	$	129.7
2010		53.0	$	8.33	$	441.3

Equity Derivative Instruments—Otto Transaction

In 2009, the Company issued 32.9 million common shares and warrants to purchase 10.0 million common shares to Mr. Alexander Otto (the “Investor”) and certain members of the Otto family (collectively with the Investor, the “Otto Family”) for aggregate gross proceeds of $112.5 million (the “Stock Purchase Agreement”). No separate consideration was paid for the warrants. The share issuances, together with the warrant issuances, are collectively referred to as the “Otto Transaction.” In March 2011, the Otto Family exercised all 10.0 million warrants for cash at $6.00 per common share. The exercise price of the warrants was also subject to downward adjustment if the weighted-average purchase price of all additional common shares sold, as defined, from the date of issuance of the applicable warrant was less than $6.00 per share (herein, along with the share issuances, referred to as “Downward Price Protection Provisions”).

Although not triggered prior to the exercise in March 2011, the exercise price of the warrants was subject to the Downward Price Protection Provisions, described above, which resulted in the warrants being required to be recorded at fair value as of the shareholder approval date of the Stock Purchase Agreement, which was April 9, 2009, and marked-to-market through earnings as of each balance sheet date thereafter until the exercise date of March 18, 2011. These equity derivative instruments were issued as part of the Company’s overall deleveraging strategy and were not issued in connection with any speculative trading activity or to mitigate any market risks.

The fair value of the Company’s equity derivative instruments (warrants) had a fair value of $74.3 million at March 18, 2011, the exercise date. Upon exercise and issuance of common shares, this liability was reclassified to paid-in capital and aggregated with the cash proceeds in the consolidated statement of equity.

The effect of the Company’s equity derivative instruments on net loss is as follows (in millions):

Derivatives Not Designated as Hedging Instruments		Year Ended December 31,
	Income Statement Location	2011		2010
Warrants	Gain (loss) on equity derivative instruments	$	21.9	$	(40.1	)

The gain/loss above for this contract was derived principally from the changes in the Company’s stock price from April 9, 2009, the shareholder approval date, through December 31, 2010 or March 18, 2011, the exercise date of the warrants.

Measurement of Fair Value—Equity Derivative Instruments Valued on a Recurring Basis

The valuation of these instruments was determined using an option pricing model that considered all relevant assumptions including the Downward Price Protection Provisions. The two key unobservable input assumptions included in the valuation of the warrants were the volatility and dividend yield. Both measures were susceptible to change over time given the impact of movements in the Company’s common share price on each. The dividend yield assumptions used ranged from 3.0% to 3.2% through the exercise date in 2011 and from 2.4% to 4.2% in 2010. Since the initial valuation date, the Company used historical volatility assumptions to determine the estimate of fair value of the five-year warrants. The Company believed that the long-term historic volatility better represented the long-term future volatility and was more consistent with how an investor would view the value of these securities. The Company continually reassessed these assumptions and reviewed the assumptions again in March 2011 upon notification from the Otto Family regarding its exercise of the warrants. The Company determined that an implied volatility assumption was more representative of how a market participant would value the instruments given the shorter term nature of the warrants. The volatility assumptions used were 36.6% in the first quarter of 2011 and 79.1% in 2010. The Company determined that the warrants fell within Level 3 of the fair value hierarchy due to the volatility and dividend yield assumptions used in the overall valuation.

The following table presents information about the Company’s equity derivative instrument (in millions) that was a liability at December 31, 2010, measured at fair value on a recurring basis as of December 31, 2010, and indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions).

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
December 31, 2010
Warrants	$	—	$	—	$	96.2	$	96.2

The table below presents a reconciliation of the beginning and ending balances of the equity derivative instruments that were included in Other Liabilities at December 31, 2010, having fair value measurements based on significant unobservable inputs (Level 3) (in millions):

	Equity Derivative Instruments— Liability
Balance of Level 3 at December 31, 2010	$	96.2
Unrealized gain		(21.9	)
Transfer out of liability to paid-in capital		(74.3	)
Balance of Level 3 at December 31, 2011	$	—