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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2008
Commission File No. 1-12504
THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)
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MARYLAND
(State or other jurisdiction of
incorporation or organization)
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95-4448705
(I.R.S. Employer
Identification Number)
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401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401
(Address of principal executive office, including zip code)
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(310) 394-6000
(Registrant's telephone number, including area code)
|
N/A
(Former name, former address and former fiscal year, if changed since last report)
|
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 twelve (12) months (or such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety
(90) days.
YES
ý
NO
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
o
NO
ý
Number of shares outstanding as of August 8, 2008 of the registrant's common stock, par value $.01 per share: 74,641,909 shares
THE MACERICH COMPANY
FORM 10-Q
INDEX
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Part I
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Financial Information
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Item 1.
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Financial Statements (Unaudited)
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3
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Consolidated Balance Sheets of the Company as of June 30, 2008 and December 31, 2007
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3
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Consolidated Statements of Operations of the Company for the three and six months ended June 30, 2008 and 2007 (Restated)
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4
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Consolidated Statement of Common Stockholders' Equity of the Company for the six months ended June 30, 2008
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5
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Consolidated Statements of Cash Flows of the Company for the six months ended June 30, 2008 and 2007 (Restated)
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6
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Notes to Consolidated Financial Statements
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7
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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40
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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55
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Item 4.
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Controls and Procedures
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56
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Part II
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Other Information
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Item 1.
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Legal Proceedings
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57
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Item 1A.
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Risk Factors
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57
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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57
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Item 3.
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Defaults Upon Senior Securities
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57
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Item 4.
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Submission of Matters to a Vote of Security Holders
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57
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Item 5.
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Other Information
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58
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Item 6.
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Exhibits
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58
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Signature
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60
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2
THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
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June 30, 2008
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December 31, 2007
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(Unaudited)
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ASSETS:
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Property, net
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$
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6,084,946
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$
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6,187,473
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Cash and cash equivalents
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53,807
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85,273
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Restricted cash
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63,157
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68,384
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Marketable securities
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28,404
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29,043
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Tenant and other receivables, net
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111,238
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137,498
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Deferred charges and other assets, net
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324,306
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386,802
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Loans to unconsolidated joint ventures
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416
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604
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Due from affiliates
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6,095
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5,729
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Investments in unconsolidated joint ventures
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1,059,633
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785,643
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Assets held for sale
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326,763
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250,648
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Total assets
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$
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8,058,765
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$
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7,937,097
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LIABILITIES, MINORITY INTEREST, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY:
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Mortgage notes payable:
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Related parties
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$
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224,034
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$
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225,848
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Others
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3,103,930
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3,102,422
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Total
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3,327,964
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3,328,270
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Bank and other notes payable
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2,648,325
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2,434,688
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Accounts payable and accrued expenses
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74,788
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97,086
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Other accrued liabilities
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258,728
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289,660
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Preferred dividends payable
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1,112
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6,356
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Liabilities on assets held for sale
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45,063
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Total liabilities
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6,355,980
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6,156,060
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Minority interest
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291,063
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547,693
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Commitments and contingencies
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Series A cumulative convertible redeemable preferred stock, $.01 par value, 3,627,131 shares authorized, 1,044,271 and 3,067,131 shares issued and outstanding at
June 30, 2008 and December 31, 2007, respectively
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27,725
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83,495
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Common stockholders' equity:
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Common stock, $.01 par value, 145,000,000 shares authorized, 74,623,994 and 72,311,763 shares issued and outstanding at June 30, 2008 and December 31, 2007,
respectively
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746
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723
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Additional paid-in capital
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1,600,157
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1,367,566
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Accumulated deficit
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(192,482
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)
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(193,932
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)
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Accumulated other comprehensive loss
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(24,424
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)
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(24,508
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)
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Total common stockholders' equity
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1,383,997
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1,149,849
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Total liabilities, minority interest, preferred stock and common stockholders' equity
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$
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8,058,765
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$
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7,937,097
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The
accompanying notes are an integral part of these consolidated financial statements.
3
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
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For the Three Months
Ended June 30,
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For the Six Months
Ended June 30,
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2008
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2007
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2008
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2007
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(Restated)
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(Restated)
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Revenues:
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Minimum rents
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$
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123,604
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$
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114,784
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$
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249,435
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$
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227,744
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Percentage rents
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2,954
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2,838
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5,658
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6,502
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Tenant recoveries
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65,646
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60,650
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132,035
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121,515
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Management Companies
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10,382
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9,599
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20,073
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18,353
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Other
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6,711
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6,453
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13,040
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13,008
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Total revenues
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209,297
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194,324
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420,241
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387,122
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Expenses:
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Shopping center and operating expenses
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67,255
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61,873
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136,172
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123,889
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Management Companies' operating expenses
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20,529
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18,519
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38,872
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36,274
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REIT general and administrative expenses
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4,135
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4,412
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8,538
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9,785
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Depreciation and amortization
|
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56,811
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53,653
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117,518
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105,032
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148,730
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|
|
138,457
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301,100
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274,980
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Interest expense:
|
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|
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Related parties
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3,683
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|
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3,213
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7,379
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5,862
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Other
|
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64,823
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55,513
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131,954
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116,884
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|
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68,506
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58,726
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|
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139,333
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|
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122,746
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Loss on early extinguishment of debt
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|
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|
|
|
877
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|
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|
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Total expenses
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217,236
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197,183
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440,433
|
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|
398,603
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Minority interest in consolidated joint ventures
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|
(878
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)
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83
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|
(1,404
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)
|
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(1,135
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)
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Equity in income of unconsolidated joint ventures
|
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24,946
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18,997
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47,244
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33,480
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|
Income tax benefit
|
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|
689
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|
|
787
|
|
|
388
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|
|
907
|
|
Gain on sale of assets
|
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|
489
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|
2,279
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|
|
1,163
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4,031
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Income from continuing operations
|
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|
17,307
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19,287
|
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27,199
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25,802
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Discontinued operations:
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|
|
|
|
|
|
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|
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(Loss) gain on sale of assets
|
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|
(113
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)
|
|
(1,124
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)
|
|
99,150
|
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|
(1,413
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)
|
|
Income from discontinued operations
|
|
|
5,493
|
|
|
1,371
|
|
|
11,018
|
|
|
1,867
|
|
|
|
|
|
|
|
|
|
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|
Total income from discontinued operations
|
|
|
5,380
|
|
|
247
|
|
|
110,168
|
|
|
454
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and preferred dividends
|
|
|
22,687
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|
|
19,534
|
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|
137,367
|
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|
26,256
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|
Less: minority interest in Operating Partnership
|
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|
3,058
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|
|
1,940
|
|
|
19,656
|
|
|
2,578
|
|
|
|
|
|
|
|
|
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|
Net income
|
|
|
19,629
|
|
|
17,594
|
|
|
117,711
|
|
|
23,678
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|
Less: preferred dividends
|
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|
835
|
|
|
2,575
|
|
|
3,289
|
|
|
5,150
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|
Less: adjustment of minority interest due to redemption value
|
|
|
|
|
|
4,119
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|
|
|
|
|
4,119
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|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
18,794
|
|
$
|
10,900
|
|
$
|
114,422
|
|
$
|
14,409
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharebasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.19
|
|
$
|
0.20
|
|
$
|
0.28
|
|
$
|
0.25
|
|
|
Discontinued operations
|
|
|
0.06
|
|
|
(0.05
|
)
|
|
1.29
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
0.25
|
|
$
|
0.15
|
|
$
|
1.57
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharediluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.19
|
|
$
|
0.20
|
|
$
|
0.31
|
|
$
|
0.25
|
|
|
Discontinued operations
|
|
|
0.06
|
|
|
(0.05
|
)
|
|
1.24
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
0.25
|
|
$
|
0.15
|
|
$
|
1.55
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
73,780,000
|
|
|
71,528,000
|
|
|
73,061,000
|
|
|
71,597,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
86,781,000
|
|
|
84,552,000
|
|
|
88,465,000
|
|
|
84,792,000
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
THE MACERICH COMPANY
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Common
Stockholders'
Equity
|
|
|
|
Shares
|
|
Par
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Balance January 1, 2008
|
|
|
72,311,763
|
|
$
|
723
|
|
$
|
1,367,566
|
|
$
|
(193,932
|
)
|
$
|
(24,508
|
)
|
$
|
1,149,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
117,711
|
|
|
|
|
|
117,711
|
|
|
Reclassification of deferred losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
285
|
|
|
285
|
|
|
Interest rate swap/cap agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
117,711
|
|
|
84
|
|
|
117,795
|
|
Amortization of share and unit-based plans
|
|
|
185,503
|
|
|
2
|
|
|
10,615
|
|
|
|
|
|
|
|
|
10,617
|
|
Exercise of stock options
|
|
|
38,750
|
|
|
|
|
|
991
|
|
|
|
|
|
|
|
|
991
|
|
Employee stock purchases
|
|
|
6,494
|
|
|
|
|
|
363
|
|
|
|
|
|
|
|
|
363
|
|
Distributions paid ($1.60) per share
|
|
|
|
|
|
|
|
|
|
|
|
(116,261
|
)
|
|
|
|
|
(116,261
|
)
|
Preferred dividends
|
|
|
|
|
|
|
|
|
(3,289
|
)
|
|
|
|
|
|
|
|
(3,289
|
)
|
Conversion of partnership units and Class A non-participating convertible preferred units to common shares
|
|
|
58,624
|
|
|
1
|
|
|
1,768
|
|
|
|
|
|
|
|
|
1,769
|
|
Conversion of preferred shares to common shares
|
|
|
2,022,860
|
|
|
20
|
|
|
55,750
|
|
|
|
|
|
|
|
|
55,770
|
|
Reversal of adjustments to minority interest for the redemption value on the Rochester Properties
|
|
|
|
|
|
|
|
|
172,805
|
|
|
|
|
|
|
|
|
172,805
|
|
Adjustment to reflect minority interest on a pro rata basis for period end ownership percentage of Operating Partnership units
|
|
|
|
|
|
|
|
|
(6,412
|
)
|
|
|
|
|
|
|
|
(6,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2008
|
|
|
74,623,994
|
|
$
|
746
|
|
$
|
1,600,157
|
|
$
|
(192,482
|
)
|
$
|
(24,424
|
)
|
$
|
1,383,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
5
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
(Restated)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
114,422
|
|
$
|
14,409
|
|
|
Preferred dividends
|
|
|
3,289
|
|
|
5,150
|
|
|
Adjustment of minority interest due to redemption value
|
|
|
|
|
|
4,119
|
|
|
|
|
|
|
|
|
Net income
|
|
|
117,711
|
|
|
23,678
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
877
|
|
|
|
Gain on sale of assets
|
|
|
(1,163
|
)
|
|
(4,031
|
)
|
|
|
(Gain) loss on sale of assets of discontinued operations
|
|
|
(99,150
|
)
|
|
1,413
|
|
|
|
Depreciation and amortization
|
|
|
122,542
|
|
|
115,264
|
|
|
|
Amortization of net premium on mortgage and bank and other notes payable
|
|
|
(4,305
|
)
|
|
(5,171
|
)
|
|
|
Amortization of share and unit-based plans
|
|
|
5,695
|
|
|
7,194
|
|
|
|
Minority interest in Operating Partnership
|
|
|
19,656
|
|
|
2,578
|
|
|
|
Minority interest in consolidated joint ventures
|
|
|
1,404
|
|
|
8,610
|
|
|
|
Equity in income of unconsolidated joint ventures
|
|
|
(47,244
|
)
|
|
(33,480
|
)
|
|
|
Distributions of income from unconsolidated joint ventures
|
|
|
14,922
|
|
|
2,658
|
|
|
|
Changes in assets and liabilities, net of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
|
Tenant and other receivables, net
|
|
|
25,645
|
|
|
1,322
|
|
|
|
|
Other assets
|
|
|
(2,885
|
)
|
|
534
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(25,475
|
)
|
|
(15,795
|
)
|
|
|
|
Due from affiliates
|
|
|
(366
|
)
|
|
(62
|
)
|
|
|
|
Other accrued liabilities
|
|
|
(19,741
|
)
|
|
(3,617
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
107,246
|
|
|
101,972
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisitions of property, development, redevelopment and property improvements
|
|
|
(326,724
|
)
|
|
(223,477
|
)
|
|
Redemption of Rochester Properties
|
|
|
(18,873
|
)
|
|
|
|
|
Maturities of marketable securities
|
|
|
807
|
|
|
724
|
|
|
Deferred leasing costs
|
|
|
(18,127
|
)
|
|
(18,870
|
)
|
|
Distributions from unconsolidated joint ventures
|
|
|
48,999
|
|
|
65,426
|
|
|
Contributions to unconsolidated joint ventures
|
|
|
(142,124
|
)
|
|
(16,131
|
)
|
|
Repayments of loans to unconsolidated joint ventures
|
|
|
188
|
|
|
261
|
|
|
Proceeds from sale of assets
|
|
|
3,282
|
|
|
14,550
|
|
|
Restricted cash
|
|
|
(628
|
)
|
|
(4,243
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(453,200
|
)
|
|
(181,760
|
)
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from mortgages and bank and other notes payable
|
|
|
871,788
|
|
|
1,460,124
|
|
|
Payments on mortgages and bank and other notes payable
|
|
|
(414,856
|
)
|
|
(1,334,479
|
)
|
|
Deferred financing costs
|
|
|
(5,744
|
)
|
|
(873
|
)
|
|
Purchase of Capped Calls
|
|
|
|
|
|
(59,850
|
)
|
|
Repurchase of common stock
|
|
|
|
|
|
(74,970
|
)
|
|
Proceeds from share and unit-based plans
|
|
|
1,354
|
|
|
533
|
|
|
Dividends and distributions
|
|
|
(128,981
|
)
|
|
(118,854
|
)
|
|
Dividends to preferred stockholders/preferred unit holders
|
|
|
(9,073
|
)
|
|
(12,244
|
)
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
314,488
|
|
|
(140,613
|
)
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(31,466
|
)
|
|
(220,401
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
85,273
|
|
|
269,435
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
53,807
|
|
$
|
49,034
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash payments for interest, net of amounts capitalized
|
|
$
|
143,125
|
|
$
|
137,960
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
Acquisition of minority interest in Non-Rochester Properties in exchange for interest in Rochester Properties
|
|
$
|
205,520
|
|
$
|
|
|
|
|
|
|
|
|
|
Deposits contributed to unconsolidated joint ventures and the purchase of properties
|
|
$
|
51,943
|
|
$
|
|
|
|
|
|
|
|
|
|
Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities
|
|
$
|
55,156
|
|
$
|
63,880
|
|
|
|
|
|
|
|
|
Accrued preferred dividend payable
|
|
$
|
1,112
|
|
$
|
|
|
|
|
|
|
|
|
|
Acquisition of property by assumption of mortgage note payable
|
|
$
|
15,775
|
|
$
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
1. Organization:
The Macerich Company (the "Company") is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers (the
"Centers") located throughout the United States.
The
Company commenced operations effective with the completion of its initial public offering on March 16, 1994. As of June 30, 2008, the Company was the sole general
partner of and held an 86% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership"). The interests in the Operating Partnership are known as "OP Units." OP Units not
held by the Company are redeemable, subject to certain restrictions, on a one-for-one basis for the Company's common stock or cash at the Company's option.
The
Company was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. The 14% limited partnership interest of the Operating
Partnership not owned by the Company is reflected in these consolidated financial statements as minority interest in the Operating Partnership.
The
property management, leasing and redevelopment of the Company's portfolio is provided by the Company's management companies, Macerich Property Management Company, LLC
("MPMC, LLC"), a single member Delaware limited liability company, Macerich Management Company ("MMC"), a California corporation, Westcor Partners, L.L.C., a single member Arizona limited
liability company, Macerich Westcor Management LLC, a single member Delaware limited liability company, Westcor Partners of Colorado, LLC, a Colorado limited liability company, MACW Mall
Management, Inc., a New York corporation, and MACW Property Management, LLC, a single member New York limited liability company. These last two management companies are collectively
referred to herein as the "Wilmorite Management Companies." The three Westcor management companies are collectively referred to herein as the "Westcor Management Companies." All seven of the
management companies are collectively referred to herein as the "Management Companies."
2. Basis of Presentation:
The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by
GAAP for complete financial statements and have not been audited by independent public accountants.
The
accompanying consolidated financial statements include the accounts of the Company and the Operating Partnership. Investments in entities that are controlled by the Company or meet
the definition of a variable interest entity in which an enterprise absorbs the majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a
result of ownership, contractual or other financial interests in the entity are consolidated; otherwise they are accounted for under the equity method and are reflected as "Investments in
unconsolidated joint ventures."
7
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
2. Basis of Presentation: (Continued)
The
unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K/A for the year ended December 31, 2007. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial statements for the interim periods have been made. The preparation of consolidated financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying consolidated balance sheet as of December 31, 2007
has been derived from the audited financial statements, but does not include all disclosures required by GAAP.
All
intercompany accounts and transactions have been eliminated in the consolidated financial statements.
Tenant and Other Receivables:
Included in tenant and other receivables is an allowance for doubtful accounts of $2,158 and $2,417 at June 30, 2008 and
December 31, 2007, respectively.
Included
in tenant and other receivables are the following notes receivable:
On
March 31, 2006, the Company received a note receivable that is secured by a deed of trust, bears interest at 5.5% and matures on March 31, 2031. At June 30, 2008
and December 31, 2007, the note had a balance of $9,556 and $9,661, respectively.
On
January 1, 2008, as part of the Rochester Redemption (See Note 14Discontinued Operations), the Company received an unsecured note receivable that bears
interest at 9.0% and matures on June 30, 2011. The balance on the note at June 30, 2008 was $11,763.
Recent Accounting Pronouncements:
In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In February
2008, the FASB issued FASB Staff Position ("FSP") SFAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purpose of Lease Classification or Measurement under Statement 13 ("FSP FAS 157-1") and FSP SFAS 157-2,
Effective Date of SFAS No. 157 ("FSP FAS 157-2"). FSP FAS 157-2 defers the effective date of SFAS No. 157 for all
non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis.
FSP FAS 157-1 excludes from the scope of SFAS No. 157 certain leasing transactions accounted for under SFAS No. 13, "Accounting for Leases." The Company adopted
SFAS No. 157 and FSP FAS 157-1 on a prospective basis effective January 1, 2008.
8
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
2. Basis of Presentation: (Continued)
The
adoption of SFAS No. 157 and FSP FAS 157-1 did not have a material impact on the Company's results of operations or financial condition.
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement
No. 115." SFAS No. 159 permits, at the option of the reporting entity, measurement of certain assets and liabilities at fair value. The Company adopted SFAS No. 159 on
January 1, 2008. The adoption of SFAS No. 159 did not have a material effect on the Company's results of operations or financial condition as the Company did not elect to apply the fair
value option to eligible financial instruments on that date.
In
December 2007, the FASB issued SFAS No. 141 (revised), "Business Combinations." SFAS No. 141(R) requires all assets and assumed liabilities, including contingent
liabilities, in a business combination to be recorded at their acquisition-date fair value rather than at historical costs. The Company is required to adopt SFAS No. 141
(R) on January 1, 2009. The Company is currently evaluating the impact of adoption on the Company's results of operations and financial condition.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment to ARB No. 51". SFAS No. 160
clarifies the accounting for a noncontrolling interest or minority interest in a subsidiary included in consolidated financial statements. The Company is required to adopt SFAS No. 160 on
January 1, 2009 and is currently evaluating the impact of adoption on the Company's results of operations and financial condition.
In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging ActivitiesAn Amendment of FASB Statement No. 133." SFAS
No. 161 requires additional disclosures on derivative instruments and hedging activities and their effect on the reporting entity's financial statements. The Company is required to adopt SFAS
No. 161 on January 1, 2009 and does not expect the adoption to have a material impact on the Company's results of operations or financial condition.
