MAC Macerich Co

Macerich Announces First Quarter Results Including 10% FFO Growth SANTA MONICA, Calif., May 2 /PRNewswire-FirstCall/ -- The Macerich Company (NYSE:MAC) today announced results of operations for the quarter ended March 31, 2005 which included net income to common stockholders for the three months ended March 31, 2005 of $18.1 million, or $.30 per share - diluted compared to net income of $18.1 million or $.31 per share-diluted for the three months ended March 31, 2004. Funds from operations ("FFO") per share - diluted for the quarter ended March 31, 2005 increased 10% to $.99 compared to $.90 for the comparable period in 2004. A reconciliation of net income to FFO and net income per common share-diluted ("EPS") to FFO per share-diluted is included in the financial highlights section of this press release. The Company's definition of FFO is in accordance with the definition provided by the National Association of Real Estate Investment Trusts ("NAREIT"). Recent Highlights: * Total same center tenant sales for the quarter ended March 31, 2005 were up 5.8% compared to the first quarter of 2004 and comparable tenant sales were up 4.6% over the quarter ended March 31, 2004. * Portfolio occupancy remained high at 92.2% at March 31, 2005, up from 91.8% at March 31, 2004. * The Company closed on the $2.333 billion acquisition of the Wilmorite entities. * Same center EBITDA grew 3.4% compared to the quarter ended March 31, 2004. * FFO per share - diluted for the quarter increased 10% to $.99 compared to $.90 for the quarter ended March 31, 2004. * During the first quarter, Macerich signed 187,000 square feet of specialty store leases at average initial rents of $35.77 per square foot. Commenting on the results, Arthur Coppola, President and Chief Executive Officer of Macerich stated, "During the quarter we saw strong retail sales growth and continued high occupancy levels. We also enjoyed double digit FFO growth fueled by solid same center performance and the positive impact of recent acquisitions. Also during the quarter we acquired interests in Metrocenter and Kierland Commons further strengthening our presence in the rapidly growing Phoenix market." Development and Redevelopments At Washington Square in suburban Portland, the Company is proceeding with an expansion project which consists of the addition of 80,000 square feet of shop space. The expansion is underway with substantial completion earmarked for the fourth quarter of 2005. The 500 acre master planned San Tan Village development in suburban Phoenix is moving forward. The project will unfold during several phases of development which will be driven by market and retailers' needs. Upon full completion, San Tan Village will represent 3,000,000 square feet of retail space. Phase I, featuring a 29 acre full service power center, will open a Wal-Mart in 2005 followed by a Sam's Club later in the year. Phase II represents an additional 308,000 square feet of gross leaseable area consisting of primarily big box retailers and is projected to open September 2005. The regional shopping center component of San Tan Village sits on 120 acres representing 1.3 million square feet of gross leaseable area including Dillard's and Robinsons-May. The project has a projected fall 2007 opening for the majority of the center. At Fresno Fashion Fair, a 92,600 square foot lifestyle center is being added. The ground breaking took place in March with a completion expected in the spring of 2006. The development of Twenty Ninth Street Center in Boulder, Colorado continues. The center will be an 877,000 square foot mixed use project. Twenty Ninth Street is an open-air retail, entertainment, restaurant and office district. Macerich has reached agreement with anchors Century Theatres, Wild Oats Market and Home Depot. The planned completion is in the fall of 2006. Acquisitions Metrocenter - In January, Macerich joined a joint venture that acquired the Metrocenter mall, a 1.39-million-square-foot Phoenix center. Macerich will handle the day to day leasing and management of the center. Macerich owns a 15% interest in the joint venture, and now has a Phoenix portfolio which currently eight regional malls -- with nearly 11.6 million square feet of gross leaseable area. Metrocenter is currently anchored by Dillard's, JCPenney, Robinsons-May, Sears and a 10-screen Harkins Theater. Kierland Commons - Also in January, Macerich formed a 50/50 joint venture to acquire a 49% interest in Kierland Commons in Phoenix. Macerich will manage and lease the property's retail components. Kierland Commons is a 38-acre "main street" development that includes 500,000 square feet of specialty retail, entertainment and restaurants, and office