SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark one)
|x|   ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES  EXCHANGE
      ACT OF 1934 For the fiscal year ended December 31, 1997.
                                    OR

| |   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
      SECURITIES EXCHANGE ACT OF 1934

     For the transition period from ___________________ to _________________
     Commission File Number  33-73988


                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
             (Exact Name of Registrant as Specified in Its Charter)

                Delaware                                38-3097317
     (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                 Identification No.)

         200 East Long Lake Road
         Suite 300, P.O. Box 200
       Bloomfield Hills, Michigan                       48303-0200
 (Address of principal executive office)                (Zip Code)

Registrant's telephone number, including area code:  (248) 258-6800
Securities registered pursuant to Section 12(b) of the Act: None


Securities registered pursuant to Section 12(g) of the Act:  None

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceding  12 months  (or for such  shorter  periods  that the
registrant was required to file such report(s)) and (2) has been subject to such
filing requirements for the past 90 days. Yes X  No     .
                                             ---     ---

 |X|         Indicate  by a  check  mark  if  disclosure  of  delinquent  filers
       pursuant to Item 405 of Regulation S-K is not contained herein,  and will
       not be contained,  to the best of registrant's  knowledge,  in definitive
       proxy or information statements  incorporated by reference in Part III of
       this Form 10-K or any amendment to this Form 10-K.


                       DOCUMENTS INCORPORATED BY REFERENCE

       Portions of the proxy statement of Taubman  Centers,  Inc. for the annual
meeting  of  shareholders  to be held in 1998 (the "TCO  Proxy  Statement")  are
incorporated by reference into Part III.



<PAGE>



                                     PART I

Item 1.  BUSINESS

The Taubman Realty Group Limited Partnership

  The Taubman Realty Group Limited Partnership  ("TRG"),  which was organized in
1985, is an operating  partnership  that engages in the  ownership,  management,
leasing,  acquisition,  development, and expansion of regional shopping centers.
TRG owns as its primary assets  interests in regional  retail  shopping  centers
(the  "Taubman  Shopping  Centers" or the  "Centers").  TRG's  portfolio,  as of
December  31,  1997,  includes 25 urban and suburban  Taubman  Shopping  Centers
located in 12 states.  Two  additional  Centers are under  construction  and are
expected to open in November 1998 and March 1999.  Twenty-two of the Centers are
"super-regional"  centers  because  they have more than  800,000  square feet of
gross  leaseable  area. TRG also owns  development  projects for future regional
shopping  centers (the  "Development  Projects")  and  approximately  99% of The
Taubman Company Limited  Partnership (the "Manager"),  which manages the Taubman
Shopping Centers and provides  services to TRG and its managing general partner,
Taubman Centers,  Inc. ("TCO").  See the table on pages 12 and 13 of this report
for information  regarding the Taubman  Shopping  Centers and TRG's interests in
them.

  TCO is a real estate  investment  trust, or REIT,  under the Internal  Revenue
Code of 1986, as amended (the "Code"). In order to satisfy the provisions of the
Code applicable to REITs,  TCO must distribute to its  shareholders at least 95%
of  its  REIT  taxable  income  and  meet  certain  other  requirements.   TRG's
partnership  agreement  provides  that  TRG  will  distribute,   at  a  minimum,
sufficient  amounts to its  partners  such that TCO's pro rata share will enable
TCO to pay shareholder  dividends (including capital gains dividends that may be
required  upon TRG's sale of an asset) that will satisfy the REIT  provisions of
the Code.

Recent Developments

  For a  discussion  of business  developments  that  occurred in 1997,  see the
response to Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

The Shopping Center Business

  There are several types of retail shopping centers,  varying primarily by size
and marketing strategy.  Retail shopping centers range from neighborhood centers
of less than 100,000 square feet of GLA to regional and super-regional  shopping
centers.  Retail  shopping  centers in excess of 400,000  square feet of GLA are
generally referred to as "regional" shopping centers, while those centers having
in  excess  of  800,000  square  feet  of  GLA  are  generally  referred  to  as
"super-regional"  shopping centers. In this annual report on Form 10-K, the term
"regional shopping centers" refers to both regional and super-regional  shopping
centers. The term "GLA" refers to gross retail space, including anchors and mall
tenant areas,  and the term "Mall GLA" refers to gross retail  space,  excluding
anchors.  The term "anchor"  refers to a department  store or other large retail
store.  The term "mall  tenants"  refers to stores (other than anchors) that are
typically specialty retailers and lease space in shopping centers.


                                       -1-

<PAGE>



Business of TRG

  TRG is engaged in the ownership, management, leasing, acquisition, development
and expansion of regional shopping centers and interests therein.

  The Taubman Shopping Centers:

  o are strategically  located in major metropolitan  areas, many in communities
    that are among the most  affluent in the country,  including  New York City,
    Chicago,  Los Angeles,  San Francisco,  Denver,  Columbus,  Detroit,  Miami,
    Phoenix, and Washington, D.C.;

  o range in size between 438,000 and 2.3 million square feet of GLA and between
    133,000  and  942,000  square  feet of Mall GLA.  The  smallest  Center  has
    approximately 50 stores,  and the largest has  approximately  250 stores. Of
    the 25 Centers, 22 are super-regional shopping centers;

  o have  aproximately  3,400  stores  operated  by  its  mall   tenants   under
    approximately 1,250 trade names;

  o have 88 anchors, operating under 17 trade names;

  o lease   approximately  76%  of  Mall  GLA  to  national  chains,   including
    subsidiaries  or  divisions of The Limited (The  Limited,  Limited  Express,
    Victoria's  Secret,  and others),  The Gap (The Gap,  Banana  Republic,  and
    others), and Woolworth  Corporation (Foot Locker, Kinney Shoes, and others);
    and

  o are among the most productive  (measured by mall tenants' average per square
    foot  sales) in the United  States.  In 1997,  mall  tenants in the  Taubman
    Shopping Centers  portfolio had average per square foot sales of $384, which
    is substantially  greater than the average for all regional shopping centers
    owned by public companies.

  The most  important  factor  affecting  the revenues  generated by the Taubman
Shopping  Centers is leasing to mall tenants  (primarily  specialty  retailers),
which represents over 90% of revenues.  Anchors account for  approximately 5% of
revenues  because many own their stores and, in general,  those that lease their
stores do so at rates substantially lower than those in effect for mall tenants.

  TRG's ownership is concentrated in highly productive  super-regional  shopping
centers.  Of its 25 Centers,  19 had annual  rent rolls at December  31, 1997 of
over $10 million and 21 had annualized  sales per square foot in excess of $300.
TRG believes that this level of productivity in the Taubman  Shopping Centers is
indicative of their strong  competitive  position and is, in  significant  part,
attributable to TRG's business strategy and philosophy.  TRG believes that large
shopping  centers  (including  regional and especially  super-regional  shopping
centers) are the least  susceptible to direct  competition  because (among other
reasons)  anchors and large specialty  retail stores do not find it economically
attractive to open  additional  stores in the immediate  vicinity of an existing
location for fear of competing with themselves.  In addition to the advantage of
size, TRG believes that the Centers'  success can be attributed in part to their
other physical characteristics, such as design, layout, and amenities.


                                       -2-

<PAGE>



Business Strategy And Philosophy

  TRG believes that the regional  shopping  center business is not simply a real
estate  development  business,  but  rather  an  operating  business  in which a
retailing  approach  to the  on-going  management  and  leasing  of the  Taubman
Shopping Centers is essential. Thus TRG:

  o offers a large,  diverse  selection of retail  stores in each Center to give
    customers a broad selection of consumer goods and variety of price ranges;

  o endeavors to increase  overall mall  tenants'  sales,  and thereby  increase
    achievable rents, by leasing space to a constantly  changing mix of tenants;
    and

  o seeks to anticipate trends in the retailing  industry and emphasizes ongoing
    introductions  of new retail concepts into the Centers.  Due in part to this
    strategy,  a number of successful retail trade names have opened their first
    mall stores in the Taubman Shopping Centers. TRG believes that its execution
    of this  leasing  strategy  is unique in the  industry  and is an  important
    element in building and  maintaining  customer  loyalty and increasing  mall
    productivity.

  The Taubman  Shopping  Centers  compete for retail consumer  spending  through
diverse,  in-depth  presentations  of  predominantly  fashion  merchandise in an
environment  intended  to  facilitate  customer  shopping.  While  some  Taubman
Shopping Centers include stores that target high-end,  upscale  customers,  each
Center  is  individually  merchandised  in  light  of  the  demographics  of its
potential customers within convenient driving distance.

  TRG's leasing  strategy  involves  assembling a diverse mix of mall tenants in
each of the  Taubman  Shopping  Centers in order to attract  customers,  thereby
generating  higher  sales by mall  tenants.  High sales by mall tenants make the
Taubman Shopping Centers attractive to prospective  tenants,  thereby increasing
the rental rates that prospective  tenants are willing to pay. TRG implements an
active leasing strategy to increase the Taubman Shopping  Centers'  productivity
and to set minimum rents at higher  levels.  Elements of this  strategy  include
terminating leases of under-performing  tenants,  renegotiating existing leases,
and not leasing space to  prospective  tenants that (though viable or attractive
in certain ways) would not enhance a Taubman Shopping Center's retail mix.

  TRG's  strategy  is  carried  out by the  Manager,  which  is  more  than  99%
beneficially  owned  by TRG and  which  has been  engaged  to  provide  property
management and leasing  services for the Taubman Shopping Centers and to provide
corporate,  development,  administrative,  and acquisition  services for TRG and
TCO.  The  Manager  has been a leading  developer  and  manager in the  regional
shopping center business for more than 25 years.

Potential For Growth

  TRG seeks to maximize  the  financial  results of its dominant  assets,  while
pursuing a growth strategy that includes the following key elements 1) an active
new center development program, 2) strategic  acquisitions,  3) expansion of the
Centers, and 4) internal growth.


                                       -3-

<PAGE>



Development of New Centers
--------------------------

  TRG believes that it has attractive  development  opportunities and intends to
continue to pursue an active program of regional  shopping  center  development.
TRG  believes  that  it has the  expertise,  through  the  Manager,  to  develop
economically  attractive regional shopping centers through intensive analysis of
local retail opportunities.  TRG believes that the development of new centers is
the best use of its capital and an area in which TRG  excels.  At any time,  TRG
has  numerous  potential  development  projects  in  various  stages,  with  the
objective of opening,  on average,  one new center each year. During 1997, TRG's
program of development  produced the opening of two centers. In July, TRG opened
The Mall at  Tuttle  Crossing,  a  super-regional  shopping  center  located  in
Columbus,  Ohio. This Center was 95% leased at year end. In November, TRG opened
Arizona Mills, a value super-regional shopping center located in Tempe, Arizona.
The Center opened 90% leased.

  Additionally,  two centers from TRG's development  program are currently under
construction.  In 1997,  TRG began  construction  on Great  Lakes  Crossing,  an
enclosed  value  super-regional  mall in  Auburn  Hills,  Michigan,  owned  by a
partnership in which TRG has an 80% controlling interest. The 1.4 million square
foot Center is  scheduled  to open in  November  1998,  at an  expected  cost of
approximately  $210 million.  Construction  continues on MacArthur Center, a new
Center in  Norfolk,  Virginia,  which is expected to open in March 1999 with 930
thousand square feet of GLA. The  three-level  Center will initially be anchored
by Nordstrom  and  Dillard's.  The project is a joint venture in which TRG has a
70% controlling interest and is projected to cost approximately $150 million.

  TRG's  policies with respect to  development  activities are designed to limit
the risks otherwise associated with development.  For instance, TRG entered into
an agreement to lease  Memorial City Mall, a center  adjacent to one of the most
affluent  residential  areas in  Houston,  Texas,  while  TRG  investigates  the
redevelopment  opportunities  of the center (see  "Management's  Discussion  and
Analysis of Financial  Condition  and Results of  Operations  --  Liquidity  and
Capital   Resources  --  Capital   Spending"  for  further   discussion  of  the
transaction).  Also,  TRG generally does not intend to acquire land early in the
development  process, but will instead generally acquire options on land or form
partnerships with landholders holding potentially  attractive development sites,
typically exercising options only once it is prepared to begin construction.  In
addition, TRG does not intend to begin construction until a sufficient number of
anchor  stores have agreed to operate in the shopping  center,  such that TRG is
confident  that the  projected  sales and rents from Mall GLA are  sufficient to
earn a return on  invested  capital in excess of TRG's cost of  capital.  Having
historically followed these two principles, TRG's experience indicates that less
than 20% of the costs of the  development of a regional  shopping center will be
incurred prior to the construction  period;  however,  no assurance can be given
that TRG will continue to be able to so minimize pre-construction costs.

  While TRG anticipates that it will continue to evaluate  development  projects
using criteria,  including  financial  criteria for rates of return,  similar to
those  employed in the past,  no  assurances  can be given that the adherence to
these policies will produce comparable  results in the future. In addition,  the
costs  of  shopping  center  development  opportunities  that are  explored  but
ultimately  abandoned  will,  to some  extent,  diminish  the overall  return on
development projects.

Strategic Acquisitions
----------------------

  TRG's  objective is to acquire  existing  centers that are compatible with the
quality  of TRG's  portfolio  (or can be  redeveloped  to that  level)  and that
satisfy TRG's strategic plans and pricing  requirements.  In 1997, TRG completed
three acquisitions totaling over $356 million.

  In September 1997, TRG acquired Regency Square shopping  center,  the dominant
fashion  center in the greater  Richmond,  Virginia  area,  for $123.9  million.
Regency  Square has  825,000  square  feet of GLA and is  anchored  by  Hecht's,
JCPenney and Sears.


                                       -4-

<PAGE>



  In December  1997,  TRG acquired The Falls  shopping  center in Miami for $156
million.  Representing  TRG's  entry into the  Florida  market,  The Falls is an
812,000 square foot Center, anchored by Bloomingdale's and Macy's.

  Also  in  December,  TRG  completed  the  $76.3  million  acquisition  of  the
participating leasehold interest in The Mall at Tuttle Crossing. Tuttle Crossing
opened in July as the  second  of TRG's two  properties  in the  Columbus,  Ohio
market.

  See "Management's  Discussion and Analysis of Financial  Condition and Results
of  Operations  --  Results of  Operations  --  Acquisitions"  and Note 3 to the
Consolidated  Financial  Statements  of TRG  for  further  discussion  of  these
acquisitions.

  TRG believes that it will have additional  opportunities  to acquire  regional
shopping  centers,  or interests  therein,  and will have certain  advantages in
doing so.

  o First, the management  expertise of the Manager will enhance the leasing and
    operation of newly acquired  regional  shopping  centers.  If  opportunities
    exist to expand,  remodel, or re-merchandise the center through new leasing,
    the  Manager's  expertise  will assist TRG in making an informed  and timely
    evaluation  of  the  economic  consequences  of  such  activities  prior  to
    acquisition, as well as facilitate implementation of such activities.

  o Second,  a center  can be  acquired  for any  combination  of cash or equity
    interests in TRG or (subject to certain  limitations) TCO, possibly creating
    the  opportunity for  tax-advantaged  transactions  for the seller,  thereby
    reducing  the  price  that  might  otherwise  have to be paid in an all cash
    transaction  or making an  opportunity  available  that would not  otherwise
    exist. TRG is able to offer partnership  interests in itself in exchange for
    shopping center  interests,  allowing  sellers to diversify their interests,
    attain  liquidity not otherwise  available,  possibly defer taxes that might
    otherwise be due if the  interests  were instead sold for cash,  maintain an
    investment in the regional  shopping center  business,  and resolve concerns
    sellers  otherwise may have regarding future management of their properties.
    For  instance,  Biltmore  Fashion  Park's  selling  group  included  private
    investors who found it tax efficient to accept TRG partnership units as part
    of the consideration when TRG acquired the Center in 1994.

Expansions of the Taubman Shopping Centers
------------------------------------------

  A key element of growth is the strategic  expansion of existing  properties to
update and enhance  their  market  positions,  by replacing or adding new anchor
stores or increasing  mall tenant space.  Most of the Taubman  Shopping  Centers
have been  designed to  accommodate  expansions.  Expansion  projects  can be as
significant  as new  shopping  center  construction  in terms of scope and cost,
requiring   governmental  and  existing  anchor  store  approvals,   design  and
engineering  activities,  including rerouting  utilities,  providing  additional
parking areas or decking,  acquiring additional land, and relocating anchors and
mall  tenants  (all of which must take place  with a minimum  of  disruption  to
existing  tenants and  customers).  In 1997,  for example,  TRG opened a 135,000
square foot  expansion at Westfarms  in August  (followed by a new  Nordstrom in
September)  and new  mall  stores  totaling  50,000  square  feet of Mall GLA at
Biltmore throughout the year. Additionally, construction is in process at Cherry
Creek,  where a 132,000  square foot  expansion of the Mall GLA will open in the
fall of 1998.

  Consolidation of department stores has also strengthened  TRG's portfolio,  as
retailers  continue to be  attracted  to TRG's  dominant  and highly  productive
locations.  A recent  department store  conversion  includes  Bloomingdale's  at
Beverly  Center,  which  opened  in March  of  1997.


                                       -5-

<PAGE>



  The  following  table  includes   information   regarding  TRG's  development,
acquisition, and expansion activities during 1997 and 1996.

Developments:

  Completion Date       Center                     Location
  ---------------       ------                     --------

  July 1997             Tuttle Crossing            Columbus, Ohio
  November 1997         Arizona Mills              Tempe, Arizona
  November 1998         Great Lakes Crossing       Auburn Hills, Michigan
  March 1999            MacArthur Center           Norfolk, Virginia

Acquisitions:

  Completion Date       Center                     Location
  ---------------       ------                     --------

  June 1996             Paseo Nuevo (1)            Santa Barbara, California
  July 1996             Fairlane Town Center (2)   Dearborn, Michigan
  December 1996         La Cumbre Plaza            Santa Barbara, California
  September 1997        Regency Square             Richmond, Virginia
  December 1997         Tuttle Leasehold           Columbus, Ohio
  December 1997         The Falls (3)              Miami, Florida

Expansions and Anchor Conversions:

  Completion Date       Center                     Location
  ---------------       ------                     --------

  June 1996             Biltmore (4)               Phoenix, Arizona
  August 1996           Fair Oaks (5)              Fairfax, Virginia
  August 1996           Lakeforest (5)             Gaithersburg, Maryland
  November 1996         Marley Station (6)         Anne Arundel County, Maryland
  November 1996         Stoneridge (6)             Pleasanton, California
  March 1997            Beverly Center (7)         Los Angeles, California
  August 1997           Westfarms (8)              West Hartford, Connecticut
  November 1997         Cherry Creek (9)           Denver, Colorado
  December 1997         Biltmore (10)              Phoenix, Arizona

------------------

(1)  Broadway  converted to Macy's  immediately  prior to TRG's  acquisition  of
     Paseo Nuevo.
(2)  Acquired partner's 75% interest in the Center.
(3)  Completely redeveloped and expanded in 1996 before TRG's acquisition of The
     Falls.
(4)  Broadway converted to Macy's.
(5)  Woodward & Lothrop converted to Lord & Taylor.
(6)  Sears opened new store.
(7)  Broadway converted to Bloomingdale's.
(8)  135,000 square foot expansion followed by the opening of a new Nordstrom in
     September.
(9)  Lord & Taylor opened new and expanded store. Additional 132,000 square foot
     expansion of mall tenant space will open in the Fall of 1998.
(10) 50,000 square foot expansion of mall tenant space completed.


                                       -6-

<PAGE>



Internal Growth
---------------

  The Taubman Shopping Centers are among the most productive in the nation, when
measured by mall tenant's average sales per square foot. Higher sales per square
foot enable mall tenants to remain  profitable while paying occupancy costs that
are a greater  percentage of total sales.  As leases expire at the Centers,  TRG
has  consistently  been able, on a portfolio basis, to lease the available space
to an existing or new tenant at higher rates.

  Augmenting  this  growth,  TRG is  pursuing a number of new sources of revenue
from the Taubman Shopping  Centers.  For example,  TRG expects increased revenue
from its  specialty  leasing  efforts.  In recent years a new industry -- beyond
traditional  carts and  kiosks -- has  evolved,  with  more and  better  quality
specialty tenants.  TRG has put in place a company-wide program to maximize this
opportunity.

Rental Rates

  As leases have expired in the Taubman Shopping Centers, TRG has generally been
able to rent the available space, either to the existing tenant or a new tenant,
at rental rates that are higher than those of the expired leases. In a period of
increasing sales, rents on new leases will tend to rise as tenants' expectations
of future  growth  become  more  optimistic.  In  periods  of  slower  growth or
declining  sales,  rents on new leases will grow more slowly or will decline for
the opposite reason.  However,  Center revenues  nevertheless  increase as older
leases roll over or are terminated early and replaced with new leases negotiated
at current  rental  rates that are usually  higher  than the  average  rates for
existing leases. The following table contains certain information  regarding per
square foot base rent, excluding renewals, at Taubman Shopping Centers that have
been owned and open for five years.

                                            Store        Store     Difference
                                All       Closings     Openings      Between
                                Mall       During       During     Opening and
                               Tenants      Year         Year     Closing Rents
                               -------      ----         ----     -------------
                               Average     Average      Average      Average
                                Base     Annualized   Annualized   Annualized
                                Rent      Base Rent    Base Rent    Base Rent
                                ----      ---------    ---------    ---------

1997 (1)...................    $38.79      $37.62       $41.67       $ 4.05
1996 (1)...................    $37.90      $33.39       $42.39       $ 9.00
1995 (1)...................    $36.33      $32.96       $41.27       $ 8.31
1994 (2)...................    $34.72      $30.46       $41.02       $10.56
1993 (3)...................    $32.64      $29.56       $35.86       $ 6.30

(1)  Includes 18 centers owned and open prior to January 1, 1991.
(2)  Includes 17 centers owned and open prior to January 1, 1990.
(3)  Includes 16 centers owned and open prior to January 1, 1989.

  Average annualized rent on stores opening in 1997 excludes rent on stores with
greater than 40,000 square feet. TRG anticipates that the spread in 1998 will be
somewhat higher than in 1997. However, this statistic is difficult to predict in
part because  TRG's  leasing  policies and  practices  may result in early lease
terminations  with actual average  closing rents which may vary from the average
rent per square foot of scheduled lease expirations. In addition, the opening or
closing of large  tenant  spaces,  which  generally  pay a lower rent per square
foot, can significantly affect the spread in a given year.


                                       -7-

<PAGE>



Lease Expirations

  The following table shows lease expirations based on information  available as
of December 31, 1997 for the next ten years for the Taubman  Shopping Centers in
operation at that date:


<TABLE>
<CAPTION>
                                                                                          Percent of
                                                     Annualized Base  Annualized Base    Total Leased
                                                         Rent Under      Rent Under      Square Footage
Lease Expiration  Number of Leases    Leased Area     Expiring Leases  Expiring Leases   Represented by
      Year            Expiring     in Square Footage   (in thousands)  Per Square Foot  Expiring Leases
      ----            --------     -----------------   --------------  ---------------  ---------------
<S>   <C>               <C>             <C>               <C>               <C>              <C>
      1998 (1)          173               423,828         $ 14,527          $ 34.27           4.5%
      1999              281               749,483           27,081            36.13           7.9%
      2000              346               845,160           31,682            37.49           8.9%
      2001              335               825,406           33,050            40.04           8.7%
      2002              376               920,849           36,971            40.15           9.7%
      2003              362             1,037,080           41,446            39.96          11.0%
      2004              310               996,685           41,044            41.18          10.5%
      2005              318             1,029,162           42,362            41.16          10.9%
      2006              198               612,522           25,835            42.18           6.5%
      2007              258               913,452           35,264            38.61           9.7%

(1)  Excludes leases that expire in 1998 for which renewal leases or leases with
     replacement tenants have been executed as of December 31, 1997.
</TABLE>

  TRG believes that the information in the table is not  necessarily  indicative
of what will occur in the future  because of several  factors,  but  principally
because TRG's leasing policies and practices create a significant level of early
lease  terminations at the Taubman Shopping  Centers.  For example,  the average
remaining term of the leases that were terminated during the period 1992 to 1997
was  approximately  1.9 years. The average term of leases signed during 1997 and
1996 was approximately 7.3 years.

  In addition,  mall tenants at Taubman Shopping Centers may seek the protection
of the bankruptcy  laws,  which could result in the termination of such tenants'
leases and thus cause a  reduction  in the cash flow  generated  by the  Taubman
Shopping Centers. Prior to 1992, such bankruptcies had not affected more than 3%
of leases in the Taubman  Shopping  Centers in any one calendar  year.  In 1997,
approximately  1.5% of leases were so affected compared to 2.8% in 1996, 3.2% in
1995, 3.1% in 1994 and 4.0% in 1993. Since 1991, the annual provision for losses
on accounts receivable has been less than 2% of TRG's annual revenues.

Occupancy

  Mall tenant average  occupancy rates of the Taubman  Shopping  Centers for the
last five years are as follows:

                 Year                 Mall Tenant Average Occupancy
                 ----                 -----------------------------
                 1997                             87.6%
                 1996                             87.4%
                 1995                             88.0%
                 1994                             86.6%
                 1993                             86.5%

  Historically,  average  annual  occupancy for TRG as a whole has been within a
narrow band. In the last ten years,  average annual occupancy has ranged between
86.5% and 88.7%.

Major Tenants

  The combined  operations of The Limited,  Inc. accounted for approximately 12%
of leased Mall GLA as of December 31, 1997 and for approximately 10% of the 1997
base rent.  The largest of these,  in terms of square  footage and rent,  is The
Limited,  which accounted for approximately  2.3% of leased Mall GLA and 2.1% of
1997 base rent.  No other single  retail  company  accounted for more than 4% of
leased Mall GLA or 1997 base rent.


                                       -8-

<PAGE>



Environmental Matters

  All of the Taubman  Shopping  Centers  presently  owned by TRG (not  including
option  interests in the Development  Projects or any of the real estate managed
by the  Manager  but not  included  in TRG's  portfolio)  have been  subject  to
environmental   assessments.   TRG  and  the   Manager  are  not  aware  of  any
environmental  liability  relating to the Taubman  Shopping Centers or any other
property in which they have or had an interest (whether as an owner or operator)
that TRG  believes  would  have a  material  adverse  effect on TRG's  business,
assets, or results of operations.  No assurances can be given, however, that all
environmental liabilities have been identified or that no prior owner, operator,
or current occupant has created an  environmental  condition not known to TRG or
the  Manager.  Moreover,  no  assurances  can be  given  that (i)  future  laws,
ordinances,  or regulations will not impose any material environmental liability
or that (ii) the current environmental condition of the Taubman Shopping Centers
will not be affected by tenants and occupants of the Taubman  Shopping  Centers,
by the condition of properties in the vicinity of the Taubman  Shopping  Centers
(such as the  presence  of  underground  storage  tanks),  or by  third  parties
unrelated to TRG or the Manager.

  With respect to the matters described below, while there can be no assurances,
TRG believes that such matters will not have a material  adverse effect on TRG's
business, assets, or results of operations.

  Beverly  Center is located over an oil field and several  abandoned oil wells,
and is adjacent to an active oil production  facility that operates numerous oil
and gas wells.  In the Los  Angeles  basin,  where  Beverly  Center is  located,
pockets of methane gas may be found in oil fields;  however,  elevated levels of
methane have not been detected at Beverly Center.

  Cherry  Creek is situated  on land that was used as a landfill  prior to 1950.
Because  of the past use of the site as a  landfill,  the site is  listed on the
United States  Environmental  Protection  Agency's  Comprehensive  Environmental
Response, Compensation and Liability Information System list.