In
May 2008, the FASB issued FSP APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)." FSP APB 14-1 requires that convertible debt instruments that may be settled in cash be separated into liability and equity components in a manner that will
reflect the reporting entity's nonconvertible debt borrowing rate. The Company is required to adopt FSP APB 14-1 on January 1, 2009 and is currently evaluating the
impact of adoption on the Company's results of operations or financial condition.
Fair Value of Financial Instruments:
On January 1, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value hierarchy distinguishes between market participant assumptions based on market
data obtained from sources independent of the reporting entity and the reporting entity's own assumptions about market participant assumptions.
Level 1
inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than
quoted prices included in
9
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
2. Basis of Presentation: (Continued)
Level 1
that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as
well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted
intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity. In
instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair
value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the
fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The
Company calculates the fair value of financial instruments and includes this additional information in the notes to consolidated financial statements when the fair value is different
than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the current year presentation. The Company reclassified loss on early
extinguishment of debt to be included in total expenses in the consolidated statements of operations.
3. Earnings per Share:
The computation of basic earnings per share ("EPS") is based on net income available to common stockholders and the weighted average number of common shares outstanding for the three and
six months ended June 30, 2008 and 2007. The computation of diluted earnings per share includes the dilutive effect of share and unit-based compensation plans and convertible senior
notes calculated using the treasury stock method and the dilutive effect of all other dilutive securities calculated using the "if-converted" method. The OP Units and MACWH, LP
common units not held by the Company have been included in the diluted EPS calculation since they may be redeemed on a one-for-one basis for
10
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
3. Earnings per Share: (Continued)
common
stock or cash, at the Company's option. The following table reconciles the basic and diluted earnings per share calculation (dollars and shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
Net
Income
|
|
Shares
|
|
Per
Share
|
|
Net
Income
|
|
Shares
|
|
Per
Share
|
|
Net income
|
|
$
|
19,629
|
|
|
|
|
|
|
|
$
|
17,594
|
|
|
|
|
|
|
|
Less: preferred dividends
|
|
|
835
|
|
|
|
|
|
|
|
|
2,575
|
|
|
|
|
|
|
|
Less: adjustment of minority interest due to redemption value
|
|
|
|
|
|
|
|
|
|
|
|
4,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
|
18,794
|
|
|
73,780
|
|
$
|
0.25
|
|
|
10,900
|
|
|
71,528
|
|
$
|
0.15
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of partnership units
|
|
|
3,058
|
|
|
12,539
|
|
|
|
|
|
1,940
|
|
|
12,726
|
|
|
|
|
Share and unit-based plans(1)
|
|
|
|
|
|
462
|
|
|
|
|
|
|
|
|
298
|
|
|
|
|
Convertible preferred stock(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
21,852
|
|
|
86,781
|
|
$
|
0.25
|
|
$
|
12,840
|
|
|
84,552
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
Net
Income
|
|
Shares
|
|
Per
Share
|
|
Net
Income
|
|
Shares
|
|
Per
Share
|
|
Net income
|
|
$
|
117,711
|
|
|
|
|
|
|
|
$
|
23,678
|
|
|
|
|
|
|
|
Less: preferred dividends
|
|
|
3,289
|
|
|
|
|
|
|
|
|
5,150
|
|
|
|
|
|
|
|
Less: adjustment of minority interest due to redemption value
|
|
|
|
|
|
|
|
|
|
|
|
4,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
|
114,422
|
|
|
73,061
|
|
$
|
1.57
|
|
|
14,409
|
|
|
71,597
|
|
$
|
0.20
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of partnership units
|
|
|
19,656
|
|
|
12,546
|
|
|
|
|
|
2,578
|
|
|
12,890
|
|
|
|
|
Share and unit-based plans(1)
|
|
|
|
|
|
398
|
|
|
|
|
|
|
|
|
305
|
|
|
|
|
Convertible preferred stock(2)
|
|
|
3,289
|
|
|
2,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
137,367
|
|
|
88,465
|
|
$
|
1.55
|
|
$
|
16,987
|
|
|
84,792
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Diluted
EPS excludes 279,707 of unvested restricted shares of common stock for the three and six months ended June 30, 2008, as their effect was
antidilutive to net income available to common stockholders. Additionally, the convertible senior notes (See Note 10Bank and Other Notes
11
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
3. Earnings per Share: (Continued)
Payable)
are excluded from diluted EPS for the three and six months ended June 30, 2008 and 2007 as their effect would be antidilutive to net income available to common
stockholders.
-
(2)
-
The
convertible preferred stock (See Note 17Cumulative Convertible Redeemable Preferred Stock) can be converted on a
one-for-one basis for common stock. The convertible preferred stock was dilutive to net income available to common stockholders for the six months ended June 30, 2008.
For the three months ended June 30, 2008, 1,852,131 shares of convertible preferred stock were excluded as their effect was antidilutive to net income available to common stockholders. In
addition, the outstanding 3,627,131 shares of convertible preferred stock were excluded from diluted EPS for the three and six months ended June 30, 2007 as their effect was antidilutive to net
income available to common stockholders.
The
minority interest in the Operating Partnership as reflected in the Company's consolidated statements of operations has been allocated for EPS calculations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Income from continuing operations
|
|
$
|
2,276
|
|
$
|
2,525
|
|
$
|
3,506
|
|
$
|
3,136
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale of assets
|
|
|
(16
|
)
|
|
(170
|
)
|
|
14,535
|
|
|
(215
|
)
|
|
Income (loss) from discontinued operations
|
|
|
798
|
|
|
(415
|
)
|
|
1,615
|
|
|
(343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,058
|
|
$
|
1,940
|
|
$
|
19,656
|
|
$
|
2,578
|
|
|
|
|
|
|
|
|
|
|
|
The
Company had an 86% and 85% ownership interest in the Operating Partnership as of June 30, 2008 and December 31, 2007, respectively. The remaining 14% and 15% limited
partnership interest as of June 30, 2008 and December 31, 2007, respectively, was owned by certain of the Company's executive officers and directors, certain of their affiliates, and
other outside investors in the form of OP Units. The OP Units may be redeemed on a one-for-one basis for common shares or cash, at the Company's option. The redemption value
for each OP Unit of the Company as of any balance sheet date is the amount equal to the average of the closing quoted price per share of the Company's common stock, par value $.01 per share, as
reported on the New York Stock Exchange for the ten trading days immediately preceding the respective balance sheet date. Accordingly, as of June 30, 2008 and December 31, 2007, the
aggregate redemption value of the then-outstanding OP Units not owned by the Company was $812,301 and $904,150, respectively.
12
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures:
The following are the Company's investments in unconsolidated joint ventures. The Operating Partnership's interest in each joint venture property as of June 30, 2008 was as
follows:
|
|
|
|
|
Joint Venture
|
|
Operating
Partnership's
Ownership %(1)
|
|
Biltmore Shopping Center Partners LLC
|
|
|
50.0
|
%
|
Camelback Colonnade SPE LLC
|
|
|
75.0
|
%
|
Chandler Festival SPE LLC
|
|
|
50.0
|
%
|
Chandler Gateway SPE LLC
|
|
|
50.0
|
%
|
Chandler Village Center, LLC
|
|
|
50.0
|
%
|
Coolidge Holding LLC
|
|
|
37.5
|
%
|
Corte Madera Village, LLC
|
|
|
50.1
|
%
|
Desert Sky MallTenants in Common
|
|
|
50.0
|
%
|
East Mesa Land, L.L.C.
|
|
|
50.0
|
%
|
East Mesa Mall, L.L.C.Superstition Springs Center
|
|
|
33.3
|
%
|
Jaren Associates #4
|
|
|
12.5
|
%
|
Kierland Tower Lofts, LLC
|
|
|
15.0
|
%
|
Macerich Northwestern Associates
|
|
|
50.0
|
%
|
Macerich SanTan Phase 2 SPE LLCSanTan Village Power Center
|
|
|
34.9
|
%
|
MetroRising AMS Holding LLC
|
|
|
15.0
|
%
|
New River AssociatesArrowhead Towne Center
|
|
|
33.3
|
%
|
North Bridge Chicago LLC
|
|
|
50.0
|
%
|
NorthPark Land Partners, LP
|
|
|
50.0
|
%
|
NorthPark Partners, LP
|
|
|
50.0
|
%
|
One Scottsdale Investors LLC
|
|
|
50.0
|
%
|
Pacific Premier Retail Trust
|
|
|
51.0
|
%
|
PHXAZ/Kierland Commons, L.L.C.
|
|
|
24.5
|
%
|
Propcor Associates
|
|
|
25.0
|
%
|
Propcor II Associates, LLCBoulevard Shops
|
|
|
50.0
|
%
|
Scottsdale Fashion Square Partnership
|
|
|
50.0
|
%
|
SDG Macerich Properties, L.P.
|
|
|
50.0
|
%
|
The Market at Estrella Falls LLC
|
|
|
35.1
|
%
|
Tysons Corner Holdings LLC
|
|
|
50.0
|
%
|
Tysons Corner LLC
|
|
|
50.0
|
%
|
Tysons Corner Property Holdings II LLC
|
|
|
50.0
|
%
|
Tysons Corner Property Holdings LLC
|
|
|
50.0
|
%
|
Tysons Corner Property LLC
|
|
|
50.0
|
%
|
WM Inland, L.L.C.
|
|
|
50.0
|
%
|
West Acres Development, LLP
|
|
|
19.0
|
%
|
Westcor/Gilbert, L.L.C.
|
|
|
50.0
|
%
|
Westcor/Goodyear, L.L.C.
|
|
|
50.0
|
%
|
Westcor/Queen Creek Commercial LLC
|
|
|
37.7
|
%
|
Westcor/Queen Creek LLC
|
|
|
37.7
|
%
|
Westcor/Queen Creek Medical LLC
|
|
|
37.7
|
%
|
Westcor/Queen Creek Residential LLC
|
|
|
37.6
|
%
|
Westcor/Surprise Auto Park LLC
|
|
|
33.3
|
%
|
Westpen Associates
|
|
|
50.0
|
%
|
WM Ridgmar, L.P.
|
|
|
50.0
|
%
|
Wilshire BuildingTenants in Common
|
|
|
30.0
|
%
|
-
(1)
-
The
Operating Partnership's ownership interest in this table reflects its legal ownership interest but may not reflect its economic interest since each
joint venture has various agreements regarding cash flow, profits and losses, allocations, capital requirements and other matters.
13
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
The Company generally accounts for its investments in joint ventures using the equity method of accounting unless the Company has a controlling
interest in the joint venture or is the primary beneficiary in a variable interest entity. Although the Company has a greater than 50% interest in Pacific Premier Retail Trust, Camelback Colonnade
SPE LLC and Corte Madera Village, LLC, the Company shares management control with the partners in these joint ventures and accounts for these joint ventures using the equity method of
accounting.
The
Company had the following recent investments in unconsolidated joint venture interests:
On
September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,546 square foot specialty center in Scottsdale, Arizona. The total
purchase price of $13,500 was funded by cash, borrowings under the Company's line of credit and the assumption of an $8,600 mortgage note payable. The Center was previously accounted for under the
equity method as an investment in unconsolidated joint ventures.
On
October 25, 2007, the Company purchased a 30% tenants-in-common interest in the Wilshire Building, a 40,000 square foot strip center in Santa Monica,
California. The total purchase price of $27,000 was funded by cash, borrowings under the Company's line of credit and the assumption of a $6,650 mortgage note payable. The results of the Wilshire
Building are included below for the period subsequent to its date of acquisition.
On
January 10, 2008, the Company, in a 50/50 joint venture, acquired The Shops at North Bridge, a 680,933 square foot urban shopping center in Chicago, Illinois, for a total
purchase price of $515,000. The Company's share of the purchase price was funded by the assumption of a pro rata share of the $205,000 fixed rate mortgage on the Center and by borrowings under the
Company's line of credit. The results of The Shops at North Bridge are included below for the period subsequent to its date of acquisition.
On
June 11, 2008, the Company became a 50% owner in a joint venture that acquired One Scottsdale, which plans to develop a luxury retail and mixed-use property in Scottsdale, Arizona.
The Company's share of the purchase price was $52,500, which was funded by borrowings under the Company's line of
credit. The results of One Scottsdale are included below for the period subsequent to its date of acquisition.
Combined
and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.
14
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
Combined
and Condensed Balance Sheets of Unconsolidated Joint Ventures:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
December 31,
2007
|
|
Assets(1):
|
|
|
|
|
|
|
|
|
Properties, net
|
|
$
|
4,897,969
|
|
$
|
4,294,147
|
|
|
Other assets
|
|
|
475,729
|
|
|
456,919
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,373,698
|
|
$
|
4,751,066
|
|
|
|
|
|
|
|
Liabilities and partners' capital(1):
|
|
|
|
|
|
|
|
|
Mortgage notes payable(2)
|
|
$
|
4,033,625
|
|
$
|
3,865,593
|
|
|
Other liabilities
|
|
|
222,185
|
|
|
183,884
|
|
|
The Company's capital(3)
|
|
|
601,867
|
|
|
401,333
|
|
|
Outside partners' capital
|
|
|
516,021
|
|
|
300,256
|
|
|
|
|
|
|
|
Total liabilities and partners' capital
|
|
$
|
5,373,698
|
|
$
|
4,751,066
|
|
|
|
|
|
|
|
-
(1)
-
These
amounts include the assets and liabilities of the following significant joint ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
SDG
Macerich
Properties, L.P.
|
|
Pacific
Premier
Retail
Trust
|
|
Tysons
Corner
LLC
|
|
As of June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
888,952
|
|
$
|
1,022,156
|
|
$
|
640,351
|
|
Total Liabilities
|
|
$
|
824,089
|
|
$
|
836,003
|
|
$
|
367,279
|
|
As of December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
904,186
|
|
$
|
1,026,973
|
|
$
|
640,179
|
|
Total Liabilities
|
|
$
|
826,291
|
|
$
|
842,816
|
|
$
|
364,554
|
|
-
(2)
-
Certain
joint ventures have debt that could become recourse debt to the Company should the joint venture be unable to discharge the obligations of the
related debt. As of June 30, 2008 and December 31, 2007, the total amount of debt that could become recourse to the Company was $15,366 and $8,655, respectively. Included in mortgage
notes payable are amounts due to affiliates of Northwestern Mutual Life ("NML") of $122,733 and $125,984 as of June 30, 2008 and December 31, 2007, respectively. NML is
considered a related party because it is a joint venture partner with the Company in Macerich Northwestern Associates. Interest expense incurred on these borrowings amounted to $2,054 and $2,188 for
the three months ended June 30, 2008 and 2007 and $4,159 and $4,367 for the six months ended June 30, 2008 and 2007, respectively.
-
(3)
-
The
Company's investment in unconsolidated joint ventures was $457,766 and $384,310 more than the underlying equity as reflected in the joint ventures'
financial statements as of June 30, 2008 and December 31, 2007, respectively. This represents the difference between the cost of the
15
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
investment
and the book value of the underlying equity of the joint venture. The Company is amortizing this difference into income on a straight-line basis, consistent with the lives of
the Company's underlying assets. The amortization of this difference was $1,876 and $868 for the three months ended June 30, 2008 and 2007, respectively, and $4,364 and $2,399 for the six
months ended June 30, 2008 and 2007, respectively.
16
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
Combined
and Condensed Statements of Operations of Unconsolidated Joint Ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SDG
Macerich
Properties, L.P.
|
|
Pacific
Premier
Retail Trust
|
|
Tysons
Corner
LLC
|
|
Other
Joint
Ventures
|
|
Total
|
|
Three Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
23,384
|
|
$
|
32,034
|
|
$
|
15,056
|
|
$
|
70,747
|
|
$
|
141,221
|
|
|
Percentage rents
|
|
|
601
|
|
|
579
|
|
|
668
|
|
|
2,729
|
|
|
4,577
|
|
|
Tenant recoveries
|
|
|
11,850
|
|
|
12,000
|
|
|
9,202
|
|
|
33,396
|
|
|
66,448
|
|
|
Other
|
|
|
886
|
|
|
1,095
|
|
|
367
|
|
|
23,266
|
|
|
25,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
36,721
|
|
|
45,708
|
|
|
25,293
|
|
|
130,138
|
|
|
237,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
14,792
|
|
|
13,326
|
|
|
7,496
|
|
|
41,913
|
|
|
77,527
|
|
|
Interest expense
|
|
|
11,632
|
|
|
11,289
|
|
|
4,126
|
|
|
28,773
|
|
|
55,820
|
|
|
Depreciation and amortization
|
|
|
7,707
|
|
|
8,089
|
|
|
4,658
|
|
|
26,140
|
|
|
46,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
34,131
|
|
|
32,704
|
|
|
16,280
|
|
|
96,826
|
|
|
179,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale of assets
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
6,170
|
|
|
6,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,576
|
|
$
|
13,004
|
|
$
|
9,013
|
|
$
|
39,482
|
|
$
|
64,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's equity in net income
|
|
$
|
1,288
|
|
$
|
6,618
|
|
$
|
4,507
|
|
$
|
12,533
|
|
$
|
24,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
22,778
|
|
$
|
30,823
|
|
$
|
14,754
|
|
$
|
61,211
|
|
$
|
129,566
|
|
|
Percentage rents
|
|
|
513
|
|
|
872
|
|
|
129
|
|
|
2,669
|
|
|
4,183
|
|
|
Tenant recoveries
|
|
|
11,756
|
|
|
12,782
|
|
|
7,364
|
|
|
28,674
|
|
|
60,576
|
|
|
Other
|
|
|
847
|
|
|
991
|
|
|
487
|
|
|
4,927
|
|
|
7,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
35,894
|
|
|
45,468
|
|
|
22,734
|
|
|
97,481
|
|
|
201,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
14,342
|
|
|
13,039
|
|
|
6,352
|
|
|
35,080
|
|
|
68,813
|
|
|
Interest expense
|
|
|
11,589
|
|
|
12,329
|
|
|
4,172
|
|
|
24,569
|
|
|
52,659
|
|
|
Depreciation and amortization
|
|
|
7,457
|
|
|
7,737
|
|
|
5,101
|
|
|
21,199
|
|
|
41,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
33,388
|
|
|
33,105
|
|
|
15,625
|
|
|
80,848
|
|
|
162,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of assets
|
|
|
13
|
|
|
|
|
|
|
|
|
772
|
|
|
785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,519
|
|
$
|
12,363
|
|
$
|
7,109
|
|
$
|
17,405
|
|
$
|
39,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's equity in net income
|
|
$
|
1,260
|
|
$
|
6,294
|
|
$
|
3,169
|
|
$
|
8,274
|
|
$
|
18,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SDG
Macerich
Properties, L.P.
|
|
Pacific
Premier
Retail Trust
|
|
Tysons
Corner
LLC
|
|
Other
Joint
Ventures
|
|
Total
|
|
Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
46,585
|
|
$
|
63,983
|
|
$
|
30,150
|
|
$
|
138,956
|
|
$
|
279,674
|
|
Percentage rents
|
|
|
1,531
|
|
|
1,703
|
|
|
1,121
|
|
|
4,917
|
|
|
9,272
|
|
Tenant recoveries
|
|
|
24,277
|
|
|
24,916
|
|
|
18,235
|
|
|
67,794
|
|
|
135,222
|
|
Other
|
|
|
1,977
|
|
|
2,194
|
|
|
973
|
|
|
29,388
|
|
|
34,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
74,370
|
|
|
92,796
|
|
|
50,479
|
|
|
241,055
|
|
|
458,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
29,738
|
|
|
26,463
|
|
|
15,210
|
|
|
81,324
|
|
|
152,735
|
|
|
Interest expense
|
|
|
23,260
|
|
|
22,894
|
|
|
8,242
|
|
|
58,313
|
|
|
112,709
|
|
|
Depreciation and amortization
|
|
|
15,158
|
|
|
15,921
|
|
|
9,280
|
|
|
49,464
|
|
|
89,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
68,156
|
|
|
65,278
|
|
|
32,732
|
|
|
189,101
|
|
|
355,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale of assets
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
14,786
|
|
|
14,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,200
|
|
$
|
27,518
|
|
$
|
17,747
|
|
$
|
66,740
|
|
$
|
118,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's equity in net income
|
|
$
|
3,100
|
|
$
|
14,003
|
|
$
|
8,874
|
|
$
|
21,267
|
|
$
|
47,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
45,927
|
|
$
|
61,708
|
|
$
|
30,700
|
|
$
|
121,036
|
|
$
|
259,371
|
|
|
Percentage rents
|
|
|
1,726
|
|
|
2,457
|
|
|
86
|
|
|
4,636
|
|
|
8,905
|
|
|
Tenant recoveries
|
|
|
23,717
|
|
|
24,802
|
|
|
15,616
|
|
|
58,188
|
|
|
122,323
|
|
|
Other
|
|
|
1,788
|
|
|
1,948
|
|
|
917
|
|
|
8,511
|
|
|
13,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
73,158
|
|
|
90,915
|
|
|
47,319
|
|
|
192,371
|
|
|
403,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
29,141
|
|
|
25,471
|
|
|
12,602
|
|
|
67,934
|
|
|
135,148
|
|
|
Interest expense
|
|
|
23,059
|
|
|
24,617
|
|
|
8,369
|
|
|
50,209
|
|
|
106,254
|
|
|
Depreciation and amortization
|
|
|
14,720
|
|
|
15,320
|
|
|
10,365
|
|
|
47,267
|
|
|
87,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
66,920
|
|
|
65,408
|
|
|
31,336
|
|
|
165,410
|
|
|
329,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale of assets
|
|
|
(4,751
|
)
|
|
|
|
|
|
|
|
772
|
|
|
(3,979
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,487
|
|
$
|
25,507
|
|
$
|
15,983
|
|
$
|
27,733
|
|
$
|
70,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's equity in net income
|
|
$
|
744
|
|
$
|
12,987
|
|
$
|
6,522
|
|
$
|
13,227
|
|
$
|
33,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.