space. Offering more than 70 specialty retailers and restaurants, the center is now approximately 99%-occupied. Sales per square foot for stores open a year or more averaged approximately $550 in 2004. Prominent tenants include Crate & Barrel, Anthropologie, Orvis, Smith & Hawken, Cheesecake Factory, Ocean Club, Morton's, The Steakhouse, Tommy Bahama, Guess?, Lucky Brand Dungarees, Compound, Barnes & Noble, and Z Gallerie. The joint venture's investment in Kierland was $90 million, including the assumption of approximately $41 million of debt. Ridgmar Mall - On April 8, 2005, Macerich acquired Ridgmar Mall in Fort Worth, Texas. The acquisition was done in a 50/50 joint venture with an affiliate of Walton Street Capital, LLC. The purchase price was $71.1 million. Concurrent with the closing, a $57.4 million loan bearing interest at a fixed rate of 6.0725% was placed on the property. Ridgmar Mall is a 1.3 million square foot super-regional mall anchored by Dillard's, Foley's, JC Penney, Neiman Marcus and Sears. The mall includes 339,000 square feet of mall shop space and also includes a recently opened 13 screen, stadium style theater complex. Annual tenant sales per square foot are approximately $300, which is a 9% increase over the prior year. The Wilmorite Portfolio - On April 25, the Company closed on its acquisition of Wilmorite Properties, Inc. and Wilmorite Holdings L.P. ("Wilmorite"). The total purchase price was approximately $2.333 billion, including the assumption of approximately $879 million of existing debt at an average interest rate of 6.43% and the issuance of convertible preferred units and common units totaling $240 million. The Wilmorite portfolio includes interests in 11 regional malls and two open-air community centers, with 13.4 million square feet of space located in Connecticut, New York, New Jersey, Kentucky and Virginia. Approximately 5 million square feet of gross leaseable area is located at three premier regional malls: Tysons Corner Center in McLean, Virginia, Freehold Raceway Mall in Freehold, New Jersey and Danbury Fair Mall in Danbury, Connecticut. The average tenant sales per square foot for these three centers is in excess of $539. The total portfolio average of mall store annual sales per square foot is $392. Financing Activity: Concurrent with the Wilmorite closing, the Company repriced its $250 million unsecured term loan. The interest rate on the loan was reduced from LIBOR plus 2.50% to LIBOR plus 1.50%. The Company has committed to a refinancing of the mortgage on Lakewood Mall. The current mortgage of $127 million with interest at 7.1% will be replaced with a $250 million 10-year fixed rate loan bearing interest at 5.41%. Earnings Guidance: Management is revising its previously issued guidance for 2005 EPS and FFO per share as follows: Guidance for 2005 and reconciliation of EPS to FFO per share and to EBITDA per share: Range per share: Fully Diluted EPS $1.23 ... $1.33 Plus: Real Estate Depreciation and Amortization $3.12 ... $3.12 Less: impact of preferred shares (not dilutive to EPS) ($.08) ... ($.08) Less: Gain on Sale of Assets $ .03 ... $ .03 Fully Diluted FFO per share $4.30 ... $4.40 Plus: Interest Expense per share $4.34 ... $4.34 Plus: impact of dividends on preferred OP units $ .33 ... $ .33 Plus: Non real estate depreciation, income taxes and ground rent expense per share $ .23 ... $ .23 EBITDA per share $9.20 ... $9.30 Less: management company expenses, REIT General and administrative expenses and EBITDA of non-comparable centers ($2.71) ... ($2.71) Same center EBITDA per share $6.49 ... $6.59 This range is based on many assumptions, including the following: Management expects 2005 same center EBITDA to grow at a 2.5% to 3.0% rate compared to 2004 results. EBITDA represents earnings before interest, income taxes, depreciation, amortization, minority interest, extraordinary items, gain (loss) on sale of assets and preferred dividends and includes joint ventures at their pro rata share. Management has assumed short-term LIBOR interest rates will increase to 3.75% by year-end 2005. This is an increase of .75% over the prior assumption. The guidance is based on management's current view of the current market conditions in the regional mall business. Due to the uncertainty in the timing and economics of acquisitions and dispositions, the guidance ranges do not include any potential property acquisitions or dispositions other than those that have closed or are under contract as of April 30, 2005. The Company is not able to assess at this time the potential impact of such exclusions on future EPS and FFO. FFO does not include gains or losses on sales of depreciated operating assets Investor Conference Call