REDEEMABLE INTERESTS AND NONCONTROLLING INTERESTS

Redeemable Noncontrolling Interests and Noncontrolling Interests of the Company

Partnership Interests in the Operating Partnership that Are Not Owned by the Company

The common units that the Company does not own are reflected in the Company's consolidated balance sheets as redeemable noncontrolling interest and noncontrolling interests in the Operating Partnership.

Series S Special Common Units

Redeemable noncontrolling interest includes a noncontrolling partnership interest in the Operating Partnership for which the partnership agreement includes redemption provisions that may require the Operating Partnership to redeem the partnership interest for real property. In July 2004, the Operating Partnership issued 1,560,940 Series S special common units (“S-SCUs”), all of which are outstanding as of December 31, 2017, in connection with the acquisition of Monroeville Mall. Under the terms of the Operating Partnership’s limited partnership agreement, the holder of the S-SCUs has the right to exchange all or a portion of its partnership interest for shares of the Company’s common stock or, at the Company’s election, their cash equivalent. The holder has the additional right to require the Operating Partnership to acquire a qualifying property and distribute it to the holder in exchange for the S-SCUs. Generally, the acquisition price of the qualifying property cannot be more than the lesser of the consideration that would be received in a normal exchange, as discussed above, or $20,000, subject to certain limited exceptions. Should the consideration that would be received in a normal exchange exceed the maximum property acquisition price as described in the preceding sentence, the excess portion of its partnership interest could be exchanged for shares of CBL's stock or, at the Company’s election, their cash equivalent. The S-SCUs receive a minimum distribution of $2.92875 per unit per year.

Series L Special Common Units

In June 2005, the Operating Partnership issued 571,700 L-SCUs, all of which are outstanding as of December 31, 2017, in connection with the acquisition of Laurel Park Place. The L-SCUs receive a minimum distribution of $0.7572 per unit per quarter ($3.0288 per unit per year). Upon the earlier to occur of June 1, 2020, or when the distribution on the common units exceeds $0.7572 per unit for four consecutive calendar quarters, the L-SCUs will thereafter receive a distribution equal to the amount paid on the common units. In December 2012, the Operating Partnership issued 622,278 common units valued at $14,000 to acquire the remaining 30% noncontrolling interest in Laurel Park Place.

Series K Special Common Units

In November 2005, the Operating Partnership issued 1,144,924 K-SCUs, all of which are outstanding as of December 31, 2017, in connection with the acquisition of Oak Park Mall, Eastland Mall and Hickory Point Mall. The holders of the K-SCUs receive a dividend at a rate of 6.25%, or $2.96875 per K-SCU. When the quarterly distribution on the Operating Partnership’s common units exceeds the quarterly K-SCU distribution for four consecutive quarters, the K-SCUs will receive distributions at the rate equal to that paid on the Operating Partnership’s common units. The holders of the K-SCUs may exchange them, on a one-for-one basis, for shares of CBL’s common stock or, at the Company’s election, their cash equivalent.

Outstanding rights to convert redeemable noncontrolling interests and noncontrolling interests in the Operating Partnership to common stock were held by the following parties at December 31, 2017 and 2016:



	December 31,
	2017	2016
CBL’s Predecessor	18,172,690	18,172,690
Third parties	10,035,683	10,119,697
	28,208,373	28,292,387

The assets and liabilities allocated to the Operating Partnership’s redeemable noncontrolling interest and noncontrolling interests are based on their ownership percentages of the Operating Partnership at December 31, 2017 and 2016. The ownership percentages are determined by dividing the number of common units held by each of the redeemable noncontrolling interest and the noncontrolling interests at December 31, 2017 and 2016 by the total common units outstanding at December 31, 2017 and 2016, respectively. The redeemable noncontrolling interest ownership percentage in assets and liabilities of the Operating Partnership was 0.8% at December 31, 2017 and 2016. The noncontrolling interest ownership percentage in assets and liabilities of the Operating Partnership was 13.4% at December 31, 2017 and 2016.