  In the summer of 1997, geotechnical drilling activities were undertaken in the
former  gasoline  station  area  as  part  of a  parking  lot  expansion  at the
southeastern corner of the Cherry Creek site. The geotechnical soil samples were
observed  to have  petroleum  odors and  staining.  A  subsurface  environmental
investigation  subsequently revealed a limited zone of hydrocarbon  contaminated
soils, with no significant impacts to groundwater. Discussions with the Colorado
Department of Labor and Employment,  Oil Inspection  Section,  held in September
1997,  resulted  in a "passive  retardation"  remedial  approach  that relies on
natural processes to degrade the hydrocarbon contamination.  A Corrective Action
Plan was  submitted  in  February  1998 that  proposes  monitoring  the soil and
groundwater  quarterly  for a period  of two  years.  Acceptance  of the plan is
anticipated by May 1998.  Implementation of the plan poses no constraints to the
current expansion activity.

  Paseo  Nuevo is  located  in an area of  known  groundwater  contamination  by
tetrachloroethylene  ("PCE").  The  groundwater  under and  around  the site was
monitored for six years before, during, and after construction of the center. No
on-site sources of PCE were identified during  construction.  The Regional Water
Quality Control Board has given approval to discontinue  the monitoring  program
because the PCE levels remained relatively constant over the six-year period and
do not exceed the state standard for PCE in drinking water.

  There  are  asbestos  containing  materials  ("ACMs")  at most of the  Taubman
Shopping  Centers,  primarily  in the form of floor  tiles,  roof  coatings  and
mastics.  The floor  tiles,  roof  coatings  and mastics are  generally  in good
condition.  Fire-proofing material containing asbestos is present at some of the
Taubman  Shopping  Centers in limited  concentrations  or in limited areas.  The
Manager has developed and is implementing an operations and maintenance  program
that details  operating  procedures with respect to ACMs prior to any renovation
and that requires  periodic  inspection  for any change in condition of existing
ACMs.


                                       -9-

<PAGE>



Personnel

  TRG has engaged the Manager to provide  real estate  management,  acquisition,
development,  and administrative  services required by (or of) TRG or any of its
properties.

  As of  December  31,  1997,  the  Manager  had 449  full-time  employees.  The
following  table  provides a breakdown of employees by  operational  areas as of
December 31, 1997:

                                                   Number Of Employees
                                                   -------------------

           Property Management...............             188
           Leasing...........................              73
           Development.......................              47
           Financial Services................              77
           Other ............................              64
                                                          ---
                 Total.......................             449
                                                          ===


The Manager considers its relations with its employees to be good.






                                      -10-

<PAGE>



Item 2.  PROPERTIES

Taubman Shopping Centers

Ownership

  The following table sets forth certain  information  about each of the Taubman
Shopping  Centers.  The table includes only Centers in operation at December 31,
1997.  Excluded  from this table are Great  Lakes  Crossing,  which will open in
November  1998,  and  MacArthur  Center,  which  will open in March  1999.  Also
excluded is Memorial City Mall, a development project.  Centers are owned in fee
other than: Beverly Center,  Cherry Creek, Columbus City Center, La Cumbre Plaza
and Paseo Nuevo,  which are held under ground leases  expiring  between 2028 and
2083 (exclusive of three ten-year renewal options at Columbus City Center),  and
a portion of the parking area at Hilltop  (the ground lease of which  expires in
2073).

  Certain of the Centers are partially owned through joint ventures.  Generally,
TRG's joint venture  partners have ongoing rights with regard to the disposition
of TRG's  interest  in the joint  ventures,  as well as the  approval of certain
major matters.






                                      -11-

<PAGE>



<TABLE>
<CAPTION>
                                                                                          TRG's %   Percent of Mall
                                                Sq. Ft of GLA/                           Ownership    GLA Occupied
                                                   Mall GLA     Year Opened/   Year       as of          as of        1997 Rent (1)
Centers                 Anchors                as of 12/31/97     Expanded   Acquired    12/31/97      12/31/97      (in Thousands)
-------                 -------                --------------   -----------  --------   ----------   ------------   ---------------
<S>                      <C>                      <C>              <C>          <C>          <C>           <C>          <C>

Beverly Center           Bloomingdale's, Macy's     908,000/         1982                     70%(2)       92%          $ 24,797
Los Angeles, CA                                     600,000

Biltmore Fashion Park    Macy's, Saks Fifth         569,000/       1963/1992/   1994         100%          95%            10,071
Phoenix, AZ              Avenue                     330,000           1997

Briarwood                Hudson's, JCPenney,        990,000/       1973/1980                 100%          95%            12,433
Ann Arbor, MI            Jacobson's, Sears          369,000

Cherry Creek             Foley's, Lord & Taylor,    903,000/          1990                    50%          96%            18,306
Denver, CO               Neiman Marcus, Saks        430,000 (3)(4)
                         Fifth Avenue

Columbus City Center     Jacobson's, Lazarus,     1,209,000/          1989                   100%          98%            16,335
Columbus, OH             Marshall Field's           415,000

Fair Oaks                Hecht's, JCPenney, Lord  1,398,000/       1980/1987/                 50%          88%            18,409
Fairfax, VA              & Taylor, Sears            582,000           1988
(Washington, D.C.
 Metropolitan Area)

Fairlane Town Center     Hudson's, JCPenney,      1,484,000/(5)    1976/1978/                100%          79%            13,632
Dearborn, MI             Lord & Taylor, Saks        594,000           1980
(Detroit Metropolitan    Fifth Avenue, Sears
 Area)

The Falls                Bloomingdale's, Macy's     812,000/       1980/1996    1997         100%          90%               884(1)
Miami, FL                                           357,000

Hilltop                  JCPenney, Macy's, Sears  1,096,000/       1976/1991                 100%          85%             5,811
Richmond, CA                                        367,000
(San Francisco
 Metropolitan Area)

La Cumbre Plaza          Robinsons-May, Sears       478,000/       1967/1989    1996         100%          95%             4,042
Santa Barbara, CA                                   178,000

Lakeforest               Hecht's, JCPenney, Lord  1,107,000/       1978/1992                 100%          88%            13,045
Gaithersburg, MD         & Taylor, Sears            437,000
(Washington, D.C.
 Metropolitan Area)

Lakeside                 Crowley's, Hudson's,     1,474,000/       1976/1980                  50%          88%            16,398
Sterling Heights, MI     JCPenney, Lord &           513,000
(Detroit Metropolitan    Taylor, Sears
 Area)

----------------------------

(1)  Includes  minimum and percentage rent for the year ended December 31, 1997.
     Excludes rent from certain  peripheral  properties.  For Centers  opened or
     acquired in 1997,  the amounts  reflect rents for the period  subsequent to
     the opening or acquisition date. 1997 openings and acquisitions include The
     Mall at Tuttle Crossing (July),  Regency Square (September),  Arizona Mills
     (November), and The Falls (December).

(2)  TRG has an option to acquire  the  remaining  30%.  The  results of Beverly
     Center are consolidated in TRG's financial statements.

(3)  GLA excludes  approximately 166,000 square feet for the renovated buildings
     on adjacent peripheral land.

(4)  An expansion of the Center of approximately 132,000 square feet of Mall GLA
     will open in the fall of 1998.

(5)  A 30-screen  theater will be added and is anticipated to open by the summer
     of 1999.


                                       12

<PAGE>



<CAPTION>

                                                                                          TRG's %   Percent of Mall
                                                Sq. Ft of GLA/                           Ownership    GLA Occupied
                                                   Mall GLA     Year Opened/   Year       as of          as of        1997 Rent (1)
Centers                 Anchors                as of 12/31/97     Expanded   Acquired    12/31/97      12/31/97      (in Thousands)
-------                 -------                --------------   -----------  --------   ----------   ------------   ---------------
<S>                      <C>                      <C>              <C>          <C>          <C>           <C>            <C>

Marley Station           Hecht's, JCPenney,       1,088,000/       1987/1994/                100%           77%           $ 9,447
Anne Arundel County, MD  Macy's, Sears              375,000           1996
(Washington, D.C.
Metropolitan Area)

Meadowood Mall           JCPenney, Macy's (two      889,000/       1979/1995                 100%           93%             9,666
Reno, NV                 locations), Sears          312,000

Paseo Nuevo              Macy's, Nordstrom          438,000/          1990      1996         100%           88%             4,193
Santa Barbara, CA                                   133,000

Regency Square           Hecht's (two               825,000/       1975/1987    1997         100%          100%             2,888(1)
Richmond, VA             locations), JCPenney,      238,000
                         Sears

The Mall at Short Hills  Bloomingdale's,          1,372,000/       1980/1994/                100%           96%            31,095
Short Hills, NJ          Macy's, Neiman Marcus,     550,000           1995
                         Nordstrom, Saks Fifth
                         Avenue

Stamford Town Center     Filene's, Macy's,          875,000/          1982                    50%           90%            15,678
Stamford, CT             Saks Fifth Avenue          382,000

Stoneridge               JCPenney, Macy's (two    1,291,000/       1980/1990/                100%           92%            15,608
Pleasanton, CA           locations), Nordstrom,     449,000           1996
(San Francisco           Sears
Metropolitan Area)

The Mall at Tuttle       JCPenney, Lazarus,         974,000/          1997                   100%           93%             5,748(1)
Crossing                 Marshall Field's,          383,000
Columbus, OH             Sears

Twelve Oaks Mall         Hudson's, JCPenney,      1,224,000/       1977/1980                  50%           95%            18,729
Novi, MI                 Lord & Taylor, Sears       486,000
(Detroit Metropolitan
 Area)

Westfarms                Filene's, Filene's       1,298,000/       1974/1997                  79%           83%            17,230
West Hartford, CT        Men's Store/Furniture      528,000
                         Gallery, JCPenney, Lord
                         & Taylor, Nordstrom

Woodfield                JCPenney, Lord &         2,267,000/       1971/1972/                 50%           89%            35,286
Schaumburg, IL           Taylor, Marshall           942,000           1995
(Chicago Metropolitan    Field's, Nordstrom,
 Area)                   Sears

Woodland                 Hudson's, JCPenney,      1,094,000/       1968/1974/                 50%           96%            13,843
Grand Rapids, MI         Sears                      369,000        1984/1989

Value Center:
------------

Arizona Mills            Off 5th Saks,            1,157,000/          1997                    37%           80%             2,611(1)
Tempe, AZ                Rainforest Cafe,           531,000
(Phoenix Metropolitan    JCPenney Outlet,
 Area)                   Oshman's Supersports     ---------
                         USA, GameWorks,
                         Harkins Cinemas

                     Total GLA/Total Mall GLA:   27,220,000/
                                                 10,850,000
                 Average GLA/Average Mall GLA:    1,089,000/
                                                    434,000
</TABLE>


                                       13

<PAGE>



Anchors

    The following table summarizes certain information  regarding the anchors at
the Taubman Shopping Centers.
                            Number of         12/31/97 GLA
  Name                    Anchor Stores       (in thousands)     % of GLA
  ----                    -------------       -------------      --------

Federated
    Macy's                      12                2,156
    Lazarus                      2                  658
    Bloomingdale's               3                  604
                                --               ------
      Total                     17                3,418            13.1%

Sears                           15                3,099            11.9%

JCPenney                        15                2,710            10.4%

May Company
    Lord & Taylor                8                1,035
    Hecht's                      5                  749
    Filene's                     2                  379
    Filene's Men's Store/
       Furniture Gallery         1                   80
    Foley's                      1                  178
    Robinsons-May                1                  150
                                --               ------
      Total                     18                2,571             9.9%

Dayton Hudson
    Hudson's                     5                1,040
    Marshall Field's             3                  686
                                --               ------
      Total                      8                1,726             6.6%

Nordstrom                        5(1)               877             3.4%

Saks                             5                  450             1.7%

Jacobson's                       2                  221             0.8%

Neiman Marcus                    2                  216             0.8%

Crowley's                        1                  115             0.4%
                                --               ------            ----
    Total                       88               15,403            59.1%
                                ==               ======            ====


(1)  An  additional  Nordstrom  store  will be added  along  with  Dillard's  in
     connection with the development of MacArthur Center.


                                       14

<PAGE>

Mortgage Debt

  The  following  table sets forth certain  information  regarding the mortgages
encumbering the Taubman  Shopping  Centers as of December 31, 1997. All mortgage
debt in the table  below is  nonrecourse  to TRG,  except  for debt  encumbering
Arizona Mills and MacArthur Center.  TRG has guaranteed the payment of principal
and interest on the mortgage debt of these Centers (the guarantee on the Arizona
Mills  mortgage is limited to the extent of TRG's 37% ownership  interest in the
joint venture owning the Center).  The loan agreements provide for the reduction
of the amounts  guaranteed as certain center  performance and valuation criteria
are met.  Biltmore,  Hilltop and  Stoneridge  are also  encumbered by assessment
bonds totaling approximately $4.8 million, which are not included in the table.
<TABLE>
<CAPTION>
                                          Principal
                                           Balance       Annual Debt                 Balance Due      Earliest
Centers Consolidated in      Interest   as of 12/31/97     Service       Maturity    on Maturity     Prepayment
TRG's Financial Statements     Rate        (000's)         (000's)         Date        (000's)          Date
--------------------------     ----        -------         -------         ----        -------          ----
<S>                          <C>          <C>           <C>              <C>          <C>         <C>
Beverly Center                  8.36%     $146,000      Interest Only    07/15/04     $146,000    30 Days' Notice(1)
Columbus City Center            7.00%        8,022              $ 725    08/01/19            0        At Any Time(2)
MacArthur Center (70%)       Floating       42,241(3)   Interest Only    10/27/00       42,241     4 Days' Notice(2)
Stoneridge                   Floating(4)    74,762      Interest Only         (4)       75,000                   (4)

Centers Owned by Unconsolidated
Joint Ventures/TRG's % Ownership
--------------------------------
Arizona Mills (37%)          Floating(5)   121,991(5)   Interest Only    02/01/02       121,991    5 Days' Notice(2)
Cherry Creek (50%)           Floating(6)   130,000      Interest Only    08/01/98       130,000    4 Days' Notice(2)
Fair Oaks (50%)                 9.00%       39,119              4,304    12/01/16             0          12/01/97(7)
Lakeside  (50%)                 6.47%       88,000      Interest Only    12/15/00        88,000   30 Days' Notice(1)
Stamford Town Center (50%)     11.69%(8)    55,630              7,207    12/01/17             0          01/01/00(9)
Twelve Oaks Mall (50%)       Floating(10)   49,940      Interest Only    10/15/01        50,000   30 Days' Notice(2)
Westfarms (79%)                 7.85%      100,000      Interest Only    07/01/02       100,000          07/01/98(11)
                             Floating(12)   51,792(12)  Interest Only    07/01/02        51,792    4 Days' Notice(2)
Woodfield  (50%)             Floating(13)  172,000      Interest Only    10/13/98       172,000   30 Days' Notice(2)
Woodland  (50%)                 8.20%       66,000      Interest Only    05/15/04        66,000   30 Days' Notice(1)

------------------------
(1)  Debt may be prepaid with a yield maintenance prepayment penalty.
(2)  Prepayment can be made without penalty.
(3)  The loan is a  construction  facility with a maximum  availability  of $150
     million.
(4)  Commercial paper facility.  The maximum  availability under the facility is
     $75 million. Commercial paper is generally sold with a 30 day maturity.
(5)  The loan is a  construction  facility with a maximum  availability  of $145
     million.  The rate is capped at 9.5% until  maturity,  plus credit  spread,
     based on one month LIBOR.
(6)  The rate is capped at 6.5% through  January 1998 and from  February 1998 to
     maturity at 7%, plus credit spread, based on one month LIBOR.
(7)  The mortgage was prepayable on 12/01/97 (the earliest prepayment date) with
     a penalty of 4.5% of outstanding principal. In March 1998, the mortgage was
     extinguished with the proceeds of a $140 million,  6.60%, secured financing
     maturing  2008.  The net  proceeds  were  also  used to pay the  prepayment
     penalty of  approximately  $1.8  million.  In  addition,  proceeds  of $5.6
     million were used to close out a treasury  lock  agreement  entered into in
     1997, which resulted in an effective rate on the financing of approximately
     7%. The remaining  proceeds were distributed to the owners.
(8)  The  lender  is  entitled  to  contingent  interest  equal to 20% of annual
     applicable receipts in excess of approximately $9.0 million.
(9)  The mortgage has a  prepayment  penalty of 6%,  declining by one-half of 1%
     for each year after the  earliest  prepayment  date,  reducing to a minimum
     penalty  of 1%,  plus an  amount  equal to ten  times  the  greater  of (i)
     contingent interest payable for the year immediately  preceding  prepayment
     or (ii) the  average  amount of  contingent  interest  for the three  years
     immediately prior to prepayment.
(10) The rate is capped at 8.55% until  maturity,  plus credit spread,  based on
     one month LIBOR.
(11) If the  loan  is  prepaid  between  7/1/98  and  1/3/02  there  is a  yield
     maintenance prepayment penalty.
(12) The loan is a  construction  facility  with a maximum  availability  of $55
     million. The rate on the construction  facility is capped until maturity at
     6.5%, plus credit spread.
(13) The interest  rate on $93.5 million was swapped to maturity at an effective
     annual rate of 5.4%.  The rate on the balance of the  financing,  which has
     been capped at a maximum annual rate,  including credit spread,  of 6.5% to
     maturity, floats at a rate of three month LIBOR plus 0.5%.
</TABLE>

  For additional  information  regarding the Taubman  Shopping Centers and their
operation, see the responses to Item 1 of this report.

                                      -15-
<PAGE>



Item 3.  LEGAL PROCEEDINGS

  Neither TRG, the  Consolidated  Businesses,  nor any of the joint  ventures is
presently  involved in any material  litigation nor, to TRG's knowledge,  is any
material  litigation  threatened against TRG or any of their properties.  Except
for routine  litigation  involving present or former tenants of Taubman Shopping
Centers  (generally  eviction  or  collection  proceedings),  substantially  all
litigation is covered by TRG's and the joint ventures' liability insurance.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  None


                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  None








                                      -16-

<PAGE>



Item 6.  SELECTED FINANCIAL DATA

  The following  table sets forth selected  financial data for TRG and should be
read in  conjunction  with  the  financial  statements  and  notes  thereto  and
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations included in this report.
<TABLE>
<CAPTION>
                                                             Year Ended December 31
                                            ----------------------------------------------------------
                                               1997        1996        1995        1994        1993
                                               ----        ----        ----        ----        ----
                                                    (In thousands of dollars, except as noted)
<S>                                         <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
I. TRG
  Revenues                                  313,426      263,696      228,918      197,134      177,107
  Operating Costs                           270,402      231,355      207,159      176,194      161,934
  Equity in income before
   extraordinary items of
   Unconsolidated Joint Ventures             52,270       51,753       57,940       51,263       54,153
                                            -------      -------      -------      -------      -------
  Income before extraordinary items          95,294       84,094       79,699       72,203       69,326
  Extraordinary items (1)                                 (1,328)      16,627      (44,731)      (9,454)
                                            -------      -------      -------      -------      -------
  Net income                                 95,294       82,766       96,326       27,472       59,872
  Preferred distributions to TCO             (4,058)
                                            -------      -------      -------      -------      -------
  Net income available to unitholders        91,236       82,766       96,326       27,472       59,872
                                            =======      =======      =======      =======      =======
  Income before extraordinary items
   per unit of partnership interest (2)        0.66         0.65         0.64         0.59         0.57
  Net income per unit of partnership
   interest (2)                                0.66         0.64         0.77         0.22         0.49
  Weighted average number of units of
   partnership interest
    outstanding (3)                     138,271,014  128,579,312  125,459,939  122,509,799  122,418,156
  Number of units of partnership
   interest outstanding
   at end of period (3)                 138,299,310  138,251,907  125,459,939  125,459,939  122,418,156
  Distributions to partnership
   unitholders                              128,094      119,099      116,225      113,479      110,939
  Preferred distributions to TCO              4,058

II. UNCONSOLIDATED JOINT VENTURES
  Revenues (4)                              258,783      265,336      291,144      268,815      268,563
  Operating Costs (4)                       166,402      171,063      183,814      174,950      167,846
                                            -------      -------      -------      -------      -------
  Income before extraordinary items          92,381       94,273      107,330       93,865      100,717
                                            =======      =======      =======      =======      =======
  TRG's share of income before
   extraordinary items                       52,270       51,753       57,940       51,263       54,153
                                            =======      =======      =======      =======      =======

<CAPTION>
                                                                As of December 31
                                            ----------------------------------------------------------
                                               1997        1996        1995        1994        1993
                                               ----        ----        ----        ----        ----
                                                    (In thousands of dollars, except as noted)
<S>                                         <C>          <C>          <C>          <C>         <C>
BALANCE SHEET DATA:
  Real estate before accumulated
   depreciation                           1,593,350    1,136,416      926,207      843,960      665,978
  Total assets                            1,396,826      978,262      804,356      739,811      574,456
  Total debt and capital lease
   obligation (5)                         1,284,327    1,041,254      969,667      872,158      695,517

<CAPTION>
                                                             Year Ended December 31
                                            ----------------------------------------------------------
                                               1997        1996        1995        1994        1993
                                               ----        ----        ----        ----        ----
                                                    (In thousands of dollars, except as noted)
<S>                                         <C>          <C>          <C>          <C>         <C>
SUPPLEMENTAL INFORMATION:
  EBITDA (6)                                255,743      229,811      216,130      186,657      174,714
  TRG's Beneficial Interest Expense (6)     102,902       98,192       96,254       74,322       67,407
  Distributable Cash Flow (6)               146,701      129,714      117,847      110,257      105,237

  Consolidated Coverage Ratio (7)               2.5          2.3          2.2          2.5          2.6

  Ratio of Earnings to Fixed Charges
   and Preferred Distributions                  1.6          1.7          1.7          1.7          1.9

OPERATING DATA:
  Mall tenant sales (8)                   3,086,259    2,827,245    2,739,393    2,561,555    2,483,342
  Sales per square foot (8)                     384          377          364          348          338
  Number of shopping centers at end
   of period                                     25           21           19           20           19
  Ending Mall GLA in thousands of
   square feet                               10,850        9,250        8,996        9,088        8,823
  Average occupancy                            87.6%        87.4%        88.0%        86.6%        86.5%
  Ending occupancy                             90.3%        88.0%        89.4%        89.3%        88.7%
  Leased space (9)                             92.3%        89.0%        90.6%        90.9%        90.1%
  Average base rent per square
   foot (10):
   All mall tenants                          $38.79       $37.90       $36.33       $34.72        $32.64
   Stores closing during year                $37.62       $33.39       $32.96       $30.46        $29.56
   Stores opening during year                $41.67       $42.39       $41.27       $41.02        $35.86


                                      -17-

<PAGE>



--------------------------

(1)  In 1995, TRG recognized an $18.9 million  extraordinary gain related to the
     disposition of Bellevue Center and the related extinguishment of debt. Also
     included in extraordinary  items are extraordinary  charges in 1993 through
     1996 related to the extinguishment of debt.
(2)  TRG's basic and diluted  earnings  per unit  amounts are equal,  except for
     1993,  for which  diluted  income before  extraordinary  items per unit and
     diluted net income per unit were 0.56 and 0.48, respectively.
(3)  Effective  September 30, 1997,  TRG split its existing units of partnership
     interest  at a  ratio  of  1,975.08  to  one,  establishing  a  one-for-one
     equivalency of TRG's units of partnership interest and TCO's common shares.
     The split did not alter the ownership  percentage of any of TRG's partners.
     Prior  years'  amounts  have been  adjusted  to reflect the unit split on a
     retroactive basis.
(4)  Amounts are reported net of intercompany profits.
(5)  Includes the Tuttle Crossing  capital lease obligation of $39.8 million and
     $14.4  million  at  December  31,  1996 and 1995,  respectively,  which was
     extinguished  during  1997.  TRG's  pro  rata  share  of  its  Consolidated
     Businesses' and  Unconsolidated  Joint  Ventures' debt  (excluding  capital
     lease  obligations)  was $1.737  billion and $1.398 billion at December 31,
     1997 and 1996, respectively.
(6)  EBITDA,  Beneficial  Interest  Expense,  and  Distributable  Cash  Flow are
     defined    and    discussed    in    MD&A     -Liquidity     and    Capital
     Resources-Distributions.  Distributable Cash Flow was restated for 1994 and
     1993 from the  previously  reported  amounts to reflect  the  deduction  of
     non-real estate  depreciation  and  amortization,  as specified in NAREIT's
     definition of Funds from Operations.  EBITDA and Distributable Cash Flow do
     not represent cash flow from operations,  as defined by generally  accepted
     accounting principles, and should not be considered to be an alternative to
     net  income as a measure  of  operating  performance  or to cash flows as a
     measure of liquidity.
(7)  Defined as EBITDA divided by TRG's Beneficial Interest Expense.
(8)  Based on reports of sales furnished by mall tenants.
(9)  Leased space comprises both occupied space and space that is leased but not
     yet  occupied.
(10) Amounts  include  Centers  owned and open for at least five years.

</TABLE>


                                      -18-

<PAGE>



Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------

  The following discussion should be read in conjunction with Selected Financial
Data, the Consolidated  Financial Statements of The Taubman Realty Group Limited
Partnership and the Notes thereto.

General Background and Performance Measurement

  The Taubman Realty Group Limited Partnership (TRG) is an operating partnership
that engages in the full range of  activities  of the regional  shopping  center
business.   These  activities  include  the  ownership,   management,   leasing,
expansion,  acquisition and development of regional  shopping  centers  (Taubman
Shopping Centers or Centers).  TRG's Managed  Businesses consist of: (i) Taubman
Shopping  Centers  that TRG  controls by  ownership  or  contractual  agreement,
development projects for future regional shopping centers (Development Projects)
and The Taubman Company Limited  Partnership (the Manager),  (collectively,  the
Consolidated  Businesses);  and (ii) Taubman  Shopping  Centers  partially owned
through   joint   ventures   with  third   parties   that  are  not   controlled
(Unconsolidated Joint Ventures). The Unconsolidated Joint Ventures are accounted
for under the equity method in TRG's Consolidated Financial Statements.

  Certain  aspects  of  the  performance  of the  Managed  Businesses  are  best
understood by measuring  their  performance as a whole,  without regard to TRG's
ownership interest. For example, mall tenant sales and shopping center occupancy
trends fit this  category  and are so analyzed  below.  In  addition,  trends in
certain  items of revenue  and  expense  are often best  understood  in the same
fashion, and the discussions following take this approach when appropriate. When
relevant,  these  items  are  also  discussed  separately  with  regard  to  the
Consolidated Businesses and the Unconsolidated Joint Ventures.

Mall Tenant Sales and Center Revenues

  Over  the long  term,  the  level of mall  tenant  sales  is the  single  most
important  determinant of revenues of the Taubman  Shopping Centers because mall
tenants  provide  over 90% of these  revenues  and  because  mall  tenant  sales
determine  the  amount  of  rent,  percentage  rent,  and  recoverable  expenses
(together,  total occupancy costs) that mall tenants can afford to pay. However,
levels of mall tenant sales can be  considerably  more volatile in the short run
than total occupancy costs.

  TRG  believes  that the  ability of tenants  to pay  occupancy  costs and earn
profits over long periods of time  increases as sales per square foot  increase,
whether through inflation or real growth in customer spending. Because most mall
tenants have certain fixed expenses, the occupancy costs that they can afford to
pay and still be profitable are a higher percentage of sales at higher sales per
square foot.

  The following table summarizes occupancy costs, excluding utilities,  for mall
tenants as a percentage of mall tenant sales.

                                           1997         1996         1995
                                           ----         ----         ----

Mall tenant sales (in thousands)     $3,086,259   $2,827,245   $2,739,393
Sales per square foot                       371          365          346
Sales per square foot (excluding
 theaters and tenants greater
  than 40,000 square feet)                  384          377          364


Minimum rents                              10.1%        10.4%        10.4%
Percentage rents                            0.3          0.3          0.3
Expense recoveries                          4.4          4.5          4.4
                                           ----         ----         ----
Mall tenant occupancy costs                14.8%        15.2%        15.1%
                                           ====         ====         ====


                                      -19-

<PAGE>



  Mall  tenant  occupancy  costs  as a  percentage  of sales  decreased  in 1997
primarily  due to Centers  acquired in 1997 and late 1996 (Results of Operations
--  Acquisitions).  These Centers have lower  occupancy costs than the portfolio
average and consequently provide a source of future revenue growth.