The Company will provide an online Web simulcast and rebroadcast of its quarterly earnings conference call. The call will be available on The Macerich Company's website at http://www.macerich.com/ and through CCBN at http://www.fulldisclosure.com/. The call begins today, May 2, 2005 at 10:30 AM Pacific Time. To listen to the call, please go to any of these web sites at least 15 minutes prior to the call in order to register and download audio software if needed. An online replay at http://www.macerich.com/ will be available for one year after the call. The Macerich Company is a fully integrated self-managed and self- administered real estate investment trust, which focuses on the acquisition, leasing, management, development and redevelopment of regional malls throughout the United States. The Company is the sole general partner and owns an 81% ownership interest in The Macerich Partnership, L.P. Macerich owns approximately 77 million square feet of gross leaseable area consisting primarily of interests in 76 regional malls. Additional information about The Macerich Company can be obtained from the Company's web site at http://www.macerich.com/. Note: This release contains statements that constitute forward-looking statements. Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to vary materially from those anticipated, expected or projected. Such factors include, among others, general industry, economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of current and prospective tenants, anchor or tenant bankruptcies, closures, mergers or consolidations, lease rates and terms, interest rate fluctuations, availability and cost of financing and operating expenses; adverse changes in the real estate markets including, among other things, competition from other companies, retail formats and technology, risks of real estate development and redevelopment, acquisitions and dispositions; governmental actions and initiatives (including legislative and regulatory changes); environmental and safety requirements; and terrorist activities which could adversely affect all of the above factors. The reader is directed to the Company's various filings with the Securities and Exchange Commission, for a discussion of such risks and uncertainties. (See attached table) THE MACERICH COMPANY FINANCIAL HIGHLIGHTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Results before Impact of Results after SFAS 144 (e) SFAS 144 (e) SFAS 144 (e) Results of Operations: For the For the For the Three Months Three Months Three Months Ended March 31, Ended March 31, Ended March 31, Unaudited Unaudited 2005 2004 2005 2004 2005 2004 Minimum Rents $94,796 $75,947 ($1,760) ($2,867) $93,036 $73,080 Percentage Rents 2,805 2,427 (31) (30) 2,774 2,397 Tenant Recoveries 46,193 41,322 (979) (1,277) 45,214 40,045 Management Companies (c) 5,277 4,602 - - 5,277 4,602 Other Income 5,146 4,054 (68) (187) 5,078 3,867 Total Revenues 154,217 128,352 (2,838) (4,361) 151,379 123,991 Shopping center and operating expenses 48,964 40,289 (1,176) (1,439) 47,788 38,850 Management Companies' operating expenses (c) 10,538 7,149 - - 10,538 7,149 Depreciation and amortization 37,653 34,301 (684) (982) 36,969 33,319 General, administrative and other expenses 2,652 3,024 - - 2,652 3,024 Interest expense 42,564 33,333 - (74) 42,564 33,259 Loss on early extinguishment of debt - 405 - - - 405 Gain (loss) on sale or writedown of assets 1,605 27 (297) (27) 1,308 - Pro rata income (loss) of unconsolidated entities (c) 11,246 14,850 - - 11,246 14,850 Income (loss) of the Operating Partnership from continuing operations 24,697 24,728 (1,275) (1,893) 23,422 22,835 Discontinued Operations: Gain (loss) on sale of asset - - 297 27 297 27 Income from discontinued operations - - 978 1,866 978 1,866 Income before minority interests 24,697 24,728 - - 24,697 24,728 Income allocated to minority interests 4,199 4,400 - - 4,199 4,400 Net income before preferred dividends 20,498 20,328 - - 20,498 20,328 Dividends earned by preferred stockholders(a) 2,358 2,212 - - 2,358 2,212 Net income to common stockholders $18,140 $18,116 $0 $0 $18,140 $18,116 Average number of shares outstanding - basic 58,865 58,390 58,865 58,390 Average shares outstanding, assuming full conversion of OP Units(d) 73,284 72,987 73,284 72,987 Average shares outstanding - diluted for FFO(d) 76,912 76,614 76,912 76,614 Per share income - diluted before discontinued operations - - $0.28 $0.28 Net income per share-basic $0.31 $0.31 $0.31 $0.31 Net income per share- diluted $0.30 $0.31 $0.30 $0.31 Dividend declared per share $0.65 $0.61 $0.65 $0.61 Funds from operations "FFO" (b)(d) - basic 73,596 66,471 73,596 66,471 Funds from operations "FFO" (a)(b)(d) - diluted 75,954 