Income is allocated to the Operating Partnership’s redeemable noncontrolling interest and noncontrolling interests based on their weighted-average ownership during the year. The ownership percentages are determined by dividing the weighted-average number of common units held by each of the redeemable noncontrolling interest and noncontrolling interests by the total weighted-average number of common units outstanding during the year.

A change in the number of shares of common stock or common units changes the percentage ownership of all partners of the Operating Partnership. A common unit is considered to be equivalent to a share of common stock since it generally is exchangeable for shares of the Company’s common stock or, at the Company’s election, their cash equivalent. As a result, an allocation is made between redeemable noncontrolling interests, shareholders’ equity and noncontrolling interests in the Operating Partnership in the Company's accompanying balance sheets to reflect the change in ownership of the Operating Partnership’s underlying equity when there is a change in the number of shares and/or common units outstanding. During 2017, 2016 and 2015, the Company allocated $3,049, $2,454 and $2,981, respectively, from shareholders’ equity to redeemable noncontrolling interest. During 2017 and 2016, the Company allocated $4,290 and $13,625, respectively, from shareholders' equity to noncontrolling interest. During 2015, the Company allocated $207 from noncontrolling interest to shareholders' equity.

The total redeemable noncontrolling interest in the Operating Partnership was $8,835 and $17,996 at December 31, 2017 and 2016, respectively. The total noncontrolling interest in the Operating Partnership was $86,773 and $100,035 at December 31, 2017 and 2016, respectively.

Redeemable Noncontrolling Interests and Noncontrolling Interests in Other Consolidated Subsidiaries

Redeemable noncontrolling interests included the aggregate noncontrolling ownership interest in four of the Company’s other consolidated subsidiaries held by third parties which were redeemed in the fourth quarter of 2016 for $3,800, which was comprised of $300 in cash and a $3,500 promissory note. See Note 10 for additional information on the note. The Company recognized a net loss of $2,602 on the disposal of its interests. The loss is included in gain on investments in the consolidated statements of operations.

The Company had 22 and 25 other consolidated subsidiaries at December 31, 2017 and 2016, respectively, that had noncontrolling interests held by third parties and for which the related partnership agreements either do not include redemption provisions or are subject to redemption provisions that do not require classification outside of permanent equity. The total noncontrolling interests in other consolidated subsidiaries were $9,701 and $12,103 at December 31, 2017 and 2016, respectively.

The assets and liabilities allocated to the redeemable noncontrolling interests and noncontrolling interests in other consolidated subsidiaries are based on the third parties’ ownership percentages in each subsidiary at December 31, 2017 and 2016. Income is allocated to the redeemable noncontrolling interests and noncontrolling interests in other consolidated subsidiaries based on the third parties’ weighted-average ownership in each subsidiary during the year.

Redeemable Interests and Noncontrolling Interests of the Operating Partnership

The S-SCUs described above that are reflected as redeemable noncontrolling interests in the Company's consolidated balance sheets are reflected as redeemable common units in the Operating Partnership's consolidated balance sheets.

The noncontrolling interests in other consolidated subsidiaries that are held by third parties that are reflected as a component of noncontrolling interests in the Company's consolidated balance sheets comprise the entire amount that is reflected as noncontrolling interests in the Operating Partnership's consolidated balance sheets.

Variable Interest Entities

In accordance with the guidance in ASU 2015-02 and ASU 2016-17, as discussed in Note 2, the Operating Partnership and certain of its subsidiaries are deemed to have the characteristics of a VIE primarily because the limited partners of these entities do not collectively possess substantive kick-out or participating rights. The Company adopted ASU 2015-02 as of January 1, 2016 and ASU 2016-17 was adopted as of January 1, 2017 on a modified retrospective basis. The adoption of ASU 2016-17 did not change any of the Company's consolidation conclusions made under ASU 2015-02 and did not change amounts within the consolidated financial statements.

The Company consolidates the Operating Partnership, which is a VIE, for which the Company is the primary beneficiary. The Company, through the Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Company's investment; the obligation or likelihood for the Company or other investors to provide financial support; and the similarity with and significance to the Company's business activities and the business activities of the other investors.