18
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
5. Derivative Instruments and Hedging Activities:
The Company recognizes all derivatives in the consolidated financial statements and measures the derivatives at fair value. The Company uses derivative financial instruments in the
normal course of business to manage or reduce its exposure to adverse fluctuations in interest rates. The Company designs its hedges to be effective in reducing the risk exposure that they are
designated to hedge. Any instrument that meets the cash flow hedging criteria in SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," is formally designated as a cash
flow hedge at the inception of the derivative contract. On an ongoing quarterly basis, the Company adjusts its balance sheet to reflect the current fair value of its derivatives. To the extent they
are effective, changes in fair value of derivatives are recorded in comprehensive income. Ineffective portions, if any, are included in consolidated statements of operations. No ineffectiveness was
recorded in net income during the three and six months ended June 30, 2008 or 2007. If any derivative instrument used for risk management does not meet the hedging criteria, it is
marked-to-market each period in the consolidated statements of operations. As of June 30, 2008, five of the Company's derivative instruments were not designated as cash
flow hedges. Changes in the market value of these derivative instruments are recorded in the consolidated statements of operations.
As
of June 30, 2008 and December 31, 2007, the Company had $0 and $286, respectively, reflected in other comprehensive income related to treasury rate locks settled in
prior years. The Company reclassified $44 and $240 for the three months ended June 30, 2008 and 2007 and $285 and $478 for the six months ended June 30, 2008 and 2007, respectively,
related to treasury rate lock transactions settled in prior years from accumulated other comprehensive income to earnings.
Interest
rate swap and cap agreements are purchased by the Company from third parties. Amounts received (paid) as a result of these agreements are recorded as a decrease (increase) to
interest expense. The Company recorded other comprehensive income (loss) related to the marking-to-market of interest rate swap and cap agreements of $23,656 and $11,447 for
the three months ended June 30, 2008 and 2007 and ($201) and $7,754 for the six months ended June 30, 2008 and 2007, respectively. The amount expected to be reclassified to interest
expense in the next 12 months is immaterial.
The
fair values of interest rate swap and cap agreements are determined using the market standard methodology of discounting the future expected cash receipts that would occur if
variable interest rates fell below or rose above the strike rate of the interest rate swap and cap agreements. The variable interest rates used in the calculation of projected receipts on the interest
rate swap and cap agreements are based on an expectation of future interest rates derived from observable market interest rate curves
and volatilities. To comply with the provisions of SFAS No. 157, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the
respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered
the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although
the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments
associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood
19
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
5. Derivative Instruments and Hedging Activities: (Continued)
of
default by itself and its counterparties. However, as of June 30, 2008, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation
of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its
derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The
following table presents the Company's assets and liabilities measured at fair value on a recurring basis as of June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets and
Liabilities (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Balance at
June 30, 2008
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments
|
|
$
|
|
|
$
|
283
|
|
$
|
|
|
$
|
283
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments
|
|
$
|
|
|
$
|
27,715
|
|
$
|
|
|
$
|
27,715
|
|
6. Property:
Property consists of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
December 31,
2007
|
|
Land
|
|
$
|
1,066,131
|
|
$
|
1,146,096
|
|
Building and improvements
|
|
|
4,832,893
|
|
|
5,121,442
|
|
Tenant improvements
|
|
|
288,834
|
|
|
285,395
|
|
Equipment and furnishings
|
|
|
82,132
|
|
|
83,199
|
|
Construction in progress
|
|
|
707,457
|
|
|
442,670
|
|
|
|
|
|
|
|
|
|
|
6,977,447
|
|
|
7,078,802
|
|
Less accumulated depreciation
|
|
|
(892,501
|
)
|
|
(891,329
|
)
|
|
|
|
|
|
|
|
|
$
|
6,084,946
|
|
$
|
6,187,473
|
|
|
|
|
|
|
|
Depreciation
expense was $45,009 and $39,101 for the three months ended June 30, 2008 and 2007 and $92,160 and $77,350 for the six months ended June 30, 2008 and 2007,
respectively.
The
Company recognized a gain on sale of land of $489 and $2,279 during the three months ended June 30, 2008 and 2007 and $1,163 and $3,996 for the six months ended
June 30, 2008 and 2007, respectively. In addition, the Company recognized a gain on sale of equipment and furnishings of $35 during the six months ended June 30, 2007.
20
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
7. Marketable Securities:
Marketable securities consist of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
December 31,
2007
|
|
Government debt securities, at par value
|
|
$
|
29,737
|
|
$
|
30,544
|
|
Less discount
|
|
|
(1,333
|
)
|
|
(1,501
|
)
|
|
|
|
|
|
|
|
|
|
28,404
|
|
|
29,043
|
|
Unrealized gain
|
|
|
2,051
|
|
|
2,183
|
|
|
|
|
|
|
|
Fair value
|
|
$
|
30,455
|
|
$
|
31,226
|
|
|
|
|
|
|
|
Future
contractual maturities of marketable securities at June 30, 2008 are as follows:
|
|
|
|
|
1 year or less
|
|
$
|
1,267
|
|
2 to 5 years
|
|
|
4,012
|
|
6 to 10 years
|
|
|
24,458
|
|
|
|
|
|
|
|
$
|
29,737
|
|
|
|
|
|
The
proceeds from maturities and interest receipts from the marketable securities are restricted to the service of the $27,362 note on which the Company remains obligated following the
sale of Greeley Mall on July 27, 2006 (See Note 10Bank and Other Notes Payable).
8. Deferred Charges And Other Assets:
Deferred charges and other assets are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
December 31,
2007
|
|
Leasing
|
|
$
|
130,819
|
|
$
|
139,343
|
|
Financing
|
|
|
51,010
|
|
|
47,406
|
|
Intangible assets resulting from SFAS No. 141 allocations:
|
|
|
|
|
|
|
|
|
In-place lease values
|
|
|
163,102
|
|
|
201,863
|
|
|
Leasing commissions and legal costs
|
|
|
37,444
|
|
|
35,728
|
|
|
|
|
|
|
|
|
|
|
382,375
|
|
|
424,340
|
|
Less accumulated amortization(1)
|
|
|
(147,675
|
)
|
|
(175,353
|
)
|
|
|
|
|
|
|
|
|
|
234,700
|
|
|
248,987
|
|
Other assets
|
|
|
89,606
|
|
|
137,815
|
|
|
|
|
|
|
|
|
|
$
|
324,306
|
|
$
|
386,802
|
|
|
|
|
|
|
|
-
(1)
-
Accumulated
amortization includes $74,049 and $101,951 relating to intangibles resulting from SFAS No. 141 allocations at June 30, 2008 and
December 31, 2007, respectively.
21
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
8. Deferred Charges And Other Assets: (Continued)
The
allocated values of above market leases included in deferred charges and other assets, net and the below market leases included in other accrued liabilities, related to SFAS
No. 141, consist of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
December 31,
2007
|
|
Above Market Leases
|
|
|
|
|
|
|
|
Original allocated value
|
|
$
|
55,790
|
|
$
|
65,752
|
|
Less accumulated amortization
|
|
|
(31,038
|
)
|
|
(38,530
|
)
|
|
|
|
|
|
|
|
|
$
|
24,752
|
|
$
|
27,222
|
|
|
|
|
|
|
|
Below Market Leases
|
|
|
|
|
|
|
|
Original allocated value
|
|
$
|
141,042
|
|
$
|
156,667
|
|
Less accumulated amortization
|
|
|
(75,378
|
)
|
|
(93,090
|
)
|
|
|
|
|
|
|
|
|
$
|
65,664
|
|
$
|
63,577
|
|
|
|
|
|
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|
22
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
9. Mortgage Notes Payable:
Mortgage notes payable consist of the following:
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|
Carrying Amount of Mortgage Notes (a)
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June 30, 2008
|
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December 31, 2007
|
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|
|
|
|
|
|
Property Pledged as Collateral
|
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Other
|
|
Related Party
|
|
Other
|
|
Related Party
|
|
Interest Rate
|
|
Monthly Payment Term(b)
|
|
Maturity Date
|
|
Capitola Mall
|
|
$
|
|
|
$
|
38,420
|
|
$
|
|
|
$
|
39,310
|
|
|
7.13
|
%
|
|
380
|
|
|
2011
|
|
Cactus Power Center(c)
|
|
|
643
|
|
|
|
|
|
|
|
|
|
|
|
3.84
|
%
|
|
2
|
|
|
2011
|
|
Carmel Plaza
|
|
|
26,033
|
|
|
|
|
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26,253
|
|
|
|
|
|
8.18
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%
|
|
202
|
|
|
2009
|
|
Chandler Fashion Center
|
|
|
168,167
|
|
|
|
|
|
169,789
|
|
|
|
|
|
5.98
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%
|
|
1,043
|
|
|
2012
|
|
Chesterfield Towne Center(d)
|
|
|
54,924
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|
|
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|
55,702
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|
|
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|
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9.07
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%
|
|
548
|
|
|
2024
|
|
Danbury Fair Mall
|
|
|
173,207
|
|
|
|
|
|
176,457
|
|
|
|
|
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4.64
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%
|
|
1,225
|
|
|
2011
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|
Deptford Mall
|
|
|
172,500
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|
|
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|
|
172,500
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|
|
|
|
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5.41
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%
|
|
778
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|
|
2013
|
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Deptford Mall(e)
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15,731
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|
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|
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|
|
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6.46
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%
|
|
101
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|
|
2016
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Eastview Commons(f)
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|
|
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8,814
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|
|
|
|
|
|
|
|
|
|
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Eastview Mall(f)
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|
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101,007
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|
|
|
|
|
|
|
|
|
|
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Fiesta Mall
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84,000
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|
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|
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84,000
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|
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|
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4.98
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%
|
|
348
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|
|
2015
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Flagstaff Mall
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|
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37,000
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|
|
|
|
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37,000
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|
|
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5.03
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%
|
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155
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|
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2015
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FlatIron Crossing
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186,015
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187,736
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|
|
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5.26
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%
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1,102
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2013
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Freehold Raceway Mall
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174,728
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|
|
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177,686
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|
|
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|
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4.68
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%
|
|
1,184
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|
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2011
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Fresno Fashion Fair(g)
|
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63,068
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|
|
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63,590
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6.52
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%
|
|
437
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|
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2008
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Great Northern Mall
|
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39,943
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|
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40,285
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5.19
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%
|
|
234
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|
|
2013
|
|
Greece Ridge Center(f)
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|
|
|
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72,000
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|
|
|
|
|
|
|
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Hilton Village
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8,539
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|
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8,530
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5.27
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%
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|
37
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|
|
2012
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La Cumbre Plaza(h)
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30,000
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|
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30,000
|
|
|
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|
|
3.85
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%
|
|
96
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|
|
2009
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|
Marketplace Mall(f)
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39,345
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|
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|
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Northridge Mall
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80,398
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|
|
|
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81,121
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|
|
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4.94
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%
|
|
453
|
|
|
2009
|
|
Pacific View
|
|
|
88,133
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|
|
|
|
|
88,857
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|
|
|
|
|
7.16
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%
|
|
602
|
|
|
2011
|
|
Panorama Mall(i)
|
|
|
50,000
|
|
|
|
|
|
50,000
|
|
|
|
|
|
3.56
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%
|
|
148
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|
|
2010
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Paradise Valley Mall
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20,751
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21,231
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5.89
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%
|
|
183
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|
|
2009
|
|
Pittsford Plaza(f)
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|
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24,596
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|
|
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|
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Pittsford Plaza(f)
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9,148
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|
|
|
|
|
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Prescott Gateway
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60,000
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|
|
60,000
|
|
|
|
|
|
5.86
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%
|
|
293
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|
|
2011
|
|
Promenade at Casa Grande(j)
|
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92,548
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|
|
|
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79,964
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|
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|
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4.13
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%
|
|
319
|
|
|
2009
|
|
Queens Center
|
|
|
89,730
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|
|
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|
|
90,519
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|
|
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7.11
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%
|
|
633
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|
|
2009
|
|
Queens Center
|
|
|
107,615
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|
|
107,614
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|
|
108,539
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|
|
108,538
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|
|
7.00
|
%
|
|
1,591
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|
|
2013
|
|
Rimrock Mall
|
|
|
42,498
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|
|
|
|
|
42,828
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|
|
|
|
|
7.56
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%
|
|
320
|
|
|
2011
|
|
Salisbury, Center at
|
|
|
115,000
|
|
|
|
|
|
115,000
|
|
|
|
|
|
5.83
|
%
|
|
559
|
|
|
2016
|
|
Santa Monica Place
|
|
|
78,462
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|
|
|
|
|
79,014
|
|
|
|
|
|
7.79
|
%
|
|
606
|
|
|
2010
|
|
SanTan Village Regional Center(k)
|
|
|
121,118
|
|
|
|
|
|
|
|
|
|
|
|
5.22
|
%
|
|
477
|
|
|
2011
|
|
Shoppingtown Mall
|
|
|
43,849
|
|
|
|
|
|
44,645
|
|
|
|
|
|
5.01
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%
|
|
319
|
|
|
2011
|
|
South Plains Mall
|
|
|
58,236
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|
|
|
|
|
58,732
|
|
|
|
|
|
8.29
|
%
|
|
454
|
|
|
2009
|
|
South Towne Center(l)
|
|
|
64,000
|
|
|
|
|
|
64,000
|
|
|
|
|
|
6.66
|
%
|
|
355
|
|
|
2008
|
|
Towne Mall
|
|
|
14,604
|
|
|
|
|
|
14,838
|
|
|
|
|
|
4.99
|
%
|
|
100
|
|
|
2012
|
|
Tucson La Encantada
|
|
|
|
|
|
78,000
|
|
|
|
|
|
78,000
|
|
|
5.84
|
%
|
|
364
|
|
|
2012
|
|
Twenty Ninth Street(m)
|
|
|
115,000
|
|
|
|
|
|
110,558
|
|
|
|
|
|
3.48
|
%
|
|
334
|
|
|
2009
|
|
Valley River Center
|
|
|
120,000
|
|
|
|
|
|
120,000
|
|
|
|
|
|
5.60
|
%
|
|
560
|
|
|
2016
|
|
Valley View Center
|
|
|
125,000
|
|
|
|
|
|
125,000
|
|
|
|
|
|
5.81
|
%
|
|
605
|
|
|
2011
|
|
Victor Valley, Mall of(n)
|
|
|
100,000
|
|
|
|
|
|
51,211
|
|
|
|
|
|
4.32
|
%
|
|
360
|
|
|
2011
|
|
Village Fair North(o)
|
|
|
|
|
|
|
|
|
10,880
|
|
|
|
|
|
5.89
|
%
|
|
82
|
|
|
|
|
Vintage Faire Mall
|
|
|
63,868
|
|
|
|
|
|
64,386
|
|
|
|
|
|
7.91
|
%
|
|
508
|
|
|
2010
|
|
Westside Pavilion(p)
|
|
|
175,000
|
|
|
|
|
|
92,037
|
|
|
|
|
|
5.33
|
%
|
|
777
|
|
|
2011
|
|
Wilton Mall
|
|
|
43,622
|
|
|
|
|
|
44,624
|
|
|
|
|
|
4.79
|
%
|
|
349
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,103,930
|
|
$
|
224,034
|
|
$
|
3,102,422
|
|
$
|
225,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
The
mortgage notes payable balances include the unamortized debt premiums (discounts). Debt premiums (discounts) represent the excess (deficiency) of the
fair value of debt over (under) the principal value of debt assumed in various acquisitions and are amortized into interest expense over the remaining term of the related debt in a manner that
23
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
9. Mortgage Notes Payable: (Continued)
approximates
the effective interest method. The interest rate disclosed represents the effective interest rate, including the debt premium (discount) and deferred finance cost.
|
|
|
|
|
|
|
|
Property Pledged as Collateral
|
|
June 30, 2008
|
|
December 31, 2007
|
|
Danbury Fair Mall
|
|
$
|
11,298
|
|
$
|
13,405
|
|
Deptford Mall
|
|
|
(44
|
)
|
|
|
|
Eastview Commons
|
|
|
|
|
|
573
|
|
Eastview Mall
|
|
|
|
|
|
1,736
|
|
Freehold Raceway Mall
|
|
|
10,656
|
|
|
12,373
|
|
Great Northern Mall
|
|
|
(150
|
)
|
|
(164
|
)
|
Hilton Village
|
|
|
(61
|
)
|
|
(70
|
)
|
Marketplace Mall
|
|
|
|
|
|
1,650
|
|
Paradise Valley Mall
|
|
|
245
|
|
|
392
|
|
Pittsford Plaza
|
|
|
|
|
|
857
|
|
Shoppingtown Mall
|
|
|
3,191
|
|
|
3,731
|
|
Towne Mall
|
|
|
417
|
|
|
464
|
|
Victor Valley, Mall of
|
|
|
|
|
|
54
|
|
Village Fair North
|
|
|
|
|
|
49
|
|
Wilton Mall
|
|
|
1,996
|
|
|
2,729
|
|
|
|
|
|
|
|
|
|
$
|
27,548
|
|
$
|
37,779
|
|
|
|
|
|
|
|
-
(b)
-
This
represents the monthly payment of principal and interest.
-
(c)
-
On
March 20, 2008, the Company obtained a construction loan that provides for borrowings of up to $101,000 and bears interest at LIBOR plus a spread
of 1.10% to 1.35% depending on certain conditions. The loan matures on March 14, 2011, with two one-year extension options. At June 30, 2008, the total interest rate was
3.84%.
-
(d)
-
In
addition to monthly principal and interest payments, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the
amount by which the property's gross receipts exceeds a base amount. Contingent interest expense recognized by the Company was $33 and $113 for the three months ended June 30, 2008 and 2007 and
$113 and $192 for the six months ended June 30, 2008 and 2007, respectively.