Occupancy

  Historically,  average  annual  occupancy for TRG as a whole has been within a
narrow band. In the last ten years,  average annual occupancy has ranged between
86.5% and 88.7%.  Mall tenant average  occupancy  rates for the last three years
are as follows:

                   Year                 Mall Tenant Average Occupancy
                   ----                 -----------------------------
                   1997                           87.6%
                   1996                           87.4
                   1995                           88.0

Rental Rates

  As leases have expired in the Taubman Shopping Centers, TRG has generally been
able to rent the available space, either to the existing tenant or a new tenant,
at rental rates that are higher than those of the expired leases. In a period of
increasing sales, rents on new leases will tend to rise as tenants' expectations
of future  growth  become  more  optimistic.  In  periods  of  slower  growth or
declining  sales,  rents on new leases will grow more slowly or will decline for
the opposite reason.  However,  Center revenues  nevertheless  increase as older
leases roll over or are terminated early and replaced with new leases negotiated
at current  rental  rates that are usually  higher  than the  average  rates for
existing leases. The following table contains certain information  regarding per
square foot base rent,  excluding  renewals,  at the 18 Taubman Shopping Centers
that have been owned and open for five years.

                                            Store        Store     Difference
                                All       Closings     Openings      Between
                                Mall       During       During     Opening and
                               Tenants      Year         Year     Closing Rents
                               -------      ----         ----     -------------
                               Average     Average      Average      Average
                                Base     Annualized   Annualized   Annualized
                                Rent      Base Rent    Base Rent    Base Rent
                                ----      ---------    ---------    ---------

1997                           $38.79      $37.62        $41.67       $4.05
1996                           $37.90      $33.39        $42.39       $9.00
1995                           $36.33      $32.96        $41.27       $8.31


  Average annualized rent on stores opening in 1997 excludes rent on stores with
greater than 40,000 square feet. TRG anticipates that the spread in 1998 will be
somewhat higher than in 1997. However, this statistic is difficult to predict in
part because  TRG's  leasing  policies and  practices  may result in early lease
terminations  with actual average  closing rents which may vary from the average
rent per square foot of scheduled lease expirations. In addition, the opening or
closing of large  tenant  spaces,  which  generally  pay a lower rent per square
foot, can significantly affect the spread in a given year.

Seasonality

  The regional shopping center industry is seasonal in nature,  with mall tenant
sales  highest in the  fourth  quarter  due to the  Christmas  season,  and with
lesser, though still significant,  sales fluctuations associated with the Easter
holiday and  back-to-school  events.  While  minimum  rents and  recoveries  are
generally not subject to seasonal  factors,  most leases are scheduled to expire
in the first quarter,  and the majority of new stores open in the second half of
the year in anticipation of the Christmas selling season. Accordingly,  revenues
and occupancy levels are generally highest in the fourth quarter.


                                      -20-

<PAGE>



  The following  table  summarizes  certain  quarterly  operating data for TRG's
Managed Businesses for 1997:

                              1st       2nd       3rd        4th
                            Quarter   Quarter   Quarter    Quarter     Total
                             1997      1997      1997       1997       1997
                          ----------------------------------------------------
                                            (in thousands)

Mall tenant sales          $600,709  $629,906  $692,487  $1,163,157  $3,086,259
Revenues                    130,677   134,756   137,728     157,192     560,353

Occupancy:
  Average Occupancy            86.5%    86.8%     87.0%       89.5%       87.6%
  Ending Occupancy             86.4%    87.1%     87.2%       90.3%       90.3%
Leased Space                   88.7%    89.5%     90.8%       92.3%       92.3%

  Because the  seasonality of sales contrasts with the generally fixed nature of
minimum rents and  recoveries,  mall tenant  occupancy costs (the sum of minimum
rents,   percentage  rents  and  expense  recoveries)   relative  to  sales  are
considerably  higher in the first  three  quarters  than they are in the  fourth
quarter.  The following table summarizes  occupancy costs,  excluding utilities,
for mall tenants as a percentage of sales for each quarter of 1997:

                                 1st       2nd       3rd       4th
                               Quarter   Quarter   Quarter   Quarter   Total
                                1997      1997      1997      1997     1997
                             -------------------------------------------------

Minimum rents                   12.6%     11.8%     11.3%      7.3%    10.1%
Percentage rents                 0.2       0.3       0.3       0.2      0.3
Expense recoveries               5.2       5.1       4.7       3.5      4.4
                                ----      ----      ----      ----     ----
Mall tenant occupancy costs     18.0%     17.2%     16.3%     11.0%    14.8%
                                ====      ====      ====      ====     ====


Results of Operations

Equity Transactions

  In October 1997, TRG's managing general partner,  Taubman Centers,  Inc. (TCO)
used the $200 million  public  offering of eight million shares of 8.3% Series A
Cumulative  Redeemable  Preferred  Stock to acquire a Series A Preferred  Equity
interest in TRG that  entitles TCO to income and  distributions  (in the form of
guaranteed payments) in amounts equal to the dividends payable on TCO's Series A
Preferred  Stock.  TRG  bore all  expenses  of the  offering,  which  have  been
accounted for as a reduction of the  proceeds.  TRG used the net proceeds to pay
down debt under TRG's existing revolving credit and commercial paper facilities,
which were used to fund the acquisition of Regency Square in September 1997.

  In December 1996, TRG issued units of partnership  interest to TCO for the $75
million  proceeds from TCO's  December  1996 offering of 5.97 million  shares of
common stock.  TRG bore all expenses of TCO's offering which have been accounted
for as a reduction of the proceeds  from TRG's  issuance of units.  TRG used the
net proceeds to pay down short term  floating rate debt and to acquire La Cumbre
Plaza.  Also in December  1996,  TCO  exchanged  common  shares for TRG units of
partnership   interest   newly  issued  under  TRG's   incentive   option  plan.
Additionally  in 1996,  TRG issued units of  partnership  interest in connection
with the acquisition of the remaining interest in Fairlane Town Center.

Acquisitions

  The following discussion of TRG's 1997 acquisitions  contains  forward-looking
statements  regarding  the  impact of these  acquisitions  on EBITDA  (EBITDA is
defined and described in Liquidity and Capital Resources -- Distributions).  The
actual  impact  may  vary  based  on a  variety  of  factors,  including  actual
occupancy,  rents achieved and operating expenses of the Centers.  See Note 3 to
TRG's   consolidated   financial   statements  for  further  discussion  of  the
acquisitions.


                                      -21-

<PAGE>



The Falls
---------

  In December 1997,  TRG acquired The Falls shopping  center for $156 million in
cash.  The  operating  results  of The  Falls  have been  consolidated  in TRG's
financial  statements from the acquisition  date. TRG borrowed under an existing
revolving credit facility to fund the  acquisition.  The acquisition is expected
to produce EBITDA of about 8% of the acquisition cost in 1998.

Regency Square
--------------

  In September  1997, TRG acquired  Regency Square  (Regency)  shopping  center,
located in Richmond,  Virginia,  for $123.9 million in cash. The acquisition was
initially funded with borrowings under TRG's revolving credit facilities,  which
were paid down in October 1997 with the proceeds from TRG's issuance of Series A
Preferred  Equity.  The operating  results of Regency have been  consolidated in
TRG's financial statements from the acquisition date. Regency is expected to add
EBITDA of approximately 8% of the acquisition cost in 1998.

La Cumbre Plaza
---------------

  In December 1996,  TRG acquired a 100%  leasehold  interest in La Cumbre Plaza
(La Cumbre) located in Santa Barbara, California for $22.25 million in cash. The
acquisition  was  funded  with  proceeds  from  an  issuance  of  TRG  units  of
partnership interest.  The operating results of La Cumbre have been consolidated
in TRG's financial statements from the acquisition date.

Fairlane Town Center
--------------------

  In July 1996, TRG completed  transactions  that resulted in the acquisition of
the 75% interest in Fairlane Town Center  (Fairlane)  previously held by a Joint
Venture Partner.  In connection with the  transaction,  TRG issued to the former
Joint  Venture  Partner  units  of  partnership   interest,   exchangeable   for
approximately  6.1 million  shares of TCO's  common  stock,  which had a closing
price of  $10.75  per  share on the day  prior to the  issuance  date.  TRG also
assumed  mortgage debt of  approximately  $26 million,  representing  the former
Joint  Venture  Partner's  beneficial  interest  in the $34.6  million  mortgage
encumbering  the property.  TRG used unsecured debt to fund the repayment of the
9.73% mortgage and the prepayment  penalty of  approximately  $1.2 million.  The
operating  results  of  Fairlane  have  been  consolidated  in  TRG's  financial
statements  from the acquisition  date.  Prior to the  acquisition  date,  TRG's
interest  in  Fairlane  was   accounted  for  under  the  equity  method  as  an
Unconsolidated  Joint  Venture.  In January 1998,  TRG redeemed the former Joint
Venture Partner's units of partnership  interest for approximately $77.7 million
(including costs).

Paseo Nuevo
-----------

  In June 1996, TRG acquired a 100% leasehold  interest in Paseo Nuevo,  located
in Santa  Barbara,  California,  for $37 million in cash. TRG borrowed under its
existing lines of credit to fund the acquisition. The operating results of Paseo
Nuevo have been consolidated in TRG's financial  statements from the acquisition
date.

New Centers and Expansions

  In November 1997,  TRG opened Arizona Mills, a 37% owned value  super-regional
shopping center located in Tempe, Arizona. The Center opened 90% leased.


                                      -22-

<PAGE>



  In July  1997,  TRG  opened  The Mall at  Tuttle  Crossing,  a  super-regional
shopping  center  located in Columbus,  Ohio.  The Center was 95% leased at year
end. TRG's  ownership  interest in The Mall at Tuttle  Crossing was subject to a
long-term  participating lease with Tuttle Crossing Holding Co., a subsidiary of
The Limited, Inc. (The Limited) for land and leasehold improvements. In December
1997,  TRG purchased  The Limited's  interests in the lease for $76.3 million in
cash and took fee simple title to the underlying  land and buildings.  The lease
had been  accounted  for as a capital  lease  with  capital  lease  assets and a
capital lease  obligation of $55.3 million at the date of the  acquisition.  The
purchase  is  anticipated  to  produce  a  return  of  approximately  8% of  the
acquisition cost in 1998.

  TRG opened a 135,000  square foot  expansion at Westfarms in August 1997.  The
expansion   was   approximately   90%  leased  as  of  year  end.  In  addition,
approximately  50,000 square feet of new mall stores opened at Biltmore in 1997.
See also Liquidity and Capital  Resources -- Capital Spending for discussions of
other planned expansion and development activities.

Memorial City Mall Lease

  In November  1996,  TRG entered into an agreement to lease  Memorial City Mall
(Memorial  City), a 1.4 million square foot shopping  center located in Houston,
Texas. The lease of this unencumbered property grants TRG the exclusive right to
manage,  lease and operate the  property.  TRG has the option to  terminate  the
lease after the third full lease year by paying $2 million to the lessor. TRG is
using this option  period to evaluate  the  redevelopment  opportunities  of the
Center.  As a  development  project,  Memorial  City has been  excluded from all
operating  statistics in this report,  and Memorial City's results of operations
have been presented as a net line item in the following  tabular  comparisons of
TRG's  results of  operations.  Memorial  City is expected to have an immaterial
effect on EBITDA and net income during the option period.



                                      -23-

<PAGE>



Comparison of Fiscal Year 1997 to Fiscal Year 1996

Occupancy and Mall Tenant Sales

  Average  occupancy  in the Taubman  Shopping  Centers was 87.6% in 1997 versus
87.4% in 1996. Ending occupancy for the Taubman Shopping Centers at December 31,
1997 was 90.3% versus  88.0% at December 31, 1996.  Leased space at December 31,
1997 was 92.3% compared to 89.0% at the same date in 1996.

  Total sales for Taubman Shopping Center mall tenants increased in 1997 by 9.2%
to $3.09  billion  from $2.83  billion  in 1996.  Tenant  sales per square  foot
increased  by 1.6% to $371 in 1997 from $365 in 1996.  Tenant  sales per  square
foot,  excluding theaters and tenants greater than 40,000 square feet, increased
by 1.9% to $384 in 1997 from $377 in 1996.  Mall tenant  sales for Centers  that
were  owned  and  open  for all of 1997 and 1996  (which  excludes  all  Centers
acquired in those  years,  as well as Tuttle  Crossing  and Arizona  Mills) were
$2.85 billion,  a 1.6% increase over 1996.  Sales statistics for the first three
quarters  of 1997 were  negatively  affected  by new  competition  near  certain
Centers. The effect of the competition on sales moderated in the fourth quarter,
after the anniversary date of the opening of the competing centers.




                                      -24-

<PAGE>



Comparison of Fiscal Year 1997 to Fiscal Year 1996

  The following table sets forth operating results for TRG's Managed  Businesses
for 1997 and 1996,  showing  the  results  of the  Consolidated  Businesses  and
Unconsolidated Joint Ventures:


<TABLE>
<CAPTION>
                                                   1997                                           1996
                                -------------------------------------------   -------------------------------------------
                                         TRG  UNCONSOLIDATED          TOTAL            TRG  UNCONSOLIDATED          TOTAL
                                CONSOLIDATED           JOINT        MANAGED   CONSOLIDATED           JOINT        MANAGED
                                  BUSINESSES(1)     VENTURES(2)  BUSINESSES     BUSINESSES(1)     VENTURES(2)  BUSINESSES
                                -------------------------------------------   -------------------------------------------
                                                                  (in millions of dollars)
<S>                                    <C>             <C>            <C>            <C>             <C>            <C>
REVENUES:
  Minimum rents                        173.3           155.9          329.2          149.2           157.2          306.4
  Percentage rents                       7.2             3.1           10.2            6.0             4.0            9.9
  Expense recoveries                    97.5            89.7          187.1           85.1            95.2          180.4
  Management, leasing and
      development                        8.8                            8.8            8.5                            8.5
  Other                                 14.9            10.2           25.0           13.0             8.9           22.0
                                       -----           -----          -----          -----           -----          -----
Total revenues                         301.6           258.8          560.4          261.9           265.3          527.2

OPERATING COSTS:
  Recoverable expenses                  82.0            76.4          158.4           71.6            81.8          153.4
  Other operating                       28.1            11.9           39.9           25.4            12.8           38.2
  Management, leasing and
      development                        4.7                            4.7            4.7                            4.7
    General and administrative          25.7                           25.7           21.8                           21.8
  Interest expense                      73.6            54.5          128.2           70.5            53.5          124.0
  Depreciation and amortization         44.5            23.7           68.1           35.7            22.9           58.7
                                       -----           -----          -----          -----           -----          -----
Total operating costs                  258.5           166.4          424.9          229.7           171.1          400.8
Net results of Memorial City (1)         0.0                            0.0            0.2                            0.2
                                       -----           -----          -----          -----           -----          -----
                                        43.0            92.4          135.4           32.3            94.3          126.6
                                                       =====          =====                          =====          =====
Equity in income of Unconsolidated
  Joint Ventures                        52.3                                          51.8
                                       -----                                         -----
Income before extraordinary item        95.3                                          84.1
Extraordinary item                                                                    (1.3)
                                       -----                                         -----
Net income                              95.3                                          82.8
Preferred distributions to TCO          (4.1)
                                       -----                                         -----
Net income available to unitholders     91.2                                          82.8
                                       =====                                         =====

SUPPLEMENTAL INFORMATION (3):
  EBITDA contribution                  161.4            94.4          255.7          138.6            91.2          229.8
  TRG's Beneficial Interest Expense    (73.6)          (29.3)        (102.9)         (70.5)          (27.7)         (98.2)
  Non-real estate depreciation          (2.1)                          (2.1)          (1.9)                          (1.9)
  Preferred distributions to TCO        (4.1)                          (4.1)
                                       -----           -----          -----          -----           -----          -----
  Distributable Cash Flow
   contribution                         81.6            65.1          146.7           66.2            63.5          129.7
                                       =====           =====          =====          =====           =====          =====

(1)  The results of operations of Memorial City are presented net in this table.
     TRG expects that Memorial City's net operating  income will approximate the
     ground rent payable under the lease for the immediate future.
(2)  With the exception of the Supplemental Information,  amounts represent 100%
     of the  Unconsolidated  Joint  Ventures.  Amounts  are net of  intercompany
     profits.  The  Unconsolidated  Joint  Ventures are  accounted for under the
     equity method in TRG's Consolidated Financial Statements.
(3)  EBITDA,  TRG's Beneficial  Interest Expense and Distributable Cash Flow are
     defined and discussed in Liquidity and Capital Resources -- Distributions.
(4)  Amounts in this table may not add due to rounding.
(5)  Certain   1996  amounts   have  been   reclassified   to  conform  to  1997
     classifications.
</TABLE>


                                      -25-

<PAGE>



TRG --Consolidated Businesses
-----------------------------

  Total revenues for 1997 were $301.6 million, a $39.7 million or 15.2% increase
over 1996.  Minimum rents  increased  $24.1 million,  of which $21.4 million was
caused by the 1997 and 1996  acquisitions,  and the opening of Tuttle  Crossing.
The results of Fairlane have been  consolidated  in TRG's results  subsequent to
the acquisition date in July 1996 (prior to that date Fairlane was accounted for
under the equity method as an Unconsolidated Joint Venture).  Minimum rents also
increased due to the expansion at Biltmore and tenant rollovers. Percentage rent
increased primarily due to the acquisitions.  The increase in expense recoveries
was primarily  due to the acquired  Centers and Tuttle  Crossing.  Other revenue
increased  $1.9 million  primarily  due to an insurance  recovery,  a litigation
settlement, and an increase in lease cancellation revenue.

  Total  operating  costs  increased  $28.8 million,  or 12.5%.  Recoverable and
depreciation  and  amortization   expenses   increased   primarily  due  to  the
acquisitions and Tuttle Crossing.  Other operating expenses increased  primarily
due to the acquisitions and Tuttle Crossing,  offset by a decrease in the charge
to  operations   for   development   pre-construction   reserves.   General  and
administrative  expense  increased by $3.9 million primarily due to increases in
compensation  (including the continuing  phase-in of the long-term  compensation
plan),  recruiter fees and relocation  charges,  travel, and training.  Interest
expense increased due to an increase in debt used to finance Tuttle Crossing and
capital  expenditures at other Consolidated  Businesses,  partially offset by an
increase in capitalized  interest.  The acquisitions  were initially funded with
debt which was  subsequently  paid down with the proceeds from the December 1996
and the October 1997 equity issuances.

  Revenues  and expenses as  presented  in the  preceding  table differ from the
amounts  shown in TRG's  consolidated  statement  of  operations  by the amounts
representing  Memorial City's revenues and expenses,  which are presented in the
preceding table as a net amount.

Unconsolidated Joint Ventures
-----------------------------

  Total revenues for 1997 were $258.8 million, a $6.5 million, or 2.5%, decrease
from  1996,  representing  a $15.0  million  decrease  caused  by the  change of
Fairlane from an Unconsolidated Joint Venture to a Consolidated Business, offset
by  increases  due to the  openings  of  Arizona  Mills  and  the  expansion  at
Westfarms,  in addition to increases at other  Centers.  The decrease in minimum
rents was  primarily  due to Fairlane,  offset by Arizona  Mills,  Westfarms and
increases  due to tenant  rollovers  at other  Centers.  The decrease in expense
recoveries was primarily due to Fairlane, offset by Arizona Mills. Other revenue
increased  by $1.3  million  primarily  due to gains on  peripheral  land sales,
offset by a decrease in lease cancellation revenue and interest income.

  Total operating  costs  decreased by $4.7 million,  or 2.7%, to $166.4 million
for  1997  including  a $10.1  million  decrease  due to  Fairlane.  Recoverable
expenses  decreased $5.4 million primarily due to Fairlane,  offset by increases
due to Arizona Mills. Other operating costs decreased  primarily due to Fairlane
and a  decrease  in bad  debt  expense.  Additionally,  included  in 1996  other
operating expense was a nonrecurring $0.5 million payment to an anchor at one of
the  Centers.  Interest  expense  increased  $1.0  million  primarily  due to an
increase  in debt used to finance  Arizona  Mills and the  Westfarms  expansion,
partially  offset by a decrease in debt related to Fairlane.  Operating costs as
presented in the preceding  table differ from the amounts shown in the combined,
summarized  financial statements of the Unconsolidated Joint Ventures (Note 4 to
TRG's financial statements) by the amount of intercompany profit.

  As a result of the foregoing,  net income of the Unconsolidated Joint Ventures
decreased by $1.9 million, or 2.0%, to $92.4 million. TRG's equity in net income
of the  Unconsolidated  Joint Ventures was $52.3  million,  a 1.0% increase from
1996.

Net Income
----------

  As a result of the foregoing, TRG's income before extraordinary item increased
by $11.2 million, or 13.3%, to $95.3 million for 1997. In 1996, TRG recognized a
$(1.3)  million  extraordinary  charge  related to the  prepayment of Fairlane's
debt.  After  payment of $4.1  million in  preferred  distributions  to TCO, net
income available to partnership unitholders for 1997 was $91.2 million, compared
to $82.8 million in 1996.


                                      -26-

<PAGE>



Comparison of Fiscal Year 1996 to Fiscal Year 1995

Occupancy and Mall Tenant Sales

  Average  occupancy  in the Taubman  Shopping  Centers was 87.4% in 1996 versus
88.0% in 1995. Ending occupancy for the Taubman Shopping Centers at December 31,
1996 was 88.0% versus  89.4% at December 31, 1995.  Leased space at December 31,
1996 was 89.0% compared to 90.6% at the same date in 1995. Average occupancy for
1996 was somewhat  less than the previous  year's level but  comfortably  within
TRG's historic range of average annual occupancy.

  Total sales for Taubman Shopping Center mall tenants increased in 1996 by 3.2%
to $2.83  billion  from $2.74  billion  in 1995.  Tenant  sales per square  foot
increased  by 5.2% to $365 in 1996 from $346 in 1995.  Sales per square  foot in
1995 was $352,  excluding  Bellevue  Center.  Mall tenant sales for Centers that
were owned and open for all of 1996 and 1995 were $2.81 billion, a 3.9% increase
over 1995.







                                      -27-

<PAGE>



Comparison of Fiscal Year 1996 to Fiscal Year 1995

  The following table sets forth operating results for TRG's Managed  Businesses
for 1996 and 1995,  showing  the  results  of the  Consolidated  Businesses  and
Unconsolidated Joint Ventures:




<TABLE>
<CAPTION>
                                                   1996                                           1995
                                -------------------------------------------   -------------------------------------------
                                         TRG  UNCONSOLIDATED          TOTAL            TRG  UNCONSOLIDATED          TOTAL
                                CONSOLIDATED           JOINT        MANAGED   CONSOLIDATED           JOINT        MANAGED
                                  BUSINESSES(1)     VENTURES(2)  BUSINESSES     BUSINESSES        VENTURES(2)  BUSINESSES
                                -------------------------------------------   -------------------------------------------
                                                                  (in millions of dollars)
<S>                                    <C>             <C>            <C>            <C>             <C>            <C>
REVENUES:
  Minimum rents                        149.2           157.2          306.4          130.4           166.2          296.6
  Percentage rents                       6.0             4.0            9.9            5.6             3.6            9.2
  Expense recoveries                    85.1            95.2          180.4           75.3           101.5          176.8
  Other                                 21.5             8.9           30.4           17.6            11.5           29.1
  Gain on disposition of Bellevue                                                                      8.3            8.3
                                       -----           -----          -----          -----           -----          -----
Total revenues                         261.9           265.3          527.2          228.9           291.1          520.0

OPERATING COSTS:
  Recoverable expenses                  71.6            81.8          153.4           62.9            88.2          151.1
  Other operating                       25.4            12.8           38.2           22.5            12.3           34.8
  Management, leasing and
      development                        4.7                            4.7            3.7                            3.7
  General and administrative            21.8                           21.8           19.8                           19.8
  Interest expense                      70.5            53.5          124.0           65.8            58.6          124.4
  Depreciation and amortization         35.7            22.9           58.7           32.4            24.7           57.1
                                       -----           -----          -----          -----           -----          -----
Total operating costs                  229.7           171.1          400.8          207.1           183.8          390.9
Net results of Memorial City (1)         0.2                            0.2
                                       -----           -----          -----          -----           -----          -----
                                        32.3            94.3          126.6           21.8           107.3          129.1
                                                       =====          =====                          =====          =====
Equity in income before extraordinary
  items of Unconsolidated Joint
  Ventures (including $5.0 million in
  1995 related to the disposition of
  Bellevue)                             51.8                                          57.9
                                       -----                                         -----
Income before extraordinary items       84.1                                          79.7
Extraordinary items                     (1.3)                                         16.6
                                       -----                                         -----
Net income                              82.8                                          96.3
                                       =====                                         =====

SUPPLEMENTAL INFORMATION(3):
  EBITDA contribution                  138.6            91.2          229.8          120.0            96.1          216.1
  TRG's Beneficial Interest Expense    (70.5)          (27.7)         (98.2)         (65.8)          (30.4)         (96.2)
  Non-real estate depreciation          (1.9)                          (1.9)          (2.0)                          (2.0)
                                       -----           -----          -----          -----           -----          -----
  Distributable Cash Flow
   contribution                         66.2            63.5          129.7           52.1            65.7          117.8
                                       =====           =====          =====          =====           =====          =====

(1)  The results of operations of Memorial City are presented net in this table.
     TRG expects that Memorial City's net operating  income will approximate the
     ground rent payable under the lease for the immediate future.
(2)  With the exception of the Supplemental Information,  amounts represent 100%
     of the  Unconsolidated  Joint  Ventures.  Amounts  are net of  intercompany
     profits.
(3)  EBITDA,  TRG's Beneficial  Interest Expense and Distributable Cash Flow are
     defined and discussed in Liquidity and Capital  Resources -- Distributions.
     EBITDA for 1995 does not include  the gain  related to the  disposition  of
     Bellevue Center.
(4)  Amounts in this table may not add due to rounding.
(5)  Certain   1996  amounts   have  been   reclassified   to  conform  to  1997
     classifications.
</TABLE>


                                      -28-

<PAGE>



TRG --Consolidated Businesses
-----------------------------

  Total revenues for 1996 were $261.9 million, a $33.0 million or 14.4% increase
from 1995. Minimum rents for 1996 increased $18.8 million, of which $8.7 million
was caused by the Fairlane and Paseo Nuevo acquisitions. The results of Fairlane
have been  consolidated  in TRG's  results  subsequent to the  acquisition  date
(prior to that date  Fairlane was  accounted  for under the equity  method as an
Unconsolidated Joint Venture). Minimum rent also increased due to the expansions
at Short  Hills and  Meadowood  and tenant  rollovers.  The  increase in expense
recoveries was also  primarily due to the Fairlane and Paseo Nuevo  acquisitions
and recoveries of increased  maintenance  costs and property taxes. The increase
in other revenues of $3.9 million was primarily due to increases in revenue from
management,   leasing,  and  development  services,   rental  fees  on  exterior
advertising  signs and gains on sales of peripheral land,  partially offset by a
decrease in lease cancellation revenue.

  Total operating  costs  increased $22.6 million,  or 10.9%, to $229.7 million.
The  increase in  recoverable  expenses  for 1996 was due to Fairlane  and Paseo
Nuevo and to increases in maintenance costs and property taxes,  including those
related to the expansion at Short Hills.  Other operating expenses increased due
to Fairlane and Paseo  Nuevo,  and an increase in the charge to  operations  for
development  pre-construction  reserves.  General  and  administrative  expenses
increased  $2.0 million due  primarily to increases in  compensation,  including
costs of the new long-term  performance  compensation plan and the allocation of
internal  acquisition costs,  travel, and professional fees in 1996, offset by a
decrease  resulting  from a $0.8  million  charge  in  1995  for  severance  and
termination  benefits.  Interest expense increased $4.7 million due primarily to
an increase in debt levels,  including  debt used to finance the  acquisition of
Paseo Nuevo and capital  expenditures and the assumption of debt relating to the
Fairlane acquisition,  and a decrease in capitalized interest,  partially offset
by decreased  interest rates.  The increase in depreciation and amortization was
due primarily to the acquisitions of Fairlane and Paseo Nuevo and the expansions
at Short Hills and Meadowood.