68,683 75,954 68,683 FFO per share- basic (b)(d) $1.01 $0.92 $1.01 $0.92 FFO per share- diluted(a)(b)(d) $0.99 $0.90 $0.99 $0.90 percentage change 10.16% (a) On February 25, 1998, the Company sold $100,000 of convertible preferred stock and on June 16, 1998 another $150,000 of convertible preferred stock was issued. The convertible preferred shares can be converted on a 1 for 1 basis for common stock. These preferred shares are not assumed converted for purposes of net income per share for 2004 and 2005 as it would be antidilutive to those calculations. On September 9, 2003, 5.487 million shares of Series B convertible preferred stock were converted into common shares. The weighted average preferred shares outstanding are assumed converted for purposes of FFO per diluted share as they are dilutive to that calculation for all periods presented. (b) The Company uses FFO in addition to net income to report its operating and financial results and considers FFO and FFO-diluted as supplemental measures for the real estate industry and a supplement to Generally Accepted Accounting Principles (GAAP) measures. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from extraordinary items and sales of depreciated operating properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO and FFO on a fully diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as the Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. FFO on a fully diluted basis is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO as presented may not be comparable to similarly titled measures reported by other real estate investment trusts. Effective January 1, 2003, gains or losses on sale of peripheral land and the impact of SFAS 141 have been included in FFO. The inclusion of gains on sales of peripheral land increased FFO for the three months ended March 31, 2005 and 2004 by $1.6 million and $1.4 million respectively, or by $.02 per share and $.02 per share, respectively. Additionally, the impact of SFAS No. 141 increased FFO for the three months ended March 31, 2005 and 2004 by $2.4 million and $1.9 million, respectively, or by $.03 per share and approximately $.025 per share, respectively. (c) This includes, using the equity method of accounting, the Company's prorata share of the equity in income or loss of its unconsolidated joint ventures for all periods presented. Certain reclassifications have been made in the 2004 financial highlights to conform to the 2005 financial highlights presentation. (d) The Company has operating partnership units ("OP units"). Each OP unit can be converted into a share of Company stock. Conversion of the OP units has been assumed for purposes of calculating the FFO per share and the weighted average number of shares outstanding. (e) In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company adopted SFAS 144 on January 1, 2002. On December 17, 2004, the Company sold Westbar and the results for the three months ended March 31, 2004 have been reclassified to discontinued operations. The sale of Westbar resulted in a gain on sale of $6.8 million. On January 5, 2005, the Company sold Arizona Lifestyle Galleries and the results for the three months ended March 31, 2004 have been reclassified to discontinued operations. The sale of this property resulted in a gain on sale of $0.3 million. Additionally, the results of Crossroads Mall in Oklahoma for the three months ended March 31, 2005 and 2004 have been reclassified to discontinued operations as the Company has identified this asset for disposition. March 31 Dec 31 Summarized Balance Sheet Information 2005 2004 (UNAUDITED) Cash and cash equivalents $53,088 $72,114 Investment in real estate, net (h) $3,589,374 $3,574,553 Investments in unconsolidated entities (i) $674,492 $618,523 Total Assets $4,661,984 $4,637,096 Mortgage and notes payable $3,277,165 $3,230,120 Pro rata share of debt on unconsolidated entities $1,202,402 $1,147,268 March 31 March 31 Additional financial data as of: 2005 2004 Occupancy of centers (f) 92.20% 91.80% Comparable quarter change in same center sales(f) (g) 5.80% 7.90% Additional financial data for the three months ended: Acquisitions of property and equipment - including joint ventures prorata $55,606 $36,277 Redevelopment and expansions of centers- including joint ventures prorata $31,523 $52,897 Renovations of centers- including joint ventures at prorata $7,509 $9,293 Tenant allowances- including joint ventures at prorata $7,294 $2,419 Deferred leasing costs- including joint ventures at prorata $4,404 $3,470 (f) excludes redevelopment properties- 29th Street Center, Parklane Mall, Santa Monica Place (g) includes mall and freestanding stores. (h) includes construction in process on