-
(e)
-
Concurrent
with the acquisition of the fee simple interest in a free standing department store, the Company assumed the existing loan on the property. The
loan bears interest at 6.46% and matures on June 1, 2016.
-
(f)
-
On
January 1, 2008, these loans were transferred in connection with the redemption of the participating convertible preferred units of
MACWH, LP (See Rochester Redemption in Note 14Discontinued Operations).
-
(g)
-
On
July 10, 2008, the Company replaced the existing loan on the property with a new $170,000 loan, bearing interest at 6.76% and maturing on
August 1, 2015.
-
(h)
-
The
floating rate loan bears interest at LIBOR plus 0.88%. On May 2, 2008, the Company exercised an option under the loan agreement to extend the
maturity of the loan to August 9, 2009. The Company has an interest rate cap agreement over the loan term which effectively prevents LIBOR from exceeding 7.12%. At June 30, 2008 and
December 31, 2007, the total interest rate was 3.85% and 6.48%, respectively.
-
(i)
-
The
floating rate loan bears interest at LIBOR plus 0.85% and matures in February 2010. The Company has an interest rate cap agreement on this loan which
effectively prevents LIBOR from exceeding 6.65%. At June 30, 2008 and December 31, 2007, the total interest rate was 3.56% and 6.00%, respectively.
-
(j)
-
The
construction loan allows for total borrowings of up to $110,000, and bears interest at LIBOR plus a spread of 1.20% to 1.40% depending on certain
conditions. The loan matures in August 2009, with two one-year extension options. At June 30, 2008 and December 31, 2007, the total interest rate was 4.13% and 6.35%,
respectively.
-
(k)
-
On
June 13, 2008, the Company placed a construction loan on the property that allows for borrowings of up to $150,000. The loan bears interest at
LIBOR plus a spread of 2.10% to 2.25% depending on certain conditions. The loan matures on June 13, 2011, with two one-year extension options. At June 30, 2008, the total
interest rate was 5.22%.
-
(l)
-
The
Company plans to pay off this loan upon maturity from borrowings under its line of credit.
24
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
9. Mortgage Notes Payable: (Continued)
-
(m)
-
The
construction loan allowed for total borrowings of up to $115,000, and bears interest at LIBOR plus 0.80%. The loan matures in June 2009, with a
one-year extension option. At June 30, 2008 and December 31, 2007, the total interest rate was 3.48% and 5.93%, respectively.
-
(n)
-
The
previous loan was paid off in full on March 1, 2008. On May 6, 2008, the Company placed a new floating rate loan for $100,000 on the
property, bearing interest at LIBOR plus 1.60% that matures on May 6, 2011, with two one-year extension options. At June 30, 2008, the total interest rate on the new loan was
4.32%.
-
(o)
-
This
loan was paid off in full on April 16, 2008.
-
(p)
-
On
June 5, 2008, the Company replaced the existing loan on the property with a new $175,000 loan that bears interest at LIBOR plus 2.00% and matures
on June 5, 2011, with two one-year extension options. At June 30, 2008, the total interest rate on the new loan was 5.33%.
Most of the mortgage loan agreements contain a prepayment penalty provision for the early extinguishment of the debt.
Total
interest expense capitalized was $8,584 and $8,934 for the three months ended June 30, 2008 and 2007 and $15,637 and $14,291 for the six months ended June 30, 2008
and 2007, respectively.
The
related party mortgage notes payable are amounts due to an affiliate of NML. See Note 11Related-Party Transactions for interest expense associated with these
loans.
10. Bank and Other Notes Payable:
Bank and other notes payable consist of the following:
Convertible Senior Notes:
On March 16, 2007, the Company issued $950,000 in convertible senior notes ("Senior Notes") that are to mature on
March 15, 2012. The Senior Notes bear interest at 3.25%, payable semiannually, are senior unsecured debt of the Company and are guaranteed by the Operating Partnership. Prior to
December 14, 2011, upon the occurrence of certain specified events, the Senior Notes will be convertible at the option of the holder into cash, shares of the Company's common stock or a
combination of cash and shares of the Company's common stock, at the election of the Company, at an initial conversion rate of 8.9702 shares per $1 principal amount. On and after December 15,
2011, the Senior Notes will be convertible at any time prior to the second business day preceding the maturity date at the option of the holder at the initial conversion rate. The initial conversion
price of approximately $111.48 per share represented a 20% premium over the closing price of the Company's common stock on March 12, 2007. The initial conversion rate is subject to adjustment
under certain circumstances. Holders of the Senior Notes do not have the right to require the Company to repurchase the Senior Notes prior to maturity except in connection with the occurrence of
certain fundamental change transactions. The carrying value of the Senior Notes at June 30, 2008 and December 31, 2007 includes an unamortized discount of $7,037 and $7,988,
respectively, incurred at issuance and is amortized into interest expense over the term of the Senior Notes in a manner that approximates the effective interest method. As of June 30, 2008 and
December 31, 2007, the effective interest rate was 3.66%.
Concurrent
with the issuance of the Senior Notes, the Company purchased two capped calls ("Capped Calls") from affiliates of the initial purchasers of the Senior Notes. The Capped Calls
25
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
10. Bank and Other Notes Payable: (Continued)
effectively
increased the conversion price of the Senior Notes to approximately $130.06, which represents a 40% premium to the March 12, 2007 closing price of $92.90 per common share of the
Company. The Capped Calls are expected to generally reduce the potential dilution upon exchange of the Senior Notes in the event the market value per share of the Company's common stock, as measured
under the terms of the relevant settlement date, is greater than the strike price of the Capped Calls. If, however, the market value per share of the Company's common stock exceeds $130.06 per common
share, then the dilution mitigation under the Capped Calls will be capped, which means there would be dilution from exchange of the Senior Notes to the extent that the market value per share of the
Company's common stock exceeds $130.06. The cost of the Capped Calls was approximately $59,850 and was recorded as a charge to additional paid-in capital in 2007.
Line of Credit:
The Company has a $1,500,000 revolving line of credit that matures on April 25, 2010 with a one-year extension
option. The interest rate fluctuates from LIBOR plus 0.75% to LIBOR plus 1.10% depending on the Company's overall leverage. The Company has an interest rate swap agreement that effectively fixed the
interest rate on $400,000 of the outstanding balance of the line of credit at 6.23% until April 25, 2011. As of June 30, 2008 and December 31, 2007, borrowings outstanding were
$1,228,000 and $1,015,000 at an effective interest rate, excluding the $400,000 swapped portion, of 3.75% and 6.19%, respectively.
Term Notes:
On April 25, 2005, the Company obtained a five-year, $450,000 term loan bearing interest at LIBOR plus 1.50%. In
November 2005, the Company entered into an interest rate swap agreement that effectively fixed the interest rate of the term loan at 6.30% from December 1, 2005 to April 25, 2010. As of
June 30, 2008 and December 31, 2007, the entire term loan was outstanding with an effective interest rate of 6.50%.
On
July 27, 2006, concurrent with the sale of Greeley Mall, the Company provided marketable securities to replace Greeley Mall as collateral for the mortgage note payable on the
property (See Note 7Marketable Securities). As a result of this transaction, the debt was reclassified to
bank and other notes payable. This note bears interest at an effective rate of 6.34% and matures in September 2013. As of June 30, 2008 and December 31, 2007, the note had a balance
outstanding of $27,362 and $27,676, respectively.
As
of June 30, 2008 and December 31, 2007, the Company was in compliance with all applicable loan covenants.
11. Related-Party Transactions:
Certain unconsolidated joint ventures have engaged the Management Companies to manage the operations of the Centers. Under these arrangements, the Management Companies are reimbursed for
compensation paid to on-site employees, leasing agents and project managers at the Centers, as well as
26
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
11. Related-Party Transactions: (Continued)
insurance
costs and other administrative expenses. The following fees were charged to unconsolidated joint ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Management Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MMC
|
|
$
|
2,960
|
|
$
|
2,544
|
|
$
|
5,885
|
|
$
|
5,106
|
|
Westcor Management Companies
|
|
|
1,863
|
|
|
1,658
|
|
|
3,718
|
|
|
3,261
|
|
Wilmorite Management Companies
|
|
|
416
|
|
|
345
|
|
|
835
|
|
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,239
|
|
$
|
4,547
|
|
$
|
10,438
|
|
$
|
9,140
|
|
|
|
|
|
|
|
|
|
|
|
Development and Leasing Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MMC
|
|
$
|
96
|
|
$
|
78
|
|
$
|
195
|
|
$
|
183
|
|
Westcor Management Companies
|
|
|
2,982
|
|
|
2,712
|
|
|
4,601
|
|
|
4,388
|
|
Wilmorite Management Companies
|
|
|
438
|
|
|
22
|
|
|
876
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,516
|
|
$
|
2,812
|
|
$
|
5,672
|
|
$
|
4,621
|
|
|
|
|
|
|
|
|
|
|
|
Certain
mortgage notes are held by NML (See Note 9Mortgage Notes Payable). Interest expense in connection with these notes was $3,678 and $3,213 for the three months
ended June 30, 2008 and 2007 and $7,372 and $5,862 for the six months ended June 30, 2008 and 2007, respectively. Included in accounts payable and accrued expenses is interest payable to
NML of $1,100 and $1,150 at June 30, 2008 and December 31, 2007, respectively.
As
of June 30, 2008 and December 31, 2007, the Company had loans to unconsolidated joint ventures of $416 and $604, respectively. Interest income associated with these
notes was $9 and $10 for the three months ended June 30, 2008 and 2007 and $21 and $22 for the six months ended June 30, 2008 and 2007, respectively. These loans represent initial funds
advanced to development stage projects prior to construction loan funding. Correspondingly, loan payables in the same amount have been accrued as an obligation by the various joint ventures.
Due
from affiliates of $6,095 and $5,729 at June 30, 2008 and December 31, 2007, respectively, represents unreimbursed costs and fees due from unconsolidated joint ventures
under management agreements.
Certain
Company officers and affiliates have guaranteed mortgages of $21,750 at one of the Company's joint venture properties.
27
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
12. Stock Repurchase Program:
On March 16, 2007, the Company repurchased 807,000 shares for $74,970 concurrent with the Senior Notes offering (See Note 10Bank and Other Notes Payable).
These shares were repurchased pursuant to the Company's stock repurchase program authorized by the Company's Board of Directors on March 9, 2007. This repurchase program ended on
March 16, 2007 because the maximum shares allowed to be repurchased under the program was reached.
13. Acquisitions:
The following acquisitions were recently completed by the Company:
Hilton Village:
On September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,546 square foot
specialty center in Scottsdale, Arizona. The total purchase price of $13,500 was funded by cash, borrowings under the Company's line of credit and the assumption of a mortgage note payable. The Center
was previously accounted for under the equity method as an investment in unconsolidated joint ventures. The results of Hilton
Village's operations have been included in the Company's consolidated financial statements since the acquisition date.
Mervyn's:
On December 17, 2007, the Company purchased a portfolio of ground leasehold and/or fee simple interests in 39 Mervyn's
department stores for $400,160. The Company purchased an additional ground leasehold interest on January 31, 2008 for $13,182 and a fee simple interest on February 29, 2008 for $19,338.
All of the purchased properties are located in the Southwest United States. The purchase price was funded by cash and borrowings under the Company's line of credit. Concurrent with each acquisition,
the Company entered into individual agreements to lease back the properties to Mervyn's for terms of 14 to 20 years.
At
acquisition, management identified 29 of the 41 aggregate properties in the portfolio as available for sale. These properties are located at shopping centers not owned or managed by
the Company. The results of operations from these properties have been included in income from discontinued operations since the acquisition date. (See Note 14Discontinued
Operations). The results of operations of the 12 Mervyn's properties not designated as assets held for sale have been included in continuing operations of the Company's consolidated financial
statements since the acquisition date.
Boscov's:
On May 20, 2008, the Company purchased fee simple interests in a 161,350 square foot Boscov's department store at Deptford Mall
in Deptford, New Jersey. The total purchase price of $23,500 was funded by the assumption of the existing mortgage note on the property and by borrowings under the Company's line of credit. The
results of operations have included this property since the date of acquisition.
28
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
14. Discontinued Operations:
The following operations were recently disposed or designated as held for sale by the Company:
Mervyn's:
On December 17, 2007, the Company purchased a portfolio of ground leasehold and/or fee simple interests in 39 Mervyn's
department stores for $400,160. The Company purchased an additional ground leasehold interest on January 31, 2008 for $13,182 and a fee simple interest on February 29, 2008 for $19,338.
(See Note 13Acquisitions). Upon closing of these acquisitions, management designated the 29 stores located at shopping centers not owned or managed by the Company in the portfolio
as available for sale. The results of operations from these properties have been included in income from discontinued operations since the respective acquisition dates. The carrying value of these
properties at June 30, 2008 and December 31, 2007 was $326,763 and $250,648, respectively, and has been recorded as assets held for sale.
Rochester Redemption:
On April 25, 2005, the Company and the Operating Partnership acquired Wilmorite Properties, Inc., a Delaware corporation
("Wilmorite"), and Wilmorite Holdings, L.P., a Delaware limited partnership ("Wilmorite Holdings"). Wilmorite's portfolio included interests in 11 regional malls and two open-air
community shopping centers with 13,400,000 square feet of space located in Connecticut, New York, New Jersey, Kentucky and Virginia. The total purchase price was approximately $2,333,333, plus
adjustments for working capital, including the assumption of approximately $877,174 of existing debt with an average interest rate of 6.43%, and the issuance of 3,426,609 Class A participating
convertible preferred units ("PCPUs") valued at $213,786, 344,625
Class A non-participating convertible preferred units valued at $21,501 and 93,209 common units in Wilmorite Holdings valued at $5,815. The balance of the consideration to the
equity holders of Wilmorite and Wilmorite Holdings was paid in cash, which was provided primarily by a five-year, $450,000 term loan bearing interest at LIBOR plus 1.50% and a $650,000
acquisition loan which had a term of up to two years and bore interest initially at LIBOR plus 1.60%. An affiliate of the Operating Partnership is the general partner and, together with other
affiliates, owned as of December 31, 2007 approximately 84% of Wilmorite Holdings, with the remaining 16% held by those limited partners of Wilmorite Holdings who elected to receive convertible
preferred units or common units in Wilmorite Holdings rather than cash. These interests represented a minority interest in MACWH, LP, a subsidiary of the Operating Partnership and successor in
interest in Wilmorite Holdings, which in turn holds the Wilmorite portfolio, and were recorded at predecessor basis, representing, at acquisition date, a $195,905 reduction from fair value in the
balance sheet with the earnings attributable to these interests reported as minority interest in consolidated joint ventures in the consolidated statements of operations.
On
January 1, 2008, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3,426,609 PCPUs. As a result of the redemption, the Company received
the 16.32% minority interest in the portion of the Wilmorite portfolio that included Danbury Fair Mall, Freehold Raceway Mall, Great Northern Mall, Rotterdam Square, Shoppingtown Mall, Towne Mall,
Tysons Corner Center and Wilton Mall, collectively referred to as the "Non-Rochester Properties," for total
29
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
14. Discontinued Operations: (Continued)
consideration
of $224,393, in exchange for the Company's ownership interest in the portion of the Wilmorite portfolio that consisted of Eastview Commons, Eastview Mall, Greece Ridge Center,
Marketplace Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties," including approximately $18,000 in cash held at those properties. Included in the redemption consideration
was the assumption of the remaining 16.32% interest in the indebtedness of the Non-Rochester Properties, which had an estimated fair value of $105,962. The Company determined the fair
value of the debt using a present value model based upon the terms of equivalent debt and upon credit spreads made available to the Company. The fair value of the debt consisted of $71,032 of
Level 2 inputs and $34,930 of Level 3 inputs in accordance with SFAS No. 157. The source of the Level 2 inputs involved the use of the nominal weekly average of the U.S.
treasury rates. In addition, the Company also received additional consideration of $11,763, in the form of a note, for certain working capital adjustments, extraordinary capital expenditures, leasing
commissions, tenant allowances, and decreases in indebtedness during the Company's period of ownership of the Rochester Properties. The Company recognized a gain of $99,263 on the exchange based on
the difference between the fair value of the additional interest acquired in the Non-Rochester Properties and the carrying value of the Rochester Properties, net of minority interest. This
exchange is referred to herein as the "Rochester Redemption."
As
a result of the Rochester Redemption, the Company recorded a credit to additional paid-in capital of $172,805 due to the reversal of adjustments to minority interest for
the redemption value on the Rochester Properties over the Company's historical cost. In addition, the Company recorded a step-up in the basis of approximately $218,812 in the remaining
portion of the Non-Rochester Properties.
The
Company has classified the results of operations for the three and six months ended June 30, 2008 and 2007 for all of the above dispositions as discontinued operations.
The
loss on sale of assets from discontinued operations of $1,124 and $1,413 for the three and six months ended June 30, 2007, respectively, consisted of additional costs related
to properties sold in 2006.
30
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
14. Discontinued Operations: (Continued)
Revenues
and income from discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scottsdale/101
|
|
$
|
|
|
$
|
26
|
|
$
|
10
|
|
$
|
42
|
|
|
Park Lane Mall
|
|
|
|
|
|
2
|
|
|
|
|
|
14
|
|
|
Holiday Village
|
|
|
|
|
|
68
|
|
|
338
|
|
|
133
|
|
|
Greeley Mall
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
(3
|
)
|
|
Great Falls Marketplace
|
|
|
43
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
Citadel Mall
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
47
|
|
|
Northwest Arkansas Mall
|
|
|
|
|
|
9
|
|
|
|
|
|
33
|
|
|
Crossroads Mall
|
|
|
|
|
|
(63
|
)
|
|
|
|
|
(26
|
)
|
|
Mervyn's
|
|
|
8,511
|
|
|
|
|
|
16,209
|
|
|
|
|
|
Rochester Properties
|
|
|
|
|
|
21,464
|
|
|
|
|
|
40,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,554
|
|
$
|
21,468
|
|
$
|
16,536
|
|
$
|
40,577
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scottsdale/101
|
|
$
|
(3
|
)
|
$
|
1
|
|
$
|
(1
|
)
|
$
|
3
|
|
|
Park Lane Mall
|
|
|
|
|
|
1
|
|
|
|
|
|
19
|
|
|
Holiday Village
|
|
|
|
|
|
51
|
|
|
338
|
|
|
114
|
|
|
Greeley Mall
|
|
|
|
|
|
(253
|
)
|
|
|
|
|
(258
|
)
|
|
Great Falls Marketplace
|
|
|
31
|
|
|
|
|
|
(33
|
)
|
|
1
|
|
|
Citadel Mall
|
|
|
|
|
|
(192
|
)
|
|
|
|
|
(134
|
)
|
|
Northwest Arkansas Mall
|
|
|
|
|
|
18
|
|
|
|
|
|
23
|
|
|
Crossroads Mall
|
|
|
|
|
|
15
|
|
|
|
|
|
51
|
|
|
Mervyn's
|
|
|
5,465
|
|
|
|
|
|
10,714
|
|
|
|
|
|
Rochester Properties
|
|
|
|
|
|
1,730
|
|
|
|
|
|
2,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,493
|
|
$
|
1,371
|
|
$
|
11,018
|
|
$
|
1,867
|
|
|
|
|
|
|
|
|
|
|
|
15. Commitments and Contingencies:
The Company has certain properties that are subject to non-cancelable operating ground leases. The leases expire at various times through 2097, subject in some cases, to
options to extend the terms of the lease. Certain leases provide for contingent rent payments based on a percentage of base rental income as defined in the lease agreements. Ground rent expense was
$1,818 and $851 for the three months ended June 30, 2008 and 2007 and $3,635 and $1,717 for the six months ended June 30, 2008 and 2007, respectively. No contingent rent was incurred in
either period.