  Revenues  and expenses as  presented  in the  preceding  table differ from the
amounts  shown  in  TRG's   consolidated   income   statements  by  the  amounts
representing  Memorial City's revenues and expenses,  which are presented in the
preceding table as a net amount.

Unconsolidated Joint Ventures
-----------------------------

  Total revenues for 1996 were $265.3 million,  a $25.8 million or 8.9% decrease
from 1995, primarily  representing a $23.8 million decrease caused by the change
in Fairlane from an Unconsolidated Joint Venture to a Consolidated  Business and
by the November 1995  disposition of Bellevue  Center  (Bellevue).  Minimum rent
decreases  due to Fairlane  and  Bellevue  were offset by  increases  due to the
expansion  at  Woodfield  and tenant  rollovers.  Expense  recoveries  decreased
primarily  due to Fairlane and Bellevue,  offset by increases at other  Centers.
Other income  decreased due to a gain on the sale of peripheral land in 1995 and
decreased  interest income in 1996, offset by an increase in lease  cancellation
revenue in 1996. In 1995, an ordinary gain of $8.3 million was recognized on the
disposition of Bellevue.

  Total operating  costs decreased by $12.7 million,  or 6.9%, to $171.1 million
for 1996,  representing  a $19.9 million  decrease due to Fairlane and Bellevue,
offset by  increases  at other  Centers.  Recoverable  expenses  decreased  $6.4
million due to Fairlane and Bellevue,  offset by increases in maintenance  costs
and property taxes.  Other  operating  costs  increased $0.5 million  reflecting
increases in property  management  costs,  promotion and advertising  costs, bad
debt expense and a nonrecurring  $0.5 million payment to an anchor at one of the
Centers,  offset by decreases  due to Bellevue and  Fairlane.  Interest  expense
decreased  $5.1  million  due to a  decrease  in debt  related to  Fairlane  and
Bellevue and an increase in capitalized interest,  partially offset by increases
due to an increase in debt used to finance  capital  expenditures  and to higher
interest rates on certain debt refinanced in 1995.  Operating costs as presented
in the preceding table differ from the amounts shown in the combined, summarized
financial  statements  of the  Unconsolidated  Joint  Ventures  (Note 4 to TRG's
financial statements) by the amount of intercompany profit.


                                      -29-

<PAGE>



  As a  result  of the  foregoing,  income  before  extraordinary  items  of the
Unconsolidated  Joint  Ventures  was $94.3  million in 1996, a decrease of 12.1%
from  1995.   TRG's  equity  in  income  before   extraordinary   items  of  the
Unconsolidated Joint Ventures decreased $6.1 million, or 10.5%, to $51.8 million
for 1996.

Net Income
----------

  As a  result  of  the  foregoing,  TRG's  income  before  extraordinary  items
increased by $4.4 million,  or 5.5%,  to $84.1  million for 1996.  In 1996,  TRG
recognized a $(1.3)  million  extraordinary  charge related to the prepayment of
Fairlane's  debt. In 1995,  TRG recognized an $18.9 million  extraordinary  gain
related  to the  disposition  of  Bellevue  and the  related  extinguishment  of
Bellevue's  debt, and $(2.2)  million in  extraordinary  charges  related to the
prepayment of debt at TRG and at one of its Unconsolidated  Joint Ventures.  Net
income for 1996 was $82.8 million, compared to $96.3 million in 1995.







                                      -30-

<PAGE>



Liquidity and Capital Resources

  As of December  31,  1997,  TRG had a cash  balance of $3.3  million.  TRG has
available  for  general  partnership  purposes  an  unsecured  revolving  credit
facility of $300 million,  which  expires in March 2000.  Included in the credit
facility is a competitive  bid option program which allows TRG to hold auctions,
among the banks  participating in the facility,  for short term borrowings of up
to $150 million.  Borrowings  under this facility at December 31, 1997 were $210
million.  TRG also has  available an unsecured  bank line of credit of up to $30
million with borrowings of $10.2 million at December 31, 1997. This line expires
in August 1998. TRG also has available a secured commercial paper facility of up
to $75 million,  with borrowings of $75 million at December 31, 1997. Commercial
paper is generally sold with a 30 day maturity.  This facility is supported by a
line of credit facility, which is renewable quarterly for a twelve month period.

  Proceeds from short term  borrowings  provided  $487.3  million of funding for
1997  (including   $358.2  million,   including   transaction   costs,  for  the
acquisitions  of Regency  Square,  The Falls and  interests in Tuttle  Crossing)
compared  to  $121.2  million  in  1996   (including   $103.6  million  for  the
acquisitions  of Paseo  Nuevo and an  interest  in  Fairlane  Town  Center).  In
November 1997, proceeds from TRG's revolving credit facilities were also used to
repay $100 million of floating rate notes.  Additionally,  proceeds in both 1997
and 1996 were used to fund capital expenditures for the Consolidated  Businesses
and contributions to Unconsolidated Joint Ventures for construction costs.

  In October  1997,  TRG used the net proceeds from the issuance of its Series A
Preferred  Equity to pay down floating rate debt under TRG's existing  revolving
credit and commercial paper facilities,  which were used to fund the acquisition
of Regency  Square.  During  1996,  proceeds  from the  issuance of TRG units of
partnership  interest  were used to pay down  short  term  borrowings  of $124.7
million and for the $22.3 million acquisition of La Cumbre.

  TRG has a medium-term note program under TRG's $500 million shelf registration
statement.  During July 1997, TRG issued $55 million of unsecured  10-year notes
at a coupon rate of 7%. The net  proceeds  were used to pay down  floating  rate
debt under TRG's  revolving  credit  facilities.  In 1996, TRG used the proceeds
from the issuance of $154 million of notes to pay down  floating rate debt under
TRG's  revolving  credit  facilities  as well as to pay  off the  $34.6  million
mortgage on Fairlane and the related  prepayment  penalty of approximately  $1.2
million.  Including  the  issuance in July 1997,  TRG has issued a total of $342
million of notes since the program's inception in 1995.

  In October 1997, TRG closed on a three year $150 million secured  construction
facility  for  MacArthur  Center,  which is owned by a  consolidated  70%  owned
venture. The loan bears interest at one month LIBOR plus 1.2%.  Borrowings under
the  facility  were $42.2  million at  December  31,  1997.  The  payment of the
principal and interest is guaranteed by TRG. The loan agreement provides for the
reduction of the amount  guaranteed as certain center  performance and valuation
criteria are met.

  In November  1997,  TRG entered  into an unsecured  $210 million  construction
facility  maturing in 2001 to finance the  construction of Great Lakes Crossing.
Under the loan  agreement,  the maturity date may be extended for one year.  The
loan bears interest at one month LIBOR plus 0.90%. Borrowings under the facility
at December 31, 1997 were $46.9 million.

  Scheduled  principal payments on installment notes were $838 thousand and $793
thousand in 1997 and 1996, respectively.


                                      -31-

<PAGE>



  At December 31, 1997,  TRG's debt and its  beneficial  interest in the debt of
its consolidated and Unconsolidated  Joint Ventures totaled $1,737.2 million. As
shown in the following table,  $79.8 million of this debt was floating rate debt
that remained unhedged at December 31, 1997. Interest rates shown do not include
amortization of debt issuance costs and interest rate hedging costs. These items
are  reported  as  interest  expense  in TRG's  results  of  operations.  In the
aggregate,  these costs accounted for 0.36% of the effective rate of interest in
TRG's  beneficial  interest  in debt at  December  31,  1997.  Included in TRG's
beneficial  interest  in  debt  at  December  31,  1997  is  debt  used  to fund
development and expansion costs.  TRG's  beneficial  interest in assets on which
interest is being  capitalized  totaled  $149.0 million as of December 31, 1997.
TRG's beneficial interest in capitalized interest was $13.7 million for the year
ended December 31, 1997.

<TABLE>
<CAPTION>
                                               Beneficial Interest in Debt
                                -------------------------------------------------------------
                                    Amount      Interest    LIBOR     Frequency       LIBOR
                                (In millions     Rate at     Cap      of Rate           at
                                 of dollars)    12/31/97     Rate      Resets        12/31/97
                                 ----------     --------     ----      ------       ---------
<S>                                 <C>          <C>        <C>        <C>            <C>

Total beneficial interest in
 fixed rate debt                    1,066.3      7.65%(1)

Floating rate debt hedged via
 interest rate caps:
   Through January 1998                65.0      6.72        6.50%     Monthly        5.72%
   Through October 1998                39.3      6.25        6.00      Three Months   5.81
   Through December 1998              100.0      6.72(1)     6.50      Three Months   5.81
   Through July 1999                   65.0      6.72(1)     7.00      Monthly        5.72
   Through December 1999              200.0      6.72(1)     9.50(2)   Monthly        5.72
   Through October 2001                25.0      6.43        8.55      Monthly        5.72
   Through January 2002                53.4      7.18(1)     9.50      Monthly        5.72
   Through July 2002                   43.4      7.67(1)     6.50      Monthly        5.72
Other floating rate debt               79.8      6.72(1)
                                    -------

Total beneficial interest in debt   1,737.2      7.32(1)
                                    =======

(1)  Denotes weighted average interest rate.
(2)  Rate reduces to 7.0% in December 1998.
</TABLE>

  TRG's loan and facility  agreements and indenture contain various  restrictive
covenants including  limitations on the amount of secured and unsecured debt and
minimum debt service coverage ratios, the latter being the most restrictive. TRG
is in compliance with all of such covenants.

  Subsequent    to   year   end,    Fairfax    Company   of   Virginia    L.L.C.
(successor-in-interest  to Fairfax Associates,  a 50% owned Unconsolidated Joint
Venture)  completed a $140 million,  6.60%,  secured financing maturing in 2008.
The net proceeds were used to  extinguish  an existing  mortgage on Fair Oaks of
approximately  $39 million and pay a prepayment  penalty of  approximately  $1.8
million. In addition, proceeds of $5.6 million were used to close out a treasury
lock agreement  entered into in 1997, which resulted in an effective rate on the
financing of  approximately  7%. The remaining  proceeds were distributed to the
owners.  TRG used its 50% share of the  distribution  to pay down its  revolving
credit facilities.


                                      -32-

<PAGE>



Distributions

  A  principal  factor  considered  by TRG in  deciding  upon  distributions  to
partners is an amount,  which TRG defines as  Distributable  Cash Flow, equal to
EBITDA less TRG's Beneficial Interest Expense,  non-real estate depreciation and
amortization,  and  preferred  distributions.  This  measure of  performance  is
influenced  not only by  operations  but also by  capital  structure.  EBITDA is
defined as TRG's  beneficial  interest in revenues,  less operating costs before
interest,  depreciation and  amortization,  meaning TRG's pro rata share of this
result  for  each  of  the  Managed  Businesses,   after  recording  appropriate
intercompany eliminations. TRG's Beneficial Interest Expense is defined as TRG's
pro rata  share of the  interest  expense of each of TRG's  Managed  Businesses.
EBITDA and Distributable  Cash Flow do not represent cash flows from operations,
as  defined  by  generally  accepted  accounting  principles,  and should not be
considered  to be an  alternative  to net income as an  indicator  of  operating
performance or to cash flows from operations as a measure of liquidity.

  The following table  summarizes  TRG's  Distributable  Cash Flow for the years
ended December 31, 1997 and 1996:


<TABLE>
<CAPTION>
                                                 Year ended                               Year ended
                                              December 31, 1997                       December 31, 1996
                                    --------------------------------------  ---------------------------------------
                                              TRG   UNCONSOLIDATED                     TRG   UNCONSOLIDATED
                                     CONSOLIDATED            JOINT            CONSOLIDATED            JOINT
                                       BUSINESSES      VENTURES(1)   TOTAL      BUSINESSES      VENTURES(1)   TOTAL
                                    --------------------------------------  ---------------------------------------
                                                                (in millions of dollars)
<S>                                         <C>           <C>        <C>             <C>           <C>        <C>
TRG's Net Income (2)(3)                                               95.3                                     82.8
Extraordinary item (3)                                                                                          1.3
Depreciation and amortization (4)                                     57.5                                     47.5
TRG's Beneficial Interest Expense                                    102.9                                     98.2
                                                                     -----                                    -----
EBITDA                                      161.4          94.4      255.7           138.6          91.2      229.8
TRG's Beneficial Interest Expense           (73.6)        (29.3)    (102.9)          (70.5)        (27.7)     (98.2)
Non-real estate depreciation                 (2.1)                    (2.1)           (1.9)                    (1.9)
Preferred distributions to TCO               (4.1)                    (4.1)
                                            -----         -----      -----           -----         -----      -----
Distributable Cash Flow                      81.6          65.1      146.7            66.2          63.5      129.7
                                            =====         =====      =====           =====         =====      =====

(1)  Amounts  represent  TRG's  beneficial  interest  in the  operations  of its
     Unconsolidated Joint Ventures.
(2)  Includes TRG's share of gains on peripheral  land sales of $2.5 million and
     $1.0 million in 1997 and 1996, respectively.
(3)  Extraordinary  charge  related  to the  extinguishment  of debt,  primarily
     consisting of a prepayment penalty.
(4)  Includes  $3.7  million  and $3.3  million of  amortization  of mall tenant
     allowances in 1997 and 1996, respectively.
(5)  Amounts may not add due to rounding.
</TABLE>

  For 1997,  EBITDA and  Distributable  Cash Flow were $255.7 million and $146.7
million,  compared to $229.8  million and $129.7 million in 1996. In addition to
$4.1  million  representing  preferred  distributions  to TCO on TRG's  Series A
Preferred  Equity,  TRG  distributed  $128.1  million to its  partners  in 1997,
compared to $119.1 million in 1996.

  The Partnership  Committee of TRG makes an annual determination of appropriate
distributions   for  each  year.  The  determination  is  based  on  anticipated
Distributable Cash Flow available after preferred  distributions to TCO on TRG's
Series A Preferred  Equity, as well as financing  considerations  and such other
factors  as  the  Partnership  Committee  considers  appropriate.  Further,  the
Partnership  Committee has decided that the growth in distributions will be less
than the growth in Distributable Cash Flow for the immediate future.

  Except under unusual  circumstances,  TRG's  practice is to  distribute  equal
monthly  installments of the determined  amount of distributions  throughout the
year.  Due  to  seasonality  and  the  fact  that  cash  available  to  TRG  for
distributions  may be  more  or less  than  net  cash  provided  from  operating
activities  plus  distributions  from Joint  Ventures  during the year,  TRG may
borrow  from  unused  credit  facilities  (described  above)  to  enable  it  to
distribute the amount decided upon by the TRG Partnership Committee.

  Distributions  by each Joint Venture may be made only in  accordance  with the
terms of its  partnership  agreement.  TRG,  in  general,  acts as the  managing
partner  and has the  right  to  determine  the  amount  of cash  available  for
distribution  from the  Joint  Venture.  In  general,  the  provisions  of these
agreements  require the  distribution  of all available cash (as defined in each
partnership agreement), but most do not allow borrowing to finance distributions
without approval of the Joint Venture Partner.


                                      -33-
<PAGE>



  As a result,  distribution  policies of many Joint  Ventures will not parallel
those of TRG.  While TRG may not,  therefore,  receive as much in  distributions
from each Joint Venture as it intends to  distribute  with respect to that Joint
Venture, TRG does not believe this will impede its intended  distribution policy
because  of TRG's  overall  access  to  liquid  resources,  including  borrowing
capacity.

  Any inability of TRG or its Joint Ventures to secure  financing as required to
fund  maturing  debts,  capital  expenditures  and  changes in working  capital,
including development activities and expansions,  may require the utilization of
cash to satisfy such  obligations,  thereby possibly  reducing  distributions to
partners of TRG.

  In  addition,  if the GM Trusts  exercise  their  rights under the Cash Tender
Agreement (see Liquidity and Capital  Resources -- Cash Tender Agreement below),
TRG will be  required  to pay the GM  Trusts  $10.9  million  and may  borrow to
finance such expenditures.

Capital Spending

  Capital  spending for routine  maintenance of the Taubman  Shopping Centers is
generally recovered from tenants.  Excluding  acquisitions,  capital spending by
the Managed Businesses not recovered from tenants is summarized in the following
table:
                                                    1997
                            ----------------------------------------------------
                                                               TRG's Share of
                                         Unconsolidated  Consolidated Businesses
                            Consolidated          Joint     and Unconsolidated
                              Businesses    Ventures(1)    Joint Ventures(1)(2)
                            ----------------------------------------------------
                                         (in millions of dollars)

Development, renovation,
 and expansion:
  Existing centers                  12.1           52.8             46.5
  New centers                      110.8          134.3            140.7
Pre-construction development
 activities, net of charge to
 operations                         11.5                            11.5
Mall tenant allowances               5.3            4.0              7.5
Corporate office improvements
 and equipment                       2.9                             2.9
Other                                0.8            0.5              1.1
                                   -----          -----            -----
Total                              143.4          191.6            210.2
                                   =====          =====            =====

(1)  Costs are net of intercompany profits.
(2)  Includes TRG's share of construction costs for Great Lakes Crossing (an 80%
     owned  consolidated  joint  venture)  and  MacArthur  Center  (a 70%  owned
     consolidated joint venture).


                                                    1996
                            ----------------------------------------------------
                                                               TRG's Share of
                                         Unconsolidated  Consolidated Businesses
                            Consolidated          Joint     and Unconsolidated
                              Businesses    Ventures(1)    Joint Ventures(1)(2)
                            ----------------------------------------------------
                                         (in millions of dollars)
Development, renovation,
 and expansion:
  Existing centers                   5.2           40.3             35.7
  New centers                       14.9           58.4             33.8
Pre-construction development
 activities,
  net of charge to operations        4.1                             4.1
Mall tenant allowances               4.5            5.2              7.0
Corporate office improvements
 and equipment                       1.5                             1.5
Other                                2.3            1.4              3.1
                                    ----          -----             ----
Total                               32.5          105.3             85.2
                                    ====          =====             ====

(1)  Costs are net of intercompany profits.
(2)  Includes TRG's share of construction costs for Great Lakes Crossing (an 80%
     owned  consolidated  joint  venture)  and  MacArthur  Center  (a 70%  owned
     consolidated joint venture).

  In 1997 and 1996, TRG's share of mall tenant allowances per square foot leased
during the year,  excluding expansion space and new developments,  was $8.34 and
$9.96,  respectively.  In addition,  TRG's share of its Consolidated Businesses'
and  Unconsolidated  Joint Ventures'  capitalized  leasing costs,  excluding new
developments,  was $10.9  million,  or $10.72 per square foot leased  during the
year in 1997,  and $8.5 million or $10.47 per square foot leased during the year
in 1996.


                                      -34-

<PAGE>



  At Cherry Creek,  an ongoing  expansion  includes a newly  constructed  Lord &
Taylor store,  which opened in November  1997,  and the addition of 132 thousand
square feet of mall GLA,  which will open in the fall of 1998.  The expansion is
expected to cost approximately $50 million.  TRG has a 50% ownership interest in
Cherry Creek.

  Great Lakes Crossing, an enclosed value super-regional mall being developed by
TRG in Auburn Hills,  Michigan, is expected to open in November 1998. The Center
will be 1.4 million  square feet and its anchors will include Off 5th-Saks Fifth
Avenue Outlet,  Oshman's  Supersports  USA,  Rainforest  Cafe,  Jeepers!,  and a
25-screen 100,000 square foot Star Theater complex. This Center will be owned by
a joint venture in which TRG has a controlling  80% interest and is projected to
cost approximately $210 million.

  MacArthur  Center, a new Center under  construction in Norfolk,  Virginia,  is
expected to open in March 1999. The Center is expected to open with 930 thousand
square feet and will  initially be anchored by  Nordstrom  and  Dillard's.  This
Center  will be owned by a joint  venture  in  which  TRG has a 70%  controlling
interest and is projected to cost approximately $150 million.

  In 1996,  TRG entered  into an agreement  to lease  Memorial  City Mall, a 1.4
million square foot shopping center located in Houston,  Texas. Memorial City is
anchored by Sears, Foley's,  Montgomery Ward and Mervyn's. TRG has the option to
terminate  the  lease  after the third  full  year by paying $2  million  to the
lessor.   TRG  is  using  this  option  period  to  evaluate  the  redevelopment
opportunities  of the  Center.  Under the terms of the lease,  TRG has agreed to
invest a minimum of $3  million  during the three  year  option  period.  If the
redevelopment  proceeds,  TRG is required to invest an additional $22 million in
property  expenditures not recoverable from tenants during the first 10 years of
the lease term.

  Assuming no acquisitions,  planned capital spending by the Managed  Businesses
not recovered from tenants for 1998 is summarized in the following table:

                                                    1998
                            ----------------------------------------------------
                                                               TRG's Share of
                                         Unconsolidated  Consolidated Businesses
                            Consolidated          Joint     and Unconsolidated
                              Businesses    Ventures(1)    Joint Ventures(1)(2)
                            ----------------------------------------------------
                                         (in millions of dollars)
Development, renovation, and
 expansion                         240.9(3)       39.0(4)           208.4
Mall tenant allowances               4.6           9.0                9.6
Pre-construction development
  and other                         22.1           1.4               22.8
                                   -----         -----              -----
Total                              267.6          49.4              240.8
                                   =====         =====              =====

(1)  Costs are net of intercompany profits.
(2)  Includes TRG's share of construction costs for Great Lakes Crossing (an 80%
     owned  consolidated  joint  venture)  and  MacArthur  Center  (a 70%  owned
     consolidated joint venture).
(3)  Includes costs related to MacArthur Center and Great Lakes Crossing.
(4)  Includes costs related to the expansion project at Cherry Creek.

  TRG's share of costs for  development  projects  scheduled  to be completed in
1999 is  anticipated  to be as much as $58 million in 1999.  TRG's  estimates of
1998  and  1999  capital  spending  include  only  projects  approved  by  TRG's
Partnership  Committee  and,  consequently,  TRG's  estimates will change as new
projects  are  approved.  Currently,  TRG  expects to open on  average  one $175
million to $200 million  shopping center each year.  TRG's  estimates  regarding
capital expenditures presented above are forward-looking  statements and certain
significant  factors  could  cause the  actual  results  to  differ  materially,
including but not limited to: 1) actual  results of  negotiations  with anchors,
tenants and contractors; 2) changes in the scope and number of projects; 3) cost
overruns; 4) timing of expenditures; and 5) actual time to complete projects.

Capital Resources

  TRG believes that its net cash provided by operating activities, distributions
from the Joint Ventures,  the unutilized portion of its credit  facilities,  and
its ability to access the credit  markets assure  adequate  liquidity to conduct
its operations in accordance with its distribution and financing policies.


                                      -35-

<PAGE>



Cash Tender Agreement

  A. Alfred  Taubman  and the GM Trusts each have the annual  right to tender to
TCO units of partnership  interest in TRG (provided that the aggregate  value is
at least $50  million)  and cause TCO to purchase  the  tendered  interests at a
purchase  price  based  on a  market  valuation  of  TCO  on  the  trading  date
immediately preceding the date of the tender (the Cash Tender Agreement).  At A.
Alfred Taubman's  election,  his family, and Robert C. Larson and his family may
participate  in tenders.  The GM Trusts will be entitled to receive  from TRG an
amount  (not to  exceed  $10.9  million  in the  aggregate  over the term of the
Partnership)  equal to 5.5% of the amounts  that TCO pays to the GM Trusts under
the Cash Tender Agreement.

  TRG is not aware of any present  intention of any partner to sell its interest
in TRG under the Cash Tender Agreement.


                                     -36-

<PAGE>



Item 8.  FINANCIAL STATEMENTS

  The Financial Statements of The Taubman Realty Group Limited Partnership,  and
the Independent  Auditors' Reports thereon are filed pursuant to this Item 8 and
are included in this report at Item 14.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE

  Not applicable.

                                   PART III *

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  The  material   appearing  in  the  TCO  Proxy  Statement  under  the  caption
"Management  --Directors and Executive Officers" is incorporated by reference as
part of the information  requested by this item. TRG is managed by a Partnership
Committee  consisting of 13 members,  11 of whom also serve as Directors of TCO,
TRG's Managing General Partner. The following is information  concerning members
of TRG's Partnership Committee that is not contained in the TCO Proxy Statement.

  Joseph F. Azrack,  50, has been a member of TRG's  Executive  Committee  since
1993. Mr. Azrack is President and Chief Executive  Officer and a Director of AEW
Capital  Management,  L.P., a Boston based real estate investment advisory firm.
Mr.  Azrack is a Director of LaQuinta  Inns,  a company  operating  in the motel
industry; Evans Withycombe Residential, Inc., which is engaged in the investment
and  development of  apartments;  and UDC Homes,  Inc., a homebuilder  active in
Arizona and California.

  Ronald M. Pastore, 39, has been a Partnership  Committee member since 1997. He
is a Director of AEW Capital Management,  L.P. He is also Asset Group Leader for
AEW  Capital  Management's  retail  group,  with direct  responsibility  for the
management of highly structured retail investments and large, multi-asset retail
portfolios.

Item 11.  EXECUTIVE COMPENSATION

  The information  required by this item is hereby  incorporated by reference to
the material appearing in the TCO Proxy Statement under the captions  "Executive
Compensation" and "Management -- Compensation of Directors."

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  The  information  appearing  in the TCO  Proxy  Statement  under  the  caption
"Security Ownership of Certain Beneficial Owners and Management" is incorporated
by  reference in partial  response to this item.  TCO owns  50,828,785  units of
partnership interest, representing 38.4% of TRG. Messrs. Azrack and Pastore, who
are the only  members  of the  Partnership  Committee  not  listed  in the table
incorporated by reference, do not own any interests in TRG.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  The information  required by this item is hereby  incorporated by reference to
the  material   appearing  in  the  TCO  Proxy   Statement   under  the  caption
"Management--Certain Transactions".


-------------------------------
*  The  Compensation  Committee  Report  on  Executive  Compensation  and  the
Shareholder  Return  Performance  Graph appearing in the TCO Proxy Statement are
not incorporated by reference in this Annual Report on Form 10-K or in any other
report, registration statement, or prospectus of the Registrant.


                                      -37-

<PAGE>



                                     PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

    14(a)(1) The following  financial  statements  of The Taubman  Realty  Group
             Limited  Partnership and the Independent  Auditors' Report  thereon
             are filed with this report:

             THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
             Independent Auditors' Report ..................................F-2
             Consolidated Balance Sheet as of December 31, 1997 and 1996....F-3
             Consolidated Statement of Operations for the years ended
               December 31, 1997, 1996 and 1995.............................F-4
             Consolidated Statement of Accumulated Deficiency in Assets for the
               years ended December 31, 1997, 1996 and 1995.................F-5
             Consolidated Statement of Cash Flows for the years ended
               December 31, 1997, 1996 and 1995.............................F-6
             Notes to Consolidated Financial Statements.....................F-7

    14(a)(2) The  following  is  a list of  the  financial  statement  schedules
             required by Item 14(d).

             THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
             Schedule II - Valuation and Qualifying Accounts...............F-24
             Schedule III - Real Estate and Accumulated Depreciation.......F-25

             UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED
             PARTNERSHIP
             Independent Auditors' Report..................................F-27
             Combined Balance Sheet as of December 31, 1997 and 1996.......F-28
             Combined Statement of Operations for the years ended
               December 31, 1997, 1996 and 1995............................F-29
             Combined Statement of Accumulated Deficiency in Assets for the
               three years ended December 31, 1997, 1996 and 1995..........F-30
             Combined Statement of Cash Flows for the years ended
               December 31, 1997, 1996 and 1995............................F-31
             Notes to Combined Financial Statements........................F-32

             UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED
             PARTNERSHIP
             Schedule II - Valuation and Qualifying Accounts...............F-41
             Schedule III - Real Estate and Accumulated Depreciation.......F-42

    14(a)(3)

            2(a)  --  Purchase  and  Sale  Agreement By and  Between One Federal
                      Street Joint Venture and The Taubman  Realty Group Limited
                      Partnership,  dated  July  16,  1997  (Purchase  and  Sale
                      Agreement)  (without exhibits or schedules,  which will be
                      supplementally  provided to the  Securities  and  Exchange
                      Commission  upon  its  request)  (incorporated  herein  by
                      reference  to Exhibit  2(a)  filed  with the  Registrant's
                      Current Report on Form 8-K dated September 4, 1997).