The table below lists the Company's consolidated VIEs as of December 31, 2017 and 2016, which do not reflect the elimination of any internal debt the consolidated VIE has with the Operating Partnership:



	As of December 31,
	2017					2016
	Assets		Liabilities			Assets		Liabilities
Consolidated VIEs:
Atlanta Outlet Outparcels, LLC	$	878	$	—		$	914	$	4
Atlanta Outlet JV, LLC	60,476		79,769		⁽¹⁾	63,361		81,128
CBL Terrace LP	16,472		13,313			16,714		13,509
El Paso Outlet Center Holding, LLC	93,139		65,149			103,232		69,535
El Paso Outlet Center II, LLC	8,512		6,955		⁽²⁾	8,638		7,028
Foothills Mall Associates	—		—		⁽³⁾	9,811		34,997
Gettysburg Outlet Center Holding, LLC	36,386		39,049			36,542		39,476
Gettysburg Outlet Center, LLC	7,218		74			7,203		37
High Point Development LP II	1,084		69			1,104		55
Jarnigan Road LP	41,671		20,229			41,392		20,988
Laredo Outlet JV, LLC	110,174		81,618		⁽⁴⁾	89,353		58,822
Lebcon Associates	59,375		120,879			47,721		121,529
Lebcon I, Ltd	9,034		9,463			9,290		9,711
Lee Partners	1,011		—			1,195		—
Louisville Outlet Outparcels, LLC	74		—			62		—
Louisville Outlet Shoppes, LLC	73,173		83,543		⁽⁵⁾	76,831		85,132
Madison Grandview Forum, LLC	32,692		13,198			33,196		13,622
The Promenade at D'Iberville	81,500		46,568			84,470		46,570
Statesboro Crossing, LLC	18,403		10,988			18,869		11,058
Village at Orchard Hills, LLC	—		—		⁽³⁾	498		—
Woodstock GA Investments, LLC	—		—		⁽³⁾	9,098		3,185
	$	651,272	$	590,864		$	659,494	$	616,386


(1)	Of this total, $4,707 related to The Outlet Shoppes at Atlanta - Phase II, is guaranteed by the Operating Partnership.


(2)	Of this total, $6,613 related to The Outlet Shoppes at El Paso - Phase II, is guaranteed by the Operating Partnership.


(3)	This joint venture is not a VIE as of December 31, 2017. See description of reconsideration event below.


(4)	Of this total, $80,145 related to The Outlet Shoppes at Laredo, is guaranteed by the Operating Partnership.


(5)	Of this total, $9,722 relates to The Outlet Shoppes of the Bluegrass - Phase II, is guaranteed by the Operating Partnership.

The table below lists the Company's unconsolidated VIEs as of December 31, 2017:



Unconsolidated VIEs:	Investment in Real Estate Joint Ventures and Partnerships		Maximum Risk of Loss
Ambassador Infrastructure, LLC⁽¹⁾	$	—	$	11,035	⁽²⁾
EastGate Storage, LLC ⁽³⁾	228		6,500
G&I VIII CBL Triangle LLC ⁽¹⁾	1,616		1,616		⁽²⁾
Shoppes at Eagle Point, LLC⁽³⁾	14,656		36,400		⁽²⁾
	$	16,500	$	55,551


(1)	This unconsolidated affiliate was classified as a VIE as of December 31, 2016.


(2)	See Note 14 for information on guarantees of debt.


(3)	See Note 5 for more information on this new unconsolidated affiliate.

Variable Interest Entities - Reconsideration Events

Woodstock GA, Investments, LLC

In 2017, the Company divested its interests in the 75/25 consolidated joint venture and was relieved of its funding obligation related to the loan secured by the vacant land owned by the joint venture. See Note 6 and Note 15 for more information.

Foothills Mall Associates

The Company held a 95% interest in this consolidated joint venture, which represented an interest in a VIE. The property was sold in 2017. See Note 4 for more information.

Village at Orchard Hills, LLC

The joint venture completed the sale of its outparcels, distributed the cash in 2017 and no longer has any assets.