As
of June 30, 2008 and December 31, 2007, the Company was contingently liable for $6,574 in letters of credit guaranteeing performance by the Company of certain
obligations relating to the
31
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
15. Commitments and Contingencies: (Continued)
Centers.
The Company does not believe that these letters of credit will result in a liability to the Company. In addition, the Company has a $24,000 letter of credit that serves as collateral to a
liability assumed in the acquisition of Shoppingtown Mall in 2005.
The
Company has entered into a number of construction agreements related to its redevelopment and development activities. Obligations under these agreements are contingent upon the
completion of the services within the guidelines specified in the agreement. At June 30, 2008, the Company had $111,838 in outstanding obligations, which it believes will be settled in the next
twelve months.
16. Share and Unit-Based Plans:
The Company has established share and unit-based compensation plans for the purpose of attracting and retaining executive officers, directors and key employees. The
share-based compensation plans provide for grants of stock awards, stock options, stock appreciation rights, operating partnership units and phantom stock units. In addition, the Company has
established an Employee Stock Purchase Plan to allow employees to purchase the Company's common stock at a discount.
The
Company accounts for its share and unit-based compensation plans in accordance with SFAS No. 123(R), "Share-Based Payment." Under SFAS No. 123(R), an equity
instrument is not recorded to common stockholders' equity until the related compensation expense is recorded over the requisite service period of the award. The Company records compensation cost on a
straight-line basis for awards, excluding the market-indexed awards referred to as "LTIP Units." Compensation cost for the market-indexed LTIP Unit awards are recognized under the graded
attribution method.
On
March 7, 2008, the Company granted 1,257,134 stock appreciation rights ("SARs") to certain executives of the Company as an additional component of compensation. The SARs vest
on March 15, 2011. Once the SARs have vested, the executive will have up to 10 years from the grant date to exercise the SARs. There is no performance requirement, only a service condition of
continued employment. Upon exercise, the executives will receive unrestricted common shares for the appreciation in value of the SARs from the grant date to the exercise date. The Company has measured
the grant date value of each SAR to be $7.68 as determined using the Black-Scholes Option Pricing Model based upon the following assumptions: volatility of 22.52%, dividend yield of 5.23%, risk free
rate of 3.15%, current value of $61.17 and an expected term of 8 years. The assumptions for volatility and dividend yield were based on the Company's historical experience as a publicly traded
company, the current value was based on the closing price on the date of grant and the risk free rate was based upon the interest rate of the 10-year treasury bond on the date of grant.
32
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
16. Share and Unit-Based Plans: (Continued)
The
following table summarizes the activity of the other non-vested share and unit-based plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTIP Units
|
|
Stock Awards
|
|
Phantom Stock
|
|
|
|
Number of
Units
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Number of
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Number of
Units
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Balance at January 1, 2008
|
|
|
187,387
|
|
$
|
55.90
|
|
|
336,072
|
|
$
|
77.21
|
|
|
6,419
|
|
$
|
83.86
|
|
|
Granted
|
|
|
118,780
|
|
$
|
61.17
|
|
|
127,273
|
|
$
|
61.17
|
|
|
2,994
|
|
$
|
64.83
|
|
|
Vested
|
|
|
(6,817
|
)
|
$
|
89.21
|
|
|
(182,498
|
)
|
$
|
70.06
|
|
|
(4,599
|
)
|
$
|
71.46
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
(1,140
|
)
|
$
|
71.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
|
299,350
|
|
$
|
57.02
|
|
|
279,707
|
|
$
|
74.60
|
|
|
4,814
|
|
$
|
83.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following summarizes the compensation cost under share and unit-based plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
LTIP units
|
|
$
|
1,710
|
|
$
|
2,054
|
|
$
|
2,985
|
|
$
|
4,044
|
|
Stock awards
|
|
|
2,645
|
|
|
3,229
|
|
|
5,993
|
|
|
5,996
|
|
Stock options
|
|
|
148
|
|
|
|
|
|
296
|
|
|
|
|
SARs
|
|
|
795
|
|
|
|
|
|
1,014
|
|
|
|
|
Phantom stock units
|
|
|
162
|
|
|
223
|
|
|
329
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,460
|
|
$
|
5,506
|
|
$
|
10,617
|
|
$
|
10,330
|
|
|
|
|
|
|
|
|
|
|
|
The
Company capitalized share and unit-based compensation costs of $2,651 and $1,638 during the three months ended June 30, 2008 and 2007 and $4,922 and $3,069 during
the six months ended June 30, 2008 and 2007, respectively.
17. Cumulative Convertible Redeemable Preferred Stock:
On February 25, 1998, the Company issued 3,627,131 shares of Series A cumulative convertible redeemable preferred stock ("Series A Preferred Stock") for proceeds
totaling $100,000 in a private placement. The preferred stock can be converted on a one for one basis into common stock and will pay a quarterly dividend equal to the greater of $0.46 per share, or
the dividend then payable on a share of common stock.
No
dividends will be declared or paid on any class of common or other junior stock to the extent that dividends on Series A Preferred Stock have not been declared and/or paid.
The
holder of the Series A Preferred Stock has redemption rights if a change in control of the Company occurs, as defined under the Articles Supplementary. Under such
circumstances, the holder of the Series A Preferred Stock is entitled to require the Company to redeem its shares, to the extent the Company has funds legally available therefor, at a price
equal to 105% of its liquidation preference
33
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
17. Cumulative Convertible Redeemable Preferred Stock: (Continued)
plus
accrued and unpaid dividends. The Series A Preferred Stock holder also has the right to require the Company to repurchase its shares if the Company fails to be taxed as a REIT for federal
tax purposes at a price equal to 115% of its liquidation preference plus accrued and unpaid dividends to the extent funds are legally available therefor.
On
October 18, 2007, the holder of the Series A Preferred Stock converted 560,000 shares to common shares. On May 6, 2008, the holder of the Series A
Preferred Stock converted 684,000 shares to common shares. On May 8, 2008, the holder of the Series A Preferred Stock converted 1,338,860 shares to common shares.
The
total liquidation preference as of June 30, 2008 was $28,791.
18. Income Taxes:
The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1994. To qualify as a REIT, the
Company must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its taxable income to its stockholders. It is management's current
intention to adhere to these requirements and maintain the Company's REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on net income it
distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, then it will be subject to federal income taxes at regular corporate rates (including any
applicable alternative minimum tax)
and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its
income and property and to federal income and excise taxes on its undistributed taxable income, if any.
Each
partner is taxed individually on its share of partnership income or loss, and accordingly, no provision for federal and state income tax is provided for the Operating Partnership in
the consolidated financial statements.
The
Company has made Taxable REIT Subsidiary elections for all of its corporate subsidiaries other than its Qualified REIT Subsidiaries. The elections, effective for the year beginning
January 1, 2001 and future years, were made pursuant to section 856(l) of the Internal Revenue Code. The Company's Taxable REIT Subsidiaries ("TRSs") are subject to corporate level
income taxes which are provided for in the Company's consolidated financial statements. The Company's primary TRSs include Macerich Management Company and Westcor Partners, L.L.C.
34
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
18. Income Taxes: (Continued)
The
income tax benefit (provision) of the TRSs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Current
|
|
$
|
7
|
|
$
|
(8
|
)
|
$
|
|
|
$
|
(17
|
)
|
Deferred
|
|
|
682
|
|
|
795
|
|
|
388
|
|
|
924
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit
|
|
$
|
689
|
|
$
|
787
|
|
$
|
388
|
|
$
|
907
|
|
|
|
|
|
|
|
|
|
|
|
SFAS
No. 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse. The deferred tax assets and liabilities of the TRSs relate primarily to differences in the book and tax bases of property
and to operating loss carryforwards for federal and state income tax purposes. A valuation allowance for deferred tax assets is provided if the Company believes it is more likely than not that all or
some portion of the deferred tax assets will not be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods. The net operating
loss carryforwards are currently scheduled to expire through 2028, beginning in 2012. Net deferred tax assets were $13,502 and $12,080 at June 30, 2008 and December 31, 2007,
respectively.
The
Company adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109," on
January 1, 2007. The adoption of this standard did not have a material impact on the Company's results of operations or financial condition. At the adoption date of January 1, 2007, the
Company had $1,574 of unrecognized tax benefit, all of which would affect the Company's effective tax rate if recognized, and which was recorded as a charge to accumulated deficit. At June 30,
2008, the Company had $2,227 of unrecognized tax benefit. As a result of tax positions taken during the current year, an increase in the unrecognized tax benefit of $164 and $321 was included in the
Company's consolidated statements of operations for the three and six months ended June 30, 2008, respectively.
The
tax years 2004 to 2007 remain open to examination by the taxing jurisdictions to which the Company is subject. The Company does not expect that the total amount of unrecognized tax
benefit will materially change within the next 12 months.
19. Segment Information:
The Company currently operates in one business segment, the acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers.
Additionally, the Company operates in one geographic area, the United States.
35
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
20. Restatement:
Subsequent to the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2007, management determined that the consolidated financial
statements as of December 31, 2007 and December 31, 2006, and for each of the three years during the period ended December 31, 2007 required restatement to correctly account for
the acquisition of Wilmorite and Wilmorite Holdings and the convertible preferred units ("CPU's") issued to prior owners in connection with the acquisition of the Wilmorite portfolio (see
Note 14Discontinued Operations). Form 10-K/A Amendment No. 1 was filed to restate these periods. Additionally, the interim periods from fiscal 2007 have been and will
be prospectively corrected by the Company with each Quarterly Report on Form 10-Q filed in 2008. The Company improperly applied purchase accounting to 100% of the Wilmorite and Wilmorite
Holdings acquisition and therefore minority interests in the Wilmorite portfolio were improperly recorded at fair value at the time of acquisition and presented outside of permanent equity as
Class A participating and non-participating convertible preferred securities in the consolidated balance sheets with the periodic distributions reflected as preferred dividends as a
reduction of net income available to common stockholders within the consolidated statements of operations. Upon further consideration, the Company determined that these interests represent a minority
interest in MACWH, LP, which in turn holds the Wilmorite portfolio. Accordingly, the Company should only have applied purchase accounting to the extent of its proportionate interest in
MACWH, LP. The Company has corrected the accounting for these interests by recording a reduction in these interests of $195,905 from fair value to predecessor basis in the consolidated balance
sheets with the earnings and dividends paid attributable to these interests reported as minority interests in consolidated joint ventures in the consolidated statements of operations. The adjustment
also includes a reduction in depreciation expense from the 100% stepped up property basis previously reported.
In
addition, because the participating CPU's were redeemable for the Rochester Properties (assets of MACWH, LP) at the option of the CPU holders, they are subject to EITF Topic
D-98, "Classification and Measurement of Redeemable Securities" and accounted for as redeemable minority interest at the greater of their redemption value or amount that would result from
applying Accounting Research Bulletin No. 51 "Consolidated Financial Statements" consolidation accounting. The Company recognized the redeemable minority interest at historical cost within
purchase accounting and subsequently adjusted the carrying value of the redeemable minority interest or redemption value changes at the end of each reporting period as a reduction of net income
available to common stockholders within the consolidated statements of operations.
The
restatement resulted in a decrease in net income available to common stockholders of $2,548 and $1,605 for the three and six months ended June 30, 2007, respectively.
36
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
20. Restatement: (Continued)
The
following is a summary of the impact of the restatement on the financial statements below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously Reported
|
|
Restatement Adjustment
|
|
Reclassification Adjustments(1)
|
|
As Restated
|
|
Consolidated Statements of Operations for the three months ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
125,901
|
|
$
|
|
|
$
|
(11,117
|
)
|
$
|
114,784
|
|
|
Percentage rents
|
|
|
2,862
|
|
|
|
|
|
(24
|
)
|
|
2,838
|
|
|
Tenant recoveries
|
|
|
68,139
|
|
|
|
|
|
(7,489
|
)
|
|
60,650
|
|
|
Management Companies
|
|
|
9,599
|
|
|
|
|
|
|
|
|
9,599
|
|
|
Other
|
|
|
9,287
|
|
|
|
|
|
(2,834
|
)
|
|
6,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
215,788
|
|
|
|
|
|
(21,464
|
)
|
|
194,324
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
68,774
|
|
|
|
|
|
(6,901
|
)
|
|
61,873
|
|
|
Management Companies' operating expenses
|
|
|
18,519
|
|
|
|
|
|
|
|
|
18,519
|
|
|
REIT general and administrative expenses
|
|
|
4,412
|
|
|
|
|
|
|
|
|
4,412
|
|
|
Depreciation and amortization
|
|
|
60,404
|
|
|
(1,113
|
)
|
|
(5,638
|
)
|
|
53,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152,109
|
|
|
(1,113
|
)
|
|
(12,539
|
)
|
|
138,457
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties
|
|
|
3,213
|
|
|
|
|
|
|
|
|
3,213
|
|
|
|
Other
|
|
|
59,048
|
|
|
|
|
|
(3,535
|
)
|
|
55,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,261
|
|
|
|
|
|
(3,535
|
)
|
|
58,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
214,370
|
|
|
(1,113
|
)
|
|
(16,074
|
)
|
|
197,183
|
|
Minority interest in consolidated joint ventures
|
|
|
(27
|
)
|
|
(3,547
|
)
|
|
3,657
|
|
|
83
|
|
Equity in income of unconsolidated joint ventures
|
|
|
18,997
|
|
|
|
|
|
|
|
|
18,997
|
|
Income tax benefit
|
|
|
787
|
|
|
|
|
|
|
|
|
787
|
|
Gain on sale of assets
|
|
|
2,279
|
|
|
|
|
|
|
|
|
2,279
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
23,454
|
|
|
(2,434
|
)
|
|
(1,733
|
)
|
|
19,287
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of assets
|
|
|
(1,124
|
)
|
|
|
|
|
|
|
|
(1,124
|
)
|
Income from discontinued operations
|
|
|
(362
|
)
|
|
|
|
|
1,733
|
|
|
1,371
|
|
|
|
|
|
|
|
|
|
|
|
Total income from discontinued operations
|
|
|
(1,486
|
)
|
|
|
|
|
1,733
|
|
|
247
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and preferred dividends
|
|
|
21,968
|
|
|
(2,434
|
)
|
|
|
|
|
19,534
|
|
Less: minority interest in Operating Partnership
|
|
|
2,398
|
|
|
(458
|
)
|
|
|
|
|
1,940
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
19,570
|
|
|
(1,976
|
)
|
|
|
|
|
17,594
|
|
Less: preferred dividends
|
|
|
6,122
|
|
|
(3,547
|
)
|
|
|
|
|
2,575
|
|
Less: adjustment of minority interest due to redemption value
|
|
|
|
|
|
4,119
|
|
|
|
|
|
4,119
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
13,448
|
|
$
|
(2,548
|
)
|
$
|
|
|
$
|
10,900
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharebasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.21
|
|
$
|
0.01
|
|
$
|
(0.02
|
)
|
$
|
0.20
|
|
|
Discontinued operations
|
|
$
|
(0.02
|
)
|
$
|
(0.05
|
)
|
$
|
0.02
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
0.19
|
|
$
|
(0.04
|
)
|
$
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharediluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.21
|
|
$
|
0.01
|
|
$
|
(0.02
|
)
|
$
|
0.20
|
|
|
Discontinued operations
|
|
$
|
(0.02
|
)
|
$
|
(0.05
|
)
|
$
|
0.02
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
0.19
|
|
$
|
(0.04
|
)
|
$
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
37
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
20. Restatement: (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously Reported
|
|
Restatement Adjustment
|
|
Reclassification Adjustments(1)
|
|
As Restated
|
|
Consolidated Statements of Operations for the six months ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
249,883
|
|
$
|
|
|
$
|
(22,139
|
)
|
$
|
227,744
|
|
|
Percentage rents
|
|
|
6,627
|
|
|
|
|
|
(125
|
)
|
|
6,502
|
|
|
Tenant recoveries
|
|
|
135,793
|
|
|
|
|
|
(14,278
|
)
|
|
121,515
|
|
|
Management Companies
|
|
|
18,353
|
|
|
|
|
|
|
|
|
18,353
|
|
|
Other
|
|
|
16,800
|
|
|
|
|
|
(3,792
|
)
|
|
13,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
427,456
|
|
|
|
|
|
(40,334
|
)
|
|
387,122
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
137,395
|
|
|
|
|
|
(13,506
|
)
|
|
123,889
|
|
|
Management Companies' operating expenses
|
|
|
36,274
|
|
|
|
|
|
|
|
|
36,274
|
|
|
REIT general and administrative expenses
|
|
|
9,785
|
|
|
|
|
|
|
|
|
9,785
|
|
|
Depreciation and amortization
|
|
|
117,494
|
|
|
(2,227
|
)
|
|
(10,235
|
)
|
|
105,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,948
|
|
|
(2,227
|
)
|
|
(23,741
|
)
|
|
274,980
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties
|
|
|
5,862
|
|
|
|
|
|
|
|
|
5,862
|
|
|
|
Other
|
|
|
123,954
|
|
|
|
|
|
(7,070
|
)
|
|
116,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,816
|
|
|
|
|
|
(7,070
|
)
|
|
122,746
|
|
|
Loss on early extinguishment of debt
|
|
|
877
|
|
|
|
|
|
|
|
|
877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
431,641
|
|
|
(2,227
|
)
|
|
(30,811
|
)
|
|
398,603
|
|
Minority interest in consolidated joint ventures
|
|
|
(1,516
|
)
|
|
(7,094
|
)
|
|
7,475
|
|
|
(1,135
|
)
|
Equity in income of unconsolidated joint ventures
|
|
|
33,480
|
|
|
|
|
|
|
|
|
33,480
|
|
Income tax benefit
|
|
|
907
|
|
|
|
|
|
|
|
|
907
|
|
Gain on sale of assets
|
|
|
4,031
|
|
|
|
|
|
|
|
|
4,031
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
32,717
|
|
|
(4,867
|
)
|
|
(2,048
|
)
|
|
25,802
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of assets
|
|
|
(1,413
|
)
|
|
|
|
|
|
|
|
(1,413
|
)
|
|
Income from discontinued operations
|
|
|
(181
|
)
|
|
|
|
|
2,048
|
|
|
1,867
|
|
|
|
|
|
|
|
|
|
|
|
Total income from discontinued operations
|
|
|
(1,594
|
)
|
|
|
|
|
2,048
|
|
|
454
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and preferred dividends
|
|
|
31,123
|
|
|
(4,867
|
)
|
|
|
|
|
26,256
|
|
Less: minority interest in Operating Partnership
|
|
|
2,865
|
|
|
(287
|
)
|
|
|
|
|
2,578
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
28,258
|
|
|
(4,580
|
)
|
|
|
|
|
23,678
|
|
Less: preferred dividends
|
|
|
12,244
|
|
|
(7,094
|
)
|
|
|
|
|
5,150
|
|
Less: adjustment of minority interest due to redemption value
|
|
|
|
|
|
4,119
|
|
|
|
|
|
4,119
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
16,014
|
|
$
|
(1,605
|
)
|
$
|
|
|
$
|
14,409
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharebasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.24
|
|
$
|
0.03
|
|
$
|
(0.02
|
)
|
$
|
0.25
|
|
|
Discontinued operations
|
|
$
|
(0.02
|
)
|
$
|
(0.05
|
)
|
$
|
0.02
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
0.22
|
|
$
|
(0.02
|
)
|
$
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharediluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.24
|
|
$
|
0.03
|
|
$
|
(0.02
|
)
|
$
|
0.25
|
|
|
Discontinued operations
|
|
$
|
(0.02
|
)
|
$
|
(0.05
|
)
|
$
|
0.02
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
0.22
|
|
$
|
(0.02
|
)
|
$
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
38
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
20. Restatement: (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously Reported
|
|
Restatement Adjustment
|
|
Reclassification Adjustments(1)
|
|
As Restated
|
|
Consolidated Statements of Cash Flows for the six months ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
|
16,014
|
|
|
(1,605
|
)
|
|
|
|
|
14,409
|
|
Preferred dividends
|
|
|
12,244
|
|
|
(7,094
|
)
|
|
|
|
|
5,150
|
|
Adjustment of minority interest due to redemption value
|
|
|
|
|
|
4,119
|
|
|
|
|
|
4,119
|
|
Net income
|
|
|
28,258
|
|
|
(4,580
|
)
|
|
|
|
|
23,678
|
|
Depreciation and amortization
|
|
|
117,491
|
|
|
(2,227
|
)
|
|
|
|
|
115,264
|
|
Minority interest in Operating Partnership
|
|
|
2,865
|
|
|
(287
|
)
|
|
|
|
|
2,578
|
|
Minority interest in consolidated joint ventures
|
|
|
1,516
|
|
|
7,094
|
|
|
|
|
|
8,610
|
|
-
(1)
-
Reclassification
adjustments include the reclassification of the results of operations of the Rochester Properties to discontinued operations. In addition,
loss on the early extinguishment of debt has been reclassified to be included in total expenses.