            2(b)  --  First  Amendment  to  Purchase and Sale  Agreement,  dated
                      August 15, 1997 (without exhibits or schedules, which will
                      be supplementally  provided to the Securities and Exchange
                      Commission  upon  its  request)  (incorporated  herein  by
                      reference  to Exhibit  2(b)  filed  with the  Registrant's
                      Current Report on Form 8-K dated September 4, 1997).



                                      -38-

<PAGE>



            2(c)  --  Agreement  of Purchase  and Sale By and  Between The Falls
                      Limited  L.P. and  The  Taubman   Realty   Group   Limited
                      Partnership, dated  November  5, 1997, as amended by First
                      Amendment  to Agreement of  Purchase and Sale entered into
                      on November 6, 1997, and Second Amendment to Agreement  of
                      Purchase  and  Sale  entered  into  on  November  13, 1997
                      (without   exhibits   or   schedules,   which   will    be
                      supplementally provided  to  the Securities  and  Exchange
                      Commission upon its request).

            3     --  Form  of The  Amended and  Restated  Agreement of  Limited
                      Partnership   of   The   Taubman   Realty   Group  Limited
                      Partnership,  as  amended  through   September   30,  1997
                      (incorporated herein by reference to Exhibit 4(c) to TCO's
                      Post-Effective  Amendment  No. 1 to Form S-3  Registration
                      Statement No. 333- 35433).

            4(a)  --  Amended and Restated  Indenture dated as of  March 4, 1994
                      between The Taubman  Realty Group Limited  Partnership and
                      Chemical   Bank,  as  Trustee  (incorporated   herein   by
                      reference to Exhibit 4(a) filed with Amendment No.1 to the
                      Registrant's Registration Statement  on Form S-4 (File No.
                      33-73988) (the "Registration Statement")).

            4(b)  --  Officers'  Certificate  designating  the  terms  of the 7%
                      Notes  due  2003  (incorporated  herein  by  reference  to
                      Exhibit  4(b)  filed  with    Amendment   No.  1   to  the
                      Registration Statement).

            4(c)  --  Officers'  Certificate  designating  the terms of TRG's 8%
                      Notes  due  1999  (incorporated  herein  by  reference  to
                      Exhibit 4(f) filed with the Registrant's  Quarterly Report
                      on Form  10-Q for the  quarter  ended  June 30,  1994 (the
                      "1994 Second Quarter Form 10-Q")).

            4(d)  --  Indenture dated as of July 22, 1994 among Beverly  Finance
                      Corp., La Cienega Associates,  the  Borrower,  and  Morgan
                      Guaranty   Trust   Company   of   New   York,  as  Trustee
                      (incorporated  herein by reference  to  Exhibit 4(g) filed
                      with the 1994 Second Quarter Form 10-Q).

            4(e)  --  Deed  of   Trust,  with  assignment  of  Rents,   Security
                      Agreement and Fixture  Filing,  dated as of July 22, 1994,
                      from La Cienega Associates,  Grantor, to Commonwealth Land
                      Title Company, Trustee, for the benefit of Morgan Guaranty
                      Trust  Company  of  New  York,  as  Trustee,   Beneficiary
                      (incorporated  herein by  reference  to Exhibit 4(h) filed
                      with the 1994 Second Quarter Form 10-Q).

            4(f)  --  Medium-Term Notes due June 15, 2002  (incorporated  herein
                      by reference to Exhibit  4(i) filed with the  Registrant's
                      Quarterly  Report on Form 10-Q for the quarter  ended June
                      30, 1995).

            4(g)  --  Amended  and Restated Revolving Loan Agreement dated as of
                      March 5, 1997 (the "Revolving  Loan Agreement"), among The
                      Taubman  Realty  Group Limited  Partnership,  as Borrower,
                      Union Bank of Switzerland, (New York  Branch), as a  Bank,
                      the other Banks signatory to the Revolving Loan Agreement,
                      each as a Bank,  and  Union Bank of Switzerland (New  York
                      Branch), as Administrative Agent (incorporated  herein  by
                      reference  to  Exhibit  4,  filed  with  the  Registrant's
                      Quarterly  Report on Form 10-Q for the quarter ended March
                      31, 1997 (the "1997 First Quarter Form 10-Q")).

            4(h)  --  Form of Contribution and Acceptance of  Preferred  Equity,
                      Designation   of   Series   A   Preferred   Equity,   and
                      Establishment  of Preferred  Rate (incorporated  herein by
                      reference   to  Exhibit   4(d)  to  TCO's   Post-Effective
                      Amendment  No. 1 to Form S-3  Registration  Statement  No.
                      333-35433).


                                      -39-

<PAGE>



            4(i)  --  Construction  Loan   Agreement   among  Taubman  MacArthur
                      Associates   Limited   Partnership,   as   Borrower,   and
                      Bayerische    Hypotheken    -   Und    Wechsel   -   Bank,
                      Aktiengesellschaft,  New York  Branch and The Other  Banks
                      and  Financial  Institutions  from  time to  time  Parties
                      hereto, as Lenders and Bayerische Hypotheken - Und Wechsel
                      - Bank  Aktiengesellschaft,  New York  Branch,  as  Agent,
                      dated as of October 28, 1997.

            4(j)  --  Loan  Agreement  dated as of  November  25, 1997 among The
                      Taubman  Realty Group  Limited  Partnership,  as Borrower,
                      Fleet  National  Bank,  as  a  Bank,  PNC  Bank,  National
                      Association,  as a Bank, the other Banks signatory hereto,
                      each as a Bank,  and PNC Bank,  National  Association,  as
                      Administrative Agent.

           *10(a) --  The  Taubman  Realty  Group   Limited   Partnership   1992
                      Incentive Option  Plan, as  Amended and Restated Effective
                      as of September 30, 1997.

            10(b) --  Corporate Services Agreement between Taubman Centers, Inc.
                      and  The  Taubman   Company   Limited   Partnership   (the
                      "Manager")  (incorporated  herein by  reference to Exhibit
                      10(b) filed with the Registration Statement).

            10(c) --  Master Services Agreement between The Taubman Realty Group
                      Limited Partnership and  the Manager (incorporated  herein
                      by reference to Exhibit 10(c) filed with the  Registration
                      Statement).

           *10(d) --  Supplemental  Retirement Savings Plan (incorporated herein
                      by reference to Exhibit 10(e)  filed with the Registrant's
                      Annual Report on Form 10-K for the year ended December 31,
                      1994).

           *10(e) --  The  Taubman Company  Long-Term  Performance  Compensation
                      Plan  (incorporated  herein by reference to Exhibit  10(g)
                      filed with the Registrant's Annual Report on Form 10-K for
                      the year ended December 31, 1995).

           *10(f) --  Employment agreement between The Taubman  Company  Limited
                      Partnership and  Lisa A.  Payne  (incorporated  herein  by
                      reference to Exhibit 10 filed with the 1997 First  Quarter
                      Form 10-Q).

           *10(g) --  Amended  and  Restated  Continuing   Offer,  dated  as  of
                      September 30,  1997 (incorporated  herein by  reference to
                      Exhibit 10 filed with the Registrant's 1997  Third Quarter
                      Report on Form 10-Q).

            12    --  Statement Re: Computation  of TRG's Ratios  of Earnings to
                      Fixed Charges and Preferred Distributions.

            21    --  Subsidiaries   of  The   Taubman   Realty   Group  Limited
                      Partnership.

            23    --  Consent of Deloitte & Touche LLP.

            24    --  Powers of Attorney.

            27    --  Financial Data Schedule.


--------------------
*  A management  contract or  compensatory  plan or  arrangement  required to be
   filed pursuant to Item 14(c) of Form 10-K.


                                      -40-

<PAGE>



14(b) Current Reports on Form 8-K.

      TRG filed a current  report on Form 8-K dated December 8, 1997 to report a
      press release announcing TRG's acquisition of The Falls shopping center in
      Miami, Florida and the agreement to purchase The Limited,  Inc.'s interest
      in The Mall at Tuttle  Crossing,  a Taubman  Shopping  Center  located  in
      Columbus, Ohio.

      TRG filed a current  report on Form 8-K dated  December  4, 1997 to report
      the  completion of TRG's  acquisition  of The Falls.  The 8-K included the
      following  financial  statements and pro forma  information  regarding the
      acquisition of The Falls:

           Independent Auditors' Report.

           The Falls,  Historical  Summary  of  Revenues  and  Direct  Operating
           Expenses for the Year Ended December 31, 1996.

           The Taubman  Realty Group Limited  Partnership,  Pro Forma  Condensed
           Consolidated Balance Sheet, September 30, 1997 (unaudited).

           The Taubman  Realty Group Limited  Partnership,  Pro Forma  Condensed
           Consolidated  Statement of  Operations,  Year Ended December 31, 1996
           (unaudited).

           The Taubman  Realty Group Limited  Partnership,  Pro Forma  Condensed
           Consolidated Statement of Operations, Nine Months Ended September 30,
           1997 (unaudited).


14(c) The list of  exhibits  filed with this  report is set forth in response to
      Item  14(a)(3).  The  required  exhibit  index  has  been  filed  with the
      exhibits.

14(d) The  financial  statement  schedules of The Taubman  Realty Group  Limited
      Partnership  and the  financial  statements  and the  financial  statement
      schedules of the Unconsolidated Joint Ventures of The Taubman Realty Group
      Limited  Partnership  listed at Item  14(a)(2) are filed  pursuant to this
      Item 14(d).


                                      -41-

<PAGE>












                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP


                        CONSOLIDATED FINANCIAL STATEMENTS
                    AS OF DECEMBER 31, 1997 AND 1996 AND FOR
            EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995












                                       F-1

<PAGE>






                          INDEPENDENT AUDITORS' REPORT





Partners
The Taubman Realty Group Limited Partnership


  We have audited the  accompanying  consolidated  balance sheets of The Taubman
Realty Group Limited  Partnership  and  subsidiaries as of December 31, 1997 and
1996,  and  the  related  consolidated  statements  of  operations,  accumulated
deficiency  in assets,  and cash flows for each of the three years in the period
ended  December  31, 1997.  Our audits also  included  the  financial  statement
schedules  listed  in the  Index  at Item 14.  These  financial  statements  and
financial  statement  schedules  are  the  responsibility  of the  Partnership's
management.  Our  responsibility  is to  express  an  opinion  on the  financial
statements and financial statement schedules based on our audits.

  We  conducted  our  audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

  In our opinion, such consolidated  financial statements present fairly, in all
material  respects,  the financial  position of The Taubman Realty Group Limited
Partnership  and  subsidiaries as of December 31, 1997 and 1996, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period ended December 31, 1997 in conformity with generally accepted  accounting
principles.  Also, in our opinion,  such  financial  statement  schedules,  when
considered in relation to the basic consolidated financial statements taken as a
whole,  present  fairly  in all  material  respects  the  information  set forth
therein.



DELOITTE & TOUCHE LLP

Detroit, Michigan
February 18, 1998



                                       F-2

<PAGE>






                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

                           CONSOLIDATED BALANCE SHEET
                                 (in thousands)






                                                         December 31
                                                   -----------------------
                                                       1997       1996
                                                       ----       ----

Assets:
  Properties (Notes 5 and 8)                       $1,593,350   $1,136,416
    Accumulated depreciation and amortization         268,658      234,030
                                                   ----------   ----------
                                                   $1,324,692   $  902,386

  Cash and cash equivalents                             3,250        7,912
  Accounts and notes receivable, less
    allowance for doubtful accounts of $414
    and $393 in 1997 and 1996                          17,803       20,162
  Accounts receivable from related
   parties (Note 10)                                    7,400        6,293
  Deferred charges and other assets
   (Notes 6 and 9)                                     43,681       41,509
                                                   ----------   ----------
                                                   $1,396,826   $  978,262
                                                   ==========   ==========

Liabilities:
  Unsecured notes payable (Note 8)                 $1,008,459   $  796,805
  Mortgage notes payable (Note 8)                     275,868      204,600
  Capital lease obligation (Note 3)                                 39,849
  Accounts payable and other liabilities (Note 7)     106,404       86,779
  Distributions in excess of net income of
    Unconsolidated Joint Ventures (Note 4)            141,815      142,367
                                                   ----------   ----------
                                                   $1,532,546   $1,270,400

Commitments and Contingencies (Notes 4, 8,
  9, 11, and 14)

Accumulated Deficiency in Assets (Note 2):
  Series A Preferred Equity                           192,840
  Partners' Accumulated Deficit                      (328,560)    (292,138)
                                                   ----------   ----------
                                                     (135,720)    (292,138)
                                                   ----------   ----------
                                                   $1,396,826   $  978,262
                                                   ==========   ==========



                       See notes to financial statements.


                                       F-3

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENT OF OPERATIONS
                        (in thousands, except unit data)






                                               Year Ended December 31
                                         ----------------------------------
                                           1997         1996         1995
                                           ----         ----         ----

Revenues:
  Minimum rents                          $181,291     $150,577     $130,418
  Percentage rents                          7,655        6,073        5,617
  Expense recoveries                      100,348       85,502       75,293
  Other                                    15,376       13,044       12,227
  Revenue from management, leasing and
   development services (Note 10)          8,756         8,500        5,363
                                         --------     --------     --------
                                         $313,426     $263,696     $228,918
                                         --------     --------     --------

Operating Costs:
  Recoverable expenses                   $ 85,750     $ 72,093     $ 62,910
  Other operating                          35,904       26,518       22,512
  Management, leasing and development
    services                                4,675        4,714        3,696
  General and administrative               25,715       21,803       19,790
  Interest expense                         73,639       70,454       65,858
  Depreciation and amortization            44,719       35,773       32,393
                                         --------     --------     --------
                                         $270,402     $231,355     $207,159
                                         --------     --------     --------
Income before equity in income of
 Unconsolidated Joint Ventures and
  before extraordinary items             $ 43,024     $ 32,341     $ 21,759
Equity in income before extraordinary
  items of Unconsolidated Joint
  Ventures (including $5,005 in 1995,
  related to the disposition of
  Bellevue) (Note 4)                       52,270       51,753       57,940
                                         --------     --------     --------
Income before extraordinary items        $ 95,294     $ 84,094     $ 79,699
Extraordinary items (Notes 4 and 8)                     (1,328)      16,627
                                         --------     --------     --------
Net Income                               $ 95,294     $ 82,766     $ 96,326
Preferred distributions to TCO (Note 2)    (4,058)
                                         --------     --------     --------
Net income available to unitholders      $ 91,236     $ 82,766     $ 96,326
                                         ========     ========     ========
Allocation of net income to
 unitholders:
  General Partners                       $ 70,663     $ 64,804     $ 77,077
  Limited Partners                         20,573       17,962       19,249
                                         --------     --------     --------
                                         $ 91,236     $ 82,766     $ 96,326
                                         ========     ========     ========

Basic and Diluted Earnings per Unit
  of Partnership Interest (Note 12):
  Income before extraordinary items      $    .66     $    .65     $    .64
  Extraordinary items                                     (.01)         .13
                                         --------     --------     --------
  Net Income                             $    .66     $    .64     $    .77
                                         ========     ========     ========

Weighted Average Number of Units of
 Partnership Interest Outstanding
 (Notes 2 and 12)                     138,271,014  128,579,312  125,459,939
                                      ===========  ===========  ===========



                       See notes to financial statements.


                                       F-4

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

           CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIENCY IN ASSETS
                  Years Ended December 31, 1997, 1996 and 1995
                                 (in thousands)






<TABLE>
<CAPTION>
                                                      Partners' Accumulated Deficit
                                                      -----------------------------
                                         Series A          General     Limited
                                     Preferred Equity     Partners     Partners       Total
                                     ----------------    ----------   ----------    ---------
<S>                                      <C>             <C>          <C>           <C>

Balance, January 1, 1995                                 $(306,423)   $ (76,525)    $(382,948)
Distributions                                              (93,000)     (23,225)     (116,225)
Net income                                                  77,077       19,249        96,326
                                                         ---------    ---------     ---------
Balance, December 31, 1995                               $(322,346)   $ (80,501)    $(402,847)
Change of ownership (Notes 2 and 3)                        124,813       22,229       147,042
Distributions                                              (93,513)     (25,586)     (119,099)
Net income                                                  64,804       17,962        82,766
                                                         ---------    ---------     ---------
Balance, December 31, 1996                               $(226,242)   $ (65,896)    $(292,138)
Issuance of Series A Preferred
 Equity (Note 2)                         $192,840                                     192,840
Change of ownership (Note 2)                                   310          126           436
Distributions                              (4,058)         (99,205)     (28,889)     (132,152)
Net income                                  4,058           70,663       20,573        95,294
                                         --------        ---------    ---------     ---------
Balance, December 31, 1997               $192,840        $(254,474)   $ (74,086)    $(135,720)
                                         ========        =========    =========     =========
</TABLE>



                       See notes to financial statements.


                                       F-5

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)




                                                Year Ended December 31
                                           --------------------------------
                                              1997       1996       1995
                                              ----       ----       ----

Cash Flows From Operating Activities:
 Income before extraordinary items          $  95,294  $  84,094  $  79,699
 Adjustments to reconcile income before
  extraordinary items to net cash
  provided by operating activities:
    Depreciation and amortization              44,719     35,773     32,393
    Income before extraordinary items in
     excess of distributions from
     Unconsolidated Joint Ventures                                     (206)
    Provision for losses on accounts
     receivable                                 1,027      1,295        818
    Amortization of deferred financing
     costs                                      2,392      2,024      2,250
    Other                                         724        615      3,062
    Gains on sales of land                       (880)    (1,041)      (818)
  Increase (decrease) in cash attributable
   to changes in assets and liabilities:
    Receivables, deferred charges and
     other assets                              (9,162)    (8,326)   (11,254)
    Accounts payable and other liabilities     19,603        999      5,501
                                            ---------  ---------  ---------
Net Cash Provided By Operating Activities   $ 153,717  $ 115,433  $ 111,445
                                            ---------  ---------  ---------

Cash Flows From Investing Activities:
  Purchase of interests in Centers          $(358,227) $(125,904)
  Additions to properties                    (142,420)   (33,806) $ (70,691)
  Proceeds from sales of land                   1,795      1,936      1,966
  Contributions to Unconsolidated Joint
   Ventures                                   (18,822)   (14,653)
  Distributions from Unconsolidated Joint
   Ventures in excess of income before
    extraordinary items                        18,270     10,921
                                            ---------  ---------  ---------
Net Cash Used In Investing Activities       $(499,404) $(161,506) $ (68,725)
                                            ---------  ---------  ---------

Cash Flows From Financing Activities:
  Debt proceeds                             $ 630,585  $ 275,212  $ 200,747
  Debt payments                              (347,838)  (229,212)   (13,689)
  Early extinguishment of debt                           (35,964)  (105,827)
  Debt issuance costs                          (2,846)      (830)    (1,599)
  Issuance of units of partnership interest       436    147,042
  Issuance of Series A Preferred Equity       192,840
  Cash distributions to partnership
   unitholders                               (128,094)  (119,099)  (116,225)
  Cash distributions to TCO for Series A
    Preferred Equity interest                  (4,058)
                                            ---------  ---------  ---------
Net Cash Provided By (Used In) Financing
 Activities                                 $ 341,025  $  37,149  $ (36,593)
                                            ---------  ---------  ---------

Net Increase (Decrease) In Cash             $  (4,662) $  (8,924) $   6,127

Cash and Cash Equivalents at Beginning
 of Year                                        7,912     16,836     10,709
                                            ---------  ---------  ---------

Cash and Cash Equivalents at End of Year    $   3,250  $   7,912  $  16,836
                                            =========  =========  =========



                       See notes to financial statements.


                                       F-6

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       Three Years Ended December 31, 1997


Note 1 - Summary of Significant Accounting Policies

General

  The Taubman Realty Group Limited  Partnership  (TRG) engages in the ownership,
management,  leasing, acquisition,  development and expansion of regional retail
shopping  centers  (Taubman  Shopping  Centers)  and  interests  therein.  TRG's
portfolio,  as of December  31,  1997,  includes 25 urban and  suburban  Taubman
Shopping Centers in 12 states.  Two additional Centers are under construction in
Norfolk,  Virginia, and Auburn Hills,  Michigan.  Taubman Centers, Inc. (TCO) is
the managing  general  partner of TRG.  GMPTS Limited  Partnership  (GMPTS),  TG
Partners Limited Partnership (TG) and Taub-Co Management,  Inc. are also general
partners.

  At December  31,  1997,  TRG had  138,299,310  units of  partnership  interest
outstanding,   of  which  107,114,443  units  represented   general  partnership
interests.  At December 31, 1997, TRG was owned 36.70% by TCO,  36.17% by GMPTS,
20.22% by certain present and former key executives (and certain of their family
members) of the  predecessor to The Taubman  Company  Limited  Partnership,  the
Manager  (collectively,  the Taubman Group), and TG, and 6.91% by certain former
joint  venture  partners and others (Note 16). The members of the Taubman  Group
(other than Taub-Co  Management,  Inc.),  the former joint venture  partners and
others  are  limited  partners  of TRG.  Additionally,  TCO  owns  the  Series A
Preferred Equity interest in TRG (Note 2).

  Income and  distributions of TRG are allocated first to the Series A Preferred
Equity interest,  and the remaining  amounts to the general and limited partners
of TRG in accordance with their percentage  ownership.  The financial statements
include only those assets,  liabilities,  and results of operations which relate
to the business of TRG. No provision  has been made for income taxes since these
taxes are the responsibility of the individual partners.

Basis of Presentation

  The  consolidated  financial  statements  include the  accounts of TRG and its
consolidated  subsidiaries.  Investments in entities unilaterally  controlled by
ownership or contractual  agreements are  consolidated;  investments in entities
not unilaterally  controlled  (Unconsolidated  Joint Ventures) are accounted for
under the equity method.

  The Manager,  which is approximately  99% beneficially  owned by TRG, provides
property  management  and  leasing  services  for Taubman  Shopping  Centers and
provides corporate,  development and acquisition services. Intercompany balances
and profits are eliminated in consolidation.

  Dollar  amounts  presented  in tables  within  the  notes to the  consolidated
financial statements are stated in thousands of dollars, except for unit data or
as otherwise noted.

Revenue Recognition

  Shopping  center space is generally  leased to specialty  retail tenants under
short and intermediate  term leases which are accounted for as operating leases.
Minimum rents are recognized on an accrual basis as earned,  the result of which
does not differ  materially from a straight-line  method.  Percentage  rents are
recognized on an accrual basis as earned.  Expense recoveries,  which include an
administrative fee, are recognized as revenue in the period applicable costs are
chargeable to tenants.


                                       F-7

<PAGE>


                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Depreciation and Amortization

  Buildings,  improvements  and equipment,  stated at cost,  are  depreciated on
straight-line or double-declining  balance bases over the estimated useful lives
of the assets,  which range from 5 to 50 years.  Tenant  allowances and deferred
leasing  costs are  amortized  on a  straight-line  basis  over the lives of the
related leases.

Capitalization

  Costs related to the acquisition, development, construction and improvement of
properties are capitalized. Interest costs are capitalized until construction is
substantially  complete.  Properties  are reviewed for  impairment  if events or
changes in  circumstances  indicate that the carrying  amounts of the properties
may  not  be  recoverable.   Costs  of  potentially   unsuccessful   development
pre-construction  activities  are  provided  for by  charges to  operations  and
written off if abandoned.

Cash and Cash Equivalents

  Cash  equivalents  consist of highly liquid  investments with a maturity of 90
days or less at the date of purchase.

Deferred Charges

  Direct  financing  and interest  rate hedging costs are deferred and amortized
over the terms of the related  agreements  as a component  of interest  expense.
Direct costs related to leasing  activities are  capitalized  and amortized on a
straight-line  basis over the lives of the related  leases.  All other  deferred
charges are amortized on a straight-line  basis over the terms of the agreements
to which they relate.

Stock-Based Compensation Plans

  Stock-based  compensation  plans  are  accounted  for under  APB  Opinion  25,
"Accounting  for Stock  Issued to  Employees"  and related  interpretations,  as
permitted under FAS 123, "Accounting for Stock-Based Compensation".

Interest Rate Hedging Agreements

  Premiums paid for interest  rate caps are  amortized to interest  expense over
the terms of the cap agreements.  Amounts  received under the cap agreements are
accounted  for on an accrual  basis,  and  recognized as a reduction of interest
expense. The differential to be paid or received on swap agreements is accounted
for on an accrual basis and recognized as an adjustment to interest expense.

Use of Estimates

  The preparation of financial  statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,  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.

Fair Value of Financial Instruments

  The following  methods and assumptions were used to estimate the fair value of
financial instruments:

    The carrying value  of  cash  and  cash  equivalents,   accounts  and  notes
       receivable, and accounts payable approximates fair value due to the short
       maturity of these instruments.


                                       F-8

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


    The fair value of TRG's debt is estimated based on quoted  market  prices if
       available,  or on the current rates  available to TRG for debt of similar
       terms and  maturity and the  assumption  that debt will be prepaid at the
       earliest possible date.

    The fair value of interest rate hedging  instruments  is the amount that TRG
       would receive or pay to terminate  the  agreement at the reporting  date,
       taking into account current interest rates.

Reclassifications

    Certain  prior  year  amounts  have been  reclassified  to  conform  to 1997
classifications.


Note 2 - Equity Transactions

  In October  1997,  TCO used the $200 million  proceeds of its offering of 8.3%
Series A Cumulative  Redeemable  Preferred  Stock (Series A Preferred  Stock) to
acquire  a Series A  Preferred  Equity  interest  in TRG  that  entitles  TCO to
distributions  (in the form of  guaranteed  payments)  in  amounts  equal to the
dividends payable on TCO's Series A Preferred  Equity.  TRG bore all expenses of
the offering,  which were  accounted for as a reduction of the proceeds from the
Series A Preferred  Equity.  TRG used the net proceeds to pay down floating rate
debt under TRG's  existing  revolving  credit and commercial  paper  facilities,
which were used to fund the  acquisition  of Regency  Square in  September  1997
(Note 3).

  The Series A Preferred Equity has no stated maturity, sinking fund requirement
or  mandatory  redemption.  In the event of  partnership  liquidation,  the $200
million Series A Preferred  Equity and any unpaid  guaranteed  payments would be
paid prior to any distributions to holders of units of partnership interest.

  Effective  September 30, 1997, TRG amended its partnership  agreement to split
existing units of partnership  interest at a ratio of 1,975.08 to one. The split
did not alter the ownership  percentage of any of TRG's  partners.  All unit and
per unit amounts have been  adjusted to reflect the unit split on a  retroactive
basis.

  In December 1996, TRG issued units of partnership  interest to TCO for the $75
million proceeds from TCO's December 1996 equity offering. TRG bore all expenses
of TCO's offering,  which have been accounted for as a reduction of the proceeds
from TRG's  issuance  of units.  Also in  December  1996,  TRG  issued  units of
partnership  interest in connection with the exercise of incentive options (Note
11).  Concurrently  under TCO's  continuing  offer to exchange  shares of common
stock for certain  partnership  interests  in TRG,  TCO  exchanged  652 thousand
shares of common stock for these newly issued units of TRG partnership interest.
TRG used the net  proceeds  from the  issuance  of units to pay down  short term
floating  rate debt and to acquire La Cumbre  Plaza  (Note 3).  Additionally  in
1996,  TRG  issued  units  of  partnership   interest  in  connection  with  the
acquisition  of the  remaining  interest in Fairlane Town Center (Note 3), which
were subsequently redeemed in January 1998 (Note 16).