wholly owned assets of $97,609 at March 31, 2005 and $88,228 at December 31, 2004. (i) the Company's prorata share of construction in process on unconsolidated entities of $44,872 at March 31, 2005 and $32,047 at December 31, 2004. For the Three Months PRORATA SHARE OF JOINT VENTURES Ended March 31, (UNAUDITED) (Unaudited) (All amounts in thousands) 2005 2004 Revenues: Minimum rents $44,566 $40,061 Percentage rents 1,907 1,508 Tenant recoveries 19,160 17,889 Other 2,819 1,989 Total revenues 68,452 61,447 Expenses: Shopping center expenses 23,178 20,700 Interest expense 16,821 14,956 Depreciation and amortization 17,495 12,358 Total operating expenses 57,494 48,014 Gain on sale or writedown of assets 288 1,417 Net income $11,246 $14,850 For the Three Months RECONCILIATION OF NET INCOME TO FFO (b)(e) Ended March 31, (UNAUDITED) (All amounts in thousands) 2005 2004 Net income - available to common stockholders $18,140 $18,116 Adjustments to reconcile net income to FFO- basic Minority interest 4,199 4,400 (Gain ) loss on sale of wholly owned assets (1,605) (27) plus gain on land sales- consolidated assets 1,308 - (Gain) loss on sale or write-down of assets from unconsolidated entities (pro rata share) (288) (1,417) plus gain on land sales- unconsolidated assets 288 1,417 Depreciation and amortization on consolidated assets 37,232 34,301 Depreciation and amortization on joint ventures (pro rata) 17,495 12,358 Less: depreciation on personal property and amortization of loan costs and interest rate caps (3,173) (2,677) Total FFO - basic 73,596 66,471 Additional adjustment to arrive at FFO -diluted Preferred stock dividends earned 2,358 2,212 FFO - diluted $75,954 $68,683 For the Three Months Ended March 31, (UNAUDITED) (All amounts in thousands) Reconciliation of EPS to FFO per diluted share: 2005 2004 Earnings per share $0.30 $0.31 Per share impact of depreciation and amortization real estate $0.71 $0.60 Per share impact of gain on sale of depreciated assets $0.00 $0.00 Per share impact of preferred stock not dilutive to EPS ($0.02) ($0.01) Fully Diluted FFO per share $0.99 $0.90 THE MACERICH COMPANY For the Three Months RECONCILIATION OF NET INCOME TO EBITDA Ended March 31, (UNAUDITED) (All amounts in thousands) 2005 2004 Net income - available to common stockholders $18,140 $18,116 Interest expense 42,447 33,333 Interest expense - unconsolidated entities (pro rata) 16,821 14,956 Depreciation and amortization - wholly-owned centers 37,232 34,301 Depreciation and amortization - unconsolidated entities (pro rata) 17,495 12,358 Minority interest 4,199 4,400 Loss on early extinguishment of debt - 405 Loss (gain) on sale of assets - wholly-owned centers (1,605) (27) Loss (gain) on sale of assets - unconsolidated entities (pro rata) (288) (1,417) Preferred dividends 2,358 2,212 EBITDA(j) $136,799 $118,637 THE MACERICH COMPANY RECONCILIATION OF EBITDA TO SAME CENTERS - NET OPERATING INCOME ("NOI") For the Three Months Ended March 31, (UNAUDITED) (All amounts in thousands) 2005 2004 EBITDA (j) $136,799 $118,637 Add: REIT general and administrative expenses 2,652 3,024 Management Companies' revenues (c) (5,277) (4,602) Management Companies' operating expenses (c) 10,538 7,149 EBITDA of non-comparable centers (29,082) (12,394) SAME CENTERS - Net operating income ("NOI") (k) $115,630 $111,814 (j) EBITDA represents earnings before interest, income taxes, depreciation, amortization, minority interest, extraordinary items, gain (loss) on sale of assets and preferred dividends and includes joint ventures at their pro rata share. Management considers EBITDA to be an appropriate supplemental measure to net income because it helps investors understand the ability of the Company to incur and service debt and make capital expenditures. EBITDA should not be construed as an alternative to operating income as an indicator of the Company's operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) or as a measure of liquidity. EBITDA, as presented, may not be comparable to similarly titled measurements reported by other companies. (k) The Company presents same-center NOI because the Company believes it is useful for investors to evaluate the operating performance of comparable centers. Same-center NOI is calculated using total EBITDA and subtracting out EBITDA from non-comparable centers and eliminating the management companies and the Company's general and administrative expenses. DATASOURCE: The Macerich Company CONTACT: Arthur Coppola, President and Chief Executive Officer, or Thomas E. O'Hern, Executive Vice President and Chief Financial Officer, both of The Macerich Company, +1-310-394-6000 Web site: http://www.macerich.com/

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