21. Subsequent Events:
On July 11, 2008, the Company obtained a construction loan on The Oaks that allows for borrowings of up to $300,000. The initial draw under the loan was $220,422. The loan bears
interest at LIBOR plus a spread of 1.75% to 2.10% depending on certain conditions. The loan matures on July 7, 2011, with two one-year extension options. The proceeds were used to
pay down the Company's line of credit.
On
July 31, 2008, the Company's joint venture in Broadway Plaza replaced the $58,855 loan on the property with a new $150,000 loan, bearing interest at 6.11% and maturing on
August 15, 2015. The lender is Northwestern Mutual life, an affiliate of the Company's partner in the joint venture. The Company's share of the incremental proceeds was used to pay down its
line of credit.
On
July 31, 2008, the Company declared a dividend/distribution of $0.80 per share for common stockholders, OP Unit holders and Series A Preferred Stock holders of record on
August 21, 2008. In addition, MACWH, LP declared a distribution of $1.05 for its non-participating convertible preferred unit holders and $0.80 per unit for its common unit
holders of record on August 21, 2008. All dividends/distributions will be paid on September 8, 2008.
In
July 2008, Mervyn's filed for bankruptcy protection. The Company has 46 Mervyn's stores in its portfolio. The Company owns the ground leasehold and/or fee simple interest in 43 of
those stores and the remaining three are owned by Mervyn's but are located at the Company's Centers. In the event Mervyn's elects, under the bankruptcy laws, to reject the lease of any Mervyn's store
in the Company's portfolio, (i) the Company will lose rental revenues and tenant recoveries due under the applicable lease, and (ii) there will be a write off of the intangible asset
and/or liability recorded as a result of applying SFAS No. 141, "Business Combinations," ("SFAS 141") to such lease. In connection with the acquisition of the Mervyn's portfolio (See
Note 13Acquisitions) and applying SFAS 141, the Company recorded intangible assets of $107,609 and intangible liabilities of $57,404.
39
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of The Macerich Company (the "Company") contains or incorporates statements that
constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You
can identify some of the forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "should," "expects," "anticipates," "intends," "projects," "predicts," "plans,"
"believes," "seeks," and "estimates" and variations of these words and similar expressions. Statements concerning current conditions may also be forward-looking if they imply a continuation of current
conditions. Forward-looking statements appear in a number of places in this Form 10-Q and include statements regarding, among other
matters:
-
-
expectations regarding the Company's growth;
-
-
the Company's beliefs regarding its acquisition, redevelopment and development
activities and opportunities;
-
-
the Company's acquisition and other strategies;
-
-
regulatory matters pertaining to compliance with
governmental regulations;
-
-
the Company's capital expenditure plans and expectations for obtaining capital for expenditures; and
-
-
the Company's expectations regarding its financial condition or results of operations.
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 or the industry to differ materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied
in such forward-looking statements. You are urged to carefully review the disclosures the Company makes concerning risks and other factors that may affect our business and operating results, including
those made in "Item 1A. Risk Factors" in this Form 10-Q and in our Annual Report on Form 10-K/A for the year ended December 31, 2007, as well as our other
reports filed with the Securities and Exchange Commission, which disclosures are incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date
of this document or to reflect the occurrence of unanticipated events.
Management's
Discussion and Analysis of Financial Condition and Results of Operations has been updated to reflect the restatement of the consolidated statements of operations for the
three and six months ended June 30, 2007 and the consolidated statement of cash flows for the six months ended
June 30, 2007. For a more detailed description of the restatement, see Note 20Restatement, in the Company's Notes to Consolidated Financial Statements.
Management's Overview and Summary
The Company is involved in the acquisition, ownership, development, redevelopment, management, and leasing of regional and community
shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, The Macerich Partnership, L.P., a Delaware
limited partnership (the "Operating Partnership"). As of June 30, 2008, the Operating Partnership owned or had an ownership interest in 72 regional shopping centers and 19 community shopping
centers aggregating approximately 77 million square feet of gross
40
leasable
area. These 91 regional and community shopping centers are referred to hereinafter as the "Centers," unless the context otherwise requires.
The
property management, leasing and redevelopment of the Company's portfolio is provided by the Company's management companies, Macerich Property Management Company, LLC
("MPMC, LLC"), a single member Delaware limited liability company, Macerich Management Company ("MMC"), a California corporation, Westcor Partners, L.L.C., a single member Arizona limited
liability company, Macerich Westcor Management LLC, a single member Delaware limited liability company, Westcor Partners of Colorado, LLC, a Colorado limited liability company, MACW Mall
Management, Inc., a New York corporation, and MACW Property Management, LLC, a single member New York limited liability company. These last two management companies are collectively
referred to herein as the "Wilmorite Management Companies." The three Westcor management companies are collectively referred to herein as the "Westcor Management Companies." All seven of the
management companies are collectively referred to herein as the "Management Companies."
The
Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through the Operating Partnership and
the Company's Management Companies.
The
following discussion is based primarily on the consolidated financial statements of the Company for the three and six months ended June 30, 2008 and 2007. This information
should be read in conjunction with the accompanying consolidated financial statements and notes thereto.
Acquisitions and Dispositions:
The financial statements reflect the following acquisitions, dispositions and changes in ownership subsequent to the occurrence of each
transaction.
On
September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,546 square foot specialty center in Scottsdale, Arizona. The total
purchase price of $13.5 million was funded by cash, borrowings under the Company's line of credit and the assumption of an $8.6 million mortgage note payable. The Center was previously
accounted for under the equity method as an investment in unconsolidated joint ventures.
On
December 17, 2007, the Company purchased a portfolio of ground leasehold and/or fee simple interests in 39 freestanding Mervyn's stores located in the Southwest United States.
The purchase price of $400.2 million was funded by cash and borrowings under the Company's line of credit. At acquisition, management designated 27 of the freestanding stores located at
shopping centers not owned or managed by the Company as available for sale.
Hilton
Village and the 12 Mervyn's freestanding stores that have not been designated as available for sale are referred herein as the "2007 Acquisition Properties."
On
January 1, 2008, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3,426,609 Class A participating convertible preferred units
("PCPUs"). As a result of the redemption, the Company received the 16.32% minority interest in the portion of the Wilmorite portfolio that included Danbury Fair Mall, Freehold Raceway Mall, Great
Northern Mall, Rotterdam Square, Shoppingtown Mall, Towne Mall, Tysons Corner Center and Wilton Mall, collectively, referred to as the "Non-Rochester Properties," for total consideration
of $224.4 million, in exchange for the Company's ownership interest in the portion of the Wilmorite portfolio that consisted of Eastview Mall, Eastview Commons, Greece Ridge Center, Marketplace
Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties." Included in the redemption consideration was the assumption of the remaining 16.32% interest in the indebtedness of
the Non-Rochester Properties, which had an estimated fair value of $106.0 million. The Company determined the fair value of the debt using a present value model based upon the terms
of equivalent debt and upon credit spreads made available to the Company. The fair value of the debt consisted of $71.1 million of Level 2 inputs and
41
$34.9 million
of Level 3 inputs in accordance with SFAS No. 157. In addition, the Company also received additional consideration of $11.8 million, in the form of a note,
for certain working capital adjustments, extraordinary capital expenditures, leasing commissions, tenant allowances, and decreases in indebtedness during the Company's period of ownership of the
Rochester Properties. The Company recognized a gain of $99.3 million on the exchange. This exchange is referred to herein as the "Rochester Redemption."
On
January 10, 2008, the Company, in a 50/50 joint venture, acquired The Shops at North Bridge, a 680,933 square foot urban shopping center in Chicago, Illinois, for a total
purchase price of $515 million. The Company's share of the purchase price was funded by the assumption of a pro rata share of the $205 million fixed rate mortgage on the Center and by
borrowings under the Company's line of credit.
On
January 31, 2008, the Company purchased a ground leasehold interest in a freestanding Mervyn's store located in Hayward, California. The purchase price of $13.2 million
was funded by cash and borrowings under the Company's line of credit. At acquisition, management designated the property as available for sale.
On
February 29, 2008, the Company purchased a fee simple interest in a freestanding Mervyn's store located in Monrovia, California. The purchase price of $19.3 million was
funded by cash and borrowings under the Company's line of credit. At acquisition, management designated the property as available for sale.
On
May 20, 2008, the Company purchased fee simple interests in a 161,350 square foot Boscov's department store at Deptford Mall in Deptford, New Jersey. The total purchase price
of $23.5 million was funded by the assumption of the existing mortgage note on the property and by borrowings under
the Company's line of credit. The results of operations have included this property since the date of acquisition and is referred to herein as the "2008 Acquisition Property."
On
June 11, 2008, the Company became a 50% owner in a joint venture that acquired One Scottsdale, which plans to develop a luxury retail and mixed-use property in Scottsdale, Arizona.
The Company's share of the purchase price was $52.5 million, which was funded by borrowings under the Company's line of credit.
Redevelopment:
The expansion of The Oaks, a 1.1 million square foot super regional mall in Thousand Oaks, California, continues on schedule
toward a multi-phased opening beginning with a 138,000 square foot Nordstrom Department Store projected to open in September 2008. New additions to the center's interior retail lineup include
the first-to-markets Bare Escentuals, Fruits and Passions, kate spade, Marciano and Teavana. Construction on the two-level, open-air retail, dining and
entertainment venue, anchored by Muvico Entertainment, Devon Seafood Grill, Ruth's Chris Steakhouse and Lazy Dog Cafe and a complete interior renovation continues toward a phased opening beginning
Fall 2008.
On
July 15, 2008, the Company announced plans for a new 122,000 square-foot Nordstrom that will debut as a new anchor for Santa Monica Place, a regional shopping
center under redevelopment in Santa Monica, California. Nordstrom will replace the vacant anchor space acquired as a result of the Federated merger. Projected to re-open Fall 2009,
construction on the project is well underway and the roof has been removed, setting the stage for the center's transformation into a sophisticated, urban, open-air environment.
Vertical
construction of an approximately 160,000 square foot luxury wing expansion at Scottsdale Fashion Square is underway and on schedule for a projected opening of Phase I of
the project in Fall 2009. Anchored by a first-to-market 60,000 square foot Barneys New York, the expansion will introduce up to 100,000 square feet of luxury shops and
restaurants on Scottsdale Road. New retailers inside the center include A/X Armani Exchange, Bare Escentuals, Bottega Veneta, Metropark, Puma and Socrati.
42
On
July 15, 2008, plans were announced to expand the existing Nordstrom footprint at Broadway Plaza, the Company's joint venture asset in Walnut Creek, California. Previously
announced was the addition of luxury department store Neiman-Marcus. The entitlement process for the new anchor addition is anticipated to be completed in late 2008. Broadway Plaza is a 697,981 square
foot open-air regional shopping center.
Inflation:
In the last three years, inflation has not had a significant impact on the Company because of a relatively low inflation rate. Most of
the leases at the Centers have rent adjustments periodically through the lease term. These rent increases are either in fixed increments or based on using an annual multiple of increases in the
Consumer Price Index ("CPI"). In addition, about 6%-13% of the leases expire each year, which enables the Company to replace existing leases with new leases at higher base rents if the
rents of the existing leases are below the then existing market rate. Additionally, historically the majority of the leases required the tenants to pay their pro rata share of operating expenses. In
January 2005, the Company began entering into leases that require tenants to pay a stated amount for operating expenses, generally excluding property taxes, regardless of the expenses actually
incurred at any Center. This change shifts the burden of cost control to the Company.
Seasonality:
The shopping center industry is seasonal in nature, particularly in the fourth quarter during the holiday season when retailer
occupancy and retail sales are typically at their highest levels. In addition, shopping malls achieve a substantial portion of their specialty (temporary retailer) rents during the holiday season and
the majority of percentage rent is recognized in the fourth quarter. As a result of the above, earnings are generally higher in the fourth quarter.
Critical Accounting Policies
The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.
Some
of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible
accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, and estimates for environmental matters. The Company's significant
accounting policies are described in more detail in Note 2 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 2007. However, the following policies are deemed to be critical.
Revenue Recognition:
Minimum rental revenues are recognized on a straight-line basis over the term of the related lease. The difference between
the amount of rent due in a year and the amount recorded as rental income is referred to as the "straight line rent adjustment." Currently, 53% of the mall and freestanding leases contain provisions
for CPI rent increases periodically throughout the term of the lease. The Company believes that using an annual multiple of CPI increases, rather than fixed contractual rent increases, results in
revenue recognition that more closely matches the cash revenue from each lease and will provide more consistent rent growth throughout the term of the leases. Percentage rents are recognized when the
tenants' specified sales targets have been met. Estimated recoveries from certain tenants for their pro rata share of real estate taxes, insurance and other shopping center operating expenses are
43
recognized
as revenues in the period the applicable expenses are incurred. Other tenants pay a fixed rate and these tenants recoveries' revenues are recognized on a straight-line basis
over the term of the related leases.
Property:
The Company capitalizes costs incurred in redevelopment and development of properties in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 34, "Capitalization of Interest Cost" and SFAS No. 67 "Accounting for Costs and the Initial Rental Operations of Real Estate Properties." The costs of
land and building under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, developments
costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. Capitalized costs are allocated to the specific
components of a project that are benefited. The Company considers a construction project as completed and held available for occupancy and ceases capitalization of costs when the areas under
development have been substantially completed.
Maintenance
and repairs expenses are charged to operations as incurred. Costs for major replacements and betterments, which includes HVAC equipment, roofs and parking lots are
capitalized and depreciated over their estimated useful lives. Gains and losses are recognized upon disposal or retirement of the related assets and are reflected in earnings.
Property
is recorded at cost and is depreciated using a straight-line method over the estimated useful lives of the assets as follows:
|
|
|
Buildings and improvements
|
|
5 - 40 years
|
Tenant improvements
|
|
5 - 7 years
|
Equipment and furnishings
|
|
5 - 7 years
|
Accounting for Acquisitions:
The Company accounts for all acquisitions in accordance with SFAS No. 141, "Business Combinations." The Company first determines
the value of the land and buildings utilizing an "as if vacant" methodology. The Company then assigns a fair value to any debt assumed at acquisition. The balance of the purchase price is allocated to
tenant improvements and identifiable intangible assets or liabilities. Tenant improvements represent the tangible assets associated with the existing leases valued on a fair market value basis at the
acquisition date prorated over the remaining lease terms. The tenant improvements are classified as an asset under real estate investments and are depreciated over the remaining lease terms.
Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three forms: (i) leasing commissions and legal costs, which represent
the value associated with "cost avoidance" of acquiring in-place leases, such as lease commissions paid under terms generally experienced in the Company's markets; (ii) value of
in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the "assumed vacant" property to the occupancy level when purchased;
and (iii) above or below market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted
for tenant credit risks. Leasing commissions and legal costs are recorded in deferred charges and other assets and are amortized over the remaining lease terms. The value of in-place
leases are recorded in deferred charges and other assets and amortized over the remaining lease terms plus an estimate of renewal of the acquired leases. Above or below market leases are classified in
deferred charges and other assets or in other accrued liabilities, depending on whether the contractual terms are above or below market, and the asset or liability is amortized to minimum rents over
the remaining terms of the leases.
44
When the Company acquires a real estate property, the Company allocates the purchase price to the components of these acquisitions using relative fair values computed using its estimates
and assumptions. These estimates and assumptions impact the amount of costs allocated between various components as well as the amount of costs assigned to individual properties in multiple property
acquisitions. These allocations also impact depreciation expense and gains or losses recorded on future sales of properties.
Asset Impairment:
The Company assesses whether there has been impairment in the value of its long-lived assets by considering factors such as
expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include the tenant's ability to perform their duties and
pay rent under the terms of the leases. The Company may recognize impairment losses if the discounted cash flows are not sufficient to cover its investment. Such a loss would be determined as the
difference between the carrying value and the fair value of a Center.
Deferred Charges:
Costs relating to obtaining tenant leases are deferred and amortized over the initial term of the agreement using the
straight-line method. Costs relating to financing of shopping center properties are deferred and amortized over the life of the related loan using the straight-line method,
which approximates the effective interest method. In-place lease values are amortized over the remaining lease term plus an estimate of
renewal. Leasing commissions and legal costs are amortized on a straight-line basis over the individual remaining lease years. The ranges of the terms of the agreements are as follows:
|
|
|
Deferred lease costs
|
|
1 - 15 years
|
Deferred financing costs
|
|
1 - 15 years
|
In-place lease values
|
|
Remaining lease term plus an estimate for renewal
|
Leasing commissions and legal costs
|
|
5 - 10 years
|
Recent Accounting Pronouncements not yet Adopted
In December 2007, the FASB issued SFAS No. 141 (revised), "Business Combinations." SFAS No. 141(R) requires all assets
and assumed liabilities, including contingent liabilities, in a business combination to be recorded at their acquisition-date fair value rather than at historical costs. The Company is
required to adopt SFAS No. 141 (R) on January 1, 2009. The Company is currently evaluating the impact of adoption on the Company's results of operations and financial condition.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment to ARB No. 51". SFAS No. 160
clarifies the accounting for a noncontrolling interest or minority interest in a subsidiary included in consolidated financial statements. The Company is required to adopt SFAS No. 160 on
January 1, 2009 and is currently evaluating the impact of adoption on the Company's results of operations and financial condition.
In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging ActivitiesAn Amendment of FASB Statement No. 133." SFAS
No. 161 requires additional disclosures on derivative instruments and hedging activities and their effect on the reporting entity's financial statements. The Company is required to adopt SFAS
No. 161 on January 1, 2009 and does not expect the adoption to have a material impact on the Company's results of operations or financial condition.
45
In
May 2008, the FASB issued FSP APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)." FSP APB 14-1 requires that convertible debt instruments that may be settled in cash be separated into liability and equity components in a manner that will
reflect the reporting entity's nonconvertible debt borrowing rate. The Company is required to adopt FSP APB 14-1 on
January 1, 2009 and is currently evaluating the impact of adoption on the Company's results of operations or financial condition.
Results of Operations
Many of the variations in the results of operations, discussed below, occurred due to the transactions described above, including the
2008 Acquisition Property, the 2007 Acquisition Properties and the Redevelopment Centers. For the comparison of the three and six months ended June 30, 2008 to the three and six months ended
June 30, 2007, the "Same Centers" include all consolidated Centers, excluding the 2008 Acquisition Property, the 2007 Acquisition Properties and the Redevelopment Centers. The Redevelopment
Centers include The Oaks, Santa Monica Place, Westside Pavilion, The Marketplace at Flagstaff, SanTan Village Regional Center and Promenade at Casa Grande.