                                       F-9

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 3 - Acquisitions

  In 1997 and 1996, TRG acquired  interests in various shopping  centers.  These
acquisitions  were  recorded  at fair  value and the  operating  results  of the
Centers  have  been   consolidated  in  TRG's  financial   statements  from  the
acquisition dates.


  Center                        Date Acquired        Purchase Price
 --------                      ---------------      ----------------

The Falls                      December 1997         $ 156,000
The Mall at Tuttle Crossing    December 1997            76,268
Regency Square                 September 1997          123,880
La Cumbre Plaza                December 1996            22,250
Fairlane Town Center           July 1996                91,552
Paseo Nuevo                    June 1996                37,000

  In 1997,  TRG  acquired  interests  in The  Mall at  Tuttle  Crossing  (Tuttle
Crossing) from Tuttle  Crossing  Holding Co., a subsidiary of The Limited,  Inc.
(The  Limited).  TRG's  ownership  interest in Tuttle  Crossing was subject to a
long-term   participating   lease  with  The  Limited  for  land  and  leasehold
improvements.  TRG purchased  The  Limited's  interest in the lease and took fee
simple title to the underlying land and buildings.  The lease had been accounted
for as a capital lease with capital lease assets and a capital lease  obligation
of $55.3 million at the acquisition date. Tuttle Crossing opened in July 1997.

  La Cumbre Plaza was  purchased  subject to four ground  leases (three of which
are participating). The leases expire in 2028. Paseo Nuevo was purchased subject
to two participating ground leases expiring in 2065.

  In 1996, TRG completed  transactions  that resulted in the  acquisition of the
75%  interest in  Fairlane  Town Center  (Fairlane)  previously  held by a Joint
Venture  Partner.  In connection  with the  transactions,  which resulted in TRG
owning 100% of Fairlane, TRG issued to the former Joint Venture Partner units of
partnership  interest,  exchangeable for approximately 6.1 million shares of TCO
common stock,  which had a closing price of $10.75 per share on the day prior to
the issuance date. The units issued represented  limited  partnership units. TRG
also assumed mortgage debt of approximately $26 million, representing the former
Joint  Venture  Partner's  beneficial  interest  in the $34.6  million  mortgage
encumbering  the property.  TRG used unsecured debt to fund the repayment of the
9.73% mortgage and prepayment penalty of $1.2 million.  Prior to the acquisition
date, TRG's interest in Fairlane was accounted for under the equity method as an
Unconsolidated  Joint  Venture.  The units  issued to the former  Joint  Venture
Partner were redeemed in January 1998 (Note 16).


                                      F-10

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


  Pro forma results of TRG's operations,  assuming the acquisitions had occurred
on January 1, 1996 are as follows:

                                                      Pro Forma
                                                      ---------
                                                Year ended December 31
                                               ------------------------
                                                   1997        1996
                                                   ----        ----

Revenues                                         $337,823    $308,487
Income before extraordinary item                   89,054      80,425
Net income                                         89,054      79,079

Earnings per unit of partnership interest:
  Income before extraordinary item               $   0.61    $   0.61
  Net income                                         0.61        0.60


  The pro forma results are not  necessarily  indicative of what actual  results
would have been had the  acquisitions  occurred on January 1, 1996, nor are they
necessarily indicative of future results.


Note 4 - Investments in Unconsolidated Joint Ventures

  Following are TRG's  investments in various real estate  Unconsolidated  Joint
Ventures  which own regional  retail  shopping  centers.  TRG is  generally  the
managing general partner of these Unconsolidated Joint Ventures.  TRG's interest
in each Unconsolidated Joint Venture is as follows:

                                                                     TRG's %
                                                                    Ownership
                                                                      as of
Unconsolidated Joint Venture       Taubman Shopping Center     December 31, 1997
----------------------------       -----------------------    ------------------

 Arizona Mills, L.L.C.              Arizona Mills                      37%
 Fairfax Associates                 Fair Oaks                          50
 Lakeside Mall Limited Partnership  Lakeside                           50
 Rich-Taubman Associates            Stamford Town Center               50
 Taubman-Cherry Creek
   Limited Partnership              Cherry Creek                       50
 Twelve Oaks Mall Limited
   Partnership                      Twelve Oaks Mall                   50
 West Farms Associates              Westfarms                          79
 Woodfield Associates               Woodfield                          50
 Woodland                           Woodland                           50

  Arizona Mills, L.L.C.  developed Arizona Mills, a value super-regional mall in
Tempe,  Arizona,  which opened in November  1997.  TRG's  ownership  interest in
Arizona Mills,  L.L.C.  increased in January 1997 to 37% from 35% as a result of
Arizona  Mills,  L.L.C.'s  redemption  of a former  owner's 5% interest for $2.8
million (the former owner is an affiliate of a partner in TRG).

  In January  1997,  Arizona  Mills,  L.L.C.  closed on a secured  $145  million
construction  facility  maturing in 2002.  The loan bears  interest at one month
LIBOR plus 1.3%. The loan is hedged until maturity at a one month LIBOR cap rate
of 9.5%,  plus credit  spread.  The  payment of the  principal  and  interest is
guaranteed by each of the owners of Arizona Mills,  L.L.C., to the extent of its
ownership  percentage.  The loan  agreement  provides  for the  reduction of the
amount guaranteed as certain center  performance and valuation criteria are met.
Borrowings on the facility at December 31, 1997 were $122 million.


                                      F-11

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


  In December  1995,  TRG  recognized  an ordinary  gain of $5.0  million on the
disposition of Bellevue  Center  (Bellevue),  a 60% owned  Unconsolidated  Joint
Venture,  based on the carrying value of TRG's investment in Bellevue.  TRG also
recognized an extraordinary gain of $18.9 million on the related  extinguishment
of Bellevue's debt. The carrying value of TRG's investment in Bellevue  differed
from  TRG's  60%  share  of  Bellevue's  net  deficiency  in  assets  due to the
elimination of intercompany profits on sales of services.

  TRG reduces its  investment  in  Unconsolidated  Joint  Ventures to  eliminate
intercompany   profits  on  sales  of  services  that  are  capitalized  by  the
Unconsolidated  Joint  Ventures.  As a  result,  the  carrying  value  of  TRG's
investment  in  Unconsolidated  Joint  Ventures  is less than TRG's share of the
deficiency in assets reported in the Balance Sheet of the  Unconsolidated  Joint
Ventures of the Taubman  Realty Group  Limited  Partnership  by $8.1 million and
$7.4 million in 1997 and 1996,  respectively.  These  differences  are amortized
over the useful lives of the related assets.




                                      F-12

<PAGE>

                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


  Combined  balance  sheet and results of  operations  information  is presented
below  for all  Unconsolidated  Joint  Ventures,  followed  by TRG's  beneficial
interest in the combined information. Beneficial interest is calculated based on
TRG's ownership interest in each of the Unconsolidated Joint Ventures.

                                                        December 31
                                                   ---------------------
                                                      1997       1996
                                                      ----       ----
Assets:
  Properties                                       $ 623,981   $ 450,469
  Other assets                                        84,397      71,252
                                                   ---------   ---------
                                                   $ 708,378   $ 521,721
                                                   =========   =========
Liabilities and partners' accumulated
 deficiency in assets:
  Debt                                             $ 875,356   $ 724,162
  Capital lease obligations                            6,509       5,000
  Other liabilities                                   94,801      51,691
  TRG's accumulated deficiency in assets            (133,680)   (134,986)
  Unconsolidated Joint Venture Partners'
    accumulated deficiency in assets                (134,608)   (124,146)
                                                   ---------   ---------
                                                   $ 708,378   $ 521,721
                                                   =========   =========

TRG's accumulated deficiency in assets (above)     $(133,680)  $(134,986)
Elimination of intercompany profit                    (8,135)     (7,381)
                                                   ---------   ---------
Distributions in excess of net income
  of Unconsolidated Joint Ventures                 $(141,815)  $(142,367)
                                                   =========   =========

                                                Year Ended December 31
                                            ------------------------------
                                              1997       1996       1995
                                              ----       ----       ----

Revenues                                    $258,635   $265,337   $287,180
                                            --------   --------   --------
Recoverable and other operating expenses    $ 94,131   $100,164   $106,859
Interest expense                              54,018     52,994     57,857
Depreciation and amortization                 24,180     23,837     25,471
                                            --------   --------   --------
Total operating costs                       $172,329   $176,995   $190,187
                                            --------   --------   --------
Income before extraordinary items           $ 86,306   $ 88,342   $ 96,993
Extraordinary items                                                 30,761
                                            --------   --------   --------
Net income                                  $ 86,306   $ 88,342   $127,754
                                            ========   ========   ========

Net income attributable to TRG              $ 46,857   $ 47,413   $ 68,498
Extraordinary items attributable to TRG                            (18,327)
Realized intercompany profit                   5,413      4,340      7,769
                                            --------   --------   --------
Equity in income before extraordinary
 items of Unconsolidated Joint Ventures     $ 52,270   $ 51,753   $ 57,940
                                            ========   ========   ========

                                                Year Ended December 31
                                            ------------------------------
                                              1997       1996       1995
                                              ----       ----       ----
TRG's beneficial interest in
 Unconsolidated Joint Ventures'
 operations:
  Revenues less recoverable and other
    operating expenses                      $ 94,361   $ 91,243   $ 96,120
  Ordinary gain on disposition of Bellevue                           5,005
  Interest expense                           (29,263)   (27,738)   (30,396)
  Depreciation and amortization              (12,828)   (11,752)   (12,789)
                                            --------   --------   --------
  Income before extraordinary items         $ 52,270   $ 51,753   $ 57,940
                                            ========   ========   ========

                                      F-13
<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 5 - Properties

  Properties,  including peripheral land and development pre-construction costs,
at December 31, 1997 and 1996 are summarized as follows:

                                                     1997         1996
                                                     ----         ----

Land                                              $  132,308   $   65,127
Buildings, improvements and equipment              1,326,731      957,185
Construction in process                               94,500       42,429
Assets under capital lease (Notes 3 and 13)                        39,849
Peripheral land                                        6,630        7,414
                                                  ----------   ----------
                                                  $1,560,169   $1,112,004
Development pre-construction costs
(See below)                                           33,181       24,412
                                                  ----------    ---------
                                                  $1,593,350   $1,136,416
                                                  ==========   ==========

  Depreciation  expense  for  1997,  1996,  and 1995 was  $37.6  million,  $29.6
million,  and $26.6 million.  Peripheral land consists  primarily of undeveloped
land generally adjacent to the Taubman Shopping Centers. Construction in process
includes costs related to the  construction  of new centers,  and expansions and
other improvements at various existing centers.

  TRG  actively  pursues  opportunities  for  the  development  of new  regional
shopping  centers.  Development  pre-construction  activities,  including market
research,  site location,  environmental  work,  zoning permits and obtaining of
anchor  commitments,  may  take  years  to  accomplish  and  ultimately  may  be
abandoned.  TRG provides a reserve for the cost of such potentially unsuccessful
pre-construction activities.

  The activity in development pre-construction costs and the related reserve for
1997 and 1996 is summarized as follows:

                                             Costs     Reserve     Net
                                             -----     -------     ---

Balance, January 1, 1996                    $35,872   $(10,198)  $25,674
Costs incurred                               12,556               12,556
Charged to operations                                   (8,501)   (8,501)
Transfers to construction in process
 and investments in Unconsolidated
  Joint Ventures                             (5,317)              (5,317)
Costs of projects written off                (6,223)     6,223
                                            -------   --------   -------
Balance, December 31, 1996                  $36,888   $(12,476)  $24,412
Costs incurred                               16,988               16,988
Charged to operations                                   (5,454)   (5,454)
Transfers to construction in process         (2,765)              (2,765)
Costs of projects written off                (1,870)     1,870
                                            -------   --------   -------
Balance, December 31, 1997                  $49,241   $(16,060)  $33,181
                                            =======   ========   =======


                                      F-14

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



Note 6 - Deferred Charges and Other Assets

  Deferred charges and other assets at December 31, 1997 and 1996 are summarized
as follows:

                                             1997           1996
                                             ----           ----

Leasing                                    $ 39,480       $ 38,353
Accumulated amortization                    (20,534)       (21,284)
                                           --------       --------
                                           $ 18,946       $ 17,069
Prepaid ground rent (Note 9)                  6,043          6,122
Deferred financing costs, net                10,486          9,343
Other, net                                    8,206          8,975
                                           --------       --------
                                           $ 43,681       $ 41,509
                                           ========       ========


Note 7 - Other Liabilities

  In November 1992, the General Motors  Hourly-Rate  Employes  Pension Trust and
the General Motors Salaried Employes Pension Trust (GM Trusts), which indirectly
own  interests  in TRG,  entered  into an  agreement  with TCO (the Cash  Tender
Agreement)  pursuant to which the GM Trusts have certain  rights to cause TCO to
purchase  their  interests  in TRG. TRG will pay the GM Trusts an amount (not to
exceed $10.9 million in the aggregate over the term of the Partnership) equal to
5.5% of the  amounts  that  TCO pays to the GM  Trusts  under  the  Cash  Tender
Agreement.



                                      F-15

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 8 - Debt

Unsecured Notes Payable

  Unsecured  notes  payable  at  December  31,  1997  and 1996  consists  of the
following:

                                                      1997        1996
                                                      ----        ----

7% Notes due 2003                                  $  199,719   $ 199,679
8% Notes due 1999                                     199,969     199,950
Floating Rate Notes due 1997                                       99,955
Notes payable to banks:
 Construction facility, maximum borrowing
   available of $210 million, interest at
   LIBOR plus 0.90%, maturing December 2001            46,900
 Line of credit, maximum borrowing
   available of $300 million, interest at
   LIBOR plus 0.90%, maturing March 2000              210,000
 Line of credit, maximum borrowing available
   of $30 million,  interest based on a
   variable bank borrowing rate, 6.75% at
   December 31, 1997, maturing August 1998             10,175      10,100
Medium-Term Notes:
 Floating rate notes:
  Three month LIBOR plus 0.80% due 1998            $   20,000   $  20,000
  Three month LIBOR plus 0.77% due 1998                14,000      14,000
  Three month LIBOR plus 0.90% due 1999                20,000      20,000
  Three month LIBOR plus 1.05% due 2001                30,000      30,000
 Fixed rate notes:
  7.38% Notes due 2000                                 13,000      13,000
  7.31% Notes due 2000                                  2,000       2,000
  7.19% Notes due 2000                                  5,000       5,000
  7.22% Notes due 2001                                  8,400       8,400
  8.00% Notes due 2001                                 69,981      69,976
  7.40% Notes due 2002                                  5,000       5,000
  7.50% Notes due 2002                                 99,791      99,745
  7.00% Notes due 2007                                 54,524
                                                   ----------   ---------
 Total Medium-Term Notes                           $  341,696   $ 287,121
                                                   ----------   ---------
Total Unsecured Notes Payable                      $1,008,459   $ 796,805
                                                   ==========   =========

  As of December 31, 1997, TRG has available for general partnership purposes an
unsecured  revolving  credit  facility of $300  million.  Included in the credit
facility is a competitive  bid option program which allows TRG to hold auctions,
among the banks  participating in the facility,  for short term borrowings of up
to $150 million.

  TRG has used the proceeds from the $210 million construction  facility to make
contributions  to  Taubman  Auburn  Hills  Associates  Limited  Partnership,   a
consolidated  80% owned  venture,  to finance  the  construction  of Great Lakes
Crossing. TRG is entitled to preferred distributions on these contributions at a
rate of prime plus 1.5%. The preferred distributions will be paid from available
cash  as  defined  in  the  partnership  agreement.  The  maturity  date  on the
construction facility may be extended to December 2002.


                                      F-16

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


  TRG has issued $342 million of Medium-Term Notes since the program's inception
in 1995 under TRG's $500 million shelf registration statement.

  TRG's loan and facility  agreements and indenture contain various  restrictive
covenants including  limitations on the amount of secured and unsecured debt and
minimum debt service coverage ratios, the latter being the most restrictive. TRG
is in compliance with all covenants.

Mortgage Notes Payable

  Mortgage  notes  payable  at  December  31,  1997  and  1996  consists  of the
following:

<TABLE>
<CAPTION>

                                                                             Balance Due
Center                   1997       1996     Interest Rate   Maturity Date   on Maturity
------                   ----       ----     -------------   -------------   -----------
<S>                    <C>        <C>          <C>              <C>            <C>

Beverly Center         $146,000   $146,000        8.36%         07/15/04       $146,000
Columbus City Center      8,022      8,175        7.00%         08/01/19              0
MacArthur Center         42,241                Floating         10/27/00         42,241
Stoneridge               74,762     44,897     Floating         01/20/98         75,000
Assessment bonds
 payable                  4,843      5,528      Various          Various              0
                       --------   --------
                       $275,868   $204,600
                       ========   ========
</TABLE>

  Mortgage debt is  collateralized by properties with a net book value of $208.7
million as of December 31, 1997. The assessment bonds payable are due in monthly
installments  with  maturities at various dates through 2019, and fixed interest
rates between 6.0% and 7.2%.

  In  October  1997,  TRG  closed on a three  year,  $150  million  construction
facility  for  MacArthur  Center,  which is owned by a  consolidated  70%  owned
venture.  The loan  bears  interest  at one month  LIBOR  plus  1.2%.  Under the
facility  agreement the maturity date may be extended for two years. The payment
of the principal and interest is guaranteed by TRG. The loan agreement  provides
for the reduction of the amount  guaranteed as certain  center  performance  and
valuation criteria are met.

  Stoneridge  is  encumbered  by a deed of trust  securing  a  commercial  paper
facility.  The facility is supported by an underlying  credit  facility of up to
$75 million, which is renewable quarterly for a twelve month period.
Commercial paper is generally sold with a 30 day maturity.

  The following table presents  scheduled  principal  payments on mortgage debt,
excluding commercial paper, as of December 31, 1997.

                        1998                  $    896
                        1999                       738
                        2000                    42,804
                        2001                       602
                        2002                       643
                        Thereafter             155,423



                                           F-17

<PAGE>


                       THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Interest Expense

   Interest  paid in 1997,  1996 and 1995,  net of amounts  capitalized  of $9.5
million,  $5.7  million and $6.9  million in 1997,  1996 and 1995,  approximated
$69.8 million, $69.8 million and $62.2 million.

Extraordinary Items

   In 1996,  TRG  recognized an  extraordinary  charge to income of $1.3 million
primarily  consisting of a prepayment  penalty related to the  extinguishment of
debt at a wholly owned Center. In 1995, TRG recognized an extraordinary  gain of
approximately  $18.9 million,  related to the extinguishment of debt at Bellevue
(Note 4) and $2.2  million of  extraordinary  charges,  consisting  primarily of
prepayment  penalties,  related  to the  extinguishment  of  debt  of TRG and an
Unconsolidated Joint Venture.

Interest Rate Hedging Instruments

   TRG enters into interest rate agreements to reduce its exposure to changes in
the cost of its floating rate debt. The derivative  agreements  generally  match
the  notional  amounts,  reset dates and rate bases of the hedged debt to assure
the  effectiveness  of the  derivatives  in reducing  interest  rate risk. As of
December 31, 1997, the following interest rate cap agreements were outstanding:

                               Frequency
     Notional     LIBOR         of Rate
      Amount     Cap Rate       Resets                       Term
    ---------    --------    ------------    -----------------------------------

    $100,000       6.5%      Three Months    November 1997 through December 1998
     200,000       9.5%        Monthly       December 1997 through December 1999



  The 9.5% cap rate of the $200 million notional amount cap agreement  decreases
to 7.0% beginning in December 1998.

  TRG  is  exposed  to  credit  risk  in  the  event  of  nonperformance  by the
counterparties  to its  interest  rate  cap  and  swap  agreements,  but  has no
off-balance  sheet risk of loss. TRG anticipates  that its  counterparties  will
fully perform their obligations under the agreements.

Fair Value of Financial Instruments Related to Debt

  The estimated fair values of TRG's financial  instruments at December 31, 1997
and 1996 are as follows:

                                                  December 31
                             ---------------------------------------------------
                                       1997                       1996
                             ------------------------   ------------------------
                              Carrying        Fair       Carrying       Fair
                                Value        Value         Value       Value
                             ------------------------   ------------------------

Unsecured notes payable      $1,008,459   $1,031,983    $ 796,805    $ 804,928
Mortgage notes payable          275,868      286,961      204,600      213,126
Interest rate instruments:
  In a receivable position          842          135          964          412
  In a payable position                                       (17)         (76)


                                      F-18

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Beneficial Interest in Debt and Interest

  TRG's beneficial  interest in the debt (excluding capital lease  obligations),
capitalized interest, and interest expense (net of capitalized interest) of TRG,
its consolidated  subsidiaries and its Unconsolidated Joint Ventures (Note 4) is
summarized in the following table.  TRG's beneficial  interest for 1997 excludes
the 30%  minority  interest  in the debt  outstanding  on the  MacArthur  Center
construction facility.


                     Unconsolidated   TRG's Share of       TRG's         TRG's
                         Joint        Unconsolidated   Consolidated   Beneficial
                        Ventures      Joint Ventures   Subsidiaries    Interest
                        --------      --------------   ------------    --------
Debt as of:
 December 31, 1997      $875,356        $ 465,556       $1,284,327    $1,737,211
 December 31, 1996       724,162          396,962        1,001,405     1,398,367

Capitalized interest:
           1997          $ 9,438         $ 4,371           $ 9,469      $ 13,676
           1996            4,790           3,187             5,682         8,869
           1995            3,481           1,799             6,852         8,651
Interest expense
 (net of capitalized
 interest):
           1997          $54,018         $29,263           $73,639      $102,902
           1996           52,994          27,738            70,454        98,192
           1995           57,857          30,396            65,858        96,254



Note 9 - Leases

Operating Leases

  Shopping  center  space is leased to tenants and certain  anchors  pursuant to
lease agreements.  Tenant leases typically provide for guaranteed  minimum rent,
percentage  rent and other  charges to cover  certain  operating  costs.  Future
minimum rent under operating leases in effect at December 31, 1997 for operating
centers,  assuming no new or renegotiated  leases or option extensions on anchor
agreements, is summarized as follows:

                1998                 $ 205,779
                1999                   196,423
                2000                   173,580
                2001                   157,597
                2002                   139,594
                Thereafter             461,160

  Certain Taubman Shopping Centers,  as lessees,  have ground leases expiring at
various dates through the year 2076. In addition,  the Manager leases its office
facilities.  Rental  payments  under ground and office leases were $9.8 million,
$8.0 million and $7.3 million in 1997, 1996 and 1995.  Included in these amounts
are related party office rental payments of $3.1 million,  $3.0 million and $2.8
million in 1997, 1996 and 1995.


                                      F-19

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


  The following is a schedule of future minimum rental  payments  required under
operating leases.

                1998                  $  8,677
                1999                     8,752
                2000                     8,537
                2001                     8,259
                2002                     8,095
                Thereafter             189,935

  The table above  includes $2.9  million,  $3.0  million,  $2.9  million,  $2.6
million,  $2.6 million and $6.2 million of related party amounts in 1998,  1999,
2000, 2001, 2002 and thereafter.

  Included  in  deferred  charges is  approximately  $6.0  million  representing
lump-sum payments for base rent on two parcels of adjacent land. These costs are
being charged to operations over the 87 and 99 year terms of the leases.

Memorial City Mall Lease

  In November  1996,  TRG entered into an agreement to lease Memorial City Mall,
located in Houston,  Texas. The lease of this  unencumbered  property grants TRG
the exclusive right to manage,  lease and operate the property.  The annual rent
is  initially $7 million.  TRG has the option to  terminate  the lease after the
third full lease year by paying $2 million to the lessor. Accordingly, the lease
will be accounted  for as an operating  lease during the option  period.  TRG is
using this option  period to evaluate  the  redevelopment  opportunities  of the
center.

  If TRG does not exercise  its option to terminate  the lease at the end of the
third full lease year, the lease continues for another 52 years and provides for
increases  in rent every ten years based on 75% of the  increase in the Consumer
Price  Index  between  1996 and the then  current  year.  Under the terms of the
lease,  TRG has agreed to invest a minimum  of $3 million  during the three year
option  period.  If the  redevelopment  proceeds,  TRG is  required to invest an
additional $22 million in property  expenditures  not  recoverable  from tenants
during the first 10 years of the lease term.


Note 10 - Transactions with Affiliates

  The  revenue  from  management,  leasing and  development  services is derived
primarily from  transactions with affiliates.  Accounts  receivable from related
parties    includes    amounts   related   to   reimbursement   of   third-party
(non-affiliated) costs.

  During 1997,  TRG acquired an option from a related party to purchase  certain
real estate on which TRG may  develop a shopping  center.  The option  agreement
requires  option  payments of $150 thousand during each of the first five years,
$400  thousand in the sixth year,  and $500 thousand in the seventh year. If TRG
exercises  the option,  the purchase  price for the property  will be between $5
million and $10 million, depending upon the year of purchase. While the optionor
will have no interest in the shopping  center  itself,  the optionor may,  under
certain  circumstances,  participate  in the proceeds from TRG's future sales of
the peripheral land contiguous to the shopping center.

  Other related party transactions are described in Notes 4, 9 and 11.


                                      F-20

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 11 - The Manager

  The  Manager,  The Taubman  Company  Limited  Partnership,  provides  property
management, leasing and development services to the Taubman Shopping Centers and
affiliates.

  The Manager has a voluntary  retirement  savings plan  established in 1983 and
amended and restated effective January 1, 1994 (the Plan). The Plan is qualified
in accordance with Section 401(k) of the Internal  Revenue Code (the Code).  The
Manager  contributes  an  amount  equal  to 2% of  the  qualified  wages  of all
qualified employees and matches employee  contributions in excess of 2% up to 7%
of  qualified   wages.   In  addition,   the  Manager  may  make   discretionary
contributions  within the limits prescribed by the Plan and imposed in the Code.
Costs relating to the Plan were $1.7 million,  $1.6 million, and $1.5 million in
the years ended December 31, 1997, 1996 and 1995, respectively.

  TRG has an incentive  option plan for  employees  of the  Manager.  Currently,
options for 8.2 million units of partnership  interest, as restated for the unit
split (Note 2), may be issued under the plan,  including options outstanding for
7.0 million  units.  The exercise  price of all options  outstanding is equal to
market  value on the  date of the  grant.  Incentive  options  generally  become
exercisable  to the  extent  of  one-third  of the  units on each of the  third,
fourth, and fifth  anniversaries of the date of grant.  Options expire ten years
from the date of grant.

  A summary of the status of the plan as of December 31, 1997,  1996,  and 1995,
and changes during the years ending on those dates are presented below:


<TABLE>
<CAPTION>
                                  1997                       1996                       1995
                         ------------------------   ------------------------   ------------------------
                                 Weighted-Average           Weighted-Average           Weighted-Average
                                  Exercise Price             Exercise Price             Exercise Price
   Options               Units       Per Unit       Units       Per Unit       Units       Per Unit
  ---------              -----       --------       -----       --------       -----       --------
<S>                      <C>         <C>            <C>          <C>           <C>         <C>
Outstanding at
 beginning of year     6,983,804      $11.19      8,129,819      $11.18      7,221,282      $11.37
Granted                  100,828       13.14                                   932,238        9.66
Exercised                (39,299)      11.25       (652,245)      11.23
Cancelled                (21,728)      10.86       (493,770)      11.06        (23,701)      11.41
                       ---------                  ---------                  ---------
Outstanding at
 end of year           7,023,605       11.22      6,983,804       11.19      8,129,819       11.18
                       =========                  =========                  =========
Options vested
 at year end           5,530,263       11.29      3,768,452       11.23      2,360,220       11.19
                       =========                  =========                  =========
</TABLE>

  Options  outstanding  at December  31, 1997 have a remaining  weighted-average
contractual  life of 5.4 years and range in exercise price from $9.39 to $13.89.
The weighted average fair value per unit of options granted during 1997 and 1995
was $2.33 and $1.37.  There were no grants in 1996.  TRG used a binomial  option
price model to determine  the grant date fair values of the 1997 and 1995 grants
based on the following  assumptions:  volatility rates of 21% and 22%, risk-free
rates  of  return  of  approximately   6.8%  and  8%,  and  dividend  yields  of
approximately 7% and 9%, respectively.