Comparison of the Three Months Ended June 30, 2008 and 2007
Revenues:
Minimum and percentage rents (collectively referred to as "rental revenue") increased by $8.9 million, or 7.6%, from 2007 to
2008. The increase in rental revenue is attributed to an increase of $3.3 million from the Redevelopment Centers, $2.7 million from the Same Centers, $2.7 million from the 2007
Acquisition Properties and $0.2 million from the 2008 Acquisition Property.
Rental
revenue includes the amortization of above and below market leases, the amortization of straight-line rents and lease termination income. The amortization of above and
below market leases increased from $2.4 million in 2007 to $2.6 million in 2008. The amortization of straight-lined rents decreased from $2.3 million in 2007 to
$2.0 million in 2008. Lease termination income decreased from $2.9 million in 2007 to $1.8 million in 2008.
Tenant
recoveries increased $5.0 million, or 8.2%, from 2007 to 2008. The increase in tenant recoveries is attributed to an increase of $3.1 million from the Same Centers,
$1.3 million from the Redevelopment Centers and $0.6 million from the 2007 Acquisition Properties.
Management
Companies' revenues increased by $0.8 million from 2007 to 2008, primarily due to increased management fees and development fees received from the joint venture Centers
and third party managed properties.
Shopping Center and Operating Expenses:
Shopping center and operating expenses increased $5.4 million, or 8.7%, from 2007 to 2008. Approximately $2.1 million of
the increase in shopping center and operating expenses is from the Same Centers, $2.1 million is from the Redevelopment Centers, $0.9 million is from the 2007 Acquisition Properties and
$0.1 million is from the 2008 Acquisition Property.
Management Companies' Operating Expenses:
Management Companies' operating expenses increased from $18.5 million in 2007 to $20.5 million in 2008, in part as a
result of the additional costs of managing the joint venture Centers and third party managed properties and higher compensation expense due to increased staffing and higher professional fees.
46
REIT General and Administrative Expenses:
REIT general and administrative expenses decreased by $0.3 million from 2007 to 2008. The decrease is primarily due to a
decrease in share and unit-based compensation expense in 2008.
Depreciation and Amortization:
Depreciation and amortization increased $3.2 million from 2007 to 2008. The increase in depreciation and amortization is
primarily attributed to an increase of $3.9 million from the Same Centers, $0.8 million from the 2007 Acquisition Properties and $0.1 million from the 2008 Acquisition Property,
offset in part by a decrease of $0.8 million from the Redevelopment Centers.
Interest Expense:
Interest expense increased $9.8 million from 2007 to 2008. The increase in interest expense was primarily attributed to an
increase of $7.5 million from increased borrowings under the Company's line of credit, $1.6 million from the Redevelopment Centers and $1.2 million from the Same Centers. The
increase in interest expense was offset in part by a decrease of $0.1 million from term loans.
The
increase in interest expense on the Company's line of credit was due to an increase in average outstanding borrowings during 2008, in part, because of the purchase of the 2007
Acquisition Properties, The Shops at North Bridge and the 2008 Acquisition Property, which is offset in part by lower LIBOR rates and spreads.
The
above interest expense items are net of capitalized interest, which decreased from $8.9 million in 2007 to $8.6 million in 2008.
Equity in Income of Unconsolidated Joint Ventures:
The equity in income of unconsolidated joint ventures increased $5.9 million from 2007 to 2008. The increase in equity in income
of unconsolidated joint ventures is due in part to an increase of $1.2 million of gain on sale of assets at various joint venture properties in 2008, an increase of $0.8 million related
to the acquisition of The Shops at North Bridge in 2008, an increase of $6.6 million from commission income earned in 2008.
Discontinued Operations:
Income from discontinued operations increased $5.1 million from 2007 to 2008. The increase is primarily due to
$5.5 million from the freestanding Mervyn's stores held for sale in 2008, offset in part by $1.7 million relating to the Rochester Redemption. See "Management's Overview and
SummaryAcquisitions and Dispositions." As a result of the designation of the Mervyn's properties as held for sale and the Rochester Redemption, the Company classified the results of
operations for these properties to discontinued operations for both periods presented.
Minority Interest in the Operating Partnership:
The minority interest in the Operating Partnership represents the 14.5% weighted average interest of the Operating Partnership not
owned by the Company during 2008 compared to the 15.7% not owned by the Company during 2007. The decrease in minority interest is primarily attributed to the conversion of 2,022,860 preferred shares
into common shares in 2008 (See Note 17Cumulative Convertible Redeemable Preferred Stock of the Company's Consolidated Financial Statements) and the repurchase of 807,000 shares in
2007 (See Note 12Stock Repurchase Program of the Company's Consolidated Financial Statements).
47
Funds From Operations:
Primarily as a result of the factors mentioned above, funds from operations ("FFO")diluted increased 2.5% from
$100.7 million in 2007 to $103.2 million in 2008. For the reconciliation of FFO and FFOdiluted to net income available to common stockholders, see "Funds from Operations"
below.
Comparison of the Six Months Ended June 30, 2008 and 2007
Revenues:
Rental revenue increased by $20.8 million, or 8.9%, from 2007 to 2008. The increase in rental revenue is attributed to an
increase of $7.9 million from the Same Centers, $6.7 million from the Redevelopment Centers, $6.1 million from the 2007 Acquisition Properties and $0.2 million from the
2008 Acquisition Property.
Rental
revenue includes the amortization of above and below market leases, the amortization of straight-line rents and lease termination income. The amortization of above and
below market leases increased from $5.7 million in 2007 to $6.1 million in 2008. The amortization of straight-lined rents decreased from $3.6 million in 2007 to
$3.5 million in 2008. Lease termination income decreased from $5.1 million in 2007 to $3.9 million in 2008.
Tenant
recoveries increased $10.5 million, or 8.7%, from 2007 to 2008. The increase in tenant recoveries is attributed to an increase of $6.6 million from the Same Centers,
$2.5 million from the Redevelopment Centers and $1.4 million from the 2007 Acquisition Properties.
Management
Companies' revenues increased by $1.7 million from 2007 to 2008, primarily due to increased management fees received from the joint venture Centers, additional third
party management contracts and increased development fees from joint ventures.
Shopping Center and Operating Expenses:
Shopping center and operating expenses increased $12.3 million, or 9.9%, from 2007 to 2008. Approximately $6.8 million of
the increase in shopping center and operating expenses is from the Same Centers, $3.7 million is from the Redevelopment Centers, $1.8 million is from the 2007 Acquisition Properties and
$0.1 million is from the 2008 Acquisition Property.
Management Companies' Operating Expenses:
Management Companies' operating expenses increased from $36.3 million in 2007 to $38.9 million in 2008, in part as a
result of the additional costs of managing the joint venture Centers and third party managed properties, and higher compensation expense due to increased staffing and higher professional fees.
REIT General and Administrative Expenses:
REIT general and administrative expenses decreased by $1.2 million from 2007 to 2008. The decrease is primarily due to a
decrease in share and unit-based compensation expense in 2008.
Depreciation and Amortization:
Depreciation and amortization increased $12.5 million from 2007 to 2008. The increase in depreciation and amortization is
primarily attributed to an increase of $8.9 million from the Same Centers, $3.0 million from the Redevelopment Centers, $2.7 million from the 2007 Acquisition Properties and
$0.1 million from the 2008 Acquisition Property.
48
Interest Expense:
Interest expense increased $16.6 million from 2007 to 2008. The increase in interest expense was primarily attributed to an
increase of $10.3 million from increased borrowings
under the Company's line of credit, $6.4 million from the convertible senior notes issued on March 16, 2007, and $3.4 million from the Same Centers. The increase in interest
expense was offset in part by a decrease of $3.5 million from term loans and $0.1 million from the Redevelopment Centers.
The
increase in interest expense on the Company's line of credit was due to an increase in average outstanding borrowings during 2008, in part, because of the purchase of The Shops at
North Bridge, the 2007 Acquisition Properties and the 2008 Acquisition Property, which is offset in part by lower LIBOR rates and spreads. The decrease in interest on term loans was due to the
repayment of the $250 million loan in 2007.
The
above interest expense items are net of capitalized interest, which increased from $14.3 million in 2007 to $15.6 million in 2008 due to an increase in redevelopment
activity in 2008.
Loss on Early Extinguishment of Debt:
The Company recorded a $0.9 million loss from the early extinguishment of the $250 million term loan in 2007.
Equity in Income of Unconsolidated Joint Ventures:
The equity in income of unconsolidated joint ventures increased $13.8 million from 2007 to 2008. The increase in equity in
income of unconsolidated joint ventures is due in part to a $2.0 million loss on the sale of assets at the SDG Macerich Properties, L.P. in 2007, an increase of $1.9 million
related to the acquisition of The Shops at North Bridge in 2008 and an increase of $6.6 million from commission income earned in 2008.
Discontinued Operations:
Income from discontinued operations increased $109.7 million from 2007 to 2008. The increase is primarily due to the
$99.3 million gain from the Rochester Redemption in 2008 and $10.7 million from the Mervyn's stores held for sale in 2008. See "Management's Overview and SummaryAcquisitions
and Dispositions." As a result of the designation of the Mervyn's
properties as held for sale and the Rochester Redemption, the Company classified the results of operations for these properties to discontinued operations for both periods presented.
Minority Interest in the Operating Partnership:
The minority interest in the Operating Partnership represents the 14.7% weighted average interest of the Operating Partnership not
owned by the Company during 2008 compared to the 15.2% not owned by the Company during 2007. The decrease in minority interest is primarily attributed to the conversion of 2,022,860 preferred shares
into common shares in 2008 (See Note 17Cumulative Convertible Redeemable Preferred Stock of the Company's Consolidated Financial Statements) and the repurchase of 807,000 shares in
2007 (See Note 12Stock Repurchase Program of the Company's Consolidated Financial Statements).
Funds From Operations:
Primarily as a result of the factors mentioned above, FFOdiluted increased 12.5% from $177.1 million in 2007 to
$199.2 million in 2008. For the reconciliation of FFO and FFOdiluted to net income available to common stockholders, see "Funds from Operations" below.
49
Operating Activities:
Cash flows provided by operations increased from $102.0 million in 2007 to $107.2 million in 2008. The decrease was
primarily due to changes in assets and liabilities in 2007 compared to 2008 and due to the results at the Centers as discussed above.
Investing Activities:
Cash used in investing activities increased from $181.8 million in 2007 to $453.2 million in 2008. The increase in cash
used in investing activities was primarily due to a $126.0 million increase in contributions to unconsolidated joint ventures, a $103.2 million increase in capital expenditures, $18.9
million of cash transferred relating to the Rochester Redemption and a decrease of $16.4 million in distributions from unconsolidated joint ventures. The increase in contributions to unconsolidated
joint ventures was attributed to the Company's pro rata share of the purchase of The Shops at North Bridge (See "Management's Overview and SummaryAcquisitions and Dispositions.")
Financing Activities:
Cash flow provided by financing activities increased to $314.5 million, compared to cash used in financing activities of
$140.6 million in 2007. The increase in cash provided by financing activities was primarily due to a decrease of $919.6 million in repayments of mortgages and bank notes payable in 2008,
the $75.0 million repurchase of common shares in 2007 and the $59.9 million purchase of Capped Calls in 2007, offset in part by a decrease of $588.3 million in proceeds from
mortgage and bank notes payable in 2008. The decrease in proceeds and repayments of mortgage and bank payable in 2008 is due to the issuance of the $950.0 million convertible senior notes in
2007.
Liquidity and Capital Resources
The Company intends to meet its short term liquidity requirements through cash generated from operations, working capital reserves,
property secured borrowings, unsecured corporate borrowings and borrowings under the revolving line of credit. The Company anticipates that revenues will continue to provide necessary funds for its
operating expenses and debt service requirements and to pay dividends to stockholders in accordance with REIT requirements. The Company anticipates that cash generated from operations, together with
cash on hand, will be adequate to fund capital expenditures which will not be reimbursed by tenants, other than non-recurring capital expenditures.
50
The following tables summarize capital expenditures incurred at the Centers:
|
|
|
|
|
|
|
|
|
|
For the Six
Months Ended
June 30,
|
|
(Dollars in thousands)
|
|
2008
|
|
2007
|
|
Consolidated Centers:
|
|
|
|
|
|
|
|
Acquisitions of property and equipment
|
|
$
|
69,094
|
|
$
|
3,331
|
|
Development, redevelopment and expansion of Centers
|
|
|
266,288
|
|
|
240,741
|
|
Renovations of Centers
|
|
|
4,739
|
|
|
14,607
|
|
Tenant allowances
|
|
|
6,445
|
|
|
8,909
|
|
Deferred leasing charges
|
|
|
12,256
|
|
|
13,327
|
|
|
|
|
|
|
|
|
|
$
|
358,822
|
|
$
|
280,915
|
|
|
|
|
|
|
|
Joint Venture Centers (at Company's pro rata share):
|
|
|
|
|
|
|
|
Acquisitions of property and equipment
|
|
$
|
265,834
|
|
$
|
1,885
|
|
Development, redevelopment and expansion of Centers
|
|
|
16,372
|
|
|
7,612
|
|
Renovations of Centers
|
|
|
6,017
|
|
|
5,171
|
|
Tenant allowances
|
|
|
3,653
|
|
|
4,606
|
|
Deferred leasing charges
|
|
|
1,741
|
|
|
2,079
|
|
|
|
|
|
|
|
|
|
$
|
293,617
|
|
$
|
21,353
|
|
|
|
|
|
|
|
Management
expects similar levels to be incurred in future years for tenant allowances and deferred leasing charges and to incur between $400 million to $600 million in
2008 for development, redevelopment, expansion and renovations. Capital for major expenditures, developments and/or redevelopments has been, and is expected to continue to be, obtained from equity or
debt financings which include borrowings under the Company's line of credit and construction loans. However, many factors impact the Company's ability to access capital, such as its overall debt
level, interest rates, interest coverage ratios and prevailing market conditions.
The
Company's total outstanding loan indebtedness at June 30, 2008 was $7.9 billion (including $1.9 billion of its pro rata share of joint venture debt). This
equated to a debt to Total Market Capitalization (defined as total debt of the Company, including its pro rata share of joint venture debt, plus aggregate market value of outstanding shares of common
stock, assuming full conversion of OP Units, MACWH, LP units and preferred stock into common stock) ratio of approximately 58.8% at June 30, 2008. The majority of the Company's debt
consists of fixed-rate conventional mortgages payable collateralized by individual properties.
The
Company filed a shelf registration statement, effective June 6, 2002, to sell securities. The shelf registration is for a total of $1.0 billion of common stock, common
stock warrants or common stock rights. The Company sold a total of 15.2 million shares of common stock under this shelf registration on November 27, 2002. The aggregate offering price of
this transaction was approximately $440.2 million, leaving approximately $559.8 million available under the shelf registration statement. In addition, the Company filed another shelf
registration statement, effective October 27, 2003, to sell up to $300 million of preferred stock. On January 12, 2006, the Company filed a shelf registration statement
registering an unspecified amount of common stock that it may offer in the future.
On
March 16, 2007, the Company issued $950 million in convertible senior notes ("Senior Notes") that mature on March 15, 2012. The Senior Notes bear interest at
3.25%, payable semiannually, are senior to unsecured debt of the Company and are guaranteed by the Operating Partnership. Prior to December 14, 2011, upon the occurrence of certain specified
events, the Senior Notes will be convertible at the option of holder into cash, shares of the Company's common stock or a combination
51
of
cash and shares of the Company's common stock, at the election of the Company, at an initial conversion rate of 8.9702 shares per $1,000 principal amount. On and after December 15, 2011, the
Senior Notes will be convertible at any time prior to the second business day preceding the maturity date at the option of the holder at the initial conversion rate. The initial conversion price of
approximately $111.48 per share represented a 20% premium over the closing price of the Company's common stock on March 12, 2007. The initial conversion rate is subject to adjustment under
certain circumstances. Holders of the Senior Notes do not have the right to require the Company to repurchase the Senior Notes prior to maturity except in connection with the occurrence of certain
fundamental change transactions.
In
connection with the issuance of the Senior Notes, the Company purchased two capped calls ("Capped Calls") from affiliates of the initial purchasers of the Senior Notes. The Capped
Calls effectively increase the conversion price of the Senior Notes to approximately $130.06, which represented a 40% premium to the March 12, 2007 closing price of $92.90 per common share of
the Company.
The
Company has a $1.5 billion revolving line of credit that matures on April 25, 2010 with a one-year extension option. The interest rate fluctuates between
LIBOR plus 0.75% to LIBOR plus 1.10% depending on the Company's overall leverage. In September 2006, the Company entered into an interest rate swap agreement that effectively fixed the interest rate
on $400.0 million of the outstanding balance of the line of credit at 6.23% until April 25, 2011. On March 16, 2007, the Company repaid $541.5 million of borrowings
outstanding from the proceeds of the Senior Notes (See Note 10Bank and Other Notes Payable of the Company's Consolidated Financial Statements). As of June 30, 2008 and
December 31, 2007, borrowings outstanding were $1,228.0 million and $1,015.0 million, respectively, at an effective interest rate, net of the $400.0 million swapped
portion, of 3.75% and 6.19%, respectively.
On
April 25, 2005, the Company obtained a five-year, $450.0 million term loan bearing interest at LIBOR plus 1.50%. In November 2005, the Company entered into
an interest rate swap agreement that effectively fixed the interest rate of the $450.0 million term loan at 6.30% from December 1, 2005 to April 15, 2010. At June 30, 2008
and December 31, 2007, the entire loan was outstanding with an interest rate of 6.50%.
At
June 30, 2008, the Company was in compliance with all applicable loan covenants.
At
June 30, 2008, the Company had cash and cash equivalents available of $53.8 million.
Off-Balance Sheet Arrangements:
The Company has an ownership interest in a number of joint ventures as detailed in Note 4 to the Company's Consolidated
Financial Statements included herein. The Company accounts for those investments in which it does not have a controlling interest or is not the primary beneficiary using the equity method of
accounting and those investments are reflected on the Consolidated Balance Sheets of the Company as "Investments in unconsolidated joint ventures." A pro rata share of the mortgage debt on these
properties is shown in "Item 3. Quantitative and Qualitative Disclosure About Market Risk."
In
addition, certain joint ventures also have debt that could become recourse debt to the Company or its subsidiaries, in excess of the Company's pro rata share, should the joint
ventures be unable to discharge the obligations of the related debt.
52
The
following reflects the maximum amount of debt principal that could recourse to the Company at June 30, 2008 (in thousands):
|
|
|
|
|
|
|
|
Property
|
|
Recourse
Debt
|
|
Maturity
Date
|
|
Boulevard Shops
|
|
$
|
4,280
|
|
|
12/17/2010
|
|
Chandler Village Center
|
|
|
4,375
|
|
|
1/15/2011
|
|
The Market at Estrella Falls
|
|
|
6,711
|
|
|
6/01/2011
|
|
|
|
|
|
|
|
|
|
|
$
|
15,366
|
|
|
|
|
|
|
|
|
|
|
|
Additionally,
as of June 30, 2008, the Company is contingently liable for $6.6 million in letters of credit guaranteeing performance by the Company of certain obligations
relating to the Centers. The Company does not believe that these letters of credit will result in any liability to the Company.
The following is a schedule of long-term contractual obligations as of June 30, 2008 for the consolidated Centers
over the periods in which they are expected to be paid (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Period
|
|
Contractual Obligations
|
|
Total
|
|
Less than
1 year
|
|
1 - 3
years
|
|
3 - 5
years
|
|
More than
five years
|
|
Long-term debt obligations (includes expected interest payments)
|
|
$
|
6,285,355
|
|
$
|
543,671
|
|
$
|
2,911,702
|
|
$
|
1,961,082
|
|
$
|
868,900
|
|
Operating lease obligations(1)
|
|
|
662,682
|
|
|
14,771
|
|
|
29,624
|
|
|
29,250
|
|
|
589,037
|
|
Purchase obligations(1)
|
|
|
111,838
|
|
|
111,838
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities(2)
|
|
|
379,691
|
|
|
379,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,439,566
|
|
$
|
1,049,971
|
|
$
|
2,941,326
|
|
$
|
1,990,332
|
|
$
|
1,457,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
See
Note 15Commitments and Contingencies of the Company's Consolidated Financial Statements.
-
(2)
-
Amount
includes $2,227 of unrecognized tax benefit associated with FIN 48.
Funds From Operations
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 GAAP measures. The National Association of Real Estate Investment Trusts ("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
53
similarly
titled measures reported by other real estate investment trusts. The reconciliation of FFO and FFO-diluted to net income available to common stockholders is provided below.
The
following reconciles net income available to common stockholders to FFO and FFO-diluted (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net incomeavailable to common stockholders
|
|
$
|
18,794
|
|
$
|
10,900
|
|
$
|
114,422
|
|
$
|
14,409
|
|
Adjustments to reconcile net income to FFObasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in the Operating Partnership
|
|
|
3,058
|
|
|
1,940
|
|
|
19,656
|
|
|
2,578
|
|
|
Adjustment of minority interest due to redemption value
|
|
|
|
|
|
4,119
|
|
|
|
|
|
4,119
|
|
|
Gain on sale of consolidated assets
|
|
|
(376
|
)
|
|
(1,183
|
)
|
|
(100,313
|
)
|
|
(2,646
|
)
|
|
|
Add: minority interest share of gain on sale of consolidated joint ventures
|
|
|
248
|
|
|
(488
|
)
|
|
589
|
|
|
348
|
|
Gain (loss) on sale of undepreciated consolidated assets
|
|
|
241
|
|
|
(542
|
)
|
|
574
|
|
|
339
|
|
(Gain) loss on sale of unconsolidated assets(1)
|
|
|
(1,604
|
)
|
|
(362
|
)
|
|
(2,923
|
)
|
|
2,020
|
|
|
Add: minority interest share of gain on sale of of unconsolidated assets(1)
|
|
|
487
|
|
|
|
|
|
487
|
|
|
|
|
Gain on undepreciated unconsolidated assets(1)
|
|
|
1,116
|
|
|
350
|
|
|
2,436
|
|
|
350
|
|
Depreciation and amortization on consolidated assets
|
|
|
57,772
|
|
|
59,291
|
|
|
118,901
|
|
|
115,267
|
|
|
Less: depreciation and amortization allocable to minority interests on consolidated joint ventures
|
|
|
(788
|
)
|
|
(1,332
|
)
|
|
(1,361
|
)
|
|
(2,326
|
)
|
Depreciation and amortization on unconsolidated assets(1)
|
|
|
25,755
|
|
|
20,696
|
|
|
48,034
|
|
|
45,084
|
|
Depreciation on personal property and amortization of loan costs and interest rate caps
|
|
|
(2,358
|
)
|
|
(3,980
|
)
|
|
(4,600
|
)
|
|
(7,640
|
)
|
|
|
|
|
|
|
|
|
|
|
FFObasic
|
|
|
102,345
|
|
|
89,409
|
|
|
195,902
|
|
|
171,902
|
|
Additional adjustments to arrive at FFOdiluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of convertible preferred stock
|
|
|
835
|
|
|
2,575
|
|
|
3,289
|
|
|
5,150
|
|
|
Impact of convertible debt
|
|
|
|
|
|
8,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFOdiluted
|
|
$
|
103,180
|
|
$
|
100,696
|
|
$
|
199,191
|
|
$
|
177,052
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of FFO shares outstanding for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFObasic(2)
|
|
|
86,319
|
|
|
84,254
|
|
|
85,607
|
|
|
84,487
|
|
Adjustments for the impact of dilutive securities in computing FFO-diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
1,852
|
|
|
3,627
|
|
|
2,460
|
|
|
3,627
|
|
|
Share and unit-based compensation plans
|
|
|
462
|
|
|
298
|
|
|
398
|
|
|
305
|
|
|
Convertible debt
|
|
|
|
|
|
8,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFOdiluted(3)
|
|
|
88,633
|
|
|
96,701
|
|
|
88,465
|
|
|
88,419
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Unconsolidated
assets are presented at the Company's pro rata share.
-
(2)
-
Calculated
based upon basic net income as adjusted to reach basic FFO. As of June 30, 2008 and 2007, 12.5 million and 12.6 million OP
Units were outstanding, respectively.
-
(3)
-
The
computation of FFOdiluted shares outstanding includes the effect of share and unit-based compensation plans and the Senior
Notes using the treasury stock method. It also assumes the conversion of MACWH, LP common and preferred units to the extent that they are dilutive to the FFO computation. In addition, the
computation of FFOdiluted includes the impact of the conversion of 0.6 million, 0.7 million and 1.3 million shares of Series A Preferred Stock into common
shares on October 18, 2007, May 6, 2008 and May 8, 2008, respectively. The preferred stock can be converted on a one-for-one basis for common stock. The
then outstanding preferred shares are assumed converted for purposes of FFO-diluted as they are dilutive to that calculation. The MACWH, LP preferred units were antidilutive to the
calculations at June 30, 2008 and 2007 and were not included in the above calculations. The Senior Notes were dilutive for the three months ended June 30, 2007 and antidilutive for the
three months ended June 30, 2008 and the six months ended June 30, 2008 and 2007, respectively.
54
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary market risk exposure is interest rate risk. The Company has managed and will continue to manage interest rate
risk by (1) maintaining a ratio of fixed rate, long-term debt to total debt such that floating rate exposure is kept at an acceptable level, (2) reducing interest rate
exposure on certain long-term floating rate debt through the use of interest rate caps and/or swaps with appropriately matching maturities, (3) using treasury rate locks where
appropriate to fix rates on anticipated debt transactions, and (4) taking advantage of favorable market conditions for long-term debt and/or equity.
The
following table sets forth information as of June 30, 2008 concerning the Company's long term debt obligations, including principal cash flows by scheduled maturity, weighted
average interest rates and estimated fair value ("FV") (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended June 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
Thereafter
|
|
Total
|
|
FV
|
|
CONSOLIDATED CENTERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate(1)
|
|
$
|
368,346
|
|
$
|
1,000,419
|
|
$
|
522,581
|
|
$
|
434,701
|
|
$
|
1,315,405
|
|
$
|
822,527
|
|
$
|
4,463,979
|
|
$
|
4,356,921
|
|
|
Average interest rate
|
|
|
6.83
|
%
|
|
6.13
|
%
|
|
5.96
|
%
|
|
5.87
|
%
|
|
4.41
|
%
|
|
5.64
|
%
|
|
5.57
|
%
|
|
|
|
|
Floating rate
|
|
|
145,000
|
|
|
142,549
|
|
|
1,103,643
|
|
|
121,118
|
|
|
|
|
|
|
|
|
1,512,310
|
|
|
1,512,310
|
|
|
Average interest rate
|
|
|
3.56
|
%
|
|
3.75
|
%
|
|
4.05
|
%
|
|
5.22
|
%
|
|
|
|
|
|
|
|
4.07
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtConsolidated Centers
|
|
$
|
513,346
|
|
$
|
1,142,968
|
|
$
|
1,626,224
|
|
$
|
555,819
|
|
$
|
1,315,405
|
|
$
|
822,527
|
|
$
|
5,976,289
|
|
$
|
5,869,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JOINT VENTURE CENTERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt (at Company's pro rata share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
160,091
|
|
$
|
304,439
|
|
$
|
64,954
|
|
$
|
195,640
|
|
$
|
37,441
|
|
$
|
957,155
|
|
$
|
1,719,720
|
|
$
|
1,716,153
|
|
|
Average interest rate
|
|
|
5.84
|
%
|
|
5.69
|
%
|
|
6.51
|
%
|
|
6.91
|
%
|
|
5.42
|
%
|
|
5.57
|
%
|
|
5.81
|
%
|
|
|
|
|
Floating rate
|
|
|
100,832
|
|
|
|
|
|
90,349
|
|
|
|
|
|
|
|
|
3,240
|
|
|
194,421
|
|
|
194,421
|
|
|
Average interest rate
|
|
|
3.49
|
%
|
|
|
|
|
3.36
|
%
|
|
|
|
|
|
|
|
8.02
|
%
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtJoint Venture Centers
|
|
$
|
260,923
|
|
$
|
304,439
|
|
$
|
155,303
|
|
$
|
195,640
|
|
$
|
37,441
|
|
$
|
960,395
|
|
$
|
1,914,141
|
|
$
|
1,910,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Fixed
rate debt includes the $450 million floating rate term note and $400 million of the line of credit balance. These amounts have effective
fixed rates over the remaining terms due to swap agreements as discussed below.
The consolidated Centers' total fixed rate debt at June 30, 2008 and December 31, 2007 was $4.5 billion and
$4.8 billion, respectively. The average interest rate on fixed rate debt at June 30, 2008 and December 31, 2007 was 5.57% and 5.57%, respectively. The consolidated Centers' total
floating rate debt at June 30, 2008 and December 31, 2007 was $1.5 billion and $1.0 billion, respectively. The average interest rate on floating rate debt at
June 30, 2008 and December 31, 2007 was 4.07% and 6.15%, respectively.
The
Company's pro rata share of the Joint Venture Centers' fixed rate debt at June 30, 2008 and December 31, 2007 was $1.7 billion and $1.6 billion,
respectively. The average interest rate on fixed rate debt at June 30, 2008 and December 31, 2007 was 5.81% and 5.89%, respectively. The Company's pro rata share of the Joint Venture
Centers' floating rate debt at June 30, 2008 and December 31, 2007 was $194.4 million and $195.0 million, respectively. The average interest rate on the floating rate debt
at June 30, 2008 and December 31, 2007 was 3.51% and 6.09%, respectively.
The
Company uses derivative financial instruments in the normal course of business to manage or hedge interest rate risk and records all derivatives on the balance sheet at fair value in
accordance with
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (See "Note 5Derivative Instruments and Hedging Activities" of the Company's Consolidated
Financial Statements).
55
The
following are outstanding derivatives at June 30, 2008 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property/Entity
|
|
Notional
Amount
|
|
Product
|
|
Rate
|
|
Maturity
|
|
Company's
Ownership
|
|
Fair
Value(1)
|
|
Camelback Colonnade
|
|
$
|
41,500
|
|
Cap
|
|
|
8.54
|
%
|
|
11/17/2008
|
|
|
75
|
%
|
$
|
|
|
Desert Sky Mall
|
|
|
51,500
|
|
Cap
|
|
|
7.65
|
%
|
|
3/15/2009
|
|
|
50
|
%
|
|
|
|
La Cumbre Plaza
|
|
|
30,000
|
|
Cap
|
|
|
7.12
|
%
|
|
8/9/2009
|
|
|
100
|
%
|
|
|
|
Metrocenter Mall
|
|
|
112,000
|
|
Cap
|
|
|
7.25
|
%
|
|
2/15/2009
|
|
|
15
|
%
|
|
|
|
Metrocenter Mall
|
|
|
25,880
|
|
Cap
|
|
|
7.25
|
%
|
|
2/15/2009
|
|
|
15
|
%
|
|
|
|
Metrocenter Mall
|
|
|
133,596
|
|
Swap
|
|
|
4.57
|
%
|
|
2/15/2009
|
|
|
15
|
%
|
|
(216
|
)
|
Panorama Mall
|
|
|
50,000
|
|
Cap
|
|
|
6.65
|
%
|
|
3/1/2010
|
|
|
100
|
%
|
|
8
|
|
The Oaks
|
|
|
150,000
|
|
Cap
|
|
|
6.25
|
%
|
|
7/1/2010
|
|
|
100
|
%
|
|
89
|
|
The Operating Partnership
|
|
|
450,000
|
|
Swap
|
|
|
4.80
|
%
|
|
4/15/2010
|
|
|
100
|
%
|
|
(12,096
|
)
|
The Operating Partnership
|
|
|
400,000
|
|
Swap
|
|
|
5.08
|
%
|
|
4/25/2011
|
|
|
100
|
%
|
|
(15,403
|
)
|
Westside Pavilion
|
|
|
175,000
|
|
Cap
|
|
|
5.50
|
%
|
|
6/1/2010
|
|
|
100
|
%
|
|
195
|
|
-
(1)
-
Fair
value at the Company's ownership percentage.
Interest
rate cap agreements ("Cap") offer protection against floating rates on the notional amount from exceeding the rates noted in the above schedule and interest rate swap agreements
("Swap") effectively replace a floating rate on the notional amount with a fixed rate as noted above.
In
addition, the Company has assessed the market risk for its floating rate debt and believes that a 1% increase in interest rates would decrease future earnings and cash flows by
approximately $17.1 million per year based on $1.7 billion outstanding of floating rate debt at June 30, 2008.
The
fair value of the Company's long-term debt is estimated based on discounted cash flows at interest rates that management believes reflect the risks associated with
long-term debt of similar risk and duration.
Item 4. Controls and Procedures
Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and
procedures or its internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their cost. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.
However,
based on their evaluation as of June 30, 2008, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective to ensure that the information required to
be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is
(a) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (b) is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
In
addition, there has been no change in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15(d)-15(f) under the Exchange Act) that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
56
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None of the Company, the Operating Partnership, Macerich Property Management Company, LLC, Macerich Management Company, the
Westcor Management Companies, the Wilmorite Management Companies or their respective subsidiaries are currently involved in any material litigation nor, to the Company's knowledge, is any material
litigation currently threatened against such entities or the Centers, other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability
insurance.
Item 1A. Risk Factors
In "Item 1A. Risk Factors" of our Annual Report on Form 10-K/A for the year ended December 31, 2007
("2007 10-K"), a risk factor entitled "Our centers depend on tenants to generate rental revenues" notes that the bankruptcy and/or closure of an Anchor or retail store may reduce occupancy
levels, customer traffic and rental
income, or otherwise adversely affect our financial performance. By way of example, in July 2008, Mervyn's filed for bankruptcy protection. We have 46 Mervyn's stores in our portfolio. We own the
ground leasehold and/or fee simple interest in 43 of those stores and the remaining three are owned by Mervyn's but are located at our Centers. In the event Mervyn's elects, under the bankruptcy laws,
to reject the lease of any Mervyn's store in our portfolio, (i) we will lose rental revenues and tenant recoveries due under the applicable lease, and (ii) there will be a write off of
the intangible asset and/or liability recorded as a result of applying SFAS No. 141, "Business Combinations," ("SFAS 141") to such lease. In connection with the acquisition of the
Mervyn's portfolio (See Note 13Acquisitions of the Company's Consolidated Financial Statements) and applying SFAS 141, the Company recorded intangible assets of $107,609 and
intangible liabilities of $57,404.
Except
as described above, there have been no material changes to the risk factors set forth under "Item 1A. Risk Factors" in the 2007 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were voted upon at the Annual Meeting held on May 29, 2008:
-
(a)
-
The
following three persons were elected as Class Two directors of the Company to serve until the annual meeting of stockholders in 2011 and until their
respective successors are duly elected and qualify:
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Dana K. Anderson
|
|
|
60,206,990
|
|
|
4,351,151
|
|
|
1,278,534
|
|
Diana M. Laing
|
|
|
64,452,297
|
|
|
1,364,091
|
|
|
20,289
|
|
Stanley A. Moore
|
|
|
64,154,498
|
|
|
1,660,819
|
|
|
21,359
|
|
57
-
(b)
-
The
ratification of the appointment of Deloitte & Touche LLP as the Company's independent public accountants for the fiscal year ending
December 31, 2008.
|
|
|
|
|
Votes
|
|
|
|
For:
|
|
|
65,804,512
|
|
Against:
|
|
|
15,049
|
|
Abstain:
|
|
|
17,115
|
|
-
(c)
-
The
approval of the Board proposal to amend the charter of the Company to provide for the declassification of the Board of Directors.
|
|
|
|
|
Votes
|
|
|
|
For:
|
|
|
65,582,444
|
|
Against:
|
|
|
215,131
|
|
Abstain:
|
|
|
39,101
|
|
There
were no broker non-votes for any of the above-described matters.
Item 5. Other Information
None
Item 6. Exhibits
|
|
|
|
|
3.1*
|
|
Articles of Amendment and Restatement of the Company
|
|
3.1.1**
|
|
Articles Supplementary of the Company
|
|
3.1.2***
|
|
Articles Supplementary of the Company (Series A Preferred Stock)
|
|
3.1.3****
|
|
Articles Supplementary of the Company (Series C Junior Participating Preferred Stock)
|
|
3.1.4*****
|
|
Articles Supplementary of the Company (Series D Preferred Stock)
|
|
3.1.5#
|
|
Articles Supplementary of the Company (reclassification of shares)
|
|
3.1.6
|
|
Articles of Amendment of the Company (Declassification of the Board)
|
|
3.2##
|
|
Amended and Restated By-Laws of the Company, as adopted on February 8, 2007
|
|
4.1###
|
|
Form of Common Stock Certificate
|
|
4.2####
|
|
Form of Preferred Stock Certificate (Series A Preferred Stock)
|
|
4.2.1###
|
|
Form of Preferred Stock/Right Certificate (Series C Junior Participating Preferred Stock)
|
|
4.2.2#####
|
|
Form of Preferred Stock Certificate (Series D Preferred Stock)
|
|
4.3###
|
|
Agreement dated as of November 10, 1998 between the Company and Computershare Investor Services as successor to EquiServe Trust Company, N.A.,
as successor to First Chicago Trust Company of New York, as Rights Agent
|
|
4.4#*
|
|
Indenture, dated as of March 16, 2007, among the Company, the Operating Partnership and Deutsche Bank Trust Company Americas (includes form
of the Notes and Guarantee)
|
|
31.1
|
|
Section 302 Certification of Arthur Coppola, Chief Executive Officer
|
58
|
31.2
|
|
Section 302 Certification of Thomas O'Hern, Chief Financial Officer
|
|
32.1
|
|
Section 906 Certification of Arthur Coppola, Chief Executive Officer, and Thomas O'Hern, Chief Financial Officer
|
-
*
-
Previously
filed as an exhibit to the Company's Registration Statement on Form S-11, as amended (No. 33-68964), and
incorporated herein by reference.
-
**
-
Previously
filed as an exhibit to the Company's Current Report on Form 8-K, event date May 30, 1995, and incorporated herein by
reference.
-
***
-
Previously
filed as an exhibit to the Company's Current Report on Form 8-K, event date February 25, 1998, and incorporated herein
by reference.
-
****
-
Previously
filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1998, and incorporated
herein by reference.
-
*****
-
Previously
filed as an exhibit to the Company's Current Report on Form 8-K, event date July 26, 2002, and incorporated herein by
reference.
-
#
-
Previously
filed as an exhibit to the Company's Registration Statement on Form S-3, as amended (No. 333-88718), and
incorporated herein by reference.
-
##
-
Previously
filed as an exhibit to the Company's Current Report on Form 8-K, event date February 8, 2007, and incorporated herein
by reference.
-
###
-
Previously
filed as an exhibit to the Company's Current Report on Form 8-K, event date November 10, 1998, as amended, and
incorporated herein by reference.
-
####
-
Previously
filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and incorporated
herein by reference.
-
#####
-
Previously
filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 333-107063), and
incorporated herein by reference.
-
#*
-
Previously
filed as an exhibit to the Company's Current Report on Form 8-K, event date March 16, 2007, and incorporated herein by
reference.
59
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
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THE MACERICH COMPANY
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By:
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/s/
THOMAS E. O'HERN
Thomas E. O'Hern
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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Date:
August 8, 2008
60
QuickLinks
THE MACERICH COMPANY FORM 10-Q INDEX
THE MACERICH COMPANY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share amounts)
THE MACERICH COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share and per share amounts) (Unaudited)
THE MACERICH COMPANY CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY (Dollars in thousands, except per share data) (Unaudited)
THE MACERICH COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
THE MACERICH COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (Unaudited)
PART II OTHER INFORMATION
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