  TRG applies APB Opinion 25 and related  Interpretations  in accounting for the
plan. The exercise price of all options  outstanding  granted under the plan was
equal to market value on the date of grant. Accordingly, no compensation expense
has been  recognized  for the  plan.  Had  compensation  cost for the plan  been
determined  based on the fair value of the  options at the grant  dates for 1997
and 1995 awards (there were no grants in 1996) consistent with the method of FAS
Statement  123, the pro forma effect on TRG's  earnings and earnings per unit of
partnership interest would not have been material.


                                      F-21

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


  Effective  January 1, 1996, the Manager adopted The Taubman Company  Long-Term
Performance  Compensation  Plan.  Annually,  eligible  employees will be granted
contingent  notional TRG units of partnership  interest,  the ultimate number of
which will be based on the employee's performance. These awards, which will vest
on the third  anniversary  of the date of grant,  will also accrue  distribution
equivalents  in the form of  additional  notional  units  each  time TRG makes a
distribution  to its partners.  Upon vesting,  additional  notional units may be
granted based on the performance of the employee and the Manager and/or TRG. The
awards will be paid to the employee in cash upon vesting,  based on the value of
TRG's units of partnership interest, unless the employee elects to defer payment
as provided in the plan.  The cost of this plan was  approximately  $4.5 million
and $2.0 million for 1997 and 1996, respectively.


Note 12 - Earnings Per Unit of Partnership Interest

  Basic  earnings  per unit of  partnership  interest  are based on the  average
number of units of partnership interest outstanding during each period.  Diluted
earnings per unit of  partnership  interest  are based on the average  number of
units of partnership interest outstanding during each period,  assuming exercise
of all options for units of partnership  interest  having  exercise  prices less
than the average market value of the units using the treasury stock method.  For
the years ended December 31, 1997, 1996 and 1995,  options for 0.4 million,  1.0
million and 7.2 million  units of  partnership  interest  with average  exercise
prices of $13.58,  $12.64  and  $11.37,  respectively,  were  excluded  from the
computation of diluted  earnings per unit because the options'  exercise  prices
were greater than the average market price for the period calculated. In January
1998, TRG redeemed a partner's  interest in TRG (Note 16), which will affect the
number of units of partnership interest outstanding in 1998.

                                              Year Ended December 31
                                    ------------------------------------------
                                         1997          1996          1995
                                    ------------------------------------------

Income before extraordinary
 items allocable to
 unitholders (Numerator)               $ 91,236     $  84,094      $ 79,699
                                       ========     =========      ========

Partnership units (Denominator):
  Basic                             138,271,014   128,579,312   125,459,939
  Effect of dilutive options          1,002,634       160,594         4,148
                                    -----------   -----------   -----------
  Diluted                           139,273,648   128,739,906   125,464,087
                                    ===========   ===========   ===========

Per unit - basic and diluted             $ 0.66        $ 0.65        $ 0.64
                                         ======        ======        ======


Note 13 -  Supplemental Disclosures of Non-Cash Activities

    In connection with the construction of Tuttle Crossing,  additions to assets
under capital lease and the capital lease  obligation  were recognized for $15.5
million, $25.4 million, and $14.4 million in 1997, 1996, and 1995, respectively.
The outstanding capital lease obligation was extinguished in connection with the
1997 acquisition of interests in Tuttle Crossing (Note 3).


Note 14 - Contingencies

    TRG is  currently  involved in certain  litigation  arising in the  ordinary
course of business.  Management  believes that this  litigation  will not have a
material adverse effect on TRG's assets or results of operations.


                                      F-22

<PAGE>



                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Note 15 - Quarterly Financial Data (Unaudited)

    The following is a summary of quarterly  results of operations  for 1997 and
1996.


                                                            1997
                                            ----------------------------------
                                            First     Second  Third    Fourth
                                            Quarter  Quarter  Quarter  Quarter
                                            ----------------------------------
                                             (in thousands, except unit data)

Revenues                                    $72,897  $73,027  $78,037  $89,465
Equity in income of Unconsolidated
 Joint Ventures                              12,328   14,340   12,205   13,397
Income before extraordinary item             23,584   22,170   23,041   26,499
Net Income                                   23,584   22,170   23,041   26,499
Basic and diluted earnings
 per unit of partnership interest:
  Income before extraordinary item            $0.17    $0.16    $0.17    $0.16
  Net Income                                   0.17     0.16     0.17     0.16

                                                            1996
                                            ----------------------------------
                                            First     Second  Third    Fourth
                                            Quarter  Quarter  Quarter  Quarter
                                            ----------------------------------
                                             (in thousands, except unit data)

Revenues                                    $59,914  $60,073  $66,318  $77,391
Equity in income of Unconsolidated
 Joint Ventures                              13,276   12,628   13,432   12,417
Income before extraordinary item             20,868   18,500   20,940   23,786
Net Income                                   20,868   18,500   19,612   23,786
Basic and diluted earnings
 per unit of partnership interest:
  Income before extraordinary item            $0.17    $0.15    $0.16    $0.18
  Net Income                                   0.17     0.15     0.15     0.18


Note 16 - Subsequent Events

  In January 1998,  TRG redeemed a partner's  6.1 million  units of  partnership
interest for approximately  $77.7 million  (including costs). The redemption was
funded through the use of an existing revolving credit facility.

  Subsequent  to  December  31,  1997,   Fairfax   Company  of  Virginia  L.L.C.
(successor-in-interest  to Fairfax Associates,  a 50% owned Unconsolidated Joint
Venture)  completed a $140 million,  6.60%,  secured financing maturing in 2008.
The net proceeds were used to  extinguish  an existing  mortgage on Fair Oaks of
approximately  $39 million and pay a prepayment  penalty of  approximately  $1.8
million. In addition, proceeds of $5.6 million were used to close out a treasury
lock agreement  entered into in 1997, which resulted in an effective rate on the
financing of  approximately  7%. The remaining  proceeds were distributed to the
owners.  TRG used its 50% share of the  distribution  to pay down its  revolving
credit facilities.


                                      F-23

<PAGE>



                                                                     Schedule II
                  THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
                        Valuation and Qualifying Accounts
              For the years ended December 31, 1997, 1996, and 1995
                                 (in thousands)



<TABLE>
<CAPTION>
                                                                    Additions
                                                           --------------------------
                                           Balance at      Charged to      Charged to                      Balance
                                            beginning       costs and        other                         at end
                                             of year        expenses        accounts      Write-offs       of year
                                            ---------      ----------      ----------    ------------     ---------
<S>                                          <C>              <C>            <C>            <C>            <C>
Year ended December 31, 1995:
  Allowance for doubtful receivables         $   502            818              0            (939)         $   381
                                             =======          =====           ====          ======          =======

  Development pre-construction reserve       $ 8,348          6,814              0          (4,964)         $10,198
                                             =======          =====           ====          ======          =======

Year ended December 31, 1996:
  Allowance for doubtful receivables         $   381          1,295             42(1)       (1,325)         $   393
                                             =======          =====           ====          ======          =======

  Development pre-construction reserve       $10,198          8,501              0          (6,223)         $12,476
                                             =======          =====           ====          ======          =======

Year ended December 31, 1997:
  Allowance for doubtful receivables         $  393           1,027              0          (1,006)         $   414
                                             ======           =====           ====          ======          =======

  Development pre-construction reserve       $12,476          5,454              0          (1,870)         $16,060
                                             =======          =====           ====          ======          =======


(1)  Represents the balance of Fairlane's  allowance for doubtful receivables as
     of the date of TRG's  acquisition  of  additional  interests  in  Fairlane.
     Subsequent  to the  acquisition  date,  the accounts of Fairlane  have been
     consolidated in TRG's financial statements.
</TABLE>


                                      F-24

<PAGE>
<TABLE>
<CAPTION>
                                                      THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP                      Schedule III
                                                       REAL ESTATE AND ACCUMULATED DEPRECIATION
                                                                    December 31, 1997
                                                                     (in thousands)

                                                                                             Gross Amount at Which
                                       Initial Cost                                      Carried at Close of Period
                                        to Company                Cost          ---------------------------------------
                                    -------------------       Capitalized                                  Accumulated       Total
                                            Buildings and      Subsequent                                 Depreciation     Cost Net
                                    Land     Improvements    to Acquisition     Land       BI&E        Total      (A/D)     of A/D
                                    ----     ------------    --------------     ----       ----        -----     -------    ------
<S>                                <C>         <C>            <C>             <C>       <C>         <C>         <C>         <C>
Taubman Shopping Centers:
 Beverly Center, Los Angeles, CA   $      0    $  131,187     $ 22,104        $      0  $  153,291  $  153,291  $ 48,058  $  105,233
 Biltmore, Phoenix, AZ               18,000        96,864        8,320          18,000     105,184     123,184     9,390     113,794
 Briarwood, Ann Arbor, MI             4,027        47,761        5,964           4,027      53,725      57,752    28,663      29,089
 Columbus City Center,
  Columbus, OH                            0        57,787          278               0      58,065      58,065    15,383      42,682
 Fairlane Town Center,
  Dearborn, MI                       14,067        88,023          771          14,067      88,794     102,861     9,869      92,992
 The Falls, Miami, FL                25,479       131,347            0          25,479     131,347     156,826       229     156,597
 Hilltop, Richmond, CA                2,522        36,139        7,788           2,522      43,927      46,449    16,740      29,709
 La Cumbre Plaza, Santa Barbara, CA       0        23,048           39               0      23,087      23,087       844      22,243
 Lakeforest, Gaithersburg, MD         4,047        18,137        7,245           4,047      25,382      29,429    16,107      13,322
 Marley Station, Glen Burnie, MD      3,692        45,072       11,118           3,692      56,190      59,882    26,968      32,914
 Meadowood Mall, Reno, NV             1,890        14,116       13,734           1,890      27,850      29,740    12,598      17,142
 Paseo Nuevo, Santa Barbara, CA           0        35,210          385               0      35,595      35,595     1,832      33,763
 Regency Square, Richmond, VA        21,702       103,062            0          21,702     103,062     124,764       980     123,784
 The Mall at Short Hills,
  Short Hills, NJ                    16,000       116,054      120,709          16,000     236,763     252,763    36,729     216,034
 Stoneridge, Pleasanton, CA             882        25,265       16,496             882      41,761      42,643    23,644      18,999
 The Mall at Tuttle Crossing,
  Columbus, OH                       20,000       118,078            0          20,000     118,078     138,078     2,629     135,449
 Other:
 Manager's Office Facilities              0             0       23,505               0      23,505      23,505    17,796       5,709
 Peripheral Land                      6,630             0            5           6,630           5       6,635         0       6,635
 Construction in Process and
  Development Pre-construction
   Costs                                  0       122,011        5,670               0     127,681     127,681         0     127,681
 Other                                    0         1,120            0               0       1,120       1,120       199         921
                                   --------    ----------     --------        --------  ----------  ----------  --------  ----------
TOTAL                              $138,938    $1,210,281     $244,131        $138,938  $1,454,412  $1,593,350  $268,658  $1,324,692
                                   ========    ==========     ========        ========  ==========  ==========  ========  ==========
<CAPTION>
                                                          Date of
                                                       Completion of
                                                      Construction or  Depreciable
                                       Encumbrances     Acquisition       Life
                                       ------------     -----------       ----
<S>                                     <C>              <C>           <C>
Taubman Shopping Centers:
 Beverly Center, Los Angeles, CA        $146,000         1982         40 Years
 Biltmore, Phoenix, AZ                     2,979         1994         40 Years
 Briarwood, Ann Arbor, MI                      0         1973         33 Years
 Columbus City Center,
  Columbus, OH                             8,022         1989         31 Years
 Fairlane Town Center,
  Dearborn, MI                                 0         1996         40 Years
 The Falls, Miami, FL                          0         1997         40 Years
 Hilltop, Richmond, CA                       607         1976         50 Years
 La Cumbre Plaza, Santa Barbara, CA            0         1996         40 Years
 Lakeforest, Gaithersburg, MD                  0         1978         30 Years
 Marley Station, Glen Burnie, MD               0         1987         40 Years
 Meadowood Mall, Reno, NV                      0         1979         40 Years
 Paseo Nuevo, Santa Barbara, CA                0         1996         40 Years
 Regency Square, Richmond, VA                  0         1997         40 Years
 The Mall at Short Hills,
  Short Hills, NJ                              0         1980         40 Years
 Stoneridge, Pleasanton, CA               76,019         1980         40 Years
 The Mall at Tuttle Crossing,
  Columbus, OH                                 0         1997         50 Years
 Other:
 Manager's Office Facilities                   0
 Peripheral Land                               0
 Construction in Process and
  Development Pre-construction
   Costs                                  42,241
 Other                                         0
                                        --------
TOTAL                                   $275,868
                                        ========
</TABLE>


The changes in total real estate  assets for the three years ended  December 31,
1997 are as follows:


                                         1997        1996       1995
                                         ----        ----       ----

   Balance, beginning of year         $1,136,416  $  926,207  $ 843,960
    Acquisitions                         358,227     150,522
    New development and improvements     142,420      59,237     85,109
    Disposals (1)                        (43,713)     (3,808)    (2,862)
    Transfers In, net (2)                              4,258
                                      ----------  ----------  ---------
   Balance, end of year               $1,593,350  $1,136,416  $ 926,207
                                      ==========  ==========  =========


                                      F-25

<PAGE>



                                                          (Schedule III (cont.))

The changes in accumulated  depreciation  and  amortization  for the three years
ended December 31, 1997 are as follows:

                                         1997        1996       1995
                                         ----        ----       ----

   Balance, beginning of year         $(234,030)  $(200,440)  $(175,358)
    Depreciation for year               (37,642)    (29,570)    (26,574)
    Disposals                             3,014       1,290       1,492
    Transfers In (2)                                 (5,310)
                                      ---------   ---------   ---------
   Balance, end of year               $(268,658)  $(234,030)  $(200,440)
                                      =========   =========   =========



(1)  1997 disposal  amount  includes  $39,849  representing  the net decrease in
     Tuttle Crossing's assets under capital lease.
(2)  Primarily  represents  consolidation in 1996 of TRG's original 25% interest
     in  Fairlane's  assets  (costs of acquiring  the remaining 75% interest are
     included in Acquisitions above), net of transfers of pre-construction costs
     to construction in process of an Unconsolidated Joint Venture.


                                      F-26

<PAGE>












            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP

                          COMBINED FINANCIAL STATEMENTS
                      AS OF DECEMBER 31, 1997 AND 1996 AND
          FOR EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995












                                      F-27

<PAGE>






                         INDEPENDENT AUDITORS' REPORT





Partners
The Taubman Realty Group Limited Partnership

  We have audited the  accompanying  combined  balance sheets of  Unconsolidated
Joint   Ventures  of  The  Taubman   Realty  Group  Limited   Partnership   (the
"Partnership")  as of  December  31,  1997 and 1996,  and the  related  combined
statements of operations,  accumulated  deficiency in assets, and cash flows for
each of the three years in the period ended  December 31, 1997.  Our audits also
included the financial statement schedules listed in the Index at Item 14. These
financial statements and financial statement schedules are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audits.

  We  conducted  our  audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

  In our opinion,  such combined  financial  statements  present fairly,  in all
material respects,  the financial  position of Unconsolidated  Joint Ventures of
The Taubman  Realty Group Limited  Partnership as of December 31, 1997 and 1996,
and the results of their  operations  and their cash flows for each of the three
years in the  period  ended  December  31,  1997 in  conformity  with  generally
accepted accounting  principles.  Also, in our opinion, such financial statement
schedules,   when  considered  in  relation  to  the  basic  combined  financial
statements  taken  as a whole,  present  fairly  in all  material  respects  the
information set forth therein.





DELOITTE & TOUCHE LLP

Detroit, Michigan
February 18, 1998





                                      F-28

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP

                             COMBINED BALANCE SHEET
                                 (in thousands)






                                                         December 31
                                                   -----------------------
                                                       1997       1996
                                                       ----       ----

Assets:
 Properties (Notes 2, 4 and 6)                      $ 829,640   $ 638,960
  Accumulated depreciation and amortization           205,659     188,491
                                                    ---------   ---------
                                                    $ 623,981   $ 450,469

 Cash and cash equivalents                             36,875      25,914
 Accounts and notes receivable, less allowance
  for doubtful accounts of $314 and $90
  in 1997 and 1996                                      8,531       7,142
 Note receivable from Joint Venture Partner
  (Note 6)                                              1,294       1,600
 Deferred charges and other assets (Notes 3 and 6)     37,697      36,596
                                                    ---------   ---------
                                                    $ 708,378   $ 521,721
                                                    =========   =========


Liabilities:
 Mortgage notes payable (Note 4)                    $ 874,472   $ 721,809
 Other notes payable (Note 4)                             884       2,353
 Capital lease obligations (Note 5)                     6,509       5,000
 Accounts payable and other liabilities                94,801      51,691
                                                    ---------   ---------
                                                    $ 976,666   $ 780,853

Commitments (Note 5)


Accumulated deficiency in assets:
 TRG                                                $(133,680)  $(134,986)
 Joint Venture Partners                              (134,608)   (124,146)
                                                    ---------   ---------
                                                    $(268,288)  $(259,132)
                                                    ---------   ---------
                                                    $ 708,378   $ 521,721
                                                    =========   =========



                       See notes to financial statements.


                                      F-29

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP

                        COMBINED STATEMENT OF OPERATIONS
                                 (in thousands)






                                                Year Ended December 31
                                            ------------------------------
                                               1997      1996      1995
                                               ----      ----      ----
Revenues:
  Minimum rents                              $155,912  $157,212  $166,244
  Percentage rents                              3,057     3,951     3,629
  Expense recoveries                           89,653    95,244   101,455
  Other                                        10,013     8,930    11,444
  Gain on disposition of Bellevue (Note 1)                          4,408
                                             --------  --------  --------
                                             $258,635  $265,337  $287,180
                                             --------  --------  --------

Operating costs:
  Recoverable expenses (Note 6)              $ 76,493  $ 81,799  $ 88,250
  Other operating (Note 6)                     17,638    18,365    18,609
  Interest expense (Note 4)                    54,018    52,994    57,857
  Depreciation and amortization                24,180    23,837    25,471
                                             --------  --------  --------
                                             $172,329  $176,995  $190,187
                                             --------  --------  --------

Income before extraordinary items            $ 86,306  $ 88,342  $ 96,993
Extraordinary items (Notes 1 and 4)                                30,761
                                             --------  --------  --------
Net Income                                   $ 86,306  $ 88,342  $127,754
                                             ========  ========  ========

Allocation of net income:
Attributable to TRG                          $ 46,857  $ 47,413  $ 68,498
Attributable to Joint Venture Partners         39,449    40,929    59,256
                                             --------  --------  --------
                                             $ 86,306  $ 88,342  $127,754
                                             ========  ========  ========



                       See notes to financial statements.


                                      F-30

<PAGE>


            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP

             COMBINED STATEMENT OF ACCUMULATED DEFICIENCY IN ASSETS
                  Years ended December 31, 1997, 1996 and 1995
                                 (in thousands)






                                                 Joint Venture
                                           TRG      Partners      Total
                                           ---      --------      -----


Balance, January 1, 1995               $(165,328)  $(167,603)  $(332,931)
Cash distributions                       (53,287)    (49,413)   (102,700)
Net income                                68,498      59,256     127,754
                                       ---------   ---------   ---------
Balance, December 31, 1995             $(150,117)  $(157,760)  $(307,877)
Cash contributions                        14,457      24,958      39,415
Non-cash contributions (Note 1)            4,797       8,050      12,847
Cash distributions                       (55,146)    (51,154)   (106,300)
TRG purchase of Fairlane interest
 (Note 1)                                  3,610      10,831      14,441
Net income                                47,413      40,929      88,342
                                       ---------   ---------   ---------
Balance, December 31, 1996             $(134,986)  $(124,146)  $(259,132)
Cash contributions                        18,822       9,800      28,622
Cash distributions                       (64,373)    (59,711)   (124,084)
Net income                                46,857      39,449      86,306
                                       ---------   ---------   ---------
Balance, December 31, 1997             $(133,680)  $(134,608)  $(268,288)
                                       =========   =========   =========



                       See notes to financial statements.


                                      F-31

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP

                        COMBINED STATEMENT OF CASH FLOWS
                                 (in thousands)






                                                Year Ended December 31
                                           --------------------------------
                                              1997       1996       1995
                                              ----       ----       ----

Cash Flows From Operating Activities:
 Income before extraordinary items         $  86,306  $  88,342  $  96,993
 Adjustments to reconcile net income
  to net cash provided by operating
  activities:
   Depreciation and amortization              24,180     23,837     25,471
   Provision for losses on accounts
    receivable                                   697      1,303        974
   Gains on sales of land                     (2,748)               (1,303)
   Gain on disposition of Bellevue (Note 1)                         (4,408)
   Other                                       3,806      2,922      2,493
 Increase (decrease) in cash attributable
  to changes in assets and liabilities:
   Receivables, deferred
    charges and other assets                  (7,760)    (1,821)   (10,128)
   Accounts payable and other liabilities     43,110      4,841      4,258
                                           ---------  ---------  --------
Net Cash Provided By Operating Activities  $ 147,591  $ 119,424  $ 114,350
                                           ---------  ---------  ---------

Cash Flows From Investing Activities:
 Additions to properties                   $(190,188) $ (97,137) $ (48,320)
 Restricted cash for expansion                            1,309     40,879
 Proceeds from sales of land                   3,452                 1,390
                                           ---------  ---------  ---------
Net Cash Used In Investing Activities      $(186,736) $ (95,828) $  (6,051)
                                           ---------  ---------  ---------

Cash Flows From Financing Activities:
 Debt proceeds                             $ 158,255  $  20,529  $ 235,030
 Debt payments                                (8,267)    (2,670)    (6,665)
 Extinguishment of debt                                           (189,705)
 Debt issuance costs                          (4,420)               (6,198)
 Cash contributions from partners             28,622     39,415
 Cash distributions to partners             (124,084)  (106,300)  (102,700)
                                           ---------  ---------  ---------
Net Cash Provided By (Used In) Financing
 Activities                                $  50,106  $ (49,026) $ (70,238)
                                           ---------  ---------  ---------

Net Increase (Decrease) In Cash            $  10,961  $ (25,430) $  38,061

Cash and Cash Equivalents at Beginning
 of Year                                      25,914     51,344    13,283
                                           ---------  ---------  --------

Cash and Cash Equivalents at End of Year   $  36,875  $  25,914  $  51,344
                                           =========  =========  =========



                       See notes to financial statements.


                                      F-32

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                       Three Years Ended December 31, 1997



Note 1 - Summary of Significant Accounting Policies

Basis of Presentation

  The Taubman Realty Group Limited  Partnership  (TRG) engages in the ownership,
management,  leasing, acquisition,  development and expansion of regional retail
shopping  centers  (Taubman  Shopping  Centers) and interests  therein.  TRG has
engaged  the  Manager  (The  Taubman  Company  Limited  Partnership,   which  is
approximately 99% beneficially owned by TRG) to provide property  management and
leasing  services  for the Taubman  Shopping  Centers and to provide  corporate,
development,   and  acquisition  services.  For  financial  statement  reporting
purposes,  the accounts of Taubman Shopping Centers owned through joint ventures
with third parties that are not controlled  (Unconsolidated Joint Ventures) have
been combined in these financial statements.  Generally,  net profits and losses
of the  Unconsolidated  Joint  Ventures  are  allocated  to TRG and the  outside
partners   (Joint  Venture   Partners)  in  accordance   with  their   ownership
percentages.

  Dollar amounts presented in tables within the notes to the combined  financial
statements are stated in thousands.

Investments in Unconsolidated Joint Ventures

  TRG's  interest in each of the  Unconsolidated  Joint Ventures at December 31,
1997, is as follows:

                                                                     TRG's %
Unconsolidated Joint Venture        Taubman Shopping Center         Ownership
----------------------------        -----------------------         ---------

 Arizona Mills, L.L.C.              Arizona Mills                      37%
 Fairfax Associates                 Fair Oaks                          50
 Lakeside Mall Limited Partnership  Lakeside                           50
 Rich-Taubman Associates            Stamford Town Center               50
 Taubman-Cherry Creek
  Limited Partnership               Cherry Creek                       50
 Twelve Oaks Mall
  Limited Partnership               Twelve Oaks Mall                   50
 West Farms Associates              Westfarms                          79
 Woodfield Associates               Woodfield                          50
 Woodland                           Woodland                           50

  Arizona Mills, L.L.C.  developed Arizona Mills, a value super-regional mall in
Tempe,  Arizona,  which opened in November  1997.  TRG's  ownership  interest in
Arizona Mills,  L.L.C.  increased in January 1997 to 37% from 35% as a result of
Arizona  Mills,  L.L.C.'s  redemption  of a former  owner's 5% interest for $2.8
million.  The former owner is an affiliate of a partner in TRG. In 1996, Arizona
Mills,  L.L.C.  purchased for $24.8 million  approximately  116 acres of land on
which the Center was constructed  from an affiliate of a partner in TRG and of a
former owner in Arizona Mills. Also in 1996, TRG and the other owners of Arizona
Mills  contributed  non-cash  pre-construction  costs  related  to  this  center
totaling $12.8 million.


                                      F-33

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP
              NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)


  In July 1996, TRG completed transactions that resulted in it acquiring the 75%
interest in Fairlane Town Center  (Fairlane)  previously held by a Joint Venture
Partner.   TRG  also  assumed  mortgage  debt  of  approximately   $26  million,
representing the former Joint Venture Partner's beneficial interest in the $34.6
million mortgage encumbering the property. The accounts of Fairlane are included
in these  combined  financial  statements  until the  acquisition  date.  On the
acquisition  date,  the book values of Fairlane's  assets and  liabilities  were
approximately $25 million and $39 million, respectively.

  In  December  1995,  the bank  group  holding  the $99.5  million  nonrecourse
mortgage  encumbering  Bellevue  Center  acquired  title to the Center through a
nonjudicial  foreclosure  sale.  The mortgage  matured on November 1, 1995.  TRG
ceased to recognize  the results of Bellevue  Associates  (Bellevue),  TRG's 60%
owned  Unconsolidated  Joint  Venture  that owned the Center,  as of November 1,
1995, and, accordingly,  the accounts of Bellevue Associates are not included in
these combined financial statements from that date.

  As a result of the foreclosure and debt extinguishment, Bellevue recognized in
1995 an  extraordinary  gain of  approximately  $31.4 million,  representing the
difference  between  the  carrying  value of the debt and the fair  value of the
Center, net of related  transaction costs, and an ordinary gain of approximately
$4.4 million,  representing  the excess of the fair value of the Center over its
carrying  value.  The  extinguishment  of the debt and write off of the Center's
carrying value represent non-cash transactions.

Revenue Recognition

  Shopping  center space is generally  leased to specialty  retail tenants under
short and intermediate  term leases which are accounted for as operating leases.
Minimum rents are recognized on an accrual basis as earned,  the result of which
does not differ  materially from a straight-line  method.  Percentage  rents are
recognized on an accrual basis as earned.  Expense recoveries,  which include an
administrative fee, are recognized as revenue in the period applicable costs are
chargeable to tenants.

Depreciation and Amortization

  Buildings,  improvements  and equipment,  stated at cost,  are  depreciated on
straight-line or double-declining  balance bases over the estimated useful lives
of the assets  which range from 3 to 55 years.  Tenant  allowances  and deferred
leasing  costs are  amortized  on a  straight-line  basis  over the lives of the
related leases.

Capitalization

  Costs related to the acquisition,  development,  construction, and improvement
of properties are capitalized. Interest costs are capitalized until construction
is substantially  complete.  Properties are reviewed for impairment if events or
changes in  circumstances  indicate that the carrying  amounts of the properties
may not be recoverable.

Cash and Cash Equivalents

  Cash  equivalents  consist of highly liquid  investments with a maturity of 90
days or less at the date of purchase.


                                      F-34

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP
              NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)


Deferred Charges

  Direct  financing  and interest  rate hedging costs are deferred and amortized
over the terms of the related  agreements  as a component  of interest  expense.
Direct costs related to leasing  activities are  capitalized  and amortized on a
straight-line  basis over the lives of the related  leases.  All other  deferred
charges are amortized on a straight-line  basis over the terms of the agreements
to which they relate.

Interest Rate Hedging Agreements

  Premiums paid for interest  rate caps are  amortized to interest  expense over
the terms of the cap agreements.  Amounts  received under the cap agreements are
accounted  for on an accrual  basis,  and  recognized as a reduction of interest
expense. The differential to be paid or received on swap agreements is accounted
for on an accrual basis and recognized as an adjustment to interest expense.

Fair Value of Financial Instruments

  The following  methods and assumptions were used to estimate the fair value of
financial instruments:

    The  carrying  value  of cash  and  cash  equivalents,  accounts  and  notes
      receivable,  and accounts payable approximates fair value due to the short
      maturity of these instruments.

    The fair value of mortgage notes and other notes payable is estimated  based
      on quoted market prices if available, or on the current rates available to
      the  Unconsolidated  Joint Ventures for debt of similar terms and maturity
      and the  assumption  that debt will be  prepaid at the  earliest  possible
      date.

    The fair  value of  interest  rate  hedging  instruments  is the  amount the
      Unconsolidated  Joint  Venture  would  pay or  receive  to  terminate  the
      agreement at the  reporting  date,  taking into account  current  interest
      rates.

Use of Estimates

  The preparation of financial  statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,  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.

Reclassifications

  Certain  prior  year  amounts  have  been  reclassified  to  conform  to  1997
classifications.


                                      F-35

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP
              NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)


Note 2 - Properties

  Properties, at December 31, 1997 and 1996, are summarized as follows:

                                              1997       1996
                                              ----       ----

 Land                                       $ 45,549   $ 43,477
 Buildings, improvements and equipment       753,859    476,283
 Construction in process                      27,443    115,953
 Peripheral land                               2,789      3,247
                                            --------   --------
                                            $829,640   $638,960
                                            ========   ========

  Depreciation expense for 1997, 1996 and 1995 was $18.7 million,  $18.0 million
and $18.4  million.  Peripheral  land  primarily  consists of  undeveloped  land
generally  adjacent to the Taubman  Shopping  Centers.  Construction  in process
includes costs related to expansions and other  improvements at various centers.
Assets under capital lease of $6.5 million and $5.0 million at December 31, 1997
and  1996,  respectively,   are  included  in  the  table  above  in  buildings,
improvements and equipment.


Note 3 - Deferred Charges and Other Assets

  Deferred charges and other assets at December 31, 1997 and 1996 are summarized
as follows:

                                              1997       1996
                                              ----       ----

     Leasing                                $ 41,568   $ 39,924
     Accumulated amortization                (20,562)   (19,298)
                                            --------   --------
                                            $ 21,006   $ 20,626
     Deferred financing, net                  12,442     11,810
     Other, net                                4,249      4,160
                                            --------   --------
                                            $ 37,697   $ 36,596
                                            ========   ========



                                      F-36

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP
              NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)


Note 4 - Debt

Mortgage Notes Payable

  Mortgage  notes  payable  at  December  31,  1997  and  1996  consists  of the
following:

                                                                     Balance Due
Center                 1997      1996   Interest Rate  Maturity Date on Maturity
------                 ----      ----   -------------  ------------- -----------

Arizona Mills        $121,991              Floating       02/01/02     $121,991
Cherry Creek          130,000   $130,000   Floating       08/01/98      130,000
Fair Oaks              39,119     39,865      9.00%       12/01/16            0
Lakeside               88,000     88,000      6.47%       12/15/00       88,000
Stamford Town Center   55,630     56,291     11.69%       12/01/17            0
Twelve Oaks Mall       49,940     49,924   Floating       10/15/01       50,000
Westfarms             100,000    100,000      7.85%       07/01/02      100,000
Westfarms              51,792     19,729   Floating       07/01/02       51,792
Woodfield             172,000    172,000   Floating       10/13/98      172,000
Woodland               66,000     66,000      8.20%       05/15/04       66,000
                      -------   --------
                     $874,472   $721,809
                     ========   ========

  The Arizona Mills loan is a construction  facility with a maximum availability
of $145 million. The rate is capped at 9.5% until maturity,  plus credit spread.
The payment of  principal  and interest is  guaranteed  by each of the owners of
Arizona  Mills to the extent of its  ownership  percentage.  The loan  agreement
provides  for  the  reduction  of  the  amount   guaranteed  as  certain  center
performance and valuation criteria are met.

  The other  Unconsolidated  Joint Ventures with floating rate debt have entered
into interest rate  agreements to reduce their exposure to increases in interest
rates.  The rate on Cherry  Creek's loan is capped at 6.5% through  January 1998
and from February 1998 to maturity at 7%, plus credit spread, based on one month
LIBOR. The loan can be extended up to an additional three years. The rate on the
Twelve Oaks loan is capped at 8.55% until maturity, plus credit spread, based on
one month LIBOR.  The interest rate on $93.5  million of the Woodfield  loan was
swapped to maturity at an effective annual rate of 5.4%. The rate on the balance
of the  Woodfield  financing,  which has been capped at a maximum  annual  rate,
including  credit  spread,  of 6.5% to maturity by an interest  rate  agreement,
floats at a rate of three month LIBOR plus 0.5%. The Westfarms  balance of $51.8
million  represents  borrowings  under a  construction  facility  with a maximum
availability  of $55 million.  The rate on the  construction  facility is capped
until maturity at 6.5%, plus credit spread.

  The Stamford note also requires payment of additional  interest ($1.3 million,
$1.6  million,  and $1.4  million in 1997,  1996,  and 1995) based on  operating
results.


                                      F-37

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP
              NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)


  Scheduled  principal  payments on mortgage  debt are as follows as of December
31, 1997:

                   1998                  $303,559
                   1999                     1,727
                   2000                    89,914
                   2001                    52,121
                   2002                   276,135
                   Thereafter             151,016
                                         --------
                   Total                 $874,472
                                         ========

Other Notes Payable

  Other notes payable at December 31, 1997 and 1996 consists of the following:

                                                     1997     1996
                                                     ----     ----
  Notes payable to banks, line of credit,
   interest generally at prime (8.5% at
   December 31, 1997), maximum borrowings
   available up to $7.5 million to fund
   tenant loans, allowances and buyouts
   and working capital.                             $ 832   $2,293
  Other                                                52       60
                                                    -----   ------
                                                    $ 884   $2,353
                                                    =====   ======

Interest Expense

  Interest paid on mortgages and other notes payable in 1997, 1996 and 1995, net
of  amounts  capitalized  of $9.4  million,  $4.8  million,  and  $3.5  million,
approximated $48.7 million, $49.9 million, and $55.6 million.

Extraordinary Items

  In 1995, Bellevue Associates recognized an extraordinary gain of approximately
$31.4 million (Note 1). The extraordinary charge to income totaling $0.6 million
in  1995   primarily   represented   a  prepayment   penalty   relating  to  the
extinguishment of mortgage debt.

Interest Rate Hedging Instruments

  Certain of the  Unconsolidated  Joint Ventures have entered into interest rate
swap and cap  agreements  to reduce  their  exposure  to  changes in the cost of
floating rate debt. The terms of the derivative agreements are equivalent to the
notional  amounts,  reset dates and rate bases of the underlying  hedged debt to
assure the  effectiveness  of the  derivatives  in reducing  interest rate risk.
These  Unconsolidated  Joint Ventures are exposed to credit risk in the event of
nonperformance  by  their   counterparties  to  the  agreements,   but  have  no
off-balance sheet risk of loss. These  Unconsolidated  Joint Ventures anticipate
that their  counterparties will be able to fully perform their obligations under
the agreements.

  In  1997,  Fairfax  Associates  entered  into a  treasury  lock  agreement  to
effectively fix the rate on its anticipated  refinancing of the mortgage on Fair
Oaks. At December 31, 1997,  Fairfax  Associates would have paid $4.2 million to
close out the agreement (Note 7).


                                      F-38

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP
              NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)


Fair Value of Debt Instruments

  The estimated  fair values of financial  instruments  at December 31, 1997 and
1996 are as follows:

                                                  December 31
                             ---------------------------------------------------
                                       1997                       1996
                             ------------------------   ------------------------
                              Carrying        Fair       Carrying       Fair
                                Value        Value         Value       Value
                             ------------------------   ------------------------

Mortgage notes payable        $874,472     $910,250      $721,809    $757,438
Other notes payable                884          884         2,353       2,353
Interest rate instruments:
 In a receivable position        4,787        2,164         4,065       3,263
 In a payable position                       (4,241)


Note 5 - Leases

  Shopping  center  space is leased to tenants and certain  anchors  pursuant to
lease agreements.  Tenant leases typically provide for guaranteed  minimum rent,
percentage  rent and other  charges to cover  certain  operating  costs.  Future
minimum rent under operating leases in effect at December 31, 1997 for operating
centers,  assuming no new or renegotiated  leases or option extensions on anchor
agreements, is summarized as follows:

                      1998                 $177,731
                      1999                  171,664
                      2000                  158,214
                      2001                  141,862
                      2002                  124,068
                      Thereafter            377,803

  Minimum rent  received from former  related  parties was $0.9 million in 1995.
There are no related party amounts in the table above.

  One  Unconsolidated  Joint Venture,  as lessee, has a ground lease expiring in
2083.  Rental payments under the lease were $1.8 million,  $1.7 million and $1.7
million in each of 1997,  1996 and 1995. All of the ground lease rental payments
and scheduled  future payments  represent  minimum rental expense payable to its
Joint Venture Partner.

  The following is a schedule of future minimum rental  payments  required under
the lease:

                      1998                  $ 1,984
                      1999                    1,984
                      2000                    1,984
                      2001                    1,984
                      2002                    2,058
                      Thereafter            656,417


                                      F-39

<PAGE>



            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP
              NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)


Capital Lease Obligations

  Certain  Unconsolidated  Joint Ventures have entered into lease agreements for
property  improvements  with three to five year terms.  As of December 31, 1997,
future minimum lease payments for these capital leases are as follows:

               1998                                $ 1,976
               1999                                  1,976
               2000                                  1,933
               2001                                  1,803
               2002                                     65
                                                   -------
               Total minimum lease payments        $ 7,753
               Less amount representing interest    (1,244)
                                                   -------
               Capital lease obligations           $ 6,509
                                                   =======


Note 6 - Transactions with Affiliates

  Charges from the Manager under various written  agreements were as follows for
the years ended December 31:
                                               1997       1996       1995
                                               ----       ----       ----

     Management and leasing services        $17,352    $16,720    $18,668
     Security and maintenance services        9,468     11,608     15,468
     Development services                     4,661      5,410      5,708
                                            -------    -------    -------
                                            $31,481    $33,738    $39,844
                                            =======    =======    =======

  TRG is a  one-third  owner of an entity  providing  management,  leasing,  and
development services to Arizona Mills, L.L.C. Charges from this entity were $9.7
million in 1997.

  Westfarms  previously loaned $2.4 million to one of its Joint Venture Partners
to purchase a portion of a deceased Joint Venture Partner's  interest.  The note
bears interest at approximately  7.9% and requires monthly principal payments of
$25 thousand,  plus accrued  interest,  with the final payment due in 2001.  The
balance  at  December  31,  1997 and 1996 was  $1.3  million  and $1.6  million,
respectively. Interest income related to the loan was approximately $0.1 million
in 1997, 1996, and 1995.

  Other related party transactions are described in Notes 1 and 5.


Note 7 - Subsequent Event

  Subsequent  to  December  31,  1997,   Fairfax   Company  of  Virginia  L.L.C.
(successor-in-interest  to Fairfax Associates) completed a $140 million,  6.60%,
secured financing  maturing in 2008. The net proceeds were used to extinguish an
existing mortgage on Fair Oaks of approximately $39 million and pay a prepayment
penalty of  approximately  $1.8 million.  In addition,  proceeds of $5.6 million
were used to close out a treasury lock agreement  entered into in 1997 (Note 4),
which  resulted in an effective rate on the financing of  approximately  7%. The
remaining proceeds were distributed to the owners.


                                      F-40

<PAGE>


<TABLE>
<CAPTION>

                                                                                                                   Schedule II
            UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
                               LIMITED PARTNERSHIP
                        Valuation and Qualifying Accounts
              For the years ended December 31, 1997, 1996 and 1995
                                 (in thousands)




                                                                    Additions
                                                           --------------------------
                                            Balance at     Charged to      Charged to                       Balance
                                             beginning      costs and        other                          at end
                                              of year       expenses        accounts       Write-offs       of year
                                              -------       --------        --------       ----------       -------
<S>                                            <C>           <C>             <C>            <C>              <C>

Year ended December 31, 1995:

  Allowance for doubtful receivables           $ 402            974              0           (1,219)         $ 157
                                               =====          =====           ====           ======          =====

Year ended December 31, 1996:

  Allowance for doubtful receivables           $ 157          1,303              0           (1,370)         $  90
                                               =====          =====           ====           ======          =====

Year ended December 31, 1997:

  Allowance for doubtful receivables           $  90            697              0             (473)         $ 314
                                               =====          =====           ====           ======          =====


</TABLE>


                                      F-41

<PAGE>
<TABLE>
<CAPTION>
                                                                                                                  Schedule III
 UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1997
                                 (in thousands)


                                                                                       Gross Amount at Which
                                          Initial Cost                               Carried at Close of Period
                                           to Company              Cost       -----------------------------------------
                                     ----------------------    Capitalized                                  Accumulated     Total
                                              Buildings and    Subsequent                                  Depreciation   Cost Net
                                      Land     Improvements   to Acquisition  Land      BI&E       Total      (A/D)        of A/D
                                      ----    -------------   --------------  ----      ----       -----      -----        -----
<S>                                  <C>        <C>               <C>         <C>       <C>        <C>        <C>         <C>
Taubman Shopping Centers:
 Arizona Mills, Tempe, AZ            $22,017    $162,406         $      0     $22,017   $162,406   $184,423   $  1,371   $183,052
 Cherry Creek, Denver, CO                  0     103,795           20,457           0    124,252    124,252     34,043     90,209
 Fair Oaks, Fairfax, VA                5,167      36,182           10,638       5,167     46,820     51,987     27,736     24,251
 Lakeside, Sterling Heights, MI        2,667      21,182           10,110       2,667     31,292     33,959     21,277     12,682
 Stamford Town Center,
   Stamford, CT                        1,977      43,461           11,318       1,977     54,779     56,756     26,950     29,806
 Twelve Oaks Mall, Novi, MI              803      28,787           14,786         803     43,573     44,376     23,500     20,876
 Westfarms, Farmington, CT             5,287      38,657          111,001       5,287    149,658    154,945     22,418    132,527
 Woodfield, Schaumburg, IL             5,264      18,450           94,034       5,264    112,484    117,748     30,552     87,196
 Woodland, Grand Rapids, MI            2,367      19,078            9,517       2,367     28,595     30,962     17,812     13,150
Other Properties:
  Peripheral land                      2,789           0                0       2,789          0      2,789          0      2,789
  Construction in Process                  0           0           27,443           0     27,443     27,443          0     27,443
                                     -------    --------         --------     -------   --------   --------   --------   --------
TOTAL                                $48,338    $471,998         $309,304     $48,338   $781,302   $829,640   $205,659   $623,981
                                     =======    ========         ========     =======   ========   ========   ========   ========
<CAPTION>
                                                       Date of
                                                    Completion of   Depreciable
                                     Encumbrances    Construction       Life
                                     ------------   --------------  -----------
<S>                                  <C>               <C>           <C>
Taubman Shopping Centers:
 Arizona Mills, Tempe, AZ            $121,991          1997          50 Years
 Cherry Creek, Denver, CO             130,000          1990          40 Years
 Fair Oaks, Fairfax, VA                39,119          1980          55 Years
 Lakeside, Sterling Heights, MI        88,000          1976          40 Years
 Stamford Town Center,
   Stamford, CT                        55,630          1982          40 Years
 Twelve Oaks Mall, Novi, MI            49,940          1977          50 Years
 Westfarms, Farmington, CT            151,792          1974          34 Years
 Woodfield, Schaumburg, IL            172,000          1971          33 Years
 Woodland, Grand Rapids, MI            66,000          1968          33 Years
Other Properties:
  Peripheral land                           0
  Construction in Process                   0
                                     --------
TOTAL                                $874,472
                                     ========

The changes in total real estate  assets for the three years ended  December 31,
1997 are as follows:

                                          1997          1996       1995
                                          ----          ----       ----

   Balance, beginning of year         $638,960      $570,066     $600,877
    Improvements                       192,888       110,187(1)    48,320
    Disposals                           (2,208)       (4,775)     (79,131)(2)
    Transfers Out                                    (36,518)(3)
                                      --------      --------     --------
   Balance, end of year               $829,640      $638,960     $570,066
                                      ========      ========     ========

The changes in accumulated  depreciation  and  amortization  for the three years
ended December 31, 1997 are as follows:

                                           1997        1996         1995
                                           ----        ----         ----

   Balance, beginning of year         $(188,491)  $(196,263)   $(198,103)
    Depreciation for year               (18,669)    (17,976)     (18,378)
    Disposals                             1,501       4,564       20,218(2)
    Transfers Out                                    21,184(3)
                                      ---------   ---------    ---------
   Balance, end of year               $(205,659)  $(188,491)   $(196,263)
                                      =========   =========    =========

(1)  Includes   TRG's   transfer   to   Arizona   Mills  of  TRG's   accumulated
     pre-construction costs related to this project.
(2)  Includes amounts related to the disposition of Bellevue Center.  Subsequent
     to October 31,  1995,  TRG ceased  recognition  of  Bellevue's  operations,
     consequently,  the  accounts  of Bellevue  are no longer  included in these
     combined financial statements.
(3)  Subsequent to TRG's purchase of the Joint Venture Partner's  interest,  the
     accounts of Fairlane  are no longer  included in these  combined  financial
     statements.
</TABLE>


                                      F-42

<PAGE>



                                  SIGNATURES

      Pursuant to the  requirements of Section 13 or 15(d) of the Securities Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                    THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP

                              By:   Taubman Centers, Inc., Its  Managing General
                                    Partner

      Date:  March 27, 1998         By:   /s/ ROBERT S. TAUBMAN
                                          -------------------------------------
                                          Robert S. Taubman, President and
                                          Chief Executive Officer

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

      Signature                          Title                       Date
      ---------                          -----                       ----


         *                       Chairman of the Board           March 27, 1998
----------------------                                           --------------
A. Alfred Taubman

         *                     Vice Chairman of the Board        March 27, 1998
----------------------                                           --------------
Robert C. Larson

/s/ ROBERT S. TAUBMAN          President, Chief Executive        March 27, 1998
----------------------            Officer, and Director          --------------
Robert S. Taubman


/s/ LISA A. PAYNE               Chief Financial Officer          March 27, 1998
----------------------                and Director               --------------
Lisa A. Payne

/s/ ESTHER R. BLUM           Vice President, Controller and      March 27, 1998
----------------------         Chief Accounting Officer          --------------
Esther R. Blum

         *                              Director                 March 27, 1998
----------------------                                          --------------
Graham Allison

         *                              Director                 March 27, 1998
----------------------                                           --------------
Claude M. Ballard

         *                              Director                 March 27, 1998
----------------------                                           --------------
Allan J. Bloostein

         *                              Director                 March 27, 1998
----------------------                                           --------------
Jerome A. Chazen

         *                              Director                 March 27, 1998
----------------------                                           --------------
Thomas E. Dobrowski

         *                              Director                 March 27, 1998
----------------------                                           --------------
S. Parker Gilbert

         *                              Director                 March 27, 1998
----------------------                                           --------------
W. Allen Reed

*By:  /s/ LISA A. PAYNE
      -----------------
      Lisa A. Payne, as
      Attorney-in-Fact


<PAGE>



                                  EXHIBIT INDEX


Exhibit
Number
------

     2(a)  --  Purchase  and Sale  Agreement  By and Between One Federal  Street
               Joint Venture and The Taubman  Realty Group Limited  Partnership,
               dated  July  16,  1997  (Purchase  and Sale  Agreement)  (without
               exhibits or schedules,  which will be supplementally  provided to
               the  Securities  and  Exchange   Commission   upon  its  request)
               (incorporated  herein by reference to Exhibit 2(a) filed with the
               Registrant's Current Report on Form 8-K dated September 4, 1997).

     2(b)  --  First Amendment to Purchase and Sale Agreement,  dated August 15,
               1997 (without exhibits or schedules, which will be supplementally
               provided  to the  Securities  and  Exchange  Commission  upon its
               request)  (incorporated herein by reference to Exhibit 2(b) filed
               with the Registrant's  Current Report on Form 8-K dated September
               4, 1997).

     2(c)  --  Agreement of Purchase  and Sale By and Between The Falls  Limited
               L.P. and The Taubman  Realty  Group  Limited  Partnership,  dated
               November 5, 1997,  as amended by First  Amendment to Agreement of
               Purchase and Sale  entered  into on November 6, 1997,  and Second
               Amendment  to  Agreement  of Purchase  and Sale  entered  into on
               November 13, 1997 (without  exhibits or schedules,  which will be
               supplementally provided to the Securities and Exchange Commission
               upon its request).

     3     --  Form of The Amended and Restated Agreement of Limited Partnership
               of The  Taubman  Realty  Group  Limited  Partnership,  as amended
               through September 30, 1997  (incorporated  herein by reference to
               Exhibit 4(c) to TCO's Post-Effective  Amendment No. 1 to Form S-3
               Registration Statement No. 333-35433).

     4(a)  --  Amended and Restated  Indenture dated as of March 4, 1994 between
               The Taubman Realty Group Limited  Partnership  and Chemical Bank,
               as Trustee  (incorporated  herein by  reference  to Exhibit  4(a)
               filed  with  Amendment  No.  1 to the  Registrant's  Registration
               Statement  on Form S-4 (File  No.  33-73988)  (the  "Registration
               Statement")).

     4(b)  --  Officers'  Certificate  designating the terms of the 7% Notes due
               2003 (incorporated herein by reference to Exhibit 4(b) filed with
               Amendment No. 1 to the Registration Statement).

     4(c)  --  Officers' Certificate designating the terms of TRG's 8% Notes due
               1999 (incorporated herein by reference to Exhibit 4(f) filed with
               the  Registrant's  Quarterly  Report on Form 10-Q for the quarter
               ended June 30, 1994 (the "1994 Second Quarter Form 10-Q")).

     4(d)  --  Indenture  dated as of July 22, 1994 among Beverly Finance Corp.,
               La Cienega  Associates,  the Borrower,  and Morgan Guaranty Trust
               Company of New York, as Trustee (incorporated herein by reference
               to Exhibit 4(g) filed with the 1994 Second Quarter Form 10-Q).

     4(e)  --  Deed of Trust, with assignment of Rents,  Security  Agreement and
               Fixture  Filing,  dated  as of July  22,  1994,  from La  Cienega
               Associates, Grantor, to Commonwealth Land Title Company, Trustee,
               for the benefit of Morgan  Guaranty Trust Company of New York, as
               Trustee, Beneficiary (incorporated herein by reference to Exhibit
               4(h) filed with the 1994 Second Quarter Form 10-Q).

     4(f)  --  Medium-Term  Notes  due June 15,  2002  (incorporated  herein  by
               reference to Exhibit 4(i) filed with the  Registrant's  Quarterly
               Report on Form 10-Q for the quarter ended June 30, 1995).




<PAGE>



                                  EXHIBIT INDEX


Exhibit
Number
------

     4(g)  --  Amended and Restated  Revolving Loan Agreement  dated as of March
               5, 1997  (the  "Revolving  Loan  Agreement"),  among The  Taubman
               Realty Group  Limited  Partnership,  as  Borrower,  Union Bank of
               Switzerland,  (New  York  Branch),  as a Bank,  the  other  Banks
               signatory to the Revolving  Loan  Agreement,  each as a Bank, and
               Union Bank of Switzerland  (New York Branch),  as  Administrative
               Agent (incorporated  herein by reference to Exhibit 4, filed with
               the  Registrant's  Quarterly  Report on Form 10-Q for the quarter
               ended March 31, 1997 (the "1997 First Quarter Form 10-Q")).

     4(h)  --  Form  of  Contribution   and  Acceptance  of  Preferred   Equity,
               Designation of Series A Preferred  Equity,  and  Establishment of
               Preferred Rate (incorporated  herein by reference to Exhibit 4(d)
               to TCO's Post-Effective  Amendment No. 1 to Form S-3 Registration
               Statement No. 333-35433).

     4(i)  --  Construction  Loan Agreement among Taubman  MacArthur  Associates
               Limited Partnership, as Borrower, and Bayerische Hypotheken - Und
               Wechsel - Bank, Aktiengesellschaft, New York Branch and The Other
               Banks  and  Financial  Institutions  from  time to  time  Parties
               hereto, as Lenders and Bayerische Hypotheken - Und Wechsel - Bank
               Aktiengesellschaft,  New  York  Branch,  as  Agent,  dated  as of
               October 28, 1997.

     4(j)  --  Loan  Agreement  dated as of November  25, 1997 among The Taubman
               Realty Group Limited  Partnership,  as Borrower,  Fleet  National
               Bank, as a Bank, PNC Bank, National  Association,  as a Bank, the
               other  Banks  signatory  hereto,  each as a Bank,  and PNC  Bank,
               National Association, as Administrative Agent.

*    10(a) --  The Taubman  Realty  Group  Limited  Partnership  1992  Incentive
               Option Plan,  as Amended and  Restated  Effective as of September
               30, 1997.

     10(b) --  Corporate  Services  Agreement between Taubman Centers,  Inc. and
               The  Taubman   Company   Limited   Partnership   (the  "Manager")
               (incorporated herein by reference to Exhibit 10(b) filed with the
               Registration Statement).

     10(c) --  Master  Services  Agreement  between  The  Taubman  Realty  Group
               Limited  Partnership  and the  Manager  (incorporated  herein  by
               reference   to  Exhibit   10(c)   filed  with  the   Registration
               Statement).

*    10(d) --  Supplemental  Retirement  Savings  Plan  (incorporated  herein by
               reference  to Exhibit  10(e) filed with the  Registrant's  Annual
               Report on Form 10-K for the year ended December 31, 1994).

*    10(e) --  The  Taubman  Company  Long-Term  Performance  Compensation  Plan
               (incorporated herein by reference to Exhibit 10(g) filed with the
               Registrant's  Annual  Report  on Form  10-K  for the  year  ended
               December 31, 1995).

*    10(f) --  Employment   agreement   between  The  Taubman   Company  Limited
               Partnership and Lisa A. Payne  (incorporated  herein by reference
               to Exhibit 10 filed with the 1997 First Quarter Form 10-Q).

*    10(g) --  Amended and Restated  Continuing Offer, dated as of September 30,
               1997  (incorporated  herein by reference to Exhibit 10 filed with
               the Registrant's 1997 Third Quarter Report on Form 10-Q).

     12    --  Statement  Re:  Computation  of TRG's Ratios of Earnings to Fixed
               Charges and Preferred Distributions.

     21    --  Subsidiaries of The Taubman Realty Group Limited Partnership.




<PAGE>



                                  EXHIBIT INDEX


Exhibit
Number
------

     23    --  Consent of Deloitte & Touche LLP.

     24    --  Powers of Attorney.

     27    --  Financial Data Schedule.


------------------------
*  A management  contract or  compensatory  plan or  arrangement  required to be
   filed pursuant to Item 14(c) of Form 10-K.